Document:

exv10w2

Exhibit 10.2

Amended and Restated

John B. Sanfilippo & Son, Inc.

Sanfilippo Value Added Plan (“SVA Plan”)

	I.	 	Purposes of the Plan
	 
	 	 	The purpose of the Plan is to more closely link incentive cash compensation to the
creation of stockholder value. The Plan is intended to foster a culture of performance and
ownership, promote employee accountability, and establish a framework of manageable risks
imposed by variable pay. The Plan is also intended to reward long-term, continuing
improvements in stockholder value with an opportunity to participate in a portion of the
wealth created. The Plan is amended and restated effective as of January 25, 2011.
	 
	II.	 	Definitions
	 
	 	 	“2011 Bonus Bank” has the meaning set forth in Section VI(B)(2)(a).
	 
	 	 	“Actual Improvement” means the annual change in SVA, as determined under Section V(B)(1) of
the Plan, which can be positive or negative.
	 
	 	 	“Annual Salary” means, with respect to a Participant, his or her annual base salary rate in
a particular fiscal year of the Company.
	 
	 	 	“Board” means the Board of Directors of the Company.
	 
	 	 	“Bonus Bank” means the amount of a Plan Participant’s bonus potential that is not yet paid
and which is accounted for by the Company in a non-interest bearing book entry account until
such time as it may be paid in the form of a Bonus Paid pursuant to the terms of the Plan.
	 
	 	 	“Bonus Declared” means the annual bonus amount for a Plan Year, as determined under Section
V of the Plan.
	 
	 	 	“Bonus Interval” means the amount of SVA growth or diminution as a variance from Target SVA
Improvement that would either (A) result in the doubling of the Target Bonus for SVA
performance above Target SVA Improvement; or, (B) result in the realization of no Target
Bonus for SVA performance below Target SVA Improvement.
	 
	 	 	“Bonus Paid” has the meaning set forth in Section VI(A).

 

 

John B. Sanfilippo & Son, Inc. Sanfilippo Value Added Plan

	 	 	“Capital Charge” means the Cost of Capital multiplied by the Company’s aggregate
capital, as determined by the Committee.
	 
	 	 	“Cause” means, in the judgment of the Committee, (A) the breach by the Participant of any
employment agreement, employment arrangement or any other agreement with the Company or a
Subsidiary, (B) the Participant engaging in a business that competes with the Company or a
Subsidiary, (C) the Participant disclosing business secrets, trade secrets or confidential
information of the Company or a Subsidiary to any party, (D) dishonesty, misconduct, fraud
or disloyalty by the Participant, (E) misappropriation of corporate funds, or (F) such other
conduct by the Participant of an incompetent, insubordinate, immoral or criminal nature as
to have rendered the continued employment of the Participant incompatible with the best
interests of the Company and its Subsidiaries.
	 
	 	 	“Change in Control” means the first date on which one of the following events occurs:

A. the consummation of a merger or consolidation of the Company with or into
another entity or any other corporate reorganization, if more than 50% of the combined
voting power of the continuing or surviving entity’s securities outstanding immediately
after such merger, consolidation or other reorganization is owned by persons who were not
stockholders of the Company immediately prior to such merger, consolidation or other
reorganization;

B. the sale, transfer or other disposition of all or substantially all of the
Company’s assets;

C. a change in the composition of the Board, as a result of which fewer than
one-half of the directors following such change in composition of the Board are directors
who either (1) had been directors of the Company on the date 24 months prior to the date of
the event that may constitute a Change in Control (the “Original Directors”) or (2) were
elected, or nominated for election, to the Board with the affirmative votes of at least a
majority of the aggregate of (a) the Original Directors who were still in office at the time
of the election or nomination and (b) the directors whose election or nomination was
previously approved pursuant to this Clause (2); or

D. any transaction as a result of which any “person” or “group” (as such terms are
used in Section 13(d) and 14(d) of the Exchange Act), other than one or more Permitted
Holders, or any group that is controlled by Permitted Holders, is or becomes the “beneficial
owner” (as defined in Rules 13d-3 and 13d-5 under the Exchange Act), directly or indirectly,
of the voting securities of the Company representing at least 30% of the total voting power
of the Company (with respect to all matters other than the election of directors)
represented by the Company’s then outstanding voting securities. For purposes of this Clause
(D), the term “transaction” shall include any conversion of the Class A Stock, whether or
not such conversion occurs in connection with a sale, transfer or other disposition of such
Class A Stock.

	 	 	For purposes of this definition, (1) the term “person” shall exclude: (a) a trustee or other
fiduciary holding securities under an employee benefit plan of the Company or a company
controlled by the Company; and (b) a corporation owned directly or indirectly by the

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John B. Sanfilippo & Son, Inc. Sanfilippo Value Added Plan

	 	 	stockholders of the Company in substantially the same proportions as their ownership of the
Common Stock (it being understood that for purposes of subsequently determining whether a
Change in Control has occurred, all references to the “Company” in the definition of Change
in Control shall be deemed to be references to the Company and/or such corporation, as
applicable); (2) the term “group” shall exclude any group controlled by any person
identified in Clause (1)(a) above and (c) the term “control” shall mean the possession,
directly or indirectly, of the power to direct or cause the direction of the management or
policies of a person, whether through the ownership of voting securities, by contract, or
otherwise, and the terms “controlling” and “controlled” have meanings correlative thereto.
	 
	 	 	Except as otherwise determined by the Committee, any spin-off of a division or subsidiary of
the Company to its stockholders will not constitute a Change in Control of the Company.
	 
	 	 	“Class A Stock” means the Class A Common Stock, $.01 par value per share, of the Company.
	 
	 	 	“Code” means the Internal Revenue Code of 1986, as amended.
	 
