SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-Q
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(Mark One)
[ X ] Quarterly Report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended September 24, 1998
[ ] Transition Report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from to
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Commission file number 0-19681
JOHN B. SANFILIPPO & SON, INC.
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(Exact Name of Registrant as Specified in its Charter)
Delaware 36-2419677
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(State or other Jurisdiction (I.R.S. Employer
of Incorporation or Organization) Identification Number)
2299 Busse Road
Elk Grove Village, Illinois 60007
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(Address of Principal Executive Offices)
Registrant's telephone number, including area code
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(847) 593-2300
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 X No
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As of November 6, 1998, 5,461,139 shares of the Registrant's
Common Stock, $.01 par value per share, excluding 117,900 treasury
shares and 3,687,426 shares of the Registrant's Class A Common
Stock, $.01 par value per share, were outstanding.
JOHN B. SANFILIPPO & SON, INC.
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INDEX TO FORM 10-Q
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PART I. FINANCIAL INFORMATION PAGE NO.
- ------------------------------ --------
Item 1 -- Consolidated Financial Statements:
Consolidated Statements of Operations for the quarters
ended September 24, 1998 and September 25, 1997 3
Consolidated Balance Sheets as of September 24, 1998
and June 25, 1998 4
Consolidated Statements of Cash Flows for the
quarters ended September 24, 1998 and September 25, 1997 5
Notes to Consolidated Financial Statements 6
Item 2 -- Management's Discussion and Analysis of
Financial Condition and Results of Operations 9
Item 3 -- Quantitative and Qualitative Disclosures About
Market Risk 14
PART II. OTHER INFORMATION
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Item 2 -- Changes in Securities 15
Item 5 -- Other Information 15
Item 6 -- Exhibits and Reports on Form 8-K 15
SIGNATURE 16
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EXHIBIT INDEX 17
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OMITTED FINANCIAL STATEMENTS
- ----------------------------
None
PART I. FINANCIAL INFORMATION
- ------------------------------
Item 1 -- Financial Statements
- ------------------------------
JOHN B. SANFILIPPO & SON, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(Dollars in thousands, except earnings per share)
For the Quarter Ended
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September 24, September 25,
1998 1997
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Net sales $73,829 $77,256
Cost of sales 62,413 64,452
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Gross profit 11,416 12,804
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Selling expenses 6,574 6,893
Administrative expenses 2,192 2,491
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8,766 9,384
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Income from operations 2,650 3,420
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Other income (expense):
Interest expense (2,275) (1,809)
Interest income 7 6
Gain on disposition of properties 11 --
Rental income 129 118
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(2,128) (1,685)
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Income before income taxes 522 1,735
Income tax (expense) (235) (720)
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Net income $ 287 $ 1,015
============= =============
Basic earnings per common share $ 0.03 $ 0.11
============= =============
Diluted earnings per common share $ 0.03 $ 0.11
============= =============
The accompanying notes are an integral part of these financial
statements.
JOHN B. SANFILIPPO & SON, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Dollars in thousands)
September 24, June 25,
1998 1998
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ASSETS
CURRENT ASSETS:
Cash $ 710 $ 549
Accounts receivable, net 25,125 23,901
Inventories 98,282 99,535
Deferred income taxes 417 417
Income taxes receivable 1,255 1,454
Prepaid expenses and other current assets 3,241 3,024
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TOTAL CURRENT ASSETS 129,030 128,880
PROPERTIES:
Buildings 55,369 55,318
Machinery and equipment 71,419 70,099
Furniture and leasehold improvements 5,009 5,001
Vehicles 4,188 4,260
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135,985 134,678
Less: Accumulated depreciation 62,520 60,943
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73,465 73,735
Land 1,892 1,892
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75,357 75,627
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OTHER ASSETS:
Goodwill and other intangibles 7,551 7,754
Miscellaneous 6,664 7,415
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14,215 15,169
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$218,602 $219,676
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LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes payable $ 45,323 $ 48,959
Current maturities 7,220 5,789
Accounts payable 17,222 12,038
Accrued expenses 7,563 9,244
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TOTAL CURRENT LIABILITIES 77,328 76,030
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LONG-TERM DEBT 60,523 63,182
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LONG-TERM DEFERRED INCOME TAXES 2,266 2,266
STOCKHOLDERS' EQUITY
Preferred Stock -- --
Class A Common Stock 37 37
Common Stock 56 56
Capital in excess of par value 57,196 57,196
Retained earnings 22,400 22,113
Treasury stock (1,204) (1,204)
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78,485 78,198
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$218,602 $219,676
============= ============
The accompanying notes are an integral part of these financial
statements.
JOHN B. SANFILIPPO & SON, INC
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars in thousands)
For the Quarter Ended
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September 24, September 25,
1998 1997
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Cash flows from operating activities:
Net income $ 287 $ 1,015
Adjustments:
Depreciation and amortization 1,958 2,158
Gain on disposition of properties (11) --
Change in current assets and current
liabilities:
Accounts receivable, net (1,224) 462
Inventories 1,253 (20,102)
Prepaid expenses and other current assets (217) (1,175)
Accounts payable 5,184 19,145
Accrued expenses (1,681) (159)
Income taxes payable/receivable 199 519
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Net cash provided by operating activities 5,748 1,863
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Cash flows from investing activities:
Acquisition of properties (1,431) (864)
Proceeds from disposition of properties 21 --
Other 687 (1,763)
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Net cash used in investing activities (723) (2,627)
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Cash flows from financing activities:
Net borrowings (repayments) on notes payable (3,636) 2,256
Principal payments on long-term debt (1,228) (1,404)
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Net cash provided by (used in) financing
activities (4,864) 852
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Net increase in cash 161 88
Cash:
Beginning of period 549 631
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End of period $ 710 $ 719
============= =============
Supplemental disclosures:
Interest paid $ 2,751 $ 2,205
Taxes paid 38 201
Supplemental disclosure of noncash investing
and financing activities:
Capital lease obligation incurred -- 110
The accompanying notes are an integral part of these financial
statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands)
Note 1 - Basis of Consolidation
- -------------------------------
The consolidated financial statements include the accounts of
John B. Sanfilippo & Son, Inc. ("JBSS") and its wholly owned
subsidiaries (collectively, with JBSS, the "Company"),
including Sunshine Nut Co., Inc. ("Sunshine").
Note 2 - Inventories
- --------------------
Inventories are stated at the lower of cost (first in, first out)
or market. Inventories consist of the following:
September 24, June 25,
1998 1998
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Raw material and supplies $51,999 $52,589
Work-in-process and finished goods 46,283 46,946
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$98,282 $99,535
============= =========
Note 3 - Earnings Per Common Share
- ----------------------------------
Earnings per common share is calculated using the weighted average
number of shares of Common Stock and Class A Common Stock
outstanding during the period. In February 1997, the Financial
Accounting Standards Board issued Statement of Financial
Accounting Standards (SFAS) No. 128 "Earnings Per Share" which
is effective for all reporting periods ending after December 15,
1997, and requires restatement for all prior periods presented.
The following tables present the required disclosures under SFAS
No. 128:
<TABLE>
<CAPTION>
For the Quarter Ended September 24, 1998 For the Quarter Ended September 25, 1997
---------------------------------------- ----------------------------------------
Income Shares Per-Share Income Shares Per-Share
(Numerator) (Denominator) Amount (Numerator) (Denominator) Amount
----------- ------------- --------- ----------- ------------- ---------
<S> <C> <C> <C> <C> <C> <C>
Net Income $287 $1,015
Basic Earnings Per Share
Income available to common
stockholders 287 9,148,565 $0.03 1,015 9,147,666 $0.11
========= =========
Effect of Dilutive Securities
Stock options -- 17,742
Diluted Earnings Per Share
Income available to common
stockholders $287 9,148,565 $0.03 $1,015 9,165,408 $0.11
=========== ============= ========= =========== ============= =========
</TABLE>
The following table summarizes the weighted-average number of
options which were outstanding for the periods presented but were
not included in the computation of diluted earnings per share
because the exercise prices of the options were greater than the
average market price of the common shares for the period:
Weighted-Average
Number of Options Exercise Price
----------------- ----------------
Quarter Ended September 24, 1998 366,630 $10.27
Quarter Ended September 25, 1997 272,808 $12.17
Note 4 - Stock Option Plan
- --------------------------
Effective August 27, 1998, the Company's Board of Directors
terminated the 1995 Equity Incentive Plan. The unexercised
options outstanding at September 24, 1998 to purchase 157,900
shares of Common Stock, however, were not affected by the
termination and will continue to be governed by the terms of the
1995 Equity Incentive Plan.
At the Company's annual meeting of stockholders on October 28,
1998, the Company's stockholders approved, and the Company
adopted, effective as of September 1, 1998, a new stock option
plan (the "1998 Equity Incentive Plan") to replace the 1995
Equity Incentive Plan. The 1998 Equity Incentive Plan provides
that an aggregate of 350,000 authorized but unissued shares of
Common Stock will be available for awards in the form of stock
options, including options intended to qualify as "incentive
stock options" within the meaning of Section 422 of the Internal
Revenue Code and nonqualified stock options. Such options may be
granted to any employee of the Company (except that the Company's
Chairman of the Board and Chief Executive Officer and the
Company's President are not eligible to participate in the 1998
Equity Incentive Plan) or any of its subsidiaries or to any
director who is not an employee of the Company or any of its
subsidiaries (an "Outside Director"). Outside Directors,
however, are only eligible to receive nonqualified options granted
in accordance with a specific formula provided in the 1998 Equity
Incentive Plan.
Generally, each stock option granted under the 1998 Equity
Incentive Plan will become exercisable in equal installments of
25% of the shares covered by the option on the first four
anniversaries of the date of grant, subject to, in the case of an
employee, continued employment with the Company, or in the case of
an Outside Director, continued service as a director, on such
date. The exercise price for each stock option granted under the
1998 Equity Incentive Plan will be determined by the Board of
Directors (the "Option Price") and must be equal to fair market
value of the Common Stock on the date of grant, with the exception
of (i) nonqualified stock options, which must have an Option Price
equal to at least 50% of the fair market value of the Common Stock
on the date of grant, and (ii) incentive stock options granted to
an employee who is a holder of more than 10% of the voting power
of the Company's capital stock, which must have an Option Price
equal to at least 110% of the fair market value of the Common
Stock on the date of grant.
The Company did not grant any stock options pursuant to the 1998
Equity Incentive Plan during the quarter ended September 24, 1998.
On October 28, 1998, however, the Company granted a stock option
to purchase 1,000 shares of Common Stock to each of its three
Outside Directors. These options were granted in accordance with
the formula specified under the 1998 Equity Incentive Plan upon
the election of such Outside Directors to the Company's Board of
Directors on October 28, 1998 and, pursuant to such formula, have
an Option Price of $4.25 per share, the closing price of the
Common Stock on October 28, 1998.
