<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec. 240.14a-11(c) or sec. 240.14a-12
Sysco Corporation
- - --------------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
- - --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(l) and
0-11.
(1) Title of each class of securities to which transaction applies:
- - --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- - --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
- - --------------------------------------------------------------------------------
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(3) Filing Party:
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(4) Date Filed:
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<PAGE> 2
[SYSCO LOGO]
SYSCO CORPORATION
1390 ENCLAVE PARKWAY
HOUSTON, TEXAS 77077-2099
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD NOVEMBER 6, 1998
To The Stockholders of Sysco Corporation:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Sysco
Corporation, a Delaware corporation (the "Company"), will be held November 6,
1998, at 10:00 a.m., at the Omni Houston Hotel located at Four Riverway,
Houston, Texas, for the following purposes:
A. To elect five directors for terms of office as shown in the
attached Proxy Statement.
B. To approve the Sysco Corporation Non-Employee Directors Stock Plan
as set forth in the attached Proxy Statement.
C. To transact such other business as may properly come before the
meeting or any adjournment thereof.
Only Common Stockholders of record on the books of the Company at the close
of business on September 11, 1998, will be entitled to vote at the meeting.
We hope you will be able to attend the meeting in person but if you cannot
be present, it is important that you sign, date and promptly return the enclosed
proxy in order that your vote may be cast at the meeting.
JOHN F. WOODHOUSE
Chairman of the Board
Dated: September 25, 1998
Enclosure:
A copy of the Annual Report of Sysco Corporation for the fiscal year ended
June 27, 1998, containing financial statements, is enclosed herewith.
<PAGE> 3
SYSCO CORPORATION
1390 ENCLAVE PARKWAY
HOUSTON, TEXAS 77077-2099
1998 ANNUAL MEETING OF STOCKHOLDERS
PROXY STATEMENT
September 25, 1998
The following information is furnished in connection with the solicitation
of proxies for the 1998 Annual Meeting of Sysco Corporation (hereinafter called
the "Company").
A form of proxy for use at the meeting is enclosed. Any stockholder who
executes and delivers a proxy has the right to revoke the same at any time
before it is voted. The solicitation of proxies is made by and on behalf of the
management of the Company.
The cost of solicitation of proxies will be borne by the Company. The
Company will authorize banks, brokerage houses and other custodians, nominees or
fiduciaries to forward copies of proxy materials to the beneficial owners of
shares or to request authority for the execution of the proxies and will
reimburse such banks, brokerage houses and other custodians, nominees or
fiduciaries for their out-of-pocket expenses incurred in connection therewith.
The Company has retained Kissel-Blake Inc. to assist in the solicitation of
proxies from such nominees and certain individual stockholders, in writing or by
telephone, at an estimated fee of $7,000 plus reimbursement for reasonable
out-of-pocket expenses. This Proxy Statement and form of proxy were first mailed
to stockholders on or about September 25, 1998.
As of September 11, 1998, the record date, there were outstanding
334,679,271 shares of the Company's Common Stock, $1 par value ("Common Stock").
The holders of Common Stock vote as a single class and are entitled to one vote
per share, noncumulative. As of September 11, 1998, no person or group was known
to the Company to own more than five percent of the Company's Common Stock. All
directors and executive officers of the Company as a group (22 persons) owned
beneficially 3,940,572 shares (constituting approximately 1.18%) of the
Company's outstanding Common Stock as of September 11, 1998. It is expected that
shares held by directors and executive officers of the Company will be voted in
favor of each proposal. As stated in the Notice of Annual Meeting of
Stockholders attached hereto, only holders of Common Stock of record at the
close of business on September 11, 1998 will be entitled to notice of and to
vote at the meeting or any adjournment thereof. The stock transfer book will not
be closed.
ELECTION OF DIRECTORS
Five directors are to be elected. The Company's bylaws provide for the
election of directors for staggered terms, with each director serving a
three-year term. The Board of Directors has nominated five directors, Gordon M.
Bethune, Colin G. Campbell, Frank A. Godchaux III, Frank H. Richardson and John
F. Woodhouse, for three-year terms of office. The proxyholders intend to vote
for the first five persons named below as directors. The remaining ten persons
named in the table set forth on page 3 will continue in office for the terms
which expire at the Annual Meeting of Stockholders in the year opposite their
respective names.
Management recommends that the five nominees named below be elected to the
Board of Directors for the above-referenced terms of office. The five nominees
have consented to being named in the Proxy Statement and to serve if elected.
Unless otherwise directed in the proxy form, the proxyholders intend to vote in
favor of electing Messrs. Bethune, Campbell, Godchaux, Richardson and Woodhouse
as directors for three-year terms of office and until their respective
successors are elected and shall qualify.