	 	 	“Committee” has the meaning set forth in Section IV(A).
	 
	 	 	“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.
	 
	 	 	“Company” means John B. Sanfilippo & Son, Inc., a Delaware corporation, and its successors
and assigns.
	 
	 	 	“Cost of Capital” means the Company’s cost of equity plus its cost of debt, expressed as a
percentage, as determined by the Committee using a weighted average of the expected return
on the Company’s debt and equity capital. Cost of Capital is intended to reflect the rate of
return that an investor could earn by choosing another investment with equivalent risk.
	 
	 	 	“Declared Bonus Multiple” means the multiple determined in accordance with Section V(B)(4)
of the Plan for purposes of determining a Participant’s Bonus Declared.
	 
	 	 	“Disability” means a Participant is (A) unable to engage in any substantial gainful activity
by reason of any medically determinable physical or mental impairment which can be expected
to result in death or can be expected to last for a continuous period of not less than 12
months, or (B) by reason of any medically determinable physical or mental impairment which
can be expected to result in death or can be expected to last for a continuous period of not
less than 12 months, receiving income replacement benefits for a period of not less than 3
months under an accident and health plan covering employees of the Company or Subsidiary;
or, if different, as may be defined for purposes of Section 409A.
	 
	 	 	“Exchange Act” means the Securities Exchange Act of 1934, as amended.

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John B. Sanfilippo & Son, Inc. Sanfilippo Value Added Plan

	 	 	“Excess Improvement” has the meaning set forth in Section V(B)(2).
	 
	 	 	“Guidelines” has the meaning set forth in Section IV(B)(3).
	 
	 	 	“NOPAT” means the Company’s net operating profit after tax, as determined by the Committee
from the Company’s audited financial statements.
	 
	 	 	“Participant” has the meaning set forth in Section III.
	 
	 	 	“Performance Target Bonus” means the annual Bonus Declared a Participant would be paid or
credited with, if any, for a Plan Year if Actual Improvement equaled Target SVA Improvement,
determined by multiplying a Participant’s Annual Salary for that Plan Year by the
Participant’s Performance Target Bonus Percentage for that Plan Year.
	 
	 	 	“Performance Target Bonus Percentage” means the percentage of a Participant’s Annual Salary,
as established or approved by the Committee for purposes of determining a Participant’s
Performance Target Bonus.
	 
	 	 	“Permitted Holder” means:

E. Jasper B. Sanfilippo (“Jasper”), Mathias A. Valentine, (“Mathias”), a spouse of
Jasper, a spouse of Mathias, any lineal descendant of Jasper or any lineal descendant of
Mathias (collectively referred to as the “Family Members”);

F. a legal representative of a deceased or disabled Family Member’s estate,
provided that such legal representative is a Family Member;

G. a trustee of any trust of which all the beneficiaries (and any donees and
appointees of any powers of appointment held thereunder) are Family Members and the trustee
of which is a Family Member;

H. a custodian under the Uniform Gifts to Minors Act or Uniform Transfers to
Minors Act for the exclusive benefit of a Family Member, provided that such custodian is a
Family Member;

I. any corporation, partnership or other entity, provided that at least 75% of the
equity interests in such entity (by vote and by value) are owned, either directly or
indirectly, in the aggregate by Family Members;

J. any bank or other financial institution, solely as a bona fide pledgee of
shares of Class A Stock by the owner thereof as collateral security for indebtedness due to
the pledgee; or

K. any employee benefit plan, or trust or account held thereunder, or any savings
or retirement account (including an individual retirement account), held for the exclusive
benefit of a Family Member.

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John B. Sanfilippo & Son, Inc. Sanfilippo Value Added Plan

	 	 	“Plan” means the Amended and Restated John B. Sanfilippo & Son, Inc. Sanfilippo Value Added
Plan.
	 
	 	 	“Plan Year” means the fiscal year of the Company.
	 
	 	 	“Retirement” means a Participant’s termination of employment, other than for Cause, either:
(A) on or after age 65, or (B) on or after age 55 if the Participant has been credited with,
at least, 10 full years of employment at the time of his termination of employment.
	 
	 	 	“Section 409A” means Code Section 409A and all applicable rules and regulations related
thereto.
	 
	 	 	“Shortfall” has the meaning set forth in Section V(B)(3).
	 
	 	 	“Subsidiary” means any corporation at least eighty percent (80%) of the outstanding
voting stock of which is owned by the Company.
	 
	 	 	“SVA” means the “stockholder value added” of the Company determined each Plan Year by
deducting the Company’s Capital Charge from NOPAT, as determined by the Committee.
	 
	 	 	“Target Bonus” means the annual bonus a Participant may be paid which shall be based on one
or more of the following with weightings as determined by the Committee: Actual Improvement
(with a minimum weighting of eighty percent (80%))and individual Participant performance.
	 
	 	 	“Target SVA Improvement” means the targeted improvement in annual SVA growth as determined
by the Committee pursuant to Section V(A)(1)(c).
	 
	 	 	“Termination for Cause” means a determination by the Committee following a Participant’s
termination of employment for any reason that, prior to such termination of employment,
circumstances constituting Cause existed with respect to such Participant.
	 
	 	 	“Termination Year” has the meaning set forth in Section VI(C)(2)(b).
	 
	III.	 	Eligibility
	 
	 	 	An employee of the Company or a Subsidiary who, individually or as part of a group, is
selected by the Committee to be eligible to participate in the Plan for the Plan Year shall
become a Participant as of the first day of such Plan Year, unless otherwise determined by
the Committee.
	 