Note 5 - Management's Statement
- -------------------------------
The unaudited financial statements included herein have been
prepared by the Company. In the opinion of the Company's
management, these statements present fairly the consolidated
statements of operations, consolidated balance sheets and
consolidated statements of cash flows, and reflect all normal
recurring adjustments which, in the opinion of management, are
necessary for the fair presentation of the results of the interim
periods. The interim results of operations are not necessarily
indicative of the results to be expected for a full year. The
data presented on the balance sheet for the fiscal year ended June
25, 1998 were derived from audited financial statements. It is
suggested that these financial statements be read in conjunction
with the financial statements and notes thereto included in the
Company's 1998 Annual Report to Stockholders for the year ended
June 25, 1998.
Item 2
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
- ----------------------------------------------
General
- -------
The Company's business is seasonal. Demand for peanut and other
nut products is highest during the months of October through
December. Peanuts, pecans, walnuts, almonds and cashews, the
Company's principal raw materials, are purchased primarily during
the period from August to February and are processed throughout
the year. As a result of this seasonality, the Company's
personnel and working capital requirements peak during the last
four months of the calendar year. Also, due primarily to the
seasonal nature of the Company's business, the Company maintains
significant inventories of peanuts, pecans, walnuts, almonds and
other nuts at certain times of the year, especially during the
second and third quarters of the Company's fiscal year.
Fluctuations in the market prices of such nuts may affect the
value of the Company's inventory and thus the Company's
profitability. At September 24, 1998, the Company's inventories
totaled approximately $98.3 million compared to approximately
$99.5 million at June 25, 1998, and approximately $83.1 million at
September 25, 1997. The increase in inventories at September 24,
1998 when compared to September 25, 1997 is primarily due to
increased levels of pecans on hand due to higher purchases in the
1997 crop year than in the preceding crop year. See "Factors That
May Affect Future Results -- Availability of Raw Materials and
Market Price Fluctuations."
RESULTS OF OPERATIONS
- ---------------------
Net Sales. Net sales decreased from approximately $77.3 million
for the first quarter of fiscal 1998 to approximately $73.8
million for the first quarter of fiscal 1999, a decrease of
approximately $3.4 million, or 4.5%. The decrease was due
primarily to lower unit volume sales to retail customers, caused
primarily by declines in regional brand and private label sales as
a result of increased competitive activity. See "Factors That May
Affect Future Results - Competitive Environment." The U.S.
Department of Transportation has recently proposed guidelines to
the major airlines which would require airlines to establish
peanut-free buffer zones on request to passengers with medically
documented severe allergies to peanuts. There can be no assurance
that the airlines, some of which are customers of the Company,
will not materially reduce or eliminate peanuts and other nut-
related snacks on flights in response to these guidelines. The
Company believes that, while such a decision by its airline
customers would reduce the Company's revenues, given the
relatively low percentage of the Company's total revenues
represented by sales to these customers, such a decision should
not otherwise have a material adverse effect on the Company's
results of operations.
Gross Profit. Gross profit for the first quarter of fiscal 1999
decreased approximately 10.8% to approximately $11.4 million from
approximately $12.8 million for the first quarter of fiscal 1998.
Gross profit margin decreased from approximately 16.6% for the
first quarter of fiscal 1998 to approximately 15.5% for the first
quarter of fiscal 1999. The decrease in gross profit margin for
the first quarter of fiscal 1999 was due primarily to a decrease
in sales as a percentage of the Company's total net sales to
retail customers, which sales generally carry higher margins than
sales to the Company's other customers, during the first quarter
of fiscal 1999 compared to the first quarter of fiscal 1998.
Selling and Administrative Expenses. Selling and administrative
expenses as a percentage of net sales decreased from approximately
12.1% for the first quarter of fiscal 1998 to approximately 11.9%
for the first quarter of fiscal 1999. Selling expenses as a
percentage of net sales was approximately 8.9% for both the first
quarters of fiscal 1999 and fiscal 1998. Administrative expenses
as a percentage of net sales decreased slightly from approximately
3.2% for the first quarter of fiscal 1998 to approximately 3.0%
for the first quarter of fiscal 1999. The slight decrease in
administrative expenses as a percentage of net sales for the
quarterly period was due primarily to decreases in expenses
related to compensation programs and in amortization of expenses
related to acquisitions.
Income from Operations. Due to the factors discussed above,
income from operations decreased from approximately $3.4 million,
or 4.4% of net sales, for the first quarter of fiscal 1998, to
approximately $2.7 million, or 3.6% of net sales, for the first
quarter of fiscal 1999.
Interest Expense. Interest expense increased from approximately
$1.8 million for the first quarter of fiscal 1998 to approximately
$2.3 million for the first quarter of fiscal 1999. The increase in
quarterly interest expense was due primarily to a higher average
level of borrowings to support higher levels of inventories.
Income Taxes. The Company recorded income tax expense of
approximately $0.2 million, or 45.0% of the loss before income
taxes, for the first quarter of fiscal 1999.
Liquidity and Capital Resources
- -------------------------------
During the first quarter of fiscal 1999, the Company continued to
finance its activities through a bank credit facility (the "Bank
Credit Facility"), $35.0 million borrowed under a long-term
financing facility originally entered into by the Company in 1992
(the "Long-Term Financing Facility") and $25.0 million borrowed on
September 12, 1995 under a long-term financing arrangement (the
"Additional Long-Term Financing").
Net cash provided by operating activities was approximately $5.7
million for the first quarter of fiscal 1999 compared to
approximately $1.9 million for the first quarter of fiscal 1998.
The increase in cash provided by operating activities was due
primarily to purchases of certain nuts, especially walnuts and
peanuts occurring earlier in the calendar year in fiscal 1998 as
compared to fiscal 1999. During the first quarter of fiscal 1999,
the Company spent approximately $1.4 million in capital
expenditures, compared to approximately $0.9 million for the first
quarter of fiscal 1998, and repaid approximately $1.2 million of
long-term debt, compared to approximately $1.4 million for the
first quarter of fiscal 1998.
The Bank Credit Facility is comprised of (i) a working capital
revolving loan which provided for working capital financing of up
to approximately $61.7 million, in the aggregate, and matures on
March 31, 2001, and (ii) an $8.3 million letter of credit to
secure the industrial development bonds which matures on June 1,
2002. Borrowings under the working capital revolving loan accrued
interest at a rate (the weighted average of which was 6.68% at
September 24, 1998) determined pursuant to a formula based on the
agent bank's quoted rate and the Eurodollar Interbank rate.
Of the total $35.0 million of borrowings under the Long-Term
Financing Facility, $25.0 million matures on August 15, 2004,
bears interest rates ranging from 7.34% to 9.18% per annum payable
quarterly, and requires equal semi-annual principal installments
based on a ten-year amortization schedule. The remaining $10.0
million of this indebtedness matures on May 15, 2006, bears
interest at the rate of 9.16% per annum payable quarterly, and
requires equal semi-annual principal installments based on a ten-
year amortization schedule. As of September 24, 1998, the total
principal amount outstanding under the Long-Term Financing
Facility was approximately $23.0 million.
The Additional Long-Term Financing has a maturity date of
September 1, 2005 and (i) as to $10.0 million of the principal
amount thereof, bears interest at an annual rate of 8.3% payable
semiannually and, beginning on September 1, 1999, requires annual
principal payments of approximately $1.4 million each through
maturity, and (ii) as to the other $15.0 million of the principal
amount thereof, bears interest at an annual rate of 9.38% payable
semiannually and requires principal payments of $5.0 million each
on September 1, 2003 and September 1, 2004, with a final payment
of $5.0 million at maturity on September 1, 2005. As of September
24, 1998, the total principal amount outstanding under the
Additional Long-Term Financing was $25.0 million.
The terms of the Company's financing facilities, as amended,
include certain restrictive covenants that, among other things:
(i) require the Company to maintain specified financial ratios;
(ii) limit the Company's capital expenditures to $7.5 million
annually; and (iii) require that Jasper B. Sanfilippo (the
Company's Chairman of the Board and Chief Executive Officer) and
Mathias A. Valentine (a director and the Company's President)
together with their respective immediate family members and
certain trusts created for the benefit of their respective sons
and daughters, continue to own shares representing the right to
elect a majority of the directors of the Company. In addition,
(i) the Long-Term Financing Facility limits the Company's payment
of dividends to a cumulative amount not to exceed 25% of the
Company's cumulative net income from and after January 1, 1996,
(ii) the Additional Long-Term Financing limits cumulative
dividends to the sum of (a) 50% of the Company's cumulative net
income (or minus 100% of the Company's cumulative net loss) from
and after January 1, 1995 to the date the dividend is declared,
(b) the cumulative amount of the net proceeds received by the
Company during the same period from any sale of its capital stock,
and (c) $5.0 million, and (iii) the Bank Credit Facility limits
dividends to the lesser of (a) 25% of net income for the previous
fiscal year, and (b) $5.0 million and prohibits the Company from
redeeming shares of capital stock. As of September 24, 1998, the
Company was in compliance with all restrictive covenants, as
amended, under its financing facilities. However, the Company may
not comply with the fixed charge financial covenant under its financing
facilities as of the end of its second quarter of fiscal 1999 if its
results of operations do not approximate its results of operations
for the second quarter of fiscal 1998. While the Company has always
obtained waivers from its lenders for past non-compliance with this
covenant, and believes it will be able to obtain similar waivers,
if necessary, as of the end of its next fiscal quarter, there can
be no assurance that such waivers will be obtained. In the event
the Company does not comply with its fixed charge covenant as of the
end of its next fiscal quarter and if it is unable to secure the
necessary waivers from its lenders, the lenders will have the right
to accelerate the balances due under the facilities.
As of September 24, 1998, the Company had approximately $18.8
million of available credit under the Bank Credit Facility.
Approximately $1.4 million was incurred on capital expenditures
for the first quarter of fiscal 1999. No significant capital
expenditures are anticipated for fiscal 1999. The Company believes
that cash flow from operating activities and funds available under
the Bank Credit Facility will be sufficient to meet working
capital requirements and anticipated capital expenditures for the
foreseeable future.
Year 2000
- ---------
The Company has substantially completed its review of its internal
systems, processes and facilities to determine if it has software
or hardware applications that are unable to appropriately
interpret or recognize the calendar year 2000 (the "Year 2000").
In addition, the Company is in the process of conducting a survey
of third parties with whom it has material business relationships
(such as customers, suppliers and financial institutions) to
determine if they have Year 2000 issues that will materially and
adversely impact the Company.
The Company believes, based on representations from its software
vendors, that its internal computer system (which was installed in
1991) and applications are Year 2000 compliant. Furthermore, a
regularly scheduled upgrade of the internal computer system to the
latest release was implemented during the first quarter of fiscal
1999. The internal computer system is responsible for inventory
control applications, financial reporting and payroll. In
addition, the Company has reviewed its manufacturing operations
and has determined that no material portion of such operations is
date sensitive. Certain of the Company's customers submit orders
through Electronic Data Interchange ("EDI"), a third party
computer system utilized by the Company. The Company's EDI system
is currently undergoing a regularly scheduled upgrade which is
expected to be completed by the end of calendar 1998. Upon
completion of this upgrade, the Company expects, based on
representations from software vendors, that its EDI system will be
Year 2000 compliant. The Company is also reviewing its desktop
computer systems and facilities for Year 2000 issues (and expects
to complete that review early in calendar 1999), but does not
presently believe that any Year 2000 issues related to such
systems and facilities would have a material adverse effect on the
Company.
