While the 2007 Stock Incentive Plan, and its predecessor, the 2004 Stock Option Plan, allow for options to vest and become exercisable in no more than one-third increments each year, grants under the plans have generally vested and become exercisable in five equal annual installments beginning one year after the grant date to create a longer-term incentive for the executives. The 2007 Stock Incentive Plan allows the Committee the discretion to grant both stock options and restricted stock, as well as other stock-based awards.awards, and the Committee currently intends to begin making annual grants of restricted stock or restricted stock units in November 2009. The Committee currently expects such annual grants to vest 1/3 per year over three years.
According to the terms of the 2004 and 2007 Plans, the exercise price of options may not be less than the fair market value on the date of the grant, which is defined in our plans as the closing price of our common stock on the New York Stock Exchange on the business day preceding the grant date. Our stock plans specifically prohibit repricing of outstanding grants.grants without stockholder approval. Historically, subject to certain minor exceptions, the Committee granted options at its regularly scheduled September meeting, which we schedule at least one year in advance. However, in February 2007, the Committee adopted stock option grant administrative guidelines whichthat set the second Tuesday in November as the annual grant date. This is a date when we are typically in a trading “window” under our Policy on Trading in Company Securities. The guidelines also establish timelines for granting stock options related to acquisitions or newly-hired key employees, which require that the Committee generally make the grants within 90 days of the event. The guidelines also establish procedures for the Committee’s action in the event that any of these pre-established dates/time periods conflict with an unanticipated trading blackout period related to material non-public information. The guidelines provide that the Committee should generally make option grants at a point in time when we have publicly disseminated all material information likely to affect the trading price of SYSCO’sSysco’s common stock. See “Compensation Discussion and Analysis — Longer Term Incentives — Stock Options”. The Committee anticipates that the guidelines will be revised so that they apply to grants of restricted stock and restricted stock units. The Committee currently anticipates that annual grants of restricted stock and/or restricted stock units will begin in November 2009.
All of the option awards listed above provide that if the executive’s employment terminates as a result of retirement in good standing or disability, the option will remain in effect, vest and be exercisable in accordance with its terms as if the executive remained an employee of SYSCO.Sysco. Awards granted in 2002 and later provide that all unvested options will vest immediately upon the executive’s death. Furthermore, the options provide that the executive’s estate or designees may exercise the options at any time within three years after his death for grants made in 2005 and later and within one year after his death for grants made prior to 2005, but in no event later than the original termination date.
All of the options above provide for the vesting of unvested options upon a change ofin control. In addition, grants made in 2005 and later provide that if the named executive’s employment is terminated other than for cause, during the 24 month period following a change ofin control, the outstanding options under the plans will be exercisable to the extent the options were exercisable as of the date of termination for 24 months after employment termination or until the expiration of the stated term of the option, whichever period is shorter.
Pension Benefits
SYSCOSysco maintains two defined benefit plans. One is the SYSCOSysco Corporation Retirement Plan, or pension plan, which is intended to be a tax-qualified plan under the Internal Revenue Code. The second is the SYSCOSysco Corporation Supplemental Executive Retirement Plan, or SERP, which is not a tax-qualified plan. The following table shows the years of credited service for benefit accumulationalaccumulation purposes and present value of the accumulated benefits for each of the named executive officers under each of the pension plan and SERP as of June 28, 2008.27, 2009. No named executive officer received payments under either defined benefit plan during the last fiscal year.
| | | | | | | | | | | | | | | | | | | | |
| | | | Number of
| | | | | | Number of
| | |
| | | | Years Credited
| | Present Value of
| | | | Years Credited
| | Present Value of
|
Name | | Plan Name | | Service (#) | | Accumulated Benefit | | Plan Name | | Service (#) | | Accumulated Benefit |
|
Schnieders | | Pension Plan | | | 25.583 | | | $ | 464,534 | | |
DeLaney | | | Pension Plan | | | 20.333 | | | $ | 195,790 | |
| | SERP | | | 25.583 | | | | 23,046,117 | | | SERP | | | 20.333 | | | | 2,774,557 | |
Spitler | | Pension Plan | | | 22.417 | | | | 394,757 | | | Pension Plan | | | 23.417 | | | | 397,819 | |
| | SERP | | | 22.417 | | | | 11,985,709 | | | SERP | | | 23.417 | | | | 12,449,092 | |
DeLaney | | Pension Plan | | | 19.333 | | | | 204,925 | | |
| | SERP | | | 19.333 | | | | 2,626,576 | | |
Pulliam | | Pension Plan | | | 21.000 | | | | 223,074 | | | Pension Plan | | | 22.000 | | | | 212,137 | |
| | SERP | | | 21.000 | | | | 6,441,509 | | | SERP | | | 22.000 | | | | 6,797,544 | |
Carrig | | Pension Plan | | | 10.083 | | | | 126,443 | | |
Smith | | | Pension Plan | | | 29.333 | | | | 365,784 | |
| | SERP | | | 10.083 | | | | 2,445,405 | | | SERP | | | 29.333 | | | | 9,049,883 | |
Green | | | Pension Plan | | | 18.333 | | | | 145,376 | |
| | | SERP | | | 18.333 | | | | 4,031,624 | |
Schnieders | | | Pension Plan | | | 26.583 | | | | 470,309 | |
| | | SERP | | | 26.583 | | | | 22,420,194 | |
We will pay the pension plan benefits in the form of a life annuity with payments guaranteed for five years. As required by SEC rules, we calculated the named executive officers’, including Mr. Schnieders’, accrued benefits under the pension plan by assuming that the named executives will remain in service with the company until age 65, which is the earliest age at which the named executive officers can retire without any reduction in benefits. We will paybenefits; however, Mr. Schnieders retired as an employee of Sysco effective June 27, 2009 at age 61.250. As a result, his actual annual payments under the pension plan benefits in the form of a life annuityPension Plan following retirement are $50,795 with payments guaranteed for 5a minimum of five years.
For the SERP, we calculated the named executive officers’ accrued benefits by assuming that the named executives will remain in service with SYSCOSysco until they become 100% vested in their SERP benefits, which is the earliest age they could retire without any reduction in SERP benefits. The 100% vesting date is at age 57 for Mr. Green, age 59 for Mr. Smith, age 60 for Messrs. Schnieders,Mr. Pulliam, age 60.250 for Mr. Spitler, and Pulliam, age 60.417 for Mr. DeLaney, and age 6161.250 for Mr. Carrig.Schnieders . These ages differ because SERP vesting is based on a combination of the participant’s age, SYSCOSysco service,and/or MIP service. Note that some of these ages represent the executive’s current age as of the 2009 fiscal year-end due to prior attainment of their 100% vesting date. We pay SERP benefits as a joint life annuity, reducing to two-thirds upon the death of either the executive or his spouse, with the unreduced payment guaranteed for at least 10 years. As noted above, Mr. Schnieders retired at age 61.250, and as a result, he is 100% vested in his SERP benefits. His actual annual payments following retirement under the SERP are $1,894,151, with payments guaranteed for a minimum of 10 years.
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We calculated the present value of thesethe accumulated SERP and pension plan benefits based on a 6.94%8.02% discount rate for the pension plan and a 7.03%7.14% discount rate for the SERP, with a post-retirement mortality assumption based on the RP2000 Combined Healthy table, sex distinct, projected to 2008,2009, with scale AA. Effective June 30, 2006, we modified certain provisions of the SERP for each executive to take into account payments under the 2007 Supplemental Bonus Agreements, but such payments will not be taken into account in determining the SERP benefit for fiscal 2008 and future years. Furthermore, certain provisions of the SERP are amended by the Executive Severance AgreementsAgreement for Messrs. Schnieders andMr. Spitler, as described in more detail under “Executive Severance AgreementsAgreement — Waiver of Cut BackCutback Provisions in SERP and Deferred Compensation Plan.”
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IfFollowing are the named executive officers in fact remain inestimated accrued benefits earned through the service of SYSCO until the earliest age at which they would be entitled to unreduced benefits underfiscal year ending 2009 for the pension plan or SERP, as described above, we estimate that theynoted. These annual amounts would be entitled to the following annual benefits commencingpayable at the earliest unreduced retirement age:age, as described above, if the named executive officer remains in the service of Sysco until such age. Projected benefits that may be earned due to pay and service after the fiscal year ended June 27, 2009 are not included in these estimates.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | Earliest
| | Expected
| | Estimated
| | | | Earliest
| | Expected
| | Estimated
|
| | | | Unreduced
| | Years of
| | Annual
| | | | Unreduced
| | Years of
| | Annual
|
Name | | Plan Name | | Retirement Age | | Payments | | Benefit | | Plan Name | | Retirement Age | | Payments | | Benefit |
|
Schnieders | | Pension Plan | | | 65 | | | | 18.4 | | | $ | 64,051 | | |
DeLaney | | | Pension Plan | | | 65 | | | | 18.5 | | | $ | 50,938 | |
| | SERP | | | 60.250 | | | | 25.5 | | | | 1,971,147 | | | SERP | | | 60.417 | | | | 25.4 | | | | 382,287 | |
Spitler | | Pension Plan | | | 65 | | | | 18.4 | | | | 58,207 | | | Pension Plan | | | 65 | | | | 18.5 | | | | 61,882 | |
| | SERP | | | 60 | | | | 25.7 | | | | 1,073,447 | | | SERP | | | 60.250 | | | | 25.6 | | | | 1,072,419 | |
DeLaney | | Pension Plan | | | 65 | | | | 18.4 | | | | 47,263 | | |
| | SERP | | | 60.417 | | | | 25.4 | | | | 381,448 | | |
Pulliam | | Pension Plan | | | 65 | | | | 18.4 | | | | 51,160 | | | Pension Plan | | | 65 | | | | 18.5 | | | | 54,835 | |
| | SERP | | | 60 | | | | 25.7 | | | | 901,883 | | | SERP | | | 60 | | | | 25.8 | | | | 902,602 | |
Carrig | | Pension Plan | | | 65 | | | | 18.4 | | | | 32,250 | | |
Smith | | | Pension Plan | | | 65 | | | | 18.5 | | | | 62,659 | |
| | SERP | | | 61 | | | | 24.9 | | | | 413,538 | | | SERP | | | 59 | | | | 26.7 | | | | 764,583 | |
Green | | | Pension Plan | | | 65 | | | | 18.5 | | | | 50,185 | |
| | | SERP | | | 57 | | | | 28.4 | | | | 539,237 | |
In addition to the above, the named executive officers are entitled to a temporary social security bridge benefit commencing at their earliest unreduced retirement age until the earlier of death or age 62. The amount of this monthly benefit for each named executive officer, other than Mr. Schnieders, based on the SERP early retirement assumptions above, is $1,694$1,625 for Mr. Schnieders,DeLaney, $1,694 for Mr. Spitler, $1,625 for Mr. DeLaney, $1,625Pulliam, $1,694 for Mr. PulliamSmith and $1,554$1,479 for Mr. Carrig.Green. Mr. Schnieders’ actual temporary social security bridge monthly benefit upon retirement is $1,694.
Pension Plan
The pension plan, which is intended to be tax-qualified, is funded through an irrevocable tax-exempt trust and covered approximately 29,000 eligible employees as of the end of fiscal 2008.2009. In general, a participant’s accrued benefit is equal to 1.5% times the participant’s average monthly eligible earnings for each year or partial year of service with SYSCOSysco or a subsidiary. This accrued benefit is expressed in the form of a monthly annuity for the participant’s life, beginning at age 65, (thethe plan’s normal retirement age)age, and with payments guaranteed for five years. If the participant remains with SYSCOSysco until at least age 55 with 10 years of service, the participant is entitled to early retirement payments. In such case, we reduce the benefit 6.67% per year for the first 5 years prior to normal retirement age and an additional 3.33% per year for years prior to age 60. Employees vest in the pension plan after five years of service. At the end of fiscal 2008,2009, Messrs. Schnieders, Spitler and SpitlerSmith met the age and service requirements to be eligible for early retirement.
Benefits provided under the pension plan are based on compensation up to a limit, which is $230,000$245,000 for calendar year 2008,2009, under the Internal Revenue Code. In addition, annual benefits provided under the pension plan may not exceed a limit, which is $185,000$195,000 for calendar year 2008,2009, under the Internal Revenue Code.
Elements Included in Benefit Formula —Compensation included in the pension plan’s benefit calculation is generally earned income excluding deferred bonuses.
Policy Regarding Extra Years of Credited Service —Generally we do not credit service in the pension plan beyond the actual number of years an employee participates in the plan. We base the years of credited service for the named executive officers only on their service while eligible for participation in the plan.
Benefit Payment Options —Participants may choose their method of payment from several options, including a life annuity option, spousal joint and survivor annuity, Social Security leveling and life annuity options with minimum guaranteed terms. Only de minimis lump sums are available.
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Supplemental Executive Retirement Plan
We offer supplemental retirement plans, including the SERP, to approximately 175170 eligible executives to provide for retirement benefits beyond the amounts available under SYSCO’sSysco’s various broad-based US and Canadian pension plans. Each of the named executive officers participates in the SERP. It is our intent that the SERP comply with Section 409A of the Internal Revenue Code in both form and operation. The SERP is an unsecured obligation of SYSCOSysco and is not qualified for tax purposes. On December 16, 2008, the Board of Directors, upon recommendation of the Compensation Committee, adopted the Eighth
50
Amended and Restated Sysco Corporation Supplemental Executive Retirement Plan. The Eighth Amended and Restated SERP, or revised SERP, was effective June 28, 2008 and replaced the Seventh Amended and Restated Sysco Corporation Supplemental Executive Retirement Plan. The revised SERP limits the class of employees who will be eligible to participate in the SERP on or after June 28, 2008 and adds an alternative MIP Retirement Program, which generally provides for lesser benefits than the SERP, for certain employees who otherwise would have participated in the SERP. None of the named executive officers participates in this alternative program.
As of the end of fiscal 2008, the SERP was designed to provide, in combination with other retirement benefits, 50% of final average compensation, as defined in the SERP, for the highest five of the last 10 fiscal years prior to retirement, or the date the executive ceased to be covered by the SERP, if earlier, provided an executive hashad at least 20 years of SYSCOSysco service, including service with an acquired company, and iswas 100% vested. “Other retirement benefits” include Social Security, benefits from the pension plan, and employer-provided benefits from SYSCO’sSysco’s 401(k) plan and similar qualified plans of acquired companies. We reduce the gross accrued benefit of 50% of final average compensation by 5% per year for each year of Sysco service less than 20 years. Employees are generally not eligible for benefits if they leave the company prior to age 55. See “AmendedWith respect to the revised SERP, while the targeted monthly benefit approximately equal to 50% of the participant’s final average compensation remains unchanged, the definition of final average compensation has changed. Under the revised SERP, average pay for years beginning with fiscal 2009 equals the monthly average of a participant’s eligible earnings for the last ten fiscal years prior to retirement, or the date he ceases to be covered under the SERP, if earlier. With respect to the determination of a participant’s accrued benefit as of June 28, 2008, as discussed below, however, final average compensation continues to be defined in the revised SERP as it was under the SERP prior to fiscal 2009.
Eligible earnings refers to compensation taken into account for SERP purposes. As discussed below, beginning with fiscal 2009, the portion of a participant’s MIP bonus counted as eligible earnings is capped at 150% of the participant’s rate of base salary as of the last day of the applicable fiscal year. Eligible earnings for fiscal years prior to fiscal 2009 are not affected by this plan change. The definition of eligible earnings that places a cap on the MIP bonus for fiscal years after fiscal 2008 will be used in all benefit calculations, including protected benefits of a protected participant, as discussed below.
Based on these changes, a Sysco corporate officer who is not a protected participant when his service with Sysco ends will receive a revised SERP benefit based on the greater of:
| | |
| • | The accrued benefit determined as of the date service with Sysco ends and calculated under the provisions of the revised SERP, or |
| • | The accrued benefit determined under the provisions of the SERP in effect at June 28, 2008, but with vesting and eligibility for immediate benefit payments determined as of that future date, using the following components: |
| | |
| ◦ | average pay, based on the highest five fiscal years, which need not be successive, of eligible earnings in the ten fiscal year period ending June 28, 2008; |
◦ full years of service with Sysco, including pre-acquisition service, as of June 28, 2008;
| | |
| ◦ | offsets as of June 28, 2008, with the standard adjustment to reflect the form and timing of the SERP benefit payments as of the date service with Sysco ends; and |
| ◦ | vesting, the monthly benefit limit and eligibility for immediate benefit payments determined as of the date service with Sysco ends. |
For a protected participant, his future benefit will be the greatest of the accrued benefits determined under four calculations using each of the regular and Restatedprotected participant benefit formulas under both the revised SERP and the June 28, 2008 accrued benefit calculation set forth above.
Under the revised SERP, Sysco has the ability to cause the forfeiture of any remaining SERP payments to a participant who was not discharged for “cause,” below,but who after his termination was determined by the Compensation Committee to have engaged in behavior while employed that would have constituted grounds for a discussiondischarge for “cause.” For this purpose, termination for “cause” includes termination for fraud or embezzlement. Sysco also has the ability to cause a forfeiture of changes inany remaining SERP payments to a participant if the participant violates certain non-competition covenants. These non-competition covenants are applicable to the entire period over which any SERP design.benefits are to be paid.
Vesting in the SERP is based upon age, MIP participation service and SYSCOSysco service. Executives are 50% vested when they reach the earlier of age 60 with 10 years of SYSCOSysco service or age 55 with 15 years of MIP participation service. The vesting percentage increases with additional years of ageand/or participation service. An executive with at least 20 years of SYSCOSysco service can retire with unreduced benefits when 100% vested. The executive generally becomes 100% vested on the earliest of:
| | |
| • | age 65 if he has at least 10 years of SYSCOSysco service; |
| • | age 55 with at least 15 years of MIP service, but only if the sum of his age and MIP service is equal to or exceeds 80; and |
| • | age 62 with at least 25 years of SYSCOSysco service and at least 15 years of MIP service. |
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Upon the occurrence of a change ofin control, each named executive officer will become 100% vested in his accumulated and all future accumulatedSERP benefit underaccrued prior to the SERP.change in control. The executive will also be 100% vested in any SERP benefit that accrues after the date of the change in control. Notwithstanding this, the SERP contains cutback provisions that will reduce amounts payable to each named executive except Mr. Spitler by the amount of control.any payments that cannot be deducted by Sysco for income tax purposes. See “— Severance Arrangements” for a discussion of the provisions of Mr. Spitler’s severance agreement that waive this cutback.
At the end of fiscal 2008, none of the named executives except Mr.2009, Messrs. Spitler, Smith and Schnieders had attained eligibility for unreduced early retirement, or were 100% vested. Mr. Schnieders is eligible forEach of these individuals was entitled to an unreduced early retirement benefit because at the time of his retirement he iswas at least age 55 hasand had at least 15 years of MIP participation, and the sum of his age and MIP service exceeds 80. The Executive Severance Agreement with Mr. Spitler requires forfeitureexceeded 80, and he had at least 20 years of his SERP benefits upon his voluntary resignation or retirement priorservice to age 60.Sysco. Messrs. DeLaney, Pulliam and CarrigGreen are not currently eligible for early retirement.
We pay the SERP benefit as a monthly life annuity with a guaranteed minimum period of 10 years if the participant is not married at the time payments commence. If the participant is married at the time payments commence, the participant and spouse are entitled to a monthly annuity for life with a guaranteed minimum period of 10 years, and generally, on the participant’s or spouse’s death, the survivor is entitled to receive a monthly annuity for life with each payment equal to two-thirds of each payment made to the couple.
We provide a temporary Social Security bridge benefit to an executive commencing SERP benefits before age 62, payable until the earlier of age 62 or death.
Elements of Compensation included in Benefit Formula —Compensation generally includes base pay, the cash portion of the Management Incentive Plan bonus (although this is limited to 150% of the annual rate of base salary for fiscal 2009 and later years, and foryears), the fiscal 2007 only, the supplemental performance bonus.bonus, and stock matches under the 2005 Management Incentive Plan and predecessor plans with respect to fiscal years prior to 2005. See also “— Minimum Benefits” below.
Minimum Benefits —Due to changes in the SERP adopted in March 2006, certain executives have protected minimum benefits based on prior plan provisions. The protected benefit includes vesting provisions that are generally less generous, and a compensation definition that includes as an additional component,components, for years prior to fiscal 2006,2009, stock matches under the 2005 Management Incentive Plan and predecessor plans, but excludes the supplemental performance bonus for fiscal 2007.2007 only. Messrs. Schnieders, Spitler and SpitlerSmith are protected participants, although for the 20082009 fiscal year the protected benefit was lower than the normalnon-protected benefit, and Mr. Schnieders’ actual benefit is based on the June 28, 2008 non-protected benefit calculation.
Funding Status —SYSCO’sSysco’s obligations under the SERP are partially funded by a rabbi trust holding life insurance and isare maintained as a book reserve account. In the event of SYSCO’sSysco’s bankruptcy or insolvency, however, the life insurance and any other assets held by the rabbi trust become subject to the claims of SYSCO’sSysco’s general creditors.
Policy with Regard to Extra Years of Credited Service —Generally, SYSCOSysco does not award extra years of credited service under the SERP. However, in certain cases, the company may accelerate vesting of a participant’s accrued benefit, or award extraadditional Sysco service MIP serviceand/or agefor purposes of determining the reduction applicable to accelerate vesting.the participant’s final average compensation. As of the date of this proxy statement, none of the named executive officers have been awarded additional credited service, MIP serviceand/or age credit for any purpose accelerated vesting of their accrued benefits under the SERP. Under Mr. Spitler’s severance agreement, if he is terminated by
52
SYSCO without cause or if he terminates his employment for good reason prior to age 60, under the SERP he is treated as if he retired at age 60 for vesting purposes.
Lump Sum Availability —Retirement benefits may not be paid as a lump sum.
Monthly Payment Limit — — The SERP benefit, other than a protected benefit, cannot exceed the participant’s vested percentage multiplied by the “limit”“monthly payment limit” in effect duringfor the fiscal year of his retirement. The monthly payment limit for participants retiring in fiscal year 20082009 is $178,537.$187,503. Each subsequent fiscal year, the limit will be adjusted for inflation.
Delay of Distributions to Named Executives —Distributions to a named executive for reasons other than death or disability will be delayed for six months after his separation dateofficer upon the named executive officer’s “separation from service” as requireddefined under Section 409A of the Internal Revenue Code.
Amended and Restated SERP — On May 14, 2008, the BoardCode will be delayed for a period of Directors, upon recommendation of the Compensation Committee, adopted the Seventh Amended and Restated Sysco Corporation Supplemental Executive Retirement Plan, or revised SERP. The revised SERP was effective June 28, 2008 and replaced the Sixth Amended and Restated Sysco Corporation Supplemental Executive Retirement Plan. With respectsix months to the compensation of SYSCO’s current corporate officers, including the named executive officers, the revised SERP is similar to the prior SERP in all material respects, except as described below.
As discussed above, the prior SERP benefit payable to a participant was targeted as a monthly benefit approximately equal to 50% of the participant’s average pay, as adjusted. While the targeted monthly benefit approximately equal to 50% of the participant’s average pay remains unchanged, the definition of average pay has changed. Where average pay was calculated under the prior SERP based on the five fiscal years, which need not be successive, in which the participant earned the highest eligible earningsextent that making payments during the last ten fiscal years preceding the fiscal year his service with SYSCO ends, under the revised SERP, average pay for years beginning with fiscal 2009 will equal the monthly average of a participant’s eligible earnings for the last ten fiscal years preceding the fiscal year his service with SYSCO ends, or the date he ceases to be covered under the SERP, if earlier. With respect to a participant’s accrued benefit as of June 28, 2008, as discussed below, however, average pay continues to be defined in the revised SERP as it was under the prior SERP.
Eligible earnings refers to compensation recognized for SERP purposes. As discussed above, beginning with fiscal 2009, the portion of a participant’s MIP bonus counted as eligible earnings will be capped at 150% of the participant’s rate of base salary as of the last day of the applicable fiscal year. Eligible earnings for fiscal years prior to fiscal 2009 are not affected by this plan change. The capped definition of eligible earnings for fiscal years after fiscal 2008, as described above, will be used in all benefit calculations, including protected benefits of a protected participant.
Based on these changes, a SYSCO corporate officer who is not a protected participant when his SYSCO service ends at some future date will receive a revised SERP benefit based on thegreater of:
| | |
| • | The benefit determined as of that future date under the new provisions described above, or |
|
| • | The accrued benefit determined as of June 28, 2008 under the provisions of the prior SERP, but with vesting and eligibility for immediate benefit payments determined as of that future date. Other components used in this June 28, 2008 accrued benefit calculation will be frozen as of June 28, 2008, as follows: |
| | |
| ◦ | average pay, based on the highest five fiscal years, which need not be successive, of eligible earnings in the ten fiscal yearsuch six-month period ending June 28, 2008; |
|
| ◦ | full years of service, including pre-acquisition service, as of June 28, 2008; and |
|
| ◦ | offsets as of June 28, 2008, with the standard adjustment to reflect the form and timing of the SERP benefit payments as of that future date. |
For a protected participant, his future benefit will be the greatest of the benefits determined under four calculations using each of the regular and protected participant benefit formulas under both the revised SERP and frozen June 28, 2008 rules discussed above.
Under the revised SERP, SYSCO now has the ability to cause the forfeiture of any remaining SERP payments to a participant who was not discharged for “cause” (such as termination for fraud or embezzlement), but who after his termination was discovered by the Compensation Committee to have engaged in behavior while employed that would have constituted grounds for a discharge for “cause.” The revised SERP also contains enhanced forfeiture for competition grounds, including, without limitation, the extension of the non-competition covenants from five years after termination of employment to the entire remaining period while any SERP benefits are to be paid.violate Section 409A.
5352
Executive Deferred Compensation Plan
The following table provides information regarding executive contributions and related company matches, earnings and account balances under the EDCP for each of the named executive officers inofficers. Neither Sysco nor any of the EDCP. No named executive officerofficers made any withdrawals or received any distributions duringcontributions to the EDCP for fiscal 2008.2009.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | Aggregate
| | | | | Aggregate
| | Aggregate
| |
| | Executive
| | Registrant
| | Aggregate
| | Balance at
| | | Aggregate
| | Withdrawals/
| | Balance at
| |
| | Contributions in
| | Contributions in
| | Earnings
| | June 28,
| | | Earnings in
| | Distributions in
| | June 30,
| |
Name | | Fiscal 2008 ($)(1) | | Fiscal 2008 ($)(2) | | in Fiscal 2008 ($)(3) | | 2008($)(4) | | | Fiscal 2009 ($)(1) | | Fiscal 2009 ($)(2) | | 2009($) | |
|
DeLaney | | | $ | 66,913 | | | | — | | | $ | 973,764 | |
Spitler | | | | 483,878 | | | $ | 7,035,640 | | | | — | |
Pulliam | | | | 219,527 | | | | 2,322,120 | | | | 869,703 | |
Smith | | | | 298,827 | | | | 4,345,242 | | | | — | |
Green | | | | 2,273 | | | | 33,036 | | | | — | |
Schnieders | | $ | 772,680 | | | $ | 115,902 | | | $ | 539,044 | | | $ | 8,913,170 | | | | 658,385 | | | | — | | | | 9,571,554 | |
Spitler | | | 960,096 | | | | 72,007 | | | | 370,723 | | | | 6,551,762 | | |
DeLaney | | | 387,984 | | | | 58,198 | | | | 30,906 | | | | 906,851 | | |
Pulliam | | | 368,256 | | | | 55,238 | | | | 171,185 | | | | 2,972,296 | | |
Carrig | | | 703,632 | | | | 52,772 | | | | 185,457 | | | | 3,518,507 | | |
| | |
(1) | | All amounts shown represent deferrals of a portion of the MIP bonus paid in August 2008. These amounts are contained in the fiscal 2008 disclosure under the “Non-Equity Incentive Plan Compensation” column of the Summary Compensation Table, as more specifically described in footnote 3 to the Table. |
|
(2) | | As discussed below, SYSCO matches a portion of the MIP bonus deferred by an executive. All amounts shown represent the SYSCO matches on the executives’ deferrals of a portion of the MIP bonus paid in August 2008. These amounts are contained in the fiscal 2008 disclosure under the “All Other Compensation” column of the Summary Compensation Table, as more specifically described in footnote 5 to the Table. |
|
(3) | | The above-market interest portion of these amounts is included in the fiscal 20082009 disclosure under the “Change in Pension Value and Nonqualified Deferred Compensation Earnings” column of the Summary Compensation Table, in the following amounts: $93,133$16,938 for Mr. Schnieders, $64,053DeLaney, $122,460 for Mr. Spitler, $5,340 for Mr. DeLaney, $29,577$55,557 for Mr. Pulliam, and $32,043$75,628 for Mr. Carrig.Smith, $575 for Mr. Green and $166,618 for Mr. Schnieders. |
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(4)(2) | | As discussed below, SYSCO matchesOn November 11, 2008, the Board, upon recommendation of the Compensation Committee, amended the EDCP to add a provision allowing participants in the EDCP a one-time opportunity during calendar year 2008 to elect to receive a distribution of all or a portion of their vested balances under the MIP bonus deferred by an executive. We credit the executive’s account with the amount of any match as of July 1 of eachPlan during calendar year with respect to bonuses paid during the following August.2009. The aggregate balance atamounts shown represent these distributions, which we made in June 28, 2008 shown above includes amounts deferred by the executives during fiscal 2008 and the matching credits that were credited to the named executive officers’ accounts on July 1, 2008, as more specifically discussed in footnotes 1 and 2 above. Amounts shown include certain amounts disclosed in the Summary Compensation Table with respect to fiscal 2007, including amounts deferred, SYSCO matches on deferrals and above-market interest. Footnote 3 to the Summary Compensation Table discloses the fiscal 2007 bonus amounts deferred by each of Messrs. Schnieders, Spitler and Pulliam. Footnote 5 to the Summary Compensation Table discloses the matching amounts credited with respect to fiscal 2007 bonus deferrals for each of Messrs. Schnieders, Spitler and Pulliam. Footnote 4 to the Summary Compensation Table discloses the above-market interest earned in fiscal 2007 with respect to amounts deferred by each of Messrs. Schnieders, Spitler and Pulliam.2009. |
SYSCOSysco maintains the EDCP to provide certain executives, including the named executives, the opportunity to defer the receipt of a portion of their annual salaries, bonuses and deemed earnings thereon on a tax-deferred basis. Federal income taxes on all amounts credited under the EDCP will be deferred until payout under current tax law. The EDCP is administered by the Compensation Committee. See “Amended and Restated EDCP,” below, for a discussion of changes in the EDCP design.
Eligibility —All SYSCOSysco executives who are participants in the MIP, excluding those whose income is subject to Canadian income tax laws, are eligible to participate. However, the Compensation Committee has the right to establish additional eligibility requirements and may exclude an otherwise eligible executive from participation.
Executive Deferrals and SYSCOSysco Matching Credit —Executives may defer up to 40% of their cash bonuses under the MIP, and for years prior to fiscal 2009 only, their supplemental performance bonuses, referred to in the aggregate as “bonus,” and up to 100% of salary. SYSCOSysco does not match salary deferrals under the EDCP. SYSCOSysco provides matching credit of 15% of the first 20% of bonus deferred, resulting in a maximum possible match credit of 3% of an executive’s bonus. The Committee may authorize additional discretionary company contributions, although it did not authorize any in fiscal 2008.2007, 2008 or 2009.
Investment Options— Options —An executive may invest the deferral portion of his or her account among nine investment options, which may be changed as often as daily. The returns for these options of varying risk/reward ranged from -17.3%negative 32.35% to 7.71%positive 6.39% for the year ended June 28, 2008.27, 2009.
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Prior to fiscal 2009, pursuantJuly 2, 2008, Moody’s plus 1%, or the “risk free” option, was one of nine available deemed investment options under the EDCP and was the default investment option for participants who failed to the Fifth Amended and Restated Executive Deferred Compensation Plan, or revised EDCP, discussed below, the portion ofmake an executive’s account attributable to SYSCOinvestment election. In addition, company matches was invested inwere automatically credited with interest at the Moody’s +plus 1% option.rate, and interest credited during an installment payout period under a fixed payment distribution option available under the EDCP was credited at Moody’s plus 1%. For a given calendar year, the Moody’s + 1% option provides an annual return equal to the Moody’s Average Corporate Bond Yield for the higher of the six or twelve-month period ending on the preceding October 31, plus 1%. The Moody’s + 1% return was 7.1917% for calendar year 2007 and 7.1950% for calendar year 2008.
Beginning as of July 2, 2008, the Moody’s plus 1%, or “risk free,” option and the default investment rate were changed to Moody’s without the addition of the 1%. As a result, the interest rate credited on company matches for future years, and the investment return on salary deferrals after July 1, 2008 and bonus deferrals for years after fiscal 2008, as well as any transfers from another investment option to the risk free option after July 1, 2008, are based on Moody’s and not Moody’s plus 1%. In addition, for participants whose employment terminates after July 1, 2008, interest credited to the participant’s account during an installment payout period will be Moody’s and not Moody’s plus 1%.
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Notwithstanding these changes, interest will continue to be credited at the Moody’s plus 1% rate on each participant’s accumulated company match account as of July 1, 2008, and on that portion of the participant’s deferral account invested in the Moody’s plus 1% option on July 1, 2008, and not otherwise transferred at a later time. The variable investment option, which allowed a participant to continue to direct the investment of his account during an installment payout period, is not available for participants who retire after July 1, 2008.
Vesting —An executive is always 100% vested in his or her deferrals, but is at risk of forfeiting the deemed investment return on the deferrals for cause or competing against SYSCOSysco in certain instances. Each SYSCOSysco match and the associated deemed investment return will be 100% vested at the earliest to occur of:
| | |
| • | the tenth anniversary of the crediting date of the match, |
| • | the executive’s 60th birthday, |
| • | the executive’s death, |
| • | the executive’s disability, or |
| • | a specified change ofin control. |
Any matches and associated investment returns not otherwise fully vested under one of the above provisions may vest under an alternative schedule when the executive is at least age 55 and has at least 15 years of MIP participation service. Vesting under this alternative schedule is based on the sum of the executive’s age and years of MIP participation service, as follows:
| | | | | | | | | | |
Sum | | Vested% | | Sum | | Vested% | | Sum | | Vested% |
|
Under 70 | | 0% | | 73 | | 65% | | 77 | | 85% |
70 | | 50% | | 74 | | 70% | | 78 | | 90% |
71 | | 55% | | 75 | | 75% | | 79 | | 95% |
72 | | 60% | | 76 | | 80% | | 80 | | 100% |
The Committee has the discretion to accelerate vesting when it determines specific situations warrant such action. Executives may forfeit vested amounts, other than salary and bonus deferrals, as described under “Forfeiture for Cause or Competition” below.
In-Service Distribution Elections and Hardship Withdrawals —Unless an executive has previously made an in-service distribution election, an executive will generally not have access to amounts deferred under the EDCP while employed by SYSCOSysco unless he or she requests and qualifies for a hardship withdrawal. Such withdrawals are available under very limited circumstances in connection with an unforeseeable emergency. An executive may make separate in-service distribution elections with respect to a given year’s salary deferral and bonus deferral, concurrent with that year’s deferral election. None of the named executives hashave made an in-service distribution election through fiscal 2009, other than as discussed below with respect to the special, one-time election offered in calendar 2008.
Distribution Events —We will distribute the vested portion of the amount credited to an executive’s EDCP account upon the earlier to occur of the executive’s death, disability, retirement or other separation event.
Distributions Following a Separation Event Other than Disability, Death or Retirement —If the executive’s employment with SYSCO ends for any reason other than disability, death or retirement prior toEffective January 1, 2009, wea participant who terminates employment other than due to death or disability prior to the earlier of age 60, or age 55 with 10 years of service with the company, will distribute the vested balance of the executive’s account to him inreceive a lump sum, and he will forfeitsum. A participant may elect the nonvested portion. However, Messrs. Schnieders and Spitler have entered into severance agreements that provide for 100% vestingform of distribution of his account if we terminate the executive without causeparticipant terminates employment after the earlier of age 60, or age 55 with 10 years of service with the executive terminates for good reason. See “Executive Severance Agreements” below. Distributions after January 1, 2009 are discussed at “Approval of Fifth Amended and Restated EDCP,” below.
Distributions Following Disability, Death or Retirement Prior to January 1, 2009 —An executivecompany. A participant may also elect the form of payment of his vested account balance for eachin the event of the following separation events:death or disability.
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| • | disability, |
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| • | death, or |
|
| • | retirement, defined as any other separation from service from SYSCO if the executive is at least age 55 with 15 or more years of MIP participation or at least age 60. Distributions after January 1, 2009 are discussed at “Approval of Fifth Amended and Restated EDCP,” below. |
An executive who has the right to elect the form of payment of his vested account balance may choose annual or quarterly installments over a specified period of up to 20 years, a lump sum or a combination of both. An executive may change his distribution elections prior to separation subject to limitations in accordance with the tax law requirements ofEDCP required by Section 409A of the Internal Revenue Code.
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When we pay installments due to death, disability or retirement,under the EDCP, we will credit the executive’s unpaid vested account balance with a fixed investment return during the entire payout period. This fixed return will equal the Moody’s Average Corporate Bond Yield for either the sixsix- or twelve-month period ending two months prior to the month of the first installment payment, whichever is higher.
Delay of Distributions to Named Executives —Distributions to a named executive upon the named executive officer’s “separation from service” as defined under Section 409A of the Internal Revenue Code will be delayed for a period of six months to the extent that making payments during such six-month period would violate Section 409A.
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Forfeiture for Cause or Competition —Any portion of an executive’s account attributable to SYSCOSysco matches, including associated deemed investment return, and the net investment gain, if any, credited on his deferrals, is subject to forfeiture for specified cause or competition. The Committee shall determine if the executive was terminated for cause or violated the applicable non-compete provisions. However, these forfeiture provisions will not apply to an executive whose employment ends during the fiscal year in which a specified change ofin control occurs or during the next three fiscal years except whenunless the Committee makes a finding of cause and an arbitrator agrees.confirms such finding. In addition, to these provisions, enhanced forfeiture provisions adopted in May 2008 are discussed under “Approval of Fifth Amended and Restated EDCP” below.
Approval of Fifth Amended and Restated EDCP —On May 14, 2008, the Board of Directors, upon recommendation of the Compensation Committee, adopted the revised EDCP. The revised EDCP was effective July 2, 2008 and replaced the Fourth Amended and Restated SYSCO Corporation Executive Deferred Compensation Plan. With respect to the compensation of SYSCO’s current corporate officers, including the named executive officers, the revised EDCP is similar to the prior EDCP in all material respects, except as described below.
Prior to the EDCP amendments, Moody’s plus 1%, or the “risk free” option, was one of nine available deemed investment options under the EDCP and was the default investment option for participants who failed to make an investment election. In addition, company matches were automatically credited with interest at the Moody’s plus 1% rate, and interest credited during an installment payout period under a fixed payment distribution option available under the EDCP was credited at Moody’s plus 1%.
Beginning as of July 2, 2008, the Moody’s plus 1%, or “risk free,” option and the default investment rate were changed to Moody’s without the addition of the 1%. As a result, the interest rate credited on company matches for fiscal 2009 and later years, and the investment return on salary deferrals after July 1, 2008 and bonus deferrals for fiscal 2009, as well as any transfers from another investment option to the risk free option after July 1, 2008, are based on Moody’s and not Moody’s plus 1%. In addition, for participants whose employment terminates after July 1, 2008, interest credited to the participant’s account during an installment payout period will be Moody’s and not Moody’s plus 1%.
Notwithstanding these amendments, interest will continue to be credited at the Moody’s plus 1% rate on each participant’s accumulated company match account as of July 1, 2008, and on that portion of the participant’s deferral account invested in the Moody’s plus 1% option on July 1, 2008, and not otherwise transferred at a later time. The variable investment option, which allowed a participant to continue to direct the investment of his account during an installment payout period, will not be available for participants who retire after July 1, 2008.
Under the prior EDCP, a participant who terminated employment prior to age 60 or age 55 with 15 years of management incentive plan participation was required to receive a mandatory lump sum payment of his account balance. Effective January 1, 2009, a participant who terminates employment prior to the earlier of age 60, age 55 with 15 years of management incentive plan participation or age 55 with 10 years of service with the company will receive a lump sum. A participant may elect the form of distribution of his account if the participant terminates employment after the earlier of age 60, age 55 with 15 years of management incentive plan participation, or age 55 with 10 years of service with the company.
