Snyder's-Lance, Inc.
LANCE INC (Form: 10-Q, Received: 05/05/2010 17:20:05)
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 27, 2010

Commission File Number 0-398
 

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 o

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 o       No o

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 o       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 30, 2010, was 32,201,516 shares.

 
 

 
 
 
LANCE, INC. AND SUBSIDIARIES
 
 
 
 
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2

PART I.  FINANCIAL INFORMATION
Item 1.  Financial Statements

LANCE, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Income/(Loss) (Unaudited)
For the Quarters Ended March 27, 2010 and March 28, 2009
(in thousands, except share and per share data)

   
Quarter Ended
 
   
March 27,
2010
   
March 28,
2009
 
             
Net revenue
  $ 221,617     $ 215,809  
Cost of sales
    137,868       131,413  
Gross margin
    83,749       84,396  
                 
Selling, general and administrative
    80,420       73,505  
Other expense, net
    3,610       61  
(Loss)/earnings before interest and income taxes
    (281 )     10,830  
                 
Interest expense, net
    860       812  
(Loss)/income before income taxes
    (1,141 )     10,018  
                 
Income tax (benefit)/expense
    (371 )     3,566  
Net (loss)/income
  $ (770 )   $ 6,452  
                 
Basic earnings per share
  $ (0.02 )   $ 0.21  
Weighted average shares outstanding – basic
    31,758,000       31,403,000  
                 
Diluted earnings per share
  $ (0.02 )   $ 0.20  
Weighted average shares outstanding – diluted
    31,758,000       32,064,000  

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

LANCE, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets
As of March 27, 2010 (Unaudited) and December 26, 2009
(in thousands, except share data)

   
March 27, 2010
   
December 26, 2009
 
ASSETS
           
             
Current assets:
           
  Cash and cash equivalents
  $ 5,826     $ 5,418  
  Accounts receivable, net of allowances of $1,123 and $972, respectively
    87,858       87,172  
  Inventories
    53,346       58,037  
  Prepaid income taxes
    7,733       238  
  Deferred income taxes
    5,181       9,790  
  Prepaid expenses and other current assets
    17,023       18,227  
Total current assets
    176,967       178,882  
                 
Other assets:
               
  Fixed assets, net of accumulated depreciation of $284,633 and $281,191, respectively
    224,463       225,981  
  Goodwill, net
    91,797       90,909  
  Other intangible assets, net
    34,976       35,154  
  Other noncurrent assets
    5,700       5,365  
    Total assets
  $ 533,903     $ 536,291  
                 
LIABILITIES AND STOCKHOLDERS' EQUITY
               
                 
Current liabilities:
               
  Accounts payable
  $ 29,286     $ 29,777  
  Other payables and accrued liabilities
    51,901       66,589  
Total current liabilities
    81,187       96,366  
                 
Other liabilities:
               
  Long-term debt
    128,000       113,000  
  Deferred income taxes
    36,896       35,515  
  Other noncurrent liabilities
    16,392       16,723  
Total liabilities
    262,475       261,604  
                 
Commitments and contingencies
    -       -  
                 
Stockholders’ equity:
               
  Common stock, 32,160,055 and 32,093,193 shares outstanding, respectively
    26,799       26,743  
  Preferred stock, no shares outstanding
    -       -  
  Additional paid-in capital
    62,039       60,829  
  Retained earnings
    170,417       176,322  
  Accumulated other comprehensive income
    12,173       10,793  
Total stockholders' equity
    271,428       274,687  
    Total liabilities and stockholders’ equity
  $ 533,903     $   536,291  

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

LANCE, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows (Unaudited)
For the Quarters Ended March 27, 2010 and March 28, 2009
(in thousands)

   
Quarter Ended
 
   
March 27, 2010
   
March 28, 2009
 
             
Operating activities
           
Net (loss)/income
  $ (770 )   $ 6,452  
  Adjustments to reconcile net income to cash from operating activities:
               
    Depreciation and amortization
    9,596       8,501  
    Stock-based compensation expense
    1,821       1,575  
    Loss on sale of fixed assets
    54       54  
    Impairment of long-lived assets
    584       -  
    Changes in operating assets and liabilities
    (12,819 )     (20,458 )
  Net cash used in operating activities
    (1,534 )     (3,876 )
                 
Investing activities
               
  Purchases of fixed assets
    (7,605 )     (5,238 )
  Proceeds from sale of fixed assets
    61       206  
Net cash used in investing activities
    (7,544 )     (5,032 )
                 
Financing activities
               
  Dividends paid
    (5,134 )     (5,049 )
  Issuances of common stock
    748       1,734  
  Repurchases of common stock
    (1,261 )     (127 )
  Net proceeds from existing credit facilities
    15,000       14,000  
Net cash provided by financing activities
    9,353       10,558  
 
               
Effect of exchange rate changes on cash
    133       (8 )
                 
Increase in cash and cash equivalents
    408       1,642  
Cash and cash equivalents at beginning of period
    5,418       807  
Cash and cash equivalents at end of period
  $ 5,826     $ 2,449  
                 
Supplemental information:
               
Cash paid for income taxes, net of refunds of $12 and $115, respectively
  $ 842     $ 608  
Cash paid for interest
  $ 831     $ 856  

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

5

LANCE, INC. AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements (Unaudited)

1.  
BASIS OF PRESENTATION

The accompanying unaudited condensed consolidated financial statements of 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 26, 2009, filed with the Securities and Exchange Commission (the “SEC”) on February 23, 2010.  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 27, 2010, are not necessarily indicative of the results to be expected for the full year.

Preparing financial statements requires management to make estimates and assumptions about future events that affect the reported amounts of assets, liabilities, revenues and expenses and the related disclosure of contingent assets and liabilities.  Examples include customer returns and promotional activity, allowances for doubtful accounts, inventory valuations, self-insurance reserves, impairment analysis of goodwill and other intangible assets, useful lives and impairment of fixed assets, incentive compensation, and income taxes.  Actual results may differ from our estimates.

Prior year amounts shown in the accompanying condensed consolidated financial statements have been reclassified for consistent presentation.

2.  
EARNINGS PER SHARE

The following tables provide a reconciliation of the common shares used for basic earnings per share and diluted earnings per share:

   
Quarters Ended
 
 
(in thousands)
 
March 27,
2010
   
March 28,
2009
 
             
Weighted average number of common shares used for basic earnings per share
    31,758       31,403  
Effect of potential dilutive shares
    -       661  
Weighted average number of common shares and potential dilutive shares used for
   diluted earnings per share
    31,758       32,064  

The effect of approximately 830,000 common equivalent shares for the quarter ended March 27, 2010 was excluded from the diluted weighted average shares outstanding due to the net loss sustained for the period.

3.  
EQUITY-BASED INCENTIVES

Compensation expense related to equity-based incentive plans of $1.8 million and $1.6 million was recognized for the quarters ended March 27, 2010 and March 28, 2009, respectively.  During the quarter ended March 27, 2010, we issued 460,412 non-qualified stock options, at $21.98 per share, and 85,815 restricted shares to employees.

During the quarter ended March 27, 2010, we repurchased 56,152 shares of common stock from employees to cover withholding taxes payable by employees upon the vesting of restricted stock.


6

LANCE, INC. AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements (Unaudited)

4.  
INVENTORIES

 
(in thousands)
 
March 27, 2010
   
December 26,
2009
 
             
Finished goods                                                                                                      
  $ 30,893     $ 33,060  
Raw materials                                                                                                      
    9,808       11,732  
Supplies, etc.                                                                                                      
    18,607       19,081  
  Total inventories at FIFO cost.                                                                                                      
    59,308       63,873  
Less adjustments to reduce FIFO cost to LIFO cost                                                                                                      
    (5,962 )     (5,836 )
   Total inventories                                                                                                      
  $ 53,346     $ 58,037  

5.  
TARGETED ACQUISITION COSTS

During the first quarter of 2010, we incurred $2.9 million in financing commitment fees and professional fees associated with an unsuccessful bid for a targeted acquisition.  The financing commitment fees of $2.7 million are reflected in Other expense, net on the Condensed Consolidated Statement of Income/(Loss).  The professional fees of $0.2 million are reflected in Selling, general & administrative expenses on the Condensed Consolidated Statement of Income/(Loss).

6.  
EQUITY INVESTMENT

We own a non-controlling equity interest in Late July Snacks LLC (“Late July”), an organic snack food company.  Equity losses, which are not material, are included in Other expense, net.  We also manufacture products for Late July.  Contract manufacturing revenue from Late July was approximately $0.8 million and $1.1 million during the first quarters of 2010 and 2009, respectively.  As of March 27, 2010, and December 26, 2009, accounts receivable due from Late July totaled $0.4 million and $0.5 million, respectively.

7.  
INCOME TAXES

We have recorded gross unrecognized tax benefits as of March 27, 2010 totaling $0.9 million and related interest and penalties of $0.3 million in other noncurrent liabilities on the Condensed Consolidated Balance Sheet.  Of this amount, $0.9 million would affect the effective tax rate if subsequently recognized.  No taxing authorities’ statutes of limitations related to the computation of our unrecognized tax benefits have expired since the beginning of 2010.  We expect that certain income tax audits will be settled, and additional statutes of limitations will likely expire before the end of 2010 and may result in a potential $0.8 million reduction in the unrecognized tax benefit amount.  We classify interest and penalties associated with income tax positions within income tax expense.

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

Jurisdiction
Open Years
US federal
2007 and forward
Canada federal
2005 and forward
Ontario provincial
2004 and forward
Massachusetts
2001 and forward
North Carolina
2006 and forward
Iowa
2006 and forward

8.  
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.