Also, the Company is in the process of making initial inquiries of
third parties with whom it has material business relationships to
determine whether they will be able to resolve in a timely manner
any Year 2000 problems materially and adversely affecting the
Company. In the course of these initial inquiries, which have
focused primarily on the Company's major customers, the Company
has not been made aware of any material Year 2000 issues which
would adversely affect the Company. In addition, the Company's
major vendors are growers, and the Company believes they are not
dependent upon computers in order to transact business. The
Company expects to complete a survey of such third parties by the
end of calendar 1998.
Based upon the Company's review of its systems and the current
status of the Company's survey of third parties with whom it has
material business relationships, the Company has not identified
any material costs to address, or material risks related to, Year
2000 issues. There can be no assurance, however, that Year 2000
issues will not have a material adverse effect on the Company if
the Company and/or those with whom it conducts business are
unsuccessful in identifying or implementing timely solutions to
any Year 2000 issues. The Company intends to continue its review
of its Year 2000 status with the intention of completing that
review on the schedule described above and, as to the extent
necessary, developing Year 2000 contingency plans for critical
business processes. In a worst case Year 2000 scenario, the
Company presently believes it would revert back to manual
applications to perform order entry, billing and similar
functions.
Factors That May Affect Future Results
- --------------------------------------
(a) Availability of Raw Materials and Market Price Fluctuations
- ----------------------------------------------------------------
The availability and cost of raw materials for the production of
the Company's products, including peanuts, pecans, other nuts,
dried fruit and chocolate, are subject to crop size and yield
fluctuations caused by factors beyond the Company's control, such
as weather condition and plant diseases. Additionally, the supply
of edible nuts and other raw materials used in the Company's
products could be reduced upon any determination by the United
States Department of Agriculture ("USDA") or other government
agency that certain pesticides, herbicides or other chemicals used
by growers have left harmful residues on portions of the crop or
that the crop has been contaminated by aflatoxin or other agents.
Shortages in the supply of and increases in the prices of nuts
and other raw materials used by the Company in its products could
have an adverse impact on the Company's profitability.
Furthermore, fluctuations in the market prices of nuts, dried
fruit or chocolate may affect the value of the Company's inventory
and the Company's profitability. For example, during the quarter
ended September 26, 1996 the Company was required to record a $2.6
million charge against its earnings to reflect the impact of a
lower cost or market adjustment of its pecan inventory. The
Company has a significant inventory of nuts, dried fruit and
chocolate that would be adversely affected by any decrease in the
market price of such raw materials. See "General" and "Results
of Operations - Gross Profit".
(b) Competitive Environment
- ---------------------------
The Company operates in a highly competitive environment. The
Company's principal products compete against food and snack
products manufactured and sold by numerous regional and national
companies, some of which are substantially larger and have greater
resources than the Company, such as Planters Lifesavers Company (a
subsidiary of RJR Nabisco, Inc.). The Company also competes with
other shellers in the industrial market and with regional
processors in the retail and wholesale markets. In order to
maintain or increase its market share, the Company must continue
to price its products competitively, which may lower revenue per
unit and cause declines in gross margin, if the Company is unable
to increase unit volumes as well as reduce its costs. See
"Results of Operations - Net Sales."
(c) Fixed Price Commitments
- ---------------------------
From time to time, the Company enters into fixed price commitments
with its customers. However, such commitments typically represent
10% or less of the Company's annual net sales and are normally
entered into after the Company's cost to acquire the nut products
necessary to satisfy the fixed price commitment is substantially
fixed. The Company will continue to enter into fixed price
commitments with respect to certain of its nut products prior to
fixing its acquisition cost when, in management's judgment, market
or crop harvest conditions so warrant. To the extent the Company
does so, these fixed price commitments may result in losses.
Historically, however, such losses have generally been offset by
gains on other fixed price commitments. However, there can be no
assurance that losses from fixed price commitments may not have a
material adverse effect on the Company's results of operations.
(d) Federal Regulation of Peanut Prices, Quotas and Poundage
Allotments
- ------------------------------------------------------------
Peanuts are an important part of the Company's product line.
Approximately 50% of the total pounds of products processed
annually by the Company are peanuts, peanut butter and other
products containing peanuts. The production and marketing of
peanuts are regulated by the USDA under the Agricultural
Adjustment Act of 1938 (the "Agricultural Adjustment Act"). The
Agricultural Adjustment Act, and regulations promulgated
thereunder, support the peanut crop by: (i) limiting peanut
imports (other than as described below pursuant to the North
American Free Trade Agreement and the Uruguay Round Agreement of
the General Agreement on Trade and Tariffs), (ii) limiting the
amount of peanuts that American farmers are allowed to take to the
domestic market each year, and (iii) setting a minimum price that
a sheller must pay for peanuts which may be sold for domestic
consumption. The amount of peanuts that American farmers can sell
each year is determined by the Secretary of Agriculture and is
based upon the prior year's peanut consumption in the United
States. Only peanuts that qualify under the quota may be sold for
domestic food products and seed. The peanut quota for the 1998
calendar year is approximately 1.2 million tons. Peanuts in
excess of the quota are called "additional peanuts" and generally
may only be exported or used domestically for crushing into oil or
meal. Current regulations permit additional peanuts to be
domestically processed and exported as finished goods to any
foreign country. The quota support price for the 1998 calendar
year is approximately $615 per ton.
The 1996 Farm Bill extended the federal support and subsidy
program for peanuts for seven years. However, there are no
assurances that Congress will not change or eliminate the program
prior to its scheduled expiration. Changes in the federal peanut
program could significantly affect the supply of, and price for,
peanuts. While the Company has successfully operated in a market
shaped by the federal peanut program for many years, the Company
believes that it could adapt to a market without federal
regulation if that were to become necessary. However, the Company
has no experience in operating in such a peanut market, and no
assurances can be given that the elimination or modification of
the federal peanut program would not adversely affect the
Company's business. Future changes in import quota limitations or
the quota support price for peanuts at a time when the Company is
maintaining a significant inventory of peanuts or has significant
outstanding purchase commitments could adversely affect the
Company's business by lowering the market value of the peanuts in
its inventory or the peanuts which it is committed to buy. While
the Company believes that its ability to use its raw peanut
inventories in its own processing operations gives it greater
protection against these changes than is possessed by certain
competitors whose operations are limited to either shelling or
processing, no assurances can be given that future changes in, or
the elimination of, the federal peanut program or import quotas
will not adversely affect the Company's business.
The North American Free Trade Agreement ("NAFTA"), effective
January 1, 1994, committed the United States, Mexico and Canada to
the elimination of quantitative restrictions and tariffs on the
cross-border movement of industrial and agricultural products.
Under NAFTA, United States import restrictions on Mexican shelled
and inshell peanuts were replaced by a tariff rate quota,
initially set at 3,377 tons and which increases by a 3% compound
rate each year until 2001. Shipments within the quota's
parameters enter the U.S. duty-free, while imports above-quota
parameters from Mexico face tariffs. The tariffs are being phased
out gradually and are scheduled to be eliminated by 2001.
The Uruguay Round Agreement of the General Agreement on Trade and
Tariffs ("GATT") took effect on July 1, 1995. Under GATT, the
United States must allow peanut imports to grow to 5% of domestic
consumption by 2001, and import quotas on peanuts were replaced by
high ad valorem tariffs, which must be reduced annually pursuant
to the terms of GATT. Also under GATT, the United States may
continue to limit imports of peanut butter but is permitted to
establish a tariff rate quota for peanut butter imports based on
1993 import levels. Peanut butter imports above the quota are
subject to an over-quota ad valorem tariff which also must be
reduced annually pursuant to the terms of GATT.
Although NAFTA and GATT do not directly affect the federal peanut
program, the federal government may, in future legislative
initiatives, reconsider the federal peanut program in light of
these agreements. The Company does not believe that NAFTA and
GATT have had a material impact on the Company's business or will
have a material impact on the Company's business in the near term.
Item 3
- ------
Quantitative and Qualitative Disclosures About Market Risk
- ----------------------------------------------------------
The Company has not entered into transactions using derivative
financial instruments. The Company believes that its exposure to
market risk related to its other financial instruments (which are
the debt instruments under "Management's Discussion and Analysis
of Financial Condition and Results of Operations - Liquidity and
Capital Resources") is not material.
PART II. OTHER INFORMATION
- ---------------------------
Item 2 -- Changes in Securities
- -------------------------------
As described above under "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Liquidity and
Capital Resources" under Part I of this report, there are
restrictive covenants under the Company's financing facilities
which limit the payment of dividends.
Item 5 -- Other Information
- ----------------------------
The Company's 1998 Annual Meeting of Stockholders was held on
October 28, 1998 for the purpose of (i) electing those directors
entitled to be elected by the holders of the Company's Class A
Common Stock, (ii) electing those directors entitled to be elected
by the holders of the Company's Common Stock, (iii) ratifying the
action of the Company's Board of Directors in appointing
PricewaterhouseCoopers LLP as independent accountants for fiscal
1999, (iv) to consider and take action upon a proposal to approve
The John B. Sanfilippo & Son, Inc. 1998 Equity Incentive Plan (the
"1998 Equity Incentive Plan"), and (v) to transact such other
business properly brought before the meeting. The meeting
proceeded and (i) the holders of Class A Common Stock elected
Jasper B. Sanfilippo, Mathias A. Valentine, John C. Taylor, J.
William Petty and Michael J. Valentine to serve on the Company's
Board of Directors by a unanimous vote of 3,687,426 votes cast
for, representing 100% of the then outstanding shares of Class A
Common Stock, (ii) the holders of Common Stock elected William D.
Fischer by a vote of 4,821,319 votes cast for and 324,219 votes
withheld, (iii) the holders of Common Stock elected John W. A.
Buyers by a vote of 4,821,319 votes cast for and 324,219 votes
withheld, (iv) the holders of Class A Common Stock and Common
Stock ratified the appointment of PricewaterhouseCoopers LLP as
the Company's independent accountants for fiscal 1999 by a total
of 42,012,679 votes cast for ratification, 5,669 votes against
ratification and 1,450 abstentions, and (v) the holders of Class A
Common Stock and Common Stock approved the adoption of the 1998
Equity Incentive Plan by a total of 39,554,846 votes cast for
adoption, 2,233,613 votes against adoption, 4,932 abstentions and
1,226,407 broker non-votes.
Item 6 -- Exhibits and Reports on Form 8-K
- ------------------------------------------
(a) The exhibits filed herewith are listed in the exhibit index
which follows the signature page and immediately precedes the
exhibits filed.
(b) Reports on Form 8-K: There were no Current Reports on
Form 8-K filed during the quarter ended
September 24, 1998.
SIGNATURE
- ---------
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
JOHN B. SANFILIPPO & SON, INC.