The revised EDCP provides that, beginning in fiscal 2009, bonuses payable under the 2006 Supplemental Performance Based Bonus Plan or any similar arrangement, including the 2009 supplemental bonus agreements discussed above, may no longer be deferred under the EDCP and as a result are no longer eligible for the company match.
The revised EDCP provides that the Compensation Committee may cause a forfeiture of a participant’s remaining company matches and investment earnings and interest credited to his account, if after a participant terminates employment for a reason other than for “cause,” the Compensation Committee determines that the participant engaged in conduct while employed by Sysco that would have resulted in his discharge for “cause.” In addition, the revised EDCP also provides that the Compensation Committee may cause a forfeiture of a participant’s remaining company matches and investment earnings and interest credited to his account, if a participant discloses trade secrets or confidential information to a competitor.
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One-Time Distribution Election —Section 409A of the Internal Revenue Code prescribes certain rules applicable to nonqualified deferred compensation plans. The final regulations under Section 409A became effective January 1, 2009. In connection with this effective date, the Internal Revenue Service provided companies with limited transition relief that expired on December 31, 2008, to allow them to amend their deferred compensation plans without being subject to certain requirements under Section 409A, as long as specified requirements were met. As a result, in November 2008, we amended the EDCP so that participants could elect, on or before December 15, 2008, to receive a one-time lump sum distribution during calendar 2009 of some or all of the participants’ deferrals under the EDCP, as well as a portion of vested company matching amounts, determined as of May 15, 2009. We made these distributions on June 30, 2009, and the amounts received by the named executive officers are shown in the “Aggregate Withdrawals/Distributions in Fiscal 2009” column in the table above.
Executive Severance AgreementsArrangements
Executive Severance Agreement with Mr. Spitler —We maintain an Executive Severance AgreementsAgreement with each of Messrs. Schnieders andMr. Spitler. These agreements are identical in all material respects, except as indicated below. A description of potential payments to Messrs. Schnieders andMr. Spitler under the agreementsagreement is included under “Quantification of Termination/Change in Control Payments.”
Definition of Good Reason —The severance agreements provideagreement provides that if the executiveMr. Spitler terminates his employment for any of the following reasons, he will have terminated his employment for “good reason,” unless we remedied the underlying circumstances within 15 days of our receipt of notice of “good reason,” as follows:
| | |
| • | SYSCOSysco demotes the executiveMr. Spitler to a lesser position; |
| • | SYSCOSysco assigns duties to him which are materially inconsistent with his position or materially reduces the executive’shis duties, responsibilities or authority; |
| • | SYSCOSysco materially reduces the executive’shis base salary, unless SYSCO also comparably reduces the base salaries of other executives who are parties to similar agreements;salary; or |
| • | SYSCOSysco relocates the executive’shis principal place of business outside of the Houston, Texas metropolitan area without the executive’shis consent. |
Obligations Upon Termination —If the executiveMr. Spitler terminates his employment for good reason or if we terminate him for any reason other than for cause, death or permanent disability, we will pay his base salary through the date of termination. If the executive signsIn addition, if Sysco receives a release in substantially the form prescribed in the agreement, starting 30 days after we receive the signed release orfrom Mr. Spitler within 60 days following the date the executive’shis employment terminates, whichever is later,then we will also pay tohim, starting on the executive60th day following the date his employment terminates, a monthly payment for 24 months equal to the sum of:
| | |
| • | executive’sHis monthly base salary in effect on the date of termination, before any elective deferrals under any SYSCOSysco plans; |
| • | an amount equal to1/12 of the average annual bonus paid to the executivehim under any SYSCOSysco management incentive plan, before any elective deferrals, for the most recent five fiscal years ended prior to the date of termination; and |
| • | an amount equal to the monthly cost to the executivehim for continued coverage under SYSCO’sSysco’s group health benefit insurance plans under Section 4980B of the Internal Revenue Code of 1986, also known as COBRA, regardless of whether the executiveMr. Spitler elects to be covered by COBRA. |
We will pay the amounts described above in lieu of any other amount of severance relating to salary or bonus continuation that the executiveMr. Spitler may be entitled to receive from us, except for any benefits under the SERP and the EDCP. Upon the later to occur of 3060 days afterfollowing termination of Mr. Spitler’s employment, assuming we have received the signed release, and 90 days after the end of the fiscal year during which the employment termination occurred, we will pay to the executiveMr. Spitler a fraction of the bonus he would have earned for that fiscal year under the MIP had hehis employment not been terminated, as determined by us in our sole discretion. The numerator of this fraction will be the number of days in the fiscal year prior to the termination date, and the denominator will be 365. However, in the event the executiveMr. Spitler’s employment terminates other than for disability or death, and the executive is a “specified employee” under Section 409A of the Internal Revenue Code, we will delay the executive’shis payments until the date that is after six months from the date of his termination from employment, all in compliance with Section 409A.
SERP and EDCP Benefits Prior to Age 60 —With respect to the SERP and EDCP, if Mr. Spitler terminates his employment for good reason or if we terminate him for any reason other than for cause, death or permanent disability, in any case before he reaches 60 yearsextent required by Section 409A of age, then:the Internal Revenue Code.
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| | |
| • | for purposes of vesting under the SERP, he will be entitled to benefits under the SERP as if he were 60 years of age at the date of termination; and |
| • | the unvested portion of his account in the EDCP will automatically vest, and we will pay the EDCP benefits to him in accordance with the form of payment elected by Mr. Spitler under the EDCP, commencing within 60 days after we receive his signed liability release. |
Because he has reached age 60, these provisions do not apply to Mr. Schnieders.
Non-Compete and Non-Disparagement Commitment— Commitment —Each executiveMr. Spitler agrees to certain non-compete and non-disparagement provisions in his agreement. The executiveHe will forfeit all the amounts listed above if, at any time within the two years following the date of termination, the executive, without our prior written consent, he directly or indirectly owns or participates in, or is employed or paid by, a business which competes or at any time did compete with SYSCOSysco in a specified trade area, and if the executivehe continues to be so engaged 60 days after receiving written notice of the committee’s finding.
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TaxGross-Up Payments —We will make additional payments to an executiveMr. Spitler if an excise tax arises under Section 4999 of the Internal Revenue Code as a result of the IRS treating any payment or acceleration right under the severance agreement or any other agreement or arrangement to which we and the executiveMr. Spitler are parties or to which we are a party and the executiveMr. Spitler is a beneficiary, as contingent upon a change ofin control pursuant to Section 280G of the Code. The payments we will make will include the excise taxes payable by the executive,Mr. Spitler, as well as any additional excise taxes, federal and state income taxes and employment taxes imposed by the IRS on our payment of the amount of the excise tax. The net effect of this will be to place the executiveMr. Spitler in the same after-tax position, so that the executivehe receives the same after-tax benefits he would have received if the excise tax had not been imposed. We will make these payments either directly to the executiveMr. Spitler in cash or to the appropriate taxing authority on the executive’shis behalf for taxes subjectwe are required to withholding.withhold.
Waiver of Cut BackCutback Provisions in SERP and Deferred Compensation Plan —The severance agreement provides forwaives the inapplicabilityapplication of the cutback provisions of the SERP and the EDCP that would otherwise reduce amounts payable to Mr. Spitler under those plans by the amount of any payments that can not be deducted by Sysco for income tax purposes.
Termination for Cause —The severance agreement provides that if we terminate the executive’sMr. Spitler’s employment for any of the following reasons, we will have terminated him for “cause”:
| | |
| • | his material breach of his duties and responsibilities or of any written policies and directives of SYSCOSysco that is willful or occurs as a result of his gross negligence and which he does not remedy within 15 days after receiving a written notice from SYSCOSysco identifying the manner in which the breach occurred; |
| • | his committing any felony or misdemeanor involving willful misconduct, not including minor violations such as traffic offenses, if his action damages SYSCO’sSysco’s property, business or reputation, as determined in good faith by our board of directors; |
| • | his engaging in a fraudulent or dishonest act, as determined in good faith by our board; |
| • | his engaging in habitual insobriety or the use of illegal drugs or substances; or |
| • | his breach of his fiduciary duties to SYSCO,Sysco, as determined in good faith by our board. |
SYSCOSysco must notify the executiveMr. Spitler of any event that would constitute termination for cause under the agreement within 90 days after SYSCOSysco becomes aware of the event; otherwise, the termination will not be considered for cause under the severance agreement. If we terminate the executiveMr. Spitler for cause, we will pay the executive’shis base salary through the date of termination but will have no obligation to make any severance payments or provide any severance benefits under the severance agreement. If the executiveMr. Spitler signs a release substantially in a form prescribed in the agreement, within 30 days after we receive the signed release, we will also pay to the executivehim any unpaid bonuses earned in a fiscal year ended prior to the date of termination, accrued but unused vacation time, and any unreimbursed business expenses owed under SYSCO’sSysco’s expense reimbursement policies.
Resignation without Good Reason —If the executiveMr. Spitler voluntarily resigns from his employment without good reason, we will pay the executive’shis salary through the effective date of the resignation. We will have no obligation to make any severance payments or provide any severance benefits to the executive. Furthermore, if Mr. Spitler resigns without good reason prior to reaching age 60, pursuant to the terms of his severance agreement, he will forfeit all benefits under the SERP.him.
Death or Permanent Disability —If the executive’s employment terminates because of death or permanent disability this will not be considered a resignation. The executive’sMr. Spitler’s employment terminates automatically upon his death. We will pay the executive’shis salary through the date of death but we will have no obligation to make any severance payments or provide any severance benefits under the severance agreement. The severance agreement defines permanent disability as the failure of the executiveMr. Spitler to perform his duties to SYSCOSysco on a full-time basis as a result of incapacity due to mental or physical illness, but only if the incapacity results in the executivehis being eligible for and entitled to receive disability payments under a disability income insurance plan for which we pay for coverage. If such a disability occurs, we may give written notice to the executivehim that we intend to terminate his employment, and if we do so, the executive’shis employment will terminate on the day specified in the notice, which date will be no less than 15 and no more than 60 days after giving the notice. If we terminate the executive’sMr. Spitler’s employment because of permanent disability, we will have no obligation to make any severance payments or provide any severance benefits under the severance agreement but we will pay the executive’shis base salary through the date of his termination.
Transition and Retirement Agreement with Mr. Schnieders —In connection with his resignation as Chief Executive Officer, effective March 31, 2009, and as executive Chairman of the Board, effective June 27, 2009, the Company entered into a
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transition and retirement agreement with Mr. Schnieders on January 19, 2009, effective as of January 27, 2009. The material terms of the Retirement Agreement are as follows:
| | |
| • | The Executive Severance Agreement between Sysco and Mr. Schnieders, dated November 24, 2008, was terminated, effective March 31, 2009. |
| • | Mr. Schnieders agreed to forego 25% of any bonus he would have received for the 2009 fiscal year pursuant to Sysco’s 2005 Management Incentive Plan. |
| • | Mr. Schnieders continued to receive his then-current base salary through June 27, 2009. |
| • | Sysco agreed that, following his retirement and cessation of his service as Chairman of the Board and a director of Sysco, Mr. Schnieders may serve on the boards of directors of suppliers or customers of Sysco and that such service will not result in a forfeiture of his benefits under any of Sysco’s benefit plans or any agreements with Sysco to which Mr. Schnieders is a party; provided that Mr. Schnieders obtains the advance written consent of Sysco’s Presiding Director or Chairman of the Board, prior to such service on the boards of directors of other companies. Mr. Schnieders also agrees not to use his Sysco contacts to, or otherwise attempt to, influence any business transactions between any such entity and Sysco, and he agrees not to disclose any Sysco trade secrets or confidential information to these entities. |
| • | Sysco agrees that, following his retirement from Sysco and cessation of his service as Chairman of the Board and a director of the Company, Mr. Schnieders may provide consulting services to companies or other business entities that distribute or otherwise sell their products outside of North America, in countries approved in advance by Sysco, and that the provision of such services by Mr. Schnieders, subject to certain conditions, will not result in a forfeiture of his benefits under any of Sysco’s benefit plans or any agreements with Sysco to which Mr. Schnieders is a party. In the event Sysco begins distributing or selling its products in any such country, Mr. Schnieders will have six months to cease his consulting services there. |
| • | During the period April 1, 2009 through June 27, 2009, Mr. Schnieders was entitled to an office and secretarial and other assistance at Sysco’s headquarters and reimbursement of all reasonable expenses incurred in connection with the performance of his duties under the agreement. From January 2009 through June 27, 2009, he was entitled to the use of the company plane for one round trip per month between Santa Fe, New Mexico and Houston, Texas. |
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Quantification of Termination/Change in Control Payments
We have entered into certain agreements and maintain certain plans that will require us to provide compensation for the named executive officers in the event of specified terminations of their employment or upon a change in control of SYSCO.Sysco. We have listed the amount of compensation we would be required to pay to each named executive officer in each situation in the tables below. Amounts included in the tables are estimates and are forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Due to the number of factors that affect the nature and
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amount of any benefits provided upon the events discussed below, any actual amounts we pay or distribute may differ materially. Factors that could affect these amounts include the timing during the year of any such event, the amount of future bonuses, the value of our stock on the date of the change in control and the ages and life expectancy of each executive and his spouse. The amounts shown in the table below assume that the event that triggered the payment occurred on June 28, 2008.27, 2009. In addition to the amounts shown, within 30 days after we receive the signed release in the required form from Messrs. Schnieders andMr. Spitler, who are partiesis party to a severance agreements,agreement, following any termination, we will also pay to Mr. Schnieders and Mr. Spitler any unpaid bonuses earned in a fiscal year ended prior to the date of termination. The executiveMr. Spitler would have been entitled to these amounts if the termination event had not occurred. However, the requirement to sign a release does not apply in the event of a change in control without termination. We have summarized the terms of theMr. Spitler’s severance agreementsagreement under “Executive Severance Agreements”“Severance Arrangements” above. All amounts shown represent total payments, except as otherwise noted. We wouldexpect to time the payment of all amounts shown in compliance with Section 409A of the Internal Revenue Code.Code
RICHARDWILLIAM J. SCHNIEDERSDELANEY
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Compensation Components | |
| | | | | | | | | | | | | Acceleration
| | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | and Other
| | | | | |
| | Compensation Components | | | | | | | | | | | | | Benefits from
| | | | | |
| | | | Payments
| | Payments
| | | | | | Acceleration
| | | | | | | | | Payments
| | Payments
| | | | | | Unvested
| | | | | |
| | | | and Benefits
| | and Benefits
| | | | | | and Other
| | | | | | | | | and Benefits
| | and Benefits
| | | | | | Stock
| | | | | |
| | Severance
| | Under
| | Under
| | | | 280G Tax
| | Benefits from
| | Insurance
| | | | | Severance
| | Under
| | Under
| | | | 280G Tax
| | Options and
| | Insurance
| | | |
| | Payment
| | EDCP
| | SERP
| | CPU
| | Gross-Up
| | Stock Options
| | Payments
| | | | | Payment
| | EDCP
| | SERP
| | CPU
| | Gross-Up
| | Restricted
| | Payments
| | | |
Termination Scenario | | (1) | | (2) | | (3) | | Payment(4) | | Payments(5) | | (6) | | (7) | | Other(8) | | | (1) | | (2) | | (3) | | Payment(4) | | Payments(5) | | Stock(6) | | (7) | | Other(8) | |
|
Retirement | | $ | — | | | $ | 4,561,719 | | | $ | 23,018,395 | | | $ | 7,840,000 | | | $ | — | | | $ | — | | | $ | — | | | $ | 64,324 | | | $ | — | | | $ | 96,207 | | | $ | — | | | $ | 1,050,000 | | | $ | — | | | $ | 559,977 | | | $ | — | | | $ | 59,298 | |
Death | | | — | | | | 4,561,719 | | | | 23,315,789 | | | | 3,904,285 | | | | — | | | | — | | | | 1,200,000 | | | | 64,324 | | | | — | | | | 248,717 | | | | 2,875,878 | | | | 486,185 | | | | — | | | | 559,977 | | | | 1,200,000 | | | | 59,298 | |
Disability | | | — | | | | 4,561,719 | | | | 23,018,395 | | | | 7,840,000 | | | | — | | | | — | | | | 1,809,673 | | | | 64,324 | | | | — | | | | 248,717 | | | | — | | | | 1,050,000 | | | | — | | | | 559,977 | | | | 2,260,517 | | | | 59,298 | |
Voluntary Resignation | | | — | | | | 4,561,719 | | | | 23,018,395 | | | | 7,840,000 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 96,207 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
Termination for Cause | | | — | | | | — | | | | — | | | | — | | | | — | | | | | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
Involuntary Termination w/o Cause, or Resignation for Good Reason(9) | | | 5,866,254 | | | | 4,561,719 | | | | 23,018,395 | | | | 7,840,000 | | | | — | | | | — | | | | — | | | | 64,324 | | |
Involuntary Termination w/o Cause, or Resignation for Good Reason | | | | — | | | | 96,207 | | | | — | | | | 1,050,000 | | | | — | | | | — | | | | — | | | | 59,298 | |
Change in Control w/o Termination | | | — | | | | 4,561,719 | | | | — | | | | 11,760,000 | | | | 4,228,031 | | | | 807,245 | | | | — | | | | — | | | | — | | | | 248,717 | | | | 1,734,975 | | | | 1,575,000 | | | | — | | | | 559,977 | | | | — | | | | — | |
Termination w/o Cause following a Change in Control | | | 5,866,254 | | | | 4,561,719 | | | | 24,451,742 | | | | 11,760,000 | | | | 6,912,136 | | | | 807,245 | | | | — | | | | 64,324 | | | | — | | | | 248,717 | | | | 1,734,975 | | | | 1,575,000 | | | | — | | | | 559,977 | | | | — | | | | 59,298 | |
KENNETH F. SPITLER
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| | | Compensation Components | |
| | | | | | | | | | | | | Acceleration
| | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | and Other
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| | Compensation Components | | | | | | | | | | | | | Benefits from
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| | Payments
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| | Payments
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| | and Benefits
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| | | | | | | | | and Benefits
| | and Benefits
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| | Severance
| | Under
| | Under
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| | Benefits from
| | Insurance
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| | Under
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| | Options and
| | Insurance
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| | Payment
| | EDCP
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| | Gross-Up
| | Stock Options
| | Payments
| | | | | Payment
| | EDCP
| | SERP
| | CPU
| | Gross-Up
| | Restricted
| | Payments
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Termination Scenario | | (1) | | (2) | | (3) | | Payment(4) | | Payments(5) | | (6) | | (7) | | Other(8) | | | (1) | | (2) | | (3) | | Payment(4) | | Payments(5) | | Stock(6) | | (7) | | Other(8) | |
|
Retirement | | $ | — | | | $ | 2,649,444 | | | $ | — | | | $ | 1,942,500 | | | $ | — | | | $ | — | | | $ | — | | | $ | 52,209 | | | $ | — | | | $ | — | | | $ | 12,441,504 | | | $ | 2,975,000 | | | $ | — | | | $ | 2,544,231 | | | $ | — | | | $ | 52,182 | |
Death | | | — | | | | 2,649,444 | | | | 12,933,487 | | | | 764,435 | | | | — | | | | — | | | | 1,200,000 | | | | 52,209 | | | | — | | | | — | | | | 12,617,664 | | | | 1,505,025 | | | | — | | | | 2,544,231 | | | | 1,200,000 | | | | 52,182 | |
Disability | | | — | | | | 2,649,444 | | | | 12,773,946 | | | | 1,942,500 | | | | — | | | | — | | | | 2,184,974 | | | | 52,209 | | | | — | | | | — | | | | 12,441,504 | | | | 2,975,000 | | | | — | | | | 2,544,231 | | | | 1,094,472 | | | | 52,182 | |
Voluntary Resignation | | | — | | | | 2,649,444 | | | | — | | | | 1,942,500 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 12,441,504 | | | | 2,975,000 | | | | — | | | | — | | | | — | | | | — | |
Termination for Cause | | | — | | | | — | | | | — | | | | — | | | | — | | | | | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
Involuntary Termination w/o Cause, or Resignation for Good Reason(9) | | | 3,523,386 | | | | 2,649,444 | | | | 12,773,946 | | | | 1,942,500 | | | | — | | | | — | | | | — | | | | 52,209 | | |
Involuntary Termination w/o Cause, or Resignation for Good Reason | | | | 3,225,700 | | | | — | | | | 12,441,504 | | | | 2,975,000 | | | | — | | | | — | | | | — | | | | 52,182 | |
Change in Control w/o Termination | | | — | | | | 2,649,444 | | | | — | | | | 2,913,750 | | | | 910,008 | | | | 427,206 | | | | — | | | | — | | | | — | | | | — | | | | 13,286,376 | | | | 4,462,500 | | | | — | | | | 2,544,231 | | | | — | | | | — | |
Termination w/o Cause following a Change in Control | | | 3,523,386 | | | | 2,649,444 | | | | 13,638,284 | | | | 2,913,750 | | | | 2,514,071 | | | | 427,206 | | | | — | | | | 52,209 | | | | 3,225,700 | | | | — | | | | 13,286,376 | | | | 4,462,500 | | | | 3,138,502 | | | | 2,544,231 | | | | — | | | | 52,182 | |
5958
WILLIAM J. DELANEY
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| | Compensation Components | |
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| | | Payments
| | | | | | | | | Acceleration
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| | | | | and Benefits
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| | | | | | | | | and Other
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Termination Scenario | | (1) | | | (2) | | | (3) | | | Payment(4) | | | Payments(5) | | | (6) | | | (7) | | | Other(8) | |
|
Retirement | | $ | — | | | $ | 39,776 | | | $ | — | | | $ | 516,250 | | | $ | — | | | $ | — | | | $ | — | | | $ | 35,055 | |
Death | | | — | | | | 181,804 | | | | 2,678,855 | | | | 202,684 | | | | — | | | | — | | | | 1,200,000 | | | | 35,055 | |
Disability | | | — | | | | 181,804 | | | | — | | | | 516,250 | | | | — | | | | — | | | | 4,011,758 | | | | 35,055 | |
Voluntary Resignation | | | — | | | | 39,776 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
Termination for Cause | | | — | | | | — | | | | — | | | | — | | | | — | | | | | | | | — | | | | — | |
Involuntary Termination w/o Cause, or Resignation for Good Reason(9) | | | — | | | | 39,776 | | | | — | | | | 516,250 | | | | — | | | | — | | | | — | | | | 35,055 | |
Change in Control w/o Termination | | | — | | | | 181,804 | | | | — | | | | 774,375 | | | | — | | | | 382,635 | | | | — | | | | — | |
Termination w/o Cause following a Change in Control | | | — | | | | 181,804 | | | | 1,644,442 | | | | 774,375 | | | | — | | | | 382,635 | | | | — | | | | 35,055 | |
LARRY G. PULLIAM
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| | | Compensation Components | |
| | | | | | | | | | | | | Acceleration
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| | Compensation Components | | | | | | | | | | | | | Benefits from
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| | Payments
| | | | | | Acceleration
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| | Payments
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| | | | and Benefits
| | and Benefits
| | | | 280G Tax
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| | | | | | | | | and Benefits
| | and Benefits
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| | Severance
| | Under
| | Under
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| | Benefits from
| | Insurance
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| | Under
| | Under
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| | Options and
| | Insurance
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| | Payment
| | EDCP
| | SERP
| | CPU
| | Payments
| | Stock Options
| | Payments
| | | | | Payment
| | EDCP
| | SERP
| | CPU
| | Gross-Up
| | Restricted
| | Payments
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Termination Scenario | | (1) | | (2) | | (3) | | Payment(4) | | (5) | | (6) | | (7) | | Other(8) | | | (1) | | (2) | | (3) | | Payment(4) | | Payments(5) | | Stock(6) | | (7) | | Other(8) | |
|
Retirement | | $ | — | | | $ | 452,077 | | | $ | — | | | $ | 787,500 | | | $ | — | | | $ | — | | | $ | — | | | $ | 38,093 | | | $ | — | | | $ | — | | | $ | — | | | $ | 945,000 | | | $ | — | | | $ | 666,328 | | | $ | — | | | $ | 46,898 | |
Death | | | — | | | | 1,261,952 | | | | 3,161,033 | | | | 383,349 | | | | — | | | | — | | | | 1,200,000 | | | | 38,093 | | | | — | | | | 869,703 | | | | 3,155,743 | | | | 451,475 | | | | — | | | | 666,328 | | | | 1,200,000 | | | | 46,898 | |
Disability | | | — | | | | 1,261,952 | | | | — | | | | 787,500 | | | | — | | | | — | | | | 4,000,872 | | | | 38,093 | | | | — | | | | 869,703 | | | | — | | | | 945,000 | | | | — | | | | 666,328 | | | | 2,253,595 | | | | 46,898 | |
Voluntary Resignation | | | — | | | | 452,077 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
Termination for Cause | | | — | | | | — | | | | — | | | | — | | | | — | | | | | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
Involuntary Termination w/o Cause, or Resignation for Good Reason(9) | | | — | | | | 452,077 | | | | — | | | | 787,500 | | | | — | | | | — | | | | — | | | | 38,093 | | |
Involuntary Termination w/o Cause, or Resignation for Good Reason | | | | — | | | | — | | | | — | | | | 945,000 | | | | — | | | | — | | | | — | | | | 46,898 | |
Change in Control w/o Termination | | | — | | | | 1,261,952 | | | | — | | | | 1,181,250 | | | | — | | | | 391,226 | | | | — | | | | — | | | | — | | | | 869,703 | | | | 4,241,360 | | | | 1,417,500 | | | | — | | | | 666,328 | | | | — | | | | — | |
Termination w/o Cause following a Change in Control | | | — | | | | 1,261,952 | | | | 4,027,995 | | | | 1,181,250 | | | | — | | | | 391,226 | | | | — | | | | 38,093 | | | | — | | | | 869,703 | | | | 4,241,360 | | | | 1,417,500 | | | | — | | | | 666,328 | | | | — | | | | 46,898 | |
KENNETH J. CARRIGSTEPHEN F. SMITH
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| | | Compensation Components | |
| | | | | | | | | | | | | Acceleration
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| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | and Other
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| | Compensation Components | | | | | | | | | | | | | Benefits from
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| | | | Payments
| | Payments
| | | | | | Acceleration
| | | | | | | | | Payments
| | Payments
| | | | | | Unvested
| | | | | |
| | | | and Benefits
| | and Benefits
| | | | 280G Tax
| | and Other
| | | | | | | | | and Benefits
| | and Benefits
| | | | | | Stock
| | | | | |
| | Severance
| | Under
| | Under
| | | | Gross-Up
| | Benefits from
| | Insurance
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| | Under
| | Under
| | | | 280G Tax
| | Options and
| | Insurance
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| | Payment
| | EDCP
| | SERP
| | CPU
| | Payments
| | Stock Options
| | Payments
| | | | | Payment
| | EDCP
| | SERP
| | CPU
| | Gross-Up
| | Restricted
| | Payments
| | | |
Termination Scenario | | (1) | | (2) | | (3) | | Payment(4) | | (5) | | (6) | | (7) | | Other(8) | | | (1) | | (2) | | (3) | | Payment(4) | | Payments(5) | | Stock(6) | | (7) | | Other(8) | |
|
Retirement | | $ | — | | | $ | 493,093 | | | $ | — | | | $ | 787,500 | | | $ | — | | | $ | — | | | $ | — | | | $ | 26,555 | | | $ | — | | | $ | — | | | $ | 9,046,760 | | | $ | 752,500 | | | $ | — | | | $ | 557,058 | | | $ | — | | | $ | 48,067 | |
Death | | | — | | | | 1,253,024 | | | | 2,964,509 | | | | 383,349 | | | | — | | | | — | | | | 1,200,000 | | | | 26,555 | | | | — | | | | — | | | | 9,140,727 | | | | 324,091 | | | | — | | | | 557,058 | | | | 1,200,000 | | | | 48,067 | |
Disability | | | — | | | | 1,253,024 | | | | — | | | | 787,500 | | | | — | | | | — | | | | 4,321,211 | | | | 26,555 | | | | — | | | | — | | | | 9,046,760 | | | | 752,500 | | | | — | | | | 557,058 | | | | 1,350,579 | | | | 48,067 | |
Voluntary Resignation | | | — | | | | 493,093 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 9,046,760 | | | | 752,500 | | | | — | | | | — | | | | — | | | | — | |
Termination for Cause | | | — | | | | — | | | | — | | | | — | | | | — | | | | | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
Involuntary Termination w/o Cause, or Resignation for Good Reason(9) | | | — | | | | 493,093 | | | | — | | | | 787,500 | | | | — | | | | — | | | | — | | | | 26,555 | | |
Involuntary Termination w/o Cause, or Resignation for Good Reason | | | | — | | | | — | | | | 9,046,760 | | | | 752,500 | | | | — | | | | — | | | | — | | | | 48,067 | |
Change in Control w/o Termination | | | — | | | | 1,253,024 | | | | — | | | | 1,181,250 | | | | — | | | | 362,441 | | | | — | | | | — | | | | — | | | | — | | | | 9,650,182 | | | | 1,128,750 | | | | — | | | | 557,058 | | | | — | | | | — | |
Termination w/o Cause following a Change in Control | | | — | | | | 1,253,024 | | | | 1,659,783 | | | | 1,181,250 | | | | — | | | | 362,441 | | | | — | | | | 26,555 | | | | — | | | | — | | | | 9,650,182 | | | | 1,128,750 | | | | — | | | | 557,058 | | | | — | | | | 48,067 | |
MICHAEL W. GREEN
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Compensation Components | |
| | | | | | | | | | | | | | | | | Acceleration
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| | | | | | | | | | | | | | | | | and Other
| | | | | | | |
| | | | | | | | | | | | | | | | | Benefits from
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| | | | | Payments
| | | Payments
| | | | | | | | | Unvested
| | | | | | | |
| | | | | and Benefits
| | | and Benefits
| | | | | | | | | Stock
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| | Severance
| | | Under
| | | Under
| | | | | | 280G Tax
| | | Options and
| | | Insurance
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| | Payment
| | | EDCP
| | | SERP
| | | CPU
| | | Gross-Up
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| | | Payments
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Termination Scenario | | (1) | | | (2) | | | (3) | | | Payment(4) | | | Payments(5) | | | Stock(6) | | | (7) | | | Other(8) | |
|
Retirement | | $ | — | | | $ | — | | | $ | — | | | $ | 752,500 | | | $ | — | | | $ | 555,932 | | | $ | — | | | $ | 40,467 | |
Death | | | — | | | | — | | | | 2,682,316 | | | | 324,091 | | | | — | | | | 555,932 | | | | 1,200,000 | | | | 40,467 | |
Disability | | | — | | | | — | | | | — | | | | 752,500 | | | | — | | | | 555,932 | | | | 2,709,134 | | | | 40,467 | |
Voluntary Resignation | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
Termination for Cause | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
Involuntary Termination w/o Cause, or Resignation for Good Reason | | | — | | | | — | | | | — | | | | 752,500 | | | | — | | | | — | | | | — | | | | 40,467 | |
Change in Control w/o Termination | | | — | | | | — | | | | 1,888,182 | | | | 1,128,750 | | | | — | | | | 555,932 | | | | — | | | | — | |
Termination w/o Cause following a Change in Control | | | — | | | | — | | | | 1,888,182 | | | | 1,128,750 | | | | — | | | | 555,932 | | | | — | | | | 40,467 | |
59
RICHARD J. SCHNIEDERS
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Compensation Components | |
| | | | | | | | | | | | | | | | | Acceleration
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| | | | | | | | | | | | | | | | | and Other
| | | | | | | |
| | | | | | | | | | | | | | | | | Benefits from
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| | | | | Payments
| | | Payments
| | | | | | | | | Unvested
| | | | | | | |
| | | | | and Benefits
| | | and Benefits
| | | | | | | | | Stock
| | | | | | | |
| | Severance
| | | Under
| | | Under
| | | | | | 280G Tax
| | | Options and
| | | Insurance
| | | | |
| | Payment
| | | EDCP
| | | SERP
| | | CPU
| | | Gross-Up
| | | Restricted
| | | Payments
| | | | |
Termination Scenario | | (1) | | | (2) | | | (3) | | | Payment(4) | | | Payments(5) | | | Stock(6) | | | (7) | | | Other(8) | |
|
Retirement(9) | | $ | — | | | $ | 5,220,103 | | | $ | 22,420,195 | | | $ | 7,070,000 | | | $ | — | | | $ | 1,389,325 | | | $ | — | | | $ | 10,067 | |
| | |
(1) | | For Messrs. Schnieders andMr. Spitler, severance payments shown are the present value of 24 monthly payments of $135,668, calculated using an annual discount rate of 2.48%0.90%. See “Executive Severance Agreements”“Severance Arrangements” above for a discussion of the calculation and payout of Mr. Spitler’s executive severance payments, including the requirement that payments are subject to execution of a release. The other named executive officers are not entitled to severance payments. |
|
(2) | | See “Non-qualified Deferred Compensation” above for a discussion of the calculation of benefits and payout options under the EDCP. For distributions following disability, death or retirement, the named executives can elect to receive distributions in a lump sum or in annual or quarterly installments over a specified period of up to 20 years. The amounts disclosed reflect the vested value of the company match on elective deferrals, as well as investment earnings on both deferrals and vested company match amounts; theseamounts. These amounts do not include salary and bonus deferrals. The amounts disclosed were calculated after giving effect to withdrawals made pursuant to the one-time opportunity during calendar year 2008 to elect to receive a distribution of all or a portion of the participant’s vested balances under the Plan. These distributions were made in late June 2009 and are further described under “Executive Compensation — Executive Deferred Compensation Plan.” |
60
| | |
| • | Mr. Schnieders has elected to receive a lump sum distribution in the event of disability, and annual installments over 5 years following death or retirement. |
| • | Upon his retirement, or in the event of his death or disability, Mr. Spitler has elected to receive a lump sum distribution of $750,000, with the remaining balance paid in quarterly installments over 10 years. |
| • | Mr. DeLaney has elected to receive annual installments over 5 years in the event of his disability, death or retirement. |
| • | Mr. Pulliam has elected to receive annual installments over 10 years following retirement, quarterly installments over 15 years in the event of disability, and quarterly installments over 10 years following death. |
| • | Mr. Carrig has elected to receive a lump sum distribution upon his retirement or in the event of his disability and quarterly installments over 10 years in the event ofor death. |
| • | Mr. Schnieders has elected to receive a lump sum distribution upon his death.retirement. |
| | |
(3) | | All amounts shown are present values of eligible benefits as of June 28, 2008,27, 2009, calculated using an annual discount rate of 7.03%7.14%, which represents the rate used in determining the values disclosed in the “Pension Benefits” table above. See “Pension Benefits” above for a discussion of the terms of the SERP and the assumptions used in calculating the present values contained in the table. The amount and expected number of benefit payments to each executive are based on each respective termination event, the form of payment, the age of the executive and his or her spouse, and mortality assumptions. Following are specific notes regarding benefits payable to each of the named executive officers: |
| | |
| • | For vesting purposes, Mr. Spitler wasis assumed to have completed a full year of MIP participation for the last anniversary of service from July 1, 2007June 29, 2008 through June 28, 2008,27, 2009, although the anniversary of his MIP participation did not occur until July 1, 2008.2009. |
|
| • | Retirement, Voluntary Resignation, and Termination for Cause— Pursuant to Section 2(b) of his executive severance agreement, if Mr. Spitler resigns as an employee without Good Reason prior to reaching age 60, he shall forfeit all benefits under the SERP. For purposes of this disclosure, Retirement, voluntary resignation, and termination for cause are deemed to be termination without Good Reason. The amount shown for Mr. Schnieders reflects 338328 monthly payments of $158,587$157,846 plus 219 monthly payments of $1,694$2,259 attributable to the PIA Supplement. Benefits are forfeited upon termination for cause. |
|
| • | Death— Because Mr. SchniedersSpitler and Mr. SpitlerSmith have reached age 55, their death benefits would be paid on a monthly basis. The other named executive officers’ death benefits would be paid on an annual basis. The amounts shown reflect payments as follows: |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | Estimated # of
| | Amount of
| | Payment
| | | Estimated # of
| | Amount of
| | Payment
|
| | Payments | | Payment | | Frequency | | | Payments | | Payment | | Frequency |
|
Schnieders | | | 356 | | | $ | 158,128 | | | | Monthly | | |
DeLaney | | | | 10 | | | $ | 384,650 | | | | Annual | |
Spitler | | | 327 | | | | 90,531 | | | | Monthly | | | | 317 | | | | 90,230 | | | | Monthly | |
DeLaney | | | 10 | | | | 356,851 | | | | Annual | | |
Pulliam | | | 10 | | | | 421,082 | | | | Annual | | | | 10 | | | | 422,082 | | | | Annual | |
Carrig | | | 10 | | | | 394,903 | | | | Annual | | |
Smith | | | | 324 | | | | 64,831 | | | | Monthly | |
Green | | | | 10 | | | | 358,761 | | | | Annual | |
60
| | |
| • | Disability;Involuntary Termination without Cause, or Resignation for Good Reason; Termination without Cause following a Change in Control— The amounts shown reflect the following monthly payments plus the amounts shown below attributable to the monthly PIA supplement, which is paid only until the executive reaches age 62. |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | Involuntary Termination Without
| | | | Disability, Involuntary Termination Without
| | | |
| | | | | | | | Cause, or Resignation for Good
| | Termination without Cause following
| | Cause, or Resignation for Good
| | Termination without Cause following a
| |
| | Disability | | Reason | | a Change in Control | | Reason | | Change in Control | |
| | | | | | Monthly
| | | | | | Monthly
| | | | | | Monthly
| | | | | | Monthly
| | | | | | Monthly
| |
| | | | | | PIA
| | | | | | PIA
| | | | | | PIA
| | | | | | PIA
| | | | | | PIA
| |
| | # of
| | Monthly
| | Supplement
| | # of
| | Monthly
| | Supplement
| | # of
| | Monthly
| | Supplement
| | # of
| | Monthly
| | Supplement
| | # of
| | Monthly
| | Supplement
| |
| | Monthly
| | Payment
| | (Until
| | Monthly
| | Payment
| | (Until
| | Monthly
| | Payment
| | (Until
| | Monthly
| | Payment
| | (Until
| | Monthly
| | Payment
| | (Until
| |
Name | | Payments | | Amounts | | Age 62) | | Payments | | Amounts | | Age 62) | | Payments | | Amounts | | Age 62) | | Payments | | Amounts | | Age 62) | | Payments | | Amounts | | Age 62) | |
|
Schnieders | | | 338 | | | $ | 158,587 | | | $ | 1,694 | | | | 338 | | | $ | 158,587 | | | $ | 1,694 | | | | 338 | | | $ | 168,476 | | | $ | 1,694 | | |
DeLaney | | | | — | | | | — | | | | — | | | | 254 | | | $ | 29,831 | | | | — | |
Spitler | | | 326 | | | | 88,703 | | | | 1,694 | | | | 326 | | | | 88,703 | | | | 1,694 | | | | 326 | | | | 94,729 | | | | 1,694 | | | | 316 | | | $ | 88,361 | | | $ | 1,694 | | | | 316 | | | | 94,378 | | | | 1,694 | |
DeLaney | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 253 | | | | 29,722 | | | | — | | |
Pulliam | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 247 | | | | 73,176 | | | | — | | | | — | | | | — | | | | — | | | | 248 | | | | 73,276 | | | | — | |
Carrig | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 258 | | | | 32,994 | | | | — | | |
Smith | | | | 326 | | | | 63,274 | | | | 1,694 | | | | 326 | | | | 67,521 | | | | 1,694 | |
Green | | | | — | | | | — | | | | — | | | | 255 | | | | 41,803 | | | | — | |
61
| | |
| • | Change in Control without Termination— Benefit payments are not triggered. |
| | |
(4) | | See “2004 Cash“Cash Performance Unit Plan”Plans” above for a discussion of the CPUs. The amounts shown include payment of awards made on September 7, 200618, 2007 and September 18, 2007.11, 2008. For purposes of this disclosure, and as defined in the plan, we have assumed the following levels of performance: |
| | |
| • | Voluntary Resignation, with respect to Mr. Spitler only, Retirement, Disability, Involuntary Termination Without Cause, and Resignation for Good Reason and Voluntary Resignation (where applicable) — Amounts reflect the target award value of awards pursuant to the fiscal2007-20092008-2010 and fiscal2008-20102009-2011 performance cycles. Mr. Schnieders and Mr. Spitler areis eligible for retirement under the company’s normal policies and, therefore, the amounts shown for each of themhim in a voluntary resignation situation treat such resignation as a retirement for purposes of payment on the CPUs. |
|
| • | Death— Amounts reflect the target award value of awards pursuant to the fiscal2007-20092008-2010 and2008-20102009-2011 performance cycles, pro-rated for the portion of each performance cycle completed at the time of death. The pro-rata factors used are 66.6% for the fiscal2007-20092008-2010 performance cycle and 33.0%33.3% for the2008-20102009-2011 performance cycle. |
|
| • | Change in Control— Amounts are based on the maximum award value (150% of target) of awards pursuant to the fiscal2007-20092008-2010 and fiscal2008-20102009-2011 performance cycles. |
| | |
(5) | | The amountsamount shown representrepresents the amountsamount we would pay pursuant to the severance agreementsagreement with Mr. Schnieders and Mr. Spitler in connection withorder to eliminate the effect of any excise taxes under Sections 280G andSection 4999 of the Code following or in connection with a change in control. |
|
(6) | | The amounts shown represent the difference between the exercise pricevalue of theunvested accelerated options andrestricted stock, valued at the closing price of SYSCOSysco common stock on the New York Stock Exchange on June 27, 2008,26, 2009, the last business day of our 20082009 fiscal year.year, plus the difference between the exercise prices of unvested accelerated options and the closing price of Sysco common stock on the New York Stock Exchange on June 26, 2009 multiplied by the number of such options outstanding. See the text following the “Option Awards” table “Outstanding Equity Awards at Fiscal Year-End”for a discussiondisclosure of the events causing an acceleration of outstanding options.unvested options and restricted stock. Assumes accelerated vesting of all unvested restricted stock options, as well as the removal of any transfer restrictions and forfeiture provisions on shares issued in association with awards under the 2005 Management Incentive Plan.stock options. |
|
(7) | | Includes payments we will make in connection with additional life insurance coverage, long-term disability coverage, including disability income coverage, and long-term care insurance. InFor all named executive officers except Mr. Schnieders, in the event of death, a lump sum Basic Life Insurance benefit is payable in an amount equal to one-times the executive’s prior yearW-2 earnings, capped at $150,000. An additional benefit is paid in the case of MIP-eligible employees in an amount equal to one-times the executive’s prior yearW-2 earnings, capped at $1,050,000. The value of the benefits payable is doubled in the event of an accidental death. InFor all named executive officers except Mr. Schnieders, in the event of disability, a monthly Long-Term Disability benefit of $25,000 is payable to age 65, following a180-day elimination period. |
|
(8) | | Includes retiree medical benefits and the payment of accrued but unused vacation. |
|
(9) | | The severance agreement with Mr. Spitler provides that if we terminate him without cause or he terminates his employment for good reason, priorSchnieders retired on June 27, 2009, the last day of fiscal 2009. All amounts shown are actual amounts the Company will pay to his reaching the age of 60, the unvested portionMr. Schnieders as a result of his EDCP account will automatically vest, and we will pay these benefits to him in a single payment within 60 days after we receive his signed liability release. Amounts shown for Mr. Spitler reflect this acceleration.retirement. |
6261
DIRECTOR COMPENSATION
Fees
We currently pay non-employee directors who serve as committee chairpersons $85,000 per year and all other non-employee directors $70,000 per year, as an annual retainer, plus reimbursement of expenses for all services as a director, including committee participation or special assignments. We pay the annual retainers quarterly. Directors are encouragedinvited to have their spouses accompany them to dinners and other functions held in connection with one or two board meetings each year, and the company pays, either directly or through reimbursement, all expenses associated with their travel to and attendance at these business-related functions. Reimbursement for non-employee director travel may include reimbursement of amounts paid in connection with travel on private aircraft excluding maintenance and ownership interests.