7

LANCE, INC. AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements (Unaudited)

We measure our derivative instruments at fair value using Level 2 inputs.  There were no changes among the levels during the first quarter of 2010.

The carrying amount of cash and cash equivalents, receivables and accounts payable approximates fair value due to their short-term nature.  The carrying amount of debt approximates fair value since its variable interest rate is based on current market rates and interest payments are made monthly.

During the first quarter of 2010, recent market value declines for commercial real estate resulted in an impairment charge of $0.6 million related to assets held for sale in Little Rock, Arkansas.  This property was sold subsequent to the end of our first quarter for $1.8 million in net proceeds.

9.  
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.

Interest Rate Swaps
Our variable-rate debt obligations incur interest at floating rates based on changes in the Eurodollar rate, Canadian Bankers’ Acceptance discount rate, Canadian prime rate and U.S. base rate interest.  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.

Foreign Currency Forwards
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 September 2010.  The notional amount for foreign currency forwards decreased from $7.2 million at December 26, 2009, to $6.0 million at March 27, 2010.

All of our derivative instruments are accounted for as cash flow hedges.  The effective portion of the change in fair value is included in Accumulated other comprehensive income, net of related tax effects, with the corresponding asset or liability recorded in the Condensed Consolidated Balance Sheets.

The pre-tax income/(expense) effect of derivative instruments on the Condensed Consolidated Statements of Income/(Loss) is as follows:
 
   
Quarter Ended
 
 
(in thousands)
 
March 27, 2010
   
March 28, 2009
 
             
Interest rate swaps (included in Interest expense, net)
  $ (614 )   $ (544 )
Foreign currency forwards (included in Net revenue)
    636       (783 )
Foreign currency forwards (included in Other expense, net)
    (8 )     (23 )
     Total net pre-tax income/(expense) from derivative instruments
  $ 14     $ (1,350 )

The fair value of derivative instruments in the Condensed Consolidated Balance Sheets using Level 2 inputs is as follows:

   
Fair Value of Asset/(Liability) at
 
 
(in thousands)
 
March 27, 2010
   
December 26, 2009
 
             
Interest rate swaps (included in Other noncurrent liabilities)
  $ (3,205 )   $ (3,461 )
Foreign currency forwards (included in Prepaid expenses and other current assets)
    471       839  
   Total fair value of derivative instruments
  $ (2,734 )   $ (2,622 )


8

LANCE, INC. AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements (Unaudited)

The change in unrealized pre-tax gains/(losses) included in other comprehensive income due to fluctuations in interest rates and foreign exchange rates were as follows:
 
   
Quarter Ended
 
 
(in thousands)
 
March 27, 2010
   
March 28, 2009
 
             
Interest rate swaps
  $ 256     $ (38 )
Foreign currency forwards
    (368 )     526  
 Total change in unrealized pre-tax (losses)/gains from derivative instruments
   (effective portion)
  $ (112 )   $ 488  

The counter party risk associated with our derivative instruments in an asset position is considered to be low, because we limit our exposure to strong, creditworthy counterparties.

10.  
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 inventory increased from $88.2 million as of December 26, 2009, to $110.6 million as of March 27, 2010, due to varying contractual obligations.  Our practice is to contract at least six months in advance for all major ingredients and packaging.

Customer Concentration
Sales to our largest customer, Wal-Mart Stores, Inc., were 23% and 21% of revenue for the quarters ended March 27, 2010 and March 28, 2009, respectively.  Accounts receivable at March 27, 2010 and December 26, 2009, included receivables from Wal-Mart Stores, Inc. totaling $21.5 million and $22.6 million, respectively.

11.  
COMPREHENSIVE INCOME

Comprehensive income/(loss) consisted of the following:

   
Quarter Ended
 
 
(in thousands)
 
March 27, 2010
   
March 28, 2009
 
             
Net (loss)/income
  $ (770 )   $ 6,452  
Foreign currency translation adjustment
    1,476       (889 )
Net unrealized (loss)/gain on derivatives, net of tax effect of $16 and $159
    (96 )     329  
Actuarial loss recognized in net income, net of tax effect of $0 and $21
    -       (36 )
 Total comprehensive income
  $ 610     $ 5,856  



9

LANCE, INC. AND SUBSIDIARIES

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

Forward-Looking Statements and Risk Factors

We, from time to time, make “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, those set forth under Item 1A – Risk Factors in our Annual Report on Form 10-K for the year ended December 26, 2009.

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.

Results of Operations

Management’s discussion and analysis of our financial condition and results of operations are based upon 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.  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 promotional activity, allowance for doubtful accounts, inventory valuations, self-insurance reserves, impairment analysis of goodwill and other intangible assets, useful lives and impairment of fixed assets, incentive compensation, and income taxes.  Actual results may differ from these estimates.

Quarter Ended March 27, 2010 Compared to Quarter Ended March 28, 2009

   
Quarter Ended
       
 
(dollars in thousands)
 
March 27, 2010
   
March 28, 2009
   
Favorable/
(Unfavorable)
Variance
 
                                     
Net revenue
  $ 221,617       100.0 %   $ 215,809       100.0 %   $ 5,808       2.7 %
Cost of sales
    137,868       62.2 %     131,413       60.9 %     (6,455 )     -4.9 %
  Gross margin
    83,749       37.8 %     84,396       39.1 %     (647 )     -0.8 %
Selling, general and administrative
    80,420       36.3 %     73,505       34.1 %     (6,915 )     -9.4 %
Other expense, net
    3,610       1.6 %     61       -       (3,549 )  
nm
 
  (Loss)/earnings before interest and taxes
    (281 )     -0.1 %     10,830       5.0 %     (11,111 )     -102.6 %
Interest expense, net
    860       0.4 %     812       0.4 %     (48 )     -5.9 %
Income tax (benefit)/expense
    (371 )     -0.2 %     3,566       1.7 %     3,937       110.4 %
  Net (loss)/income
  $ (770 )     -0.3 %   $ 6,452       3.0 %   $ (7,222 )     -111.9 %
   
nm = not meaningful.
 
 
 

10

LANCE, INC. AND SUBSIDIARIES

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

First Quarter Summary
During the first quarter of 2010, we incurred a net loss of $0.8 million as compared to net income of $6.5 million during the first quarter of 2009.  The economic environment continues to negatively impact our business across many channels and product categories.  The geographic regions that have been hit the hardest from unemployment overlap significantly within our core markets.  This is driving revenue softness in our convenience store channel, an important channel for us.  In addition, as more retailers drive value offerings to consumers, our promotional pricing activity has increased significantly as compared to the first quarter of 2009.  Our non-branded product categories have experienced pressure from increased and deeper promotions from competitive branded companies, which may be a result of excess inventories or a drive to recapture market share lost to private brands over the last several quarters.  In addition, we are seeing softness in same store sales by many of our large customers.  These pressures have created a highly competitive environment requiring increases in our own promotional pricing activity to maintain market share in the branded product category.

While we continued to invest in our brand-building efforts through advertising and core infrastructure during the first quarter, we plan to react to the continued softness in revenue.  We are taking steps to reduce our operating costs, making changes to our promotional approach to improve productivity, and taking actions to support our volume growth.  We believe these measures will drive  a rebound in our profit margin.

Our results for the first quarter were also impacted by approximately $2.9 million of financing commitment fees and professional fees associated with an unsuccessful bid for a targeted acquisition.  Additionally, we recorded an impairment charge of $0.6 million for the assets held for sale in Little Rock, Arkansas that was driven by recent market value declines for commercial properties.

Revenue
Total revenue increased approximately 3% from the first quarter of 2009 as follows:

(dollars in millions)
 
Quarter Ended
March 27, 2010
   
Change from Quarter Ended March 28, 2009
 
             
Branded Products
  $ 126.6       -1 %
Non-Branded Products
    95.0       7 %
   Total Revenue
  $ 221.6       3 %

As a percentage of total revenue, revenue by product category is as follows:
   
Quarter Ended
 
   
March 27, 2010
   
March 28, 2009
 
             
Branded Products
    57 %     59 %
Non-Branded Products
    43 %     41 %
   Total Revenue
    100 %     100 %

Compared to the first quarter of 2009, revenue from branded products decreased 1%. Sales of branded products were significantly impacted by increased promotional pricing activity for certain core product categories during the first quarter of 2010.  Sales of branded products to grocery stores, dollar stores, mass merchandisers and distributors increased compared to the same quarter of last year due to the acquisition of Stella D’oro, new product offerings and growth with new and existing customers.  These increases were more than offset by double-digit revenue declines from certain channels, including convenience stores, up-and-down the street customers, and food service establishments resulting from the impact of lower consumer spending in these channels.  During the first quarter of 2009, sales of branded peanut butter sandwich crackers were negatively impacted by a competitor’s peanut butter recall.

Non-branded products consist of private brands and contract manufacturing.  Revenue from non-branded products increased approximately 7% compared to the first quarter of 2009.  Growth in this category is being driven by new product offerings but has experienced competitive pressures from higher promotional pricing activity from branded competitors.


11

LANCE, INC. AND SUBSIDIARIES

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

Gross Margin
Gross margin decreased $0.6 million, or 1.3% as a percentage of revenue, compared to the first quarter of 2009.  The decrease in gross margin was due to higher promotional pricing activity, write-offs and aging of certain inventory, unfavorable customer and product mix, increased labor costs and higher depreciation expense.  Largely offsetting these declines in gross margin were lower ingredient costs and increased sales volume as compared to the first quarter of 2009.