Date: November 6, 1998 By: /s/ Gary P. Jensen
-------------------------------------
Gary P. Jensen
Executive Vice President, Finance
and Chief Financial Officer
EXHIBIT INDEX
-------------
Exhibit
Number Description
- ------- -------------------------------------------------------------
2 None
3.1 Restated Certificate of Incorporation of Registrant(2)
3.2 Certificate of Correction to Restated Certificate(2)
3.3 Bylaws of Registrant(1)
4.1 Specimen Common Stock Certificate(3)
4.2 Specimen Class A Common Stock Certificate(3)
4.3 Second Amended and Restated Note Agreement by and between the
Registrant and The Prudential Insurance Company of America
("Prudential") dated January 24, 1997 (the "Long-Term
Financing Facility")(19)
4.4 7.87% Series A Senior Note dated September 29, 1992 in the
original principal amount of $4.0 million due August 15, 2004
executed by the Registrant in favor of Prudential(5)
4.5 8.22% Series B Senior Note dated September 29, 1992 in the
original principal amount of $6.0 million due August 15, 2004
executed by the Registrant in favor of Prudential(5)
4.6 8.22% Series C Senior Note dated September 29, 1992 in the
original principal amount of $4.0 million due August 15, 2004
executed by the Registrant in favor of Prudential(5)
4.7 8.33% Series D Senior Note dated January 15, 1993 in the
original principal amount of $3.0 million due August 15, 2004
executed by the Registrant in favor of Prudential(6)
4.8 6.49% Series E Senior Note dated September 15, 1993 in the
original principal amount of $8.0 million due August 15, 2004
executed by the Registrant in favor of Prudential(9)
4.9 8.31% Series F Senior Note dated June 23, 1994 in the
original principal amount of $8.0 million due May 15, 2006
executed by the Registrant in favor of Prudential(10)
4.10 8.31% Series F Senior Note dated June 23, 1994 in the
original principal amount of $2.0 million due May 15, 2006
executed by the Registrant in favor of Prudential(10)
4.11 Amended and Restated Guaranty Agreement dated as of October
19, 1993 by Sunshine in favor of Prudential(8)
4.12 Amendment to the Second Amended and Restated Note Agreement
dated May 21, 1997 by and among Prudential, Sunshine and the
Registrant(20)
4.13 Amendment to the Second Amended and Restated Note Agreement
dated March 31, 1998 by and among Prudential, the Registrant,
Sunshine, and Quantz Acquisition Co., Inc. ("Quantz")(21)
4.14 Guaranty Agreement dated as of March 31, 1998 by JBS
International, Inc. ("JBSI") in favor of Prudential(21)
4.15 $1.8 million Promissory Note dated March 31, 1989 evidencing
a loan by Cohen Financial Corporation to LaSalle National Bank
("LNB"), as Trustee under Trust Agreement dated March 17, 1989
and known as Trust No. 114243(12)
4.16 Modification Agreement dated as of September 29, 1992 by and
among LaSalle National Trust, N.A. ("LaSalle Trust"), a national
banking association, not personally but as Successor Trustee to
LNB under Trust Agreement dated March 17, 1989 known as Trust
Number 114243; the Registrant; Jasper B. Sanfilippo and Mathias
A. Valentine; and Mutual Trust Life Insurance Company(5)
4.17 Note Purchase Agreement dated as of August 30, 1995 between
the Registrant and Teachers Insurance and Annuity Association of
America ("Teachers")(15)
4.18 8.30% Senior Note due 2005 in the original principal amount
of $10.0 million, dated September 12, 1995 and executed by the
Registrant in favor of Teachers(15)
4.19 9.38% Senior Subordinated Note due 2005 in the original
principal amount of $15.0 million, dated September 12, 1995 and
executed by the Registrant in favor of Teachers(15)
4.20 Guaranty Agreement dated as of August 30, 1995 by Sunshine
in favor of Teachers (Senior Notes)(15)
4.21 Guaranty Agreement dated as of August 30, 1995 by Sunshine
in favor of Teachers (Senior Subordinated Notes)(15)
4.22 Amendment, Consent and Waiver, dated as of March 27, 1996,
by and among Teachers, Sunshine and the Registrant(17)
4.23 Amendment No. 2 to Note Purchase Agreement dated as of
January 24, 1997 by and among Teachers, Sunshine and the
Registrant(19)
4.24 Amendment to Note Purchase Agreement dated May 19, 1997 by
and among Teachers, Sunshine and the Registrant(20)
4.25 Amendment No. 3 to Note Purchase Agreement dated as of March
31, 1998 by and among Teachers, Sunshine, Quantz and the
Registrant(21)
4.26 Guaranty Agreement dated as of March 31, 1998 by JBSI in
favor of Teachers (Senior Notes)(21)
4.27 Guaranty Agreement dated as of March 31, 1998 by JBSI in
favor of Teachers (Senior Subordinated Notes)(21)
10.1 Certain documents relating to $8.0 million Decatur County-
Bainbridge Industrial Development Authority Industrial
Development Revenue Bonds (John B. Sanfilippo & Son, Inc.
Project) Series 1987 dated as of June 1, 1987(1)
10.2 Industrial Building Lease dated as of October 1, 1991
between JesCorp., Inc. and LNB, as Trustee under Trust Agreement
dated March 17, 1989 and known as Trust No. 114243(14)
10.3 Industrial Building Lease (the "Touhy Avenue Lease") dated
November 1, 1985 between Registrant and LNB, as Trustee under
Trust Agreement dated September 20, 1966 and known as Trust No.
34837(11)
10.4 First Amendment to the Touhy Avenue Lease dated June 1,
1987(11)
10.5 Second Amendment to the Touhy Avenue Lease dated December
14, 1990(11)
10.6 Third Amendment to the Touhy Avenue Lease dated September 1,
1991(16)
10.7 Industrial Real Estate Lease (the "Lemon Avenue Lease")
dated May 7, 1991 between Registrant, Majestic Realty Co. and
Patrician Associates, Inc(1)
10.8 First Amendment to the Lemon Avenue Lease dated January 10,
1996(17)
10.9 Mortgage, Assignment of Rents and Security Agreement made on
September 29, 1992 by LaSalle Trust, not personally but as
Successor Trustee under Trust Agreement dated February 7, 1979
known as Trust Number 100628 in favor of the Registrant relating
to the properties commonly known as 2299 Busse Road and 1717
Arthur Avenue, Elk Grove Village, Illinois(5)
10.10 Industrial Building Lease dated June 1, 1985 between
Registrant and LNB, as Trustee under Trust Agreement dated
February 7, 1979 and known as Trust No. 100628(1)
10.11 First Amendment to Industrial Building Lease dated
September 29, 1992 by and between the Registrant and LaSalle
Trust, not personally but as Successor Trustee under Trust
Agreement dated February 7, 1979 and known as Trust Number
100628(5)
10.12 Second Amendment to Industrial Building Lease dated March
3, 1995, by and between the Registrant and LaSalle Trust, not
personally but as Successor Trustee under Trust Agreement dated
February 7, 1979 and known as Trust Number 100628(12)
10.13 Third Amendment to Industrial Building Lease dated August
15, 1998, by and between the Registrant and LaSalle Trust, not
personally but as Successor Trustee under Trust Agreement dated
February 7, 1979 and known as Trust Number 100628(22)
10.14 Ground Lease dated January 1, 1995, between the Registrant
and LaSalle Trust, not personally but as Successor Trustee under
Trust Agreement dated February 7, 1979 and known as Trust Number
100628(12)
10.15 Party Wall Agreement, dated March 3, 1995, between the
Registrant, LaSalle Trust, not personally but as Successor
Trustee under Trust Agreement dated February 7, 1979 and known as
Trust Number 100628 and the Arthur/Busse Limited Partnership(12)
10.16 Secured Promissory Note in the amount of $6,223,321.81
dated September 29, 1992 executed by Arthur/Busse Limited
Partnership in favor of the Registrant(5)
10.17 Tax Indemnification Agreement between Registrant and
certain Stockholders of Registrant prior to its initial public
offering(2)
10.18 Indemnification Agreement between Registrant and certain
Stockholders of Registrant prior to its initial public offering(2)
10.19 The Registrant's 1991 Stock Option Plan(1)
10.20 First Amendment to the Registrant's 1991 Stock Option
Plan(4)
10.21 John B. Sanfilippo & Son, Inc. Split-Dollar Insurance
Agreement Number One among John E. Sanfilippo, as trustee of the
Jasper and Marian Sanfilippo Irrevocable Trust, dated September
23, 1990, Jasper B. Sanfilippo, Marian R. Sanfilippo and
Registrant, and Collateral Assignment from John E. Sanfilippo as
trustee of the Jasper and Marian Sanfilippo Irrevocable Trust,
dated September 23, 1990, as assignor, to Registrant, as
assignee(7)
10.22 John B. Sanfilippo & Son, Inc. Split-Dollar Insurance
Agreement Number Two among Michael J. Valentine, as trustee of
the Valentine Life Insurance Trust, dated May 15, 1991, Mathias
Valentine, Mary Valentine and Registrant, and Collateral
Assignment from Michael J. Valentine, as trustee of the Valentine
Life Insurance Trust, dated May 15, 1991, as assignor, and
Registrant, as assignee(7)
10.23 Certain documents relating to Reverse Split-Dollar
Insurance Agreement between Sunshine and John Charles Taylor
dated November 24, 1987(12)
10.24 Outsource Agreement between the Registrant and Preferred
Products, Inc. dated January 19, 1995 [CONFIDENTIAL TREATMENT
REQUESTED](12)
10.25 Letter Agreement between the Registrant and Preferred
Products, Inc., dated February 24, 1995, amending the Outsource
Agreement dated January 19, 1994 [CONFIDENTIAL TREATMENT
REQUESTED](12)
10.26 The Registrant's 1995 Equity Incentive Plan(13)
10.27 Promissory Note (the "ILIC Promissory Note") in the
original principal amount of $2.5 million, dated September 27,
1995 and executed by the Registrant in favor of Indianapolis Life
Insurance Company ("ILIC")(16)
10.28 First Mortgage and Security Agreement (the "ILIC"
Mortgage") by and between the Registrant, as mortgagor, and ILIC,
as mortgagee, dated September 27, 1995, and securing the ILIC
Promissory Note and relating to the property commonly known as
3001 Malmo Drive, Arlington Heights, Illinois (16)
10.29 Assignment of Rents, Leases, Income and Profits dated
September 27, 1995, executed by the Registrant in favor of ILIC
and relating to the ILIC Promissory Note, the ILIC Mortgage and
the Arlington Heights facility(16)
10.30 Environmental Risk Agreement dated September 27, 1995,
executed by the Registrant in favor of ILIC and relating to the
ILIC Promissory Note, the ILIC Mortgage and the Arlington Heights
facility(16)
10.31 Credit Agreement among the Registrant, Bank of America
Illinois ("BAI") as agent, NCB, The Northern Trust Company
("NTC") and BAI, dated as of March 27, 1996(17)
10.32 Reimbursement Agreement between the Registrant and BAI,
dated as of March 27, 1996(17)
10.33 Guaranty Agreement dated as March 27, 1996 by Sunshine in
favor of BAI as agent on behalf of NCB, NTC and BAI(17)
10.34 Amendment No. 1 and Waiver to Credit Agreement dated as of
August 1, 1996 by and among the Registrant, BAI, NCB and NTC(18)
10.35 Amendment No. 2 and Waiver to Credit Agreement dated as of
October 30, 1996 by and among the Registrant, BAI, NCB and NTC(18)
10.36 Amendment No. 3 to Credit Agreement dated as of January 24,
1997 by and among the Registrant, BAI, NCB, and NTC(19)
10.37 Amendment No. 5 to Credit Agreement dated as of June 2,
1997 by and among the Registrant, BAI, NCB, and NTC(20)
10.38 Amendment No. 7 to Credit Agreement dated as of March 27,
1998 by and among the Registrant, BAI, NCB, and NTC(21)
10.39 Employment Agreement by and between Sunshine and Steven G.
Taylor dated June 17, 1992(19)
10.40 Credit Agreement dated as of March 31, 1998 among the
Registrant, Sunshine, Quantz, JBSI, U.S. Bancorp Ag Credit, Inc.