	IV.	 	Administration

	 	A.	 	The Committee
	 
	 	 	 	The Compensation Committee of the Board shall be the Committee hereunder unless
a new, independent committee is selected by the Board. For this purpose, a new
Committee will be deemed independent if it is comprised solely of two or more

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John B. Sanfilippo & Son, Inc. Sanfilippo Value Added Plan

	 	 	 	directors who are “independent directors” within the meaning of the The Nasdaq Stock
Market, Inc.’s rules and regulations.
	 
	 	B.	 	Powers
	 
	 	 	 	The Committee shall have full and exclusive discretionary power to:

1. Interpret the Plan,

2. To determine those employees of the Company and its Subsidiaries who are eligible
to participate in the Plan,

3. Adopt such rules, regulations, and guidelines (including the establishment of
performance criteria) the “Guidelines”, for administering the Plan as the Committee
may deem necessary or proper, including the full discretion not to make payment of
any or all of the Bonus Paid determined in Section VI, and

4. Except to the extent prohibited by applicable law or the applicable rules of a
stock exchange, or inconsistent with the Company’s Bylaws or Committee charter,
allocate all or any portion of its responsibilities and powers under this Plan to
any one or more of its members or delegate all or any part of its responsibilities
and powers to any person or persons selected by it. Such delegation shall include,
unless limited by its terms, all of the responsibility and authority held by the
Committee hereunder, and any such allocation or delegation may be revoked by the
Committee at any time.

	 	C.	 	Adjustment to Payments

1. Subject to final approval of the Committee, individual Participant payments
may be subject to change by recommendation of the Participant’s manager and senior
management team, with consideration given to the individual’s job performance.

2. If a Participant violates any Company policy, the Company retains the right to
declare forfeited any award granted to a Participant hereunder, to the extent it
remains unpaid; provided, however, that in the event that a Participant’s prior Plan
Year Bonus Paid has not yet been paid at the time the Company declares such
Participant’s award forfeited, such forfeited amounts shall be distributed to other
Participant(s) on a pro rata basis, or distributed to other Participant(s) as
otherwise determined by the Committee.

3. If (a) the Company is required to prepare an accounting restatement due to the
material noncompliance of the Company with any financial reporting requirement under
securities laws, (b) the Committee determines a Termination for Cause occurred with
respect to a Participant or (c) the Company is required by law, rule or regulation
or the rules of the stock exchange on which the Company’s securities are listed to
“clawback”

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John B. Sanfilippo & Son, Inc. Sanfilippo Value Added Plan

any amounts paid hereunder, the Committee may require any or all of the following:
(i) any award granted to the Participant hereunder, to the extent it remains unpaid
at the time of the restatement, be forfeited; provided, however, that in the event
that a Participant’s prior Plan Year Bonus Paid has not yet been paid at the time
the Committee declares such Participant’s award forfeited, such forfeited amounts
shall be distributed to other Participant(s) on a pro rata basis, or distributed to
other Participant(s) as otherwise determined by the Committee; and (ii) the
Participant shall pay to the Company in cash all of the amounts paid hereunder
during the three-year period (or such other period as determined by the Committee)
prior to the date the Company is required to prepare the financial restatement based
on the erroneous data or the Participant’s termination of employment, as the case
may be, together with any other amounts which may be required to be paid under any
law, rule or regulation or the rules of the stock exchange on which the Company’s
securities are listed.

	 	D.	 	Third-Party Advisors
	 
	 	 	 	The Committee may employ attorneys, consultants, accountants, and other
persons. The Board, Committee, the Company and its officers shall be entitled to
rely upon the advice or opinion of such persons.
	 
	 	E.	 	Binding Effect of Committee Actions
	 
	 	 	 	All actions taken and all interpretations and determinations made by the
Committee shall be final and binding upon the Participants, the Company, and all
other interested persons. No member of the Committee shall be personally liable for
any action, determination, or interpretations made in good faith with respect to the
Plan. All members of the Committee shall be fully protected and indemnified by the
Company, to the fullest extent permitted by applicable law, in respect of any such
action, determination, or interpretation of the Plan.
	 
	 	F.	 	Foreign Jurisdiction
	 
	 	 	 	The Committee shall have the discretion to modify or amend the Plan, or adopt
additional terms and/or conditions, as may be deemed necessary or advisable in order
to comply with the local laws and regulations of any jurisdiction.

V. Determination of Bonus Declared

	 	A.	 	Determination of SVA and Actual Improvement

	 	 	 	1. Beginning of Plan Year Determinations. At the beginning of each applicable
Plan Year, the following determinations shall be made:

	 	 	 	a) The Committee shall determine, or approve the determination of, the
Company’s annual SVA as of the end of the preceding Plan Year.

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John B. Sanfilippo & Son, Inc. Sanfilippo Value Added Plan

b) The Committee shall determine or approve Performance Target Bonus
Percentages for each Participant and the Company’s Cost of Capital for the
applicable Plan Year.

c) The Committee shall establish the Target SVA Improvement and the Bonus
Interval for the applicable Plan Year, which standards may be set by the
Committee for one or more Plan Years.

2. End of Plan Year Determinations. As of the end of each applicable Plan Year, the
following determinations shall be made:

a) The Committee shall determine the Company’s annual SVA as of the end of
the Plan Year and the resulting Actual Improvement.

b) The Committee shall determine, or approve the determination of, the
Declared Bonus Multiple for such Plan Year, consistent with the terms of the
Plan.

     B. Determination of Bonus Declared

Each Participant shall be credited with a Bonus Declared, if any, for a Plan
Year according to the following:

1. The Actual Improvement in SVA for a Plan Year shall be determined by subtracting
the SVA for the immediately preceding Plan Year (or such other amount as determined
by the Committee) from the SVA for the Plan Year.

