Document:

Ex-10.1

 

EXHIBIT 10.1

Sanderson Farms, Inc.

First Amendment to Credit Agreement

     This First Amendment to Credit Agreement (herein, the “Amendment”) is entered into as of April
27, 2007, among Sanderson Farms, Inc., a Mississippi corporation, the Banks party hereto, and
Harris N.A., as Agent for the Banks, (“Agent”), and SunTrust Bank, as Documentation Agent.

Preliminary Statements

     A. The Company, the Banks and the Agent are parties to a Credit Agreement dated as of November
17, 2005 (the “Credit Agreement”). All capitalized terms used herein without definition shall have
the same meanings herein as such terms have in the Credit Agreement.

     B. The Company has requested that the Banks amend the Credit Agreement to increase the amount
of the Revolving Credit made available to the Company thereunder from $200,000,000 to $225,000,000,
extend the Revolving Credit Termination Date from November 17, 2010, to April 1, 2012, reduce the
Revolving Credit Commitment of Regions Bank, add ING Capital LLC (“ING”) to the Credit Agreement as
a Bank, and amend certain other provisions of the Credit Agreement, and the Banks are willing to do
so on the terms and conditions set forth in this Amendment.

     Now, Therefore, for good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, the parties hereto agree as follows:

1. Amendments.

     Upon satisfaction of all of the conditions precedent set forth in Section 2 hereof, the Credit
Agreement shall be amended as follows:

     1.1. The date “November 17, 2010” appearing in the last sentence of Section 1.1(a) of the
Credit Agreement shall be replaced with the date “April 1, 2012”, and the Revolving Credit
Termination Date under the Credit Agreement shall be April 1, 2012.

     1.2. The dates “July 17, 2008” and “September 17, 2008” appearing in the first sentence of
Section 1.1(b) of the Credit Agreement shall be replaced by the dates “December 1, 2009”, and
“February 1, 2010”, respectively.

1

 

     1.3. Section 1.1(c) of the Credit Agreement shall be amended to read as follows:

     “(c) The respective maximum aggregate principal amounts of the Revolving Credit at any
one time outstanding which each Bank by its acceptance hereof severally agrees to make
available to the Company are as follows (collectively, the “Revolving Credit Commitments”
and individually, a “Revolving Credit Commitment”):

	 	 	 	 	 
	Harris N.A.
	 	$	50,000,000	 
	SunTrust Bank
	 	$	40,000,000	 
	Regions Bank
	 	$	37,500,000	 
	U.S. Bank National Association
	 	$	37,500,000	 
	ING Capital LLC
	 	$	30,000,000	 
	Trustmark National Bank
	 	$	30,000,000	 
	Total
	 	$	225,000,000	” 

     1.4. Sections 7.9 and 7.10 of the Credit Agreement shall be amended to read as follows:

     “Section 7.9. Consolidated Tangible Net Worth. The Company will maintain at all times
Consolidated Tangible Net Worth during each fiscal year of the Company in an amount not less
than $225,000,000 (commencing with the fiscal quarter ended January 31, 2007) increasing on
the last day of each fiscal quarter ending thereafter by an amount equal to (a) 100% of any
Net Proceeds of Stock issued during such quarter plus (b) 60% of an amount (but not less
than zero) equal to (i) the Company’s Consolidated Net Income for such fiscal quarter, minus
(ii) the lesser of (x) $3,000,000 and (y) the aggregate amount of all dividends actually
paid during such fiscal quarter rounded to the next highest $100,000.

     Section 7.10. Consolidated Indebtedness for Borrowed Money to Total Capitalization.
The Company will not permit the ratio of its Consolidated Indebtedness for Borrowed Money to
its Total Capitalization (the “Leverage Ratio”), expressed as a percentage, at any time to
exceed the percentage indicated below during each fiscal year of the Company specified
below:

	 	 	 	 	 
	Fiscal Year Ending	 	Maximum Permitted Leverage Ratio
	October 31, 2007
	 	 	50	%
	October 31, 2008
	 	 	55	%
	October 31, 2009
	 	 	55	%
	October 31, 2010
	 	 	50	%
	October 31, 2011
	 	 	50	%
	October 31, 2012
	 	 	50	%

2

 

     1.5. The form attached to Exhibit E of the Credit Agreement as Schedule 1 thereto shall be
replaced by Schedule 1 attached to this Amendment.

     1.6. Section 11.17 of the Credit Agreement shall be amended by inserting the phrase “and
except with respect to assignments to a Bank or an affiliate of a Bank” after the phrase “and, so
long as no Event of Default then exists”.

2. Conditions Precedent.

     The effectiveness of this Amendment is subject to the satisfaction of all of the following
conditions precedent:

     2.1. The Company and each of the Banks shall have executed this Amendment.

     2.2. The Company shall have executed and delivered to the Agent for the benefit of each Bank
(except SunTrust Bank) a Revolving Credit Note in the form of Exhibit A to the Credit Agreement
payable to the order of such Bank in a principal amount equal to its Revolving Credit Commitment
after giving effect to this Amendment.

     2.3. Each Guarantor Subsidiary shall have executed the Guarantors’ Acknowledgment attached
hereto.

     2.4. The Agent shall have received original counterparts of each of the following documents:

     (a) copies of the Articles of Incorporation, as restated, and all amendments thereto,
of the Company and each Guarantor Subsidiary certified by the office of the secretary of
state of their respective states of incorporation as of a date no earlier than April 1,
2007;

     (b) copies of the By-Laws, as restated, and all amendments thereto, of the Company and
each Guarantor Subsidiary, certified as true, correct and complete on the date hereof by the
Treasurer of the Company and each Guarantor Subsidiary, respectively;

     (c) a good standing certificate or certificate of existence for the Company and each
Guarantor Subsidiary, dated no earlier than April 1, 2007, from the office of the secretary
of state of the states of their respective incorporation; and

     (d) the favorable written opinion of counsel for the Company in the form of Exhibit A
attached hereto.

3

 

     2.5. The Agent shall have received a Certificate of the Treasurer of the Company and each of
the Guarantor Subsidiaries with respect to (a) resolutions of their respective Board of Directors
authorizing the transactions contemplated hereby, and (b) incumbency and signature of the
President, Treasurer and Secretary of the Company and each Guarantor Subsidiary.

     2.6. The Agent shall have received for the ratable account of the Banks a non-refundable
amendment fee in an amount equal to three-one hundredths of one percent (0.03%) of the amount of
the Banks’ Revolving Credit Commitments before giving effect to this Amendment.

     2.7. The Agent shall have received for the ratable account of the Banks that increased their
Revolving Credit Commitments and ING a non-refundable fee in an amount equal to one-eighth of one
percent (0.125%) of the amount of the increase in each such Bank’s Revolving Credit Commitment.

3. Representations and Warranties.

     3.1. Each of the representations and warranties set forth in Section 5 of
the Credit Agreement is true and correct.

     3.2. The Company is in full compliance with all of the terms and conditions of the Credit
Agreement and no Event of Default or Potential Default has occurred and is continuing thereunder or
shall result after giving effect to this Amendment.

4. Addition of ING as a Bank and Reduction of Regions Bank’s Commitment.

     4.1. Upon the satisfaction of all of the conditions precedent set forth in Section 2 of this
Amendment ING shall be a party to the Credit Agreement, shall have all of the rights and
obligations of a “Bank” thereunder and shall be deemed to have acquired risk participations in all
Swingline Loans, L/Cs and Reimbursement Obligations outstanding under the Credit Agreement pursuant
to the terms and conditions of the Credit Agreement.

     4.2. ING acknowledges that it has received a copy of the Intercreditor Agreement dated as of
April 28, 2006, among the Banks, the holders of the Company’s $20,000,000 aggregate principal
amount of its 6.65% Senior Notes, due July 7, 2007, and the holder of the Company’s $50,000,000
aggregate principal amount of its 6.12% Senior Notes, due April 28, 2016 (the “Intercreditor
Agreement”). ING acknowledges and agrees that upon the satisfaction of all of the conditions
precedent set forth in Section 2 of this Amendment, ING shall be a party to the Intercreditor
Agreement and shall have all of the rights and obligations of a “Lender” thereunder.

     4.3 For avoidance of doubt, Regions Bank acknowledges and agrees that its overall Revolving
Credit Commitment has been decreased and not increased pursuant to the terms of this Amendment.