("USB") as Agent, Keybank National Association ("KNA"), and
LNB(21)
10.41 Revolving Credit Note in the principal amount of $35.0
million executed by the Registrant, Sunshine, Quantz and JBSI in
favor of USB, dated as of March 31, 1998(21)
10.42 Revolving Credit Note in the principal amount of $15.0
million executed by the Registrant, Sunshine, Quantz and JBSI in
favor of KNA, dated as of March 31, 1998(21)
10.43 Revolving Credit Note in the principal amount of $20.0
million executed by the Registrant, Sunshine, Quantz and JBSI in
favor of LSB, dated as of March 31, 1998(21)
10.44 The Registrant's 1998 Equity Incentive Plan
11 None
15 None
17 None
18 None
24-26 None
27 Financial Data Schedule
99 None
(1) Incorporated by reference to the Registrant's Registration
Statement on Form S-1, Registration No. 33-43353, as filed
with the Commission on October 15, 1991 (Commission File No.
0-19681).
(2) Incorporated by reference to the Registrant's Annual Report on
Form 10-K for the fiscal year ended December 31, 1991
(Commission File No. 0-19681).
(3) Incorporated by reference to the Registrant's Registration
Statement on Form S-1 (Amendment No. 3), Registration No. 33-
43353, as filed with the Commission on November 25, 1991
(Commission File No. 0-19681).
(4) Incorporated by reference to the Registrant's Quarterly Report
on Form 10-Q for the second quarter ended June 25, 1992
(Commission File No. 0-19681).
(5) Incorporated by reference to the Registrant's Current Report
on Form 8-K dated September 29, 1992 (Commission File No. 0-
19681).
(6) Incorporated by reference to the Registrant's Current Report
on Form 8-K dated January 15, 1993 (Commission File No. 0-
19681).
(7) Incorporated by reference to the Registrant's Registration
Statement on Form S-1, Registration No. 33-59366, as filed
with the Commission on March 11, 1993 (Commission File No. 0-
19681).
(8) Incorporated by reference to the Registrant's Quarterly Report
on Form 10-Q for the third quarter ended September 30, 1993
(Commission File No. 0-19681).
(9) Incorporated by reference to the Registrant's Current Report
on Form 8-K dated September 15, 1993 (Commission file No. 0-
19681).
(10) Incorporated by reference to the Registrant's Current
Report on Form 8-K dated June 23, 1994 (Commission File No.
0-19681).
(11) Incorporated by reference to the Registrant's Annual
Report on Form 10-K for the fiscal year ended December 31,
1993 (Commission File No. 0-19681).
(12) Incorporated by reference to the Registrant's Annual
Report on Form 10-K for the fiscal year ended December 31,
1994 (Commission File No. 0-19681).
(13) Incorporated by reference to the Registrant's Quarterly
Report on Form 10-Q for the first quarter ended March 30, 1995
(Commission File No. 0-19681).
(14) Incorporated by reference to the Registrant's Quarterly
Report on Form 10-Q for the second quarter ended June 29, 1995
(Commission File No. 0-19681).
(15) Incorporated by reference to the Registrant's Current
Report on Form 8-K dated September 12, 1995 (Commission File
No. 0-19681).
(16) Incorporated by reference to the Registrant's Quarterly
Report on Form 10-Q for the third quarter ended September 28,
1995 (Commission file No. 0-19681).
(17) Incorporated by reference to the Registrant's Annual
Report on Form 10-K for the fiscal year ended December 31,
1995 (Commission file No. 0-19681).
(18) Incorporated by reference to the Registrant's Current
Report on Form 8-K dated January 24, 1997
(Commission file No. 0-19681).
(19) Incorporated by reference to the Registrant's Annual
Report on Form 10-K for the fiscal year ended December 31, 1996
(Commission file No. 0-19681).
(20) Incorporated by reference to the Registrant's Current
Report on Form 8-K dated May 21, 1997
(Commission file No. 0-19681).
(21) Incorporated by reference to the Registrant's Quarterly
Report on Form 10-Q for the third quarter ended
March 26, 1998 (Commission file No. 0-19681).
(22) Incorporated by reference to the Registrant's Annual Report
on Form 10-K for the fiscal year ended June 25, 1998
(Commission file No. 0-19681).
John B. Sanfilippo & Son, Inc. will furnish any of the above
exhibits to its stockholders upon written request addressed to the
Secretary at the address given on the cover page of this Form 10-
Q. The charge for furnishing copies of the exhibits is $.25 per
page, plus postage.
THE JOHN B. SANFILIPPO & SON, INC.
1998 EQUITY INCENTIVE PLAN
- ----------------------------------
John B. Sanfilippo & Son, Inc. (the "Company") hereby
establishes The John B. Sanfilippo & Son, Inc. 1998 Equity
Incentive Plan (the "Plan"), to become effective September 1, 1998
(the "Effective Date"), subject to approval by the holders of a
majority of the combined voting power of the Common Stock, $.01 par
value, of the Company ("Common Stock") and Class A Common Stock,
$.01 par value, of the Company ("Class A Stock") present, or
represented, and entitled to vote at a meeting duly called and
held. Grants may be made hereunder prior to such stockholder
approval, provided that any such grants shall be subject to such
stockholder approval.
1. Definitions.
In this Plan, except where the context otherwise indicates,
the following definitions apply:
1.1. "Agreement" means a written agreement implementing a
grant of an Option.
1.2 "Board" means the Board of Directors of the Company.
1.3 "Change in Control" shall have the meaning set forth in
Subsection 15.1 hereof.
1.4 "Class A Stock" means the Class A Common Stock, $.01 par
value per share, of the Company.
1.5 "Code" means the Internal Revenue Code of 1986, as
amended.
1.6 "Committee" means the entire Board or any committee of
the Board appointed by the Board to administer the Plan,
meeting the standards of Rule 16b-3(d)(1) under the Exchange
Act, or any similar successor rule and Temp. Treas. Reg.
Section 1.162-27(e)(3) or any similar successor rule. Unless
otherwise determined by the Board, the entire Board shall be
the Committee and shall administer the Plan.
1.7 "Common Stock" means the Common Stock, par value $.01 per
share, of the Company, and any other shares into which such
common stock shall thereafter be exchanged by reason of a
recapitalization, merger, consolidation, split-up,
combination, exchange of shares or the like.
1.8. "Company" means John B. Sanfilippo & Son, Inc., a
Delaware corporation, its successors and assigns.
1.9. "Current Grant" shall have the meaning set forth in
Subsection 6.4(e) hereof.
1.10. "Date of Exercise" means the date on which the
Company receives notice of the exercise of an Option in
accordance with the terms of Section 8 hereof.
1.11. "Date of Grant" means the date on which an Option is
granted by the Committee (or such later date as specified in
advance by the Committee) or, in the case of a Nonstatutory
Stock Option granted to an Outside Director, the date on which
such Nonstatutory Stock Option is granted pursuant to and in
accordance with the provisions of Section 10 hereof.
1.12. "Effective Date" means September 1, 1998, subject to
approval by the holders of the combined voting power of the
Common Stock and Class A Stock present, or represented, and
entitled to vote at a meeting duly called and held.
1.13. "Employee" means any person determined by the
Committee to be an employee of the Company or any Subsidiary.
1.14. "Exchange Act" means the Securities Exchange Act of
1934, as amended.
1.15. "Fair Market Value" of a Share means:
(a) If on the applicable date the Common Stock is
listed for trading on a national or regional securities exchange
or authorized for quotation on the Nasdaq National Market System,
the closing price of the Common Stock on such exchange or Nasdaq
National Market System, as the case may be, on the applicable date,
or if no sales of Common Stock shall have occurred on such exchange
or Nasdaq National Market System, as the case may be, on the
applicable date, the closing price of the Common Stock on the next
preceding date on which there were such sales;
(b) If on the applicable date the Common Stock is not
listed for trading on a national or regional securities
exchange or authorized for quotation on the Nasdaq National
Market System, the mean between the closing bid price and the
closing ask price of the Common Stock as otherwise reported by
the Nasdaq Stock Market, Inc. with respect to the applicable
date or, if closing bid and ask prices for the Common Stock
shall not have been so reported with respect to the applicable
date, on the next preceding date with respect to which such
bid and ask prices were so reported; or
(c) If on the applicable date the Common Stock is not
listed for trading on a national or regional securities
exchange or authorized for quotation on the Nasdaq National
Market System or otherwise reported by the Nasdaq Stock
Market, Inc., the fair market value of a Share as determined
by the Committee pursuant to a reasonable method adopted in
good faith for such purpose.
Such Fair Market Value shall be subject to adjustment as
provided in Section 23 hereof.
1.16. "For Cause" shall have the meaning set forth in
Subsection 14.2 hereof.
1.17. "Incentive Stock Option" means an Option granted
under the Plan that qualifies as an incentive stock option
under Section 422 of the Code and that the Company designates
as such in the Agreement granting the Option.
1.18. "Insider" means a director, officer or beneficial
owner of more than 10% of the Common Stock of the Company for
purposes of Section 16 of the Exchange Act.
1.19. "Nonstatutory Stock Option" means an Option granted
under the Plan that is not an Incentive Stock Option.
1.20. "Option" means a right to purchase Common Stock
granted under the Plan in accordance with the terms of either
Section 6 or Section 10 hereof.
1.21. "Optionee" means an Outside Director or an Employee
to whom an Option has been granted.
1.22. "Option Period" means the period during which an
Option may be exercised.
1.23. "Option Price" means the price per Share at which an
Option may be exercised. The Option Price shall be determined
by the Committee in accordance with the terms and conditions
of the Plan, except that, in the case of Nonstatutory Stock
Options granted to Outside Directors pursuant to the
provisions of Section 10, in no event shall the Option Price
be less than 100% of the Fair Market Value per Share
determined as of the Date of Grant.
1.24. "Other Plans" shall have the meaning set forth in
Subsection 6.4(d) hereof.
1.25. "Outside Director" means any person who is a
director of the Company and who is not also an employee of
either the Company, any Subsidiary or any of their respective
affiliates.
1.26. "Permanent Disability" means a mental or physical
condition which, in the opinion of the Committee, renders an
Optionee unable or incompetent to carry out the job
responsibilities which such Optionee held or tasks to which
such Optionee was assigned at the time the disability was
incurred and which is expected to be permanent or for an
indefinite period.
1.27. "Plan" means The John B. Sanfilippo & Son, Inc. 1998
Equity Incentive Plan.