2. If the Actual Improvement exceeds the Target SVA Improvement, the amount of that
excess shall be the “Excess Improvement”;

3. If the Target SVA Improvement exceeds the Actual Improvement, the amount of that
excess shall be the “Shortfall”;

4. The Declared Bonus Multiple shall be determined by comparing the Excess
Improvement or Shortfall to the Target SVA Improvement and Bonus Interval, according
to the following:

a) If the Actual Improvement equals the Target SVA Improvement, the Declared
Bonus Multiple shall equal one (1).

b) If the Actual Improvement exceeds the Target SVA Improvement, the
Declared Bonus Multiple shall equal the Excess Improvement divided by the
Bonus Interval, plus one (1); provided, however, that after the 2011 Plan
Year, in no event shall the Declared Bonus Multiple be greater than 2.0.

c) If the Actual Improvement is less than the Target SVA Improvement, the
Declared Bonus Multiple shall equal the Shortfall (expressed as a negative

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John B. Sanfilippo & Son, Inc. Sanfilippo Value Added Plan

number) divided by the Bonus Interval, plus one (1); provided, however, that
after the 2011 Plan Year, in no event shall the Declared Bonus Multiple be
less than 0.

5. The Bonus Declared for each Participant shall equal the Participant’s Performance
Target Bonus, multiplied by the Declared Bonus Multiple.

6. A Participant’s Bonus Declared may be based upon the Declared Bonus Multiple for
the Company only, or at the discretion of the Committee, a Participant’s Bonus
Declared may be based upon the Declared Bonus Multiple for a particular division,
operation, or Subsidiary of the Company, or combination thereof as determined by the
Committee.

VI. Payment of Bonus Paid

     A. Bonus Paid

The bonus payable to a Participant with respect to the applicable Plan Year, if
any (“Bonus Paid”), shall be determined as set forth in Section VI(B). For the 2013
Plan Year, a Participant’s Bonus Bank shall also be paid to the Participant as
provided in Section VI(B)(2)(d).

     B. Determination of Bonus Paid & Bonus Bank Elimination

1. Beginning with the 2012 Plan Year and thereafter, the Participant’s Bonus
Paid shall be the Participant’s Bonus Declared calculated in accordance with Section
V(B)(5).

2. The Bonus Paid for the 2011 Plan Year will be calculated as follows:

a) Bonus Bank Calculation for 2011 Plan Year. For the 2011 Plan
Year, the Participant’s Bonus Bank will be credited with the Participant’s
Bonus Declared (which may be positive or negative). The resulting amount in
the Participant’s Bonus Bank is referred to as the “2011 Bonus Bank”.

b) 2011 Bonus Bank Negative or Equal to Zero. If a Participant’s
2011 Bonus Bank is negative or equal to zero, then there shall be no Bonus
Paid to such Participant for the 2011 Plan Year, and the Participant’s
Bonus Bank (whether negative or equal to zero) shall thereafter be
extinguished.

c) 2011 Bonus Bank between Zero and 1.2 times Performance Target
Bonus. If a Participant’s 2011 Bonus Bank is between zero and 1.2
times such Participant’s fiscal 2011 Plan Year Performance Target Bonus,
then the Participant’s Bonus Paid shall be an amount that is equal the Participant’s
2011 Bonus Bank, and the Participant’s Bonus Bank shall thereafter be
extinguished.

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John B. Sanfilippo & Son, Inc. Sanfilippo Value Added Plan

d) Bonus Bank greater than 1.2 times Performance Target Bonus. If a
Participant’s 2011 Bonus Bank is equal to or greater than 1.2 times such
Participant’s fiscal 2011 Plan Year Performance Target Bonus, then the
Participant’s Bonus Paid shall be 1.2 times the Participant’s fiscal 2011
Plan Year Performance Target Bonus. Thereafter, the Participant’s remaining
Bonus Bank (after deducting the Bonus Paid for the 2011 Plan Year) shall be
paid to the Participant in cash at the time the 2013 Plan Year Bonus Paid is
paid to the Participant pursuant to Section VI(B)(1) above; provided,
however, that if a Participant, on the day that the Company pays the Bonus
Paid for the 2011 Plan Year, is (or will be, on or before the last day of
the 2012 Plan Year) (i) 65 years or older or (b) 55 years or older and has
been credited with at least 10 full years of employment, then such
Participant shall receive the remaining Bonus Bank at the time that the
Bonus Paid for the 2011 Plan Year is paid and such Participant’s Bonus Bank
shall thereafter be extinguished.

3. The Bonus Paid shall be paid by the Company within thirty (30) days following the
Committee’s determination of the Declared Bonus Multiple, but in no event earlier
than the first day of the Plan Year following the applicable Plan Year and no later
than the fifteenth (15th) day of the third month following the end of the
applicable Plan Year. The Bonus Paid or any payment of the Bonus Bank determined
under this subsection shall not vest until such time as the date on which it is
paid; provided, however, that in the event that a Participant’s prior Plan Year
Bonus Paid or Bonus Bank has not yet been paid at the time such Participant’s award
is forfeited pursuant to the terms of this Plan, such forfeited amounts shall be
distributed to other Participant(s) on a pro rata basis, or distributed to other
Participant(s) as otherwise determined by the Committee.

4. Subsequent to either the 2011 Plan Year or 2013 Plan Year, as determined pursuant
to Section VI(B)(2)(b)-(c) or Section VI(B)(2)(d), respectively, Bonus Banks will no
longer exist.