Selling, General and Administrative Expenses
Selling, general, and administrative expenses increased $6.9 million, or 2.2% as a percentage of revenue, as compared to the first quarter of 2009.  Advertising costs increased $2.0 million as we continue to invest in our brands.  Employee-related expenses increased $1.6 million due to higher compensation costs and higher benefit plan costs associated with our self-insured medical plan.  Shipping and distribution expenses increased $1.2 million due to increases in fuel costs.  Additionally, certain fixed infrastructure costs, such as rent and depreciation, increased compared to the first quarter of 2009.  There was also an increase in professional fees to support our strategic initiatives and an unsuccessful bid for a targeted acquisition.

Other Expense, Net
Other expense, net increased $3.5 million primarily due to financing commitment fees of $2.7 million associated with an unsuccessful bid for a targeted acquisition.  Additionally, we recorded an impairment charge of $0.6 million related to the assets held for sale in Little Rock, Arkansas.
 
 
Income Tax Expense
Our effective income tax rate was 32.5% in the first quarter of 2010 compared to 35.6% in the first quarter of 2009.  The decrease in the effective income tax rate was the result of lower earnings before taxes and higher net favorable permanent tax differences.

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 cannot 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 and dividends.  Sufficient liquidity is expected to be 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.

Operating Cash Flows
Net cash used in operating activities was $1.5 million during the first quarter of 2010 and $3.9 million during the first quarter of 2009.  Cash used from changes in operating assets and liabilities decreased from $20.5 million during the first quarter of 2009 to $12.8 million in the first quarter of 2010, due primarily to lower levels of inventory at March 27, 2010 compared to December 26, 2009.

Investing Cash Flows
Net cash used in investing activities was $7.5 million for the first quarter of 2010.  Capital expenditures for fixed assets, principally manufacturing equipment and building improvements, totaled $7.6 million during the first quarter of 2010, partially funded by proceeds from the sale of assets of $0.1 million.  Capital expenditures are expected to continue at a level sufficient to support our strategic and operating needs.  Capital expenditures for fiscal 2010 are projected to be between $35 million and $40 million a nd funded by net cash flow from operating activities, cash on hand, and our existing credit facilities.

Net cash used in investing activities during the first quarter of 2009 represented capital expenditures of $5.2 million, partially offset by proceeds from the sale of fixed assets of $0.2 million.  Capital expenditures for purchases of fixed assets were $40.7 million for the year ended December 26, 2009.


12

LANCE, INC. AND SUBSIDIARIES

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

Financing Cash Flows
During both of the first quarters of 2010 and 2009, we paid dividends of $0.16 per common share totaling $5.1 million and $5.0 million, respectively.  We received cash and related tax benefits of $0.7 million and $1.7 million during the first quarter of 2010 and 2009, respectively, as a result of stock option exercises.  During the first quarter of 2010, we repurchased 56,152 shares of common stock from employees to cover withholding taxes payable by employees upon the vesting of restricted stock for $1.3 million.  Proceeds from our existing credit facilities of $15.0 million were primarily used to fund purchases of fixed assets during the first quarter of 2010.   On May 4 , 2010, the Board of Directors declared a quarterly cash dividend of $0.16 per share, payable on May 25 , 2010, to stockholders of record on May 17 , 201 0 .

Debt
Additional borrowings available under our existing U.S. and Canadian credit facilities totaled $20.9 million as of March 27, 2010.  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 $15.7 million as of March 27, 2010.

Contractual Obligations
In order to fix a portion of our ingredient, packaging and energy costs, we have entered into forward purchase agreements with certain suppliers based on market prices, forward price projections and expected usage levels.  Purchase commitments increased from $88.2 million as of December 26, 2009, to $110.6 million as of March 27, 2010, due to varying contractual obligations.  We are currently contracted at least six 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, Canadian Bankers’ Acceptance discount rate, Canadian prime rate and U.S. base rate interest.  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 $0.6 million lower without these agreements during the first quarter of 2010.

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 September 2010.  During the first quarter of 2010, foreign currency fluctuations unfavorably impacted pre-tax earnings by $1.4 million compared to the first quarter of 2009.  However, the decrease in pre-tax earnings was almost entirely mitigated by the favorable effect of derivative forward contracts of $1.4 million during the first quarter of 2010 compared to the first quarter of 2009.  Due to foreign currency fluctuations during the first quarter of 2010 and 2009, we recorded gains of $1.5 million and losses of $0.9 million, respectively, in other comprehensive income because of the translation of the subsidiary’s financial statements into U.S. dollars.

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 quarters of 2010 and 2009, net bad debt expense was $0.2 million and $0.7 million, respectively.  Allowances for doubtful accounts were $1.1 million at March 27, 2010 and $1.0 million at December 26, 2009.


13

LANCE, INC. AND SUBSIDIARIES

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, we carried out 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 pursuant to Rule 13a-15(b) of the Securities and Exchange Act of 1934 (the “Exchange Act”).  Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective for the purpose of providing reasonable assurance that the information required to be disclosed in the reports we file or submit under the Exchange Act (1) is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and (2) is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosures.

There have been no changes in our internal control over financial reporting during the quarter ended March 27, 2010, that have materially affected, or that are reasonably likely to materially affect, our internal controls over financial reporting.

14

LANCE, INC. AND SUBSIDIARIES

PART II.  OTHER INFORMATION

Item 1.  Legal Proceedings

We are currently subject to various routine legal proceedings and claims incidental to our business.  In our opinion, such routine litigation and claims should not have a material adverse effect upon our consolidated financial statements taken as a whole.

Item 1A.  Risk Factors

There have been no material changes to the factors disclosed in Item 1A – Risk Factors in our Annual Report on Form 10-K for the year ended December 26, 2009.

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

Our Credit Agreement dated October 20, 2006, restricts our payment of cash dividends and repurchases of common stock if, after payment of any dividends or any repurchases of common stock, our consolidated stockholders’ equity would be less than $125.0 million.  At March 27, 2010, our consolidated stockholders’ equity was $271.4 million.

In December 2008, the Board of Directors approved the repurchase of up to 100,000 shares of common stock for the purpose of acquiring shares of common stock from employees to cover withholding taxes payable by employees upon the vesting of shares of restricted stock when sales of common stock by employees are not permitted.  During the first quarter of 2009, we repurchased 6,741 shares of common stock for this purpose.  During the first quarter of 2010, we repurchased the following shares of common stock for this purpose:

   
Total Number
of Shares Purchased
   
Average Price Paid Per Share
   
Total Number of Shares
Repurchased as Part of Publically
Announced Plans or Programs
   
Maximum Number of Shares
That May Yet to be Purchased
Under the Plans or Programs
 
December 27, 2009 – January 23, 2010
    6,726     $ 24.34       -       86,533  
January 24, 2010 – February 20, 2010
    -       -       -       86,533  
February 21, 2010 – March 27, 2010
    49,426     $ 22.19       -       37,107  


15

LANCE, INC. AND SUBSIDIARIES

Item 6.  Exhibits

Exhibit Index

No.
 
Description
     
3.1
 
Restated Articles of Incorporation of 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
 
Bylaws of Lance, Inc., as amended through November 1, 2007, incorporated herein by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed on November 7, 2007 (File No. 0-398).
     
10.1*
 
2010 Annual Performance Incentive Plan for Officers, filed herewith.
     
10.2*
 
2010 Three-Year Performance Incentive Plan for Officers and Key Managers, filed herewith.
     
10.3*
 
Retirement Agreement, effective January 15, 2010, between the Registrant and Earl D. Leake, filed herewith.
     
10.4
 
First Amendment, dated March 19, 2010, to the Credit Agreement dated as of October 20, 2006, among the Registrant, Tamming Foods, Ltd., Bank of America, National Association, Wells Fargo  Securities, LLC (formally Wachovia Capital Markets, LLC) and the other lenders named therein, 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.
     
* Management contract.
     
Items 3, 4 and 5 are not applicable and have been omitted.
 

16

LANCE, INC. AND SUBSIDIARIES

 
 
 
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.
 
 
LANCE, INC.
   
   
 
By:
  /s/ Rick D. Puckett
 
 
Rick D. Puckett
 
 
Executive Vice President, Chief Financial Officer,
 
 
Treasurer and Secretary
 
 
Dated:  May 5, 2010

17

 

Exhibit 10.1

LANCE, INC.

2010 Annual Performance Incentive Plan for Officers

Purposes and Introduction
 
 
The 2010 Annual Performance Incentive Plan provides for Performance Awards under the 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 2010 Annual Performance Incentive Plan for Officers (the “2010 Plan”) are to:
 
· Motivate behaviors that lead to the successful achievement of specific sales, financial and operations goals that support Lance’s 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 Lance and communicate to employees that greater responsibility carries greater rewards.
 
For 2010, participants will be eligible to earn incentive awards based on the performance measures listed on Exhibit A hereto and defined as follows:
 
1.Net Revenue is defined as sales and other operating revenue, net of returns, allowances, discounts and other sales deduction items for the 2010 fiscal year, as audited and reported in the Company’s Form 10-K for the 2010 fiscal year.
 
2.Corporate Earnings Per Share (“Corporate EPS”) is defined as the fully diluted earnings per share of the Company for the 2010 fiscal year, as audited and reported in the Company’s Form 10-K for the 2010 fiscal year.
 
3.Cash Flow From Operations is defined as the net cash flow from operating activities for the 2010 fiscal year, as audited and reported in the Company’s Form 10-K for the 2010 fiscal year.
 
To achieve the maximum motivational impact, plan goals and the awards that will be received for meeting those goals will be communicated to participants as soon as practical after the 2010 Plan is approved by the Compensation Committee of the Board of Directors.
 