In addition to the annual retainer, non-employee directors receive the following fees for attendance at meetings:
| | |
| • | For committee meetings held in conjunction with regular Board meetings, committee chairmen who attend in person, or who participate by telephone because of illness or the inability to travel, will receive $1,750 and committee members who attend in person, or who participate by telephone because of illness or the inability to travel, will receive $1,500; |
| • | For special committee meetings not held in conjunction with regular Board meetings, committee chairmen who attend in person or who participate by telephone will receive $1,750 and committee members who attend in person or who participate by telephone will receive $1,500; and |
| • | For special Board meetings, all non-employee directors who attend in person or who participate by telephone will receive $1,500. |
The Board is currently contemplating changing the compensation for non-employee directors to eliminate the meeting fees and increase the retainer amounts. Any such changes would be effective beginning January 1, 2010. Non-employee directors also receive discounts on products carried by the company and its subsidiaries comparable to the discounts offered to all company employees.
Non-Executive Chairman of the Board Compensation
In addition to the compensation received by all non-employee directors, Mr. Fernandez, Sysco’s Non-Executive Chairman of the Board, receives an additional annual retainer of $250,000 per year, paid quarterly.
Directors Deferred Compensation Plan
Non-employee directors may defer all or a portion of their annual retainer, including the Non-Executive Chairman of the Board’s annual retainer, and meeting attendance fees under the Directors Deferred Compensation Plan. Non-employee directors may choose from a variety of investment options, including Moody’s Average Corporate Bond Yield plus 1%, with respect to amounts deferred inprior to fiscal 2008.2009. This investment option was reduced to Moody’s Average Corporate Bond Yield, without the addition of 1%, for amounts deferred after fiscal 2008. We credit such deferred amounts with investment gains or losses until the non-employee director’s retirement from the Board or until the occurrence of certain other events.
2005 Non-Employee Directors Stock Plan
As of September 22, 2008,21, 2009, the non-employee directors held options and shares of restricted stock that were issued under the Amended and Restated 2005 Non-Employee Directors Stock Plan, the Non-Employee Directors Stock Plan, as amended and restated, and the Amended and Restated Non-Employee Directors Stock Option Plan. We may notonly make any additional grants under the Non-Employee Directors Stock Plan or the Amended and Restated Non-Employee Directors Stock Option Plan, and we may not make any additional grants under the 2005 Non-Employee Directors Stock Plan, after November 11, 2010. Since we may only make grants under the 2005 Non-Employee Directors Stock Plan,so the description below relates only to such plan.
Options
The 2005 Non-Employee Directors Stock Plan gives discretion to the Board to determine the size and timing of all option grants under the plan, as well as the specific terms and conditions of all options, but specifies that directors may not exercise an option more than seven years after the grant date and that no more than one-third1/3 of the options contained in any grant may vest per year for the first three years following the grant date. All options currently outstanding under the plan have seven year terms and vest ratably over three years on the anniversary of the grant date.
Generally, if a director ceases to serve as a director of SYSCO,Sysco, he or she will forfeit all the options he or she holds, whether or not those options are exercisable. However, if the director leaves the Board after serving out his or her term, or at any time after reaching age 71, his or her options will remain in effect and continue to vest and become exercisable and expire as if the director
62
had remained a director of SYSCO.Sysco. All unvested options will automatically vest upon the director’s death, and the director’s estate may exercise the options at any time within three years after the director’s death, but no later than the option’s original termination date.
63
Election to Receive a Portion of the Annual Retainer in Common Stock
Instead of receiving his or her full annual retainer fee in cash, a non-employee director may elect to receive up to 50% of his or her annual retainer fee, in 10% increments, in common stock. This election is not available for the Non-Executive Chairman of the Board’s additional annual retainer. If a director makes this election, on the date we make each quarterly payment of the director’s annual retainer fee we will credit the director’s stock account with:
| | |
| • | The number of shares of SYSCOSysco common stock that the director could have purchased on that date with the portion of his or her cash retainer that he or she has chosen to receive in stock, assuming a purchase price equal to the last closing price of the common stock on the first business day prior to that date; we call these shares elected shares; and |
| • | 50% of the number of elected shares we credited to the director’s account; we call these extra shares additional shares. |
The elected shares and additional shares vest as soon as we credit the director’s account with them, but we do not issue them until the end of the calendar year. The director may not transfer the additional shares, however, until two years after we issue them, provided that certain events will cause this transfer restriction to lapse.
The two year transfer restriction on additional shares will lapse if:
| | |
| • | the director dies; |
| • | the director leaves the Board: |
| | |
| ◦ | due to disability; |
| ◦ | after having served out his or her full term; or |
| ◦ | after reaching age 71; or |
| | |
| • | a change in control, as defined in the plan, occurs. |
Restricted Stock and Restricted Stock Units
The plan provides that the Board may grant shares of restricted stock and restricted stock units in the amounts and on such terms as it determines but specifies that no more than one-third1/3 of the shares contained in any grant may vest per year for the first three years following the grant date. A restricted stock unit is an award denominated in units whose value is derived from common stock, and which is subject to similar restrictions and possibility of forfeiture as is the restricted stock. All outstanding grants of restricted stock to the non-employee directors vest ratably over three years on the anniversary of the grant date. We have not issued any restricted stock units under the plan.
Generally, if a director ceases to serve as a director of SYSCO,Sysco, he or she will forfeit all the unvested restricted stock and restricted stock units that he or she holds. However, if the director leaves the board after serving out his or her term, or for any reason after reaching age 71, his or her restricted stock and restricted stock units will remain in effect and continue to vest as if the director had remained a director of SYSCO.Sysco. All unvested restricted stock and restricted stock units will automatically vest upon the director’s death. In addition to the plan provisions regarding vesting upon a change in control of SYSCO,Sysco, the restricted stock grant agreement which governs restricted stock grants made under the plan provides that any unvested portion of a restricted stock award will vest if a person or persons acting together acquire beneficial ownership of at least 20% of outstanding SYSCOSysco common stock.
Change in Control
The plan provides that the unvested portion of the retainer stock award will vest if a specified change in control occurs.
6463
Fiscal 20082009 Non-Employee Director Compensation
The following table provides compensation information for fiscal 20082009 for each of our non-employee directors who served for any part of the fiscal year:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | Non-Qualified
| | | | | | | | | | | | | Non-Qualified
| | | | | |
| | | | | | | | Deferred
| | | | | | | | | | | | | Deferred
| | | | | |
| | Fees Earned or Paid
| | Stock Awards
| | Option Awards
| | Compensation
| | All Other
| | | | | Fees Earned or Paid
| | Stock Awards
| | Option Awards
| | Compensation
| | All Other
| | | |
Name | | in Cash($)(1) | | ($)(2)(3) | | ($)(3)(4) | | Earnings($)(5) | | Compensation($) | | Total($) | | | in Cash($)(1) | | ($)(2)(3) | | ($)(3)(4) | | Earnings($)(5) | | Compensation($) | | Total($) | |
|
Cassaday | | $ | 105,250 | | | $ | 196,987 | | | $ | 13,013 | | | | — | | | | (6 | ) | | $ | 315,250 | | | $ | 120,250 | | | $ | 192,975 | | | $ | 13,013 | | | $ | — | | | | | (6) | | $ | 326,238 | |
Craven | | | 93,346 | | | | 175,288 | | | | 22,954 | | | $ | 1,119 | | | | (6 | ) | | | 292,707 | | | | 122,000 | | | | 181,222 | | | | 11,562 | | | | 1,768 | | | | | (6) | | | 316,552 | |
Fernandez | | | 83,500 | | | | 174,970 | | | | — | | | | 267 | | | | (6 | ) | | | 258,737 | | | | 101,500 | | | | 177,477 | | | | — | | | | 1,584 | | | | | (6) | | | 280,561 | |
Golden | | | 76,500 | | | | 174,970 | | | | 22,954 | | | | 13,351 | | | | (6 | ) | | | 287,775 | | | | 91,000 | | | | 177,476 | | | | 11,562 | | | | 21,122 | | | | | (6) | | | 301,160 | |
Hafner | | | 106,500 | | | | 188,779 | | | | 24,086 | | | | 377 | | | | (6 | ) | | | 319,742 | | | | 126,750 | | | | 188,808 | | | | 11,562 | | | | — | | | | | (6) | | | 327,120 | |
Koerber | | | 45,500 | | | | 135,075 | | | | — | | | | — | | | | (6 | ) | | | 180,575 | | | | 103,000 | | | | 177,511 | | | | — | | | | 13 | | | $ | 13,518 | (6) | | | 294,042 | |
Merrill(7) | | | 96,500 | | | | 174,970 | | | | 22,954 | | | | 12,046 | | | | (6 | ) | | | 306,470 | | | | 56,000 | | | | 53,118 | | | | 11,562 | | | | 7,153 | | | | | (6) | | | 127,833 | |
Newcomb | | | 89,000 | | | | 160,005 | | | | — | | | | — | | | | (6 | ) | | | 249,005 | | | | 101,500 | | | | 177,477 | | | | — | | | | — | | | | | (6) | | | 278,977 | |
Sewell | | | 90,000 | | | | 174,970 | | | | 22,954 | | | | 61 | | | | (6 | ) | | | 287,985 | | | | 104,500 | | | | 177,476 | | | | 11,562 | | | | 13,746 | | | | | (6) | | | 307,284 | |
Tilghman | | | 111,250 | | | | 184,400 | | | | 22,954 | | | | — | | | | (6 | ) | | | 318,604 | | | | 127,000 | | | | 183,554 | | | | 11,562 | | | | — | | | | | (6) | | | 322,116 | |
Ward | | | 104,000 | | | | 179,242 | | | | 22,954 | | | | 2,780 | | | | (6 | ) | | | 308,976 | | | | 120,250 | | | | 181,222 | | | | 11,562 | | | | 4,957 | | | | | (6) | | | 317,991 | |
| | |
(1) | | Includes retainer fees and meeting fees, including any retainer fees for which the non-employee director has elected to receive shares of SYSCOSysco common stock in lieu of cash and fees for the fourth quarter of fiscal 20082009 that were paid at the beginning of fiscal 2009.2010. Although we credit shares to a director’s account each quarter, the elected shares are not actually issued until the end of the calendar year unless the director’s service as a member of the Board of Directors terminates. Therefore, the amounts shown with respect to elected shares reflect shares issued at the end of calendar 20072008 for calendar 20072008 service. Dr. Koerber and Ms. Newcomb did not begin electing to receive share of common stock in lieu of cash fees until calendar 2008. The number of shares of stock actually credited to each non-employee director’s account in lieu of cash during fiscal 20082009 is as follows: Mr. Cassaday — 1,2671,746 shares, Dr. Craven — 1,2141,746 shares, Mr. Fernandez — 1,0621,437 shares, Mr. Golden — 1,0621,437 shares, Mr. Hafner — 1,2671,746 shares, Dr. Koerber — 428,1,437 shares, Mr. Merrill — 1,062280 shares, Ms. Newcomb — 6121,437 shares, Mrs. Sewell — 1,0621,437 shares, Mr. Tilghman — 1,2671,746 shares and Ms. Ward — 1,2671,746 shares. |
|
(2) | | For fiscal 2008,2009, the Board, upon the recommendation of the Corporate Governance and Nominating Committee, determined that it would grant approximately $160,000 in long-term incentives to each of the non-employee directors. Therefore, on November 11, 2007, The2008, the Board granted each of the non-employee directors except for Dr. Koerber, who did not become a director until January 2008, 4,792other than Mr. Merrill 6,403 shares of restricted stock valued at $33.39$24.99 per share. On February 22,share, the closing price of Sysco common stock on the New York Stock Exchange on November 10, 2008. Mr. Merrill had served a portion of his term during fiscal 2009, but was not standing for re-election at the November 2008 Annual Meeting of Stockholders; therefore, on November 11, 2008, the Board granted Dr. Koerber 4,510Mr. Merrill 1,601 shares of restricted stock valued at $29.57$24.99 per share.share, the closing price of Sysco common stock on the New York Stock Exchange on November 10, 2008. The amounts in this column reflect the dollar amount recognized for financial statement reporting purposes for the fiscal year ended June 28, 200827, 2009 in accordance with Statement of Financial Accounting Standards No. 123R, “Share-based Payments”Payments,” and include amounts from awards issued prior to fiscal 20082009 as well as those issued during and with respect to fiscal 2008.2009. See Note 1516 of the consolidated financial statements in SYSCO’sSysco’s Annual Report for the year ended June 28, 200827, 2009 regarding assumptions underlying valuation of equity awards. |
The amounts in this column also reflect the dollar amount recognized for financial statement reporting purposes for the fiscal year ended June 28, 200827, 2009 in accordance with Statement of Financial Accounting Standards No. 123R with respect to a 50% stock match for directors who elect to receive a portion of their annual retainer fee in common stock. The value of any “elected” shares is included in the column entitled “Fees Earned or Paid in Cash” as described in footnote (1) above. See “2005 Non-Employee Directors Stock Plan” above for a more detailed description. Although we credit shares to a director’s account each quarter, the shares are not actually issued until the end of the calendar year unless the director’s service as a member of the Board of Directors terminates. Therefore, the amounts shown with respect to matched shares reflect shares issued at the end of calendar 20072008 for calendar 20072008 service. Dr. Koerber and Ms. Newcomb did not begin electing to receive share of common stock in lieu of cash fees, and therefore receiving matching shares, until calendar 2008. The number of additional shares actually credited to each non-employee directors’director’s account during fiscal 20082009 is as follows: Mr. Cassaday — 632873 shares, Dr. Craven — 606873 shares, Mr. Fernandez — 531717 shares, Mr. Golden — 531717 shares, Mr. Hafner — 632873 shares, Dr. Koerber — 213717 shares, Mr. Merrill — 531140 shares, Ms. Newcomb — 306717 shares, Mrs. Sewell — 531717 shares, Mr. Tilghman — 632873 shares and Ms. Ward — 632873 shares.
6564
| | |
(3) | | The aggregate number of options and unvested stock awards and options held by each non-employee director as of June 28, 200827, 2009 was as follows: |
| | | | | | | | | | | | | | | | |
| | Aggregate Unvested Stock
| | Aggregate Options
| | Aggregate Unvested Stock
| | Aggregate Options
|
| | Awards Outstanding as of
| | Outstanding as of
| | Awards Outstanding as of
| | Outstanding as of
|
| | June 28, 2008 | | June 28, 2008 | | June 27, 2009 | | June 27, 2009 |
|
Cassaday | | | 11,792 | | | | 15,000 | | | | 11,932 | | | | 15,000 | |
Craven | | | 7,792 | | | | 47,000 | | | | 10,598 | | | | 47,000 | |
Fernandez | | | 10,792 | | | | 3,500 | | | | 12,598 | | | | 3,500 | |
Golden | | | 7,792 | | | | 63,000 | | | | 10,598 | | | | 55,000 | |
Hafner | | | 9,126 | | | | 23,000 | | | | 11,932 | | | | 23,000 | |
Koerber | | | 4,510 | | | | | | | 9,410 | | | | — | |
Merrill | | | 7,792 | | | | 63,000 | | | | 5,796 | | | | 55,000 | |
Newcomb | | | 10,792 | | | | 3,500 | | | | 12,598 | | | | 3,500 | |
Sewell | | | 7,792 | | | | 63,000 | | | | 10,598 | | | | 55,000 | |
Tilghman | | | 10,459 | | | | 31,000 | | | | 10,598 | | | | 31,000 | |
Ward | | | 7,792 | | | | 39,000 | | | | 10,598 | | | | 39,000 | |
| | |
(4) | | None of the non-employee directors received option grants during fiscal 2008.2009. The amounts in this column reflect the dollar amount recognized for financial statement reporting purposes for the fiscal year ended June 28, 2008 in accordance with Statement of Financial Accounting Standards No. 123R, “Share-based Payments” and include amounts from awards issued during or prior to fiscal 2006. See Note 15 of16of the consolidated financial statements in SYSCO’sSysco’s Annual Report for the year ended June 28, 200827, 2009 regarding assumptions underlying valuation of equity awards. |
|
(5) | | We do not provide a pension plan for the non-employee directors. The amounts shown in this column represent above-market earnings on amounts deferred under the Non-Employee Director Deferred Compensation Plan. Directors who do not have any amounts in this column were not eligible to participate in such plan, did not participate in such plan or did not have any above-market earnings. |
|
(6) | | The amount shown with respect to Dr. Koerber reflects the amount paid for spousal travel in connection with business events. The total value of all perquisites and personal benefits received by each of the other non-employee directors, including reimbursements for spousal airfare and meals associated with certain Board meetings, was less than $10,000. |
|
(7) | | Mr. Merrill retired from the Board of Directors in November 2008. |
Mr.None of Messrs. Schnieders, did not receiveDeLaney or Spitler received any compensation in or for fiscal 20082009 for Board service other than the compensation for his services as an executive officer that is disclosed elsewhere in this proxy statement.
Non-Employee Director Compensation Consultant
For the past several years and through the first quarter of fiscal 2009,2010, the Corporate Governance and Nominating Committee has retained Mercer HR Consulting to provide advice regarding non-employee director compensation. At the Corporate Governance and Nominating Committee’s request, Mercer has provided data regarding the amounts and type of compensation paid to non-employee directors at the companies in SYSCO’sSysco’s peer group, and has also identified trends in director compensation. All decisions regarding non-employee director compensation are recommended by the Corporate Governance and Nominating Committee and approved by the Board of Directors.
Stock Ownership Guidelines
The Corporate Governance Guidelines provide that after five years of service as a non-employee director, such individuals are expected to continuously own a minimum of 10,000 shares of SYSCOSysco common stock. All of the current directors beneficially held the requisite number of shares as of September 22, 2008.21, 2009. Stock ownership guidelines applicable to executive officers are described under “Stock Ownership — Stock Ownership Guidelines.”
Proposed 2009 Non-Employee Directors Stock Plan and Equity Deferral Plan
See “Proposal to Approve the 2009 Non-Employee Directors Stock Plan” for a description of the proposed 2009 Non-Employee Directors Stock Plan. If such plan is approved by the stockholders, we will also implement a Directors Equity Deferral Plan that will include provisions for equity deferrals pursuant to the 2009 Non-Employee Directors Stock Plan.
REPORT OF THE AUDIT COMMITTEE
The Audit Committee has met and held discussions with management and the independent public accountants regarding SYSCO’sSysco’s audited consolidated financial statements for the year ending June 28, 2008.27, 2009. Management represented to the Audit Committee that SYSCO’sSysco’s consolidated financial statements were prepared in accordance with generally accepted accounting principles, and the Audit Committee has reviewed and discussed the audited consolidated financial statements with management and the independent public
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accountants. The Audit Committee also discussed with the independent public accountants the matters required to be discussed by Statement on Auditing Standards No. 61, as amended and adopted by the Public Company Accounting Oversight Board. SYSCO’sSysco’s independent public accountants provided to the Audit Committee the written
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disclosures and the letter required by the Independence Standards Board’s Standard No. 1, “Independence Discussions with Audit Committees,” as modified or supplemented, and the Audit Committee discussed with the independent public accountants that firm’s independence.
Based on the Audit Committee’s discussion with management and the independent public accountants and the Audit Committee’s review of the representations of management and the report of the independent public accountants, the Audit Committee recommended to the Board of Directors that the audited consolidated financial statements be included in SYSCO’sSysco’s Annual Report onForm 10-K for the year ended June 28, 200827, 2009 for filing with the Securities and Exchange Commission.
AUDIT COMMITTEE
Joseph A. Hafner, Jr.
Richard G. Merrill
Hans-Joachim Koerber
Nancy S. Newcomb
Hans-Joachim Koerber
Richard G. Tilghman, Chairman
Fees Paid to Independent Registered Public Accounting Firm
DuringThe following table presents fees billed for professional audit services rendered by Ernst & Young LLP for the audit of Sysco’s annual financial statements for fiscal 2009 and 2008, and 2007, SYSCO incurred the following fees billed during those periods for other services performedrendered by Ernst & Young LLP:
| | | | | | | | | | | | | | | | |
| | Fiscal 2008 | | Fiscal 2007 | | | Fiscal 2009 | | Fiscal 2008 | |
|
Audit Fees(1) | | $ | 5,303,283 | | | $ | 4,051,410 | | | $ | 4,147,150 | | | $ | 5,303,283 | |
Audit-Related Fees(2) | | | 569,021 | | | | 464,454 | | | | 513,550 | | | | 569,021 | |
Tax Fees(3) | | | 3,458,316 | | | | 4,130,804 | | | | 3,034,772 | | | | 3,458,316 | |
All Other Fees | | | — | | | | — | | | | — | | | | — | |
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(1) | | Audit fees inbilled for fiscal 2009 included $3,625,000 related to the audit and quarterly reviews of the consolidated financial statements (including an audit of the effectiveness of the company’s internal control over financial reporting), $298,750 related to the preparation of audited financial statements for one of the company’s subsidiaries, $215,500 related to comfort letters, consents and assistance with and review of documents filed with the SEC and $7,900 related to a statutory audit. Audit fees billed for fiscal 2008 included $3,836,000 related to the audit and quarterly reviews of the consolidated financial statements (including an audit of the effectiveness of the company’s internal control over financial reporting), $1,089,538 related to the preparation of audited financial statements for one of the company’s subsidiaries, $218,500 related to comfort letters, consents, and assistance with and review of documents filed with the SEC and $159,245 for consultations regarding various accounting standards. Audit fees in fiscal 2007 included $3,618,514 related to the audit and quarterly reviews of the consolidated financial statements (including an audit of the effectiveness of the company’s internal control over financial reporting) and $432,896 related to the preparation of audited financial statements for one of the company’s subsidiaries, which has been reclassified from audit-related fees. |
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(2) | | Audit-related fees billed in fiscal 2009 included $211,550 related to acquisition due diligence, $72,000 related to the audits of the Company’s benefit plans, $225,000 for consultations regarding various accounting standards and $5,000 for other audit-related services. Audit-related fees billed in fiscal 2008 included $489,526 related to acquisition due diligence, $39,000 for agreed upon procedures related to one of the subsidiaries, $34,000 related to the audit of one of the company’s benefit plans and $6,495 for other audit-related services. Audit-related fees in fiscal 2007 included $387,959 related to acquisition due diligence, $70,000 related to audits of the company’s benefit plans and $6,495 for other audit-related services. |
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(3) | | Tax fees billed in fiscal 2009 included $2,415,815 related to local, state, provincial and federal income tax return preparation, $320,909 related to various tax examinations, $177,206 related to a transfer pricing study, $115,842 related to various state tax matters and $5,000 related to the Company’s benefit plans filing. Tax fees billed in fiscal 2008 included $2,691,656 related to local, state, provincial and federal income tax return preparation, $515,752 related to various tax examinations, $221,736 related to a transfer pricing study, $25,459 related to a review of certain subsidiary legal structures and $3,713 related to various state tax matters. Tax fees in fiscal 2007 included $2,862,693 related to local, state, provincial and federal income tax return preparation, $1,094,620 related to various tax examinations, $70,773 related to a transfer pricing study, $66,879 related to a review of certain subsidiary legal structures and $35,839 related to various state tax matters. |
Pre-Approval Policy
In February 2003, the Audit Committee adopted a formal policy concerning approval of audit and non-audit services to be provided by the independent auditor to the company. The policy requires that all services, including audit services and permissible audit related, tax and non-audit services, to be provided by Ernst & Young LLP to the company, be pre-approved by the Audit Committee. All of the services performed by Ernst & Young in or with respect to fiscal 20072009 and fiscal 2008 were approved in advance by the Audit Committee pursuant to the foregoing pre-approval policy and procedures. During fiscal 2008,2009, Ernst & Young did not provide any services prohibited under the Sarbanes-Oxley Act.
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PROPOSAL TO APPROVE MATERIAL TERMS OF, AND COMPENSATIONTHE 2009 NON-EMPLOYEE
DIRECTORS STOCK PLAN ITEM NO. 2 ON THE PROXY CARD
The 2009 Non-Employee Directors Stock Plan (the “Plan”) was recommended by the Corporate Governance and Nominating Committee (the “Committee”) on September 3, 2009, and adopted by the Board of Directors on September 3, 2009, subject to stockholder approval. If approved by the stockholders at the Annual Meeting, the Plan will become effective on November 18, 2009.
The Plan will replace the 2005 Non-Employee Directors Stock Plan (the “Prior Directors Plan”). We expect to issue elected shares and the related additional shares credited for calendar 2009 service on December 31, 2009 or as soon as practicable thereafter and, as described in the following paragraph, we will also make our annual grants of restricted stockand/or restricted stock units to non-employee directors in November 2009. With respect to any such issuances, shares may be issued under either the Prior Directors Plan or, after its effective date, the Plan.
As of September 21, 2009, 153,500 shares were available for the issuance of options, 73,294 shares were available for the issuance of restricted stock, restricted stock units, stock elections and stock matches, and 10,000 shares were available for issuance pursuant to dividend equivalent rights under the Prior Directors Plan. Of the 73,294 shares available as of September 21, 2009 under the Prior Directors Plan for the issuance of restricted stock, restricted stock units, stock elections and stock matches, 12,473 shares had been allocated to directors’ accounts for elected and matched shares for the first half of calendar 2009 and allocations of approximately the same amount will be made in the second half of calendar 2009. This amount will fluctuate based on the closing price of Sysco’s common stock on September 30, 2009 and December 31, 2009. Our stock option grant administrative guidelines set the second Tuesday in November as the annual grant date, subject to certain exceptions. For 2009, that would be Tuesday, November 10, approximately one week before the Annual Meeting at which stockholders will be asked to approve the Plan. For fiscal 2009, the Board determined that it would grant approximately $160,000 in long-term incentives to each of the non-employee directors, resulting in the issuance of 65,631 shares in November 2008. We do not know the exact number of shares that will be granted to non-employee directors in November 2009, although the Board currently expects to make an award similar to the one granted in November 2008. Based on Sysco’s closing stock price on September 21, 2009, such an award would use approximately 62,500 of the remaining shares available for the issuance of restricted stock pursuant to the Prior Directors Plan. As a result, if the Plan is approved, a substantial portion of the shares allocated to directors’ accounts for elected and matched shares in calendar 2009 will be issued under the Plan, instead of the Prior Directors Plan. If the Plan is not approved, each director will receive cash in lieu of the elected and matched shares he or she otherwise would have received for calendar 2009. See “Director Compensation” for information regarding non-employee director compensation, including awards granted under the Prior Directors Plan in fiscal 2009.
Stockholder Approval
Under applicable New York Stock Exchange rules, stockholder approval is required with respect to all equity compensation plans.
Sysco Stock Price
On September 21, 2009, the closing price of Sysco’s common stock as reported by the NYSE was $25.59.
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The 2009 Non-Employee Directors Stock Plan
The following is a summary of the principal provisions of the Plan. The full text of the Plan is attached hereto as Annex A.
Key Terms of the Plan
| | |
Plan Term | | The Plan is effective through November 18, 2016 |
Eligible Participants | | All members of Sysco’s Board of Directors who are not current employees of Sysco or any of its subsidiaries |
Total Shares Authorized | | 750,000 shares of Sysco’s common stock are reserved for issuance under the Plan |
Shares Authorized Under the Plan as a Percent of Outstanding Shares (based on Shares Outstanding as of September 21, 2009) | | Approximately 0.13% |
Award Types | | Restricted Stock, Restricted Stock Units, Elected Shares and Additional Shares (all types, collectively, “awards”) |
Vesting Period for Restricted Stock and Restricted Stock Units | | Determined by the Committee, but no earlier than one year following the date of grant |
Purpose
The purpose of the Plan is to make available shares of common stock for award to or purchase by non-employee directors of Sysco in order to attract, retain and provide compensation for the services of experienced and knowledgeable non-employee directors for the benefit of Sysco and its stockholders, and enable them to increase their ownership of Sysco common stock and their personal financial stake in the Company, in addition to underscoring their common interest with stockholders in increasing the value of Sysco over the long term.
Eligibility
All members of Sysco’s Board of Directors who are not current employees of Sysco or any of its subsidiaries are eligible to participate in the Plan. There currently are ten non-employee directors on the Board.
Adjustments to Shares Subject to the Plan
The number of shares covered by the Plan is subject to adjustment in the event of stock dividends, stock splits, combinations of shares, mergers, consolidations, rights offerings, reorganizations or recapitalizations, or in the event of other changes in Sysco’s corporate structure or shares. Any such adjustment will be made only if adjustments are made to awards under the Company’s incentive plans for management then in effect. Shares issued under the Plan may consist, in whole or in part, of authorized but unissued shares, treasury shares or shares purchased on the open market.
If any shares of common stock subject to an award are forfeited or cancelled, or if an award terminates or expires without a distribution of shares to the grantee, the shares with respect to such award will, to the extent of any forfeiture or cancellation, again be available for awards under the Plan. Shares will not again be available if such shares are surrendered or withheld as payment of withholding taxes in respect of an award. Awards that are settled solely in cash will not reduce the number of shares of Common Stock available for awards.
Administration of the Plan
The Plan is administered by the Board. The Board has the authority to terminate or amend the Plan, to determine the terms and provisions of the respective award agreements, to construe award agreements and the Plan, and to make all other determinations in the judgment of the Board necessary or desirable for the administration of the Plan. However, the Plan may not be amended by the Board to revoke or alter any provision in a manner which is unfavorable to the grantee of Restricted Stock, Restricted Stock Units, Elected Shares or Additional Shares then outstanding. In addition, certain material amendments of the Plan are subject to stockholder approval, including increasing the number of shares authorized for issuance, expanding the types of awards that may be granted, materially expanding the class of participants or materially extending the term of the Plan.
The Board may delegate any or all of its authority under the Plan to the non-employee directors, or to any two or more thereof. The Corporate Governance and Nominating Committee, pursuant to its charter, is charged with providing guidance and making recommendations to the Board on director compensation and on current and prospective director benefit plans, including incentive compensation and equity-based plans.
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Restricted Stock and Restricted Stock Units
The Board of Directors may grant shares of Restricted Stockand/or Restricted Stock Units to participants in such amounts and upon such terms and conditions as the Board shall determine; provided, however, that no grant of Restricted Stock or of any Restricted Stock Unit shall in any event vest earlier than one year following the date of grant. Grants of Restricted Stock are grants of common stock and Restricted Stock Units are awards denominated in units whose value is derived from common stock. Awards of Restricted Stock and Restricted Stock Units may be subject to forfeiture based on the passage of time, the achievement of performance goals,and/or upon the occurrence of other events as determined by the Board in its discretion.
The Board may impose, at the time of grant or any time thereafter, such other conditionsand/or restrictions on any shares of Restricted Stock or Restricted Stock Units granted pursuant to the Plan as it may deem advisable including, without limitation, a requirement that participants pay a stipulated purchase price for each share of Restricted Stock or each Restricted Stock Unit, that specific performance goals be obtained, the imposition of time-based restrictions on vesting following the attainment of the performance goals, time-based restrictions, restrictions under applicable laws or under the requirements of any stock exchange or market upon which such shares are listed or traded, or holding requirements or sale restrictions placed on the shares following vesting.
Common stock subject to a Restricted Stock Award may not be sold, assigned, transferred, pledged or otherwise encumbered prior to the date it is vested. Restricted Stock Units may not be transferred, except as otherwise specified by the Board.
To the extent required by law, non-employee directors in whose names shares of Restricted Stock are issued shall be granted the right to exercise full voting rights with respect to those shares during the period of restriction. A participant shall have no voting rights with respect to any Restricted Stock Units. During the period of restriction, non-employee directors holding shares of Restricted Stock or Restricted Stock Units may, if the Board so determines, be credited with dividends paid with respect to the underlying shares or dividend equivalents. The Board, in its sole discretion, may determine the form of payment of dividends or dividend equivalents, including cash, unrestricted common stock, Restricted Stock, or Restricted Stock Units. When and if Restricted Stock Units become payable, a non-employee director having received the grant of such units shall be entitled to receive payment from the Company in cash, in shares of common stock of equivalent value (based on the fair market value thereof on the first business day prior to the date on which the Restricted Stock Units became payable), in some combination thereof, or in any other form determined by the Board in its sole discretion.
Elected and Additional Shares
A non-employee director who is otherwise eligible to receive an annual cash retainer fee for services provided as a director, including any additional retainer fee paid to the Non-Executive Chairman of the Board for his or her service in such capacity and any fees paid to a committee chairman for his or her service in such capacity, may elect to forego up to 100% of his or her annual retainer fee, in 10% increments (exclusive of any fees or other amounts payable for attendance at meetings of the Board or for service on any committee thereof), and receive in its stead Sysco common stock, in an amount determined as set forth below. Upon making such an election, the elected amount is deducted ratably from the quarterly payment of the director’s annual retainer fee, and the electing director’s account is credited on the date of each quarterly payment of the annual retainer fee (“Quarterly Payment Date”) with that number of shares of Sysco common stock determined by dividing his or her elected amount by the fair market value, as defined in the Plan, of one share of Sysco common stock as of the first business day prior to such Quarterly Payment Date (“Elected Shares”).
A non-employee director who chooses Elected Shares, as described in the previous paragraph, also receives that number of shares of common stock determined by dividing 50% of the elected amount attributable to the portion of the Elected Shares representing up to half of his or her annual retainer fee (excluding any additional retainer fee paid for chairing the Board or one of its committees and any fees paid for meeting attendance or service on a committee), by the fair market value of one share of Sysco common stock as of the first business day prior to such Quarterly Payment Date (“Additional Shares”).
The issuance date of common stock credited pursuant to a non-employee director’s election to forego up to 100% of his or her annual retainer fee is December 31 of the calendar year as to which the director has elected to receive stock in lieu of cash retainer payments or the last business day prior to December 31, if December 31 is not a business day of the Company’s transfer agent. If a director who has elected to receive common stock in lieu of cash retainer payments ceases to be a director for any reason, certificates for such shares shall be issued within 60 days following the date such director ceases to serve on the Board.
All Elected Shares and Additional Shares are 100% vested as of the date they are credited to the electing director. Additional Shares, however, may not be sold or transferred for a period of one year after the date on which they are issued, or, if deferred, the date as of which they would have been issued, but for the deferral (the “Restriction”). The Restriction remains in
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effect after the date an electing director ceases to be a director; provided, however, that the Restriction lapses (i) if an electing director ceases to be a director by reason of disability or under circumstances which would not cause forfeiture of unvested Restricted Stock or Restricted Stock Units (as discussed at “Termination of Service” below); or (ii) on the date of certain defined changes of control of Sysco. For a description of change in control provisions contained within the Plan, see “Change in Control” under the Proposal to Approve Amendments to the 2007 Stock Incentive Plan.
Deferral of Shares
A non-employee director may elect to defer receipt of all or any portion of any shares of common stock issued under the Plan, whether such shares are to be issued as a grant of Restricted Stock, Elected Shares or Additional Shares, or upon the vesting of a Restricted Stock Unit grant. Generally, the receipt of stock may be deferred until the earliest to occur of the death of the non-employee director, the date on which the non-employee director ceases to be a director of the Corporation, or a change of control of Sysco. All such deferral elections shall be made in accordance with the terms and conditions set forth in Sysco’s 2009 Board of Directors Stock Deferral Plan.
Termination of Service
Under the Plan, unless otherwise determined by the Board, upon cessation of service as a non-employee director, all unvested Restricted Stock Awards and Restricted Stock Units are forfeited, unless:
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| • | The non-employee director serves out his or her term but does not stand for reelection at the end of the term; |
| • | The non-employee director retires from service prior to the expiration of his or her term and after attaining age 71; or |
| • | Termination is due to the death of the non-employee director. |
Upon a non-employee director’s death, all unvested Restricted Stock Awards and Restricted Stock Units will vest, and all restrictions with respect to Additional Shares will lapse.
Other Rights
No non-employee director has any claim or right to be granted or issued a Restricted Stock Award, Restricted Stock Unit, Elected Shares or Additional Shares, except as provided in the Plan. Nothing contained in the Plan shall be construed as giving any non-employee director any right to be retained as a director of the Company.
Effect of Plan Termination
No awards may be credited or awarded under the Plan after its termination date, but Restricted Stock or Restricted Stock Units granted prior to Plan termination shall continue to vest and be paid in accordance with their terms and Elected Shares and Additional Shares credited prior to Plan termination shall continue to be subject to the terms of the Plan and may be issued in accordance with the terms of the Plan.