5. Miscellaneous.

     5.1. Reference to this specific Amendment need not be made in any note, document,
letter, certificate, the Credit Agreement itself, the Revolving Notes, or any communication issued

4

 

or made pursuant to or with respect to the Credit Agreement or the Revolving Notes, any reference
to the Credit Agreement being sufficient to refer to the Credit Agreement as amended hereby.

     5.2. This Amendment may be executed in any number of counterparts, and by the different
parties on different counterparts, all of which taken together shall constitute one and the same
agreement. Any of the parties hereto may execute this Amendment by signing any such counterpart
and each of such counterparts shall for all purposes be deemed to be an original. This Amendment
shall be governed by the internal laws of the State of Illinois.

[signature pages to follow]

5

 

     This Amendment is entered into as of the date and year first above written.

	 	 	 	 	 	 	 
	 	 	Sanderson Farms, Inc.	 	 
	 
	 	 	 	 	 	 
	 

	 	By
	 	  /s/ D. Michael Cockrell	 	 
	 

	 	 	 	Its Treasurer & Chief Financial Officer
	 	 

     Accepted and agreed to as of the date and year first above written.

	 	 	 	 	 	 	 
	 	 	Harris N.A.
individually and as Agent	 	 
	 
	 	 	 	 	 	 
	 

	 	By
	 	/s/ David J. Bechstein	 	 
	 	 	     Its Vice President	 	 
	 
	 	 	 	 	 	 
	 	 	SunTrust Bank	 	 
	 
	 	 	 	 	 	 
	 

	 	By
	 	/s/ Hugh E. Brown	 	 
	 	 	     Its Director	 	 
	 
	 	 	 	 	 	 
	 	 	Regions Bank	 	 
	 
	 	 	 	 	 	 
	 

	 	By
	 	/s/ Stanley A. Herren	 	 
	 	 	     Its Vice President	 	 
	 
	 	 	 	 	 	 
	 	 	U.S. Bank National Association	 	 
	 
	 	 	 	 	 	 
	 

	 	By
	 	/s/ Travis Volger	 	 
	 	 	     Its Assistant Vice President	 	 
	 
	 	 	 	 	 	 
	 	 	Trustmark National Bank	 	 
	 
	 	 	 	 	 	 
	 

	 	By
	 	/s/ William Edwards	 	 
	 	 	     Its First Vice President	 	 

Signature Page

Sanderson Farms, Inc.

First Amendment to Credit Agreement

 

 

	 	 	 	 	 	 	 
	 	 	ING Capital LLC	 	 
	 
	 	 	 	 	 	 
	 

	 	By
	 	/s/ William B. Redmond	 	 
	 	 	     Its Managing Director	 	 

Signature Page

Sanderson Farms, Inc.

First Amendment to Credit Agreement

 

 

Guarantors’ acknowledgment

     The undersigned, each of which has executed and delivered to the Banks a Guaranty Agreement
dated as of November 17, 2005 (the “Guaranty Agreement”), hereby acknowledges the amendment of the
Credit Agreement as set forth above and agrees that all of the Company’s indebtedness, obligations
and liabilities to the Banks and the Agent under the Credit Agreement, as amended by the foregoing
Amendment, and the Notes (including without limitation all such indebtedness, obligations and
liabilities to ING Capital LLC) is and shall continue to be entitled to the benefits of said
Guaranty Agreement. The undersigned further agree that the Acknowledgment or consent of the
undersigned to any further amendments of the Credit Agreement shall not be required as a result of
this Acknowledgment having been obtained, except to the extent, if any, required by the Guaranty
Agreement.

Dated as of April 27, 2007.

	 	 	 	 	 	 	 
	 	 	Sanderson Farms, Inc. (Foods Division)	 	 
	 
	 	 	 	 	 	 
	 

	 	By
	 	/s/ D. Michael Cockrell	 	 
	 	 	     Its Treasurer & Chief Financial Officer	 	 
	 
	 	 	 	 	 	 
	 	 	Sanderson Farms, Inc. (Production Division)	 	 
	 
	 	 	 	 	 	 
	 

	 	By
	 	/s/ D. Michael Cockrell	 	 
	 	 	     Its Treasurer & Chief Financial Officer	 	 
	 
	 	 	 	 	 	 
	 	 	Sanderson Farms, Inc. (Processing Division)	 	 
	 
	 	 	 	 	 	 
	 

	 	By
	 	/s/ D. Michael Cockrell	 	 
	 	 	     Its Treasurer & Chief Financial Officer	 	 

 

 

Exhibit A

Form of Opinion of Counsel

 

 

Schedule 1

to Compliance Certificate

Sanderson Farms, Inc.

Compliance Calculations for

Credit Agreement Dated as of November 17, 2005, as amended

Calculations as of the last day of the fiscal quarter ended ___, 20___

	 	 	 	 	 	 	 	 	 	 	 	 	 
	Section 7.9 Consolidated Tangible Net Worth	 	 	 	 
	 	 	 	 	 	 	 	 	 
	 	 	 	 
	 	 	 	 	 	(a	)	 	Prior Fiscal Quarter’s Required
Minimum Amount
	 	$	                    	 
	 	 	 	 	 	 	 	 	 
	 	 	 	 
	 	 	 	 	 	(b	)	 	Consolidated Net Income for
Current Fiscal Quarter
to “as of” date
	 	$	                    	 
	 	 	 	 	 	 	 	 	 
	 	 	 	 
	 	 	 	 	 	(c	)	 	Dividends paid during Current Fiscal Quarter
	 	$	                    	 
	 	 	 	 	 	 	 	 	 
	 	 	 	 
	 	 	 	 	 	(d	)	 	Adjustment (lesser of $3,000,000 and line (c))
	 	$	                    	 
	 	 	 	 	 	 	 	 	 
	 	 	 	 
	 	 	 	 	 	(e	)	 	(b) — (d)*
	 	$	                    	 
	 	 	 	 	 	 	 	 	 
	 	 	 	 
	 	 	 	 	 	(f	)	 	60% of (e)
	 	$	                    	 
	 	 	 	 	 	 	 	 	 
	 	 	 	 
	 	 	 	 	 	(g	)	 	Net Proceeds of Stock for
Current Fiscal Quarter
to “as of” date
	 	$	                    	 
	 	 	 	 	 	 	 	 	 
	 	 	 	 
	 	 	 	 	 	(h	)	 	Current Fiscal Quarter’s
Required Minimum Amount
(a) + (f) + (g)
	 	$	                    	 
	 	 	 	 	 	 	 	 	 
	 	 	 	 
	 	 	 	 	 	(i	)	 	Current Fiscal Year Consolidated
Tangible Net Worth
	 	$	                    	 
	 	 	 	 	 	 	 	 	 
	 	 	 	 
	 	 	 	 	 	 	 	 	Compliance     Yes _____   No _____
	 	 	 	 

 

			
	*	 	But not less than $0.

1

 

	 	 	 	 	 	 	 	 	 	 	 	 	 
	Section 7.10 Leverage Ratio	 	 	 	 
	 	 	 	 	 	 	 	 	 
	 	 	 	 
	 	 	 	 	 	(a	)	 	Consolidated Indebtedness for
Borrowed Money
	 	$	                    	 
	 	 	 	 	 	 	 	 	 
	 	 	 	 
	 	 	 	 	 	(b	)	 	Consolidated Indebtedness for
Borrowed Money
	$	       
                  	 
	 	 	 	 	 	 	 	 	Consolidated Tangible Net Worth
	$	       
                  	 
	 	 	 	 	 	 	 	 	 
	 	 	 	 
	 	 	 	 	 	 	 	 	Total
	 	$	                    	 
	 	 	 	 	 	 	 	 	 
	 	 	 	 
	 	 	 	 	 	 	 	 	(a)/(b)
	 	 	                     	*

 

			
	*	 	Required to not exceed ___%.

	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	Compliance     Yes _____   No _____
	 	 	 	 
	 	 	 	 	 	 	 	 	 
	 	 	 	 
	Section 7.11 Consolidated Current Ratio	 	 	 	 
	 	 	 	 	 	 	 	 	 
	 	 	 	 
	 	 	 	 	 	(a	)	 	Consolidated Current Assets
	 	$	                    	 
	 	 	 	 	 	(b	)	 	Consolidated Current
Liabilities
	 	$	                    	 
	 	 	 	 	 	(c	)	 	Consolidated Deferred Taxes
	 	$	                    	 
	 	 	 	 	 	(d	)	 	Consolidated Current Liabilities
minus Consolidated Deferred
Taxes [(b)-(c)]
	 	$	                    	 
	 	 	 	 	 	 	 	 	(a)/(d)
	 	 	                     	*

 

			
	*	 	Required to be not less than 2.0 to 1.