Each participant will be assigned a Target Incentive, stated as a percent of base salary.  The Target Incentive Award, or a greater or lesser amount, will be earned at the end of the Plan Year based on the attainment of predetermined goals.
 
Base salary shall be the annual rate of base compensation for the Plan Year which is set no later than April of such Plan Year; provided that for any award intended to satisfy the Performance-Based Exception, base salary shall be the annual rate of base compensation for the Plan Year which is set no later than March 31 of such Plan Year.
 
Not later than 75 days after fiscal year-end, 100% of the awards earned will be payable to participants in cash.
 
Plan Year
The period over which performance will be measured is the Company’s 2010 fiscal year (the “Plan Year”).
 
Eligibility and Participation
Eligibility in the Plan is limited to Officers of Lance who are key to Lance’s success. The Compensation Committee of the Board of Directors will review and approve participants nominated by the President and 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 may not participate in any other annual incentive plan (e.g., sales incentives, etc.) offered by Lance or its affiliates.  Exhibit B includes the list of 2010 participants approved by the Compensation Committee at its February 8, 2010 meeting.
 
Target Incentive 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.
Exhibit B lists the Target Incentive for each participant for the Plan Year.  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 Measures and Award Funding
The 2010 performance measures are on Exhibit A attached hereto.
 
                   Threshold                    Target                     Maximum
Award Level Funded                                                       50%                      100%                        200%
 
 
 
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 measure is reached.
 
The payout for the Net Revenue performance measure shall not exceed Target if the Corporate EPS performance measure does not equal or exceed its Threshold.
 
The performance measures 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 2010 and determined the performance level achieved.
 
 
Threshold, Target and Maximum levels will be defined at the beginning of each Plan Year for each performance measure.
 
The following definitions for the terms 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
 
Individual Performance
Each participant will receive 35% of his or her Target Incentive Award based on Net Revenue, 45% of his or her Target Incentive Award based on Corporate EPS, and 20% of his or her Target Incentive Award based on Cash Flow From Operations.
 
Form and
Timing of
Payments
Final award payments will be made in cash as soon as practicable after award amounts are approved by the Compensation Committee of the Board of Directors, but not more than 75 days after the end of the Company’s 2010 fiscal 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, pro rata payouts will be made at the greater of (1) Target Incentives or (2) actual results for the year-to-date, based on the number of days in the Plan Year preceding the Change in Control.  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 prorations for executive officers, including the President and Chief Executive Officer, shall be approved by the Compensation Committee.
 
Stockholder Approval
 
The 2010 Plan and the awards hereunder are made pursuant to the Incentive Plan, which was approved by the Company’s stockholders at the Annual Meeting of Stockholders held on April 26, 2007.
 
Governance
The Compensation Committee of the Board of Directors of Lance, Inc. is ultimately responsible for the administration and governance of the Plan.  Actions requiring Committee approval include final determination of plan eligibility and participation, identification of performance measures, performance objectives and final award determination.  The 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 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 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 Committee shall be conclusive and binding on all participants.

 
 

 

Exhibit A

Performance Measures

Performance Measure                                                                  Weight                                             Threshold                     Target            Maximum

Net Revenue*                                                                      35%                                                 $930 million              $975 million     $1,030 million

Corporate EPS*                                                            45%                                     $1.20                          $1.45                         $1.75
   
Cash Flow From Operations*                                                  20%                                            $71 million                 $83 million          $97 million

_______________

 
* Excludes acquisitions, divestitures and special items, which are significant one-time income or expense items.

 
 

 

Exhibit B


 
Name
 
Title
 
Award
Percentage
   
Target
Incentive
 
               
David V. Singer
President and Chief Executive Officer
    100 %   $ 700,000  
                   
Rick D. Puckett
Executive Vice President,
Chief Financial Officer,
Treasurer and Secretary
    60 %   $ 248,000  
                   
Glenn A. Patcha
Senior Vice President –
Sales and Marketing
    50 %   $ 185,600  
                   
Blake W. Thompson
Senior Vice President - Supply Chain
    50 %   $ 154,700  
                   
Kevin A. Henry
Senior Vice President and Chief Human Resources Officer
    ** %   $ **   
                   
Earl D. Leake
Senior Vice President
    50 %   $ 140,300  
                   
Margaret E. Wicklund
Vice President, Controller and Assistant Secretary
    ** %   $ **   

____________________
**
Amounts are omitted for participants other than the Chief Executive Officer, Chief Financial Officer and other executive officers who were named in the Summary Compensation Table of the Company’s Proxy Statement for the 2010 Annual Meeting of Stockholders.


Exhibit 10.2

LANCE, INC.

2010 Three-Year Performance Incentive Plan for Officers and Key Managers


Purposes and Introduction
 
The 2010 Three-Year Performance Incentive Plan for Officers and Key Managers provides for Stock Options, Restricted Stock and Performance Awards under the 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 2010 Three-Year Performance Incentive Plan for Officers and Key Managers (the “2010 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 the performance measures specified below.
 
·            Provide a way to attract and retain key executives and managers who are critical to Lance’s future success.
 
·            Provide competitive total compensation for executives and managers commensurate with Company performance.
 
To achieve the maximum motivational impact, the Plan and the awards opportunities will be communicated to participants as soon as practical after the 2010 Plan is approved by the Compensation Committee of the Board of Directors.
 
Each officer will be assigned a Target Incentive based on market and peer group data and each other participant will be assigned a Target Incentive, stated as a percent of base salary.  The Chief Executive Officer is assigned a Target Incentive based on his Employment Agreement.  Concurrently with the approval of the 2010 Plan, 25% of the Target Incentive will be awarded in the form of Nonqualified Stock Options and 25% will be awarded in the form of Restricted Stock.  The final 50% of the Target Incentive will be in the form of a Performance Award to be settled in shares of Common Stock after the completion of the 2010, 2011 and 2012 fiscal years (the “Performance Period”), based on the attainment of predetermined goals.
 
 
For the 2010 Plan, participants will be eligible to earn the Performance Award based on the matrix on Exhibit A-1 hereto which incorporates the financial performance measures on Exhibit A-2 hereto, excluding special items and any acquisition or divestiture related activity for the first 12 months after the closing of the acquisition or divestiture, and relative total shareholder return of the peer companies listed on Exhibit A-3 hereto.  The financial performance measures and relative total shareholder return are defined as follows:
 
1.  Net Revenue (“Net Revenue”) is defined as the cumulative revenue and other operating revenue, net of returns, allowances, discounts and other sales deduction items for the 2010, 2011 and 2012 fiscal years, as audited and reported in the Company’s Forms 10-K for the 2010, 2011 and 2012 fiscal years.
 
2.  Corporate Earnings Per Share (“Corporate EPS”) is defined as the cumulative fully diluted earnings per share of the Company for the 2010, 2011 and 2012 fiscal years, as audited and reported in the Company’s Forms 10-K for the 2010, 2011 and 2012 fiscal years.
 
3.  Return on Invested Capital (“ROIC”) is defined as the average of the ROIC for the 2010, 2011 and 2012 fiscal years, as audited and reported in the Company’s Forms 10-K for the 2010, 2011 and 2012 fiscal years, calculated as follows:
 
  Operating Income  x (1 - Tax Rate)
Average Equity + Average Net Debt
 
Operating Income shall be the Company’s actual earnings before interest and taxes and excluding other income and expense.
 
Tax Rate for ROIC shall be the Company’s actual total effective income tax rate for each year.
 
Average Net Debt shall be the Company’s average debt less average cash for each year.
 
4.  Relative Total Shareholder Return (“RTSR”) is defined as the total shareholder return for Lance relative to a peer group of 24 companies.  Each peer company, including Lance will be compared to each other and put into four quadrants ranked from highest total shareholder return to lowest, with the highest in Quadrant One and the lowest in Quadrant Four.
 
Total Shareholder Return is defined as the return of $100 invested in each stock at the beginning of the period compared to the value of that $100, with dividends reinvested, at the end of the measurement period.  The starting number of shares purchased for each peer company, including Lance, with $100 will be based on the average weekly stock price for the preceding year (2009).
 
If any peer company ceases to be publicly traded during the Performance Period, the Russell 2000 Index will be inserted in its place; if a second peer company ceases to be publicly traded, the S&P 500 Index will be inserted in its place.
 
Base salary shall be the annual rate of base compensation for the 2010 fiscal year  which is in effect on February 22, 2010; provided that for any award intended to satisfy the Performance-Based Exception, base salary shall be the annual rate of base compensation for the fiscal year which is set no later than March 31 of such fiscal year.
 
Eligibility and Participation
Eligibility in the Plan is limited to Executive Officers and Key Managers in Salary Grade 18 and above who are key to Lance’s success. The Compensation Committee will review and approve participants nominated by the President and Chief Executive Officer.  An employee hired or promoted into an eligible position during the Performance Period will not participate in the 2010 Plan.  Participation in the 2010 Plan does not guarantee participation in any subsequent long-term incentive plans but will be reevaluated and determined on an annual basis.
 
Exhibit A-4 and Exhibit A-5 include the list of 2010 Plan participants approved by the Compensation Committee on February 22, 2010.
 
Target Incentives and
Performance Measures
Each participant will be assigned a Target Incentive as specified above.  Participants, other than officers, will be assigned to a Performance Tier by Salary Grade.
 
Performance Tier                                  Performance Tier Description
 
1                      Officer
2                      Non-Officer Vice President
                             3                      Key Managers
 
For the Performance Awards, the 2010-2012 financial performance measures are on Exhibit A-1 attached hereto.  Percent of payout will be determined according to the matrix on Exhibit A-2 attached hereto which encompasses RTSR and the financial performance measures.
 