U.S. Federal Income Tax Consequences
The following is a general description of the U.S. federal income tax consequences of awards granted under the Plan. This summary does not address any state, local, foreign or other non-federal income tax consequences associated with the Plan. This discussion is intended for the information of stockholders considering how to vote at the annual meeting and not as tax guidance to individuals who participate in the Plan. Participants in the Plan should consult their own tax advisors to determine the tax consequences to them based on their own particular circumstances.
Restricted Stock. Upon the grant of Restricted Stock, no income is recognized by a non-employee director (unless the director timely makes an election under Section 83(b) of the Internal Revenue Code (“Section 83(b)”), and the Company is not allowed a deduction at that time. When the award vests and is no longer subject to a substantial risk of forfeiture for federal income tax purposes, the non-employee director recognizes taxable ordinary income in an amount equal to the fair market value at the time of vesting of the Restricted Stock (less the purchase price paid for the shares, if any), and the Company is entitled to a corresponding deduction at that time. If a non-employee director makes a timely election under Section 83(b), then the non-employee director recognizes taxable ordinary income in an amount equal to the fair market value at the time of grant of the Restricted Stock (less the purchase price paid for the shares, if any), and the Company is entitled to a corresponding deduction at that time.
Restricted Stock Units. Upon the grant of a Restricted Stock Unit, no income is recognized by the non-employee director, and the Company is not allowed a deduction at that time. When the award vests and is no longer subject to a substantial risk of
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forfeiture for federal income tax purposes, the non-employee director recognizes taxable ordinary income in an amount equal to the cash or the fair market value at the time of vesting of the shares received by the non-employee director (less the purchase price paid for the shares, if any), and the Company is entitled to a corresponding deduction at that time.
Elected Shares and Additional Shares. A non-employee director who elects to receive Elected Shares and Additional Shares will recognize ordinary compensation income in an amount equal to the fair market value of such shares as of the date they are credited to his or her account. The Company will generally be entitled to a deduction for the amount included in the income of the non-employee director for the Company’s taxable year within which the non-employee director’s taxable year ends.
Section 409A of the Internal Revenue Code. Awards made under the Plan, including awards granted under the Plan that are considered to be deferred compensation for purposes of Section 409A of the Internal Revenue Code (“Section 409A”), must satisfy the requirements of Section 409A to avoid adverse tax consequences to recipients, which could include the inclusion of amounts not payable currently in income, and an excise tax of 20% tax on any amount included in income and interest. The company intends to structure any awards under the Plan such that the requirements under Section 409A are either satisfied or are not applicable to such awards.
Deferred Compensation. Stock that is deferred by a non-employee director under the Plan pursuant to the terms of the 2009 Board of Directors Stock Deferral Plan, and deemed dividends, if any, payable with respect to the deferred stock will be taxed as ordinary compensation upon receipt by the non-employee director and the Company is entitled to a corresponding deduction at that time.
Certain Interests of Directors
In considering the recommendation of the Board with respect to the Plan, stockholders should be aware that members of the Board have interests that present them with conflicts of interest in connection with this proposal to approve the Plan, as non-employee directors would be eligible for the grant of awards under the Plan. However, the Board believes that approval of the Plan will advance the interests of the Company and its stockholders by encouraging non-employee directors to make significant contributions to the long-term success of the company and attracting future non-employee directors.
Required Vote
The affirmative vote of a majority of votes cast, either for, against or abstain, is required to approve this proposal. In addition, the total votes cast on the proposal must represent over 50% of shares outstanding. Broker non-votes are not considered to be votes cast for either of these purposes.
The Board of Directors recommends a vote FOR approval of the 2009 Non-Employee Directors Stock Plan.
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PROPOSAL TO BE PAIDAPPROVE AMENDMENTS TO CERTAIN EXECUTIVE OFFICERS PURSUANT TO,
THE 2008 CASH PERFORMANCE UNIT2007 STOCK INCENTIVE PLAN
ITEM NO. 23 ON THE PROXY CARD
Upon theOn September 3, 2009, upon recommendation of the Compensation Committee, the Board of Directors has adoptedamended the 2008 Cash Performance Unit2007 Stock Incentive Plan, (the “2008 Plan”), subject to obtainingstockholder approval. If approved by the stockholder approvalstockholders at the Annual Meeting, the amendments to the 2007 Stock Incentive Plan will become effective on November 18, 2009.
Proposed Amendments to the 2007 Stock Incentive Plan
If approved, the Plan would be amended as follows.
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1) | Increase the Total Number of Shares Authorized for Issuance under the Plan |
The proposed amendments would increase the total number of number of shares available for issuance under the Plan from 30 million to 55 million. As of September 21, 2009, 14,038,419 shares or options to purchase shares had been issued under the Plan, leaving 15,961,581 shares available for issuance. As such, the proposed amendments would increase the total shares remaining available for issuance by 25 million to 40,961,581. The amounts discussed below. in this proposal do not take into account the issuance on October 5, 2009 of options to purchase 75,000 shares and 5,000 restricted stock units to Sysco’s newly appointed Executive Vice President and Chief Financial Officer.
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2) | Increase the Total Number of Shares Authorized for Issuance as Options and Stock Appreciation Rights under the Plan |
The proposed amendments would increase the total number of number of shares available for issuance as Options and Stock Appreciation Rights, or SARs, under the Plan from 25 million to 55 million. As of September 21, 2009, Options to purchase 13,962,597 shares and no SARSs had been issued under the Plan, leaving 11,037,403 shares available for issuance as Options and SARs. As such, the proposed amendments would increase the shares remaining available for issuance as Options and SARs by 30 million to 40,961,581 (although only 25 million of such shares are for a new authorization; approximately 4.9 million of such shares were previously authorized for the issuance of Restricted Stock, Restricted Stock Units and Other Stock-Based Awards and the amendments simply allow them to be used for options and SARs to the extent that they are not used for such full-value awards). Our stock option grant administrative guidelines set the second Tuesday in November as the annual grant date. For 2009, that would be Tuesday, November 10, approximately one week before the Annual Meeting at which stockholders will be asked to approve these amendments to the Plan. In November 2008, Plan permits uswe issued a total of approximately 7.8 million options to pay cash bonusesemployees. We do not know the exact number of options that will be granted to certain salaried employees based onin November 2009; however, if the achievementnumber of pre-established performance goals over a performance periodoption awards were similar to those awarded in November 2008, approximately 3.2 million shares would remain available for the issuance of at least three fiscal years. The 2008 Plan is intendedOptions and SARs prior to replace the 2004 Cash Performance Unit Plan (the “2004 Plan”), which expires in September 2009. Upon approval of the 2008proposed amendments.
All other provisions relating to Options and SARs in the Plan, including the Board intends to cease making new awardsdefinition of each term, remain unchanged by the proposed amendments.
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3) | Increase the Total Number of Shares Authorized for Issuance as Restricted Stock, Restricted Stock Units and Other Stock-Based Awards under the Plan and Remove the Provision Allowing Issuances in Excess of the Total Number of Shares Authorized for such Awards |
The proposed amendments would increase the total number of shares available for issuance as Restricted Stock, Restricted Stock Units and Other Stock-Based Awards under the 2004 Plan although any unpaid awards previously granted will continuefrom 5 million to be paid out10 million. As of September 21, 2009, 75,822 shares had been issued as Restricted Stock, Restricted Stock Units and Other Stock-Based Awards under the termsPlan, leaving 4,924,178 shares available for issuance as Restricted Stock, Restricted Stock Units and Other Stock-Based Awards, prior to the adjustment described below. As such, the proposed amendments would increase the shares remaining available for issuance as Restricted Stock, Restricted Stock Units and Other Stock-Based Awards by 5 million to 9,924,178. If any of such shares are issued, they will reduce the number of shares available for the issuance of Options and SARs described above. The Compensation Committee removed the 28% stock match from our Management Incentive Plan, beginning with the fiscal 2009 bonus that would have been payable in fiscal 2010. This change was made in order to shift the compensation mix emphasis from short-term to longer-term incentives, with the expectation that such portion of the 2004 Plan.bonus will be replaced beginning in November 2009 with grants of restricted stock or restricted stock units vesting over a three-year period. It is currently expected that less than 1 million shares will be issued as Restricted Stock or Restricted Stock Units in November 2009.
PaymentThe proposed amendments would also remove a provision in the Plan that provides that Restricted Stock, Restricted Stock Units and Other Stock-Based Awards may be issued in excess of compensationthe limitation contained in the previous paragraph, provided
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that the aggregate number of shares available for issuance under the 2008 Plan is reduced by four shares for each share in excess of the limitation. As of September 21, 2009 and prior to the officers subjectamendment to remove this provision, if no further grants of Options or SARs were made pursuant to the Plan, up to 2,759,350 shares of Restricted Stock, Restricted Stock Units and Other Stock-Based Awards could be issued in reliance on this provision.
All other provisions relating to Restricted Stock, Restricted Stock Units and Other Stock-Based Awards in the Plan, including the definition of each term, remain unchanged by the proposed amendments.
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4) | Clarify an Ambiguity regarding the Duration of the Plan |
The proposed amendments would clarify an ambiguity contained in Section 162(m)5.1 of the Plan regarding the Plan’s duration. Section 5.1 states that the Plan shall have a duration of seven years from its Effective Date, which was November 9, 2007. In the 2007 proxy statement, the proposal to approve the Plan also states that the Plan has a term of seven years. However, the last line of Section 5.1 provides that no Award may be granted under the Plan on a date more than three years after the Effective Date. The proposed amendments would remove this prohibition and clarify that awards may be made under the Plan through November 9, 2014.
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5) | Remove Certain Provisions of only Historical Significance |
With respect to the Plan’s three-year rolling average annual usage rate limitation, Section 3.1 of the Plan sets the method of calculation for fiscal years 2008 and 2009. As the calculation of this rate for fiscal years 2008 and 2009 is being submitted to stockholders for approval at the 2008 Annual Meeting so that such compensation will qualify as performance-basedno longer relevant for purposes of Plan administration, the proposed amendments would remove this language from Section 3.1.
Stockholder Approval Required
Under applicable New York Stock Exchange rules and by terms contained within the Plan, stockholder approval is required to approve any increase in the number of shares available for issuance under the Plan and for certain other material revisions to the Plan. In addition, stockholder approval is required for a company to (i) grant incentive stock options (“ISOs”) to employees under Section 422 of the Internal Revenue Code and (ii) ensure that certain compensation can be eligible for an exemption from the limits on tax deductibility imposed by Section 162(m) of the Code. The 2008 Plan is designed to ensure that any compensation that may be payable under the 2008 Plan will qualify as performance-based compensation within the meaning ofInternal Revenue Code (“Section 162(m)”). Section 162(m) limits the deductibility of certain compensation paid to individuals, referred to herein as 162(m) Officers, who are, at the end of the Code, and therefore is fully deductible bytax year in which the Company for federal incomecompany would otherwise claim its tax purposes. Section 162(m) ofdeduction, the Code generally denies deductions by an employer for compensation in excess of $1 million per year that is paid to “covered employees.” Covered employees are defined as thecompany’s chief executive officer and theits other three other most highly compensatedhighest-paid executive officers other than the chief financial officer, atofficer.
Sysco Stock Price
On September 21, 2009, the endclosing price of Sysco’s common stock as reported by the NYSE was $25.59.
The 2007 Stock Incentive Plan
The following is a summary of the fiscal year. However, performance-based compensation is excluded from the $1 million deduction limit, provided that allprincipal provisions of the requirements of Section 162(m) and the regulations promulgated thereunder are satisfied. One of these requirements is that the material terms pursuant to which the compensation isPlan, as proposed to be paid, including the employees eligible to receive the compensation, a description of the business criteria on which the performance goals are based and the maximum amount of compensation that could be paid to any covered employee, are disclosed to and approved by the stockholders in a separate vote prior to the payment
In light of this requirement, the material terms of, and the payment of compensation to the covered employees under, the 2008 Plan are being submitted to the stockholders for approval at the 2008 Annual Meeting. If stockholders do not approve this proposal, no bonuses will be paid under the 2008 Plan to the covered employees, regardless of whether bonuses would otherwise be earned; however, the Board may or may not adopt another cash plan in which the covered employees may participate.
A copy of the 2008 Plan is attached as Annex A to this Proxy Statement.amended. The description that follows is qualified in its entirety by reference to the full text of the 2008 Plan, set forth inincluding the Annex.proposed amendments described above, is attached hereto as Annex B.
Key Terms of the Plan
| | |
Plan Term | | The Plan is effective and awards may be granted through November 9, 2014 |
Eligible Participants | | All employees selected by the Committee |
Total Shares Authorized (including prior issuances) | | 55 million, with up to 55 million authorized to be issued as Options or SARs and up to 10 million authorized to be issued as Restricted Stock, Restricted Stock Units and Other Stock-Based Awards |
Awards Outstanding (as of September 21, 2009) | | Options with respect to 13,962,597 shares, as well as 75,822 shares of unvested Restricted Stock; as of September 21, 2009, there are no outstanding SARs, Restricted Stock Units or Other Stock-Based Awards |
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| | |
Shares Remaining Available for Issuance (as of September 21, 2009) | | 15,961,581 total shares would remain available for issuance under the Plan, with 11,037,403 shares available for issuance as Options and SARs and up to 4,924,178 shares available for issuance as Restricted Stock, Restricted Stock Units and Other Stock-Based Awards |
| | Our stock option grant administrative guidelines set the second Tuesday in November as the annual grant date. For 2009, that would be Tuesday, November 10, approximately one week before the Annual Meeting at which stockholders will be asked to approve these amendments to the Plan. In November 2008, we issued a total of approximately 7.8 million options to employees. We do not know the exact number of options that will be granted to employees in November 2009; however, if the number of option awards were similar to those awarded in November 2008, approximately 3.2 million shares would remain available for the issuance of Options and SARs prior to approval of the proposed amendments. |
| | The Compensation Committee removed the 28% stock match from our Management Incentive Plan, beginning with the fiscal 2009 bonus that would have been payable in fiscal 2010. This change was made in order to shift the compensation mix emphasis from short-term to longer-term incentives, with the expectation that such portion of the bonus will be replaced beginning in November 2009 with grants of restricted stock or restricted stock units vesting over a three-year period. It is currently expected that less than 1 million shares will be issued as Restricted Stock or Restricted Stock Units in November 2009. |
Three-Year Rolling Average Annual Utilization Rate Limitation | | 1.5% of common shares outstanding |
Award Types | | Stock Options (Incentive and Non-Qualified) (“Options”), Restricted Stock, Restricted Stock Units, Other Stock-Based Awards, and Stock Appreciation Rights (“SARs”) (all types, collectively, “awards”) |
Individual Share Limits | | Options and/or SARs relating to no more than 750,000 shares may be granted to any individual in any given fiscal year, and all awards other than Options and SARs granted to any individual in any given fiscal year are limited to no more than 250,000 shares |
Vesting Period | | Determined by the Committee, but no more than one-third of the shares subject to each grant may vest per year for the first three years, except for awards conditioned on the attainment of Performance Goals |
Stock Option Exercise Period | | Determined by the Committee, but not more than seven years from the date of grant |
Stock Option Exercise Price | | Not less than fair market value on date of grant, defined as the closing price on the NYSE on the day prior to grant |
Prohibited | | • Repricings without stockholder approval |
| | • Reload options and discounted stock options |
| | • Acceleration of payment or vesting of any award other than for death, disability, retirement or upon a change in control |
Purpose of the 2008 Cash Performance Unit Plan
The purpose of the 2008 Plan is to increase stockholder value and to advancepromote the interests of the Companycompany and its Subsidiariesstockholders by providing financial incentives designed to attract, retainexecutive officers and motivate keyother employees of the Company.company and its defined subsidiaries with appropriate incentives and rewards to encourage them to enter into and remain in their positions with the company and to acquire a proprietary interest in the long-term success of the
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company, as well as to reward the performance of these individuals in fulfilling their personal responsibilities for long-range and annual achievements.
We believe strongly that our equity compensation programs and emphasis on employee stock ownership have been integral to our past success and will be important to our ability to achieve consistently superior performance in the years ahead.
Administration of the Plan
TheUnless otherwise determined by the Board, the Compensation Committee of(the “Committee”) administers the Board will administer the 2008 Plan. The Committee is composed entirelysolely of “non-employee directors” within the meaning ofRule 16b-3 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), “outside directors” within the meaning of Section 162(m), of the Internal Revenue Code, and “independent directors” within the meaning of NYSE listing standardsstandards.
The Committee has the power, in its discretion, to grant awards under the Plan, to select the individuals to whom awards are granted, to determine the terms of the grants, to interpret the provisions of the Plan and to otherwise administer the Plan. Except as prohibited by applicable law or stock exchange rules, the Committee may delegate all or any of its responsibilities and powers under the Plan to one or more of its members, including, without limitation, the power to designate participants and determine the amount, timing and term of awards under the Plan. In no event, however, shall the Committee have the power to accelerate the payment or vesting of any award, other than in the event of death, disability, retirement or a change in control of the company.
The Plan provides that members of the Committee shall be indemnified and held harmless by the company from any loss or expense resulting from claims and litigation arising from actions related to the Plan.
Adjustments to Shares Subject to the Plan
If any shares of common stock subject to an award are forfeited or cancelled, or if an award terminates or expires without a distribution of shares to the grantee, the shares of common stock with respect to such award shall, to the extent of any such forfeiture or cancellation, again be available for awards under the Plan; provided, however, that with respect to SARs that are settled in common stock, the aggregate number of shares of common stock subject to the SAR grant shall be counted against the shares available for issuance under the Plan as one share for every share subject thereto, regardless of the number of shares used to settle the SAR upon exercise. Also, shares of stock will not again be available if such shares are surrendered or withheld as payment of either the exercise price of an awardand/or withholding taxes with respect to an award. Awards that are settled solely in cash will not reduce the number of shares of stock available for awards.
If the company undergoes a recapitalization, reclassification, stock split, stock dividend, combination, subdivision or another similar transaction affecting the common stock, or if the company makes an extraordinary dividend or distribution (including, without limitation, to implement a spinoff), then, subject to any required action by stockholders, the number and kind of shares available under the Plan, and the Company’s Corporate Governance Guidelines.various award grant limitations contained in the Plan, will be automatically adjusted accordingly. In addition, subject to any required stockholder action, the number and kind of shares covered by outstanding awards and the price per share of outstanding awards, shall be automatically proportionately adjusted to reflect such an event.
If the company merges or consolidates with another corporation, or is liquidated or disposes of all or substantially all of its assets, then the Committee may deal with outstanding Options under the Plan in any of the following ways: First, it may provide for each holder of an Option or other award to receive, upon exercise of such Option or award, the same securities or other property that the company’s stockholders receive in the transaction. Second, it may provide for each holder of an Option or other award to receive, upon exercise of such Option or award, stock of the surviving corporation in the transaction, having a value equal, on a per share basis, to the per share consideration received by the company’s stockholders in the transaction. Third, it may cause Options or other awards to vest (if they have not otherwise vested under thechange-in-control provisions of the Plan). Fourth, it may cancel Options or SARs, provided that in the case ofin-the-money Options or SARs, the cancellation shall be contingent upon a payment to the participants of an amount equal to the difference between the value of the underlying shares (based on the transaction consideration) and the exercise or base price.
Eligibility and Participation
Eligibility to participate in the 2008 Plan is limited to full-time, salariedemployees of the company and its defined subsidiaries. All employees (currently approximately 47,000 employees) are within the class eligible for selection to participate in the Plan, although in fiscal 2009 approximately 1,700 employees received awards under the Plan.
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Options and Other Awards
The Committee may grant Options and other awards to eligible employees. The Committee will have complete discretion, subject to the terms of the Plan, to determine the persons to whom Options and other awards will be awarded, the time or times of grant, and the other terms and conditions of the grant. The awards may be granted with value and payment contingent upon Performance Goals.
Performance Goals
Under the Plan, Performance Goals may be based on one or more of the following criteria applied to one or more of the company, its defined subsidiaries,and/or certain specified affiliates (if applicable, such criteria shall be determined in accordance with generally accepted accounting principles (“GAAP”) or based upon the company’s GAAP financial statements): (1) return on total stockholder equity; (2) earnings per share of Stock; (3) earnings before any or all of interest, taxes, minority interest, depreciation and amortization; (4) economic profit; (5) sales or revenues; (6) return on assets, capital or investment; (7) market share; (8) control of operating or non-operating expenses; (9) implementation or completion of critical projects or processes; (10) operating cash flow, (11) free cash flow, (12) return on capital or increase in pretax earnings; (13) net earnings; (14) margins; (15) market price of the company’s securities, and (16) any combination of, or a specified increase in, any of the foregoing. The performance goals may be based upon the attainment of specified levels of performance under one or more of the criteria described above relative to the performance of other comparable entities. To the extent permitted under Section 162(m) of the Internal Revenue Code (including, without limitation, compliance with any requirements for stockholder approval), the Committee may designate additional business criteria on which the Performance Goals may be based or adjust, modify or amend the aforementioned business criteria. Performance Goals may include a threshold level of performance below which no award will be earned, a level of performance at which the target amount of an award will be earned and a level of performance at which the maximum amount of the award will be earned. The Committee in its sole discretion has the authority to make equitable adjustments to the Performance Goals in recognition of unusual or non-recurring events.
Option Exercise Price and Vesting of Awards
The Committee determines the exercise price with respect to each Option at the time of grant. The Option exercise price per share of common stock may not be less than 100% of the fair market value per share of the common stock underlying the Option on the date of grant, and no Option may be repriced in violation of the repricing limitations discussed in “Amendment and Termination” below. For purposes of determining the Option exercise price, fair market value is defined as the closing price on the NYSE the first business day prior to the date of grant. The Committee may determine at the time of grant the terms under which Options and SARs shall vest and become exercisable. However, no Option or SAR may have a term in excess of 7 years, and all awards are subject to a minimum three-year vesting schedule, with no more than one-third of the shares subject to the award vesting each year; provided, however, that at the time of the grant of an Option or SAR, the Committee may place restrictions on the exercisability or vesting of the Option or SAR that shall lapse, in whole or in part, only upon the attainment of Performance Goals; provided that such Performance Goals shall relate to periods of performance of at least one fiscal year, and if the Option or SAR is granted to a 162(m) Officer, the grant of the Option or SAR and the establishment of the Performance Goals shall be made during the period required under Internal Revenue Code Section 162(m).
Special Limitations on ISOs
If the total fair market value of shares of common stock subject to ISOs that are exercisable for the first time by an employee in a given calendar year exceeds $100,000, valued as of the grant date of the ISO, the Options for shares of common stock in excess of $100,000 for that year will be treated as non-qualified stock options (“NQOs”).
Stock Appreciation Rights (SARs)
An SAR is the right to receive stock, cash, or other property equal in value to the difference between the grant price of the SAR and the market price of the company’s stock on the exercise date. SARs may be granted independently or in tandem with an Option at the time of grant of the related Option. An SAR granted in tandem with an Option shall be exercisable only to the extent the underlying Option is exercisable. An SAR confers on the grantee a right to receive an amount with respect to each share of common stock subject thereto, upon exercise thereof, equal to the excess of (A) the fair market value of one share of common stock on the date of exercise over (B) the grant price of the SAR (which in the case of an SAR granted in tandem with an Option shall be equal to the exercise price of the underlying Option, and which in the case of any other SAR shall be such price as the Committee may determine but in no event shall be less than the fair market value of a share of common stock on the date of grant of such SAR).
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Exercise of Options and SARs
Options and SARs are exercisable in accordance with such terms and conditions and during such periods as may be established by the Committee. For Options, notice of exercise must be accompanied by a payment equal to the applicable Option exercise price plus all withholding taxes due, such amount to be paid in cash or by tendering, either by actual delivery of shares or by attestation, shares of common stock that are acceptable to the Committee, such shares to be valued at fair market value as of the day the shares are tendered, or paid in any combination of cash and shares, as determined by the Committee. To the extent permitted by applicable law, a participant may elect to pay the exercise price through the contemporaneous sale by a third party broker of shares of common stock acquired upon exercise yielding net sales proceeds equal to the exercise price and any withholding tax due and the remission of those sale proceeds to the company.
Transferability of Awards
Except as otherwise provided by the Committee, Options, SARs and any unvested other awards may not be transferred except by will or applicable laws of descent and distribution. Notwithstanding the foregoing, in no event may any such award be transferred to a third party for consideration at any time.
Termination of Options and Other Awards
Options and SARs shall be exercisable during such periods as may be established by the Committee. Except as discussed below and at “Change in Control,” Options and SARs will expire on the earlier to occur of the expiration date of the Option or 90 days after the severance of an Option holder’s employment with the company or any of its subsidiaries. If, before the expiration of an Option or SAR, a holder’s employment terminates as a result of retirement in good standing or disability under the established rules of the company then in effect, the Option or SAR will remain in effect, vest and be exercisable in accordance with its terms. Upon the death of an employee while employed by the company or its subsidiaries, Options, to the extent then exercisable, shall remain exercisable by the executors or administrators of his or her estate for up to three years following the date of death, but in no event later than the original termination date of the Option or SAR. However, no Option or SAR may be exercised more than 7 years from the date of grant. To the extent not exercised by the applicable deadline, the Option or SAR will terminate.
With respect to all other awards, any unvested awards shall immediately vest, and all restrictions pertaining to such other awards shall lapse and have no further effect, upon the holder’s death or retirement in good standing or disability under the established rules of the company then in effect, except as otherwise provided by the Committee at grant of the award.
Restricted Stock and Restricted Stock Units
Restricted Stock is common stock that the company grants subject to transfer restrictions and vesting criteria. A Restricted Stock Unit is a right to receive stock or cash equal to the value of a share of stock at the end of a specified period that the company grants subject to transfer restrictions and vesting criteria. The grant of these awards under the Plan are subject to such terms, conditions and restrictions as the Committee determines consistent with the terms of the Plan.
At the time of grant, the Committee may place restrictions on Restricted Stock and Restricted Stock Units that shall lapse, in whole or in part, only upon the attainment of Performance Goals; provided that such Performance Goals shall relate to periods of performance of at least one fiscal year, and if the award is granted to a 162(m) Officer, the grant of the award and the establishment of the Performance Goals shall be made during the period required under Internal Revenue Code Section 162(m). Except to the extent restricted under the award agreement relating to the Restricted Stock, a grantee granted Restricted Stock shall have all of the rights of a stockholder including the right to vote Restricted Stock and the right to receive dividends.
Unless otherwise provided in an award agreement, upon the vesting of a Restricted Stock Unit, there shall be delivered to the grantee, within 30 days of the date on which such award (or any portion thereof) vests, the number of shares of common stock equal to the number of Restricted Stock Units becoming so vested.
Other Stock-Based Awards
The Plan also allows the Committee to grant “Other Stock-Based Awards,” which means a right or other interest that may be denominated or payable in, valued in whole or in part by reference to, or otherwise based on, or related to, common stock. This includes, without limitation, (i) unrestricted stock awarded as a bonus or upon the attainment of Performance Goals or otherwise as permitted under the Plan and (ii) a right to acquire stock from the company containing terms and conditions prescribed by the Committee. At the time of the grant of Other Stock-Based Awards, the Committee may place restrictions on the payout or vesting of Other Stock-Based Awards that shall lapse, in whole or in part, only upon the attainment of Performance
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Goals; provided that such Performance Goals shall relate to periods of performance of at least one fiscal year, and if the award is granted to a 162(m) Officer, the grant of the Award and the establishment of the Performance Goals shall be made during the period required under Internal Revenue Code Section 162(m). Other Stock-Based Awards may not be granted with the right to receive dividend equivalent payments.
Dividend Equivalent Rights
Subject to the requirements of Internal Revenue Code Section 409A, an award of Restricted Stock Units may provide the grantee with the right to receive dividend equivalent payments with respect to stock subject to the award (both before and after the stock subject to the award is earned, vested, or acquired), which payments may be either made currently or credited to an account for the grantee, and may be settled in cash or stock, at such times as determined by the Committee on the date of the grant of the Restricted Stock Unit. Any such settlements and any such crediting of dividend equivalents may, at the time of grant of the Restricted Stock Unit, be made subject to the transfer restrictions, forfeiture risks, vesting and conditions of the underlying Restricted Stock Units or such other conditions, restrictions and contingencies as the Committee shall establish at the time of grant of the Restricted Stock Unit, including a requirement that such credited amounts are reinvested in stock equivalents, provided that all such conditions, restrictions and contingencies shall comply with the requirements of Internal Revenue Code Section 409A. Other Stock-Based Awards may not be granted with the right to receive dividend equivalent payments.
Awards to Employees Subject to Taxation Outside of the United States
Without amending the Plan, awards may be granted to grantees who are foreign nationals or who are employed outside the United States or both, on such terms and conditions different from those specified in the Plan as may, in the judgment of the Committee, be necessary or desirable to further the purpose of the Plan. Such different terms and conditions may be reflected in addenda to the Plan or in the applicable award agreement. However, no such different terms or conditions shall be employed if such terms or conditions constitute, or in effect result in, an increase in the aggregate number of shares that may be issued under the Plan or a change in the group of eligible grantees.
Forfeiture
Notwithstanding any other provision of the Plan and except as discussed under “Change in Control” below, if the Committee finds by a majority vote that: (i) the participant, before or after termination of his or her employment relationship with the company or any of its defined subsidiaries for any reason, (a) committed fraud, embezzlement, theft, a felony, or proven dishonesty in the course of his employment and that such act damaged the company or any of its defined subsidiaries, or (b) disclosed trade secrets of the company or any of its defined subsidiaries, or (ii) the participant, before or after termination of his or her employment relationship for any reason, participated, engaged or had a financial or other interest (whether as an employee, officer, director, consultant, contractor, stockholder, owner, or otherwise) in any commercial endeavor in the United States which is competitive with the business of the company or any of its defined subsidiaries in violation of the Sysco Code of Business Conduct as in effect on the date of such participation or other engagement or in such a manner that would have violated the Code of Business Conduct had the participant been employed by the company or any of its defined subsidiaries at the time of the activity in question, then any outstanding Options and SARs which have not been exercised and any awards other than Options and SARs that have not vested will be forfeited. The decision of the Committee as to the nature of a participant’s conduct, the damage done to the company or any of its defined subsidiaries and the extent of the participant’s competitive activity will be final. No decision of the Committee, however, will affect the finality of the discharge of the participant in any manner. The Committee may, in its discretion, include a form of non-compete, non-solicitationand/or non-disparagement agreement in any award agreement, and such non-compete, non-solicitation or non-disparagement agreement may be personalized, in the Committee’s discretion, to fit the circumstances of any specific grantee.
Change in Control
In the event of a specified change in control of the company (a “Change in Control”), including but not limited to, certain acquisitions of 20% or more of the Company’s outstanding common stock, certain changes in the identity of a majority of the members of the Board of Directors and certain mergers in which the company’s then existing shareholders do not own at least 60% of the outstanding voting securities of the surviving entity, all outstanding Options and SARs shall vest and become exercisable and all other outstanding awards shall vest and all restrictions pertaining to such other awards shall lapse and have no further effect. In the event that the employment of a participant who is an employee of the company or any of its defined subsidiaries is terminated by the company other than for cause, as defined below, during the24-month period following a Change in Control, all of such participant’s outstanding Options and SARs may thereafter be exercised by the participant, to the
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extent that such Options and SARs were exercisable as of the date of such termination of employment, for (x) a period of 24 months from such date of termination or (y) until expiration of the stated term of such Option or SAR, whichever period is shorter. The forfeiture provisions relating to competition as described in the immediately preceding paragraph shall not apply to any participant who incurs a termination of employment pursuant to the Change in Control provisions in the Plan. For purposes of these provisions, the term “cause” shall mean “cause” as defined in the participant’s award agreement or written employment, consulting or other agreement with the company or a subsidiary, or if not defined in any such agreement, “cause” shall mean conviction of the participant for a felony, dishonesty while performing his employment duties, or a participant’s willful or deliberate failure to perform his or her duties in any material respect.
Tax Withholding
Issuance of shares under the Plan is subject to withholding of all applicable taxes, and the Committee may condition the delivery of any shares or other benefits under the Plan on satisfaction of the applicable withholding obligations. The Committee, in its discretion, and subject to such requirements as the Committee may impose prior to the occurrence of such withholding, may permit such withholding obligations to be satisfied through cash payment by the participant, through the surrender of shares of common stock which the participant already owns, or through the surrender of shares of common stock to which the participant is otherwise entitled under the Plan, but only to the extent of the minimum amount required to be withheld under applicable law.
Term of the Plan
Unless earlier terminated by the Board of Directors, the Plan will terminate on November 9, 2014. No awards may be granted under the Plan subsequent to that date. As discussed above under “Proposed Amendments to the 2007 Stock Incentive Plan,” the proposed amendments would clarify an ambiguity contained within the Plan regarding the Plan’s duration.
Amendment and Termination
The Board may, at any time, amend or terminate the Plan, except that the following actions may not be taken without stockholder approval: (i) any increase in the number of shares that may be issued under the Plan (except by certain adjustments provided under the Plan); (ii) any change in the class of persons eligible to receive ISOs under the Plan; (iii) any change in the requirements of the Plan regarding the exercise price of Options or grant price of SARs; (iv) any repricing or cancellation and regrant of any Option or, if applicable, other award at a lower exercise, base or purchase price, whether in the form of an amendment, cancellation or replacement grant, or a cash-out of underwater options or any action that provides for awards that contain a so- called “reload” feature under which additional Options or other awards are granted automatically to the grantee upon exercise of the original Option or award; or (v) any other amendment to the Plan that would require approval of the company’s stockholders under applicable law, regulation, rule or stock exchange listing requirement.
Federal Income Tax Consequences
The following discussion addresses certain anticipated United States federal income tax and certain employment tax consequences to the company and to recipients of awards made under the Plan who are citizens or residents of the United States for federal income tax purposes. It is based on the Internal Revenue Code and interpretations thereof as in effect on the date of this proxy statement. This summary is not intended to be exhaustive and, among other things, does not describe the state, local, or foreign tax consequences of a grant of awards under the Plan. Moreover, it is not intended as tax advice to any individual.
IRS Circular 230 Notice
To ensure compliance with requirements imposed by the Internal Revenue Service, you are hereby notified that any discussion of tax matters set forth in this prospectus was written in connection with the promotion or marketing (within the meaning of IRS Circular 230) of awards made under the Plan, and was not intended or written to be used, and cannot be used, by any taxpayer for the purpose of avoiding any tax-related penalties under federal law. Each recipient of an award under the Plan should seek advice based on his or her particular circumstances from an independent tax advisor.
Summary of Current Federal Income Tax Rates for Individuals
Ordinary income of individuals, such as compensation income, is currently taxed at a top marginal rate of 35%. In addition, for capital assets sold the maximum long-term capital gains rate for individuals is currently 15%. The maximum federal income tax rate for qualifying dividends received by individuals is currently 15%.
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Options
Grant of Options. There are no federal income tax consequences to the grantee of an Option or the company upon the grant of either an ISO or an NQO under the Plan.
Exercise of NQOs. Upon the exercise of an NQO, the grantee generally will recognize ordinary compensation income, subject to withholding and employment taxes, in an amount equal to: (a) the fair market value, on the date of exercise, of the acquired shares of common stock, less (b) the exercise price paid for those shares. In general, as long as the company satisfies the applicable reporting requirements, the company will be entitled to a tax deduction equal to the compensation income recognized by the grantee. Gains or losses recognized by the grantee upon a subsequent disposition of the shares will be treated as long-term capital gain or loss if the shares are held for more than a year from the date of exercise. Such gains or losses will be short-term capital gains or losses if the shares are held for one year or less. For purposes of computing gain or loss, the grantee’s basis in the shares received will be the exercise price paid for the shares plus the amount of compensation income, if any, recognized upon exercise of the Option.
Exercise of ISOs. Upon the exercise of an ISO, the grantee will recognize no immediate taxable income for regular income tax purposes, provided the grantee was continuously employed by the company or a subsidiary from the date of grant through the date which is three months prior to the date of exercise (or through the date which is one year prior to the exercise date in the case of termination of employment as a result of total disability). If an Option originally designated as an ISO is exercised after those employment periods, the exercise of the Option will be treated as the exercise of an NQO for income tax purposes, and compensation income will be recognized by the optionee and the company will be entitled to a deduction in accordance with the rules discussed above concerning NQOs.
The exercise of an ISO will, however, result in an adjustment for alternative minimum tax purposes in an amount equal to the excess of the fair market value of the shares at exercise over the exercise price. That adjustment may result in alternative minimum tax liability to the grantee upon the exercise of the ISO. Subject to certain limitations, alternative minimum tax paid in one year may be carried forward and credited against regular federal income tax liability for subsequent years. If the grantee retains the shares acquired upon the exercise of the ISO for more than two years from the date of grant and one year from the date of exercise, any gain or loss on a later sale of the shares will be treated as a long-term capital gain or loss, and the company will not be entitled to any tax deduction with respect to the ISO.
If the grantee disposes of the shares of common stock received upon the exercise of an ISO before the expiration of the two-year and one-year holding periods discussed above, a “Disqualifying Disposition” occurs. In that event, the grantee will have ordinary compensation income, subject to income tax withholding and employment taxes, and the company will be entitled to a corresponding deduction at the time of the Disqualifying Disposition. The amount of ordinary income and deduction generally will be equal to the lesser of: (a) the fair market value of the shares of common stock on the date of exercise minus the exercise price; or (b) the amount realized upon disposition of the common stock minus the exercise price. If the amount realized in the Disqualifying Disposition exceeds the value of the shares on the date of exercise, that additional amount will be taxable as either a long-term or short-term capital gain depending on how long the shares were held by the grantee following exercise of the Option. To be entitled to a deduction as a result of a Disqualifying Disposition, the company must satisfy applicable reporting requirements.
Stock Appreciation Rights
Grant of SARs. There will be no federal income tax consequences to either the grantee or the company upon the grant of an SAR.
Exercise of SARs. The grantee generally will recognize ordinary compensation income upon the exercise of an SAR in an amount equal to the aggregate amount of cash and the fair market value of any shares of common stock received upon exercise. Subject to the company satisfying applicable reporting requirements with respect to shares issued upon exercise, the company will be entitled to a deduction equal to the amount includible in the grantee’s income as compensation income as a result of the exercise of the SAR. Any shares of common stock received by the grantee upon the exercise of an SAR will have a tax basis equal to the fair market value of the common stock on the date of exercise. Upon a subsequent sale of those shares, any gain or loss realized by the grantee will be long-term or short-term capital gain or loss, depending upon whether the shares were held for more than one year from the date of exercise.
Restricted Stock and Restricted Stock Units
Restricted Stock. A recipient of Restricted Stock generally does not recognize income and the company generally is not entitled to a deduction at the time of grant. Instead, the recipient recognizes compensation income and the company is generally
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entitled to a deduction on the date on which the stock vests or the substantial risk of forfeiture lapses with respect to the Restricted Stock (“Vesting Date”). The amount of income recognized and the amount of the company’s deduction will equal the fair market value of the vested stock on the Vesting Date. However, the recipient may make an election under Section 83(b) of the Code (a “Section 83(b) Election”) to include in income the fair market value of Restricted Stock at the time of grant. If a Section 83(b) Election is made, the company’s deduction will equal the fair market value of the Restricted Stock at the time of grant. If a grantee of Restricted Stock is retirement eligible at the time of grant or becomes retirement eligible at any time prior to the date on which the stock vests, the Restricted Stock is no longer subject to a substantial risk of forfeiture as of such date and these grantees are required to include in income the fair market value of any unvested Restricted Stock held by the grantee at the time the grantee becomes retirement eligible. The company will be entitled to a deduction equal to the fair market value of the Restricted Stock as of such time.
The Restricted Stock received by the grantee will have a tax basis equal to the fair market value of the Restricted Stock as of the Vesting Date or, if the grantee makes a Section 83(b) Election the fair market value of the Restricted Stock on the date of grant. Upon a subsequent sale of those shares, any gain or loss realized by the grantee will be long-term or short-term capital gain or loss, depending upon whether the shares were held for more than one year from the Vesting Date or, if the grantee makes a Section 83(b) Election, the date of grant.
Restricted Stock Units. A recipient of a Restricted Stock Unit generally does not recognize income and the company is not entitled to a deduction at the time of grant. Instead, the recipient recognizes compensation income at the time payment for the Restricted Stock Units is received by the recipient. The amount of compensation income recognized by the recipient will equal the fair market value of any shares of company common stock received at the time payment for the Restricted Stock Units is received by the recipient. Subject to the company satisfying applicable reporting requirements, the company generally will be entitled to a deduction equal to the amount included in the recipient’s income at the time payment for the Restricted Stock Units is received by the recipient. Any shares of common stock received by the grantee upon payment for the Restricted Stock Units will have a tax basis equal to the fair market value of the common stock on the date of payment. Upon a subsequent sale of those shares, any gain or loss realized by the grantee will be long-term or short-term capital gain or loss, depending upon whether the shares were held for more than one year from the date of payment.