	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	Compliance     Yes _____  No _____
	 	 	 	 
	Section 7.12 Capital Expenditures	 	 	 	 
	 	 	 	 	 	 	 	 	 
	 	 	 	 
	 	 	 	 	 	(a	)	 	Maximum Amount Allowed
	 	$	                    	 
	 	 	 	 	 	(b	)	 	Expenditures Year-to-date
	 	$	                    	 
	 	 	 	 	 	 	 	 	(a)-(b)
	 	 	                     	*
	 	 	 	 	 	 	 	 	 
	 	 	 	 
	 	 	 	 	 	 	 	 	Compliance     Yes     _____  
	 	 	No    _____	 

2

 

APPENDIX

SANDERSON FARMS, INC.

REVOLVING CREDIT NOTE

                    , 2007

     FOR VALUE RECEIVED, the undersigned, SANDERSON FARMS, INC., a Mississippi corporation (the
“Company”) promises to pay to the order of                     . (the “Lender”) on the Revolving Credit
Termination Date (as defined in the Credit Agreement referred to below) at the principal office of
Harris N.A. in Chicago, Illinois, the principal sum of                      ($                    ) or, if
less, the aggregate unpaid principal amount of all Revolving Credit Loans made by the Lender to the
Company under the Revolving Credit provided for under the Credit Agreement hereinafter mentioned
and remaining unpaid on the Revolving Credit Termination Date together with interest on the
principal amount of each Revolving Credit Loan from time to time outstanding hereunder at the
rates, and payable in the manner and on the dates, specified in said Credit Agreement.

     The Lender shall record on its books or records or on the schedule to this Note which is a
part hereof the principal amount of each Revolving Credit Loan made under the Revolving Credit, all
payments of principal and interest and the principal balances from time to time outstanding;
provided that prior to the transfer of this Note all such amounts shall be recorded on the schedule
attached to this Note. The record thereof, whether shown on such books or records or on the
schedule to this Note, shall be prima facie evidence as to all such amounts; provided, however,
that the failure of the Lender to record, or any mistake in recording, any of the foregoing shall
not limit or otherwise affect the obligation of the Company to repay all Revolving Credit Loans
made under the Revolving Credit, together with accrued interest thereon.

     This Note is one of the Revolving Notes referred to in and issued under that certain Credit
Agreement dated as of November 17, 2005, among the Company, Harris N.A., as Agent, and the banks
named therein, as amended from time to time (the “Credit Agreement”), and this Note and the holder
hereof are entitled to all of the benefits and security provided for thereby or referred to
therein. Payment of this Note has been guaranteed pursuant to that certain Guaranty Agreement
dated as of November 17, 2005, from the Guarantor Subsidiaries to the Banks, to which reference is
hereby made for a statement of the terms thereof. All defined terms used in this Note, except
terms otherwise defined herein, shall have the same meaning as such terms have in said Credit
Agreement.

     Prepayments may be made on any Revolving Credit Loan evidenced hereby and this Note (and the
Revolving Credit Loans evidenced hereby) may be declared due prior to the expressed maturity
thereof, all in the events, on the terms and in the manner as provided for in said Credit
Agreement.

1

 

     The Company hereby waives presentment for payment and demand.

     This Note is issued in substitution and replacement of, and in part evidences the indebtedness
formerly evidenced by, the Revolving Credit Note dated November 17, 2005 of the Company payable to
the order of the Lender.

     This Note is governed by and shall be construed in accordance with the internal laws of the
State of Illinois.

	 	 	 	 	 	 	 
	 	 	SANDERSON FARMS, INC.	 	 
	 
	 	 	 	 	 	 
	 

	 	By	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	Its	 	 	 	 
	 

	 	 	 	 

	 	 

2Exhibit 10.1

 

Exhibit 10.1

LANCE, INC.

2007 KEY EMPLOYEE INCENTIVE PLAN

TABLE OF CONTENTS

	 	 	 	 	 	 	 
	Section 1.

	 	Purpose
	 	 	2	 
	 
	 	 	 	 	 	 
	Section 2.

	 	Definitions
	 	 	2	 
	 
	 	 	 	 	 	 
	Section 3.

	 	Administration
	 	 	5	 
	 
	 	 	 	 	 	 
	Section 4.

	 	Duration of and Common Stock Subject to Plan
	 	 	6	 
	 
	 	 	 	 	 	 
	Section 5.

	 	Eligibility
	 	 	7	 
	 
	 	 	 	 	 	 
	Section 6.

	 	Stock Options
	 	 	7	 
	 
	 	 	 	 	 	 
	Section 7.

	 	Stock Appreciation Rights
	 	 	8	 
	 
	 	 	 	 	 	 
	Section 8.

	 	Restricted Awards
	 	 	9	 
	 
	 	 	 	 	 	 
	Section 9.

	 	Performance Awards
	 	 	11	 
	 
	 	 	 	 	 	 
	Section 10.

	 	Other Stock-Based and Combination Awards
	 	 	12	 
	 
	 	 	 	 	 	 
	Section 11.

	 	Qualified Performance-Based Awards
	 	 	12	 
	 
	 	 	 	 	 	 
	Section 12.

	 	Deferral Elections
	 	 	15	 
	 
	 	 	 	 	 	 
	Section 13.

	 	Termination of Employment
	 	 	15	 
	 
	 	 	 	 	 	 
	Section 14.

	 	Non-transferability of Awards
	 	 	15	 
	 
	 	 	 	 	 	 
	Section 15.

	 	Adjustments Upon Changes in Capitalization, Etc.
	 	 	15	 
	 
	 	 	 	 	 	 
	Section 16.

	 	Change in Control
	 	 	17	 
	 
	 	 	 	 	 	 
	Section 17.

	 	Amendment and Termination
	 	 	18	 
	 
	 	 	 	 	 	 
	Section 18.

	 	Miscellaneous
	 	 	18	 

 

 

LANCE, INC.

2007 KEY EMPLOYEE INCENTIVE PLAN

     Section 1. Purpose. The purpose of the Lance, Inc. 2007 Key Employee Incentive Plan (the
“Plan”) is to attract and retain managerial and other key employees, and to reward such employees
for making major contributions to the success of Lance, Inc. (the “Company”). The Plan is designed
to meet these objectives by offering performance-based stock and cash incentives and other
equity-based incentive awards, thereby providing such employees with a proprietary interest in the
long term growth and performance of the Company.

     Section 2. Definitions. For purposes of the Plan, unless the context clearly indicates
otherwise, the following terms shall have the meanings set forth below:

     (a) “Award” (collectively, “Awards”) means an award or grant made to a
Participant under Sections 6 through 11, inclusive, of the Plan.

     (b) “Beneficial Owner” has the meaning ascribed to such term in Section 13(d)
of the Exchange Act and Rule 13d-3 of the General Rules and Regulations under the
Exchange Act.

     (c) “Board” means the Board of Directors of the Company.

     (d) “Code” means the Internal Revenue Code of 1986, as in effect from time to
time, or any successor thereto, together with rules, regulations and interpretations
promulgated thereunder.

     (e) “Common Stock” means the $0.83 1/3 par value Common Stock of the Company or
any security of the Company issued in substitution, exchange or lieu thereof
pursuant to Section 15 hereof.

     (f) “Company” means Lance, Inc., a North Carolina corporation, and any
subsidiary corporations within the meaning of Section 424(f) of the Code, as well as
any successor corporation or corporations thereto.

     (g) “Compensation Committee” means the Compensation Committee of the Board;
provided, that (i) with respect to any Awards to any Insider,
Compensation Committee means all of the members of the Compensation Committee who
are “non-employee” directors within the meaning of Rule 16b-3 adopted under the
Exchange Act, and (ii) with respect to any Awards to any key employees who are Named
Executive Officers intended to comply with the Performance-Based Exception,
Compensation Committee means all of the members of the Compensation Committee who
are “outside directors” within the meaning of Section 162(m) of the Code.

2

 

     (h) “Covered Employee” means a “covered employee” as defined in Section
162(m)(3) of the Code.

     (i) “Director” means a member of the Board.