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<PAGE> 4
The following information has been furnished to the Company by the five
members of the Board of Directors who are nominees for election or reelection at
the 1998 Annual Meeting:
GORDON M. BETHUNE, 57, was elected by the Board as a director of the
Company in September 1998. Mr. Bethune is Chairman of the Board and Chief
Executive Officer of Continental Airlines, Inc. and has served in that capacity
since 1996. Prior to joining Continental Airlines in 1994 as President and Chief
Operating Officer, he was Vice President and General Manager of the Renton
Division of the Commercial Airline Group of Boeing Corporation.
COLIN G. CAMPBELL, 62, has served as a director of the Company since 1989.
Mr. Campbell is the President of Rockefeller Brothers Fund, a private
philanthropic foundation, and also serves as a director of Pitney Bowes Inc.,
HSB Group and Rockefeller Financial Services, Inc.
FRANK A. GODCHAUX III, 71, has served as a director of the Company since
1987. Mr. Godchaux is the Chairman of the Board of Directors of Riviana Foods
Inc., a food manufacturer.
FRANK H. RICHARDSON, 65, has served as a director of the Company since
1993. Mr. Richardson served as President and Chief Executive Officer of Shell
Oil Company until his retirement in 1993.
JOHN F. WOODHOUSE, 67, has served as a director and officer of the Company
since its formation in 1969. Mr. Woodhouse is Chairman of the Board of Directors
of the Company. From 1985 until November 1994, Mr. Woodhouse served as Chairman
and Chief Executive Officer of the Company. Mr. Woodhouse also serves as a
director of Shell Oil Company. Mr. Woodhouse is Chairman of the Executive
Committee of the Board of Directors of the Company.
The following information has been furnished to the Company by the ten
members of the Board of Directors of the Company whose terms of office extend
beyond the 1998 Annual Meeting:
JOHN W. ANDERSON, 66, has served as a director of the Company since 1981.
Mr. Anderson is retired, having formerly served as the Vice-President Customer
Services of Southwestern Bell Telephone Company.
CHARLES H. COTROS, 61, has served as a director of the Company since 1985.
Mr. Cotros serves as Executive Vice President and Chief Operating Officer of the
Company and is a member of the Executive Committee of the Board of Directors of
the Company. Mr. Cotros also serves as a director of Metamore Worldwide, Inc.
JUDITH B. CRAVEN, 52, has served as a director of the Company since 1996.
She has served since July 1992 as President of the United Way of the Texas Gulf
Coast. From February 1983 to June 1992, Dr. Craven served as Dean of the School
of Allied Sciences of the University of Texas Health Science Center at Houston
and from September 1987 to June 1992 as Vice President of Multicultural Affairs
for the University of Texas Health Science Center. Dr. Craven is also a director
of A.H. Belo Corporation, Luby's Cafeterias, Inc. and the Houston Branch,
Federal Reserve Bank of Dallas.
JONATHAN GOLDEN, 61, has served as a director of the Company since 1984.
Mr. Golden is a partner of Arnall Golden & Gregory, LLP, counsel to the Company,
and is a member of the Executive Committee of the Board of Directors of the
Company. Mr. Golden also serves as a director of The Profit Recovery Group
International, Inc.
BILL M. LINDIG, 61, has served as a director of the Company since 1983. Mr.
Lindig is the President and Chief Executive Officer of the Company and is a
member of the Executive Committee of the Board of Directors of the Company. He
also serves as a director of Burlington Northern Santa Fe Corporation.
RICHARD G. MERRILL, 67, has served as a director of the Company since 1983.
Currently retired, he formerly served as Executive Vice President of The
Prudential Insurance Company of America. Mr. Merrill is also a director of W.R.
Berkley Corporation. Mr. Merrill is a member of the Executive Committee of the
Board of Directors of the Company.
RICHARD J. SCHNIEDERS, 50, was elected to the Board of Directors of the
Company in July 1997. Mr. Schnieders was elected Senior Vice President,
Merchandising and Multi-Unit Sales in May 1997 after previously serving as
Senior Vice President, Merchandising Services since 1992. He also serves as a
director of Aviall, Inc.
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PHYLLIS S. SEWELL, 67, has served as a director of the Company since 1991.
Mrs. Sewell, currently retired, formerly served as Senior Vice President of
Federated Department Stores, Inc. Mrs. Sewell is also a director of Pitney Bowes
Inc. and Lee Enterprises, Inc.
ARTHUR J. SWENKA, 61, has served as a director of the Company since 1994.
Mr. Swenka was elected Senior Vice President, Operations of the Company in
December 1994. Previously, Mr. Swenka had served since 1984 as President and
Chief Executive Officer of Nobel/Sysco Food Services Company.
THOMAS B. WALKER, JR., 74, has served as a director of the Company since
1970. Mr. Walker is a limited partner of The Goldman Sachs Group, L.P. and is a
director of A. H. Belo Corporation, Riviana Foods Inc. and NCH Corp. Mr. Walker
is a member of the Executive Committee of the Board of Directors of the Company.
Unless otherwise noted, the persons named above have been engaged in the
principal occupations shown for the past five years or longer.