Dividends or Dividend Equivalent Payments. Any dividends on Restricted Stock, or dividend equivalent payments with respect to Restricted Stock Units, paid to the recipient prior to the Vesting Date for Restricted Stock or the time of payment for Restricted Stock Units will be includible in the recipient’s income as compensation income and deductible as such by the company. If the recipient makes a Section 83(b) Election with respect to Restricted Stock, any dividends received by the recipient will be taxed as a dividend to the recipient and the company will not be entitled to a deduction.
Section 162(m) Limitation
In general, Section 162(m) of the Internal Revenue Code limits to $1 million the federal income tax deduction that may be claimed in any tax year of the company with respect to certain compensation payable to any employee who is the chief executive officer or one of the other three highest paid executive officers of the company, other than the chief financial officer, on the last day of that tax year. This limit does not apply to “performance-based compensation” paid under a plan that meets the requirements of Section 162(m) of the Internal Revenue Code and the regulations promulgated thereunder. The company believes that Options granted under the Plan qualify for the performance-based compensation exception to the Section 162(m) limitations under current law because stockholder approval has been obtained for the Plan, and any taxable compensation with respect to Options granted is based solely on an increase in value of the stock after the date of grant of the Option since the Option exercise price will be no less than the fair market value of the company common stock on the date of grant. Compensation from Restricted Stock, Restricted Stock Units and Other Stock-Based Awards generally will be performance-based compensation only if the vesting conditions as established by the Committee are based upon the Performance Goals and the grant of the awards otherwise complies with Section 162(m).
Golden Parachute Tax and Section 280G of the Internal Revenue Code
The Plan provides for immediate vesting of all then outstanding unvested awards upon a Change in Control. If the vesting of the award is accelerated as the result of a Change in Control, all or a portion of the value of the award at that time might be a “parachute payment” under Section 280G of the Code for certain employees of the company. Section 280G generally provides that if compensation received by the grantee that is contingent on a Change in Control equals or exceeds three times the grantee’s average annual compensation for the five taxable years preceding the Change in Control (a “parachute payment”), the company will not be entitled to a deduction, and the recipient will be subject to a 20% excise tax with respect to that portion of the parachute payment in excess of the grantee’s average annual compensation. See “Severance Arrangements — TaxGross-Up
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Payments” for a description of the company’s payment obligations under its outstanding severance agreement with respect to this excise tax. Section 280G of the Code generally applies to employees or other individuals who perform services for the company if, within the12-month period preceding the Change in Control, the individual is an officer of the company, a shareholder owning more than 1% of the stock of the company, or a member of the group consisting of the lesser of the highest paid 1% of the employees of the company or the highest paid 250 employees of the company.
Deferred Compensation
Awards made under the Plan, including awards granted under the Plan that are considered to be deferred compensation for purposes of Section 409A of the Internal Revenue Code, must satisfy the requirements of Internal Revenue Code Section 409A to avoid adverse tax consequences to recipients, which could include the inclusion of amounts not payable currently in income, an excise tax of 20% tax on any amount included in income and interest. The company intends to structure any awards under the Plan such that the requirements under Internal Revenue Code Section 409A are either satisfied or are not applicable to such awards.
The discussion set forth above is intended only as a summary and does not purport to be a complete enumeration or analysis of all potential tax effects relevant to recipients of awards under the Plan. We have not undertaken to discuss the tax treatment of awards under the Plan in connection with a merger, consolidation or similar transaction. Such treatment will depend on the terms of the transaction and the method of dealing with the awards in connection therewith.
Certain Interests of Directors
In considering the recommendation of the Board of Directors with respect to the proposed amendments to the Plan, stockholders should be aware that members of the Board of Directors may from time to time have interests that present them with conflicts of interest in connection with this proposal to approve amendments to the Plan. For example, Directors who are also employees of the company will be eligible for the grant of awards under the Plan; however, only Messrs. DeLaney and Spitler are currently both a director and employee of the company, and neither individual serves on the Compensation Committee. The Board of Directors believes that approval of the proposed amendments to the Plan will advance the interests of the company and its stockholders by encouraging employees to make significant contributions to the long-term success of the company.
New Plan Benefits
Because of the discretionary nature of any future awards under the Plan, the amount of such awards is not determinable at this time with respect to the company’s executive officers, including the named executive officers, and the company’s other employees. Information regarding options and restricted stock granted in fiscal 2009 to certain executive officers of the company under the Plan is set forth in the table captioned “Grants of Plan-Based Awards,” and information regarding outstanding options and restricted stock under the Plan and the Company’s prior stock and stock option plans is set forth in the table captioned “Outstanding Equity Awards at Fiscal Year-End.”
Required Vote
The affirmative vote of a majority of votes cast, either for, against or abstain, is required to approve this proposal. In addition, the total votes cast on the proposal must represent over 50% of shares outstanding. Broker non-votes are not considered to be votes cast for either of these purposes.
The Board of Directors recommends a vote FOR approval of the amendments to 2007 Stock Incentive Plan.
PROPOSAL TO APPROVE THE 2009 MANAGEMENT INCENTIVE PLAN
ITEM NO. 4 ON THE PROXY CARD
The 2009 Management Incentive Plan (the “2009 MIP” or the “Plan”) was recommended by the Compensation Committee (the “Committee”) on September 3, 2009, and adopted by the Board of Directors on September 3, 2009, subject to stockholder approval. If approved by the stockholders, the 2009 MIP will become effective on November 30, 2009 for awards granted on or after May 1, 2010. The 2009 MIP will terminate on November 30, 2014 unless earlier terminated by action of the Board of Directors. Awards made prior to termination of the Plan with respect to the 2015 fiscal year will remain in effect following termination of the Plan. The Committee will not make any awards or pay any compensation under the 2009 MIP without stockholder approval.
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The 2009 MIP will replace the 2005 Management Incentive Plan (the “2005 MIP”). However, awards made with respect to fiscal year 2010 will be governed by the terms of the 2005 MIP.
Stockholder Approval
Stockholder approval of the 2009 MIP is necessary to ensure that certain compensation paid under the Plan can be eligible for an exemption from the limits on tax deductibility imposed by Section 162(m) of the Internal Revenue Code (“Section 162(m)”). Section 162(m) limits the deductibility of certain compensation paid to individuals, referred to herein as Section 162(m) Officers, who are, at the end of the tax year in which the company would otherwise claim its tax deduction, the company’s chief executive officer and its other three highest-paid executive officers other than the chief financial officer. Compensation that qualifies as performance-based for purposes of Section 162(m) is not subject to the annual Section 162(m) limit on the deductibility of compensation in excess of $1 million with respect to Section 162(m) Officers. One of the requirements for compensation to constitute performance-based compensation is that the material terms under which compensation is to be paid to Section 162(m) Officers, including any performance goals, be disclosed to and voted on by the Company’s stockholders in a separate stockholder vote before the payment of the compensation. It is intended that such approval apply to all awards payable with respect to fiscal years 2011, 2012, 2013, 2014 and 2015.
The following summary of the material terms of the 2009 MIP is qualified in its entirety by the terms of the 2009 MIP, a copy of which is attached as Annex C hereto.
Purpose of the 2009 MIP
The purpose of the 2009 MIP is to promote the interests of the Company and its stockholders by providing incentives to (i) certain key management personnel for outstanding performance in the management of one or more of the Company’s Operating Companies, as defined below, and (ii) certain corporate personnel for managing the operations of the Company as a wholeand/or managing the operations of one or more of the Company’s Operating Companies. To achieve that purpose, the 2009 MIP permits the grant of performance-based bonus awards, payable in cash, as further explained below.
Administration of the 2009 MIP
The Committee will administer the 2009 MIP, except that it may delegate administrative powers with respect to awards to non-executive officers. The Committee is composed entirely of “non-employee directors” within the meaning of SECRule 16b-3 promulgated under the Securities Exchange Act of 1934, as amended, and “outside directors” within the meaning of Section 162(m). The members of the Committee are also “independent” as that term is defined by New York Stock Exchange listing requirements and the Company’s Corporate Governance Guidelines.
The Committee will have the power in its discretion to grant awards under the 2009 MIP, to select the individuals to whom awards are granted, to determine the terms of all awards under the 2009 MIP, to interpret the provisions of the 2009 MIP, including the manner of determining financial and accounting concepts discussed in the Plan, and to otherwise administer the Plan.
Eligibility and Participation
The Committee designates those employees of the Company and its subsidiaries. Each year, within 90 days afterOperating Companies who are eligible to receive a bonus under the beginning2009 MIP. Operating Companies, for purposes of the applicable performance period,2009 MIP, are 1) entities in which the Company, directly or indirectly, owns more than 50% of the vote or value of the equity interests issued by such entity or 2) any other entity, operating division, employment location or business unit designated by the Committee as such.
To the extent possible, the Committee will determine those eligible employees who will participatedesignate participants for a particular fiscal year before the start of that year, or as soon as practicable during the fiscal year in which a person first becomes eligible. Except as described below in connection with a Change of Control, the Committee may remove an employee from participation in the 2008Plan, with or without cause, at any time, even if he or she has already been designated to participate, and such an employee will not be entitled to any bonus under the Plan for the year in which he or she is removed, regardless of when during such year he or she is removed.
If the Committee determines that a participant is a Section 162(m) Officer for a particular fiscal year, the officer will be deemed a “Senior Executive Participant” for purposes of the Plan. Such officer’s bonus will be calculated without regard to such designation; however, any bonus for Senior Executive Participants shall be subject to certain limitations and restrictions further described herein.
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Currently, approximately 50,000170 employees of the Company and its subsidiaries are within the class eligible for selection to participate in the 2008 Plan. The Committee currently plans to designate all of the Management Incentive Plan as participants in the 2008 Plan, which is currently 174 employees.2009 MIP.
Award Determination and Performance GoalsPayment of Bonuses
Within the first 90 days of each performance period, theThe Committee will establishdesignate the particular fiscal year over which performance goals foris to be measured (the “Performance Period”), the date that performance period. The Committee may base performance goals on any combinationpayment of corporate, subsidiary, division, or business unit performance.
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However,bonuses will be made with respect to covered employees,any Performance Period, the Committee will establishPerformance Goals, as described below, for the Performance Period, and the method for evaluating performance goals fromfor the Performance Period. Bonuses are paid solely in cash within 90 days following the end of the Performance Period in which the bonus is earned.
Performance Goals
Performance Goals for a Performance Period may include any one or more of the following criteria:
| | |
| • | Increases in Net After-Tax Earnings Per Share, |
| • | Increases in Operating Pre-Tax Earnings, |
| • | Sales Growth,Return on capital; |
| • | Return on Capital Employed,assets; |
| • | Sales growth; |
| • | Market share; |
| • | Margin growth; |
| • | Return on Assets, |
| • | Market Share, |
| • | Margin Growth, |
| • | Return on Equity,equity; |
| • | Total Shareholder Return,shareholder return; |
| • | Increase in net after-tax earnings per share; |
| • | Increase in operating pre-tax earnings; |
| • | Operating Profitprofit or Improvementsimprovements in Operating Profit,operating profit; |
| • | Improvements in Working Capital, |
| • | Improvements incertain asset or financial measures (including working capital and the Ratioratio of Salessales to Net Working Capital,net working capital); |
| • | Reductions in Inventories, Accounts Receivablecertain costs (including reductions in inventories or Operating Expenses,accounts receivable or reductions in operating or non-operating expenses); |
| • | Net Earnings,earnings; |
| • | Pre-Tax Earnings,Pre-tax earnings or variations of income criteria in varying time periods; |
| • | Economic Value Added (definedvalue added, defined as a formula equal to: |
| | |
| ◦ | net operating profit after taxes minus the producttax, less |
| ◦ | average total assets, net of intercompany balances and non-interest liabilities, times weighted average cost of capital times adjusted assets, with adjusted assets equal to total assets less intercompany balances less non-interest bearing liabilities plus present value non-cancellable lease agreements), andcapital; |
| | |
| • | ComparisonsGeneral comparisons with other Peer Companiespeer companies or Generally Recognized Industry Groupsindustry groups or Classifications Based on Relative Performance Using Oneclassifications with regard to one or Moremore of these criteria; or |
| • | Market price of the Above CriteriaCompany’s securities. |
Within 90 days afterWith respect to participants other than Senior Executive Participants, the beginningCommittee may establish Performance Goals pursuant to other factors directly tied to the performance of each performance period,the Company or its Operating Companies.
The relative weights of criteria that comprise the Performance Goals are determined by the Committee in its sole discretion, will also determine (i)discretion. In establishing the length ofPerformance Goals for a Performance Period, the Committee may establish different Performance Goals for different individuals and groups. Also, the Committee may alter the performance period, which shall be no less than three fiscal years in duration, (ii) the payment date for the performance period, (iii) the unit value and the method for determining the payment amount for each participant, and (iv) the maximum number of performance units that may be received by each participant for that performance period. It is anticipated that awards will be made annually under the 2008 Plan, which will result in overlapping performance periods.
The Committee may not alter or amend the performance goals or the specific performance goals of awards under the 2008 Plancriteria with respect to “named executives” (asany participant, provided that term is defined inany such alteration with respect to a Senior Executive Participant must comply with the requirements of the “performance-based compensation” exception under Section 402(a)(3) of162(m).
Regulation S-K)Additional Bonuses and covered employees after they have been approved
Participants who are employed by an Operating Company are also eligible for an additional bonus, as determined by the Committee and without respect to the Performance Goals described above; provided, however, that Senior Executive Participants are only eligible for such additional bonus to the extent that the additional bonus is established in accordance with the requirements of the “performance-based compensation” exception under Section 162(m).
Accounting Principles for Performance Periods
In calculating whether or not a bonus is earned for a particular Performance Period, generally accepted accounting principles shall be applied on a basis consistent with prior periods unless otherwise modified by the Committee; provided, however, that no such exercise of discretion results inmodification shall apply to a reduction inSenior Executive Participant unless the payment amountrequirements for the “performance-based compensation” exception under Section 162(m) have been satisfied with respect to such participants.modification.
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Limitations on Bonuses
The maximum paymentBonus opportunities awarded to Senior Executive Participants depend upon the criteria described above. However, no Senior Executive Participant may receive a bonus for any given Performance Period in respectexcess of $10,000,000. Otherwise, there is no limit to the bonus that participants can earn under the 2009 MIP.
Adjustments for Long Fiscal Years
In calculating whether or not a bonus has been earned, or the amount of any performance periodbonus earned, Performance Goals for fiscal years containing 53 weeks are subject to be paidadjustment in order to any covered employee shall not exceed 1%provide comparability with 52-week years, at the discretion of the Company’s earnings before income taxes as reported in the Company’sForm 10-K for the fiscal year ended immediately prior to the payment date with respect to such performance period.
The 2008 Plan provides generally that the performance for any “long fiscal year” of 53 weeks during a performance period will be automatically adjusted by reducing the relevant performance measure for the last fiscal quarter of the long fiscal year by 1/14th. However, the Committee has the discretionary authority to determine the extent of an adjustment to a performance measure for a long fiscal year to more accurately compare performance during a long fiscal year to that during a 52-week fiscal year;Committee; provided that the Committee may not exercise such discretion after the first 90 days of the Performance Period with respect to a covered employee more than 90 days after the beginning of a performance periodSenior Executive Participants unless such exercise of discretion results in a reduction of the payment amount to the covered employees.bonus payable.
PaymentsClawback of Bonus
Payments earnedIf a restatement of the Company’s financial results, other than a restatement due to a change in accounting policy, occurs within 36 months of the payment of a bonus under the 2008 Plan will be made in cash on or before the payment date for a given performance period. Payment dates will be determined by2009 MIP, the Committee and may not be later thanhas the last dayright, subject to applicable law, to recoup from any recipient the portion of the fourth month following completionbonus payment that would not have been earned had the bonus been calculated based on the restated results, in such form and at such time as determined in the sole discretion of the applicable performance period. Although none of SYSCO’s executive benefit plans currently permit deferral of amounts earned under the 2008 Plan, such plans could allow participants to defer amounts earned under the 2008 Plan in the future.Committee.
Termination of Employment
Generally, a participant must be employed on the last day of a performance period to receive payments under the 2008 Plan. Therefore, if a participant’s employment terminates for any reason other than retirement, death or disability, such participant’s performance units will be cancelled and the participant will receive no payment under the 2008 Plan. If a participant’s employment terminates after the end of a performance period but before the payment date, the participant will be paid any amounts earned during the performance period on the payment date. If a participant’s employment is terminated by reason of retirement or disability, such participant will be entitled to receive payment for the full performance period. Performance units
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can be cancelled if a participant engages in activities competitive with the Company prior to the end of a performance period. If a participant dies prior to the end of a performance period, his or her beneficiaries or personal representatives will be entitled to receive a pro rata portion of any amounts earned.
Change of Control
IfIn the event of a specified change of control as definedof the Company (a “Change of Control”), including but not limited to, certain acquisitions of 20% of more of the Company’s outstanding common stock, certain changes in the 2008 Plan, occurs duringidentity of a performance period, a participant’s performance units with respectmajority of the members of the Board of Directors and certain mergers in which the Company’s then existing stockholders do not own at least 60% of the outstanding voting securities of the surviving entity, in lieu of any award he or she might otherwise be entitled to such performance periodunder the 2009 MIP, each participant will generally be considered vested, and payment will be made to the participantentitled, within 90 days afterfollowing the dateChange of the change of control. Payments will be based on the maximumControl, to a bonus amount that could be paid assuming the highest level of performance is achieved.
Duration of Plan
The 2008 Plan will expire on September 4, 2013, unless sooner terminated by the Board.
Amendments
The 2008 Plan may be withdrawn or amended by the Board or the Committee at any time, unless such withdrawal or amendment may decrease or eliminate a payment that would be made under the change of control provision described above. In addition, the Board and the Committee undertake and represent that the following amendments, to the extent that they would affect covered employees, will not be made without stockholder approval:prorated based on:
| | |
| • | Modifying eligibility requirements,the portion of the year that has elapsed; and |
| • | Materially increasing participants’ benefits, or |
| • | Modifyingan amount equal to the award to which the participant would have been entitled based on annualized performance measuresresults for covered employees.the interim period ending with the most recently completed fiscal quarter. |
For example, if a Change of Control occurred exactly 90 days through the fiscal year, and the Company’s most recently completed interim results on an annualized basis would have entitled a participant to a $50,000 bonus for that year, then he or she would instead be entitled to $12,328.77 (or $50,000 × 90/365).
Participants Remaining at End of Year
If a participant remains employed by the Company or any Operating Company through the last day of the fiscal year in which the Change of Control occurs, and if the bonus that would have been paid to him or her for such fiscal year under the Plan based on the Company’s actual performance for the entire year would have been greater than the amount he or she received under the foregoing paragraph, then a cash sum equal to the difference in value will be paid.
Participants with Severance Arrangements
Notwithstanding the foregoing, with respect to any participant who has a severance agreement with the Company, any bonus paid pursuant to the foregoing paragraphs shall be reduced by any portion of the participant’s severance which is determined by reference to payments received or to be received under the 2009 MIP or any of its predecessor or successor plans. Currently, only Mr. Spitler is a party to a severance agreement. See “Executive Compensation-Severance Arrangements.”
Amendment and Early Termination
The 2009 MIP allows amendment at any time by the Board of Directors. Any such amendment shall be effective as of commencement of the Performance Period during which the 2009 MIP is amended, regardless of the date of the amendment, unless otherwise stated by the Board of Directors. The 2009 MIP may be terminated at any time by the Board of Directors and termination will be effective as of the commencement of the Performance Period in which such action to terminate the 2009 MIP is taken.
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Federal Income Tax Consequences
The following discussion addresses certain anticipated United States federal income tax and certain employment tax consequences to the Company and to recipients of awards made under the Plan who are citizens or residents of the United States for federal income tax purposes. It is based on the Internal Revenue Code and interpretations thereof as in effect on the date of this proxy statement. This summary is not intended to be exhaustive and, among other things, does not describe the state, local, or foreign tax consequences of a generalgrant of awards under the Plan. Moreover, it is not intended as tax advice to any individual.
Cash Bonuses
A participant will recognize ordinary compensation income at the time a participant’s bonus is paid and will be subject to withholding for federal, and generally for state and local, income taxes at the time the participant recognizes ordinary income with respect cash received. Ordinary income of individuals, such as compensation income, is currently taxed at a top marginal rate of 35%.
Deductibility — In General
Subject to the discussion below, the Company will be entitled to a deduction for federal income tax purposes that corresponds to the timing and amount of compensation income recognized by a participant.
Tax Code Limitations on Deductibility
In order for the amounts described above to be deductible by the Company, such amounts must constitute reasonable compensation for services rendered or to be rendered and must be ordinary and necessary business expenses.
Golden Parachute Tax and Section 280G of the Internal Revenue Code
The ability of the Company to obtain a deduction for future payments under the 2009 MIP could be limited by the golden parachute rules of Section 280G of the Internal Revenue Code (“Section 280G”). Section 280G generally provides that if compensation received by the grantee that is contingent on a change of control equals or exceeds three times the grantee’s average annual compensation for the five taxable years preceding the change of control (a “parachute payment”), the company will not be entitled to a deduction, and the recipient will be subject to a 20% excise tax with respect to that portion of the parachute payment in excess of the grantee’s average annual compensation. See “Severance Arrangements — TaxGross-Up Payments” for a description of the company’s payment obligations under its outstanding severance agreement with respect to this excise tax. Section 280G generally applies to employees or other individuals who perform services for the company if, within the12-month period preceding the change of control, the individual is an officer of the company, a shareholder owning more than 1% of the stock of the company, or a member of the group consisting of the lesser of the highest paid 1% of the employees of the company or the highest paid 250 employees of the company.
Section 162(m) Limitation
As noted above, Section 162(m) limits to $1 million the federal income tax consequencesdeduction that may be claimed in any tax year of the company with respect to certain compensation payable to Section 162(m) Officers. This limit does not apply to “performance-based compensation” paid under a plan that meets the 2008 Plan to the covered employees. This summary does not address any state, local or other non-federal tax consequences associated with the payment of compensation to covered employees under the 2008 Plan. This discussion is intended for the information of stockholders considering how to vote at the annual meeting and not as tax guidance to individuals who participate in the 2008 Plan.
Deductibility of Compensation Paid to Covered Employees
In general, subject to certain limitations, compensation that is paid to the covered employees under the 2008 Plan will be deductible by SYSCO for federal income tax purposes.
Section 162(m) of the Code generally imposes a $1 million limit on the deductibility of compensation paid to a covered employee for any taxable year. However, compensation that qualifies as performance-based for purposesrequirements of Section 162(m) of the Internal Revenue Code is not subject toand the Section 162(m) limitation.regulations promulgated thereunder. The 2008 Plan2009 MIP has been drafted and is intended to be administered in a manner that would enable the compensation paid to covered employeesSection 162(m) Officers to qualify as performance-based for purposes of Section 162(m) of the Code. Shareholder. Stockholder approval of the payment of compensation under the 2008 Plan to the covered employees2009 MIP is necessary in order for such compensation paid under the 2009 MIP to qualify as performance-based for purposes of Section 162(m) of the Code..
To the extent that compensation paidDeferred Compensation
Awards made under the 2008 Plan qualifies as performance-based2009 MIP, including awards granted under the 2009 MIP that are considered to be deferred compensation for purposes of Section 162(m)409A of the Internal Revenue Code, must satisfy the requirements of Internal Revenue Code Section 409A to avoid adverse tax deductionconsequences to recipients, which could include the inclusion of amounts not payable currently in income, an excise tax of 20% tax on any amount included in income and interest. The Company intends to structure any awards under the Plan such that is generally available with respectthe requirements under Internal Revenue Code Section 409A are either satisfied or are not applicable to such compensation will not be subject to the deductibility limitation of Section 162(m) of the Code.awards.
Parachute Payments
In general, the Company willThe discussion set forth above is intended only as a summary and does not purport to be unablea complete enumeration or analysis of all potential tax effects relevant to claim a tax deduction with respect to paymentsrecipients of awards under the 2008 CPU Plan following a change of control2009 MIP. We have not undertaken to discuss the extent such payments are treated as a “parachute payment” for purposes of Section 280G of the Code. In addition, a covered employee will be subject to a 20% excise tax to the extent the total parachute payments made to such covered employee exceed the covered person’s five-year average compensation.
A payment is considered a “parachute payment” for purposes of Section 280G of the Code, if the total amount of all payments and benefits to be received by the covered employee that are “contingent on a change of control” for purposes of Section 280G of the Code, including payments under the 2008 CPU Plan, equal or exceed three times the covered employee’s averageW-2 compensation for the five tax years preceding the year of the change of control (“five-year average compensation”). Payments made under the 2008 Plan to a covered employee as a result of a change of control generally will be treated as being paid “contingent on a change of control” for purposes of Section 280G of the Code.
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See “Executive Compensation — Executive Severance Agreements — TaxGross-Up Payments” fortreatment of awards under the 2009 MIP in connection with a descriptionmerger, consolidation or similar transaction. Such treatment will depend on the terms of the Company’s payment obligations undertransaction and the Severance Agreementsmethod of dealing with Messrs. Schnieders and Spitler with respect to this excise tax.
Treatment to Covered Employees
The covered employees will recognize ordinary compensation income with respect to any compensation paid under the 2008 Plan at the time of payment.
Tax Withholding
We will deduct from all 2008 Plan payments, any federal, state or local taxes required by law to be withheld with respect thereto.awards in connection therewith.
New Plan Benefits
Because of the numberdiscretionary nature of performance units that may be granted in theany future awards under the 2008 Plan, the amount of such awards is not determinable at this time the following table indicates the number of performance units that were granted in September 2008with respect to the specified personsCompany’s executive officers, including the named executive officers, and the Company’s other employees.
Executive Deferred Compensation Plan
Participants in the 2009 MIP will be entitled to defer portions of any bonus payable under the 2004 Plan, as well as the related threshold, target2009 MIP and maximum payout values. No additional performance units are expectedreceive matching contributions to be granted during fiscal 2009their accounts under the 2004 Plan or the 2008Company’s Executive Deferred Compensation Plan.
| | | | | | | | | | | | | | | | |
| | Number of
| | Threshold
| | Target
| | Maximum
|
| | Performance
| | Dollar Value
| | Dollar Value
| | Dollar Value
|
Name and Position | | Units | | (1) | | (1) | | (1) |
|
Richard J. Schnieders | | | 90,000 | | | $ | 787,500 | | | $ | 3,150,000 | | | $ | 4,725,000 | |
Chairman and Chief Executive Officer | | | | | | | | | | | | | | | | |
Kenneth F. Spitler | | | 40,000 | | | | 350,000 | | | | 1,400,000 | | | | 2,100,000 | |
President and Chief Operating Officer | | | | | | | | | | | | | | | | |
William J. DeLaney | | | 18,000 | | | | 157,500 | | | | 630,000 | | | | 945,000 | |
Executive Vice President and Chief Financial Officer | | | | | | | | | | | | | | | | |
Larry G. Pulliam | | | 15,000 | | | | 131,250 | | | | 525,000 | | | | 787,500 | |
Executive Vice President, Global Sourcing and Supply Chain | | | | | | | | | | | | | | | | |
Kenneth J. Carrig | | | 15,000 | | | | 131,250 | | | | 525,000 | | | | 787,500 | |
Executive Vice President and Chief Administrative Officer Executive Officers as a group, including the Named Executive Officers | | | 238,000 | | | | 2,082,500 | | | | 8,330,000 | | | | 12,495,000 | |
All non-executive officers and other employees as a group | | | 337,400 | | | | 2,952,250 | | | | 11,809,000 | | | | 17,713,500 | |
All non-employee directors as a group | | | — | | | | — | | | | — | | | | — | |
Total | | | 575,400 | | | | 5,034,750 | | | | 20,139,000 | | | | 30,208,500 | |
See “Compensation Discussion and Analysis — Retirement/Career Incentives — Nonqualified Executive Deferred Compensation Plan”.
Supplemental Executive Retirement Plan
| | |
(1) | | Based on a value of $35 per unit. The threshold dollar value assumes that only one performance criteria, either sales or diluted earnings per share, pays out at a minimum level, resulting in a 25% payout. The target dollar value assumes that both performance criteria pay out at target levels, resulting in a 100% payout. The maximum dollar value assumes that both performance criteria pay out at maximum levels, resulting in a 150% payout. Actual payout amounts will not be determinable until the end of the three-year performance period (fiscal 2012) and may be different than the amounts shown. If minimum performance levels of at least one of the performance criteria are not met, no payments will be made. |
Bonuses payable under the 2009 MIP capped at 150% of the participant’s base salary in effect at the end of the relevant fiscal year will be included in calculating a participant’s final average compensation for purposes of determining benefits payable under the current Supplemental Executive Retirement Plan. See “Compensation Discussion and Analysis — Retirement/Career Incentives — Supplemental Executive Retirement Plan”.
Certain Interests of Directors
In considering the recommendation of the Board of Directors with respect to this proposal to approve the 2009 MIP, stockholders should be aware that members of the Board of Directors may from time to time have interests that present them with conflicts of interest in connection with this proposal. For example, Directors who are also employees of the company will be eligible for the grant of awards under the 2009 MIP; however, only Messrs. DeLaney and Spitler are currently both a director and employee of the company, and neither individual serves on the Compensation Committee. The Board of Directors believes that approval of the 2009 MIP will advance the interests of the Company and its stockholders by encouraging employees to make significant contributions to the long-term success of the Company.
Required Vote
The affirmative vote of a majority of votes cast, either for or against, is required to approve the material terms of,this proposal. Broker non-votes and the payment of compensationabstentions are not considered to covered employees under, the 2008 Plan.be votes cast for this purpose.
The Board of Directors recommends a vote FOR approval of the material terms of, and the
payment of compensation to the covered employees pursuant to, the 2008
Cash Performance Unit2009 Management Incentive Plan.
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PROPOSAL TO RATIFY APPOINTMENT OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
ITEM NO. 35 ON THE PROXY CARD
The Audit Committee of the Board has appointed Ernst & Young LLP as SYSCO’sSysco’s independent registered public accounting firm for fiscal 2008.2010. Ernst & Young LLP has served as the company’s independent public registered public accounting firm providing auditing, financial and tax services since their engagement in fiscal 2002. In determining to appoint Ernst & Young, the Audit Committee carefully considered Ernst & Young’s past performance for the company, its independence with respect to the services to be performed and its general reputation for adherence to professional auditing standards.
Although the company is not required to seek ratification, the Audit Committee and the Board believe it is sound corporate governance to do so. If stockholders do not ratify the appointment of Ernst & Young, the current appointment will stand, but the Audit Committee will consider the stockholders’ action in determining whether to appoint Ernst & Young as the company’s independent registered public accounting firm for fiscal 2009.2010.
Representatives of Ernst & Young LLP will be present at the Annual Meeting and will have the opportunity to make a statement if they desire to do so. They will also be available to respond to appropriate questions.
The Board of Directors recommends a vote FOR the ratification of the
appointment of the independent registered public accounting firm for fiscal 2010.
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ADVISORY VOTE ON EXECUTIVE COMPENSATION
PHILOSOPHY, POLICIES AND PROCEDURES
ITEM NO. 6 ON THE PROXY CARD
We believe that our compensation policies and procedures are centered on apay-for-performance philosophy and are strongly aligned with the long-term interests of our stockholders.
We also believe that both Sysco and its stockholders benefit from corporate governance policies that are responsive to stockholder concerns. A number of our stockholders have expressed an interest in a non-binding advisory vote on the overall executive compensation philosophy, policies and procedures employed by the Company. Thus, with the approval of the Board of Directors and its Compensation Committee, the Company is voluntarily providing stockholders with the right to cast an advisory vote on our executive compensation philosophy, policies and procedures at the 2009 annual meeting of stockholders.
This proposal, commonly known as a“Say-on-Pay” proposal, gives you as a stockholder the opportunity to endorse or not endorse our executive pay philosophy, policies and procedures. This vote is intended to provide an overall assessment of our executive compensation program rather than focus on any specific item of compensation. The Compensation Committee and the Board intend to take into account the outcome of the vote when considering future executive compensation arrangements. However, because your vote is an advisory, non-binding vote, it will not directly affect or otherwise limit any existing compensation or award arrangements of any of our named executive officers. As described in the “Compensation Discussion and Analysis”, the following key principles remain the cornerstone of Sysco’s executive compensation philosophy:
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| • | Pay for performance |
| • | Enhance stockholder value |
| • | Strike appropriate balance between short-term and long-term compensation and short-term and long-term interests of the business |
| • | Provide competitive executive compensation and benefits |
By adhering to these key principles, we believe that the application of our compensation philosophy, policies and procedures have resulted in executive compensation decisions that are appropriate and that have benefitted the Company over time. Sysco’s executive compensation program has resulted in a corporate culture that recognizes and incents individual and team performance and that aligns the interests of stockholders and executives by linking a substantial portion of compensation to the Company’s performance. For example:
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| • | The named executive officers did not receive an annual bonus for fiscal 2009 because the minimum performance criteria of a 4% increase in diluted earnings per share was not satisfied; |
| • | Approximately 83% of the total fiscal 2008 compensation disclosed in the 2008 Summary Compensation Table for our named executive officers (excluding the increase in the value of retirement benefits and earnings on deferred compensation), were annual and longer-term incentives, including MIP bonus, supplemental bonus, cash performance unit grants and stock option grants, that were at risk if certain performance criteria were not satisfied or were subject to our future performance; and |
| • | Despite the fact that our corporate officers earned no MIP bonus for fiscal 2009, approximately 59% of the total fiscal 2009 compensation disclosed in the Summary Compensation Table for our named executive officers (excluding the increase in the value of retirement benefits and earnings on deferred compensation), were annual and longer-term incentives, including cash performance unit grants and stock option grants, that were at risk if certain performance criteria were not satisfied or were subject to our future performance. |
The Compensation Committee of our Board of Directors, which is responsible for determining the compensation of our executive officers, is composed solely of outside directors who satisfy the independence requirements of the New York Stock Exchange. To assist it, the Compensation Committee engages Mercer, an independent compensation consultant. As a result, the Compensation Committee provides independent oversight and engages in an ongoing independent review of all aspects of our executive compensation programs.
In addition, during fiscal 2009, the Compensation Committee and Board adopted a policy that requires the Company to recapture incentive payments paid to an executive if, within 36 months after the payment and following certain specified restatements of financial results, it is determined that such incentive payments would have been lower had they been calculated based on such restated results. Specific provisions enforcing this clawback policy were included in the fiscal 2010 MIP awards granted in May 2009 and are expected to be included in the CPU awards to be issued in November 2009.
We invite you to consider the details provided in the “Compensation Discussion and Analysis”, as well as the Summary Compensation Table and the tables and other information that follow it. These will provide you with the breadth of the
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considerations that are taken into account when setting compensation, as well as details of the valuation of the individual elements of the compensation program. The Summary Compensation Table and its footnotes allow you to view the trends in compensation and application of our philosophies and practices for the years presented.
Given the information provided above and elsewhere in this proxy statement, the Board of Directors asks you to approve the following resolution:
“Resolved, that Sysco’s stockholders approve the compensation philosophy, policies and procedures employed by Sysco’s Compensation Committee, as described in the “Compensation Discussion and Analysis” and the tabular disclosure regarding named executive officer compensation (together with the accompanying narrative disclosure) in this proxy statement”
The Board of Directors recommends that you vote “FOR” this proposal
approving the compensation philosophy, policies and procedures of the Compensation Committee.
STOCKHOLDER PROPOSAL TO REQUEST THAT THE
BOARD TAKE THE NECESSARY STEPS TO
REQUIRE THAT ALLOF DIRECTORS STANDADOPT CERTAIN PRINCIPLES FOR ELECTION ANNUALLYHEALTH CARE REFORM
ITEM NO. 47 ON THE PROXY CARD
Gerald R. ArmstrongThe AFL-CIO Reserve Fund of 820815 Sixteenth Street, No. 705, Denver, Colorado80202-3227,N.W., Washington, D.C. 20006, owner of 100455 shares of SYSCOSysco common stock, has notified us that heit intends to present the following proposal at the Annual Meeting. In accordance with applicable proxy regulations, the proposal and supporting statement, for which the companySysco accepts no responsibility, are set forth below exactly as they were submitted by the proponent.
RESOLUTION
ThatRESOLVED: Shareholders of Sysco Corporation (the “Company”) urge the shareholders of SYSCO CORPORATION request its Board of Directors to takeadopt principles for health care reform based upon principles reported by the steps necessaryInstitute of Medicine:
1. Health care coverage should be universal.
2. Health care coverage should be continuous.
3. Health care coverage should be affordable to requireindividuals and families.
4. The health insurance strategy should be affordable and sustainable for society.
5. Health insurance should enhance health and well being by promoting access to high-quality thatall Directors stand for election annually. The Board declassification shall be completed in a manner that does not affect the unexpired terms of the previously-elected Directors.
is effective, efficient, safe, timely, patient-centered, and equitable.
SUPPORTING STATEMENT
The proponent believesInstitute of Medicine, established by Congress as part of the electionNational Academy of directorsSciences, issued five principles for reforming health insurance coverage in a report,Insuring America’s Health: Principles and Recommendations (2004). We believe principles for health care reform, such as those set forth by the Institute of Medicine, are essential if public confidence in our Company’s commitment to health care coverage is to be maintained.
Access to affordable, comprehensive health care insurance is the strongest way that shareholders influencemost significant social policy issue in America according to polls by NBC News/The Wall Street Journal, the directorsKaiser Foundation andThe New York Times/CBS News. In our opinion, health care reform also is a central issue in the presidential campaign of any corporation. Currently, our board2008.
Many national organizations have made health care reform a priority. In 2007, representing “a stark departure from practice,” the American Cancer Society redirected its entire $15 million advertising budget “to the consequences of directors is divided into three classes with each class serving three-year terms. Because of this structure, shareholders may only vote for one-thirdinadequate health coverage” in the United States (The New York Times,8/31/07).
John Castellani, president of the directors each year. ThisBusiness Roundtable (representing 160 of the country’s largest companies), has stated that 52 percent of the Business Roundtable’s members say health costs represent their biggest economic challenge. “The cost of health care has put a tremendous weight on the U.S. economy,” according to Castellani, “The current situation is not sustainable in the best interests of shareholders because it reduces accountability.
Southwest Bancorp, Inc.a global, competitive workplace.” (BusinessWeek, Nash Finch Company, ConocoPhillips, ONEOK, Inc., Hess Corporation, U.S. Bancorp, Qwest Communications International, XCEL Energy, Marshall & Illsley Corporation, Devon Energy Corporation, and many other corporations have eliminated three-year terms for Directors at either the request of the proponent or his presenting a proposal, such as this, which was supported by shareholders.July 3, 2007).
The performanceNational Coalition on Health Care (whose members include some of our managementthe largest publicly-held companies, institutional investors and our Board of Directors is now being more strongly tested due to economic conditions and the accountabilitylabor unions) also has created principles for performance must be givenhealth insurance reform. According to the shareholders whose capital has been entrustedNational Coalition on Health Care, implementing its principles would save employers presently providing health insurance coverage an estimated $595-$848 billion in the formfirst 10 years of share investments.
A study by researchers at Harvard Business School and the University of Pennsylvania’s Wharton School titled “Corporate Governance and Equity Prices” (Quarterly Journal of Economics, February, 2003) looked at the relationship between corporate governance practices (including classified boards) and firm performance. The study found a significant positive link between governance practices favoring shareholders (such as annual directors election) and firm value.implementation.
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While management may argueWe believe that directors need and deserve continuity, management should become aware that continuity and tenure may be best assured whenthe 47 million Americans without health insurance results in higher costs, causing an adverse effect on shareholder value for our Company, as well as all other U.S. companies which provide health insurance to their performanceemployees. Annual surcharges as directors is exemplary and is deemed beneficialhigh as $1,160 for the uninsured are added to the best intereststotal cost of the corporationeach employee’s health insurance, according to Kenneth Thorpe, a leading health economist at Emory University. Moreover, we feel that increasing health care costs further reduces shareholder value when it leads companies to shift costs to employees, thereby reducing employee productivity, health and its shareholders.