The performance measures will be communicated to each participant as soon as practicable after it has been established.  Final Performance Awards will be calculated after the Compensation Committee has reviewed the Company’s audited financial statements for 2010, 2011 and 2012 and determined the performance level achieved.
 
Exhibit A-4 and Exhibit A-5 list the Target Incentives for each participant for the 2010 Plan as determined by the Compensation Com­mittee.  Target Incentives will be communicated to each participant as close to the beginning of the year as practicable, in writing.  Target Incentives, except for Officers, will be calculated by multiplying each participant’s base salary by the appropriate Performance Tiers and percentages, as described below.
 
Percentage of Base Salary
Performance Tier                                  for 2010 Target Incentives
2                                35-45%
                                3                                15-30%
 
Final Performance Awards will be calculated, paid and granted after the Compensation Committee has reviewed the Company’s audited financial statements for 2010, 2011 and 2012 and determined the performance levels achieved.
 
Awards
As further specified on Exhibit B-1 and Exhibit B-2, the Awards under the 2010 Plan shall be as follows:
 
1.  Stock Options.  Each participant shall receive Stock Options equal to 25% in value of his or her Target Incentive.  The number of Stock Options awarded to each participant 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 the awards are approved by the Compensation Committee 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 date of grant and the term of each Stock Option will be ten years.
 
2.  Restricted Stock.  Each participant shall receive Restricted Stock equal to 25% in value of his or her Target Incentive.  The number of shares of Restricted Stock awarded to each participant will equal the dollar value of the participant’s Restricted Stock Incentive divided by the closing price of the Common Stock on the date of award, with the results rounded up to the nearest multiple of three shares.
 
The award date for Restricted Stock will be the date the awards are approved by the Compensation Committee and the value shall be the Fair Market Value of the Common Stock on the award date.  Each award of Restricted Stock will vest in three substantially equal annual installments beginning one year after the date of award.
 
3.  Performance Awards.  Each participant shall receive a Performance Award equal to 50% in value of his or her Target Incentive.
 
As a Performance Award, the number of shares of the Company’s Common Stock awarded will equal the applicable dollar value divided by the closing price for the Company’s Common Stock on the award date, with the result rounded up to the nearest multiple of three shares.  Such shares of Common Stock will be fully vested on the award date.
 
For purposes of the 2010 Plan, the award date for shares of Common Stock as a Performance Award will be the date established by the Compensation Committee after completion of the Performance Period and the applicable performance level has been determined.
 
Form and Timing of
Awards
Awards will be made as soon as practicable after the performance level has been determined and approved by the Compensation Committee.  All awards will be rounded to the nearest multiple of three shares.
 
Change In Status
An employee hired or promoted into an eligible position during the Performance Period will not participate in the 2010 Plan.
 
Certain
Terminations of
Employment
Performance Awards
 
In the event a participant voluntarily terminates employment (other than by Retirement) or is terminated involuntarily during or after the end of the Performance Period but before the applicable award date, the participant shall not receive any Performance Award hereunder.
 
In the event of a participant’s death or Disability before the end of the Performance Period, any Performance Award will be determined on 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 date, any Performance Award will be determined based on actual performance and paid out all in cash on or about the applicable award date.
 
If the event of a participant’s Retirement during or after the end of the Performance Period but before the applicable award date, any Performance Award will be determined based on actual performance and paid out all in cash on or about the applicable award date.
 
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) :  Stock Options, whether vested or unvested, cease to be exercisable as of the date of termination.
 
Involuntary termination :  Vested Stock Options will remain exercisable for a period of 30 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.
 
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.
 
Restricted Shares
 
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 (including any Restricted Stock granted in connection with a Performance Award following completion of the Performance Period) 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.
 
“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, (i) unvested Stock Options and unvested Restricted Stock will vest as provided in the Incentive Plan and (ii) for outstanding Performance Awards pro rata payouts will be made all in cash at the greater of (1) Target Incentive or (2) actual results 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.
 
Communications
Progress reports should be made to participants annually, showing performance results.
 
Executive Officers
Notwithstanding any provisions to the contrary above, participation, awards  and prorations for Executive Officers, including the President and Chief Executive Officer, shall be approved by the Compensation Committee.
 
Stockholder
Approval
The 2010 Plan and the awards hereunder are made pursuant to the Incentive Plan, which was approved by the Company’s stockholders at the Annual Meeting of Stockholders held on April 26, 2007.
 
Governance
The Compensation Committee of the Board of Directors of Lance, Inc. is ultimately responsible for the administration and governance of the Plan.  Actions requiring Committee approval include final determination of plan eligibility and participation, identification of performance measures and goals, final award components and determination and amendments to the Plan.  For purposes of the Plan, acquisition performance will be excluded for the first twelve months after the acquisition and included in the results thereafter.  The Committee may adjust any award due to extraordinary events such as acquisitions, dispositions, required accounting adjustments or similar events, all as specified in Section 11(d) of the Incentive Plan; provided, however, that the 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 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 Committee shall be conclusive and binding on all participants.


 
 

 


Exhibit A-1
Matrix


 
 
RELATIVE SHAREHOLDER RETURN QUADRANT
 
Attainment
Quartile 4
Quartile 3
Quartile 2
Quartile 1
FINANCIAL
PARAMETER
PERFORMANCE
Maximum
75%
100%
175%
250%
Target
50%
75%
100%
150%
Threshold
25%
50%
75%
100%
Below Threshold
0%
25%
50%
75%



 
 

 


Exhibit A-2
Performance Measures



   
2010 Three Year Plan
 
   
Weighting
   
Threshold
@50%
   
Target
@100%
   
Maximum
@200%
 
Net Revenue
     Cumulative for 2010 - 2012
    50 %   $ 2,860     $ 3,044     $ 3,328  
                                 
EPS
     Cumulative for 2010 - 2012
    30 %   $ 3.97     $ 4.80     $ 5.79  
                                 
ROIC
      Average for 2010 - 2012
    20 %     9.0 %     12.0 %     15.0 %
                                 
Notes:
 
  1    Acquisitions and divestitures are excluded for the first twelve months post close

 

 
 

 

Exhibit A-3
Peer Companies

 
Cap Size
 
Ticker
   
2006 Avg Weekly Price
   
2009 Avg Weekly Price
   
3 Yr Investment of $100 is worth
   
2009 Quartile Rank
 
American Italian Pasta Company
Mid
 
AIPC
    $ 7.31     $ 29.76     $ 475.76       1  
Diamond Foods
Mid
 
DMND
    $ 16.97     $ 27.91     $ 209.22       1  
Green Mountain
Mid
 
GMCR
    $ 11.14     $ 60.52     $ 202.25       1  
Church & Dwight
Mid
 
CHD
    $ 37.57     $ 54.85     $ 160.89       1  
TreeHouse Foods
Mid
 
THS
    $ 25.15     $ 31.35     $ 154.50       1  
Smuckers
Mid
 
SJM
    $ 44.38     $ 47.78     $ 139.13       1  
Ralcorp
Mid
 
RAH
    $ 43.91     $ 58.75     $ 136.00       2  
General Mills
Large
 
GIS
    $ 52.34     $ 58.73     $ 134.35       2  
Lance
Mid
 
LNCE
    $ 21.79     $ 23.26     $ 120.71       2  
J&J Snacks
Mid
 
JJSF
    $ 33.36     $ 38.12     $ 119.77       2  
Lancaster Colony Group
Mid
 
LANC
    $ 41.50     $ 45.14     $ 119.71       2  
Kellogg
Large
  K   $ 47.35     $ 45.86     $ 112.36       2  
Hormel Foods
Mid
 
HRL
    $ 35.60     $ 34.55     $ 107.35       3  
Heinz
Large
 
HNZ
    $ 40.56     $ 37.48     $ 105.43       3  
DelMonte Foods
Mid
 
DLM
    $ 11.04     $ 9.20     $ 102.31       3  
ConAgra
Large
 
CAG
    $ 22.91     $ 19.30     $ 99.72       3  
Campbells
Large
 
CPB
    $ 34.90     $ 30.17     $ 96.86       3  
Flowers
Mid
 
FLO
    $ 27.68     $ 23.22     $ 85.85       3  
Kraft
Large
 
KFT
    $ 32.18     $ 26.02     $ 84.46       4  
Sara Lee
Large
 
SLE
    $ 17.12     $ 10.12     $ 71.15       4  
Hershey Co
Large
 
HSY
    $ 53.12     $ 36.75     $ 67.37       4  
Alberto Culver
Mid
 
ACV
    $ 43.67     $ 25.22     $ 67.07       4  
Hain Celestial
Mid
 
HAIN
    $ 25.69     $ 16.52     $ 66.18       4  
Hansen Natural
Mid
 
HANS
    $ 84.60     $ 35.04     $ 45.39       4  
 

 
 

 

Exhibit A-4
2010 Three-Year Performance Incentive Plan for Officers

Name
Title
 
Target Incentive
 
         
David V. Singer
President and Chief Executive Officer
  $ 1,600,000  
Rick D. Puckett
Executive Vice President, Chief Financial Officer, Secretary and Treasurer
  $ 475,000  
Glenn A. Patcha
Senior Vice President – Sales and Marketing
  $ 420 ,000  
Blake W. Thompson
Senior Vice President – Supply Chain
  $ 350 ,000  
Kevin A. Henry
Senior Vice President and Chief Human Resources Officer
  $ **  
Margaret E. Wicklund
Vice President, Controller and Assistant Secretary
  $ **  

___________________
**
Amounts are omitted for participants other than the Chief Executive Officer, Chief Financial Officer and other executive officers who were named in the Summary Compensation Table of the Company’s Proxy Statement for the 2010 Annual Meeting of Stockholders.