     (j) “Disability” means the inability, by reason of physical or mental infirmity
or both, of an individual to perform satisfactorily the duties then assigned to such
individual or any other duties the Company is willing to assign to such individual
for which compensation is payable. Disability shall be determined by the
Compensation Committee based upon such evidence as the Compensation Committee shall
deem sufficient and, upon medical evidence, if available, and, in the discretion of
the Compensation Committee, upon certification of such Disability by an independent
qualified physician. Notwithstanding the foregoing, for any Awards that constitute
a nonqualified deferred compensation plan within the meaning of Section 409A(d) of
the Code and provide for an accelerated payment in connection with any Disability,
Disability shall have the same meaning as set forth in any regulations, revenue
procedure, revenue rulings or other pronouncements issued by the Secretary of the
United States Treasury pursuant to Section 409A of the Code, applicable to such
plans.

     (k) “Exchange Act” means the Securities Exchange Act of 1934, as amended and in
effect from time to time, or any successor statute.

     (l) “Fair Market Value,” with respect to a share of the Common Stock at a
particular time, shall be that value as determined by the Compensation Committee
which shall be (i) if such Common Stock is listed on a national securities exchange
or traded on the NASDAQ Stock Market, the closing price for sales of the Common
Stock on a national securities exchange or the NASDAQ Stock Market on which the
Common Stock is principally traded on said date, or, if no sales occur on said date,
then on the next preceding date on which there were such sales of Common Stock, (ii)
if the Common Stock shall not be listed on a national securities exchange or traded
on the National Market System, the mean between the closing bid and asked prices
last reported by the National Association of Securities Dealers, Inc. for the
over-the-counter market on said date or, if no bid and asked prices are reported on
said date, then on the next preceding date on which there were such quotations, or
(iii) if at any time quotations for the Common Stock shall not be reported by the
National Association of Securities Dealers, Inc. for the over-the-counter market and
the Common Stock shall not be listed on any national securities exchange or traded
on the NASDAQ Stock Market, the fair market value determined by the Compensation
Committee in such manner as it may deem reasonable.

     (m) “Incentive Stock Option” means any Stock Option granted pursuant to the
provisions of Section 6 of the Plan that is intended to be and is specifically
designated as an “incentive stock option” within the meaning of Section 422 of the
Code.

3

 

     (n) “Insider” means an individual who is, on the relevant date, an officer,
director or ten percent (10%) beneficial owner of any class of the Company’s equity
securities that is registered pursuant to Section 12 of the Exchange Act, all as
defined under Section 16 of the Exchange Act and the rules thereunder.

     (o) “Member of the Van Every Family” means (i) a lineal descendant of Salem A.
Van Every, Sr., including adopted persons as well as persons related by blood, (ii)
a spouse of an individual described in clause (i) of this Paragraph 2(o) or (iii) a
trust, estate, custodian and other fiduciary or similar account for an individual
described in clause (i) or (ii) of this Paragraph 2(o).

     (p) “Named Executive Officer” means, for a calendar year, a Participant who is
one of the group of “covered employees” for such calendar year within the meaning of
Code Section 162(m) or any successor statute.

     (q) “Non-Qualified Stock Option” means any Stock Option granted pursuant to the
provisions of Section 6 of the Plan that is not an Incentive Stock Option.

     (r) “Outside Person” means any Person other than (i) a Member of the Van Every
Family, (ii) a trustee or other fiduciary holding securities under an employee
benefit plan of the Company or (iii) a corporation owned directly or indirectly by
the stockholders of the Company in substantially the same proportions as their
ownership of the Company.

     (s) “Participant” means an employee of the Company who is granted an Award
under the Plan.

     (t) “Performance Award” means an Award granted pursuant to the provisions of
Section 9 of the Plan the vesting of which is contingent on performance attainment.

     (u) “Performance Cash Award” means an Award of cash or other monetary units
granted pursuant to the provisions of Section 9 of the Plan.

     (v) “Performance-Based Exception” means the performance-based exception set
forth in Code Section 162(m)(4)(C) from the deductibility limitations of Code
Section 162(m).

     (w) “Performance Equity Award” means an Award of units representing shares of
Common Stock granted pursuant to the provisions of Section 9 of the Plan.

     (x) “Person” has the meaning ascribed to said term in Section 3(a)(9) of the
Exchange Act as modified and used in Sections 13(d) and 14(d) of the

4

 

Exchange Act, including a “group” as defined in Section 13(d) of the Exchange Act.

     (y) “Plan” means the Lance, Inc. 2007 Key Employee Incentive Plan as set forth
herein, as the same may be hereafter amended and from time to time in effect.

     (z) “Qualified Business Criteria” means one or more of the business criteria
listed in Paragraph 11(b) upon which performance goals for certain Qualified
Performance-Based Awards may be established by the Committee.

     (aa) “Qualified Performance-Based Award” means, with respect to a Covered
Employee, an Award granted to an officer of the Company that is either (i) intended
to qualify for the Performance-Based Exception and is made subject to performance
goals based on Qualified Business Criteria as set forth in Paragraph 11(b), or (ii)
a Stock Option or SAR having an exercise price equal to or greater than the Fair
Market Value of the underlying Common Stock as of the Grant Date.

     (bb) “Restricted Award” means an Award granted pursuant to the provisions of
Section 8 of the Plan.

     (cc) “Restricted Stock Grant” means an Award of shares of Common Stock granted
pursuant to the provisions of Section 8 of the Plan.

     (dd) “Restricted Unit Grant” means an Award of units representing shares of
Common Stock granted pursuant to the provisions of Section 8 of the Plan.

     (ee) “Retirement” means 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.

     (ff) “Stock Appreciation Right” or “SAR” means an Award to benefit from the
appreciation of Common Stock granted pursuant to the provisions of Section 7 of the
Plan.

     (gg) “Stock Option” means an Award to purchase shares of Common Stock granted
pursuant to the provisions of Section 6 of the Plan.

     Section 3. Administration.

     (a) The Plan shall be administered by the Compensation Committee.

     (b) The Compensation Committee is authorized to grant Awards under the Plan, to construe and
interpret the Plan, to promulgate, amend and rescind rules and regulations relating to the
implementation of the Plan and to make all other determinations necessary or advisable for

5

 

the administration of the Plan. Any determination, decision or action of the Compensation
Committee in connection with the construction, interpretation, administration or application of the
Plan shall be final, conclusive and binding upon all persons participating in the Plan and any
person validly claiming under or through persons participating in the Plan. The Company shall
effect the granting of Awards under the Plan in accordance with the determinations made by the
Compensation Committee, by execution of instruments in writing in such form as are approved by the
Compensation Committee.

     Section 4. Duration of and Common Stock Subject to Plan.

     (a) Term. The Plan shall be effective on April 26, 2007, subject to approval by a plurality
of the shares voting on approval of the Plan at the Annual Meeting of Stockholders held on said
date or any adjournment thereof. The Plan shall terminate on April 26, 2013.

     (b) Shares of Common Stock Subject to Plan. The maximum number of shares of Common Stock with
respect to which Awards may be granted under the Plan, subject to adjustment as provided in Section
15 of the Plan, shall be 1,800,000 shares of the total authorized shares of the Common Stock. For
the purpose of computing the total number of shares of Common Stock available for Awards under the
Plan, there shall be counted against the foregoing limitation the number of shares of Common Stock
subject to issuance upon exercise or settlement of Awards and the number of shares of Common Stock
which equal the value of Restricted Unit Grants and Performance Equity Grants and other stock-based
Awards in each case determined as of the dates on which such Awards are granted. If any Award is
canceled, terminates, expires or lapses for any reason, any shares subject to such Award shall not
count against the aggregate number of shares that may be issued under the Plan as set forth above.
The following items shall not count against the aggregate number of shares that may be issued under
the Plan as set forth above: (i) the payment in cash of dividends or dividend equivalents under any
outstanding Award; (ii) any Award that is settled in cash rather than by issuance of shares; or
(iii) Awards granted through the assumption of, or in substitution for, outstanding Awards
previously granted to individuals who become key employees as a result of a merger, consolidation,
acquisition or other corporation transaction involving the Company or any subsidiary of the
Company. Common Stock which may be issued under the Plan may be either authorized and unissued
shares or issued shares which have been reacquired by the Company. No fractional shares of Common
Stock shall be issued under the Plan.

     (c) Restricted and Other Award Limitations. In no event shall the Compensation Committee
grant Restricted Awards, Performance Equity Awards or other stock-based or combination Awards (as
described in Section 10) covering in the aggregate more than the sum of (i) 500,000 shares of
Common Stock plus (ii) the number of shares of Common Stock for any such Award that is canceled,
terminates, expires or lapses for any reason..