The proponent regards as unfounded the concern expressed by some that annual election of all directors could leave companies without experienced directors in the event that all incumbents are voted out by shareholders. In the unlikely event that shareholders do vote to replace all directors, such a decision would express dissatisfaction with the incumbent directors and reflect a need for change.
If you agree that shareholders may benefit from greater accountability afforded by annual election ofall directors, please vote FOR this proposal.
BOARD OF DIRECTORS’ STATEMENT IN OPPOSITION OF THE PROPOSAL
The Board of Directors unanimously recommends a vote “AGAINST” this stockholder proposal.
After careful consideration, SYSCO’sWhile we recognize the ongoing national dialogue related to health care and the importance of providing comprehensive employee benefits (including health care) to attract and retain employees, the Board has considered the stockholder proposal and believes its adoption is unnecessary. Furthermore, the Board does not believe that Sysco’s Annual Meeting is the proper forum for this national policy debate.
The Board believes that supplying efficient and effective health care coverage at the company level is an important employee benefit issue best addressed by Sysco’s management. Sysco is committed to providing its employees, retirees and their families with quality, cost-effective health and life management benefits designed to meet their diverse and changing needs. We provide medical, dental and vision coverage with the majority of Directors has concludedthe cost borne by Sysco. We also offer wellness programs to many of our employees, includingon-site health screenings,on-site fitness centers at selected locations, a smoking cessation program, lifestyle coaching, disease management and decision-making tools to help employees better manage their overall health. These benefits, which are highly valued by our employees, also help our business by enhancing employee well-being and productivity.
Comprehensive health care reform involves complex legislative and public policy issues. Furthermore, the IOM principles upon which the proposal is based are very complex. A full and complete explanation of the IOM principles and how they relate to the many pending health care reform proposals would require voluminous detail and analysis. This would be an expensive and time consuming project, and we believe that forSysco’s Annual Meeting is not the reasons described below,proper forum to consider these matters. The Board believes that such issues are best addressed by elected officials, health care and public policy experts, and industry groups. Furthermore, the Board does not believe that Sysco’s adoption of the broad and vague health care principles in this proposal would effectively contribute to the ongoing debate surrounding health care reform.
Finally, it is not in the best interests of SYSCOSysco and itsour stockholders to maintain a classified Board on which the directors serve three-year terms.
Comprehensive Corporate Governance Review
In 2006,for the Board directed its Corporate Governance and Nominating Committee to study corporate governance best practices by publicly held U.S. corporations and recommend appropriate amendments to SYSCO’s Bylaws and Corporate Governance Guidelines. The Committee’s comprehensive corporate governance review was conducted with the assistance of outside counsel and was completed in May 2007. As a direct result of this review, the following corporate governance principles designed to benefit stockholders and enhance stockholder value were recommended by the Committee and approved by the Board:
| | |
| • | A Bylaw amendment to implement a majority vote standard for the election of directors in uncontested elections; |
| • | An amendment to the Corporate Governance Guidelines to require any director who is not re-elected in an election in which majority voting applies to tender his or her resignation; |
| • | Simplification of the Committee’s procedures by which stockholders may suggest nominees for election to the Board; and |
| • | Retention of SYSCO’s classified Board structure. |
Analysis of Classified Board Structure
In response to this proposal, the Board, with the assistance of the Corporate Governance and Nominating Committee, once again has examined its decision to retain a classified board. The Committee began its review with the recognition that the number of companies with classified boards had declined in recent years. At the same time, however, a number of well-respected U.S. publicly held companies, including AmerisourceBergen Corporation, Best Buy Company, Inc., Costco Wholesale Corp. and Target Corp., all members of the peer group our Compensation Committee uses for executive compensation benchmarking purposes, continue to have classified boards. As part of its review, the Committee examined the advantages and disadvantages of retaining SYSCO’s classified Board structure and determined that a classified board continues to be in the best interest of SYSCO and its shareholders for the following reasons:
Continuity, Stability and Experience — SYSCO is uniquely positioned as a global leader within its industry, and a company of its size and complexity requires a high level of leadership experience. A classified board structure, which the Company has employed since its inception, provides a framework in which, each year, the majority of the directors will have had prior experience and familiarity with the Company, its operations and strategies, and the management team. Such directors are more capable of engaging in the long-term strategic planning that is critical to our success. In addition, a classified board does not interfere with the Board’s ability to add new directors. In fact, over the past seven years, the Committee has recommended, and SYSCO’s Board has nominated, seven new independent directors and has reduced the number of employee directors to one. Moreover, a classified board structure may strengthenpotentially constrain the Company’s ability to recruit highly qualified directors who are willingprovide health care programs to our employees by adopting the principles of any single organization. We must be able to make a significant commitment to the Company and its stockholders for the long term.
Protection Against Unfair Takeover Proposals — A classified board of directors can play an important role in protecting stockholders against an unsolicited takeover proposal at a price that is not in the best long-term interests of our stockholders. While not precluding a takeover, a classified board structure affords SYSCO time to evaluate the adequacy and fairness of any
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takeover proposal, negotiate with the potential acquirer on behalf of all stockholders and weighappropriate determinations about what health care alternatives including the continued operation of SYSCO’s business, in order to provide maximum value for all stockholders. With over 80% of SYSCO’S Board composed of independent directors, the majority of whom have a historical perspective of the Company’s operations and industry,the Board believes it is well-positioned to evaluate SYSCO’s value and pursue a course of action designed to maximize stockholder value, particularly in the context of a hostile takeover.
In connection with considering the continued desirability of a classified board in the context of a takeover proposal, the Committee also reviewed SYSCO’s other anti-takeover defenses. In this regard, the Committee considered that SYSCO’s stockholder rights plan expired in 2006 and a new plan has not been adopted. The Committee also considered that SYSCO’s Bylaws provide that its stockholders can act by written consent. In addition, the Committee noted that SYSCO’s governing documents do not require a supermajority vote to approve mergers.
Accountability to Stockholders — The Committee understands that some corporate governance activists view classified boards as reducing director accountability. The Board does not believe that to be the case. On the contrary, all directors are required to uphold their fiduciary duties to SYSCO and its stockholders, regardless of the length of their term of office. Moreover, as noted above, SYSCO has adopted a majority voting standard for the election of directors and any director who is not re-elected must tender his or her resignation. The Committee also noted that (1) at least 91% of votes cast and at least 77% of SYSCO’s outstanding shares voted “for” every SYSCO director nominee in the last four director elections; and (2) proxy advisory firm Institutional Shareholder Services recommended votes “for” for all of SYSCO’s director nominees in each of the last four director elections.
Conclusion
In considering the classified board structure, SYSCO’s Board has focused on the best Board structure for SYSCO and its stockholders in order to drive Company profitability and increase stockholder value, particularly in light of the current challenging economic environment and rising fuel prices. The Board believes that experienced directors who are knowledgeable about the Company’s business environment are a valuable resource and are in the best position to make decisions in the best interests of the Companyour employees and its stockholders. Sustainable companies must plan effectively over the long-term,their families and SYSCO’s classified Board provides greater assurance that its directors have the necessary experience and solid knowledge of the Company’s complex business and long-term strategy. As demonstrated by the Company’s results over the past several years, the Board believes that the company has benefited from this long-term focus. In this regard, the company has recently recorded significant year-over-year increases in earnings per share. For full fiscal year 2008 versus 2007, and full fiscal year 2007 versus 2006, diluted earnings per share increased by 13% and 18%, respectively.to offer innovative health care solutions.
For the foregoing reasons, the Board of Directors believes that this stockholder proposal is not in the best interestsinterest of SYSCOSysco and its stockholders.Therefore, the Board of Directors unanimously recommends a vote “AGAINST” this stockholder proposal.
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STOCKHOLDER PROPOSALS
Presenting Business
If you would like to present a proposal underRule 14a-8 of the Securities Exchange Act of 1934 at our 20092010 Annual Meeting of Stockholders, send the proposal in time for us to receive it no later than June 9, 2009.2010. If the date of our 20092010 Annual Meeting is subsequently changed by more than 30 days from the date of this year’s Annual Meeting, we will inform you of the change and the date by which we must receive proposals. If you want to present business at our 20092010 Annual Meeting outside of the shareholder proposal rules ofRule 14a-8 of the Exchange Act and instead pursuant to Article I, Section 8 of the company’s Bylaws, the Corporate Secretary must receive notice of your proposal by August 21, 2009,20, 2010, but not before July 12, 2009,11, 2010, and you must be a stockholder of record on the date you provide notice of your proposal to the company and on the record date for determining stockholders entitled to notice of the meeting and to vote.
Nominating Directors for Election
The Corporate Governance and Nominating Committee will consider any director nominees you recommend in writing for the 20092010 Annual Meeting by followingif you submit such written recommendation in conformity with the proceduresprocedural and adhering to the deadlines discussedinformational requirements set forth at “Presenting Business” above.“Corporate Governance And Board Of Directors Matters — Nominating Committee Policies and Procedures in Identifying and Evaluating Potential Director Nominees” no later than May 1, 2010. You may also nominate someone yourself at the 20092010 Annual Meeting, as long as the Corporate Secretary receives notice of such nomination between July 12, 200911, 2010 and August 21, 2009,20, 2010, and you follow the procedures outlined in Article I, Section 7 of the company’s Bylaws. See also “Corporate Governance and Board of Directors Matters — Nominating Committee Policies and Procedures in Identifying and Evaluating Potential Director Nominees” for information about potential director nominees.
Meeting Date Changes
If the date of next year’s Annual Meeting is advanced by more than 30 days prior to or delayed by more than 60 days after the date of this year’s Annual Meeting, we will inform you of the change, and we must receive your director nominee notices or your stockholder proposals outside ofRule 14a-8 of the Exchange Act by the latest of 90 days before the Annual Meeting, 10 days after we mail the notice of the changed date of the Annual Meeting or 10 days after we publicly disclose the changed date of the Annual Meeting.
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ANNEX A
SYSCO CORPORATION
2008 CASH PERFORMANCE UNIT2009 NON-EMPLOYEE DIRECTORS STOCK PLAN
WHEREASARTICLE 1
GENERAL,
This 2009 Non-Employee Directors Stock Plan (the “Plan”) is established to attract, retain and compensate for service as members of the Board of Directors highly qualified individuals who are not current employees of Sysco Corporation (the “Corporation”) and to enable them to increase their ownership in the Corporation’s common stock. This Plan will be beneficial to the Corporation and its stockholders since it will allow these Directors to have a greater personal financial stake in the Corporation through the ownership of the Corporation’s common stock, in addition to underscoring their common interest with stockholders in increasing the value of the Corporation over the longer term. The Plan provides for the grant of Restricted Stock, Restricted Stock Units, Elected Shares and Additional Shares (all as defined herein, and collectively, “Awards”)
Section 1.1 “Company”Eligibility. All members of the Corporation’s Board of Directors who are not current employees of the Corporation or any of its subsidiaries (“Non-Employee Directors”) are eligible to participate in this Plan.
Section 1.2 Shares Available.
(a) Number of Shares Available. There are reserved for issuance under this Plan 750,000 shares of the Corporation’s Common Stock, $1.00 par value (“Common Stock”), which may be authorized but unissued shares, treasury shares, or shares purchased on the open market.
(b) Recapitalization Adjustment. In the event of a reorganization, recapitalization, stock split, stock dividend, combination of shares, merger, consolidation, rights offering, or any other change in the corporate structure or shares of the Corporation, adjustments in the number and kind of shares authorized by this Plan and in the number and kind of shares that may or are required to be issued hereunder pursuant to any type of Award hereunder shall automatically be made if, and in the same manner as, similar adjustments are made to awards issued under the Corporation’s incentive plans for management of the Corporation then in effect.
(c) Replenishment. If any shares of Common Stock subject to an Award are forfeited or cancelled, or if an Award terminates or expires without a distribution of shares to the grantee, the shares of Common Stock with respect to such Award shall, to the extent of any such forfeiture or cancellation, again be available for Awards under the Plan. Shares of Common Stock shall not again be available if such shares are surrendered or withheld as payment of withholding taxes in respect of an Award. Awards that are settled solely in cash shall not reduce the number of shares of Common Stock available for Awards.
Section 1.3 Deferral of Shares. A Non-Employee Director may elect to defer receipt of all or any portion of any shares of Common Stock to be issued under this Plan, whether such shares are to be issued as a grant of Restricted Stock, Elected Shares or Additional Shares, or upon the vesting of a Restricted Stock Unit grant. Deferral elections shall be made in accordance with terms and conditions set forth in the Sysco Corporation 2009 Board of Directors Stock Deferral Plan (the “Deferred Stock Plan”). Shares of Common Stock to be issued to the Non-Employee Director as a result of a deferral election, without regard to the reinvestment of deemed dividends, if any, at the times and in the form provided under the Deferred Stock Plan shall not be available for other Awards under this Plan. Notwithstanding the foregoing, in the event that Common Stock to be issued under the Deferred Stock Plan resulting from the reinvestment of deemed dividends, if any, would cause the Corporation to exceed the maximum number of shares of Common Stock that may be issued under this Plan, the Common Stock attributable to such dividends shall be paid to the Non-Employee Director in cash based on the Fair Market Value on the date the Non-Employee Director’s deferral otherwise is paid. For purposes of determining the “Fair Market Value” of a share of Common Stock as of any date, the “Fair Market Value” as of that date shall be the last closing price of the Common Stock on the first business day prior to that date on the New York Stock Exchange or, if the Common Stock is not listed on the New York Stock Exchange, on any other exchange or quotation system on which the Common Stock is listed or quoted.
ARTICLE 2
ELECTION TO RECEIVE COMMON STOCK
Section 2.1 Eligibility.
(a) A Non-Employee Director who is otherwise eligible to receive cash payment for services provided as a Director may elect to receive up to 100% of his or her annual retainer fee (excluding (i) any additional retainer fee paid for serving as a
A-1
committee chairman (a “Committee Chairman”), (ii) any fees or other amounts payable for attendance at the meetings of the Board or for service on any committee thereof and (iii) any additional retainer fee paid to a Non-Executive Chairman of the Board (a “Board Chairman”) for his or her service in such capacity), in 10% increments, in the form of Common Stock (a “Stock Election”), subject to the following terms of this Article 2.
(b) In addition to the Stock Election, a Board Chairman or a Committee Chairman who is otherwise eligible to receive an additional cash payment for his or her service in such capacity (the “Chairman’s Fee”) may elect to receive up to 100% of such Chairman’s Fee, in 10% increments, in the form of Common Stock (a “Chairman’s Stock Election”), subject to the following terms of this Article 2.
(c) The amount of the fee which a Non-Employee Director, Board Chairman or Committee Chairman elects to receive in Common Stock is referred to herein as the “Elected Amount.” The Elected Amount shall be deducted ratably from the quarterly payments of the annual retainer fee payable to such Non-Employer Director, Board Chairman or Committee Chairman in that calendar year in which the Elected Amount would have been paid but for the Stock Election.
Section 2.2 Common Stock.
(a) Any Non-Employee Director, Board Chairman or Committee Chairman who makes a Stock Election or Chairman’s Stock Election pursuant to Section 2.1 (an “Electing Director”) shall have an account created on the books of the Corporation to which shares of Common Stock shall be credited and debited as provided in this Article 2 (the “Stock Account”).
(b) The “Eligible Elected Amount” is the lesser of a Non-Employee Director’s Stock Election made pursuant to Section 2.1(a) or 50% of his or her annual retainer fee eligible for a Stock Election made pursuant to Section 2.1(a). With respect to this Section 2.2(b), only a Non-Employee Director’s Eligible Elected Amount shall be used in the calculation of Additional Shares, as described in Section 2.2(b)(ii) below. Each Electing Director who makes a Stock Election pursuant to Section 2.1(a) shall, except as provided in Section 1.3, have credited to his or her Stock Account on the date of each quarterly payment of the annual retainer fee (the “Quarterly Payment Date”) the sum of (i) that number of shares of Common Stock determined by dividing his or her Elected Amount attributable to a Stock Election made pursuant to Section 2.1(a) by the Fair Market Value on such Quarterly Payment Date (such shares are referred to as “Elected Shares”) and (ii) that number of shares of Common Stock determined by dividing 50% of the Eligible Elected Amount by the Fair Market Value on such Quarterly Payment Date (such shares are referred to as “Additional Shares”).
(c) Any Board Chairman or Committee Chairman who makes a Chairman’s Stock Election pursuant to Section 2.1(b) shall, except as provided in Section 1.3, have credited to his or her Stock Account on the Quarterly Payment Date that number of shares of Common Stock determined by dividing his or her Elected Amount attributable to a Chairman’s Stock Election made pursuant to Section 2.1(b) by the Fair Market Value on such Quarterly Payment Date (such shares are referred to as “Chairman’s Elected Shares”). For purposes of this Plan, all references to “Elected Shares” shall be deemed to include the Chairman’s Elected Shares.
Section 2.3 Vesting. All Elected Shares and Additional Shares shall be 100% vested as of the date they are credited to the Electing Director’s Stock Account. Elected Shares may not be sold or transferred prior to the date they are issued. Additional Shares may not be sold or transferred for a period of one year after the date as of which they are issued (or, if deferred, the date as of which they would have been issued, but for the deferral) and such shares shall bear a legend setting forth this restriction (the “Restriction”). The Restriction shall remain in effect after the date an Electing Director ceases to be a Director; provided, however, that (i) if an Electing Director ceases to be a Director by reason of death, disability or cessation of service under the circumstances described in Section 4.1 (a) or (b), or as otherwise determined by the Board of Directors, the Restriction shall lapse and be of no further force or effect on or after the date of such death, disability, cessation of service or determination; and (ii) the Restriction shall lapse and be of no further force or effect on the date of a Change in Control, as defined below.
For purposes of this Plan, “Change in Control” means:
(i) The acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) (a “Person”) of beneficial ownership (within the meaning ofRule 13d-3 promulgated under the Exchange Act) of 20% or more of either (A) the then-outstanding shares of Common Stock of the Corporation (the “Outstanding Corporation Common Stock”) or (B) the combined voting power of the then-outstanding voting securities of the Corporation entitled to vote generally in the election of directors (the “Outstanding Corporation Voting Securities”);provided,however, that, for purposes of this definition, the following acquisitions shall not constitute a Change in Control: (1) any acquisition directly from the Corporation, (2) any acquisition by the Corporation, (3) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Corporation or any company controlled by, controlling or under common control with the Corporation or (4) any
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acquisition by any corporation pursuant to a transaction that complies with subparagraphs (iii)(A), (iii)(B) and (iii)(C) below;
(ii) The occurrence of the following: Individuals who, as of November 18, 2009, constitute the Board (the “Incumbent Board”) cease for any reason to constitute at least a majority of the Board;provided,however, that any individual becoming a director subsequent to November 18, 2009 whose election, or nomination for election by the Corporation’s stockholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board;
(iii) Consummation of a reorganization, merger, statutory share exchange or consolidation or similar corporate transaction involving the Corporation or any of its subsidiaries, a sale or other disposition of all or substantially all of the assets of the Corporation, or the acquisition of assets or stock of another entity by the Corporation or any of its subsidiaries (each, a “Business Combination”), in each case unless, following such Business Combination, (A) all or substantially all of the individuals and entities that were the beneficial owners of the Outstanding Corporation Common Stock and the Outstanding Corporation Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than 60% of the then-outstanding shares of common stock and the combined voting power of the then-outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Business Combination (including, without limitation, a corporation that, as a result of such transaction, owns the Corporation or all or substantially all of the Corporation’s assets either directly or through one or more subsidiaries) in substantially the same proportions to one another as their ownership immediately prior to such Business Combination of the Outstanding Corporation Common Stock and the Outstanding Corporation Voting Securities, as the case may be, (B) no Person (excluding any corporation resulting from such Business Combination or any employee benefit plan (or related trust) of the Corporation or such corporation resulting from such Business Combination) beneficially owns, directly or indirectly, 20% or more of, respectively, the then-outstanding shares of common stock of the corporation resulting from such Business Combination or the combined voting power of the then-outstanding voting securities of such corporation, except to the extent that such ownership existed prior to the Business Combination, and (C) at least a majority of the members of the board of directors of the corporation resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement or of the action of the Board providing for such Business Combination; or
(iv) Approval by the stockholders of the Corporation of a complete liquidation or dissolution of the Corporation.
Section 2.4 Date of Issuance. The effective date of issuance of Common Stock issued pursuant to this Article 2 (the “Issue Date”) shall be December 31 for any year as to which a Non-Employee Director, Board Chairman or Committee Chairman has made a Stock Election or Chairman’s Stock Election as described in Section 2.1 hereof, or if December 31 is not a business day for the Corporation’s transfer agent, the last business day of the Corporation’s transfer agent prior to December 31. On, or as soon as practicable after, the Issue Date, a certificate for the total number of vested shares in his or her account on the Issue Date shall be issued to such Electing Director subject to the other terms and conditions of this Plan, and at that time, the balance in such Electing Director’s Stock Account shall be debited by the number of shares issued. Notwithstanding the foregoing, if a Non-Employee Director, Board Chairman or Committee Chairman ceases to be a director for any reason when there are shares credited to such director’s Stock Account, certificates for such shares shall be issued within 60 days of the date such Non-Employee Director, Board Chairman or Committee Chairman ceases to be a Director and the Issue Date of such shares shall be the date such Non-Employee Director ceased to be a director.
Section 2.5 Method of Election. A Non-Employee Director, Board Chairman or Committee Chairman who wishes to make a Stock Election or Chairman’s Stock Election must deliver to the Secretary of the Corporation a written irrevocable election specifying the Elected Amount by December 31 of the calendar year immediately prior to the calendar year to which the Stock Election or Chairman’s Stock Election relates (or at such other time required under rules established by the Board).
Section 2.6 Calendar 2009 Stock Elections. Elected Shares and Additional Shares may be issued under the Plan pursuant to Stock Elections made in calendar 2009 pursuant to the Corporation’s Amended and Restated 2005 Non-Employee Directors Stock Plan (the “Prior Directors Plan”); provided, however, that such shares shall be subject to the provisions of the Prior Directors Plan.
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ARTICLE 3
RESTRICTED STOCK AND RESTRICTED STOCK UNITS
Section 3.1 Grant of Restricted Stock or Restricted Stock Units. Subject to the terms and provisions of the Plan, the Board of Directors, at any time and from time to time, may grant shares of Restricted Stockand/or Restricted Stock Units, as such terms are defined below, to participants in such amounts and upon such terms and conditions as the Board shall determine; provided, however, that no grant of Restricted Stock or of any Restricted Stock Unit shall in any event vest earlier than one year following the date of grant. “Restricted Stock” means an award of Common Stock subject to forfeiture based on the passage of time, the achievement of performance goals,and/or upon the occurrence of other events as determined by the Board in its discretion, granted subject to the terms of this Plan. “Restricted Stock Unit” means an award denominated in units whose value is derived from Common Stock and which is subject to forfeiture based on the passage of time, the achievement of performance goals,and/or upon the occurrence of other events as determined by the Board in its discretion, granted subject to the terms of this Plan.
Section 3.2 Restricted Stock or Restricted Stock Unit Agreement. Each Restricted Stockand/or Restricted Stock Unit grant shall be evidenced by an Award Agreement duly executed by the Corporation and the Non-Employer Director to whom the award is granted that shall specify the period(s) and types of restrictions, the number of shares of Restricted Stock or the number of Restricted Stock Units granted, and any such other provisions as the Board shall determine.
Section 3.3 Other Restrictions.
(a) The Board shall impose, in the Award Agreement at the time of grant or anytime thereafter, such other conditionsand/or restrictions on any shares of Restricted Stock or Restricted Stock Units granted pursuant to this Plan as it may deem advisable including, without limitation, a requirement that participants pay a stipulated purchase price for each share of Restricted Stock or each Restricted Stock Unit, that specific performance goals be obtained, the imposition of time-based restrictions on vesting following the attainment of the performance goals, time-based restrictions, restrictions under applicable laws or under the requirements of any stock exchange or market upon which such shares are listed or traded, or holding requirements or sale restrictions placed on the shares by the Corporation upon vesting of such Restricted Stock or Restricted Stock Units. Except as otherwise provided in this Article 3 or the applicable Award Agreement, shares of Restricted Stock covered by each Restricted Stock award shall become freely transferable by the participant, subject to compliance with applicable laws, after all conditions and restrictions applicable to such shares have been satisfied or lapse.
(b) Common Stock subject to a Restricted Stock award may not be sold, assigned, transferred, pledged or otherwise encumbered prior to the date it is vested, and except as otherwise specified by the Board, Restricted Stock Units may not be transferred.
(c) Each certificate issued in respect of Common Stock pursuant to a Restricted Stock award shall be registered in the name of the Non-Employee Director and deposited with the Corporation until such time as all restrictions have lapsed.
Section 3.4 Certificate Legend. In addition to any other legends placed on certificates, each certificate representing shares of Restricted Stock granted pursuant to the Plan may bear a legend such as the following:
The sale or other transfer of the shares of stock represented by this certificate, whether voluntary, involuntary, or by operation of law, is subject to certain restrictions on transfer as set forth in the Sysco Corporation 2009 Non-Employee Directors Stock Plan, and in the associated Award Agreement. A copy of the Plan and such Award Agreement may be obtained from Sysco Corporation.
Section 3.5 Voting Rights. To the extent required by law, participants in whose names shares of Restricted Stock granted hereunder shall be issued, shall be granted the right to exercise full voting rights with respect to those shares during the period of restriction. A participant shall have no voting rights with respect to any Restricted Stock Units granted hereunder.
Section 3.6 Dividends and Other Distributions. During the period of restriction, participants holding shares of Restricted Stock or Restricted Stock Units granted hereunder may, if the Board so determines, be credited with dividends paid with respect to the underlying shares or dividend equivalents while they are so held in a manner determined by the Board in its sole discretion. The Board may apply any restrictions to the dividends or dividend equivalents that the Board deems appropriate. The Board, in its sole discretion, may determine the form of payment of dividends or dividend equivalents, including cash, unrestricted Common Stock, Restricted Stock, or Restricted Stock Units.
Section 3.7 Payment in Consideration of Restricted Stock Units. When and if Restricted Stock Units become payable, a participant having received the grant of such units shall be entitled to receive payment from the Corporation in cash, shares of Common Stock of equivalent value (based on the Fair Market Value thereof), in some combination thereof, or in any other form determined by the Board in its sole discretion. The Board’s determination regarding the form of payout shall be set forth or reserved for later determination in the Award Agreement pertaining to the grant of the Restricted Stock Unit.
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ARTICLE 4
MISCELLANEOUS
Section 4.1 Cessation of Service. Except as set forth below and unless otherwise determined by the Board, upon cessation of service as a Non-Employee Director (for reasons other than death), all Restricted Stock and Restricted Stock Units shall be forfeited by the grantee; provided, however, that, unless otherwise determined by the Board, if (a) any Non-Employee Director serves outhis/her term but does not stand for re-election at the end thereof or (b) any Non-Employee Director shall retire from service on the Board (for reasons other than death) prior to the expiration of his or her term and on or after the date he or she attains age 71, such grantee’s Restricted Stock and Restricted Stock Units shall remain in effect and vest as if the grantee had remained a Non-Employee Director of the Corporation. The status of Elected Shares and Additional Shares shall be governed by Section 2.3.
Section 4.2 Death. Upon the death of a Non-Employee Director, all Restricted Stock and Restricted Stock Units shall vest and all restrictions with respect to Additional Shares shall lapse.
Section 4.3 Administration. This Plan shall be administered by the Board of Directors of the Corporation. This Plan may be terminated or amended by the Board of Directors as they deem advisable. The Board may delegate its authority hereunder to the Non-Employee Directors, or to any two or more thereof.
Section 4.4 Amendments. No amendment may revoke or alter in a manner unfavorable to the grantees any Restricted Stock, Restricted Stock Units, Elected Shares or Additional Shares then outstanding, and no amendment, unless approved by the Corporation’s stockholders, can increase the number of shares authorized for issuance hereunder.
Section 4.5 Term. No Restricted Stock, Restricted Stock Unit, Elected Shares or Additional Shares may be credited or awarded under this Plan after November 18, 2016. Restricted Stock and Restricted Stock Units granted prior to November 18, 2016 shall continue to vest in accordance with their terms and may be paid in accordance with the terms thereof and Elected Shares and Additional Shares credited prior to November 18, 2016 shall continue to be subject to the provisions hereof and may be issued in accordance with the terms hereof.
Section 4.6 No Other Rights. Except as provided in this Plan, no Non-Employee Director shall have any claim or right to be granted or issued a Restricted Stock Award, Restricted Stock Unit, Elected Shares or Additional Shares under this Plan. Neither this Plan nor any actions hereunder shall be construed as giving any Director any right to be retained as a director of the Corporation.
Section 4.7 Regulations and Other Approvals.
(a) The obligation of the Corporation to deliver Common Stock with respect to any Award granted under the Plan shall be subject to all applicable laws, rules and regulations, including all applicable federal and state securities laws, and the obtaining of all such approvals by governmental agencies as may be deemed necessary or appropriate by the Board.
(b) Each Award is subject to the requirement that, if at any time the Board determines, in its absolute discretion, that the listing, registration or qualification of Stock issuable pursuant to the Plan is required by any securities exchange or under any state or federal law, or the consent or approval of any governmental regulatory body is necessary or desirable as a condition of, or in connection with, the grant of an Award or the issuance of Common Stock, no such Award shall be granted or payment made or Common Stock issued, in whole or in part, unless listing, registration, qualification, consent or approval has been effected or obtained free of any conditions not acceptable to the Board.
(c) In the event that the disposition of Common Stock acquired pursuant to the Plan is not covered by a then current registration statement under the Securities Act of 1933, as amended (the “Securities Act”), and is not otherwise exempt from such registration, such Common Stock shall be restricted against transfer to the extent required by the Securities Act, or regulations thereunder, and applicable state securities laws, and the Board may require a grantee receiving Common Stock pursuant to the Plan, as a condition precedent to receipt of such Common Stock, to represent to the Corporation in writing that the Common Stock acquired by such grantee is acquired for investment only and not with a view to distribution.
(d) With respect to persons subject to Section 16 of the Exchange Act, it is the intent of the Corporation that the Plan and all transactions under the Plan comply with all applicable provisions ofRule 16b-3, as promulgated under the Exchange Act.
Section 4.8 Prior Plan. This Plan supersedes the Prior Directors Plan. Options granted under the Prior Directors Plan shall continue to become exercisable and may be exercised according to their terms, Restricted Stock Awards and retainer stock awards granted under the Prior Directors Plan shall continue to vest in accordance with their terms and Additional Shares (as defined in the Prior Directors Plan) granted under the Prior Directors Plan shall continue to be subject to the provisions thereof. Awards (as defined within the Prior Directors Plan) with respect to a Non-Employee Director’s service in calendar 2009 may be issued under the Prior Directors Plan.
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ANNEX B
SYSCO CORPORATION
2007 STOCK INCENTIVE PLAN
(conformed version as amended)
SECTION 1
GENERAL
1.1 Purpose. The Sysco Corporation 2007 Stock Incentive Plan (the “Plan”) has been established by Sysco Corporation (the “Company”) to promote the interests of the Company and the stockholders of the Company by providing executive officers and other employees of the Company with appropriate incentives and rewards to encourage them to enter into and continue in the employ of the Company and to acquire a proprietary interest in the long-term success of the Company, as well as to reward the performance of these individuals in fulfilling their personal responsibilities for long-range and annual achievements. The Plan provides for the grant, in the sole discretion of the Committee, as defined below, of options (including “incentive stock options” and “nonqualified stock options”), stock appreciation rights, restricted stock, restricted stock units and other stock- based awards. The Plan is designed so that awards granted hereunder intended to comply with the requirements for “performance-based compensation” under Section 162(m) of the Code may comply with such requirements, and the Plan and such awards shall be interpreted in a manner consistent with such requirements.
1.2 Definitions. Capitalized terms in the Plan shall be defined as set forth below:
In addition to the other definitions contained herein, the following definitions shall apply:
(a) Affiliated Company. The term “Affiliated Company” means any company controlled by, controlling or under common control with the Company.
(b) Award. The term “Award” shall mean any award or benefit granted under the Plan, including, without limitation, Options, SARs, Restricted Stock, Restricted Stock Units and Other Stock-Based Awards.
(c) Award Agreement. The term “Award Agreement” means a written employment, consulting or similar agreement between a Grantee and the Company or a written Award grant agreement under the Plan.
(d) Board. The term “Board” shall mean the Board of Directors of the Company.
(e) Cause. The term “Cause” means, unless otherwise provided by the Committee, (1) “Cause” as defined in any Award Agreement to which the Grantee is a party, or (2) if there is no such Award Agreement or if it does not define Cause: (A) conviction of the Grantee for committing a felony under federal law or the law of the state in which such action occurred, (B) dishonesty in the course of fulfilling the Grantee’s employment duties or (C) willful and deliberate failure on the part of the Grantee to perform the Grantee’s employment duties in any material respect. The Committee shall, unless otherwise provided in an Award Agreement with a Grantee, have the sole discretion to determine whether “Cause” exists, and its determination shall be final.
(f) Change in Control. The term “Change in Control” shall mean:
(i) The acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) (a “Person”) of beneficial ownership (within the meaning ofRule 13d-3 promulgated under the Exchange Act) of 20% or more of either (A) the then-outstanding shares of common stock of the Company (the “Outstanding Company Common Stock”) or (B) the combined voting power of the then-outstanding voting securities of the Company entitled to vote generally in the election of directors (the “Outstanding Company Voting Securities”);provided,however, that, for purposes of this definition, the following acquisitions shall not constitute a Change in Control: (1) any acquisition directly from the Company, (2) any acquisition by the Company, (3) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any Affiliated Company or (4) any acquisition by any corporation; pursuant to a transaction that complies with subparagraphs (iii)(A), (iii)(B) and (iii)(C) below;
(ii) The occurrence of the following: Individuals who, as of November 9, 2007, constitute the Board (the “Incumbent Board”) cease for any reason to constitute at least a majority of the Board;provided,however, that any individual becoming a director subsequent to November 9, 2007 whose election, or nomination for election by the Company’s stockholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this
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purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board;
(iii) Consummation of a reorganization, merger, statutory share exchange or consolidation or similar corporate transaction involving the Company or any of its subsidiaries, a sale or other disposition of all or substantially all of the assets of the Company, or the acquisition of assets or stock of another entity by the Company or any of its subsidiaries (each, a “Business Combination”), in each case unless, following such Business Combination, (A) all or substantially all of the individuals and entities that were the beneficial owners of the Outstanding Company Common Stock and the Outstanding Company Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than 60% of the then-outstanding shares of common stock and the combined voting power of the then-outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Business Combination (including, without limitation, a corporation that, as a result of such transaction, owns the Company or all or substantially all of the Company’s assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership immediately prior to such Business Combination of the Outstanding Company Common Stock and the Outstanding Company Voting Securities, as the case may be, (B) no Person (excluding any corporation resulting from such Business Combination or any employee benefit plan (or related trust) of the Company or such corporation resulting from such Business Combination) beneficially owns, directly or indirectly, 20% or more of, respectively, the then-outstanding shares of common stock of the corporation resulting from such Business Combination or the combined voting power of the then-outstanding voting securities of such corporation, except to the extent that such ownership existed prior to the Business Combination, and (C) at least a majority of the members of the board of directors of the corporation resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement or of the action of the Board providing for such Business Combination; or
(iv) Approval by the stockholders of the Company of a complete liquidation or dissolution of the Company.
(g) Code. The term “Code” means the Internal Revenue Code of 1986, as amended. A reference to any provision of the Code shall include reference to any successor provision of the Code.
(h) Committee. The term “Committee” means the committee of the Board described in Section 3 hereof and anysub-committee established by such Committee pursuant to Section 2.3.
(i) Covered Employee. The term “Covered Employee” means an employee who is, or who is anticipated to become, between the time of grant and payment of the Award, a “covered employee,” as such term is defined in Section 162(m)(3) of the Code (or any successor section thereof).
(j) Eligible Grantee. The term “Eligible Grantee” shall mean any executive officer or employee of the Company or a Subsidiary, as determined by the Committee in its sole discretion.
(k) Fair Market Value. For purposes of determining the “Fair Market Value” of a share of Stock as of any date, the “Fair Market Value” as of that date shall be the closing sale price of the Stock on the first business day prior to that date on the New York Stock Exchange.
(l) Grantee. The term “Grantee” means an executive officer or employee of the Company or a Subsidiary who has been granted an Award under the Plan.
(m) ISO. The term “ISO” means any Option intended to be and designated as an incentive stock option within the meaning of Section 422 of the Code.
(n) NQSO. The term “NQSO” means any Option that is not designated as an ISO, or which is designated by the Committee as an ISO but which subsequently fails or ceases to qualify as an ISO.
(o) Option. The term “Option” means a right, granted to an Eligible Grantee under Section 4.2(a), to purchase shares of Stock. An Option may be either an ISO or an NQSO.
(q) Other Stock-Based Award. The term “Other Stock-Based Award” means a right or other interest granted to an Eligible Grantee under Section 4.2(e) of the Plan that may be denominated or payable in, valued in whole or in part by reference to, or otherwise based on, or related to, Stock, including but not limited to (i) unrestricted Stock awarded as a bonus or upon the attainment of Performance Goals or otherwise as permitted under the Plan, and (ii) a right granted to an Eligible Grantee to acquire Stock from the Company containing terms and conditions prescribed by the Committee.
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(r) Performance Goals. The term “Performance Goals” means performance goals based on the attainment by the Company or any Subsidiary of the Company or any Affiliated Company (or any division or business unit of any such entity), or any two or more of the foregoing, of performance goals pre-established by the Committee in its sole discretion, based on one or more of the following criteria (if applicable, such criteria shall be determined in accordance with generally accepted accounting principles (“GAAP”) or based upon the Company’s GAAP financial statements): (1) return on total stockholder equity; (2) earnings per share of Stock; (3) earnings before any or all of interest, taxes, minority interest, depreciation and amortization; (4) economic profit; (5) sales or revenues; (6) return on assets, capital or investment; (7) market share; (8) control of operating or non-operating expenses; (9) implementation or completion of critical projects or processes; (10) operating cash flow, (11) free cash flow, (12) return on capital or increase in pretax earnings; (13) net earnings; (14) margins; (15) market price of the Company’s securities, and (16) any combination of, or a specified increase in, any of the foregoing. The Performance Goals may be based upon the attainment of specified levels of performance under one or more of the criteria described above relative to the performance of other comparable entities. To the extent permitted under Section 162(m) of the Code (including, without limitation, compliance with any requirements for stockholder approval), the Committee in its sole discretion may designate additional business criteria on which the Performance Goals may be based or adjust, or modify or amend the aforementioned business criteria. Performance Goals may include a threshold level of performance below which no Award will be earned, a level of performance at which the target amount of an Award will be earned and a level of performance at which the maximum amount of the Award will be earned. The Committee in its sole discretion shall have the authority to make equitable adjustments to the Performance Goals in recognition of unusual or non-recurring events affecting the Company or any Subsidiary of the Company or any Affiliated Company or the financial statements of the Company or any Subsidiary of the Company or any Affiliated Company, in response to changes in applicable laws or regulations, including changes in generally accepted accounting principles or practices, or to account for items of gain, loss or expense determined to be extraordinary or unusual in nature or infrequent in occurrence or related to the disposal of a segment of a business, as applicable.
(s) Restricted Stock. The term “Restricted Stock” means an Award of shares of Stock to an Eligible Grantee under Section 4.2(c) that may be subject to certain restrictions and to a risk of forfeiture. Stock issued upon the exercise of Options or SARs is not “Restricted Stock” for purposes of the plan, even if subject to post-issuance transfer restrictions or forfeiture conditions. When Restricted Stock vests, it ceases to be “Restricted Stock” for purposes of the Plan.
(t) Restricted Stock Unit. The term “Restricted Stock Unit” means a right granted to an Eligible Grantee under Section 4.2(d) to receive Stock or cash at the end of a specified deferral period, which right may be conditioned on the satisfaction of specified performance or other criteria.
(u) Rule 16b-3. The term“Rule 16b-3” meansRule 16b-3, as from time to time in effect promulgated by the Securities and Exchange Commission under Section 16 of the Securities Exchange Act of 1934, as amended, including any successor to such Rule.