Although management does not contemplate the possibility, in the event any
nominee is not a candidate or is unable to serve as a director at the time of
the election, the proxies will be voted for any nominee who shall be designated
by the present Board of Directors to fill such vacancy.
The name of each nominee, the term of office for which the nominee is
proposed to be elected, the number of shares of Common Stock beneficially owned
directly or indirectly by each nominee as of the close of business on September
11, 1998 (according to information received by the Company) and the percentage
of outstanding shares of Common Stock such ownership represented at September
11, 1998, are detailed below. Similar information is also provided for those
directors whose terms expire in future years.
<TABLE>
<CAPTION>
SHARES OF
COMMON STOCK
BENEFICIALLY
CURRENT OWNED AS OF PERCENT OF
TERM SEPTEMBER 11, OUTSTANDING
NAME EXPIRES 1998(1)(2) SHARES(3)
---- ------- ------------- -----------
<S> <C> <C> <C>
Directors Standing for Election for Three-Year
Terms of Office
Gordon M. Bethune................................ 1998 -0- *
Colin G. Campbell................................ 1998 3,333 *
Frank A. Godchaux III............................ 1998 55,333(4) .02%
Frank H. Richardson.............................. 1998 13,833(5) *
John F. Woodhouse................................ 1998 1,262,814 .38%
Directors with Continuing Terms
John W. Anderson................................. 1999 22,562 .01%
Judith B. Craven................................. 1999 -0- *
Bill M. Lindig................................... 1999 894,394(6) .27%
Richard G. Merrill............................... 1999 23,667 .01%
Phyllis S. Sewell................................ 1999 11,333 *
Charles H. Cotros................................ 2000 357,034 .11%
Jonathan Golden.................................. 2000 49,333(7) .01%
Richard J. Schnieders............................ 2000 90,717 .03%
Arthur J. Swenka................................. 2000 148,409 .04%
Thomas B. Walker, Jr............................. 2000 214,533 .06%
All Executive Officers and Directors as a Group (22
Persons)(8)(9)................................... 3,940,572 1.18%
</TABLE>
- - ---------------
* Less than .01% of outstanding shares, after rounding.
(1) Includes shares of Common Stock owned by the wives and/or dependent children
of each of the following named individuals: Colin G. Campbell, 1,000 shares;
Frank A. Godchaux III, 12,000 shares;
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<PAGE> 6
Richard J. Schnieders, 21,507 shares; and Arthur J. Swenka, 466 shares. Also
includes 46,644 shares owned by the wives and/or dependent children of other
current executive officers and directors.
(2) Includes options to acquire an aggregate 70,279 shares of Common Stock which
are presently exercisable or will become exercisable within 60 days after
the date of this Proxy Statement as follows: Charles H. Cotros, 16,706
shares; Bill M. Lindig, 14,066 shares; Richard J. Schnieders, 18,013 shares;
Arthur J. Swenka, 7,428 shares; and John F. Woodhouse, 14,066 shares.
(3) Rounded to the nearest 1/100 of one percent.
(4) Includes 20,000 shares held by Riviana Foods Inc. of which Mr. Godchaux and
his wife are affiliates.
(5) Includes 8,000 shares held by the Frank and Marilyn Richardson Family
Foundation of which Mr. Richardson and his wife are directors.
(6) Includes 92,600 shares held by trusts of which Mr. Lindig's wife is trustee.
(7) Includes 40,000 shares held by a trust created under the estate of Sol I.
Golden, of which Mr. Golden is a co-trustee.
(8) Includes options to acquire 10,664 shares of Common Stock which are
presently exercisable or will become exercisable within 60 days after the
date of this Proxy Statement held by current executive officers and
directors other than as set forth in note (2) above.
(9) As of September 11, 1998, Thomas E. Lankford, Senior Vice President,
Operations and an executive named in the Summary Compensation Table on page
9 hereof, beneficially owned 294,418 shares of Common Stock, constituting
.09% of the outstanding shares of Company Common Stock. Mr. Lankford's
ownership includes options to acquire 31,720 shares of Common Stock which
are presently exercisable or will become exercisable within 60 days after
the date of this Proxy Statement. As of September 11, 1998, George L. Holm,
Senior Vice President, Operations and an executive named in the Summary
Compensation Table on page 9 hereof, beneficially owned 103,760 shares of
Common Stock, constituting .03% of the outstanding shares of Company Common
Stock. Mr. Holm's ownership includes options to acquire 38,920 shares of
Common Stock which are presently exercisable or will become exercisable
within 60 days after the date of this Proxy Statement.