 
 

 

Exhibit B-1
2010 Three-Year Performance Incentive Plan for Officers

 
 
Name
 
Stock Option  Incentive
   
Nonqualified
Stock
Options
   
Restricted
 Stock
  Awards
   
Restricted
 Stock   Shares
   
Performance
 Award Opportunity
 
                               
David V. Singer
 
  $ 400,000       85,287     $ 400,000       18,198     $ 800,000  
Rick D. Puckett
  $ 118,750       25,320     $ 118,750       5,403     $ 237,500  
                                         
Glenn A. Patcha
  $ 105,000       22,389     $ 105,000       4,776     $ 210,000  
                                         
Blake W. Thompson
  $ 87,500       18,657     $ 87,500       3,981     $ 175,000  
                                         
Kevin A. Henry
  $   **     **     $   **     **     $   **
                                         
Margaret E. Wicklund
  $   **     **     $   **     **     $   **

___________________
**
Amounts are omitted for participants other than the Chief Executive Officer, Chief Financial Officer and other executive officers who were named in the Summary Compensation Table of the Company’s Proxy Statement for the 2010 Annual Meeting of Stockholders.




Exhibit 10.3

STATE OF NORTH CAROLINA
RETIREMENT AGREEMENT
COUNTY OF MECKLENBURG

THIS RETIREMENT AGREEMENT (this “Agreement”) is entered into as of the Effective Date (as defined below) by and between LANCE, INC., a North Carolina corporation (the “Company”), and EARL D. LEAKE (“Leake”).

STATEMENT OF PURPOSE
Leake has been employed by the Company for many years and has contributed materially to the successful operation of the Company’s business.  Leake has advised the Company of his intention to retire, and the Company has expressed the desire to continue to have the benefit of Leake’s advice, counsel and services during a transition period while his duties and responsibilities are being transitioned to others.  The Company recognizes Leake’s dedication to the Company and has expressed its gratitude for his effective service.  Leake is currently a Senior Vice President of the Company.

During his employment with the Company, Leake entered into an Amended and Restated Compensation and Benefits Assurance Agreement and an Amended and Restated Executive Severance Agreement, both dated April 24, 2008.  This Agreement terminates and replaces both of those agreements.

The parties have agreed to resolve all issues relating to Leake’s employment with the Company and his retirement from employment on the terms and conditions set forth in this Agreement.

AGREEMENT

NOW, THEREFORE , in consideration of the Statement of Purpose and the terms and provisions of this Agreement, the parties, meaning to be legally bound, hereto mutually agree as follows:

1.   Definitions.   As used herein, the following terms shall have the following meanings:
 
 
(a)
Affiliate ” with reference to the Company means any Person that directly or indirectly is controlled by, or is under common control with, the Company, including each subsidiary of the Company.  For purposes of this definition the term “control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through ownership of voting securities, by contract or otherwise.

 
(b)
Amended and Restated Compensation and Benefits Assurance Agreement ” means that certain Amended and Restated Compensation and Benefits Assurance Agreement between Leake and the Company, entered into on April 24, 2008.

 
(c)
Amended and Restated Executive Severance Agreement ” means that certain Amended and Restated Executive Severance Agreement between Leake and the Company, entered into on April 24, 2008.

 
(d)
Code ” means the Internal Revenue Code of 1986, as amended.

 
(e)
Effective Date ” with reference to this Agreement means the eighth (8th) day following the execution of this Agreement by Leake (if not previously revoked by Leake), if not a Saturday, Sunday or legal holiday, and if such day is a Saturday, Sunday or legal holiday, then the first business day following such eighth (8th) day.

 
(f)
Person ” means any individual, corporation, association, partnership, business trust, joint stock company, limited liability company, foundation, trust, estate or other entity or organization of whatever nature.

 
(g)
Retirement Benefit ” means the “Retirement Benefit” as defined in, and in an amount determined in accordance with, the Amended and Restated Executive Severance Agreement.

 
(h)
Retirement Date ” means March 31, 2011.

 
(i)
Termination Date ” means the date of Leake’s Termination of Employment.

 
(j)
Termination of Employment ” means Leake’s “termination of employment” with the Company within the meaning of Section 409A of the Code and the Company’s 409A administrative policies, if any.

2.   Retirement Date; Duties Pending Retirement; Resignation From Offices.   The parties agree that Leake will retire from his employment with the Company, effective on the Retirement Date.
 
During the period from the Effective Date of this Agreement until the Retirement Date, Leake will publicly support and diligently assist the Company in the transition of his duties and responsibilities to others, and engage in special projects and perform such other tasks consistent with his position as Senior Vice President, as reasonably requested by the Company’s President or his designee.

Leake does hereby resign from all offices, committees and positions he holds with the Company and its Affiliates (except the position of Senior Vice President of the Company), with such resignation to be effective on the Effective Date of this Agreement.  Leake does hereby resign from his position as Senior Vice President of the Company, with such resignation to be effective on the Retirement Date.  Leake will execute any additional resignation letters, forms or other documents as requested by the Company that acknowledge his resignation from such employment, positions, committees and offices.

3.   Payments And Benefits To Be Provided By The Company.   The Company agrees to pay or provide Leake with payments and benefits under this Agreement as follows:
 
 
(a)
Leake will continue to receive his current salary and current annual incentive level (as a participant in the 2009 Annual Performance Incentive Plan for Officers, and at the same incentive level as a participant in the Company’s 2010 Annual Performance Incentive Plan for Officers), through January 1, 2011, in accordance with the Company’s generally applicable policies and procedures; because he will not be required to work normal business hours during 2010, Leake agrees that salary continuation during this period shall exhaust Leake’s accrued vacation entitlement and any additional accrual of vacation or other paid time off relating to Leake’s employment and service with the Company up to and including the Retirement Date.

 
(b)
Notwithstanding Leake’s continuing service with the Company until the Retirement Date as set forth above, Leake will receive no salary or annual or long-term incentive compensation for the period from January 1, 2011 until the Retirement Date, provided, however , that Leake will receive the minimum nominal amount in salary sufficient to maintain Leake’s status as an employee to continue Leake’s eligibility for the Company’s normal employee and welfare benefits.

 
(c)
Leake will continue to receive an automobile allowance, at the same level as is currently in force, for the period from the Effective Date of this Agreement to the Retirement Date.
 
 
 
(d)
Leake will receive payment, in a lump sum, payable within thirty days of the Termination Date, of the Retirement Benefit; provided, however, that payment of the Retirement Benefit shall not be made until the date six months after the Termination Date to the extent required by Section 409A(a)(2)(B)(i) of the Code.

 
(e)
Leake is a participant in various Company-sponsored incentive plans, including the following:

(i)  
2006 Five-Year Performance Equity Plan for Officers and Senior Managers;
 
(ii)  
2007 Three-Year Performance Incentive Plan for Officers;
 
(iii)  
2008 Three-Year Performance Incentive Plan for Officers and Key Managers (as amended through December 11, 2008);
 
(iv)  
2009 Three-Year Performance Incentive Plan for Officers and Key Managers; and
 
(v)  
2009 Annual Performance Incentive Plan for Officers.
 
All of Leake’s vested interests in these identified plans shall be determined in accordance with Leake’s retirement on the Retirement Date, and shall be paid when and as provided in, and otherwise subject to, the terms, provisions and conditions of the applicable plans, and nothing in this Agreement shall modify or override the terms, provisions or conditions of those plans.
 
 
(f)
Leake will be permitted to participate in the Company’s 2010 Annual Performance Incentive Plan for Officers at the same incentive level as in the 2009 Annual Performance Incentive Plan for Officers.

 
(g)
Leake will not be a participant in the Company’s 2010 Three-Year Performance Incentive Plan for Officers and Key Managers, or in any 2011 Annual Performance Incentive Plan for Officers, or any multi-year performance incentive plan beginning in 2011.

 
(h)
Leake has participated, and will continue to be eligible to participate on the same basis as other active employees of the Company, in other Company sponsored benefit plans, including the Company’s Profit-Sharing and 401(k) Retirement Savings Plan, Compensation Deferral and Benefit Restoration Plan, Employee Stock Purchase Plan, group health plan and other welfare benefit plans (other than vacation, as provided above); all of Leake’s vested interests in such benefit plans shall be paid when and as provided in, and otherwise subject to, the terms, provisions and conditions of the applicable plans, and nothing in this Agreement shall modify or override the terms, provisions or conditions of those plans, and in that regard Leake shall become eligible for continuation coverage for health benefits under the group health plan following his Retirement Date to the extent (if any) and in the manner provided by the “COBRA” provisions of federal law.

4.   Termination Of All Other Benefits Not Specified In This Agreement. The Company and Leake acknowledge and agree that all other benefits and perquisites related to or resulting from Leake’s employment and positions with the Company and its Affiliates, which are not described and provided for in this Agreement, terminate on the Effective Date, and that the Company has no further obligations with respect thereto.  It is specifically agreed that the Amended and Restated Compensation and Benefits Assurance Agreement and the Amended and Restated Executive Severance Agreement, both dated April 24, 2008, are hereby terminated and replaced by the compensation and benefits provided in this Agreement.
 
5.   Employment Taxes And Withholdings.   Leake acknowledges and agrees that the Company shall withhold from the payments and benefits described in this Agreement all taxes, including income and employment taxes, required to be so deducted or withheld under applicable law.
 