     C. Payment Upon Termination of Employment

1. In General. Subject to Section IV(C)(3) and except as specified below, and
unless otherwise determined by the Committee, in the event a Participant’s
employment is terminated for any reason, including by the Company for Cause or by
the Participant for any reason, or the Participant becomes ineligible to participate
in the Plan, (a) the Participant shall not earn or be paid any Bonus Declared or
Bonus Paid for the Plan Year in which the termination occurs, (b) in the event that
the prior Plan Year Bonus Paid has not yet been paid, the Participant shall not earn
or be paid any Bonus Declared or Bonus Paid for such prior Plan Year; provided,
however, that any amounts
forfeited pursuant to this VI(C)(1)(b) shall be distributed to other Participant(s)
on a pro rata basis, or distributed to other Participant(s) as otherwise determined
by the Committee, (c) unless otherwise determined by the Committee, the full amount
of the

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Participant’s Bonus Bank (if any) shall be forfeited in its entirety as of
the termination date, and (d) the Participant shall have no rights or interests in
the Plan thereafter. Any payments made under this Section VI(C)(1) at the discretion
of the Committee shall be within the time set forth in Section VI(B) and the
Participant shall have no rights or interests in the Plan thereafter.

2. Upon Death, Disability, Retirement, or Termination by the Company Other than for
Cause. Subject to Section IV(C)(3), in the event of a Participant’s death,
Disability, Retirement or termination by the Company other than for Cause:

a) To the extent not previously paid, any Bonus Paid or payment of the Bonus
Bank pursuant to Section VI(B)(2)(d) with respect to the Plan Year preceding
the Plan Year in which termination occurs shall be considered vested and
earned in accordance with the terms of Section VI(B) and shall be paid by
the Company to the former Participant, or in the event of his or her death,
to his or her estate or designated beneficiary, within the time set forth in
Section VI(B) and the Participant shall have no rights or interests in the
Plan thereafter.

b) With respect to the Plan Year in which the termination occurs (the
“Termination Year”), a Participant shall receive a Bonus Paid determined in
accordance with Section VI(B) of the Plan, multiplied by a fraction, the
numerator of which shall equal the total number of days during the
Termination Year in which the Participant was employed by the Company, and
the denominator of which shall be 365. Thereafter, following the payment, if
any, of the Bonus Paid for the Termination Year, the full amount of the
Participant’s Bonus Bank (if any) shall be considered vested and earned as
of the termination date and shall be paid by the Company to the former
Participant, or in the event of his or her death, to his or her estate or
designated beneficiary, in one lump sum and the Participant shall have no
rights or interests in the Plan thereafter.

3. Condition of Payments. At the discretion of the Committee, any payment hereunder
that is due to termination of employment by the Company or by the Participant may be
subject to a requirement that the Participant execute a release of claims (including
claims relating to age discrimination) against the Company and its Subsidiaries and
related persons at the time and in the form determined by the Company from time to
time.

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VII. General Provisions

     A. No Right to Employment or Participation

No Participant or other person shall have any claim or right to be retained in
the employment of the Company or a Subsidiary by reason of the Plan or any Bonus
Declared, Bonus Paid or Bonus Bank. Selection for eligibility to participate in the
Plan for any given Plan Year shall not entitle the Participant to participate in any
subsequent Plan Year. In the event a Participant is not selected to participate in a
subsequent Plan Year, such Participant’s Bonus Bank (if any) shall remain unchanged
for such year and Participant shall not be entitled to any payment of such Bonus
Bank unless and until such Participant again becomes eligible or is again selected
to participate in the Plan.

     B. Plan Expenses

The expenses of the Plan and its administration shall be borne by the Company.

     C. Plan Not Funded

The Plan shall be unfunded. The Company shall not be required to establish any
special or separate fund or to make any other segregation of assets to assure the
payment of any Bonus Declared, Bonus Paid or Bonus Bank under the Plan.

     D. Reports

The appropriate officers of the Company shall cause to be filed any reports,
returns, or other information regarding the Plan, as may be required by applicable
statute, rule, or regulation.

     E. Governing Law

The validity, construction, and effect of the Plan, and any actions relating to
the Plan, shall be determined in accordance with the laws of the state of Illinois
and applicable federal law, without regard to the conflicts of laws provisions of
any state.

VIII. Amendment and Termination of the Plan; Change in Control; 409A

     A. Amendment and Termination of the Plan.

1. The Board may, from time to time, amend the Plan in any respect, or may
discontinue or terminate the Plan at any time, provided, however, that:

a) Impact on Existing Rights. Except as required by law, no
amendment, discontinuance or termination of the Plan shall alter or
otherwise affect the amount credited to a Participant’s Bonus Bank or affect
the amount of a Bonus Declared prior to the date of termination;

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b) Impact on SVA Performance Measurement System. No amendment shall
be made which would replace the SVA performance measurement system for
purposes of determining the Bonus Declared under the Plan during a Plan Year
for such Plan Year, provided that the Board or Committee shall have the
authority to adjust and establish Target SVA Improvement, Performance Target
Bonus Percentages, and other criteria utilized in the SVA performance
measurement system; and

c) Consequence of Full Termination of Plan. In the event of the
termination of this Plan, the full amount, if any, then credited to a
Participant’s Bonus Bank shall be paid in full within sixty (60) days
following the effective date of termination, but in no event later than the
fifteenth (15th) day of the third month following the Plan Year
in which the Plan is terminated. If the Plan is terminated prior to the end
of a Plan Year, the Bonus Declared for that Plan Year shall be determined
and paid to a Participant as set forth in Section VI of the Plan, assuming
that Target SVA Improvement for that Plan Year had been achieved, then
pro-rated for the actual number of days in the Plan Year before the Plan was
terminated. In each case any such payment shall be subject to the terms and
conditions of this Plan.

     B. Consequence of Change in Control

1. The following rules shall apply to the determination of a Change in Control:
(a) any event listed in the definition of “Change in Control” that the Committee
elects not to treat as a Change in Control of the Company prior to the occurrence of
a Change in Control shall not constitute a Change in Control; and (b) upon a
determination by the Committee in its discretion, any other event substantially
similar to an event described in the definition of “Change in Control” shall be a
Change in Control.