DIRECTOR COMPENSATION
Directors whose principal occupation is other than employment with the
Company are compensated at the rate of $50,000 per year plus reimbursement of
expenses for all services as a director, including committee participation or
special assignments. Such directors are given the opportunity to defer their
annual compensation until their retirement from the Board or until the
occurrence of certain other events. Such deferred compensation accrues interest
at a rate equal to a long-term index (the index utilized is the monthly average
for the previous calendar year of the highest of the 20-year Treasury Bond,
10-year Treasury Note and Moody's Corporate Bond Yield Indices) plus 1%. The
current rate of interest in effect is 8.53% per annum. Messrs. Godchaux, Golden,
Merrill and Walker and Mrs. Sewell elected to defer their annual compensation
for 1998.
The non-employee directors also receive a grant of options to purchase
4,000 shares of Company Common Stock (after adjusting for the 2-for-1 stock
split by way of stock dividend distributed on March 20, 1998 to stockholders of
record as of February 27, 1998 (the "Stock Split)) each November under the
Company's Non-Employee Directors Stock Option Plan (the "1995 Plan") if the
earnings per share of the Company for the preceding fiscal year increased by 10%
or more over the earnings per share of the Company for the last prior year. In
addition to requiring a 10% increase in earnings per share before options are
issued to non-employee directors, rigorous performance goals generally must be
met during the five-year period after the options are issued before such options
will vest and the grantee may exercise such option. If the options do not vest
during the five-year period after they are issued, such options will vest six
months prior to the expiration of the ten-year life of the grant if the director
is still serving on the Board of Directors. Pursuant to this plan, each
non-employee director received a grant of options to purchase 4,000 shares of
Company Common Stock (as adjusted for the Stock Split) in each of 1994, 1995,
1996 and 1997 (except for Dr. Craven
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who received a grant to purchase 4,000 shares in each of 1996 and 1997) and
1,333 shares of the 1994 grant are currently exercisable.
No other remuneration was paid for services as a director during the fiscal
year ended June 27, 1998.
On May 13, 1998, the Board of Directors adopted, subject to stockholder
approval, the Company's Non-Employee Directors Stock Plan (the "Directors
Plan"). Under the Directors Plan, non-employee directors will receive the
automatic grant of options to purchase 4,000 shares Common Stock following the
Company's 1998 Annual Meeting and each succeeding Annual Meeting thereafter. The
terms of such options and option grants are substantially the same as the terms
of options and option grants provided for under the 1995 Plan described in the
preceding paragraph. However, unlike the 1995 Plan, the Directors Plan also
calls for a one-time Retainer Stock Award of 2,000 shares of Common Stock to
each current non-employee director following the Company's 1998 Annual Meeting
as well as a one-time Retainer Stock Award of 2,000 shares of Common Stock to
each person who becomes a non-employee director of the Company after November 6,
1998. Finally, unlike the 1995 Plan, the Directors Plan would permit each
non-employee director to elect to receive up to one-half of his/her annual
retainer in Common Stock in which case the Company will provide a matching grant
of 50% of the number of shares resulting from the non-employee director's
election to receive a portion of his/her retainer in Common Stock. If the
Directors Plan is approved at the 1998 Annual Meeting, the Directors Plan will
supersede the 1995 Plan, options outstanding under the 1995 Plan will remain
outstanding and be governed thereby and no further options will be granted under
the 1995 Plan. See "Proposal to Approve the Sysco Corporation Non-Employee
Directors Stock Plan" below.
EXECUTIVE COMPENSATION
REPORT ON EXECUTIVE COMPENSATION
This report documents the components of the Company's compensation programs
for its executive officers and describes the basis on which fiscal 1998
compensation determinations were made with respect to the executive officers of
the Company, including Mr. Lindig, the Chief Executive Officer. All fiscal 1998
compensation decisions with respect to base salaries, annual incentive
compensation and all option grants under the 1991 Stock Option Plan were made by
the Compensation and Stock Option Committee (the "Committee").
OVERALL EXECUTIVE COMPENSATION PHILOSOPHY
Since it became a publicly held corporation in 1970, the Company has always
directly linked the compensation of its executive officers to the performance of
the Company. Specifically, the Company has tied the level of its executive
compensation to increases in the Company's earnings and return on shareholders'
equity. This has been accomplished through the following means:
- A "pay-for-performance" orientation based upon Company performance for
corporate officers other than senior vice presidents, operations and a
combination of operating company and Company performance for corporate
senior vice presidents, operations and operating company senior
management;
- Competitive base salaries;
- Potentially significant annual incentive bonuses under the Company's
management incentive plan;
- The issuance of performance-based stock options; and
- Customary benefits, including a supplemental executive retirement plan.
The factors and criteria upon which the determination of the fiscal 1998
compensation of Mr. Lindig, the Chief Executive Officer of the Company, was
based were the same as those discussed below with respect to all executive
officers except as otherwise described below with respect to the Company's
senior vice presidents, operations.