     (d) Incentive Stock Option Award Limitation. In no event shall the Compensation Committee
grant Incentive Stock Option Awards covering in the aggregate more than 1,800,000 shares of Common
Stock.

     (e) Individual Award Limit for Equity-Based Awards. In no event shall a Participant receive
Stock Options, SARs, Performance Equity Awards, Restricted Stock, Restricted Stock

6

 

Units or other stock-based Awards during any one calendar year covering in the aggregate more than
400,000 shares of Common Stock.

     (f) Individual Award Limit for Cash-Based Awards. The aggregate dollar value of any
Performance Cash Awards or other cash-based Awards intended to satisfy the Performance-Based
Exception that may be paid to a Participant under the Plan during any one calendar year shall not
exceed $3,000,000.

     Section 5. Eligibility. Only managerial and other key employees shall be eligible to be
granted Awards under the Plan. The Compensation Committee shall, from time to time, (i) determine
those managerial and other key employees to whom Awards shall be granted and the conditions of each
such Award or issue and sale and (ii) grant such Awards. No member of the Compensation Committee
while serving as such shall be eligible to receive any Award hereunder.

     Section 6. Stock Options. Stock Options may be granted under the Plan in the form of
Incentive Stock Options or Non-Qualified Stock Options; and such Stock Options shall be subject to
the following terms and conditions and shall contain such additional terms and conditions, not
inconsistent with the express provisions of the Plan, as the Compensation Committee shall
determine:

     (a) Grant. Stock Options may be granted under the Plan on such terms and
conditions not inconsistent with the provisions of the Plan and in such form as the
Compensation Committee may from time to time approve. Stock Options may be granted
alone, in addition to or in combination with other Awards under the Plan.

     (b) Stock Option Price. The option exercise price per share of Common Stock
purchasable under a Stock Option shall be determined by the Compensation Committee
at the time of grant, but in no event shall the exercise price of a Stock Option be
less than 100% of the Fair Market Value of the Common Stock on the date of the grant
of such Stock Option.

     (c) Option Term. The term of each Stock Option shall be fixed by the
Compensation Committee; except that the term of Incentive Stock Options shall not
exceed 10 years after the date the Incentive Stock Option is granted.

     (d) Exercisability. A Stock Option shall be exercisable at such time or times
and subject to such terms and conditions as shall be determined by the Compensation
Committee at the date of grant.

     (e) Method of Exercise. Stock Options shall be exercised by the delivery of a
notice of exercise to the Company, setting forth the number of shares with respect
to which the Stock Option is to be exercised, accompanied by full payment for the
shares. To be effective, notice of exercise must be made in accordance with
procedures established by the Company from time to time.

7

 

          The option price due upon exercise of any Stock Option shall be payable to the
Company in full either: (i) in cash or its equivalent, or (ii) by tendering
previously acquired shares having an aggregate Fair Market Value at the time of
exercise equal to the total option price (provided that the shares which are
tendered must have been held by the Participant for at least six (6) months prior to
their tender to satisfy the option price unless such shares had been acquired by the
Participant on the open market), or (iii) by a combination of (i) and (ii).

          As soon as practicable after notification of exercise and full payment, the
Company shall deliver the shares to the Participant in an appropriate amount based
upon the number of shares purchased under the Stock Option(s).

          Notwithstanding the foregoing, the Compensation Committee also may allow (i)
cashless exercises as permitted under Federal Reserve Board’s Regulation T, subject
to applicable securities law restrictions, or (ii) exercises by any other means
which the Compensation Committee determines to be consistent with the Plan’s purpose
and applicable law.

     (f) Special Rule for Incentive Stock Options. With respect to Incentive Stock
Options granted under the Plan, the aggregate Fair Market Value (determined as of
the date the Incentive Stock Option is granted) of the number of shares with respect
to which Incentive Stock Options are exercisable for the first time by a Participant
during any calendar year shall not exceed $100,000 or such other limit as may be
required by the Code.

     (g) No Rights. A Participant granted a Stock Option shall have no rights as a
stockholder of the Company with respect to the shares covered by such Stock Option
except to the extent that shares of Common Stock are issued to the Participant upon
the due exercise of the Stock Option.

     (h) Repricing of Stock Options. In no event shall any outstanding Stock Option
be repriced to a lower option exercise price per share of Common Stock at any time
during the term of such Stock Option without the prior affirmative vote of holders
of a majority of the shares of Common Stock of the Company present at a stockholders
meeting in person or represented by proxy and entitled to vote thereon.

     Section 7. Stock Appreciation Rights. Stock Appreciation Rights may be granted under the Plan
subject to the following terms and conditions and shall contain such additional terms and
conditions, not inconsistent with the express terms of the Plan, as the Compensation Committee
shall determine:

     (a) Stock Appreciation Rights. A Stock Appreciation Right is an Award
entitling a Participant to receive an amount equal to the excess of the Fair Market
Value of a share of Common Stock on the date of exercise over the Fair Market Value
of a share of Common Stock on the date of grant of the Stock Appreciation Right, or
such other price as is set by the Compensation Committee

8

 

provided such other price is not less than 100% of the Fair Market Value of the
Common Stock on the date of the grant of such Stock Appreciation Right, multiplied
by the number of shares of Common Stock with respect to which the Stock Appreciation
Right shall have been exercised.

     (b) Grant. A Stock Appreciation Right may be granted in combination with, in
addition to or completely independent of a Stock Option or any other Award under the
Plan.

     (c) Exercise. A Stock Appreciation Right may be exercised by a Participant in
accordance with procedures established by the Compensation Committee, except that in
no event shall a Stock Appreciation Right be exercisable within the first six months
after the date of grant. The Compensation Committee may also provide that a Stock
Appreciation Right shall be automatically exercised on one or more specified dates.

     (d) Form of Payment. Payment upon exercise of a Stock Appreciation Right may
be made in cash, in shares of Common Stock, or any combination thereof, as the
Compensation Committee shall determine; provided, however, that any Stock
Appreciation Right exercised upon or subsequent to the occurrence of a Change in
Control (as defined in Section 16) shall be paid in cash.

     (e) No Rights. A Participant granted a Stock Appreciation Right shall have no
rights as a stockholder of the Company with respect to the shares covered by such
Stock Appreciation Right except to the extent that shares of Common Stock are issued
to the Participant upon the due exercise of the Stock Appreciation Right.

     Section 8. Restricted Awards. Restricted Awards may be granted under the Plan in the form of
either Restricted Stock Grants or Restricted Unit Grants. Restricted Awards shall be subject to
the following terms and conditions and shall contain such additional terms and conditions, not
inconsistent with the express provisions of the Plan, as the Compensation Committee shall
determine:

     (a) Restricted Stock Grants. A Restricted Stock Grant is an Award of shares of
Common Stock to a Participant subject to such terms and conditions as the
Compensation Committee deems appropriate, including, without limitation,
restrictions on the sale, assignment, transfer or other disposition of such shares
and the requirement that the Participant forfeit such shares back to the Company
upon termination of employment prior to vesting.

     (b) Restricted Unit Grants. A Restricted Unit Grant is an Award of units to be
paid in cash upon vesting (with each unit having a value equivalent to the Fair
Market Value of one share of Common Stock) granted to a Participant subject to such
terms and conditions as the Compensation Committee deems appropriate, including,
without limitation, the requirement that the Participant forfeit such units upon
termination of employment prior to vesting.

9

 

     (c) Grants of Awards. Restricted Awards may be granted under the Plan in such
form and on such terms and conditions as the Compensation Committee may from time to
time approve. Restricted Awards may be granted alone, in addition to or in
combination with other Awards under the Plan. Subject to the terms of the Plan, the
Compensation Committee shall determine the number of Restricted Awards to be granted
to a Participant and the Compensation Committee may impose different terms and
conditions on any particular Restricted Award made to any Participant. Each
Participant receiving a Restricted Stock Grant shall be issued a stock certificate
in respect of such shares of Common Stock. Such certificate shall be registered in
the name of such Participant, shall be accompanied by a stock power duly executed by
such Participant, and shall bear an appropriate legend referring to the terms,
conditions and restrictions applicable to such Award; which certificate evidencing
such shares shall be held in custody by the Company until the restrictions thereon
shall have lapsed.