2. The Committee shall determine the treatment of the Bonus Paid to Participants and
Bonus Banks (if any) prior to a Change in Control, except that to the extent that
the Committee takes no action (and except as otherwise expressly provided for in the
Guidelines), in the event of a Change in Control, (a) the Bonus Declared for that
Plan Year shall be determined as set forth in Section VI of the Plan, but assuming
that Target SVA Improvement for that Plan Year had been achieved, and prorating it
for the actual number of days in the Plan Year before the Change in Control and such
Bonus Paid shall be paid within the sixty (60) day period following the effective
time of the Change in Control and (b) after taking into account the payment
described in Clause (a), the full amount, if any, then credited to a Participant’s
Bonus Bank shall be paid in full within the sixty (60) day period following the
effective time of the Change in Control.

3. Except as expressly provided for in the Guidelines, the Committee may elect prior
to a Change in Control, that, in the event of a Change in Control, the Plan shall

Page | 13 

 

John B. Sanfilippo & Son, Inc. Sanfilippo Value Added Plan

continue on in full force and effect or be assumed or an equivalent Plan be
implemented by the successor corporation in any Change in Control transaction, or
parent or subsidiary of such successor corporation.

     C. Section 409A

This Plan is intended to be exempt from Section 409A. However, to the extent
Section 409A applies to any payment hereunder, notwithstanding anything to the
contrary in this Plan the following shall apply:

1. To the extent required in order to avoid accelerated taxation and/or tax
penalties under Section 409A, amounts that would otherwise be payable pursuant to
this Plan during the six-month period immediately following the Participant’s
termination of employment shall instead be paid on the first business day after the
date that is six months following the Participant’s “separation from service” within
the meaning of Section 409A;

2. A Participant shall not be entitled to any payments resulting from or arising due
to a “termination of employment”, “termination” or “retirement” (or other similar
term having a similar import) unless (and until) such Participant has “separated
from service” within the meaning of Section 409A; and

3. To the extent any provision of the Plan or action by the Committee would subject
any Participant to liability for interest or additional taxes under Section 409A, it
will be deemed null and void, to the extent permitted by law and deemed advisable by
the Committee. It is intended that the Plan will be exempt from Section 409A (or if
subject to Section 409A, compliant with Section 409A), and the Plan shall be
interpreted and construed on a basis consistent with such intent. The Plan may be
amended in any respect deemed necessary (including retroactively) by the Board in
order to preserve exemption from (or compliance with) Section 409A. The preceding
shall not be construed as a guarantee of any particular tax effect for Plan
payments. A Participant is solely responsible and liable for the satisfaction of
all taxes and penalties that may be imposed on such person in connection with any
payments to such person under the Plan (including any taxes and penalties under
Section 409A), and the Company (or any affiliate or subsidiary) shall have no
obligation to indemnify or otherwise hold a Participant harmless from any or all of
such taxes or penalties.

Page | 14exv10w40

EXHIBIT 10.40

KB HOME

2010 EQUITY INCENTIVE PLAN

STOCK OPTION AGREEMENT

     This Stock Option Agreement (“Agreement”) is made on October 7, 2010 (“Award Date”) by and
between KB Home, a Delaware corporation (“Company”), and Jeffrey T. Mezger (“Holder”). Capitalized
terms used in this Agreement and not defined herein have the respective meanings given to them in
the KB Home 2010 Equity Incentive Plan (“Plan”).

A G R E E M E N T

     1. Subject to the terms of the Plan and this Agreement, the Company hereby grants to Holder
an option (“Option”) to purchase from the Company an aggregate of 260,000 shares of Common Stock,
$1.00 par value per share, of the Company, at the purchase price of $11.06 per share, the Option to
be exercisable as hereinafter provided. A copy of the Plan is attached hereto and/or is available
upon request, and is made a part hereof.

     2. The Option shall vest and be exercisable if Holder does not experience a Termination of
Service prior to any of the applicable dates described in this Section 2 and if, and only if, the
performance goal, as set forth in this Section 2, has been satisfied.

          The performance goal with respect to the Option shall be that the Management Development and
Compensation Committee of the Company’s Board of Directors (the “Committee”) has determined that
one of the following three performance metrics has been achieved as of KB Home’s November 30 fiscal
year end in any of 2011, 2012, and 2013 (each, a “measurement date”):

	 	(a)	 	Positive Cumulative Operating Margin: The Company has
achieved in any one performance period (as described in this subsection (a))
positive cumulative operating margin. Cumulative operating margin shall be
calculated as the sum of the Company’s consolidated total operating income over
a performance period, excluding the impact of inventory and joint venture
impairments and land option contract abandonments, divided by the Company’s
consolidated total revenue over the same performance period. The first
performance period shall be from December 1, 2010 through November 30, 2011.
The second performance period shall be from December 1, 2010 through November
30, 2012. The third performance period shall be from December 1, 2010 through
November 30, 2013. The performance goal for the Award will be satisfied in
full under this Agreement if and upon the Committee’s determination of the
achievement in any performance period of the Positive Cumulative Operating
Margin performance metric as described in this subsection (a);
	 
	 	(b)	 	Relative Operating Margin: The Company’s cumulative
operating margin over a performance period is greater than the 50th percentile
relative to the cumulative operating margin of the companies included in the
global industry classification standard homebuilding sub-industry index on the
Award Date, excluding companies that produce manufactured or prefabricated
homes, companies in bankruptcy, companies that do not build homes, and
companies