6.   Return Of Company Property.   On or before the Termination Date, Leake shall return to the Company all Company property that Leake has had in Leake’s possession at any time, including, but not limited to, Company records, documents, tools, credit cards, entry cards, identification cards, identification badges, keys, key fobs, laptop computers, computer software, diskettes, tapes, passwords, sales materials, personnel data, handheld devices, all equipment issued by the Company to Leake, and any materials of any kind which contain or embody any proprietary or confidential information of the Company (and all reproductions thereof).
 
7.   Confidential Information.   Leake acknowledges that by reason of Leake’s employment by the Company, Leake has had access to certain Company “Trade Secrets” (as defined in the North Carolina Trade Secrets Protection Act, N.C.G.S. §66-152), confidential product formulations and other proprietary information about the Company’s business (collectively “Confidential Information”).  Leake agrees that he shall not directly or indirectly use, reveal, disclose or remove from the Company’s premises Confidential Information or material containing Confidential Information, without the prior written consent of the Company.  In addition, Leake represents that he will return to the Company all property of the Company, including all Confidential Information, which is now or may hereafter come into his possession.
 
8.   Cooperation In Litigation And Other Legal Matters.   Leake agrees that in the event information or assistance is needed from Leake by the Company to defend or establish any legal claims, Leake will cooperate with the Company in providing the assistance and information.  Leake's assistance and cooperation shall include, but not be limited to, providing informal interviews with the Company or its representatives; supplying affidavits; appearing at and providing testimony in depositions, hearings, arbitrations, administrative proceedings (including but not limited to Equal Employment Opportunity Commission and National Labor Relations Board proceedings), and state and federal court trials.  This assistance and cooperation requirement shall apply to any pending grievances, charges or litigation, and all future grievances, charges or litigation.  Both parties agree to act reasonably and in good faith in scheduling the dates, times and length of time during which Leake will perform consulting services and provide assistance and cooperation in litigation.
 
9.   Non-Solicitation Of Company Employees.   For the duration of the period from the Effective Date of this Agreement through twelve (12) consecutive calendar months immediately following Leake’s Retirement Date, Leake shall not employ or engage or solicit the employment or engagement of any person who is or was employed by the Company at any time within the six (6) month period prior to the Effective Date of this Agreement, or encourage any such person to end his or her employment with the Company.  Notwithstanding the foregoing, it shall not be a violation of this Paragraph for Leake to engage, solicit or recruit any such person for service as a volunteer with a non-profit organization.
 
10.   Mutual Non-Disparagement.   Leake shall not at any time disparage or make derogatory or negative comments, written or oral, about the Company, its officers or employees.  Nothing in this paragraph prohibits Leake from complying with a court order or lawful subpoena that Leake has not caused to be issued.  The Company and its officers shall likewise refrain from making negative or derogatory comments about Leake.
 
11.   Confidentiality Of This Agreement; Employment Reference.   Leake shall not at any time, directly or indirectly, discuss with or disclose to anyone (other than to members of his immediate family, his attorneys, his tax advisors and the appropriate taxing authorities or as otherwise required by law), the terms of this Agreement, including the amounts payable hereunder.  If any person asks about the above matters, he will simply say that all issues relating to his employment and his retirement have been resolved.  The Company further agrees that if any person makes inquiry concerning Leake, the Company will advise such person only as to the dates of Leake’s employment with the Company, the positions held and that Leake has retired or will retire from employment with the Company as of March 31, 2011.
 
12.   Release Of The Company.   Leake, on behalf of himself and his heirs, personal representatives, successors and assigns, hereby releases and forever discharges the Company and its Affiliates, and each and every one of their respective present and former shareholders, directors, officers, employees and agents, and each of their respective successors and assigns, from and against any and all claims, demands, actions, causes of action, damages, costs and expenses, including without limitation all “Employment-Related Claims,” which Leake now has or may have by reason of any thing occurring, done or omitted to be done prior to the Effective Date of this Agreement; provided , however , this release shall not apply to any claims that Leake may have for the payments or benefits expressly provided for Leake or otherwise specifically referred to in this Agreement.  For purposes of this Agreement, “Employment-Related Claims” means all rights and claims Leake has or may have:
 
 
(a)
related to his employment by or status as an employee of the Company or any of its Affiliates or the termination of that employment or status or to any employment practices and policies of the Company, or its Affiliates; or

 
(b)
under the federal Age Discrimination in Employment Act of 1967, as amended (“ADEA”).

13.   Special ADEA Waiver Acknowledgements.   LEAKE ACKNOWLEDGES AND AGREES THAT HE HAS READ THIS AGREEMENT IN ITS ENTIRETY AND THAT THIS AGREEMENT CONTAINS A GENERAL RELEASE OF ALL KNOWN AND UNKNOWN CLAIMS, INCLUDING RIGHTS AND CLAIMS ARISING UNDER THE FEDERAL AGE DISCRIMINATION IN EMPLOYMENT ACT OF 1967, AS AMENDED.  LEAKE FURTHER ACKNOWLEDGES AND AGREES THAT:
 
 
(a)
THIS AGREEMENT DOES NOT RELEASE, WAIVE OR DISCHARGE ANY RIGHTS OR CLAIMS THAT MAY ARISE AFTER THE EFFECTIVE DATE OF THIS AGREEMENT;

 
(b)
HE IS ENTERING INTO THIS AGREEMENT AND RELEASING, WAIVING AND DISCHARGING RIGHTS OR CLAIMS ONLY IN EXCHANGE FOR CONSIDERATION THAT HE IS NOT ALREADY ENTITLED TO RECEIVE;

 
(c)
HE HAS BEEN ADVISED, AND IS BEING ADVISED IN THIS AGREEMENT, TO CONSULT WITH AN ATTORNEY BEFORE EXECUTING THIS AGREEMENT;

 
(d)
HE HAS BEEN ADVISED, AND IS BEING ADVISED IN THIS AGREEMENT, THAT HE HAS UP TO TWENTY-ONE (21) DAYS  WITHIN WHICH TO CONSIDER THIS AGREEMENT AND TO DELIVER (OR CAUSE TO BE DELIVERED) THIS AGREEMENT TO DAVID V. SINGER, PRESIDENT, AND THAT IF HE EXECUTES THIS AGREEMENT PRIOR TO THE EXPIRATION OF THE TWENTY-ONE (21) DAY PERIOD, THEN HE EXPRESSLY WAIVES HIS RIGHTS WITH RESPECT TO THE REMAINING TIME, AND THAT THE AGREEMENT WILL BECOME EFFECTIVE THE EIGHTH DAY AFTER HE SIGNS IT AS REFERENCED IN PARAGRAPH  13(e) BELOW; AND

 
(e)
HE IS AWARE THAT HE MAY REVOKE THIS AGREEMENT AT ANY TIME WITHIN SEVEN (7) DAYS AFTER THE DAY HE SIGNS THIS AGREEMENT AND THAT THIS AGREEMENT WILL NOT BECOME EFFECTIVE OR ENFORCEABLE UNTIL THE EIGHTH DAY AFTER THE DATE THIS AGREEMENT IS SIGNED, ON WHICH DAY, THE EFFECTIVE DATE, THIS AGREEMENT WILL AUTOMATICALLY BECOME EFFECTIVE UNLESS PREVIOUSLY REVOKED WITHIN THAT SEVEN-DAY PERIOD.  HE IS ALSO AWARE THAT TO AFFECT A REVOCATION, HE MAY, WITHIN THE SEVEN-DAY PERIOD DELIVER (OR CAUSE TO BE DELIVERED) TO DAVID V. SINGER, PRESIDENT, NOTICE OF HIS REVOCATION OF THIS AGREEMENT NO LATER THAN 5:00 P.M. EASTERN TIME ON THE SEVENTH (7TH) DAY FOLLOWING HIS EXECUTION OF THIS AGREEMENT.

14.   Severability.    Each provision of this Agreement is severable from every other provision of this Agreement.  Any provision of this Agreement that is determined by any court of competent jurisdiction to be invalid or unenforceable will not affect the validity or enforceability of any other provision hereof or the invalid or unenforceable provision in any other situation or any other jurisdiction.  Any provision of this Agreement held invalid or unenforceable only in part or degree will remain in full force and effect to the extent not held invalid or unenforceable.
 
15.   Applicable Law.   This Agreement is made and executed with the intention that the construction, interpretation and validity hereof shall be determined in accordance with and governed by the laws of the State of North Carolina.
 
16.   Binding Effect.   This Agreement shall be binding upon and inure to the benefit of the Company, its successors and assigns.  This Agreement shall be binding upon and inure to the benefit of Leake, his heirs, executors and administrators.
 
17.   Compliance With 409A.   This Agreement is intended to comply with Section 409A of the Internal Revenue Code, to the extent applicable.  Notwithstanding any provision herein to the contrary, this Agreement shall be interpreted and administered consistent with this intent.
 
18.   Entire Agreement.   This Agreement constitutes the entire agreement between the parties with respect to the subject matter hereof and supersedes and cancels all prior or contemporaneous oral or written agreements and understandings between them with respect to the subject matter hereof.
 

IN WITNESS WHEREOF , the Company has caused this Agreement to be signed by its duly authorized officer on the execution date indicated below, and Leake has hereunto set his hand and seal on the execution date indicated below.

LANCE, INC.