     (d) Restriction Period. Restricted Awards shall provide that in order for a
Participant’s rights to vest in such Awards, the Participant must remain in the
employment of the Company, subject to relief for specified reasons, for a period of
time commencing on the date of the Award and ending on such later date or dates as
the Compensation Committee may designate at the time of the Award (“Restriction
Period”). During the Restriction Period, a Participant may not sell, assign,
transfer, pledge, encumber or otherwise dispose of shares of Common Stock received
under a Restricted Stock Grant. The Compensation Committee, in its sole discretion,
may provide for the lapse of restrictions in installments during the Restriction
Period. Upon expiration of the applicable Restriction Period (or lapse of
restrictions during the Restriction Period where the restrictions lapse in
installments), the Participant shall be entitled to receive his or her Restricted
Award or portion thereof, as the case may be.

     (e) Payment of Awards. A Participant shall be entitled to receive payment for
a Restricted Unit Grant (or portion thereof) upon expiration of the applicable
Restriction Period. Payment in settlement of a Restricted Unit Grant shall be made
as soon as practicable following the expiration of the Restriction Period in cash,
in shares of Common Stock equal to the number of units granted under the Restricted
Unit Grant with respect to which such payment is made, or in any combination
thereof, as the Compensation Committee in its sole discretion shall determine.

     (f) Rights as a Stockholder. A Participant shall have, with respect to the
shares of Common Stock received under a Restricted Stock Grant, all of the rights of
a stockholder of the Company, including the right to vote the shares, and the right
to receive any cash dividends. Stock dividends issued with respect to the shares
covered by a Restricted Stock Grant shall be treated as additional shares under the
Restricted Stock Grant and shall be subject to the same restrictions and

10

 

other terms and conditions that apply to shares under the Restricted Stock Grant
with respect to which such dividends are issued.

     Section 9. Performance Awards. Performance Awards may be granted under the Plan in the form
of either Performance Equity Awards or Performance Cash Awards. Performance Awards may be subject
to the following terms and conditions and may contain such additional terms and conditions, not
inconsistent with the express provisions of the Plan, as the Compensation Committee shall
determine:

     (a) Performance Equity Awards. A Performance Equity Award is an Award of units
(with each unit equivalent in value to one share of Common Stock as it varies
throughout the term of the designated performance period) to a Participant and may
be subject to such terms and conditions as the Compensation Committee deems
appropriate, including, without limitation, the requirement that the Participant
forfeit such units or a portion of such units in the event certain performance
criteria are not met within a designated period of time.

     (b) Performance Cash Awards. A Performance Cash Award is an Award of a
specified dollar value in cash (including a number of units payable in cash, with
each unit representing a monetary amount as designated by the Compensation
Committee) to a Participant subject to such terms and conditions as the Compensation
Committee deems appropriate, including, without limitation, the requirement that the
Participant forfeit such Award or a portion of such Award in the event certain
performance criteria are not met within a designated period of time.

     (c) Grants of Awards. Performance Awards may be granted under the Plan in such
form as the Compensation Committee may from time to time approve. Performance
Awards may be granted alone, in addition to or in combination with other Awards
under the Plan. Subject to the terms of the Plan, the Compensation Committee shall
determine the number of Performance Awards to be granted to a Participant and the
Compensation Committee may impose different terms and conditions on any particular
Performance Award made to any Participant.

     (d) Performance Goals and Performance Periods. Performance Awards shall
provide that in order for a Participant’s rights to vest in such Awards the Company
or the Participant, or a combination thereof, must achieve certain performance goals
(“Performance Goals”) over a designated performance period (“Performance Period”).
The Performance Goals and Performance Period shall be established by the
Compensation Committee, in its sole discretion. The Compensation Committee shall
establish Performance Goals for each Performance Period before, or as soon as
practicable after, the commencement of the Performance Period. The Compensation
Committee may also establish a schedule or formula for such Performance Period
setting forth the portion of the Performance Award which will be earned or forfeited
based on the degree of achievement of the Performance Goals actually achieved or
exceeded. In setting

11

 

Performance Goals, the Compensation Committee may use such measures of performance
as it deems appropriate.

     (e) Payment of Awards. In the case of a Performance Equity Award, the
Participant shall be entitled to receive payment for each unit earned in an amount
equal to the Fair Market Value of a share of Common Stock on the date on which the
Compensation Committee determines the number of units earned by the Participant. In
the case of a Performance Cash Award, the Participant shall be entitled to receive
payment in an amount equal to the dollar value of the Award. Payment in settlement
of a Performance Award shall be made as soon as practicable following the conclusion
of the respective Performance Period in cash, in shares of Common Stock, or in any
combination thereof, as the Compensation Committee in its sole discretion shall
determine.

     Section 10. Other Stock-Based and Combination Awards.

     (a) The Compensation Committee may grant other Awards under the Plan pursuant to which Common
Stock is or may in the future be acquired, or Awards denominated in stock units, including ones
valued using measures other than market value. Such other stock-based Awards may be granted either
alone, in addition to or in combination with any other type of Award granted under the Plan.

     (b) The Compensation Committee may also grant Awards under the Plan in combination with other
Awards or in exchange of Awards, or in combination with or as alternatives to grants or rights
under any other employee plan of the Company, including the plan of any acquired entity.

     (c) Subject to the provisions of the Plan, the Compensation Committee shall have authority to
determine the individuals to whom and the time or times at which such Awards shall be made, the
number of shares of Common Stock to be granted or covered pursuant to such Awards, and any and all
other conditions and/or terms of the Awards.

     Section 11. Qualified Performance-Based Awards

     (a) Incentive Stock Options and Stock Appreciation Rights. The provisions of the Plan are
intended to ensure that all Stock Options and Stock Appreciation Rights granted hereunder to any
Covered Employee shall qualify for the Performance-Based Exception.

     (b) Other Awards. When granting an Award other than a Stock Option or a Stock Appreciation
Right, the Committee may designate such Award as a Qualified Performance-Based Award, based upon a
determination that the recipient is or may be a Covered Employee with respect to such Award, and
the Committee wishes such Award to qualify for the Performance-Based Exception. If an Award is so
designated, the Committee shall establish performance goals for such Award within the time period
prescribed by Section 162(m) of the Code based on one or more of the following Qualified Business
Criteria, which may be expressed in terms of Company-wide objectives or goals or in terms of
objectives or goals that relate to the performance of an affiliate or a division, region,
department, function or

12

 

combination thereof within the Company or an affiliate:

	 	 	 
	 

	 	—Revenue

	 

	 	—Sales

	 

	 	—Profit (net profit, gross profit, operating profit, economic profit, profit margins or other corporate profit measures)

	 

	 	—Earnings on a pre-tax or after-tax basis (EBIT, EBITDA, earnings per share, earnings growth or other corporate earnings measures)

	 

	 	—Margins (net or gross)

	 

	 	—Net income (before or after taxes, operating income or other income measures)

	 

	 	—Cash (cash flow, cash generation or other cash measures)

	 

	 	—Stock price or performance

	 

	 	—Stock index price or performance

	 

	 	—Total stockholder return (stock price appreciation plus reinvested
dividends divided by beginning share price or other measures of return)

	 

	 	—Financial return measures (including, but not limited to, dividends, return on assets, capital, equity, investment or sales, cash flow, or free cash flow)

	 

	 	—Market share measures

	 

	 	—Improvements in capital structure

	 

	 	—Levels of debt, equity, accounts receivable, lost time accidents or safety

	 

	 	—Employee relations (surveys, employee claims)

	 

	 	—Expenses (operating expense, expense management, expense ratio, expense efficiency
ratios, other expense measures or cost containment, including medical,
casualty and workers compensation costs)

	 

	 	—Internal rate of return or increase in net present value

	 

	 	—Working capital targets relating to inventory, accounts receivable or other
components

	 

	 	—Planning accuracy (as measured by comparing planned results to actual results)

	 

	 	—Productivity improvement

	 

	 	—Inventory measures (turns, reduction, shrinkage)

	 

	 	—Customer relations and service (count, frequency, attitude, order fill rate)

	 

	 	—Compliance goals (employee turnover, social goals, diversity goals, safety programs, regulatory or legal compliance)

	 

	 	—Business
expansion, acquisitions and divestitures.