1.28. "Prior Grants" shall have the meaning set forth in
Subsection 6.4(e) hereof.
1.29. "Reload Option" means a new Option granted to an
Optionee pursuant to and in accordance with Subsections
4.3(f)(v) and 8.2 hereof, upon the surrender of Shares to pay
the Option Price of a previously granted Option.
1.30 "Share" means a share of Common Stock.
1.31. "Share Withholding" shall have the meaning set forth
in Subsection 13.1 hereof.
1.32. "Subsidiary" means a corporation at least 50% of the
total combined voting power of all classes of stock of which
is owned by the Company either directly or through one or more
Subsidiaries.
1.33. "Ten Percent Owner" shall have the meaning set forth
in Subsection 6.4(a) hereof.
1.34. "Termination of Employment" shall have the meaning
set forth in Subsection 14.1 hereof.
1.35. "$100,000 Limit" shall have the meaning set forth in
Subsection 6.4(d) hereof.
2. Purpose.
The purpose of the Plan is to advance the interests of
the Company and its Subsidiaries by encouraging and
facilitating the acquisition of a larger personal financial
interest in the Company by Outside Directors and those
Employees upon whose judgment and interest the Company and its
Subsidiaries are largely dependent for the successful conduct
of their operations, and by making executive positions in the
Company and its Subsidiaries more attractive. It is
anticipated that the acquisition of such financial interest
will stimulate the efforts of such Employees and Outside
Directors on behalf of the Company and its Subsidiaries and
strengthen their desire to continue in the service of the
Company and its Subsidiaries. It is also anticipated that the
opportunity to obtain such a financial interest will prove
attractive to promising executive talent and will assist the
Company and its Subsidiaries in attracting such persons. The
Plan is intended to meet the requirements of Rule 16b-3 of the
Exchange Act at all times during which Insiders are subject to
the requirements of Section 16 of the Exchange Act.
3. Scope of the Plan.
3.1. Shares Available. An aggregate of 350,000 Shares is
hereby authorized and made available and shall be reserved for
issuance under the Plan with respect to the exercise of
Options. Such number of Shares shall be reduced by the
aggregate number of Shares acquired from time to time to be
held as treasury Shares reserved for use under the Plan.
Subject to the foregoing and the other provisions of this
Section 3, Shares that are issued upon the exercise of Options
awarded under the Plan may be issued out of either the
Company's authorized and unissued or treasury shares of Common
Stock. The aggregate number of Shares available under this
Plan shall be subject to adjustment upon the occurrence of any
of the events and in the manner set forth in Section 23
hereof.
3.2. Shares Subject to Terminated Options. If, and to the
extent, an Option shall expire or terminate for any reason
without having been exercised in full, the Shares subject
thereto which have not become outstanding shall (unless the
Plan shall have terminated) become available under the Plan
for other grants.
3.3 Authority to Purchase Shares. The Board, such committee
of the Board that the Board shall specifically authorize or
direct on its behalf, or the Committee shall have the
authority to cause the Company to purchase from time to time,
in such amounts and at such prices as the Board, in its
discretion, shall deem advisable or appropriate, Shares to be
held as treasury Shares and reserved and used solely for or in
connection with grants under the Plan, at the discretion of
the Committee.
4. Administration.
4.1. The Committee. The Plan shall be administered by the
Committee.
4.2. Authority of the Committee. The Committee shall have
full and final authority, in its discretion, but subject to
the express provisions of the Plan, as follows:
(a) to grant Options;
(b) subject to Sections 6 and 10, to determine (a) the
Option Price of the Shares subject to each Option, (b) the
Employees and Outside Directors to whom, and the time or times
at which, Options shall be granted, and (c) subject to
Section 3, the number of Shares subject to an Option to be
granted to each Optionee thereof;
(c) to determine all other terms and provisions of each
Agreement (which may, but need not be, identical), other than
the exercisability of Options which is governed by
Subsection 6.2 hereof, and, with the consent of the Optionee,
to modify any Agreement;
(d) to construe and interpret the Plan and Agreements;
(e) to prescribe, amend and rescind rules and
regulations relating to the Plan, including, without
limitation and subject to Section 14 hereof, the rules with
respect to the exercisability of Options;
(f) to require, whether or not provided for in the
pertinent Agreement, of any person exercising an Option, at
the time of such exercise, the making of any representations
or agreements which the Committee may deem necessary or
advisable in order to comply with the securities laws of the
United States of America or of any state;
(g) to prescribe the method by which grants of Options
shall be evidenced;
(h) to cancel, with the consent of the Optionee thereof,
outstanding Options and to grant new Options in substitution
therefor;
(i) to require withholding from or payment by an
Optionee of any federal, state or other governmental taxes;
(j) to prohibit the election described in Section 11
hereof;
(k) to make all other determinations deemed necessary or
advisable for the administration of the Plan; and
(l) to impose such additional conditions, restrictions
and limitations upon the exercise, vesting or retention of
Options as the Committee may, prior to or concurrently with
the grant or award thereof, deem appropriate, including, but
not limited to, limiting the percentage of Options which may
from time to time be exercised by an Optionee.
4.3. Agreements Evidencing Stock Options.
(a) Options awarded under the Plan shall be evidenced by
Agreements which shall not be inconsistent with the terms and
provisions of the Plan, and which shall contain such
provisions as the Committee may in its sole discretion deem
necessary or desirable. Without limiting the generality of
the foregoing, the Committee may in any Agreement impose such
restrictions or conditions upon the exercise of such Option or
upon the sale or other disposition of the shares of Common
Stock issuable upon exercise of such Option as the Committee
may in its sole discretion determine. By accepting an award
pursuant to the Plan each Optionee shall thereby agree that
each such award shall be subject to all of the terms and
provisions of the Plan, including, but not limited to, the
provisions of Section 4.6.
(b) Each Agreement shall set forth the number of shares
of Common Stock subject to the Option granted thereby, subject
to adjustment by the Committee to reflect changes in
capitalization as contemplated by Section 23.
(c) Each Agreement relating to Options shall set forth
the amount payable by the Optionee to the Company upon
exercise of the Option evidenced thereby, subject to
adjustment by the Committee to reflect changes in
capitalization as contemplated by Section 23.
(d) Each Agreement shall set forth the period during
which the Option shall be exercisable, which shall be
determined by the Committee in its discretion, subject to the
terms of Subsection 6.4(b) and Section 10 hereof; provided,
however, that no Option shall be exercisable after the
expiration of ten (10) years from the Date of Grant, and each
Option shall be subject to earlier termination as herein
provided.
(e) Each Agreement shall specify whether the Option is a
Nonstatutory Stock Option or an Incentive Stock Option.
(f) Without limiting the foregoing, the Committee shall
provide, in its discretion, in any Agreement:
(i) for an agreement by the Optionee to render
services to the Company or a Subsidiary upon such terms
and conditions as may be specified in the Agreement,
provided that the Committee shall not have the power to
commit the Company or a Subsidiary to employ or otherwise
retain any Optionee;
(ii) for restrictions on the transfer, sale or other
disposition of Shares issued to the Optionee upon the
exercise of an Option;
(iii) for an agreement by the Optionee to resell
to the Company, under specified conditions, Shares issued
upon the exercise of an Option;
(iv) for the payment of the Option Price upon the
exercise of an Option otherwise than in cash, including
without limitation by delivery of Shares valued at Fair
Market Value on the Date of Exercise of the Option in
accordance with the terms of Subsection 8.1 hereof, or a
combination of cash and Shares, or for the payment in
part of the Option Price with a promissory note in
accordance with the terms of Subsection 8.3 hereof;
(v) for the automatic issuance of a Reload Option
covering a number of Shares equal to the number of any
Shares used to pay the Option Price in accordance with
the terms of Subsection 8.2 hereof; or
(vi) for the right of the Optionee to surrender to
the Company an Option (or a portion thereof) that has
become exercisable and to receive upon such surrender,
without any payment to the Company or a Subsidiary (other
than required tax withholding amounts), that number of
Shares (equal to the highest whole number of Shares)
having an aggregate Fair Market Value as of the date of
surrender equal to that number of Shares subject to the
Option (or portion thereof) being surrendered multiplied
by an amount equal to the excess of (i) the Fair Market
Value of a Share on the date of surrender, over (ii) the
Option Price, plus an amount of cash equal to the Fair
Market Value of any fractional Share to which the
Optionee might be entitled. Any such surrender shall be
treated as the exercise of the Option (or portion
thereof).
4.4. Finality of Committee Determinations: Liability of
Members. The determination of the Committee on all matters
relating to the Plan or any Agreement shall be final, binding
and conclusive. No member of the Committee shall be liable
for any action or determination made in good faith with
respect to the Plan, any Agreement or any grant thereunder.
4.5. Periodic Committee Review and Meetings with Management.
The Committee shall from time to time review the
implementation and results of the Plan to determine the extent
to which the Plan's purpose is being accomplished. In
addition, the Committee shall periodically meet with senior
management of the Company to review their suggestions
regarding grants under the Plan, including the individuals who
are proposed to receive grants and the amount and terms of
such grants; provided, however, that all such grants shall be
determined solely by the Committee in its discretion.
4.6. Indemnification of Committee. In addition to such other
rights of indemnification as they may have as directors of the
Company or as members of the Committee, the members of the
Committee shall be indemnified by the Company against the
reasonable expenses, including attorneys' fees, actually and
reasonably incurred in connection with the defense of any
action, suit or proceeding, or in connection with any appeal
therein, to which they or any of them may be a party by reason
of any action taken or failure to act under or in connection
with the Plan or any Option granted hereunder, and against all
amounts reasonably paid by them in settlement thereof or paid
by them in satisfaction of a judgment in any such action, suit
or proceeding, other than for actions involving wilful
misfeasance, gross negligence or reckless disregard of the
member's duties.
5. Eligibility.
Options may be granted only to Outside Directors and
Employees, except that (i) Outside Directors are not eligible
to receive Options other than pursuant to Section 10 and (ii)
neither Jasper B. Sanfilippo, Sr. nor Mathias A. Valentine
shall be eligible to receive Options under the Plan. Subject
to the provisions of Section 3 and Subsection 6.5 hereof, an
Employee or Outside Director who has been granted an Option
may be granted additional Options; provided, however, that
grants of Nonstatutory Stock Options to Outside Directors are
subject to the limitations set forth in Section 10. In
selecting the individuals to whom Options shall be granted as
well as in determining the number of Shares subject to each
Option to be granted, the Committee shall take into
consideration such factors as it deems relevant in connection
with promoting the purposes of the Plan.
6. Conditions to Grants and Awards.
6.1. General. Subject to the provisions of Sections 5 and 10
hereof, the Committee is hereby authorized to grant
Nonstatutory Stock Options to Outside Directors and Employees
and Incentive Stock Options to Employees. All Options
designated as Incentive Stock Options shall be, in addition to
the other provisions of this Plan, subject to the terms and
conditions of Subsection 6.4 below. Subject to the provisions
of Section 3 hereof, an individual who has been granted an
Option may, if such individual is otherwise eligible, be
granted additional Options if the Committee shall so
determine. Subject to the other provisions of this Plan, the
Committee may grant Options with terms and conditions which
differ among the Optionees thereof.