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BASE SALARIES
The Company has established base salaries of the executive officers of the
Company in the range of compensation payable to executive officers of United
States industrial corporations without reference to specific Company performance
criteria. This range of compensation is reexamined from time to time through a
survey of compensation practices by an independent compensation consultant
across a broad cross-section of U.S. industrial corporations (the "Survey"). The
Survey sample does not necessarily include those companies in the peer group
included in the performance graphs on pages 13 and 14 due to the differing size,
management responsibilities and organizational structures of those corporations
relative to the Company. Base salaries for all of the executive officers were
last reviewed on November 6, 1997, and adjustments were made in compensation
which became effective January 1, 1998. At that time, Mr. Lindig's base salary
was increased approximately 10%. It has been the consistent practice of the
Company to maintain the Chief Executive Officer's base salary at or below the
median of the range of base salaries payable to chief executive officers of the
surveyed industrial corporations which have chief executive officers with job
content and/or responsibilities comparable to those of the Company's Chief
Executive Officer.
ANNUAL INCENTIVE COMPENSATION
The Company provides annual incentive compensation to all executive
officers of the Company through the Sysco Corporation 1995 Management Incentive
Plan ("MIP"). The MIP is designed to offer opportunities for compensation which
are tied directly to Company performance. In addition, the MIP is designed to
foster significant equity ownership in the Company by the executive officers and
all other participants in the MIP.
For executive officers, fiscal 1998 incentive bonuses under the MIP were
calculated in two parts. The first part was based on the overall performance of
the Company and was based upon the interplay between the percentage increase in
earnings per share and the return on shareholders' equity. The MIP utilized a
matrix based on these two factors to determine award levels, resulting in an
award of 78.4% of base salary to each executive officer participating in this
portion of the MIP, including Mr. Lindig, who was awarded $599,760.
The second portion of the fiscal 1998 incentive bonus under the MIP for
executive officers was based upon the number of Sysco operating companies which
achieve a target return on capital. This portion of the incentive bonus is paid
only when the operating companies achieving the goals, in the aggregate, employ
at least 50% of the total capital of all of the Company's operating companies,
which was the case during fiscal 1998, resulting in an award of 55.5% of base
salary to each executive officer participating in this portion of the MIP,
including Mr. Lindig, who was awarded $424,575.
For senior vice presidents, operations, a portion of their bonus was based
upon the two-part calculation set forth above and a portion was based upon the
aggregate financial results of those operating subsidiaries or divisions for
which they are responsible, considered as one company. This portion is based
upon the interplay between the aggregate percentage increase in pretax earnings
of their supervised operations and the aggregate return on capital of their
supervised operations.
In order to encourage significant equity ownership in the Company by its
executive officers, the MIP provides that participants may elect to receive up
to 40% of their annual incentive bonus in the form of Sysco Common Stock, based
on a per share price equal to the closing price on the New York Stock Exchange
of Sysco Common Stock on the last day of the fiscal year for which the MIP bonus
is calculated. If such election is made, the participant is awarded one
additional share for each two shares received in accordance with the foregoing
calculation. In addition, participants who elect to receive Common Stock are
also entitled to receive an additional cash bonus ("Supplemental Bonus") equal
to the product of (i) the value of such matching shares received by the
participant (which is equal to the closing price of such shares on the last
trading day of the fiscal year), and (ii) the effective tax rate applicable to
the Company. In fiscal 1998, Mr. Lindig elected to receive 40% of his bonus in
Sysco Common Stock. The stock portion of the bonus awarded Mr. Lindig under the
MIP consisted of 24,102 shares valued at $614,601; he also has received a
Supplemental Bonus of $79,898.
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Finally, MIP participants are entitled to defer under the Company's
Deferred Compensation Plan up to 40% of their annual incentive bonus (without
considering any election to receive a portion of the bonus in stock). For
deferrals of up to 20% of the annual incentive bonus, the Deferred Compensation
Plan provides for the Company to make a payment equal to 50% of the amount
deferred. This matching payment vests upon the earliest to occur of (i) the
tenth anniversary of the date the matching payment is made, (ii) the
participant's reaching age sixty, (iii) the death or permanent disability of the
participant, or (iv) a change in control of the Company. In fiscal 1998, Mr.
Lindig deferred 20% of his MIP bonus, and therefore received a matching payment
equal to 50% of the amount deferred.
1991 STOCK OPTION PLAN
During fiscal 1998, the Company granted options to purchase shares of
Company Common Stock to 897 key employees, including the Company's executive
officers, pursuant to its 1991 Stock Option Plan (the "Plan"). All fiscal 1998
grants to executive officers were made in September 1997.
The Plan is administered by the Committee. In general, it is the practice
of the Committee to consider issuing options under the Plan only when
participants in the MIP are entitled to receive an annual incentive bonus
thereunder. In other words, option grants generally are considered only in years
when the Company achieves certain earnings per share and return on shareholders'
equity targets. See "Annual Incentive Compensation" above. It is the current
intention of the Committee to continue this practice, although it is not
required by the terms of the Plan.