(v) Stock. The term “Stock” means shares of the common stock, par value $1 per share, of the Company.
(w) Stock Appreciation Right or SAR. The term “Stock Appreciation Right” or “SAR” means the right, granted to an Eligible Grantee under Section 4.2(b), to be paid an amount measured by the appreciation in the Fair Market Value of Stock from the date of grant to the date of exercise of the right.
(x) Subsidiary. The term “Subsidiary” means any present or future subsidiary corporation of the Company within the meaning of Section 424(f) of the Code, and any present or future business venture designated by the Committee in which the Company has a significant interest, including, without limitation, any subsidiary corporation in which the Company has at least a 20% ownership interest, as determined in the discretion of the Committee, and also including the Baugh Supply Chain Cooperative, Inc. and all of its members.
SECTION 2
ADMINISTRATION
2.1 Committee. The authority to manage the operation of and administer the Plan shall be vested in a committee (the “Committee”) in accordance with this Section 2. The Committee shall be selected by the Board, and shall consist solely of two or more members of the Board who are non-employee directors within the meaning ofRule 16b-3 and are outside directors within the meaning of Code Section 162(m). Unless otherwise determined by the Board, Sysco’s Compensation Committee shall be designated as the “Committee” hereunder.
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2.2 Powers of Committee. The Committee’s administration of the Plan shall be subject to the following:
(a) Subject to the provisions of the Plan, the Committee will have the authority and discretion to select from among the Eligible Grantees those persons who shall receive Awards, to determine the time or times of receipt, to determine the types of Awards and the number of shares covered by the Awards, and to establish the terms, conditions, performance criteria, restrictions, and other provisions of such Awards.
(b) The Committee will have the authority and discretion to interpret the Plan, to establish, amend, and rescind any rules and regulations relating to the Plan, to determine the terms and provisions of any Award Agreement made pursuant to the Plan, and to make all other determinations that may be necessary or advisable for the administration of the Plan.
(c) Any interpretation of the Plan by the Committee and any decision made by it under the Plan is final and binding on all persons.
(d) In managing the operation of and administering the Plan, the Committee shall take action in a manner that conforms to the certificate of incorporation and by-laws of the Company, and applicable state corporate law.
(e) Subject to Section 3.2 hereof, neither the Board, the Committee nor their respective delegates shall have the authority to (i) reprice (or cancel and regrant) any Option, SAR or, if applicable, other Award at a lower exercise, base or purchase price without first obtaining the approval of the shareholders,Company’s stockholders, (ii) take any other action (whether in the form of an amendment, cancellation or replacement grant, or a cash-out of underwater options) that has the effect of repricing an Option, SAR or other Award, or (iii) grant any Option, SAR or other Award that contains a so-called “reload” feature under which additional Options, SARs or other Awards are granted automatically to the Grantee upon exercise of the original Option, SAR or Award.
(f) Anything in the Plan to the contrary notwithstanding, the Committee’s authority to modify outstanding Awards shall be limited to the extent necessary so that the existence of such authority does not (i) cause an Award that is not otherwise deferred compensation subject to Section 409A of the Code to become deferred compensation subject to Section 409A of the Code or (ii) cause an Award that is otherwise deferred compensation subject to Section 409A of the Code to fail to meet the requirements prescribed by Section 409A of the Code.
(g) Anything in the Plan to the contrary notwithstanding, neither the Board nor the Committee may accelerate the payment or vesting of any Option, SAR or other Award except in the event of death, disability, retirement or a Change in Control.
2.3 Delegation by Committee. Except to the extent prohibited by applicable law or the applicable rules of a stock exchange, the Committee may allocate all or any portion of its responsibilities and powers to any one or more of its members, including without limitation, the power to designate Grantees hereunder and determine the amount, timing and terms of Awards hereunder. Any such allocation or delegation may be revoked by the Committee at any time.
2.4 Information to be Furnished to Committee. The Company and its Subsidiaries and Affiliated Companies shall furnish the Committee with such data and information as it determines may be required for it to discharge its duties. The records of the Company and its Subsidiaries and Affiliated Companies as to an employee’s or Grantee’s employment, termination of employment, leave of absence, reemployment and compensation shall be conclusive unless the Committee determines such records to be incorrect. Grantees and other persons entitled to benefits under the Plan must furnish the Committee such evidence, data or information as the Committee considers desirable to carry out the terms of the Plan.
2.5 Indemnification. Each person who is or shall have been a member of the Committee, or the Board, shall be indemnified and held harmless by the Company against and from any loss, cost, liability or expense that may be imposed upon or reasonably incurred by him or her in connection with or resulting from any claim, action, suit or proceeding to which he or she may be a party or in which he or she may be involved by reason of any action taken or failure to act under the Plan and against and from any and all amounts paid by him or her in settlement thereof, with the Company’s approval, or paid by him or her in satisfaction of any judgment in any such action, suit or proceeding against him or her, provided he or she shall give the Company an opportunity, at its own expense, to handle and defend the same before he or she undertakes to handle and defend it on his or her own behalf. The foregoing right of indemnification shall be in addition to any other rights of indemnification or elimination of liability to which such persons may be entitled under the Company’s Certificate of Incorporation or Bylaws, as a matter of law, or otherwise, or any power that the Company may have to indemnify them or hold them harmless.
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SECTION 3
STOCK SUBJECT TO PLAN
3.1 Shares Available for Awards; Individual Limitations. Subject to the adjustments described below, the maximum number of shares of Stock reserved for the grant of Awards under the Plan shall be 55 million shares of Stock. Of the 55 million shares of Stock reserved for the grant of Awards under the Plan, up to 55 million shares of Stock may be issued in the aggregate pursuant to Options, which may be either ISOs or NQSOs, and SARs, and up to 10 million shares of Stock may be awarded under the Plan in the aggregate in respect of Awards other than Options and SARs. The maximum number of shares of Stock that may be covered by all Optionsand/or SARs granted to any individual during any fiscal year under the Plan is 750,000. The maximum number of shares of Stock that may be covered by all Awards other than Options or SARs granted to any individual during any fiscal year under the Plan is 250,000. Shares of Stock issuable hereunder may, in whole or in part, be authorized but unissued shares or shares of Stock that shall have been or may be reacquired by the Company in the open market, in private transactions or otherwise. The Company’s three-year rolling average annual usage of shares under the Plan will not exceed 11/2% of total shares outstanding, measured as of the first day of each fiscal year in which grants are being made. If any shares of Stock subject to an Award are forfeited or cancelled, or if an Award terminates or expires without a distribution of shares to the Grantee, the shares of Stock with respect to such Award shall, to the extent of any such forfeiture or cancellation, again be available for Awards under the Plan; provided, however, that with respect to SARs that are settled in Stock, the aggregate number of shares of Stock subject to the SAR grant shall be counted against the shares available for issuance under the Plan as one share for every share subject thereto, regardless of the number of shares used to settle the SAR upon exercise. Shares of Stock shall not again be available if such shares are surrendered or withheld as payment of either the exercise price of an Award and/ or withholding taxes in respect of an Award. Awards that are settled solely in cash shall not reduce the number of shares of Stock available for Awards. Upon the exercise of any Award granted in tandem with any Award pursuant to Section 4.2(b)(i), such related Awards shall be cancelled to the extent of the number of shares of Stock as to which the Award is exercised and, notwithstanding the foregoing, such number of shares shall no longer be available for Awards under the Plan.
3.2 Adjustments for Changes in Capitalization. If the outstanding shares of Stock are changed into or exchanged for a different number or kind of shares or other securities of the Company by reason of any recapitalization, reclassification, stock split, stock dividend, combination, subdivision or similar transaction, or if the Company makes an extraordinary dividend or distribution to its stockholders (including without limitation to implement a spinoff) (each, a “Corporate Transaction”) then, subject to any required action by the stockholders of the Company, the number and kind of shares of Stock available under the Plan or subject to any limit or maximum hereunder shall automatically be proportionately adjusted, with no action required on the part of the Committee or otherwise. Subject to any required action by the stockholders, the number and kind of shares covered by each outstanding Award, and the price per share in each such Award, to the extent applicable, shall be automatically proportionately adjusted for any increase or decrease in the number of issued shares of the Company resulting from a Corporate Transaction to the extent necessary to prevent dilution or enlargement of the rights of Grantees under the Plan.
3.3 Certain Mergers and Other Extraordinary Events. If the Company merges or consolidates with another corporation, whether or not the Company is a surviving corporation, or if the Company is liquidated or sells or otherwise disposes of substantially all of its assets while unexercised Options or other Awards remain outstanding under the plan, (A) subject to the provisions of clause (C) below, after the effective date of the merger, consolidation, liquidation, sale or other disposition, as the case may be, each holder of an outstanding Option or other Award shall be entitled, upon exercise of that Option or Award or in place of it, as the case may be, to receive, at the option of the Committee and in lieu of shares of Stock, (i) the number and class or classes of shares of stock or other securities or property to which the holder would have been entitled if, immediately prior to the merger, consolidation, liquidation, sale or other disposition, the holder had been the holder of record of a number of shares of Stock equal to the number of shares of Stock as to which that Option may be exercised or are subject to the Award or (ii) shares of stock of the company that is the surviving corporation in such merger, consolidation, liquidation, sale or other disposition having a value, as of the date of payment under (i) above, as determined by the Committee in its sole discretion, equal to the value of the shares of stock or other securities or property otherwise payable under (i) above; (B) if Options or other Awards have not already become exercisable or vested under Section 4.2(g) hereof, the Committee may waive any limitations set forth in or imposed pursuant to the Plan so that all Options or other Awards, from and after a date prior to the effective date of that merger, consolidation, liquidation, sale or other disposition, as the case may be, specified by the Committee, shall be exercisable in fulland/or fully vested; and (C) all outstanding Options or SARs may be cancelled by the Committee as of the effective date of any merger, consolidation, liquidation, sale or other disposition, provided that any such cancellation pursuant to this Section 3.3 shall be contingent upon the payment to the affected Grantees, in the case of anin-the-money Option or SAR, cash, property or a combination thereof having an aggregate value equal to the excess of the value of the per-share amount of consideration paid pursuant to the merger, consolidation, liquidation, sale or other disposition, as the case may be, giving rise to such cancellation, over the exercise price of such Option or SAR multiplied by the number of shares of Stock subject to the Option or SAR. Any
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adjustments pursuant to this Section 3.3 shall be made by the Committee in its sole discretion, and its determination in that respect shall be final, binding and conclusive, regardless of whether or not any such adjustment shall have the result of causing an ISO to cease to qualify as an ISO.
3.4 Limitation on Grantees’ Rights. Except as hereinbefore expressly provided in this Section 3, a Grantee shall have no rights by reason of any subdivision or consolidation of shares of stock of any class or the payment of any stock dividend or any other increase or decrease in the number of shares of stock of any class or by reason of any dissolution, liquidation, merger, or consolidation or spin-off of assets or stock of another corporation, and any issue by the Company of shares of stock of any class shall not affect, and no adjustment by reason thereof shall be made with respect to, the number or price of shares of Stock subject to an Award, unless the Committee shall otherwise determine.
3.5 Company Right and Power. The grant of any Award pursuant to the Plan shall not affect in any way the right or power of the Company (A) to make adjustments, reclassifications, reorganizations or changes of its capital or business structure, (B) to merge or consolidate, (C) to dissolve, liquidate, sell, or transfer all or any part of its business or assets or (D) to issue any bonds, debentures, or preferred or other preference stock ahead of or affecting the Stock.
3.6 Fractional Shares. Notwithstanding anything contained in this Section 3, if any action described in this Section 3 results in a fractional share for any Grantee under any Award hereunder, such fraction shall be completely disregarded and the Grantee shall only be entitled to the whole number of shares resulting from such adjustment. All adjustments made by the Committee to effect the terms of this Section 3 shall be final, conclusive and binding upon the holders of Options, SARS and other Awards.
SECTION 4
AWARDS
4.1 General. The term of each Award shall be for such period as may be determined by the Committee, subject to the limitations set forth below. Subject to the terms of the Plan and any applicable Award Agreement, payments to be made by the Company or any Subsidiary of the Company upon the grant, maturation, or exercise of an Award may be made in such forms as the Committee shall determine at the date of grant or thereafter, including, without limitation, cash, Stock, or other property. In addition to the foregoing, the Committee may impose on any Award or the exercise thereof, at the date of grant, such additional terms and conditions, not inconsistent with the provisions of the Plan, as the Committee shall determine; provided, however, that any such terms and conditions shall not be inconsistent with Section 409A of the Code.
4.2 Types of Awards. The Committee is authorized to grant the Awards described in this Section 4.2, under such terms and conditions as deemed by the Committee to be consistent with the purposes of the Plan. Such Awards may be granted with value and payment contingent upon Performance Goals. Each Award shall be evidenced by an Award Agreement containing such terms and conditions applicable to such Award as the Committee shall determine.
(a) Options. The Committee is authorized to grant Options to Grantees on the following terms and conditions:
(i) Type of Award. The Award Agreement evidencing an Option shall designate the Option as either an ISO or an NQO, as determined in the discretion of the Committee.
(ii) Exercise Price. The exercise price of each Option granted under this Section 4.2 shall be established by the Committee or shall be determined by a method established by the Committee at the time the Option is granted; provided, however, that the exercise price shall not be less than 100% of the Fair Market Value of a share of Stock on the date of grant of the Award.
(iii) Exercise.
(A) Subject to the provisions of the Plan, Options shall be exercisable in accordance with such terms and conditions and during such periods as may be established by the Committee; provided, however, that no Option may be exercised more than seven years after its grant date.
(B) Except as set forth in Section 5.11, no Option granted hereunder may be exercised after the earlier of (I) the expiration of the Option or (II) ninety days after the severance of an Option holder’s employment with the Company or any Subsidiary. At the time of the grant of Options, the Committee may place restrictions on the exercisability or vesting of Options that shall lapse, in whole or in part, only upon the attainment of Performance Goals; provided that such Performance Goals shall relate to periods of performance of at least one fiscal year, and if the Award is granted to a Covered Employee, the grant of the Award and the establishment of the Performance Goals shall be made during the period required under Code Section 162(m).
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(C) Whether an authorized leave of absence, or an absence for military or government service, constitutes severance of an Option holder’s employment relationship with the Company or a Subsidiary will be determined by the Committee at the time of the event, in its sole discretion.
(iv) Payment of Option Exercise Price. The payment of the exercise price of an Option granted under this Section 4 shall be subject to the following:
(A) Subject to the following provisions of this Section 4.2(a)(iv), the full exercise price for shares of Stock purchased upon the exercise of any Option shall be paid at the time of such exercise (except that, in the case of an exercise arrangement approved by the Committee and described in paragraph 4.2(a)(iv)(C) payment may be made as soon as practicable after the exercise).
(B) The exercise price shall be payable in cash or by tendering (either by actual delivery of shares or by attestation) shares of Stock that are acceptable to the Committee and were valued at Fair Market Value as of the day the shares are tendered, or in any combination of cash, shares, or attested shares, as determined by the Committee.
(C) To the extent permitted by applicable law and the policies adopted from time to time by the Committee, a Grantee may elect to pay the exercise price upon the exercise of an Option by irrevocably authorizing a third party to sell shares of Stock (or a sufficient portion of the shares) acquired upon exercise of the Option and remit to the Company a sufficient portion of the sale proceeds to pay the entire exercise price and any tax withholding resulting from such exercise.
(b) SARs. The Committee is authorized to grant SARs to Grantees on the following terms and conditions:
(i) In General. SARs may be granted independently or in tandem with an Option at the time of grant of the related Option. An SAR granted in tandem with an Option shall be exercisable only to the extent the underlying Option is exercisable. Payment of an SAR may be made in cash, Stock, property, or a combination of the foregoing, as specified in the Award Agreement or determined in the sole discretion of the Committee. At the time of the grant of SARs, the Committee may place restrictions on the exercisability or vesting of SARs that certainshall lapse, in whole or in part, only upon the attainment of Performance Goals; provided that such Performance Goals shall relate to periods of performance of at least one fiscal year, and if the Award is granted to a Covered Employee, the grant of the Award and the establishment of the Performance Goals shall be made during the period required under Code Section 162(m).
(ii)Term and Exercisability of SARs. SARs shall be exercisable over the exercise period at such times and upon such conditions as the Committee may determine, as reflected in the Award Agreement; provided, however, that no SAR may be exercised more than seven years after its grant date. Except as set forth in Section 5.11, no SAR granted hereunder may be exercised after the earlier of (A) the expiration of the SAR or (B) ninety days after the severance of an SAR holder’s employment with the Company or any Subsidiary.
(iii) Payment. An SAR shall confer on the Grantee a right to receive an amount with respect to each share of Stock subject thereto, upon exercise thereof, equal to the excess of (A) the Fair Market Value of one share of Stock on the date of exercise over (B) the grant price of the SAR (which in the case of an SAR granted in tandem with an Option shall be equal to the exercise price of the underlying Option, and which in the case of any other SAR shall be such price as the Committee may determine but in no event shall be less than the Fair Market Value of a share of Stock on the date of grant of such SAR). An SAR may be exercised by giving written notice of such exercise to the Committee or its designated agent.
(c) Restricted Stock. The Committee is authorized to grant Restricted Stock to Grantees on the following terms and conditions:
(i) Issuance and Restrictions. Restricted Stock shall be subject to such restrictions on transferability and other restrictions, if any, as the Committee may impose at the date of grant, which restrictions may lapse separately or in combination at such times, under such circumstances, in such installments, or otherwise, as the Committee may determine. The Committee may place restrictions on Restricted Stock that shall lapse, in whole or in part, only upon the attainment of Performance Goals; provided that such Performance Goals shall relate to periods of performance of at least one fiscal year, and if the Award is granted to a Covered Employee, the grant of the Award and the establishment of the Performance Goals shall be made during the period required under Code Section 162(m). Except to the extent restricted under the Award Agreement relating to the Restricted Stock, a Grantee granted Restricted Stock shall have all of the rights of a stockholder including, without limitation, the right to vote Restricted Stock and the right to receive dividends thereon.
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(ii) Certificates for Stock. Restricted Stock granted under the Plan may be evidenced in such manner as the Committee shall determine. If certificates representing Restricted Stock are registered in the name of the Grantee, such certificates shall bear an appropriate legend referring to the terms, conditions, and restrictions applicable to such Restricted Stock, and the Company may retain physical possession of the certificate.
(iii) Dividends. Except to the extent restricted under the applicable Award Agreement, cash dividends paid on Restricted Stock shall be paid at the dividend payment date subject to no restriction. Unless otherwise determined by the Committee, Stock distributed in connection with a stock split or stock dividend shall be subject to the transfer restrictions, forfeiture risks and vesting conditions to the same extent as the Restricted Stock with respect to which such Stock or other property has been distributed.
(d) Restricted Stock Units. The Committee is authorized to grant Restricted Stock Units to Grantees, subject to the following terms and conditions:
(i) Conditions to Vesting. At the time of the grant of Restricted Stock Units, the Committee may place restrictions on Restricted Stock Units that shall lapse, in whole or in part, only upon the attainment of Performance Goals; provided that such Performance Goals shall relate to periods of performance of at least one fiscal year, and if the Award is granted to a Covered Employee, the grant of the Award and the establishment of the Performance Goals shall be made during the period required under Code Section 162(m).
(ii) Benefit Upon Vesting. Unless otherwise provided in an Award Agreement, upon the vesting of a Restricted Stock Unit, there shall be delivered to the Grantee, within 30 days of the date on which such Award (or any portion thereof) vests, the number of shares of Stock equal to the number of Restricted Stock Units becoming so vested.
(iii) Dividend Equivalents. Subject to the requirements of Section 409A of the Code, an Award of Restricted Stock Units may provide the Grantee with the right to receive dividend equivalent payments with respect to Stock subject to the Award (both before and after the Stock subject to the Award is earned, vested, or acquired), which payments may be either made currently or credited to an account for the Grantee, and may be settled in cash or Stock, as determined by the Committee. Any such settlements and any such crediting of dividend equivalents may, at the time of grant of the Restricted Stock Unit, be made subject to the transfer restrictions, forfeiture risks, vesting and conditions of the Restricted Stock Units and subject to such other conditions, restrictions and contingencies as the Committee shall establish at the time of grant of the Restricted Stock Unit, including the reinvestment of such credited amounts in Stock equivalents, provided that all such conditions, restrictions and contingencies shall comply with the requirements of Section 409A of the Code.
(e) Other Stock-Based Awards. The Committee is authorized to grant Awards to Grantees in the form of Other Stock-Based Awards, as deemed by the Committee to be consistent with the purposes of the Plan. At the time of the grant of Other Stock-Based Awards, the Committee may place restrictions on the payout or vesting of Other Stock-Based Awards that shall lapse, in whole or in part, only upon the attainment of Performance Goals; provided that such Performance Goals shall relate to periods of performance of at least one fiscal year, and if the Award is granted to a Covered Employee, the grant of the Award and the establishment of the Performance Goals shall be made during the period required under Code Section 162(m).
The Committee shall determine the terms and conditions of such Awards at the date of grant. Other Stock-Based Awards may not be granted with the right to receive dividend equivalent payments.
(f) Settlement of Options and SARs. Shares of Stock delivered pursuant to the exercise of an Option or SAR shall be subject to such conditions, restrictions and contingencies as the Committee may establish in the applicable Award Agreement. Settlement of SARs may be made in shares of Stock (valued at their Fair Market Value at the time of exercise), in cash, or in a combination thereof, as determined in the discretion of the Committee. The Committee, in its discretion, may impose such conditions, restrictions and contingencies with respect to shares of Stock acquired pursuant to the exercise of an Option or an SAR as the Committee determines to be desirable.
(g) Vesting; Additional Terms. Except as set forth below and in Sections 3.3 and 5.11, and other than Options, SARs, Restricted Stock, Restricted Stock Units or Other Stock-Based Awards conditioned upon the attainment of Performance Goals that relate to performance periods of at least one fiscal year, no Award granted hereunder may vest in excess of 1/3 of the number of shares subject to the Award per year for the first three years after the grant date. Unless the Committee determines otherwise, the date on which the Committee adopts a resolution expressly granting an Award shall be considered the day on which such Award is granted. The term of any Award granted under the Plan will not exceed seven years from the date of grant. Notwithstanding the foregoing, if before the expiration of an Option or SAR, the holder’s
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employment relationship with the Company or a Subsidiary terminates as a result of retirement in good standing or disability under the established rules of the Company then in effect, the Option or SAR will remain in effect, vest and be exercisable in accordance with its terms as if the holder remained an employee of the Company or Subsidiary. In the event of an Option or SAR holder’s death during the term of his or her Option or SAR, all unvested Options and SARs will vest immediately and may be exercised by the holder’s estate, or by the person to whom such right devolves from the holder by reason of his or her death, at any time within three years after the date of the holder’s death but in no event later than the original termination date of the Option or SAR. In no event may an Option or SAR be exercised after three years following the holder’s death. With respect to all other Awards, any unvested Awards shall immediately vest, and all restrictions pertaining to such other Awards shall lapse and have no further effect, upon the holder’s death or retirement in good standing or disability under the established rules of the Company then in effect, except as otherwise provided by the Committee at grant of the Award. Upon the occurrence of a Change in Control, all outstanding Options and SARs shall vest and become exercisable and all other outstanding Awards shall vest and all restrictions pertaining to such other Awards shall lapse and have no further effect.
SECTION 5
OPERATION
5.1 Duration. Grants may be made under the Plan through November 9, 2014. In the event of Plan termination while Awards remain outstanding, the Plan shall remain in effect as long as any Awards under it are outstanding, although no further grants may be made following Plan termination.
5.2 Uncertificated Stock. Nothing contained in the Plan shall prohibit the issuance of Stock on an uncertificated basis, to the extent allowed by the Company’s Certificate of Incorporation and Bylaws, by applicable law and by the applicable rules of any stock exchange.
5.3 Tax Withholding. All distributions under the Plan are subject to withholding of all applicable taxes, and the Committee may condition the delivery of any shares or other benefits under the Plan on satisfaction of the applicable withholding obligations. The Committee, in its discretion, and subject to such requirements as the Committee may impose prior to the occurrence of such withholding, may permit such withholding obligations to be satisfied through cash payment by the Grantee, through the surrender of shares of Stock which the Grantee already owns, or through the surrender of unrestricted shares of Stock to which the Grantee is otherwise entitled under the Plan, but only to the extent of the minimum amount required to be withheld under applicable law.
5.4 Use of Shares. Subject to the limitations on the number of shares of Stock that may be delivered under the Plan, the Committee may use available shares of Stock as the form of payment for compensation, grants or rights earned or due under any other compensation plans or arrangements of the Company or a Subsidiary, including the plans and arrangements of the Company or a Subsidiary assumed in business combinations.
5.5 Transferability. Except as otherwise provided by the Committee, Options, SARs and any other unvested Awards or Awards subject to any restrictions hereunder are not transferable except as designated by the Grantee by will or by the laws of descent and distribution. Notwithstanding the foregoing, in no event may any such Award be transferred to a third party for consideration at any time.
5.6 Form and Time of Elections. Unless otherwise specified herein, each election required or permitted to be made by any Grantee or other person entitled to benefits under the Plan, and any permitted modification, or revocation thereof, shall be in writing filed with the Committee at such times, in such form, and subject to such restrictions and limitations, not inconsistent with the terms of the Plan, as the Committee shall require.
5.7 Agreement With Company. An Award under the Plan shall be subject to such terms and conditions, not inconsistent with the Plan, as the Committee shall, in its sole discretion, prescribe. The terms and conditions of any Award to any Grantee shall be reflected in such form of written document as is determined by the Committee. A copy of such document shall be provided to the Grantee, and the Committee may, but need not, require that the Grantee shall sign a copy of such document. Such document is referred to in the Plan as an “Award Agreement” regardless of whether any Grantee signature is required.
5.8 Gender and Number. Where the context admits, words in any gender shall include any other gender, words in the singular shall include the plural and the plural shall include the singular.
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5.9 Limitation of Implied Rights.
(a) Neither a Grantee nor any other person shall, by reason of participation in the Plan, acquire any right in or title to any assets, funds or property of the Company or any Subsidiary whatsoever, including, without limitation, any specific funds, assets, or other property which the Company or any Subsidiary, in its sole discretion, may set aside in anticipation of a liability under the Plan. A Grantee shall have only a contractual right to the Stock or amounts, if any, payable under the Plan, unsecured by any assets of the Company or any Subsidiary, and nothing contained in the Plan shall constitute a guarantee that the assets of the Company or any Subsidiary shall be sufficient to pay any benefits to any person.
(b) The Plan does not constitute a contract of employment, and selection as a Grantee will not give any participating employee the right to be retained in the employ of the Company or any Subsidiary, nor any right or claim to any benefit under the Plan, unless such right or claim has specifically accrued under the terms of the Plan. Except as otherwise provided in the Plan or the Award Agreement, no Award under the Plan shall confer upon the holder thereof any rights as a stockholder of the Company prior to the date on which the individual fulfills all conditions for receipt of such rights.
5.10 Forfeiture; Non-Competition Agreements. Notwithstanding any other provision of the Plan, except as provided in Section 5.11 below, if the Committee finds by a majority vote that: (i) the Grantee, before or after termination of his or her employment or consulting relationship with the Company or a Subsidiary (as used in this Section 5.10, an “Employer”) for any reason, (a) committed fraud, embezzlement, theft, a felony, or proven dishonesty in the course of his or her employment or other engagement by Employer, and by such act damaged Employer, or (b) disclosed trade secrets of Employer; or (ii) the Grantee, before or after termination of his or her employment or other engagement with Employer for any reason, participated, engaged or had a financial or other interest (whether as an employee, officer, director, consultant, contractor, stockholder, owner, or otherwise) in any commercial endeavor in the United States competitive with the business of Employer (a) in violation of the Sysco Corporation Cash Performance Unit Plan, effectiveCode of Business Conduct, as in effect on the date of such participation or other engagement,or (b) in such a manner that would have violated the Code of Business Conduct had Grantee been employed by Employer at the time of the activity in question, then any outstanding Awards which, in the case of Options or SARs, have not been exercised and, in the case of Awards other than Options or SARs, have not vested, will be forfeited. The decision of the Committee as to the nature of a Grantee’s conduct, the damage done to Employer and the extent of the Grantee’s competitive activity will be final. No decision of the Committee, however, will affect the finality of the discharge of the Grantee by Employer in any manner. The Committee may, in its discretion, include a form of non-compete, non-solicitationand/or non-disparagement agreement in any Award Agreement, and such non-compete, non-solicitation or non-disparagement agreement may be personalized, in the Committee’s discretion, to fit the circumstances of any specific Grantee.
5.11 Termination of Employment Following Change In Control. In the event that the employment of a Grantee who is an employee of the Company or a Subsidiary is terminated by the Company other than for Cause during the24-month period following a Change in Control, all of such Grantee’s outstanding Options and SARs may thereafter be exercised by the Grantee, to the extent that such Options and SARs were exercisable as of September 3, 2004,the date of such termination of employment (x) for a period of 24 months from such date of termination or (y) until expiration of the stated term of such Option or SAR, whichever period is the shorter. The provisions of clause (ii) of Section 5.10 of the Plan shall not apply to any Grantee who incurs a termination of employment pursuant to this Section 5.11 with respect to activity after such termination of employment.
5.12 Section 409A. It is intended that all Options and SARs granted under the Plan shall be exempt from the provisions of Section 409A of the Code and that all other Awards under the Plan, to the extent that they constitute “non-qualified deferred compensation” within the meaning of Section 409A of the Code, will comply with Section 409A of the Code (and any regulations and guidelines issued thereunder). The Plan and any Award Agreements issued hereunder may be amended in any respect deemed by the Board or the Committee to be necessary in order to preserve compliance with Section 409A of the Code.
5.14 Regulations and Other Approvals.
(a) The obligation of the Company to sell or deliver Stock with respect to any Award granted under the Plan shall be subject to all applicable laws, rules and regulations, including all applicable federal and state securities laws, and the obtaining of all such approvals by governmental agencies as may be deemed necessary or appropriate by the Committee.
(b) Each Award is subject to the requirement that, if at any time the Committee determines, in its absolute discretion, that the listing, registration or qualification of Stock issuable pursuant to the Plan is required by any securities exchange or under any state or federal law, or the consent or approval of any governmental regulatory body is necessary or desirable as a condition of, or in connection with, the grant of an Award or the issuance of Stock, no such Award shall be granted or payment made or Stock issued, in whole or in part, unless listing, registration, qualification, consent or approval has been effected or obtained free of any conditions not acceptable to the Committee.
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(c) In the event that the disposition of Stock acquired pursuant to the Plan is not covered by a then current registration statement under the Securities Act and is not otherwise exempt from such registration, such Stock shall be restricted against transfer to the extent required by the Securities Act of 1933, as amended, or regulations thereunder, and restated (theapplicable state securities laws, and the Committee may require a Grantee receiving Stock pursuant to the Plan, as a condition precedent to receipt of such Stock, to represent to the Company in writing that the Stock acquired by such Grantee is acquired for investment only and not with a view to distribution.
(d) With respect to persons subject to section 16 of the Securities and Exchange Act of 1934, as amended, it is the intent of the Company that the Plan and all transactions under the Plan comply with all applicable provisions ofRule 16b-3.
5.15 Awards to Employees Subject to Taxation Outside of the United States. Without amending the plan, Awards may be granted to Grantees who are foreign nationals or who are employed outside the United States or both, on such terms and conditions different from those specified in the Plan as may, in the judgment of the Committee, be necessary or desirable to further the purposes of the Plan. Such different terms and conditions may be reflected in Addenda to the Plan or in the applicable Award Agreement. However, no such different terms or conditions shall be employed if such terms or conditions constitute, or in effect result in, an increase in the aggregate number of shares which may be issued under the Plan or a change in the definition of Eligible Grantee.
“Current Plan”SECTION 6
AMENDMENT AND TERMINATION)
(a) The Plan may be terminated or amended by the Board of Directors at any time, except that the following actions may not be taken without stockholder approval:
(i) any increase in the number of shares that may be issued under the Plan (except by certain adjustments provided for under the Plan);
WHEREAS,(ii) any change in the Current Plan is setclass of persons eligible to expire on September 3, 2009; andreceive ISOs under the Plan;
WHEREAS,(iii) any change in the Company desiresrequirements of Sections 4.2(a)(ii) and 4.2(b)(iii) hereof regarding the exercise price of Options and the grant price of SARs; or
(iv) any repricing or cancellation and regrant of any Option or, if applicable, other Award at a lower exercise, base or purchase price, whether in the form of an amendment, cancellation or replacement grant, or a cash-out of underwater options or any action that provides for Awards that contain a so-called “reload” feature under which additional Options or other Awards are granted automatically to adopt a new cash performance unitthe Grantee upon exercise of the original Option or Award.
(v) any other amendment to the Plan that would require approval of the Company’s stockholders under applicable law, regulation or rule or stock exchange listing requirement.
Notwithstanding any of the foregoing, adjustments pursuant to Section 3 shall not be subject to the foregoing limitations of this Section 6.
(b) Options may not be granted under the Plan after the date of termination of the Plan, but Options granted prior to that date shall continue to be exercisable according to their terms.
SECTION 7
GOVERNING LAW
The plan shall be governed by, and construed in accordance with, the laws of the State of Texas, except to the extent that the General Corporation Law of the State of Delaware shall be applicable.
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ANNEX C
SYSCO CORPORATION
2009 MANAGEMENT INCENTIVE PLAN
This SYSCO CORPORATION 2009 MANAGEMENT INCENTIVE PLAN (the “Plan”) effective for awards granted on or after May 1, 2010, was recommended by the Compensation Committee (the ‘‘Committee”) of the Board of Directors (the “Board of Directors”) of Sysco Corporation (the “Company”) on September 4,3, 2009, in order to increase stockholder value and to advanceadopted by the interestsBoard of Directors of the Company and its subsidiaries by providing financial incentives designed to attract, retain and motivate key employees of the Company.on September 3, 2009.
NOW, THEREFORE, the Company hereby adopts the Sysco Corporation 2008 Cash Performance Unit Plan, effective for Awards (as defined herein) issued on or after September 4, 2009, as follows:
ARTICLE I
PURPOSE OF THE PLAN1. Statement of Principle
The purpose of the Plan is to increase stockholder value and to advance the interests of the Company and its Subsidiaries by providing financial incentives designed to attract, retain and motivatereward (i) certain key employees of the Company.
ARTICLE II
DEFINITIONS
When usedmanagement personnel for outstanding performance in the Plan, the following terms shall have the following meanings:
“Award” shall mean the determination by the Committee that a Participant should receive a given number of Performance Units, as evidenced by a document of notification given to a Participant at the time of such determination.
“Board of Directors” means the Board of Directors of the Company.
“Change of Control” means the occurrencemanagement of one or more events described in paragraphs (i) through (iii), below.
(i) Change in Ownership ofOperating Companies (as defined herein) and (ii) certain corporate personnel for managing the Company. A change in the ownershipoperations of the Company shall occur on the date that any one person, or more than one person acting as a group (withinwholeand/or managing the meaningoperations of paragraph (iv)), acquires ownership of Company stock that, together with Company stock held by such person or group, constitutes more than 50% of the total fair market value or total voting power of the stock of the Company.
(A) If any one person or more than one person acting as a group (within the meaning of paragraph (iv)) is considered to own more than 50% of the total fair market value or total voting power of the stock of the Company, the acquisition of additional Company stock by such person or persons shall not be considered to cause a change in the ownership of the Company or to cause a change in the effective control of the Company (within the meaning of paragraph (ii) below).
(B) An increase in the percentage of Company stock owned by any one person, or persons acting as a group (within the meaning of paragraph (iv)), as a result of a transaction in which the Company acquires its stock in exchange for property, shall be treated as an acquisition of stock for purposes of this paragraph (i).
(C) The provisions of this paragraph (i) shall apply only to the transfer or issuance of Company stock if such Company stock remains outstanding after such transfer or issuance.
(ii) Change in Effective Control of the Company.
(A) A change in the effective control of the Company shall occur on the date that either of (1) or (2) below occurs:
(1) Any one person, or more than one person acting as a group (within the meaning of paragraph (iv)), acquires (or has acquired during the twelve (12) month period ending on the date of the most recent acquisition by such person or persons) ownership of stock of the Company possessing 30% or more of the total voting power of the stock of the Company; or
(2) A majority of members of the Board is replaced during any twelve (12) month period by directors whose appointment or election is not endorsed by a majority of the Board prior to the date of the appointment or election.
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(B) A change in effective control of the Company also may occur with respect to any transaction in which either of the Company or the other corporation involved in a transaction experiences a Change of Control event described in paragraphs (i) or (iii).
(C) If any one person, or more than one person acting as a group (within the meaning of paragraph (iv)), is considered to effectively control the Company (within the meaning of this paragraph (ii)), the acquisition of additional control of the Company by the same person or persons shall not be considered to cause a change in the effective control of the Company (or to cause a change in the ownership of the Company within the meaning of paragraph (i)).
(iii) Change in Ownership of a Substantial Portion of the Company’s Assets. A change in the ownership of a substantial portion of the Company’s assets shall occur on the date that any one person, or more than one person acting as a group (within the meaning of paragraph (iv)), acquires (or has acquired during the twelve (12) month period ending on the date of the most recent acquisition by such person or persons) assets from the Company that have a total gross fair market value (within the meaning of paragraph (iii)(B)) equal to or more than 40% of the total gross fair market value of all of the assets of the Company immediately prior to such acquisition or acquisitions.
(A) A transfer of the Company’s assets shall not be treated as a change in the ownership of such assets if the assets are transferred to one or more of the following:
(1) A shareholder of the Company (immediately before the asset transfer) in exchange for or with respect to the Company stock;
(2) An entity, 50% or more of the total value or voting power of which is owned, directly or indirectly, by the Company;
(3) A person, or more than one person acting as a group (within the meaning of paragraph (iv)) that owns, directly or indirectly, 50% or more of the total value or voting power of all of the outstanding stock of the Company; or
(4) An entity, at least 50% of the total value or voting power of which is owned, directly or indirectly, by a person described in paragraph (iii)(A)(3).
For purposes of this paragraph (iii)(A), and except as otherwise provided, a person’s status is determined immediately after the transfer of assets.
(B) For purposes of this paragraph (iii), gross fair market value means the value of all Company assets, or the value of the assets being disposed of, determined without regard to any liabilities associated with such assets.
(iv) For purposes of this definition, persons shall be considered to be acting as a group if they are owners of a corporation that enters into a merger, consolidation, purchase, or acquisition of assets, or similar business transaction with the Company. If a person, including an entity shareholder, owns stock in the Company and another entity with which the Company enters into a merger, consolidation, purchase, or acquisition of stock, or similar business transaction, such shareholder shall be considered to be acting as a group with other Company shareholders only to the extent of the ownership in the Company prior to the transaction giving rise to the change and not with respect to the ownership interest in the other corporation. Persons shall not be considered to be acting as a group solely because they purchase or own stock of the same corporation at the same time, or as a result of the same public offering.
(v) Identification of Relevant Corporations. To constitute a Change of Control hereunder, the Change of Control must relate to (A) the corporation for which the Participant is performing services at the time of the Change of Control, (B) the corporation that is liable for the payment of the awards under this Plan (or all corporations liable for the payment if more than one corporation is liable), or (C) a corporation that is a majority shareholder of a corporation identified in (A) or (B), or any corporation in a chain of corporations in which each corporation is a majority shareholder of another corporation in the chain, ending with the corporation identified in (A) or (B)Operating Companies (as defined herein). For purposes of this paragraph (v), a majority shareholder is a shareholder owning more than 50% of the total fair market value and total voting power of such corporation.
“Code” means the Internal Revenue Code of 1986, as amended.
“Committee” means the Compensation Committee of the Board of Directors, or such other committee as the Board of Directors may designate to have primary responsibility for the administration of the Plan.
“Company” means Sysco Corporation, a Delaware corporation.
“Completed Fiscal Years” is defined in Section 6.3.
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“Covered Employee”means a “covered employee” within the meaning of Section 162(m)(3) of the Code.
“Disability” means a physical or mental condition that meets the eligibility requirements for the receipt of disability income under the terms of the disability income plan sponsored by the Company pursuant to which the Participant is eligible for benefits.
“Effective Date” is defined in Section 9.1.
“Exchange Act” means the Securities Exchange Act of 1934, as amended.