     Performance goals with respect to the foregoing Qualified Business Criteria may be specified
in absolute terms, in percentages, or in terms of growth from period to period or growth rates over
time, as well as measured relative to an established or specially-created performance index of
Company competitors or peers. Any member of a specially-created performance index that undergoes a
corporate event or transaction of a kind described in Section 15 or that files a petition for
bankruptcy during a measurement period shall be disregarded from and after such event, unless the
Committee determines not to disregard such entity or to make some other adjustment to measuring the
performance index and the effect of such Committee determination is to reduce the amount payable
under any affected Qualified Performance-Based Award. Performance goals need not be based upon an
increase or positive result under a business

13

 

criterion and could include, for example, the maintenance of the status quo or the limitation
of economic losses (measured, in each case, by reference to a specific business criterion).
Notwithstanding anything herein to the contrary, the Committee may exercise, with respect to such
Qualified Business Criteria and related performance goals, such negative discretion as is permitted
under applicable law for purposes of the Performance-Based Exception.

     (c) Performance Goals. Each Qualified Performance-Based Award (other than a Stock Option or
SAR) shall be earned, vested and payable (as applicable) only upon the achievement of performance
goals established by the Committee based upon one or more of the Qualified Business Criteria,
together with the satisfaction of any other conditions, such as continued employment, as the
Committee may determine to be appropriate; provided, however, that the Committee may provide,
either in connection with the grant thereof or by amendment thereafter, that achievement of such
performance goals will be waived upon the death, Disability or Retirement of the Participant, or
upon a Change in Control as defined in Section 16. Performance periods established by the Committee
for any such Qualified Performance-Based Award may be as short as three months and may be any
longer period. In addition, the Committee may reserve the right, in connection with the grant of a
Qualified Performance-Based Award, to exercise negative discretion to determine that the portion of
such Award actually earned, vested and/or payable (as applicable) shall be less than the portion
that would be earned, vested and/or payable based solely upon application of the applicable
performance goals.

     (d) Inclusions and Exclusions from Performance Criteria. The Committee may determine
prospectively, at the time that goals under this Section 11 are established, whether or not to
adjust any such goals during or after the applicable performance period to take into consideration
and/or mitigate the unbudgeted impact of unusual or non-recurring gains and losses, accounting
changes, acquisitions, dispositions, divestitures, discontinued operations and/or “extraordinary
items” within the meaning of generally accepted accounting principles (“non-recurring items”), or
if such non-recurring items were not foreseen or were not quantifiable at the time such goals were
established, upon the occurrence of such non-recurring items, including any of the following that
occur during the applicable performance period: (a) asset write-downs or impairment charges; (b)
litigation or claim costs, judgments or settlements; (c) the effect of changes in tax laws,
accounting principles or other laws or provisions affecting reported results; (d) restatements
occurring as a result of errors that arise from events other than fraud or failures in performance;
(e) accruals for reorganization and restructuring programs; (f) extraordinary nonrecurring items as
described in Accounting Principles Board Opinion No. 30 and/or in management’s discussion and
analysis of financial condition and results of operations appearing in the Company’s annual report
to stockholders for the applicable year; (g) acquisitions or divestitures; and (h) foreign exchange
gains and losses.

     (e) Certification of Performance Goals. Any payment of a Qualified Performance-Based Award
granted with performance goals pursuant to Paragraph 11(c) above shall be conditioned on the
written certification of the Committee in each case that the performance goals and any other
material conditions were satisfied. Except as specifically provided in Paragraph 11(c), no
Qualified Performance-Based Award held by a Covered Employee or by an employee who in the
reasonable judgment of the Committee may be a Covered Employee on the date of payment, may be
amended, nor may the Committee exercise any discretionary authority it may otherwise have under the
Plan with respect to a Qualified Performance-Based Award under the

14

 

Plan, in any manner to waive the achievement of the applicable performance goal based on Qualified
Business Criteria or to increase the amount payable pursuant thereto or the value thereof, or
otherwise in a manner that would cause the Qualified Performance-Based Award to cease to qualify
for the Performance-Based Exception.

     Section 12. Deferral Elections. The Compensation Committee may permit a Participant to elect
to defer his or her receipt of the payment of cash or the delivery of shares of Common Stock that
would otherwise be due to such Participant by virtue of the exercise or earn out of an Award made
under the Plan. If any such election is permitted, the Compensation Committee may establish rules
and procedures for such payment deferrals, including the possible (a) payment or crediting of
reasonable interest on such deferred amounts credited in cash, and (b) the payment or crediting
dividend equivalents in respect of deferrals credited in units of Common Stock. Any such permitted
deferrals shall comply with all applicable requirements of Section 409A of the Code, including the
timing of any such deferral elections and the timing and form of payments.

     Section 13. Termination of Employment. The terms and conditions under which an Award may be
exercised after a Participant’s termination of employment shall be determined by the Compensation
Committee.

     Section 14. Non-transferability of Awards. No Award under the Plan, nor any rights or
interests therein, shall be assignable or transferable by a Participant except by will or the laws
of descent and distribution. During the lifetime of a Participant, Stock Options and Stock
Appreciation Rights are exercisable only by, and payments in settlement of Awards will be payable
only to, the Participant or his or her legal representative.

     Section 15. Adjustments Upon Changes in Capitalization, Etc.

     (a) The existence of the Plan and the Awards granted hereunder shall not affect or restrict in
any way the right or power of the Board or the stockholders of the Company to make or authorize any
adjustment, recapitalization, reorganization or other change in the Company’s capital structure or
its business, any merger or consolidation of the Company, any issue of bonds, other debentures,
preferred or prior preference stocks, the dissolution or liquidation of the Company or any sale or
transfer of all or any part of its assets or business, or any other corporate act or proceeding.

     (b) In the event that a dividend shall be declared upon the Common Stock payable in shares of
Common Stock, the number of shares of Common Stock then subject to any Award and the number of
shares reserved for issuance pursuant to the Plan but not yet covered by an Award shall be adjusted
by adding to each such share the number of shares which would be distributable thereon if such
share had been outstanding on the date fixed for determining the stockholders entitled to receive
such stock dividend. In the event that the outstanding shares of Common Stock shall be changed
into or exchanged for a different number or kind of shares of stock or other securities of the
Company or of another corporation, or changed into or exchanged for cash or property or the right
to receive cash or property (but not including any dividend payable in cash or property other than
a liquidating distribution), whether through reorganization, recapitalization, stock split-up,
combination of shares, merger or consolidation, then there shall

15

 

be substituted for each share of Common Stock subject to any Award and for each share of Common
Stock reserved for issuance pursuant to the Plan but not yet covered by an Award, the number and
kind of shares of stock or other securities or cash or property or right to receive cash or
property into which each outstanding share of Common Stock shall be so changed or for which each
such share shall be exchanged. In the event there shall be any change other than as specified
above in this Section 15, in the number or kind of outstanding shares of Common Stock or of any
stock or other securities into which such Common Stock shall have been changed or for which it
shall have been exchanged, then if the Compensation Committee shall in its sole discretion
determine that such change equitably requires an adjustment in the number or kind of shares
theretofore reserved for issuance pursuant to the Plan but not yet covered by an Award and of the
shares then subject to an Award or Awards, such adjustment shall be made by the Compensation
Committee and shall be effective and binding for all purposes of the Plan and each agreement
entered into with a Participant under the Plan. In the case of any such substitution or adjustment
as provided for in this Section 15, the Award price for each share covered thereby prior to such
substitution or adjustment will be the Award price for all shares of stock or other securities or
cash or property or right to receive cash or property which shall have been substituted for such
share or to which such share shall have been adjusted pursuant to this Section 15. No adjustment
or substitution provided for in this Section 15 shall require the Company in any agreement with a
Participant to issue a fractional share and the total substitution or adjustment with respect to
each agreement with a Participant shall be limited accordingly. In the event that the number of
shares of Common Stock subject to an Award is adjusted pursuant to the provisions of this Section
15, then any Stock Appreciation Rights related to such Award shall be appropriately and equitably
adjusted.