In addition to requiring that certain performance goals must be met before
options are issued to any Plan participant, it has been the consistent practice
of the Company to impose rigorous performance goals which must be met before the
options will vest and participants may exercise their options. In the case of
corporate employees, these performance goals are based upon increases in Company
earnings per share and return on shareholders' equity. In effect, therefore,
there have been two different sets of performance goals, one for the grant of
the option and one for the exercise of the option. The Company currently
anticipates continuing this practice.
It also has been the practice of the Company to provide that options
granted under the Plan expire ten years after the date of grant, with a
five-year initial vesting period. The Committee currently anticipates continuing
the practice of providing that options which have not vested during this
five-year period will vest six (6) months prior to the end of their ten-year
life provided the holder remains in the active employment of the Company or one
of its operating companies at that time.
During fiscal 1998, Mr. Lindig received one (1) grant of 19,000 options at
an exercise price of $17.50 per share (as adjusted for the Stock Split). These
options contain vesting requirements which are identical to those discussed
above.
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REVIEW OF POTENTIAL EFFECT OF SECTION 162(m)
Section 162(m) of the Code ("Section 162(m)") generally sets a limit of $1
million on the amount of compensation (other than certain types of compensation,
including "performance-related" compensation that complies with the requirements
of Section 162(m)) that the Company can deduct for federal income tax purposes
in any given year with respect to the compensation of each of the executive
officers named in the Summary Compensation Table in the proxy statement with
respect to such year. The Board and the Committee have determined, after
reviewing the effect of Section 162(m), that their policy will be to structure
the performance-based compensation arrangements for such named executive
officers, to the extent feasible and taking into account all relevant
considerations, so as to satisfy Section 162(m)'s conditions for deductibility.
COMPENSATION AND STOCK
OPTION COMMITTEE
Richard G. Merrill, Chairman
John W. Anderson
Colin G. Campbell
Frank H. Richardson
Phyllis S. Sewell
Judith B. Craven
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The following tables set forth information with respect to the Chief
Executive Officer and the other four most highly compensated executive officers
of the Company and its subsidiaries employed at the end of fiscal 1998 as to
whom the total annual salary and bonus for the fiscal year ended June 27, 1998
exceeded $100,000:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION AWARD(5)
--------------------------------------------- -----------------------
(E) (F) (G)
OTHER RESTRICTED SECURITIES (I)
(B) (D) ANNUAL STOCK UNDERLYING ALL OTHER
(A) FISCAL (C) BONUS COMPENSATION AWARDS OPTIONS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY($) (1)(2)($) (3)($) (4)($) (#) (6)($)
--------------------------- ------ --------- --------- ------------ ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Bill M. Lindig........................ 1998 $727,500 $694,499 -- $614,601 19,000 $118,580
President and Chief Executive 1997 660,000 561,385 -- 496,799 20,000 97,542
Officer and Director 1996 615,500 439,974 -- 389,320 20,000 75,834
John F. Woodhouse..................... 1998 $645,000 $612,805 -- $542,283 19,000 $126,923
Chairman and Director 1997 615,000 500,385 -- 442,779 20,000 107,820
1996 615,500 429,511 -- 380,038 20,000 94,845
Charles H. Cotros..................... 1998 $565,000 $540,166 -- $478,023 19,000 $ 95,817
Executive Vice President and Chief 1997 510,000 435,306 -- 385,170 20,000 76,548
Operating Officer and Director 1996 472,500 338,703 -- 299,722 20,000 58,505
Thomas E. Lankford.................... 1998 $287,500 $321,702 -- $235,161 15,000 $ 44,811
Senior Vice President, Operations 1997 257,500 186,097 -- 164,650 16,000 31,712
1996 232,500 154,199 -- 136,418 16,000 25,750
George L. Holm(6)..................... 1998 $270,000 $300,086 -- $239,139 15,000 $ 41,163
Senior Vice President, Operations 1997 225,000 148,060 -- 131,017 16,000 22,959
1996 -- -- -- -- -- --
</TABLE>
- - ---------------
(1) Includes amounts deferred pursuant to the Company's Executive Deferred
Compensation Plan.
(2) Does not include that portion of a participant's bonus which the participant
elected to receive in the form of restricted Common Stock of the Company.
See column (f).
(3) Does not include perquisites and other personal benefits, if any, the
aggregate of which in the case of each named individual does not exceed the
lesser of $50,000 or 10% of such individual's annual salary and bonus as
reported.
(4) The amount presented is determined by multiplying the number of shares
earned by the closing price of the Company's Common Stock on the New York
Stock Exchange on June 26, 1998, the date as of which the shares were
earned, without taking into consideration the following restrictions on the
shares. The shares are not transferable by the recipient for two years
following receipt thereof and are subject to certain repurchase rights on
the part of the Company in the event of termination of employment other than
pursuant to normal retirement or disability. The recipient receives
dividends on the shares during the restricted two-year period. During fiscal
1998, the number of restricted shares received by the named individuals was
as follows: Mr. Lindig -- 24,102 shares; Mr. Woodhouse -- 21,266 shares; Mr.