6.2. Exercisability. Each Option granted under this Plan
shall provide that the Option shall become exercisable in
equal installments of 25% of the total number of Shares
subject to being purchased thereunder on each of the first,
second, third and fourth anniversaries of the Option's Date of
Grant; provided, however, that the Optionee remains an
Employee (or a director of the Company in the case of a
Nonstatutory Stock Option granted to an Outside Director
pursuant to Section 10 hereof) on each such anniversary of the
Date of Grant. To the extent not set forth in the Plan, the
terms and conditions of each grant shall be set forth in an
Agreement.
6.3. Grants of Options and Option Price. Subject to the
provisions of Section 10, before the grant of any Option, the
Committee shall determine the Option Price of the Shares
subject to such Option; provided that, except as provided in
Subsection 6.4 below with respect to Incentive Stock Options,
the Option Price shall not be less than fifty percent (50%) of
the Fair Market Value of a Share on the Date of Grant.
6.4. Grants of Incentive Stock Options. Any Option designated
as an Incentive Stock Option may be granted only to an
Employee and shall:
(a) have an Option Price of (i) not less than 100% of
the Fair Market Value of a Share on the Date of Grant, or (ii)
in the case of an Employee who owns stock (including stock
treated as owned under Section 424(d) of the Code) possessing
more than 10% of the total combined voting power of all
classes of stock of the Company or any of its Subsidiaries (a
"Ten Percent Owner"), not less than 110% of the Fair Market
Value of a Share on the Date of Grant;
(b) have an Option Period of not more than ten (10)
years (five (5) years, in the case of a Ten Percent Owner)
from the Date of Grant, and shall be subject to earlier
termination as herein provided;
(c) notwithstanding the provisions relating to
termination of employment set forth in Section 14 hereof, not
be exercisable more than three (3) months (or one (1) year, in
the case of an Optionee who is disabled within the meaning of
Section 22(e)(3) of the Code) after termination of employment;
(d) not have an aggregate Fair Market Value of Shares
(determined for each Incentive Stock Option at the time it is
granted) with respect to which Incentive Stock Options are
exercisable for the first time by such Optionee during any
calendar year (under this Plan and any other employee stock
option plan of the Optionee's employer or any parent or 50%-
or-more owned subsidiary thereof ("Other Plans")), determined
in accordance with the provisions of Section 422 of the Code,
which exceeds $100,000 (the "$100,000 Limit");
(e) if the aggregate Fair Market Value of Shares
(determined on the Date of Grant) with respect to all
Incentive Stock Options previously granted under this Plan and
the Other Plans ("Prior Grants") and any Incentive Stock
Options under such grant (the "Current Grant") which are
exercisable for the first time during any calendar year would
exceed the $100,000 Limit, be exercisable as follows:
(i) the portion of the Current Grant exercisable
for the first time by the Optionee during any calendar
year which would be, when added to any portions of any
Prior Grants exercisable for the first time by the
Optionee during any such calendar year with respect to
Shares which would have an aggregate Fair Market Value
(determined at the time of each such grant) in excess of
the $100,000 Limit shall, notwithstanding the terms of
the Current Grant, be exercisable for the first time by
the Optionee in the first subsequent calendar year or
years in which it could be exercisable for the first time
by the Optionee when added to all Prior Grants without
exceeding the $100,000 Limit; and
(ii) if, viewed as of the date of the Current Grant,
any portion of a Current Grant could not be exercised
under the provisions of the immediately preceding
sentence during any calendar year commencing with the
calendar year in which it is first exercisable through
and including the last calendar year in which it may by
its terms be exercised, such portion of the Current Grant
shall not be an Incentive Stock Option, but shall be
exercisable as a separate Option at such date or dates as
are provided in the Current Grant.
(f) be granted within ten (10) years from the earlier of
the date the Plan is adopted or the date the Plan is approved
by the stockholders of the Company; and
(g) require the Optionee to notify the Committee of any
disposition of any Shares issued pursuant to the exercise of
the Incentive Stock Option under the circumstances described
in Section 421(b) of the Code (relating to certain
disqualifying dispositions), within ten (10) days of such
disposition.
6.5. Code Section 162(m) Compliance for Option Grants. The
maximum number of Shares subject to Options which may be
awarded to any Optionee in any one calendar year shall not
exceed 50,000 Shares. In all events, determinations under the
preceding sentence shall be made in a manner which is
consistent with Code Section 162 and the regulations
promulgated thereunder.
7. Non-transferability.
Each Option granted hereunder shall by its terms not be
assignable or transferable other than by will or the laws of
descent and distribution. During the life of the Optionee,
all rights granted to the Optionee under the Plan or under any
Agreement shall be exercisable only by the Optionee.
8. Exercise of Options.
8.1. Manner of Exercise and Payment. Subject to the
provisions hereof and the provisions of the Agreement under
which it was granted, each Option shall be exercised by
delivery to the Company's treasurer of written notice of
intent to purchase a specific whole number of Shares subject
to the Option. The Option Price of any Shares as to which an
Option is exercised shall be paid in full at the time of the
exercise, unless and to the extent that the Committee agreed
in the Agreement in which the Option was granted to accept a
promissory note as provided in Subsection 8.3 below. Payment
may, at the election of the Optionee, be made in (i) cash,
(ii) Shares valued at their Fair Market Value on the Date of
Exercise, (iii) surrender of an exercisable Option covering
Shares with an aggregate Fair Market Value as of the date of
exercise in excess of the aggregate dollar amount of the
Option Prices of such Shares under such Option equal to the
Option Price of the Options sought to be exercised,
(iv) through the delivery of irrevocable instructions to a
broker to deliver promptly to the Company an amount in cash
equal to the Option Price, (v) any combination of the
foregoing, or (vi) in accordance with the terms of the
Agreement under which the Options sought to be exercised were
granted. In certain circumstances, payment may also be made
in accordance with Subsection 8.3 below.
8.2. Reload Option. Pursuant to Subsection 4.3(f)(v) hereof,
the Committee may, in its sole discretion, award Reload
Options in an amount equal to the number of Shares that could
be delivered in payment of the Option Price (as set forth in
Subsection 8.1 above) in connection with the exercise of an
Option. To the extent required by applicable law, the number
of Reload Options available to each Optionee shall be set
forth in each grant. The Option Price for any Reload Option
shall be the Fair Market Value of a Share on the date that
Shares are surrendered in payment of the Option Price. Other
terms of the Reload Option shall be the same as the terms
contained in the Agreement relating to the Option being
exercised, provided that if a Reload Option is granted in
connection with the use of Shares to pay the exercise price of
an Incentive Stock Option, the Reload Option shall be a
Nonstatutory Stock Option.
8.3. Deferred Payment of Option Price. To the extent
permitted by applicable law, the Committee may agree in the
Agreement in which an Option is granted to accept as partial
payment for the Shares a promissory note of the Optionee
evidencing his or her obligation to make future cash payment
therefor; provided, however, that in no event may the
Committee accept a promissory note for an amount in excess of
the difference between the aggregate Option Price and the par
value of the Shares purchased pursuant to the Option.
Promissory notes made pursuant to this Subsection 8.3 shall be
payable as determined by the Committee, shall be secured by a
pledge of the Shares in respect of the purchase of which the
promissory is being delivered and shall bear interest at a
rate fixed by the Committee (which rate shall not be lower
than a reasonable commercial rate).
9. Accelerated Exercise.
Notwithstanding any other provisions of the Plan, all
unexercised Options may be exercised or disposed of commencing
on the date of a Change of Control, as defined in Section 15
hereof; provided, however, that the Company may cancel all
such Options under the Plan as of the date of a Change of
Control by giving notice to each Optionee thereof of its
intention to do so and by permitting the purchase during the
thirty-day period next preceding such effective date of all of
the Shares subject to such outstanding Options.
10. Grant of Stock Options to Outside Directors.
Each Outside Director shall be eligible to be granted
Nonstatutory Stock Options and all such grants shall only be
made under and in accordance with the provisions in this
Section 10.
10.1. Grant to Outside Directors. Each person who becomes
an Outside Director shall be granted on the date such person
first becomes elected as an Outside Director, and on each date
such person is re-elected as an Outside Director, which in
each case shall be the Date of Grant, a Nonstatutory Stock
Option to purchase 1,000 Shares at an Option Price equal to
the Fair Market Value of such Shares on the Date of Grant.
Each such Nonstatutory Stock Option shall provide that it may
be exercised no later than ten (10) years following the Date
of Grant and that the Nonstatutory Stock Option shall become
exercisable in equal installments of 250 Shares on each of the
first, second, third and fourth anniversaries of the Date of
Grant, provided, however, that the Optionee remains a director
of the Company on each such anniversary of the Date of Grant.
10.2. Insufficient Shares Available. If on any date on
which Nonstatutory Stock Options are to be granted pursuant to
Subsection 10.1 above there is an insufficient number of
Shares available pursuant to Section 3 hereof for such grant,
the number of Shares subject to each Option granted pursuant
to Subsection 10.1 on such date shall equal the number of
Shares that otherwise would be subject to such Nonstatutory
Stock Options but for such limitation multiplied by a
fraction, the numerator of which shall be the total number of
Shares then available pursuant to Section 3 for the grant of
Nonstatutory Stock Options,. and the denominator of which
shall be the aggregate number of Shares that otherwise would
be granted pursuant to Subsection 10.1, such product to be
rounded down to the nearest whole number.
10.3. Amendments to Section. Notwithstanding Section 24
hereof, the provisions in this Section 10 may not be amended
more than once every six (6) months, other than to comport
with changes in the Code, the Employee Retirement Income
Security Act, or the rules thereunder.
11. Notification under Section 83(b).
Provided that the Committee has not prohibited such
Optionee from making the following election, if an Optionee
shall, in connection with the exercise of any Option, make the
election permitted under Section 83(b) of the Code (i e., an
election to include in such Optionee's gross income in the
year of transfer the amounts specified in Section 83(b) of the
Code), such Optionee shall notify the Committee of such
election within ten (10) days of filing notice of the election
with the Internal Revenue Service, in addition to any filing
and notification required pursuant to regulations issued under
the authority of Section 83(b) of the Code.
12. Withholding Taxes.
12.1. Remittance of Tax as Condition of Delivery. The
Company shall be entitled to require as a condition of
delivery of Shares hereunder that the Optionee remit an amount
sufficient to satisfy all federal, state and other
governmental withholding tax requirements related thereto.
12.2. Mandatory Withholding on Officers, Directors and
Greater Than 10% Stockholders. In the case of an Optionee
who is an officer, director or beneficial owner of more than
10% of the Common Stock of the Company (as determined in
accordance with Rule 13d-3 under the Exchange Act), whenever
under the Plan, Shares are to be delivered, the Company shall
withhold an amount sufficient to satisfy all federal, state
and other governmental withholding tax requirements related
thereto.
