EXHIBIT 10.1
LANCE, INC.
2004 ANNUAL PERFORMANCE INCENTIVE PLAN FOR OFFICERS
Purposes and The primary purposes of the 2004 Annual Performance Incentive
Introduction Plan for Officers are to:
- Motivate behaviors that lead to the successful
achievement of specific sales, financial and operations
goals that support Lance's stated business strategy.
- 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 because more pay is "at risk."
For 2004, participants will be eligible to earn incentive
awards based on Corporate Return on Capital Employed (ROCE),
Divisional Return on Net Assets (RONA) and individual
performance objectives against specific goals as described
below.
- ROCE is calculated as follows:
Net Income + Interest Expense x (1 - Tax Rate)
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Average Equity + Average Debt
- RONA is calculated as follows:
Operating Profit x (1 - Tax Rate)
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Average Operating Assets - Average Operating Liabilities
Tax Rate shall be the actual income tax rate for ROCE and will
be the income tax rate in the operating plan for the
applicable operating unit for RONA.
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
2004 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.
Following 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 fiscal year.
Eligibility and Eligibility in the Plan is limited to Officers of Lance who
Participation 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. Attachment A includes the list of
2004 participants approved by the Compensation Committee at
its April 22, 2004 meeting.
Target Incentive Each participant will be assigned a Target Incentive
Awards 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 duties of a position change
during the year, or Base Salary is increased significantly,
the Target Incentive shall be revised as appropriate.
Attachment A lists the Target Incentive and applicable
performance measure for each participant for the 2004 Plan
Year. These Target Incentives will be reviewed and adjusted
annually by the Compensation Committee. 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 financial and
individual performance for the year, as described below).
2
Performance The 2004 financial performance measures for the Company as a
Measures and whole and the operating units are shown below. Specific goals
Award Funding and related payouts are also shown below.
Each operating unit will fund its own awards.
Minimum Target Maximum
------- -------- ---------
Lance, Inc. (ROCE) *% *% *%
Lance Co. (RONA) *% *% *%
Vista/Tamming (RONA) *% *% *%
Award Level Funded 50% 100% 200%
[*Targets not required to be disclosed.]
Percent of payout will be determined on a straight line basis
between minimum and maximum. There will be no payouts unless
the minimum applicable performance measure is reached and
there will be no payouts if the Company as a whole does not
reach the minimum applicable performance measure.
The performance measures, specific numerical goals and the
role of individual performance in determining final payouts
will be communicated to each participant at the beginning of
the year. Final Target Incentive Awards will be calculated
after the Compensation Committee has reviewed the Company's
audited financial statements for 2004 and determined the
performance level achieved.
Minimum, Target and Maximum levels will be defined at the
beginning of each year for each performance measure.
The following definitions for the terms Maximum, Target and
Minimum should help set the goals for each year, as well as
evaluate the payouts:
- Maximum: Excellent; deserves an above-market bonus
- Target: Normal or expected performance; deserves market
level bonus
- Minimum: Lowest level of performance deserving payment
above base salary; deserves below market bonus
- Below minimum: Deserves no additional pay beyond base
salary
3
Individual Each Officer will receive 100% of his or her Target
Performance Incentive Award based on his or her applicable performance
measure except for those participants listed on Attachment B,
who will receive 75% to 90% of his or her Target Incentive
Award based on his or her applicable performance measure and
the remainder based on his or her individual performance
objective listed on Attachment B.
Form and Final award payments will be made in cash as soon as
Timing of practicable after award amounts are of approved by the
Payments Compensation Committee of the Board of Directors. All awards
will be rounded to the nearest $100.
Change in Status An employee hired into an eligible position during the year
may participate in the Plan for the balance of the year on a
pro rata basis.
Certain In the event a participant voluntarily terminates
Terminations of employment or is terminated involuntarily before the end of
Employment the year, any award will be forfeited. In the event of death,
permanent disability, or normal or early retirement, the award
will be paid on a pro rata basis after the end of the plan
year. Awards otherwise will be calculated on the same basis as
for other participants, except that any adjustment for
individual Employment performance will be based on performance
prior to the termination of employment.
Change In In the event of a Change in Control, pro rata payouts
Control will be made at the greater of (1) Target 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.
For this purpose, a Change in Control is defined as when any
person, corporation or other entity and its affiliates
(excluding members of the Van Every Family and any trust,
custodian or fiduciary for the benefit of any one or more
members of the Van Every Family) acquires or contracts to
acquire or otherwise controls in excess of 35% of the then
outstanding equity securities of the Company. For the purposes
of this plan, the Van Every Family shall mean the lineal
descendants of Salem A.Van Every, Sr., whether by blood or
adoption, and their spouses.
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.
4
Executive Notwithstanding any provisions to the contrary above,
Officers participation, Target Incentive Awards and prorations for
executive officers, including the President and Chief
Executive Officer, shall be approved by the Compensation
Committee.
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 retains the discretion to adjust any award that is
determined to be inappropriate due to anomalies in the
application of a performance measure. The decisions of the
Committee shall be conclusive and binding on all participants.
5
ATTACHMENT A
Performance Award Target
Name Title Measure Percentage Incentive
------ ------- ------------- ----------- ----------
P. A. Stroup, III President and Chief Lance, Inc. *% $*
Executive Officer ROCE
H. D. Fields Vice President and Vista/Tamming *% $*
President, Vista RONA
Bakery, Inc.
L. R. Gragnani, Jr. Vice President Lance, Inc. *% $*
- Information ROCE
Technology/CIO
E. D. Leake Vice President Lance, Inc. *% $*
- Human Resources ROCE
B. C. Preslar Vice President Lance, Inc. *% $*
- Finance and Chief ROCE
Financial Officer
F. I. Lewis Vice President Lance Co. *% $*
- Sales RONA
D. R. Perzinski Treasurer Lance, Inc. *% $*
ROCE
M. E. Wicklund Controller and Lance, Inc. *% $*
Assistant Secretary ROCE
[*Award targets omitted for participants as targets not required to be
disclosed.]
ATTACHMENT B
Individual
Individual Performance
Performance Objective
Name Title Objective Percentage
---- ----- ----------- -----------
P. A. Stroup, III President and Chief Lance, Inc. *%
Executive Officer Safety
H. D. Fields Vice President and Vista/Tamming *%
President, Vista Safety
Bakery, Inc.
E. D. Leake Vice President Lance, Inc. *%
- Human Resources Safety
F. I. Lewis Vice President Direct Store *%
- Sales Delivery Sales
[*Objective percentage omitted for participants as targets not required to be
disclosed.]