Cotros -- 18,746 shares; Mr. Lankford -- 9,222 shares; and Mr. Holm -- 9,378
shares. At the end of fiscal 1998, the aggregate number and dollar amount
(computed using the closing price of the Company's Common Stock on June 26,
1998 as described above) of restricted shares held by the named individuals
were as follows: Mr. Lindig -- 50,956 shares at $1,299,378; Mr.
Woodhouse -- 45,200 shares at $1,152,600; Mr. Cotros -- 39,566 shares at
$1,008,933; Mr. Lankford -- 18,122 shares at $462,111; and Mr. Holm --
16,460 shares at $419,730.
(5) Column (h), Long Term Incentive Plan Payouts, is not included in the table
since no compensation required to be reported thereunder was paid to the
named individuals during the periods covered by the table nor does the
Company have any compensation plans which provide for the payment of such
compensation.
(6) Mr. Holm was elected as an executive officer September 30, 1996 and
therefore compensation information for fiscal year 1996 (which ended June
29, 1996) is not provided.
9
<PAGE> 12
(6) The amounts shown include the Company match equal to 50% of the first 20% of
the annual incentive bonus which each individual elected to defer under the
Company's Executive Deferred Compensation Plan and the amount the Company
paid for term life insurance coverage for each individual as follows:
<TABLE>
<CAPTION>
1998 1997 1996
------------------------------- ------------------------------- ------------------------------
DEFERRED TERM DEFERRED TERM DEFERRED TERM
NAME TOTAL MATCH INSURANCE TOTAL MATCH INSURANCE TOTAL MATCH INSURANCE
- - ---- -------- -------- --------- -------- -------- --------- ------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Bill M. Lindig.............. $118,580 $102,434 $16,146 $ 97,542 $82,800 $14,742 $75,834 $64,890 $10,944
John F. Woodhouse........... 126,923 90,383 36,540 107,820 73,800 34,020 94,845 63,345 31,500
Charles H. Cotros........... 95,817 79,671 16,146 76,548 64,200 12,348 58,505 49,955 8,550
Thomas E. Lankford.......... 44,811 39,195 5,616 31,712 27,445 4,267 25,750 22,740 3,010
George L. Holm(1)........... 41,163 39,857 1,306 22,959 21,837 1,122 -- -- --
</TABLE>
- - ---------------
(1) See note (6) to Summary Compensation Table.
The following table provides, as to the individuals named in the Summary
Compensation Table, information regarding the grants of stock options during the
last fiscal year. The Company did not grant any stock appreciation rights under
the 1991 Stock Option Plan during the last fiscal year.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
PERCENTAGE
NUMBER OF OF TOTAL
SECURITIES OPTIONS
UNDERLYING GRANTED TO EXERCISE OR GRANT DATE
OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION PRESENT
NAME GRANTED(#)(1) FISCAL 1998 ($/SHARE) DATE VALUE($)(2)
- - ---- ------------- ------------ ----------- ---------- -----------
<S> <C> <C> <C> <C> <C>
Bill M. Lindig................... 19,000 1.00% $17.50 9/3/2007 $119,320
John F. Woodhouse................ 19,000 1.00% $17.50 9/3/2007 $119,320
Charles H. Cotros................ 19,000 1.00% $17.50 9/3/2007 $119,320
Thomas E. Lankford............... 15,000 0.79% $17.50 9/3/2007 $ 94,200
George L. Holm................... 15,000 0.79% $17.50 9/3/2007 $ 94,200
</TABLE>
- - ---------------
(1) The options do not vest and become exercisable unless the Company attains
certain levels of increases in earnings per share and return on
shareholders' equity. If these increases are not attained within five years
of the date of grant, the options will not vest thereafter until six months
prior to the expiration of the ten-year life of the grant, and only if the
recipient is still an active employee of the Company at that time.
(2) The hypothetical grant value for the options of $6.28 per share was
determined using a modified Black-Scholes pricing model. In applying the
model, the Company assumed a volatility of 24%, a 6.4% risk-free rate of
return, a dividend yield at the date of grant of 1.71%, and a 10-year option
term. The Company did not assume any option exercises or risk of forfeiture
during the 10-year term. If used, such assumptions could have reduced the
reported grant date value. The actual value, if any, an executive may
realize upon exercise of options will depend on the excess of the stock
price over the exercise price on the date the option is exercised.
Consequently, there is no assurance that the value realized will be at or
near the value estimated by the modified Black-Scholes model.
10
<PAGE> 13
The following table provides information with respect to aggregate option
exercises in the last fiscal year and fiscal year-end option values for the
executive officers named in the Summary Compensation Table. The Company did not
grant any stock appreciation rights under the 1991 Stock Option Plan during the
last fiscal year to any officers, including executive officers, of the Company.