13. Elective Share Withholding.
13.1. An Optionee, other than an Insider, may, subject to
Committee approval, elect the withholding ("Share
Withholding") by the Company of a portion of the Shares
otherwise deliverable to such Optionee upon his or her
exercise of an Option having a Fair Market Value equal to
either (a) the amount necessary to satisfy such Optionee's
required federal, state or other governmental withholding tax
liability with respect thereto, or (b) a greater amount, not
to exceed the estimated total amount of such Optionee's tax
liability with respect thereto.
13.2. Share Withholding Is Subject to Committee Approval.
Share Withholding is subject to Committee approval and each
Share Withholding election by an Optionee shall also be
subject to the following restrictions:
(a) the election must be made prior to the date on which
the amount of tax to be withheld is determined; and
(b) the election shall be irrevocable.
14. Termination of Employment.
14.1. Forfeiture. Subject to the provisions of
Subsection 6.4 hereof with respect to Incentive Stock Options,
an unexercised Option shall terminate and/or be forfeited upon
the date on which the Optionee thereof is no longer an
Employee ("Termination of Employment") if the Termination of
Employment was the result of the resignation of the Optionee
or the Optionee was terminated For Cause (as defined in
Subsection 14.2 below) or otherwise, except that:
(a) Death. If the Optionee's Termination of Employment
is by reason of his or her death, unexercised Options to the
extent exercisable on the date of the Optionee's death, may be
exercised, in whole or in part, at any time within one (1)
year after the date of death by the Optionee's personal
representative or by the person to whom the Options are
transferred by will or the applicable laws of descent and
distribution.
(b) Retirement. If the Optionee's employment is
terminated as a result of retirement under the provisions of a
retirement plan of the Company or a Subsidiary applicable to
the Optionee (or on or after age 60 if no retirement plan of
the Company or Subsidiary is applicable to the Optionee), any
unexercised Option, to the extent exercisable at the date of
such Termination of Employment, may be exercised, in whole or
in part, at any time within ninety (90) days after the date of
such Termination of Employment; provided that, if the Optionee
dies after such Termination of Employment and before the
expiration of such 90-day period, unexercised Options held by
such deceased Optionee may be exercised by his or her personal
representative or by the person to whom the Option is trans-
ferred by will or the applicable laws of descent and
distribution within one (1) year after the Optionee's
Termination of Employment.
(c) Permanent Disability. If the Optionee's employment
is terminated as a result of his or her Permanent Disability,
any unexercised Option, to the extent exercisable at the date
of such Termination of Employment, may be exercised, in whole
or in part, at any time within one (1) year after the date of
such Termination of Employment; provided that, if an Optionee
dies after such Termination of Employment and before the
expiration of such one (1) year period, the unexercised
Options may be exercised by the deceased Optionee's personal
representative or by the person to whom the unexercised
Options are transferred by will or the applicable laws of
descent and distribution within one (1) year after the
Optionee's Termination of Employment, or, if later, within 180
days after the Optionee's death.
(d) Other Reasons for Termination. If the Optionee has
a Termination of Employment for any reason other than by
death, retirement, Permanent Disability, resignation or For
Cause, any unexercised Option to the extent exercisable on the
date of such Termination of Employment, may be exercised, in
whole or in part, at any time within three (3) months from the
date of such Termination of Employment.
14.2. "For Cause." A Termination of Employment "For
Cause" shall mean a Termination of Employment that, in the
judgment of the Committee, is the result of (i) the breach by
the Employee of any employment agreement, employment
arrangement or any other agreement with the Company or a
Subsidiary, (ii) the Employee engaging in a business that
competes with the Company or a Subsidiary, (iii) the Employee
disclosing business secrets, trade secrets or confidential
information of the Company or a Subsidiary to any party,
(iv) dishonesty, misconduct, fraud or disloyalty by the
Employee, (v) misappropriation of corporate funds, or
(vi) such other conduct by the Employee of an incompetent,
insubordinate, immoral or criminal nature as to have rendered
the continued employment of the Employee incompatible with the
best interests of the Company and its Subsidiaries.
14.3. Option Term. Any of the provisions herein to the
contrary notwithstanding, no Option shall be exercisable
beyond the term specified in the related Agreement thereof.
15. Change of Control.
15.1. Definition of "Change of Control." A "Change of
Control" occurs if, and as of the first date on which, no
shares of Class A Stock remain outstanding.
15.2. Notice of Change of Control. The Company shall
notify all Optionees of the occurrence of a Change of Control
promptly after its occurrence, but any failure of the Company
to notify shall not deprive the Optionees of any rights
accruing hereunder by virtue of a Change of Control.
16. Substituted Options.
If the Committee cancels, with the consent of an
Optionee, any Option granted under the Plan, and a new Option
is substituted therefor, then the Committee may, in its
discretion, provide that the Date of Grant of the canceled
Option shall be the date used to determine the earliest date
or dates for exercising the new substituted Option under
Subsection 6.2 hereof so that the Optionee may exercise or
dispose of the substituted Option at the same time as if the
Optionee had held the substituted Option since the Date of
Grant of the canceled Option; provided, however, that no
Optionee who for purposes of Section 16 of the Exchange Act is
treated as an officer, director or 10% stockholder of the
Company may dispose of a substituted Option, within less than
six months after the Date of Grant (calculated without
reference to this Section 16).
17. Securities Law Matters.
17.1. Investment Intent Representation: Restrictive
Legend. Where an investment intent representation or
restrictive legend is deemed necessary to comply with the
Securities Act of 1933, as amended, the Committee may require
a written representation to that effect by the Optionee, or
may require that such legend be affixed to certificates for
Shares at the time the Option is exercised.
17.2. Company's Right to Postpone Exercise. If based upon
the opinion of counsel to the Company, the Committee
determines that the exercise of any Options would violate any
applicable provision of (i) state or federal securities law,
(ii) the listing requirements of any securities exchange
registered under the Exchange Act on which are listed any of
the Company's equity securities, (iii) the listing
requirements of the Nasdaq National Market if any of the
Company's equity securities are listed thereon, or (iv) the
listing requirements of The Nasdaq Small Cap Market if any of
the Company's equity securities are listed thereon, then the
Committee may postpone any such exercise; provided, however,
that the Company shall use its best efforts to cause such
exercise to comply with all such provisions at the earliest
practicable date; and provided further, that the Committee's
authority under this Subsection 17.2 shall expire from and
after the date of any Change of Control.
17.3. Rule 16b-3 Compliance. With respect to Insiders,
transactions under the Plan are intended to comply with all
applicable conditions of Rule 16b-3 or its successors under
the Exchange Act. To the extent any provision of the Plan or
action by the Board or the Committee fails to so comply, it
shall be deemed null and void, to the extent permitted by law
and deemed advisable by the Board and the Committee.
18. Funding.
Benefits payable under the Plan to any person shall be
paid directly by the Company. The Company shall not be
required to fund, or otherwise segregate assets to be used for
payment of, benefits under the Plan.
19. No Employment Rights.
Neither the establishment of the Plan, nor the granting
of any rights under the Plan, shall be construed to (a) give
any Optionee the right to remain employed by the Company, any
Subsidiary or any of their affiliates or to any benefits not
specifically provided by the Plan, or (b) in any manner modify
the right of the Company, any Subsidiary or any of their
affiliates to modify, amend or terminate any of its employee
benefit plans.
20. Stockholder Rights.
An Optionee shall not, by reason of any right granted
hereunder, have any right as a stockholder of the Company with
respect to the Shares which may be deliverable upon exercise
of such Option until such Shares have been delivered to him or
her.
21. Nature of Payments.
Any and all grants or deliveries of Shares hereunder
shall constitute special incentive payments to the Optionee
and shall not be taken into account in computing the amount of
salary or compensation of the Optionee for the purposes of
determining any pension, retirement, death or other benefits
under (a) any pension, retirement, profit-sharing, bonus, life
insurance or other employee benefit plan of the Company, any
Subsidiary or any of their affiliates, or (b) any agreement
between the Company, any Subsidiary or any of their
affiliates, on the one hand, and the Optionee, on the other
hand, except as such plan or agreement shall otherwise
expressly provide.
22. Non-Uniform Determinations.
Neither the Committee's nor the Board's determinations
under the Plan need be uniform and may be made by the
Committee or the Board selectively among persons who receive,
or are eligible to receive, grants under the Plan (whether or
not such persons are similarly situated). Without limiting
the generality of the foregoing, the Committee shall be
entitled, among other things, to make non-uniform and
selective determinations, and to enter into non-uniform and
selective Option agreements as to (a) the persons to receive
grants under the Plan, (b) the terms and provisions of grants
under the Plan, and (c) the treatment, under Section 14
hereof, of leaves of absence.
23. Adjustments.
Any Option entered into hereunder may contain such
provisions as the Committee shall determine for equitable
adjustment of (a) the number of Shares covered thereby, (b)
the Option Price, or (c) otherwise, to reflect a stock
dividend, stock split, reverse stock split, Share combination,
recapitalization, merger, consolidation, asset spin-off,
reorganization or similar event, of or by the Company. In any
such event, regardless of whether specified in an Agreement,
the aggregate number of Shares available under the Plan shall
be appropriately adjusted to equitably reflect such event.
24. Amendment of the Plan.
Subject to Subsection 10.3 hereof, the Board may make such
modifications of the Plan as it shall deem advisable;
provided, however, no modifications shall be made which would
impair the rights of any Option theretofore granted without
the Optionee's consent; and provided further, the Board may
not, without further approval of the stockholders of the
Company, except as provided in Section 23 above, either:
(a) materially increase the number of Shares reserved
for issuance under the Plan;
(b) materially increase the benefits accruing to
participants under the Plan;
(c) materially modify the requirements as to eligibility
for participation in the Plan; or
(d) extend the date of termination of the Plan.
25. Termination of the Plan.
The Plan shall terminate on the tenth (10th) anniversary
of the Effective Date or at such earlier time as the Board may
determine. Any termination, whether in whole or in part,
shall not affect any rights then outstanding under the Plan.
26. Controlling Law.
The Plan shall be governed, construed and administered in
accordance with the laws of the State of Delaware, except its
laws with respect to choice of law.
27. Action by the Company.
Any action required by the Company under the Plan shall
be by resolution of the Board.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the John B.
Sanfilippo & Son, Inc. Consolidated Statement of Operations for the quarter
ended September 24, 1998 and Consolidated Balance Sheet as of September 24, 1998
and is qualified in its entirety by reference to such statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-24-1999
<PERIOD-END> SEP-24-1998
<CASH> 549
<SECURITIES> 0
<RECEIVABLES> 25,125
<ALLOWANCES> 0
<INVENTORY> 98,282
<CURRENT-ASSETS> 129,030
<PP&E> 137,877
<DEPRECIATION> 62,520
<TOTAL-ASSETS> 218,602
<CURRENT-LIABILITIES> 77,328
<BONDS> 60,523
0
0
<COMMON> 93
<OTHER-SE> 78,392
<TOTAL-LIABILITY-AND-EQUITY> 218,602
<SALES> 73,829
<TOTAL-REVENUES> 73,829
<CGS> 62,413
<TOTAL-COSTS> 62,413
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,275
<INCOME-PRETAX> 522
<INCOME-TAX> 235
<INCOME-CONTINUING> 287
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 287
<EPS-PRIMARY> 0.03
<EPS-DILUTED> 0.03
</TABLE>