 

	 	 	 	that do not have shares of stock that trade on a national securities
exchange registered with the Securities and Exchange Commission (or a successor
federal agency) (each such company, a “GICS Index Comparator Company”), based
on most recent data available for such GICS Index Comparator Companies as of
the Company’s November 30 fiscal year end that encompasses four fiscal quarters
(with respect to the first performance period), eight fiscal quarters (with
respect to the second performance period) or twelve fiscal quarters (with
respect to the third performance period), as the case may be for each such GICS
Index Comparator Company. If any GICS Index Comparator Company after the Award
Date merges, is acquired or is involved in a business combination transaction
and the surviving company is a GICS Index Comparator Company, data for the
surviving company shall be included in evaluating the achievement of this
performance metric. If any GICS Index Comparator Company after the Award Date
merges, is acquired or is involved in a business combination transaction that
results in any such case in a surviving company that is not a GICS Index
Comparator Company, or if any GICS Index Comparator Company is involved in a
“going private” transaction, files for bankruptcy or about which data is no
longer publicly available, data for any such GICS Index Comparator Company (A)
to the extent available and encompassing one or more full fiscal quarterly
periods for any such GICS Index Comparator Company shall be included in
evaluating the achievement of this performance metric with respect to the
particular performance period in which the applicable event occurs, so long as
there is data available for at least one such full fiscal quarterly period
ending within twelve months of the end of such performance period; and (B)
shall not be included in evaluating the achievement of this performance metric
for the performance period or periods (as the case may be) following the
performance period in which the applicable event occurs; provided that in no
event will data for any such GICS Index Comparator Company that was included in
evaluating the achievement of this performance metric in any prior performance
period be retroactively removed with respect to evaluating the achievement of
this performance metric with respect to any such prior measurement period. The
performance goal for the Award will be satisfied in full under this Agreement
if and upon the Committee’s determination of the achievement in any one
performance period of the Relative Operating Margin performance metric
described in this subsection (b); or
	 
	 	(c)	 	Relative Customer Satisfaction: Based on the most
recently released pre-measurement date results of a survey conducted by an
independent firm, as of any one of the measurement dates, the Company’s average
(mean) customer satisfaction rating for the number of markets in which the
Company has active operations and which are covered by the survey is above the
average (mean) customer satisfaction ratings of the homebuilders covered in the
survey relative to the number of markets in which such homebuilders have active
operations and are covered by the survey; provided that if no such survey is
available at any applicable measurement date, this item may be measured by
objective data underlying customer satisfaction, as determined by the Committee
in its sole discretion. The performance goal for the Award will be satisfied
in full under this Agreement if and upon the Committee’s

2

 

	 	 	 	determination of the
achievement as of any one applicable measurement date of the Relative Customer
Satisfaction performance metric described in this subsection (c).

	 	 	 	All determinations with respect to the achievement of the foregoing performance
metrics shall be made by the Committee no later than ninety days after each
measurement date.
	 
	 	 	 	If any of the three foregoing performance metrics is determined by the Committee to
have been achieved at the first measurement date, one-third of the Option will vest
on the date of determination and the remaining two-thirds will vest in equal
installments on the second and third anniversaries of the Award Date subject to
Holder not experiencing a Termination of Service prior to any such vesting dates.
If none of the three foregoing performance metrics is determined by the Committee to
have been achieved at the first measurement date, but at least one is determined by
the Committee to have been achieved at the second measurement date, two-thirds of
the Option will vest on the date of determination and the remaining one-third will
vest on the third anniversary of the Award Date subject to Holder not experiencing a
Termination of Service prior to any such vesting dates. If none of the three
foregoing performance metrics is determined by the Committee to have been achieved
at the first or at the second measurement dates, but at least one is determined by
the Committee to have been achieved at the third measurement date, the Option will
then vest in full on the date of determination subject to Holder not experiencing a
Termination of Service prior to such date. If none of the three foregoing
performance metrics is determined by the Committee to have been achieved by the
third measurement date, (i) up to one half of the Option will vest if and on the
date that the Committee determines that the Relative Operating Margin at the third
measurement date is within at least 60% of its applicable performance metric goal
(as the goal is above the 50th percentile; 60% of that goal is equal to
above the 30th percentile); and (ii) up to one-half of the Option will
vest if and on the date the Committee determines that Relative Customer Satisfaction
at the third measurement date is within at least 60% of its applicable performance
metric goal as described above, in each case of (i) and (ii) subject to subject to
Holder not experiencing a Termination of Service prior to the third measurement date
and in accordance with the following table (with performance between 60% and 100% of
achievement interpolated linearly):

	 	 	 
	Performance Metric Achievement	 	Range of Performance Option Vesting
	Actual % of Performance Goal Achieved	 	% of Eligible Award
	 
	60% -70%
	 	25% -44%
	70% -80%
	 	44% -63%
	80% -90%
	 	63% -81%
	90% -100%
	 	81% to 100%

	 	 	 	If none of the three performance metrics as described in this Section 2 have
been achieved (whether in full or at an applicable qualifying 60% threshold level at
the third measurement date), notwithstanding any other provision of this Agreement
(including without limitation Section 3 below), the Option shall not vest or

3

 

	 	 	 	become
exercisable and Holder shall immediately forfeit all rights, title and interests in
and to any portion of the Option.

     3. Without limiting the generality of Section 1 above, it is understood and agreed that the
Option is subject to the following additional terms and conditions and to the terms and conditions
of the Plan:

          (a) 100% of the Option will vest and become immediately exercisable, and the performance goal
in Section 2 above shall be deemed satisfied in full, upon Holder’s Retirement. “Retirement” means
severance from employment with the Company and its Affiliates for any reason other than a leave of
absence, termination for cause, death or disability, at such time as the sum of Holder’s age and
years of service with the Company and its Affiliates equals at least 65 or more, provided that
Holder is then at least 55 years of age. The Company shall have the sole right to determine
whether Holder’s severance from employment constitutes a Retirement.