“Fiscal Year” means, as determined in the sole discretion of the Committee, a period used for purposes of measuring performance for purposes of this Plan which is based as closely as possible on the fiscal year of the Company.
“Participant” means an employee of the Company or any of its Subsidiaries who is designated as a Participant by the Committee.
“Payment Amount” means the total amount to be paid to a Participant with respect to the Performance Units awarded to such Participant for a particular Performance Period.
“Payment Date”means a date determined by the Committee for purposes of (i) making payment of amounts earned under this Plan and, (ii) in the event a Participant elects to defer receipt of amounts earned under this Plan pursuant to the terms of a deferred compensation plan sponsored by the Company, the date such amounts are credited under the applicable deferred compensation plan. This date shall be no later than the last day of the fourth month following completion of the respective Performance Period.
“Performance Goals” means the performance goals established by the Committee for each Performance Period pursuant to the Plan, against which performance will be measured.
“Performance Period” means a period of no less than three Fiscal Years, as determined by the Committee, during which the Performance Goals shall be measured for purposes of determining the Payment Amount.
term “Performance Unit” means a unit of participation which shall constitute the basis from which a Participant’s Payment Amount shall be determined with regard to the Performance Goals established by the Committee.
“Plan” means this Sysco Corporation 2008 Cash Performance Unit Plan, as it may be amended from time to time.
“Retirement” means any termination of employment with theOperating Company or a Subsidiary as a result of retirement in good standing under established rules of the Company then in effect.
“Section 409A”means Section 409A of the Code. References herein to “Section 409A” shall also include any regulatory and other interpretive authority promulgated by the Treasury Department or the Internal Revenue Service under Section 409A of the Code.
“Specified Employee”means a “specified employee” as defined in Section 409(A)(a)(2)(B)(i) of the Code.
“Subsidiary”” means (i) any entity in which the Company, directly or indirectly, owns more than 50% of the vote or value of the equity interests issued by such entity, andor (ii) any other entity, operating division, employment location or business unit designated by the Committee as a “Subsidiary”an “Operating Company” for purposes of this Plan. All references to ‘‘Performance Periods” in the Plan are to fiscal years of the Company unless otherwise specifically noted.
2. “Unit Value”Plan Compensation Committeemeans
The Committee is charged with structuring, proposing the per unit amount that is used for purposesimplementation of, and implementing the terms and conditions of the Plan. The Committee shall have the authority to: (i) adopt, alter, amend and repeal such rules, guidelines and practices governing the Plan as it shall, from time to time, deem advisable; (ii) interpret the terms and provisions of the Plan and any award issued under the Plan (and any agreements relating thereto), including without limitation the manner of determining financial and accounting concepts discussed in the Payment AmountPlan; (iii) otherwise supervise the administration of the Plan; and, (iv) except as to the application of the Plan to executive officers, delegate such authority provided to the Committee under the Plan as it may deem necessary or appropriate to the Chairman of the Board, Chief Executive Officer, Chief Operating Officer, President and any Executive Vice President, and any of them individually. All decisions made by the Committee pursuant to the provisions of the Plan shall be made toin the Committee’s sole discretion and shall be final and binding on all persons, including the Company and all Participants in respect of Performance Units awarded under the Plan.(as defined herein).
ARTICLE III
PARTICIPATION3. Participation
3.1(A) Designation of Participants. The Committee shall determine and designate from time to time those employees of the Company and its Subsidiariesit’s Operating Companies who are eligible to be granted Performance Units (and who thereby become Participants)receive a bonus (each a, “Participant” and collectively, the number of Performance Units to be granted to each Participant.
3.2 “AwardsParticipants. Performance Units shall be granted by”) under the Committee by a written notification to Participants evidencingPlan. To the Award in such form asextent possible, the Committee shall approve,make such designation prior to the commencement of the Performance Period for which notificationsuch employee will be eligible for a bonus under the Plan, or as soon as practicable during the Performance Period in which an employee first becomes eligible to participate in the Plan. Except as otherwise provided herein, once an employee has been designated as a Participant for a Performance Period, the Committee shall complyhave the right to remove such employee as a Participant in the Plan for such Performance Period, with or without cause, at any time on or before the last day of such Performance Period and except as otherwise provided herein, the Participant shall not be entitled to any bonus under the Plan for the Performance Period in which such Participant is removed regardless of when during the Performance Period the Participant is removed.
(B) Senior Executive Participants. Notwithstanding anything to the contrary contained herein, if it is determined that a Participant is a “covered employee” of the Company within the meaning of Section 162(m)(3) of the Internal Revenue Code of 1986, as amended (and any Treasury Regulations or guidance issued thereunder) (the “Code”) for a Performance Period (a ‘‘Senior Executive Participant”), such Participant’s bonus shall be calculated without regard to such Participant’s status as a Senior Executive Participant, provided, however, that such Participant’s bonus shall be subject to any and all limitations and restrictions applicable to Senior Executive Participants under the termsPlan and conditions of this Plan. Furtherthe annual incentive program (and any related agreements) for the Performance Units may be granted by the Committee from time to time to Participants, so long as this Plan shall continue in full force and effect.
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ARTICLE IV
DETERMINATION OF PERFORMANCE GOALSPeriod.
4.14. Determination of Performance Period Determinations.Goals.
(a)(A) In General. WithinBefore the first 90beginning of the relevant Performance Period, but in no event later than ninety (90) days after the beginning of eachsuch Performance Period, the Committee, in its sole discretion, shall (a) establish for thatsuch Performance Period (i) the beginning and ending dates, andPerformance Period over which performance is to be measured; (ii) the Fiscal Years,payment date for the Performance Period, (ii) the Payment Date for the Performance Period,Period; (iii) the Performance Goals (as defined below) for each Participant,Participant; and (iv) the method for evaluating performance for the Performance Period, and (v)
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Period. Notwithstanding the Unit Value andforegoing, the method for determiningCommittee shall have the Payment Amount for eachright to alter the bonus formula with respect to any Participant and (b) designateby changing the maximum numberperformance targets or otherwise as determined in the sole discretion of Performance Unitsthe Committee;provided that may be grantedany such change shall not apply to a Participant forwho is also a Senior Executive Participant with respect to such Performance Period.Period unless such change complies with the requirements of the “performance based compensation” exception under Section 162(m) of the Code.
(b)(B) Adjustments for Long Fiscal YearsPerformance Goals. The Performance Goals established by the Committee for a Performance Period may include any one or more of the following criteria (i) return on capital, (ii) return on assets, (iii) sales growth, (iv) market share, (v) margin growth, (vi) return on equity, (vii) total shareholder return, (viii) increase in net after-tax earnings per share, (ix) increase in operating pre-tax earnings, (x) operating profit or improvements in operating profit, (xi) improvements in certain asset or financial measures (including working capital and the ratio of sales to net working capital), (xii) reductions in certain costs (including reductions in inventories or accounts receivable or reductions in operating or non-operating expenses), (xiii) net earnings, (xiv) pre-tax earnings or variations of income criteria in varying time periods, (xv) economic value added, (xvi) general comparisons with other peer companies or industry groups or classifications with regard to one or more of these criteria; (xvii) market price of the Company securities or (xviii) with respect to a Participant (other than a Senior Executive Participant) other factors directly tied to the performance of the Company or an Operating Company (the ‘‘Performance Goals”). Subject to the Committee’s discretion to formulate a different bonus structure as to any Participant other than Senior Executive Participants, the Performance Goals may be based on one or more of the following: (i) the performance of the Company as a whole; (ii) the performance of the Operating Company which employs such Participant (or the Operating Company designated by the Committee as the Operating Company by reference to which performance is to be measured); or (iii) the aggregate performance of the Operating Companies over which such Participant has managerial authority. The relative weights of the criteria that comprise the Performance Goals shall be determined by the Committee in its sole discretion. In establishing the Performance Goals for a Performance Period, the Committee may establish different Performance Goals for individual Participants or groups of Participants.
(C) Additional Bonus. In addition to the bonus determined using the Performance Goals set forth above, a Participant employed by an Operating Company may also be eligible for an additional bonus (“Additional Bonus”) as determined by the Committee in its sole discretion. The Additional Bonus may be established by the Committee at one or more times during such Performance Period or within ninety (90) days following the end of such Performance Period based on such criteria as the Committee may develop in its sole discretion;provided however, any Participant who is also a Senior Executive Participant with respect to such Performance Period shall not be eligible for an Additional Bonus unless such Additional Bonus is established in accordance with the requirements of the “performance based compensation” exception under Section 162(m) of the Code.
(D) General Rules Regarding Bonus Calculation.
(i) Whether or not the results of operations of one or more Operating Companies or the Company for a given Performance Period result in a bonus, generally accepted accounting principles shall be applied on a basis consistent with prior periods unless otherwise modified by the Committee; provided however, no such modification shall apply to a Senior Executive Participant unless the requirements for the “performance based compensation” exception under Section 162(m) of the Code have been satisfied with respect to such modification. Any determination made pursuant to this Section 4(D)(i) shall be based on the calculations made by the Company and shall be binding on each Participant.
(ii) Except as provided in Section 9, as to Senior Executive Participants, there is no limit to the bonus that can be earned under this Plan. Prior to the payment of a bonus to a Senior Executive Participant, other than a bonus payable following a Change of Control pursuant to Section 7, the Committee shall certify that the Performance Goals and other material terms of the Plan have been achieved with respect to such Senior Executive Participant.
(iii) This Section 4.1(b)4(D)(iii) shall apply whenever the Performance Goals for a Performance Period containstake into account performance for one or more Fiscal Yearsfiscal years of 53 weeks (each, a“Long Fiscal Year”Year”). In making any determination as to whether the Performance Goals have been satisfied or as to the amount of the Payment Amountbonus payable with respect to a Performance Period, the relevant Performance Goals for a Long Fiscal Year shall be deemed to be a number equal to the numerical measure of each such Performance Goal based on the performance of the Companyand/or its SubsidiariesOperating Companies for such Long Fiscal Year minus an amount equal to the product of (i) 1/14th;14th; and (ii) the numerical measure of each such Performance Goal based on the performance of the Companyand/or its SubsidiariesOperating Companies for the last fiscal quarter of such Long Fiscal Year. Notwithstanding the foregoing, the Committee may exercise its discretion in determining the extent of the adjustment, if any, to the calculation of any Performance Goal for a Long Fiscal Year appropriate to more accurately compare performance during a Long Fiscal Year to that during a 52-week fiscal year; provided that, the Committee may not exercise such discretion after the first ninety (90) days of the Performance Period with respect to Covered EmployeesSenior Executive Participants unless such exercise of discretion results in a reduction of the Payment Amountbonus payable to the Covered Employees.
4.2 Performance Goals. The Performance Goals established by the Committee for a Performance Period may include any one or more of several criteria, such as, but not limited to, return on capital employed, return on assets, sales growth, market share, margin growth, return on equity, total shareholder return, increase in net after-tax earnings per share, increase in operating pre-tax earnings, operating profit or improvements in operating profit, improvements in certain asset or financial measures (including working capital and the ratio of sales to net working capital), reductions in certain costs (including reductions in inventories or accounts receivable or reductions in operating expenses), net earnings, pre-tax earnings or variations of income criteria in varying time periods, economic value added, or general comparisons with other peer companies or industry groups or classifications with regard to one or more of these criteria. The Performance Goals may be based on the performance of the Company generally, the performance of a particular Subsidiary, division or business unit, or the performance of a group of Subsidiaries, divisions or business units. The relative weights of the criteria that comprise the Performance Goals shall be determined by the Committee in its sole discretion. In establishing the Performance Goals for a Performance Period, the Committee may establish different Performance Goals for individualSenior Executive Participants or groups of Participants.
ARTICLE V
PAYMENT
5.1 Determination of Performance. After the end of each Performance Period, the performance of the Company and its Subsidiaries will be determined by the Company and approved by the Committee for each Performance Goal. The Committee shall certify in writing to each Participant the degree of achievement of each Performance Goal based upon the actual performance results for the Performance Period.
5.2 Determination of Payment Amount. After the end of each Performance Period, the Payment Amount for each Participant for such Performance Period shall be calculated by the Company and certified by the Committee based upon the level of performance achieved by the Company and its Subsidiaries for each Performance Goal applicable to such Participant for the Performance Period, as determined in accordance with Section 5.1.Period.
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5. Payment
5.3 Payment of Payment Amount.The Payment Amountbonus payable to Participants under this Plan shall be paid solely in cash and shall be paid on or before ninety (90) days following the Payment Date;end of each Performance Period;provided, however, that subject to the requirements of the applicable deferred compensation plan and such other rules and requirements as the Committee may from time to time prescribe, the Committee may allow a Participant to defer receipt of all or a portion of the Payment AmountParticipant’s bonus under the Plan if permitted under the terms of the deferred compensation plan sponsored by the Company in which the Participant is eligible to participate.
5.46. Overall Limitation ApplicableClawback of Bonus.
In accordance with the Company’s incentive payment clawback policy, in the event of a restatement of financial results (other than a restatement due to Covered Employees. Notwithstanding any other provisiona change in thisaccounting policy) within thirty-six (36) months of the payment of a bonus under the Plan, if the Committee determines in its sole and absolute discretion, that the bonus paid to a Participant under the Plan would have been lower had it been calculated based on such restated results (the “Adjusted MIP Bonus”), then the Committee shall, subject to applicable governing law, have the right to recoup from such Participant, in such form and at such time as the Committee determines in its sole and absolute discretion, the difference between the amount previously paid to such Participant pursuant to the contrary, in no event shallPlan (without regard to amounts deferred by such Participant under the Company’s executive benefit plans) and the Adjusted MIP Bonus.
7. Change of Control
(A) “Change of Control” means the occurrence of one or more of the following events:
(i) The acquisition by any Covered Employee beindividual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) (a ‘‘Person”) of beneficial ownership (within the meaning ofRule 13d-3 promulgated under the Exchange Act) of 20% or more of either (i) the then-outstanding shares of Common Stock of the Company (the “Outstanding Company Common Stock”) or (ii) the combined voting power of the then-outstanding voting securities of the Company entitled to vote generally in the election of directors (the “Outstanding Company Voting Securities”); provided, however, that, for purposes of this Section 7(A)(i), the following acquisitions shall not constitute a payment in respectChange of Control: (1) any Performance Period in excess of oneacquisition directly from the Company, (2) any acquisition by the Company, (3) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any affiliated company or (4) any acquisition by any corporation pursuant to a transaction that complies with Sections 7(A)(iii)(1), 7(A)(iii)(2) and 7(A)(iii)(3);
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percent (1%)(ii) The occurrence of the Company’s earnings before income taxesfollowing: Individuals who, as publicly disclosed inof September 9, 2009, constitute the “Consolidated Results of Operations” section of the Company’s annual report to the Securities and Exchange Commission onForm 10-K for the Fiscal Year ended immediately before the Payment Date applicable to such Performance Period.
ARTICLE VI
TERMINATION OF EMPLOYMENT
If a Participant’s employment is terminated before the end of the Performance Period, the treatment of the Performance Units awarded with respect to such Performance Period will be as follows:
6.1 Board (the “In GeneralIncumbent Board. If, before the end of the Performance Period, the Participant’s employment terminates”) cease for any reason other thanto constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to September 9, 2009 whose election, or nomination for election by the reasons described in Sections 6.2 through 6.4,Company’s stockholders, was approved by a vote of at least a majority of the Participant’s Performance Unitsdirectors then comprising the Incumbent Board shall be canceled, and the Participant shall receive no payment under this Plan in respect ofconsidered as though such Performance Units. Ifindividual were a Participant’s employment terminates after the endmember of the Performance PeriodIncumbent Board, but before the Payment Date, the Participant (or the Participant’s designated beneficiary in the caseexcluding, for this purpose, any such individual whose initial assumption of death) shall be paid the Payment Amount with respect to such Performance Periodoffice occurs as determined under Article V hereof on the Payment Date.
6.2 Retirement. Subject to compliance with the conditions outlined below, if, during the Performance Period, a Participant’s employment terminates by reasonresult of Retirement, the Payment Amount for such Performance Period shall be paid on the Payment Date for such Performance Period;provided, however, that if such Participant is a Specified Employee, the Payment Amount shall not be paid to the Participant until the later of six months following the date of Retirementan actual or the Payment Datethreatened election contest with respect to the applicable Performance Period, but only to the extent that making such Payment Amount would result in a violationelection or removal of Section 409A. The Participant’s Payment Amount with respect to such Performance Period shall be determineddirectors or other actual or threatened solicitation of proxies or consents by taking into account the actual performance of the Companyand/or its Subsidiaries for the entire Performance Period;provided, however, that the Company reserves the right to cancel the Performance Units on behalf of a Participant, if prior toPerson other than the endBoard;
(iii) Consummation of the applicable Performance Period, the Participant: (i) performs any services, whether as an employee, officer, director, agent, independent contractor, partnera reorganization, merger, statutory share exchange or otherwise, for a competitor ofconsolidation or similar corporate transaction involving the Company or any of its affiliates withoutOperating Companies, a sale or other disposition of all or substantially all of the consentassets of the Company, or (ii) takes any other action, including, but not limited to, interfering with the relationship betweenacquisition of assets or stock of another entity by the Company or any of its affiliatesOperating Companies (each, a ‘‘Business Combination”), in each case unless, following such Business Combination, (1) all or substantially all of the individuals and anyentities that were the beneficial owners of its employees, clientsthe Outstanding Company Common Stock and the Outstanding Company Voting Securities immediately prior to such Business Combination beneficially own, directly or agents, which is intendedindirectly, more than 60% of the then-outstanding shares of Common Stock and the combined voting power of the then-outstanding voting securities entitled to damagevote generally in the election of directors, as the case may be, of the corporation resulting from such Business Combination (including, without limitation, a corporation that, as a result of such transaction, owns the Company or does damageall or substantially all of the Company’s assets either directly or through one or more Operating Companies) in substantially the same proportions (as compared to the businessother beneficial owners of the Company’s Voting Securities immediately prior to such Business Combination) as their ownership immediately prior to such Business Combination of the Outstanding Company Common Stock and the Outstanding Company Voting Securities, as the case may be, (2) no Person (excluding any corporation resulting from such Business Combination or reputationany employee benefit plan (or related trust) of the Company or such corporation resulting from such Business Combination) beneficially owns, directly or indirectly, 20% or more of, respectively, the then-outstanding shares of common stock of the corporation resulting from such Business Combination or the combined voting power of the then-outstanding voting securities of such
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corporation, except to the extent that such ownership existed prior to the Business Combination, and (3) at least a majority of the members of the board of directors of the corporation resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement or of the action of the Board providing for such Business Combination; or
(iv) Approval by the stockholders of the Company of a complete liquidation or dissolution of the Company.
6.3 Death. If(B) Notwithstanding anything to the contrary contained herein, and in lieu of any other payments due hereunder other than pursuant to this Section 7, within ninety (90) days following the date on which a Change of Control has occurred, each person who was a Participant dies duringat the time of the Change of Control shall be paid a cash bonus hereunder, equal to the following (subject to reduction in the case of certain severance payments, as set forth below): the product of (i) a fraction equal to the number of days in the Performance Period in which the numberChange of Control occurs up to and including the date of the Change of Control divided by 365, and (ii) the bonus that would have been paid under this Plan, calculated using a Performance Units awardedGoal equal to the Participant will be reduced by multiplyingproduct of (a) the numberCompany’sand/or one or more Operating Companies’ performance through and including the end of the most recently completed fiscal quarter occurring prior to and in the same Performance Units initially awarded toPeriod as the Participant byChange of Control (the “Measurement Date”), calculated in accordance with generally accepted accounting principles, if applicable, and (b) a fraction, the numerator of which is the number of full months in the Performance Period during which the Participant was an active employee of the Company or a Subsidiary365 and the denominator of which is the number of monthsdays in such Performance Period up to and including the Measurement Date.
(C) In addition to any bonus paid or payable pursuant to Section 7(B), any Participant who remains in the employ of the Company or any Operating Company on the last day of the Performance Period. A partial month workedPeriod in which a Change of Control occurs shall be counted as a full month if the Participant is an active employee for 15entitled to receive, in cash, within ninety (90) days or more in that month. The Payment Amount to be paid to the Participant’s beneficiaries based on the resulting reduced number of Performance Units shall be determined as follows:
(a) If the Participant’s death occurs after the end of one or more Fiscal Years during the Performance Period, but within six months or lessan amount equal to the positive difference, if any, between (a) the bonus that would have been paid to the Participant for such Performance Period under the Plan as in effect on the date of the beginningChange of a Fiscal Year, the Payment Amount shall be determinedControl, using the actual performancePerformance of the Companyand/or its Subsidiariesone or more Operating Companies for each completed Fiscal Year priorthe entire Performance Period, and (b) the amount paid pursuant to Section 7(B).
(D) Notwithstanding the foregoing, with respect to any Participant who is a party to the Company’s form of severance agreement on file with the Securities and Exchange Commission, or any future severance agreement with the Company, the bonus paid pursuant to this Section 7 shall be reduced, but to not less than zero, by the amount of any payment pursuant to such Participant’s death (the“Completed Fiscal Years”);severance agreement that is determined or calculated with respect to payments received or to be received under this Plan or any predecessor or successor thereof.
(b) If8. No Employment Arrangements Implied
Nothing herein shall imply any right of continued employment for a Participant, and except as set forth in Section 7 with respect to a Change of Control or as otherwise determined by the Participant’s death occurs more than six months after the start ofCommittee in its discretion, if a Fiscal Year included in the Performance Period butParticipant is terminated, voluntarily or involuntarily, with or without cause, prior to the end of a Fiscal Year duringgiven Performance Period, such Participant shall not be entitled to any bonus for such Performance Period the Payment Amount shall be determined (i) using the actual performanceregardless of whether or not a bonus would have been earned had such Participant remained employed by the Company for each Completed Fiscal Year, if any, and (ii) using the actual performance of theor an Operating Companyand/or its Subsidiaries for the Fiscal Year in which the Participant dies; or
(c) If the Participant’s death occurs six months or less after the start of the Performance Period, the Payment Amount for the Performance Units granted with respect to such Performance Period shall be zero. The Payment Amount determined pursuant to this Section 6.3 shall be paid to the Participant’s designated beneficiary as soon as practicable following the determination of the Payment Amount.
6.4 Disability. If, before through the end of the relevant Performance Period, a Participant’s employment is terminated as a result of Disability, the Payment Amount for such Performance Period shall be paid on the Payment Date for such Performance Period, and the Participant’s Payment Amountprovided, however, any bonus earned with respect to such Performance Period shall be determined by taking into account the actual performance of the Companyand/or its Subsidiaries for the entire Performance Period.
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ARTICLE VII
CHANGE OF CONTROL
If a Change of Control has occurred during a Performance Period that remains unpaid at the Participant’s Performance Units awarded with respect totime of any such Performance Periodtermination shall not be considered vested, and the Payment Amount shall be paid to the Participant within ninety (90) days after the date of the Change of Control. For purposes of this Article VII, the Payment Amount to be made to each Participant shall be the maximum amount that could be paid to such Participant with respect to the Participant’s Performance Units for such Performance Period assuming the highest level of performance is achieved.affected.
ARTICLE VIII
ADMINISTRATION9. Term; Amendment or Termination.
8.1 In General. The Plan shall be administered under the supervision and direction of the Committee or its designees, as applicable. In administering the Plan, the Committee will determine the Participants and the number of Performance Units to be granted to individual Participants, establish appropriate Fiscal Years, Performance Periods and Performance Goals as bases for payments under the Plan, establish the methods and procedures for measuring performance, and determine the Payment Date and methods and procedures for payment of Awards under the Plan. Further, the Committee may, from time to time, change or waive requirements of the Plan, or outstanding Performance Units, to conform with the law, to meet special circumstances not anticipated or covered in the Plan, or to carry on successful operation of the Plan, and in connection therewith, the Committee or its designee shall have the full power and authority to:
(a) Prescribe, amend and rescind rules and regulations relating to the Plan, or outstanding Performance Units, establish procedures deemed appropriate for the Plan’s administration, and make any and all other determinations not herein specifically authorized which may be necessary or advisable for its effective administration;
(b) Make any amendments to or modifications of the Plan which may be required or necessary to make the Plan set forth herein comply with the provisions of any laws, federal or state, or any regulations issued thereunder, and to cause the Company at its expense to take any action related to the Plan which may be required under such laws or regulations; and
(c) Contest on behalf of Participants or the Company, at the expense of the Company, any ruling or decision on any issue related to the Plan, and conduct any such contest and any resulting litigation to a final determination, ruling or decision.
Notwithstanding anything herein to the contrary, the Committee may, unless otherwise prohibited from doing so by the Board of Directors or such committee’s charter, delegate any Plan related function it may deem necessary or appropriate to employees of the Company or its Subsidiaries or to third parties.
Nothing herein shall be deemed to authorize, and the Committee will have no discretion, to alter or amend the Performance Goals or the specific Performance Goals of Awards under the Plan with respect to “named executives” (as that term is defined in Section 402(a)(3) ofRegulation S-K) and Covered Employees after they have been approved by the Committee unless such exercise of discretion results in a reduction in the Payment Amount with respect to such Participants.
8.2 Limitation of Liability. No member of the Committee shall be liable for any act, omission, or determination taken or made in good faith with respect to the Plan or any Awards made hereunder, and the members of the Committee shall be entitled to indemnification, defense and reimbursement by the Company in respect of any claim, loss, damage, or expenses (including attorneys’ fees and expenses) arising therefrom to the full extent permitted by law and as provided for in the bylaws of the Company or under any directors’ and officers’ liability or similar insurance coverage or any indemnification agreement that may be in effect from time to time. The Company reserves the right to select counsel to defend any litigation covered by this Section 8.2.
8.3 Compliance with Section 409A. The Plan (i) is intended to comply with, (ii) shall be interpreted and its provisions shall be applied in a manner that is consistent with, and (iii) shall have any ambiguities therein interpreted, to the extent possible, in a manner that complies with Section 409A.
ARTICLE IX
TERM; WITHDRAWAL OR AMENDMENT
9.1(A) Effective Date and Term. The Plan has been adopted by the Board of Directors on September 3, 2009 and is effective, subject to obtaining stockholder approval of the material terms of the 2009 MIP Plan at the 2009 annual meeting, for Awards issuedawards granted on or after September 4,November 18, 2009 (the“Effective Date”Date”);provided, however, that. In no events will payments shall be made under this Plan to Covered EmployeesSenior Executive Participants unless this Plan has been approved by the Company’s stockholders.stockholders in a vote meeting the requirements of Section 162(m) of the Code. The term of the Plan shall continue until
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November 30,18, 2014, unless sooner terminated by the Board;provided, however, that such termination must comply with the requirementsBoard of Section 409A.Directors. No new Awardsawards may be made after the termination of the Plan, but any awards granted prior to November 30,18, 2014 that have not yet been paid in will continue to remain outstanding and will be payable in accordance with and to the extent provided in the Plan and the applicable grant agreements orand programs.
9.2(B) WithdrawalAmendment or AmendmentTermination. The Company’sPlan may be amended at any time by the Board of Directors orand any such amendment shall be effective as of commencement of the CommitteePerformance Period during which the Plan is amended, regardless of the date of the amendment, unless otherwise stated by the Board of Directors. The Plan may be terminated at any time withdraw or amendby the Plan.Board of Directors and such termination will be effective as of the commencement of the Performance Period in which such action to terminate the Plan is taken. Notwithstanding the foregoing, no amendment or withdrawaltermination following a Change of Control may in any way decrease or eliminate a payment due to a Participant pursuant to Article VII.Section 7.
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10. Overall Limitation upon Payments under Plan to Senior Executive Participants
9.3Notwithstanding any other provision in the Plan to the contrary, in no event shall any Senior Executive Participant be entitled to a bonus amount for any Performance Period in excess of $10 million.
11. Prior Plan.
As of itsthe Effective Date, this Plan shall supersede the Current Plan.Sysco Corporation 2005 Management Incentive Plan, as amended and restated (the “Prior Plan”). No further awards will be granted under the CurrentPrior Plan following such date, but any awards granted under the CurrentPrior Plan prior to the Effective Date of this Planbefore November 18, 2009 that have not yet been paid as of that date will continue to remain outstanding and will be payable in accordance with and to the extent provided in the CurrentPrior Plan and the applicable grant agreements or programs.
ARTICLE X
MISCELLANEOUS
10.1 Beneficiaries. Each Participant may designate a beneficiary or beneficiaries to receive, in the event of such Participant’s death, any payments remaining to be made to the Participant under the Plan. Each Participant shall have the right to revoke any such designation and to redesignate a beneficiary or beneficiaries by written notice to the Company to such effect. If any Participant dies without naming a beneficiary or if all of the beneficiaries named by a Participant predecease the Participant, then any amounts remaining to be paid under the Plan shall be paid to the Participant’s estate.
10.2 Awards Non-Transferable. Any rights of a Participant under this Plan, and in or to an Award, shall be personal in nature and may not be assigned or transferred (other than a transfer by will or the laws of descent and distribution). Any attempted assignment or transfer of the Award shall be null and void and without effect.
10.3 Withholding for Taxes. The Company or its Subsidiaries shall have the right to deduct from all payments under the Plan any federal, state, or local taxes required by law to be withheld with respect to such payments.
10.4 Plan Funding. The Plan shall at all times be unfunded and no provision shall at any time be made with respect to segregating any assets of the Company or its Subsidiaries for payment of any benefits under the Plan. The right of a Participant to receive payment under the Plan shall be an unsecured claim against the general assets of the Company or its Subsidiaries, and neither the Participant nor any other person shall have any rights in or against any specific assets of the Company or its Subsidiaries. The Company and its Subsidiaries may establish a reserve of assets to provide funds for payments under the Plan.
10.5 No Contract of Employment. The existence of this Plan, as in effect at any time or from time to time, or any grant of Performance Units under the Plan shall not be deemed to constitute a contract of employment between the Company, or its Subsidiaries, and any employee or Participant, nor shall it constitute a right to remain in the employ of the Company or its Subsidiaries.
10.6 No Right to Participate. Except as provided in Articles III and IV, no Participant or other employee shall at any time have a right to be selected for participation in the Plan, despite having previously participated in an incentive or bonus plan of the Company or its Subsidiaries.
10.7 Facilitation of Payments. Notwithstanding anything else in this Plan to the contrary, in the event that a payment is due to an employee, or former employee (or a beneficiary thereof), under this Plan and the recipient is a minor, mentally incompetent, or otherwise incapacitated, such payment shall be made to the recipient’s legal representative, or guardian. If there is no such legal representative, or guardian, the Committee, in its sole discretion, may direct that payment be made to any person the Committee, in its sole discretion, believes, by reason of a family relationship, or otherwise, will apply. Upon such payment, for the benefit of the recipient, the Company and each of its Subsidiaries shall be fully discharged of all obligations therefor.
10.8 Addresses; Missing Recipients. A recipient of any payment under this Plan who is not a current employee of the Company, or its Subsidiaries, shall have the obligation to inform the Company of his or her current address, or other location to which payments are to be sent. Neither the Company nor its Subsidiaries shall have any liability to such recipient, or any other person, for any failure of such recipient, or person, to receive any payment if it sends such payment to the address provided by such recipient by first class mail, postage paid, or other comparable delivery method. Notwithstanding anything else in this Plan to the contrary, if a recipient of any payment cannot be located within 120 days following the date on which such payment is due after reasonable efforts by the Company or its Subsidiaries, such payments and all future payments owing to such recipient shall be forfeited without notice to such recipient. If, within two years (or such longer period as the Committee, in its sole discretion,
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may determine), after the date as of which payment was forfeited (or, if later, is first due), the recipient, by written notice to the Company, requests that such payment and all future payments owing to such recipient be reinstated and provides satisfactory proof of their identity, such payments shall be promptly reinstated. To the extent the due date of any reinstated payment occurred prior to such reinstatement, such payment shall be made to the recipient (without any interest from its original due date) within 90 days after such reinstatement.
10.9 Governing Law. The laws of the State of Delaware (excluding its principles relating to conflicts of laws) shall govern the Plan.
10.10 Successors. All obligations of the Company and its Subsidiaries under the Plan shall be binding upon and inure to the benefit of any successor to the Company or such Subsidiary, whether the existence of such successor is the result of a direct or indirect purchase, merger, consolidation, or otherwise.
10.11 Third Parties. Nothing expressed or implied in this Plan is intended or may be construed to give any person other than eligible Participants any rights or remedies under this Plan.
10.12 Headings. Section and other headings contained in this Plan are for reference purposes only, and are not intended to describe, interpret, define, or limit the scope, extent or intent of the provisions of the Plan.
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| SYSCO-PS-08 |
SYSCO CORPORATION
1390 ENCLAVE PARKWAY
HOUSTON, TX 77077-2099
VOTE BY INTERNET - www.proxyvote.com
Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 P.M. Eastern Time the day before the cut-off date or meeting date. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form.
ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALS
If you would like to reduce the costs incurred by our company in mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards and annual reports electronically via e-mail or the Internet. To sign up for electronic delivery, please follow the instructions above to vote using the Internet and, when prompted, indicate that you agree to receive or access proxy materials electronically in future years.
VOTE BY PHONE - 1-800-690-6903
Use any touch-tone telephone to transmit your voting instructions up until 11:59 P.M. Eastern Time the day before the cut-off date or meeting date. Have your proxy card in hand when you call and then follow the instructions.
VOTE BY MAIL
Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717.
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VOTE BY INTERNET — www.proxyvote.com Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 P.M. Eastern Time the day before the cut-off date or meeting date. Have your proxy card in hand when you access the web site and SYSCO CORPORATION follow the instructions to obtain your records and to create an electronic voting 1390 ENCLAVE PARKWAY instruction form. HOUSTON, TX 77077-2099 ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALS ATTN: LEGAL DEPARTMENT If you would like to reduce the costs incurred by our company in mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards and annual reports electronically via e-mail or the Internet. To sign up for electronic delivery, please follow the instructions above to vote using the Internet and, when prompted, indicate that you agree to receive or access proxy materials electronically in future years. VOTE BY PHONE - 1-800-690-6903 Use any touch-tone telephone to transmit your voting instructions up until 11:59 P.M. Eastern Time the day before the cut-off date or meeting date. Have your proxy card in hand when you call and then follow the instructions. VOTE BY MAIL Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: | | | | |
| | SYSCO1 | | M17202-P84920 KEEP THIS PORTION FOR YOUR RECORDS |
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THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. | DETACH AND RETURN THIS PORTION ONLY |
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SYSCO CORPORATION | | | | | | | | | | |
| | The Board of Directors recommends a vote
“FOR” “FOR” each of the nominees for director, “FOR”
Proposals proposals 2, 3, 4, 5 and 36 and “AGAINST” Proposal 4. | | | | | | | | | | |
| | proposal 7. Vote on Directors | | | | | | | | | | |
| | Vote on Proposals For Against Abstain 1. | | To elect as directors the three nominees named | | | | | | | | | | |
| | | | in the proxy statement Election of Directors to serve until the Annual | | For | | Against | | Abstain | | | | |
| | | | Meeting of Stockholders in 2011: | | | | | | | | | | |
| | | | 2012 Nominees: For Against Abstain 2. To approve the 2009 Non-Employee Directors Stock Plan; 0 0 0 1a. Judith B. Craven | | o | | o | | o | | | | |
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| | | | Jonathan Golden 0 0 0 3. To authorize amendments to Sysco’s 2007 Stock Incentive 0 0 0 Plan, as amended; 1b. Phyllis S. Sewell | | o | | o | | o | | | | |
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| | | | 1c. Richard G. Tilghman | | o | | o | | o | | | | |
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| | Vote on Proposals | | For | | Against | | Abstain |
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| | 2. | | Joseph A. Hafner. Jr. 0 0 0 4. To approve the material terms of, and the payment of compensation to certain executive officers pursuant to, 1c. Nancy S. Newcomb 0 0 0 0 0 0 the 2008 Cash Performance Unit2009 Management Incentive Plan, so that the deductibility of such compensation will not be limited by 1d. Kenneth F. Spitler 0 0 0 Section 162(m) of the Internal Revenue Code; | | o | | o | | o |
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| | 3. | | 5. To ratify the appointment of Ernst & Young LLP as SYSCO’sSysco’s 0 0 0 independent accountants for fiscal 2009; | | o | | o | | o |
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| | 4. | | 2010; 6. To consider and approve an advisory proposal relating to 0 0 0 the company’s executive compensation philosophy, policies and procedures; For address changes and/or comments, please check 0 7. To consider a stockholder proposal, if presented at the meeting, requesting that the Board of Directors take the necessary steps to require that all directors stand for election annually; and | | o | | o | | o |
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| | 5. | | To transact any other business as may properly be brought before the meeting or any adjournment thereof. | | | | | | |
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| | For address changes and/or comments, please check0 0 0 this box and write them on the back where indicated. | | o |
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| | meeting, requesting that the Board of Directors adopt certain principles for health care reform; and 8. To transact such other business as may properly come Only stockholders of record at the close of business on September 22, 200821, 2009 will before the meeting or any adjournment thereof. be entitled to receive notice of and to vote at the Annual Meeting. | | |
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| | Please sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor, administrator, or other fiduciary, please give full title as such. Joint owners should each sign personally. All holders must sign. If a corporation or partnership, please sign in full corporate or partnership name, by authorized officer. Signature [PLEASE SIGN WITHIN BOX] | Date | | | | Signature (Joint Owners) | Date | | |
Important Notice Regarding Internet Availability of Proxy Materials for the Annual Meeting:The Notice and Proxy Statement and Annual Report are available at www.proxyvote.com.SYSCO CORPORATION
Proxy for the Annual Meeting of Stockholders
November 19, 2008
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby constitutes and appoints Richard J. Schnieders and William J. DeLaney, and each of them jointly and severally, proxies, with full power of substitution, to vote all shares of common stock which the undersigned is entitled to vote at the Annual Meeting of Stockholders of Sysco Corporation to be held on Wednesday, November 19, 2008 at 10:00 a.m., at The Houstonian Hotel, 111 North Post Oak Lane, Houston, Texas 77024, or any adjournment thereof.
The undersigned acknowledges receipt of the notice of annual meeting and proxy statement, each dated October 7, 2008, grants authority to any of said proxies, or their substitutes, to act in the absence of others, with all the powers which the undersigned would possess if personally present at such meeting, and hereby ratifies and confirms all that said proxies, or their substitutes, may lawfully do in the undersigned’s name, place and stead. The undersigned instructs said proxies, or any of them, to vote as set forth on the reverse side.
Those proxies signed and returned with no choice indicated will be voted “FOR” each of the nominees for director, “FOR” Proposals 2 and 3 and “AGAINST” Proposal 4, and will be voted in the discretion of the proxy holder on any other matter that may properly come before the meeting and any adjournment or postponement of the Annual Meeting.
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| Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting: The Notice and Proxy Statement and Annual Report are available at www.proxyvote.com. M17203-P84920 SYSCO CORPORATION Annual Meeting of Stockholders November 18, 2009 THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS The undersigned hereby constitutes and appoints Manual A. Fernandez and William J. DeLaney, and each of them jointly and severally, proxies, with full power of substitution, to vote all shares of common stock which the undersigned is entitled to vote at the Annual Meeting of Stockholders of Sysco Corporation to be held on Wednesday, November 18, 2009 at 10:00 a.m., at the St. Regis Hotel, 1919 Briar Oaks Lane, Houston, Texas 77027 or any adjournment thereof. The undersigned acknowledges receipt of the Notice of Annual Meeting and Proxy Statement, each dated October 8, 2009, grants authority to any of said proxies, or their substitutes, to act in the absence of others, with all the powers which the undersigned would possess if personally present at such meeting, and hereby ratifies and confirms all that said proxies, or their substitues, may lawfully do in the undersigned’s name, place and stead. The undersigned instructs said proxies, or any of them, to vote as set forth on the reverse side. Those proxies signed and returned with no choice indicated will be voted “FOR“each of the nominees for director, “FOR” Proposals 2, 3, 4, 5 and 6 and “AGAINST” Proposal 7 and will be voted in the discretion of the proxy holder on any other matter that may properly come before the meeting and any adjournment or postponement of the Annual Meeting. Address Changes/Comments: | | | | | |
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| | ___ ___(If you noted any Address Changes/Comments above, please mark corresponding box on the reverse side.) Continued and to be signed on reverse side 679462 |
(If you noted any Address Changes/Comments above, please mark corresponding box on the reverse side.)
(Continued and to be signed on the reverse side.)