     (c) In the event of (i) a dissolution or liquidation of the Company, (ii) a sale of all or
substantially all of the Company’s assets, (iii) a merger or consolidation involving the Company in
which the Company is not the surviving corporation or (iv) a merger or consolidation involving the
Company in which the Company is the surviving corporation but the holders of shares of the
Company’s Common Stock receive securities of another corporation and/or other property, including
cash, the Compensation Committee shall, in its absolute discretion, have the power to cancel,
effective immediately prior to the occurrence of such event, each Stock Option and each Stock
Appreciation Right outstanding immediately prior to such event (whether or not then exercisable)
and, in consideration of such cancellation, the Company will pay to the Participant an amount in
cash for each share of Common Stock subject to such Stock Option or Stock Appreciation Right equal
to the excess of (A) the value as determined by the Compensation Committee, in its absolute
discretion, of the property (including cash) received by the holder of one share of Common Stock as
a result of such event over (B) the exercise price of such Stock Option or Stock Appreciation
Right; or provide for the exchange of each Stock Option and Stock Appreciation Right outstanding
immediately prior to such event (whether or not then exercisable) for an option on or stock
appreciation right with respect to, as appropriate, some or all of the property which a holder of
the number of shares of Common Stock subject to such Stock Option or Stock Appreciation Right would
have received in such transaction and, incident thereto, make an equitable adjustment as determined
by the Compensation Committee, in its absolute discretion, in the exercise price of the option or
stock appreciation right, or the number of shares or amount of property subject to the option or
stock appreciation right or, if appropriate, provide for a cash payment to the Participant to whom
such Stock Option or Stock

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Appreciation Right was granted in partial consideration for the exchange of the Stock Option or
Stock Appreciation Right.

     Section 16. Change in Control.

     (a) Except as may otherwise be provided in an award agreement, incentive plan, award
guidelines or other instrument adopted under this Plan, in the event of a Change in Control (as
defined below) of the Company, (i) all Stock Options or Stock Appreciation Rights then outstanding
shall become fully exercisable as of the date of the Change in Control, whether or not then
exercisable, (ii) all restrictions and conditions of all Restricted Stock Grants and Restricted
Unit Grants then outstanding shall be deemed satisfied as of the date of the Change in Control, and
(iii) all Performance Awards shall be deemed to have been fully earned as of the date of the Change
in Control.

     (b) “Change in Control” means, and shall be deemed to have occurred upon, the first to occur
of any of the following events:

	 	(i)	 	Any Outside Person becomes the Beneficial Owner,
directly or indirectly, of securities of the Company representing
twenty-five percent (25%) or more of the combined voting power of the
Company’s then outstanding securities; or

	 
	 	(ii)	 	During any period of two (2) consecutive years (not
including any period prior to the date hereof), individuals who at the
beginning of such period constitute the Board (and any new Director,
whose nomination for election by the Company’s stockholders was
approved by a vote of at least two-thirds (2/3) of the Directors then
in office who either were Directors at the beginning of the period or
whose nomination for election was so approved) cease for any reason to
constitute a majority of the members of the Board; or

	 
	 	(iii)	 	The stockholders of the Company approve: (i) a plan of
complete liquidation of the Company; or (ii) an agreement for the sale
or disposition of all or substantially all of the Company’s assets
other than a sale or disposition of all or substantially all of the
Company’s assets to an entity at least sixty percent (60%) of the
combined voting power of the voting securities of which are owned by
the stockholders of the Company in substantially the same proportions
as their ownership of the Company immediately prior to such sale or
disposition; or

	 
	 	(iv)	 	The stockholders of the Company approve a merger,
consolidation, or reorganization of the Company with or involving any
other corporation, other than a merger, consolidation, or
reorganization that would result in the voting securities of the
Company outstanding immediately prior thereto continuing to represent
(either by remaining outstanding or by being converted into voting

17

 

	 	 	 	securities of the surviving entity or any parent thereof) at least
sixty percent (60%) of the combined voting power of the voting
securities of the Company (or such surviving entity) outstanding
immediately after such merger, consolidation, or reorganization.

However, in no event shall a “Change in Control” be deemed to have occurred with respect to a
Participant if that Participant is part of a purchasing group which consummates the Change in
Control transaction. A Participant shall be deemed “part of a purchasing group” for purposes of
the preceding sentence if the Participant is an equity participant in the acquiring company or
group or surviving entity (the “Purchaser”) except for ownership of less than one percent (1%) of
the equity of the Purchaser. Notwithstanding the foregoing, for any Awards that constitute a
nonqualified deferred compensation plan within the meaning of Section 409A(d) of the Code and
provide for an accelerated payment in connection with a Change in Control, Change in Control shall
have the same meaning as set forth in any regulations, revenue procedure, revenue rulings or other
pronouncements issued by the Secretary of the United States Treasury pursuant to Section 409A of
the Code, applicable to such plans.

     Section 17. Amendment and Termination. Without further approval of the stockholders of the
Company, the Board may at any time terminate the Plan, or may amend it from time to time in such
respects as the Board may deem advisable, except that the Board may not, without approval of the
stockholders, make any amendment which would (i) require stockholder approval for Incentive Stock
Options granted or to be granted under the Plan to qualify as incentive stock options within the
meaning of Section 422 of the Code or (ii) require stockholder approval under applicable law or the
rules of any national securities exchange upon which the Common Stock is listed at the time such
amendment is proposed.

     Section 18. Miscellaneous.

     (a) Tax Withholding. The Company shall have the power and the right to deduct or withhold, or
require a Participant to remit to the Company, an amount sufficient to satisfy Federal, state, and
local taxes (including the Participant’s FICA obligation) required by law to be withheld with
respect to any taxable event arising as a result of this Plan.

     (b) Share Withholding. The Company may cause any tax withholding obligation described in
Paragraph 18(a) to be satisfied by the Company withholding shares having a Fair Market Value on the
date the tax is to be determined equal to the minimum statutory total tax which could be imposed on
the transaction. In the alternative, the Company may permit Participants to elect to satisfy the
tax withholding obligation, in whole or in part, by either (i) having the Company withhold shares
having a Fair Market Value on the date the tax is to be determined equal to the minimum statutory
total tax which could be imposed on the transaction or (ii) tendering previously acquired shares
having an aggregate Fair Market Value equal to the minimum statutory total tax which could be
imposed on the transaction (provided that the shares which are tendered must have been held by the
Participant for at least six (6) months prior to their tender unless such shares had been acquired
by the Participant on the open market). All such elections shall be irrevocable, made in writing,
signed by the Participant, and shall be subject to any restrictions or limitations that the
Compensation Committee, in its sole discretion, deems appropriate.

18

 

     (c) No Right To Employment. Neither the adoption of the Plan nor the granting of any Award
hereunder shall confer upon any employee of the Company any right to continued employment with the
Company, nor shall it interfere in any way with the right of the Company to terminate the
employment of any of its employees at any time, with or without cause.

     (d) Unfunded Plan. The Plan shall be unfunded and the Company shall not be required to
segregate any assets that may at any time be represented by Awards under the Plan. Any liability
of the Company to any person with respect to any Award under the Plan shall be based solely upon
any contractual obligations that may be effected pursuant to the Plan. No such obligation of the
Company shall be deemed to be secured by any pledge of, or other encumbrance on, any property of
the Company.

     (e) Payments to Trust. The Compensation Committee is authorized to cause to be established a
trust agreement or several trust agreements whereunder the Company may make payments of amounts due
or to become due to Participants in the Plan.

     (f) Engaging in Competition With Company. In the event a Participant’s employment with the
Company is terminated for any reason whatsoever, and within 18 months after the date thereof such
Participant accepts employment with any competitor of, or otherwise engages in competition with,
the Company, the Compensation Committee, in its sole discretion, may require such Participant to
return to the Company the economic value of any Award which is realized or obtained (measured at
the date of exercise, vesting or payment) by such Participant at any time during the period
beginning on that date which is six months prior to the date of such Participant’s termination of
employment with the Company.

     (g) Securities Law Restrictions. No shares of Common Stock shall be issued under the Plan
unless counsel for the Company shall be satisfied that such issuance will be in compliance with
applicable Federal and state securities laws. Certificates for shares of Common Stock delivered
under the Plan may be subject to such stop-transfer orders and other restrictions as the
Compensation Committee may deem advisable under the rules, regulations, and other requirements of
the Securities and Exchange Commission, any stock exchange upon which the Common Stock is then
listed, and any applicable federal or state securities law. The Compensation Committee may cause a
legend or legends to be put on any such certificates to make appropriate reference to such
restrictions.

     (h) Award Agreement. Each Participant receiving an Award under the Plan shall enter into an
agreement with the Company in a form specified by the Compensation Committee agreeing to the terms
and conditions of the Award and such related matters as the Compensation Committee shall, in its
sole discretion, determine.

     (i) Costs of Plan. The costs and expenses of administering the Plan shall be borne by the
Company.

     (j) Governing Law. The Plan and all actions taken thereunder shall be governed by and
construed in accordance with the laws of the State of North Carolina.

19

 

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

     (l) Indemnification. Provisions for the indemnification of officers and directors of the
Company in connection with the administration of the Plan shall be as set forth in the Company’s
Articles of Incorporation and Bylaws as in effect from time to time.

20

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