          (b) The Committee, in its discretion, may deem the performance goal in Section 2 above to be
satisfied and accelerate the vesting of the balance, or some lesser portion of the balance, of the
unvested Option at any time, subject to the limitations on acceleration of vesting set forth in the
Plan. If and to the extent so accelerated, the applicable balance of the Option shall vest as of
the date or upon the occurrence of the condition specified by the Committee.

          (c) The Option, to the extent vested, shall in any event cease to be exercisable and shall
expire and terminate to the extent not exercised on the earlier of (1) the close of business on
October 7, 2020; (2) ninety calendar days after Holder’s Termination of Service for any reason
other than for cause (as determined by the Company) or Retirement; (3) the date specified in
subsection (c)(1) of this Section 3 in the event of Holder’s Retirement, or (4) five calendar days
after the date of Holder’s Termination of Service if for cause (as determined by the Company).
Notwithstanding the foregoing, in the event of the death or disability of Holder, the performance
goal in Section 2 shall be deemed satisfied in full, Holder shall be credited with one additional
year of service vesting, and the Option (to the extent vested based on Holder’s service and the
additional credited year of service vesting at the time of Holder’s disability or death) will
terminate on the earlier of (x) one year from the date of disability or death or (y) the date
specified in subsection(c)(1) of this Section 3.

          (d) The Option may not be sold, pledged, assigned or transferred in any manner other than as
permitted by the Plan.

          (e) Holder shall have none of the rights of a stockholder of the Company with respect to
shares of Common Stock subject to the Option unless and until Holder becomes the record owner of
such shares following exercise of the Option in accordance with the terms of this Agreement.

     4. Any exercise of the vested Option shall be made by giving the Company written or electronic
notice of exercise specifying the number of shares to be purchased. The notice of exercise shall
be accompanied by any additional documents required under the Plan and by full payment of the
purchase price and any applicable withholding taxes. Payment may be made by (a) cash or check, (b)
shares of Common Stock owned by Holder (which are not the subject of any pledge or other security
interest) having a Fair Market Value (as defined in the Plan) on the date of

4

 

delivery equal to the
aggregate payment required, or (c) delivery of a written or electronic notice that Holder has
placed a market sell order with a broker with respect to shares then issuable upon exercise of the
Option, and that the broker has been directed to pay a sufficient portion of the net proceeds of
the sale to the Company in satisfaction of the aggregate payment required (so long as payment of
such net proceeds is then made to the Company upon settlement of such sale); provided that Holder
may elect to have the Company withhold shares otherwise issuable upon exercise of the Option in
satisfaction of any applicable tax withholding obligation.

     5. Neither the execution and delivery hereof nor the granting of the Option shall confer upon
Holder any right to be employed or engaged in any capacity by the Company or any Affiliate, or to
continue in such employment or engagement, or shall interfere with or restrict in any way the
rights of the Company and any Affiliate, which rights are hereby expressly reserved, to discharge
Holder at any time.

     6. The Option is subject to all of the terms and conditions of the Plan, including without
limitation, any terms, rules, or determinations made by the Committee pursuant to its authority
under the Plan and Plan provisions on adjustment of awards, non-transferability, satisfaction of
tax requirements and compliance with other laws.

     7. The Company may impose such restrictions, conditions or limitations as it determines
appropriate as to the timing and manner of any resales by Holder or other subsequent transfers by
Holder of any shares of Common Stock issued to Holder as a result of the exercise of this Option,
including without limitation (a) restrictions under an insider trading or other Company policy,
(b) restrictions designed to delay and/or coordinate the timing and manner of sales by Holder and
others following a public offering of the Company’s stock, (c) stock ownership or holding
requirements and (d) restrictions as to the use of a specified brokerage firm for such resales or
other transfers.

     8. Any notice given hereunder to the Company shall be addressed to the Company at its
corporate headquarters, attention Senior Vice President, Human Resources, and any notice given
hereunder to Holder shall be addressed to Holder at Holder’s address as shown on the records of the
Company.

     9. Holder agrees to be bound by the terms and conditions of this Agreement and of the Plan and
that in the event of any conflict in terms between this Agreement and the terms of the Plan, the
terms of the Plan shall prevail.

     10. This Agreement will be construed, administered and enforced in accordance with the laws of
the State of California. This Agreement and the grant of the Option evidenced hereby shall be
subject to rescission by the Company if an executed original of this Agreement is not received by
the Company within four weeks of the Award Date.

     11. The Option is intended to be exempt from the requirements of Section 409A of the Code, and
this Agreement shall be interpreted in a manner consistent with such intent. Notwithstanding
anything to the contrary in the Plan or in this Agreement, Holder agrees that Holder shall be
solely responsible for the satisfaction of all taxes, interest and penalties that may be imposed on
Holder or for Holder’s account in connection with the Option (including without limitation any
taxes, interest and penalties under Section 409A), and neither the Company nor its Affiliates shall
have any obligation to reimburse, indemnify or otherwise hold Holder harmless from any or all of
such taxes, interest or penalties.

5

 

     IN WITNESS WHEREOF, the Company, by its duly authorized officer, and Holder have executed this
Agreement as of the day and year first above written.

	 	 	 	 	 
	 	KB HOME

 	 
	 	By:  	/S/ THOMAS F. NORTON
 	 
	 	 	Thomas F. Norton 	 
	 	 	Senior Vice President, Human Resources 	 
	 
	 	HOLDER:

 	 
	 	By:  	/S/ JEFFREY T. MEZGER
 	 
	 	 	Jeffrey T. Mezger 	 
	 	
Date: 	
 11-4-2010	 
	 

6

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