By   /s/ David V. Singer                                                                            
David V. Singer
President

Execution Date:   1/7/2010                                                                 




   /s/ Earl D. Leake                                                                            
Earl D. Leake

Execution Date:   1/7/2010                                                       




 
 

 

Exhibit 10.4
 

FIRST AMENDMENT
 

THIS FIRST AMENDMENT dated as of March 19, 2010 (this “ Amendment ”) amends the Credit Agreement dated as of October 20, 2006 (the “ Credit Agreement ”) among LANCE, INC., a North Carolina corporation (the “ Company ”), TAMMING FOODS LTD. (doing business as Lance Canada), an Ontario corporation (the “ Canadian Borrower ” and together with the Company, collectively the “ Borrowers ”), the several financial institutions from time to time party thereto (collectively the “ Lenders ”; individually each a “ Lender ”), WELLS FARGO SECURITIES, LLC (formerly known as Wachovia Capital Markets, LLC), as syndication agent, and BANK OF AMERICA, NATIONAL ASSOCIATION, as letter of credit issuing lender, as administrative agent for the Lenders, and as Canadian Agent.  Terms defined in the Credit Agreement are, unless otherwise defined herein or the context otherwise requires, used herein as defined therein.
 
WHEREAS, the Company, the Canadian Borrower, the Lenders and the Agents have entered into the Credit Agreement; and
 
WHEREAS, the parties hereto desire to amend the Credit Agreement in certain respects as more fully set forth herein;
 
NOW, THEREFORE, the parties hereto agree as follows:
 
SECTION 1   Amendments .  Subject to the satisfaction of the conditions precedent set forth in Section 3 , the Credit Agreement shall be amended as follows.
 
1.1   Amendment of Definition .  Section 1.1 of the Credit Agreement is amended so that the definition of “EBITDA” reads in its entirety as follows:
 
EBITDA means, for any Computation Period, the Company’s consolidated net income from continuing operations for such period, plus , to the extent deducted in determining such earnings, Interest Expense, income taxes, depreciation and amortization, minus , to the extent included in determining such earnings, any income tax refunds, plus any Acquired EBITDA and any fees and expenses incurred in connection with any Acquisition, any costs or charges to the Company and its Subsidiaries as a result of an increase in value to the pre-acquisition historical amounts of accounts receivables, inventories or any other current assets (a “ write-up ”), in each case to the extent that such write-up is required by GAAP and occurs as a result of an Acquisition, minus any Disposed EBITDA.
 
1.2   Addition of Definitions .  Section 1.1 of the Credit Agreement is further amended by adding thereto the following definitions in proper alphabetical sequence:
 

Acquired EBITDA means, with respect to any Person or division (or similar business unit) acquired by the Company in an Acquisition during any Computation Period, the total of (a) the consolidated net income from continuing operations of such Person or division (or similar business unit) for the period from the first day of such Computation Period to the date of such acquisition plus (b) to the extent deducted in determining such consolidated net income (and without duplication), interest expense (whether paid or accrued and including imputed interest expense in respect of capital lease obligations), income taxes, depreciation and amortization, all calculated on a basis approved by the Administrative Agent minus (c) to the extent included in such consolidated net income, any income tax refunds.
 
Disposed EBITDA means, with respect to any Person or division (or similar business unit) sold or otherwise disposed of by the Company during any Computation Period, the total of (a) the consolidated net income from continuing operations of such Person or division (or similar business unit) for the period from the first day of such Computation Period to the date of such sale or other disposition plus (b) to the extent deducted in determining such consolidated net income (and without duplication), interest expense (whether paid or accrued and including imputed interest expense in respect of capital lease obligations), income taxes, depreciation and amortization, all calculated on a basis approved by the Administrative Agent minus (c) to the extent included in such consolidated net income, any income tax refunds.
 
SECTION 2                       Warranties .  The Company represents and warrants to each Agent and each Lender (and the Canadian Borrower represents and warrants with respect to itself to each Agent and each Lender) that, after giving effect to the effectiveness of this Amendment, (a) each warranty set forth in Article VI of the Credit Agreement is true and correct in all material respects, except to the extent that such warranty specifically refers to an earlier date, and (b) no Event of Default or Unmatured Event of Default exists.
 
SECTION 3                       Effectiveness of Amendments .
 
3.1   Amendments .  The amendments set forth in Section 1 above shall become effective when the Administrative Agent shall have received all of the following (provided that the following are received on or before March 19, 2010):  (i) counterparts of this Amendment executed by the Company, the Canadian Borrower, the Required Lenders and the Administrative Agent; (ii) all documents as shall reasonably demonstrate the corporate power and authority of the Borrowers to enter into, and the validity with respect to the Borrowers of, this Amendment and the other Loan Documents and any other matters relevant hereto, all in form and substance satisfactory to the Administrative Agent; and (iii) all governmental and third party approvals, if any, necessary or advisable in connection with the execution, delivery and performance of this Amendment by the Borrowers.
 

SECTION 4                       Miscellaneous .
 
4.1            Continuing Effectiveness, etc.   As herein amended, the Credit Agreement shall remain in full force and effect and is hereby ratified and confirmed in all respects.  After the effectiveness of this Amendment, all references in the Credit Agreement and the other Loan Documents to “Credit Agreement” or similar terms shall refer to the Credit Agreement as amended hereby.
 
4.2            Counterparts .  This Amendment may be executed in any number of counterparts and by the different parties on separate counterparts, and each such counterpart shall be deemed to be an original but all such counterparts shall together constitute one and the same Amendment.  Delivery of a signed signature page hereto by facsimile or e-mail (in a .pdf or similar file) shall be effective as delivery of a manually signed counterpart hereof.
 
4.3            Governing Law .  THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NORTH CAROLINA WITHOUT REGARD TO THE CONFLICTS OR CHOICE OF LAW PRINCIPLES THEREOF; PROVIDED THAT THE PARTIES HERETO SHALL RETAIN ALL RIGHTS ARISING UNDER FEDERAL LAW.
 
4.4            Successors and Assigns .  This Amendment shall be binding upon the Borrowers, the Lenders and the Agents and their respective successors and assigns, and shall inure to the benefit of the Borrowers, the Lenders and the Agents and the respective successors and assigns of the Lenders and the Agents.
 
[Signature Pages Follow]
 

 

 

1505445 99529018
   

 
 

 

IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and delivered by their proper and duly authorized officers as of the day and year first above written.
 
 
LANCE, INC.
     
     
 
By:
/s/ Rick D. Puckett
 
Title:
Executive Vice President
     
     
 
TAMMING FOODS LTD.
     
     
 
By:
/s/ Rick D. Puckett
 
Title:
Executive Vice President
     



1505445 99529018
S-1
FIRST AMENDMENT

 
 

 


 
 
BANK OF AMERICA, NATIONAL
ASSOCIATION, as Administrative Agent
     
     
 
By:
/s/ William F. Sweeney
 
Title:
Senior Vice President
     
     
 
BANK OF AMERICA, NATIONAL
ASSOCIATION, as an Issuing Lender and a U.S.
Revolving Credit Lender
     
     
 
By:
/s/ William F. Sweeney
 
Title:
Senior Vice President
     

 


1505445 99529018
S-2
FIRST AMENDMENT

 
 

 


 
WACHOVIA BANK, NATIONAL
ASSOCIATION, as a Term Lender and U.S.
Revolving Credit Lender
     
     
 
By:
/s/ Scott Santa Cruz
 
Title:
Director
     


1505445 99529018
S-4
FIRST AMENDMENT

 
 

 


 
REGIONS BANK, as a Term Lender and U.S.
Revolving Credit Lender
     
     
 
By:
/s/ Anthony LeTrent
 
Title:
Senior Vice President
     


1505445 99529018
S-5
FIRST AMENDMENT

 
 

 


 
BRANCH BANKING AND TRUST COMPANY, as a Term Lender and U.S. Revolving Credit Lender
     
     
 
By:
/s/ Stuart M. Jones
 
Title:
Senior Vice President
     



1505445 99529018
S-6
FIRST AMENDMENT

 
 

 


 
JPMORGAN CHASE BANK, N.A., as a Term Lender and U.S. Revolving Credit Lender
     
     
 
By:
/s/ Patrick S. Thornton
 
Title:
Senior Vice President
     


1505445 99529018
S-7
FIRST AMENDMENT

 
 

 


 
SUNTRUST BANK, as a Term Lender and U.S. Revolving Credit Lender
     
     
 
By:
/s/ M. Gabe Bonfield
 
Title:
Vice President
     

1505445 99529018
S-8
FIRST AMENDMENT

 
 

 


 
BANK OF AMERICA, NATIONAL ASSOCIATION, acting through its Canada
Branch, as Canadian Agent and
a Canadian Lender
     
     
 
By:
/s/ Medina Sales de Andrade
 
Title:
Vice President
     


1505445 99529018
S-9
FIRST AMENDMENT

 
 

 


 
WACHOVIA CAPITAL FINANCE CORPORATION (CANADA), as a Canadian Lender
     
     
 
By:
/s/  Niall Hamilton
 
Title:
Senior Vice President
     
 
 

1505445 99529018
S-10
FIRST AMENDMENT

 
 

 


 
JPMORGAN CHASE BANK, N.A., as a Canadian Lender
     
     
 
By:
/s/  Patrick S. Thornton
 
Title:
Senior Vice President
     



1505445 99529018
S-11
FIRST AMENDMENT

 
 

 

 
 
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 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 5, 2010



/s/ David V. Singer
 
David V. Singer
 
President and Chief Executive Officer
 
 
 
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 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 5, 2010



/s/ Rick D. Puckett
 
Rick D. Puckett
 
Executive Vice President, Chief Financial Officer, Treasurer and Secretary
 

 
 
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 Lance, Inc. (the “Company”) on Form 10-Q for the period ended March 27, 2010 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), we, David V. Singer, President and Chief Executive Officer of the Company, and Rick D. Puckett, Executive Vice President, Chief Financial Officer, Treasurer and Secretary 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 Lance, Inc. and will be retained by 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
President and Chief Executive Officer
 
Executive Vice President, Chief Financial
May 5, 2010
 
Officer, Treasurer and Secretary
   
May 5, 2010