AGGREGATED OPTION EXERCISES
IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
(D)
NUMBER OF (E)
SECURITIES UNDERLYING VALUE OF UNEXERCISED
(B) (C) UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS AT
SHARES VALUE JUNE 27, 1998(#)(2) JUNE 27, 1998($)(2)(3)
(A) ACQUIRED ON REALIZED --------------------------- ---------------------------
NAME EXERCISE(#) ($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Bill M. Lindig......................... 8,276 65,530 14,066 72,334 $166,853 $735,758
John F. Woodhouse...................... 5,280 38,940 14,066 72,334 166,853 735,758
Charles H. Cotros...................... 8,276 75,641 16,706 72,334 200,843 735,758
Thomas E. Lankford..................... -- -- 31,720 51,000 406,582 502,000
George L. Holm......................... 9,200 94,300 38,920 39,000 493,232 362,000
</TABLE>
- - ---------------
(1) Computed based on the difference between the closing price of the Common
Stock on the day of exercise and the exercise price.
(2) Based on option vesting status as of September 11, 1998.
(3) Computed based on the difference between the closing price on June 26, 1998
and the exercise price.
DEFINED BENEFIT RETIREMENT PLAN
The Company has a defined benefit retirement plan which was amended and
restated effective July 2, 1989 ("Retirement Plan") and further amended
effective January 1, 1998. The Retirement Plan provides for an annual benefit
payable monthly for five years certain and life thereafter, equal to (a) the
normal retirement benefit which accrued under the prior plan as of July 2, 1989,
plus (b) an amount equal to 1 1/2% of the participant's aggregate career
compensation earned on and after July 2, 1989.
In the event of a participant's death prior to his or her normal retirement
age (age 65) or the commencement of a benefit, if earlier, and if the
participant has five or more years of credited service, a death benefit is
payable in an amount equal to the value of the pension accrued by the deceased
participant prior to his or her death or earlier termination of employment.
Under current law and regulations, the maximum annual retirement benefit
that may be payable in 1998 under the five years certain and life thereafter
form of payment to an individual retiring at age 65 is $128,388. Without regard
to this maximum limitation, the named executive officers have accrued the
following benefits and credited benefit service as of June 27, 1998: Mr.
Lindig -- $73,339 and 14 years; Mr. Woodhouse -- $177,659 and 29 years; Mr.
Cotros -- $82,921 and 14 years; Mr. Lankford -- $35,589 and 17 years; and Mr.
Holm -- $25,495 and 10 years.
11
<PAGE> 14
The named executive officers also have anticipated future service to age 65
as follows (except for Mr. Woodhouse who currently is 67): Mr. Lindig -- 4
years; Mr. Cotros -- 4 years; Mr. Lankford -- 14 years; and Mr. Holm -- 22
years. In addition to benefits accrued to date, each named executive officer
will accrue benefits in the future in accordance with the table below:
PENSION PLAN TABLE(1)(2)
<TABLE>
<CAPTION>
CAREER AVERAGE YEARS OF CREDITED SERVICE
COMPENSATION EARNED ON ----------------------------------------------------
AND AFTER JUNE 27, 1998(3) 10 15 20 25 30 35
-------------------------- ------ ------ ------ ------ ------ -------
<S> <C> <C> <C> <C> <C> <C>
$ 50,000......................... 7,500 11,250 15,000 18,750 22,500 26,250
100,000......................... 15,000 22,500 30,000 37,500 45,000 52,500
150,000......................... 22,500 33,750 45,000 56,250 67,500 78,750
200,000......................... 30,000 45,000 60,000 75,000 90,000 105,000
</TABLE>
- - ---------------
(1) Assumes that the annual benefit is payable for five years certain and life
thereafter and that retirement age is 65. Pension plan benefits are not
subject to deduction by social security or any other offsets.
(2) Current law and regulations limit retirement benefits in 1998 to $128,388 if
they are payable for five years certain and life thereafter (assuming
Retirement Plan and Social Security retirement age of 65). This limitation
applies to total retirement benefits under the Retirement Plan as determined
by adding benefits accrued with respect to periods of employment with the
Company both before and after June 27, 1998. The Pension Plan Table does not
reflect this limitation.
(3) Compensation for benefit calculation purposes is limited by law to $160,000
for 1998 and later years subject to future cost-of-living adjustments. Pay
limitations are not taken into account in the Pension Plan Table.
To the extent included in W-2 income, all amounts shown in the Summary
Compensation Table, other than deferred bonus, term life insurance payments and
the Company match under the Executive Deferred Compensation Plan, are utilized
to compute career average compensation subject to the pay limitations noted in
footnote (3).
PERFORMANCE GRAPHS
PERFORMANCE GRAPHS
The following two performance graphs compare the performance of the
Company's Common Stock to the S&P 500 Index and to a peer group for the
Company's last five and ten fiscal years, respectively. The peer group is
comprised of Fleming Companies, Inc., Nash Finch Company, Richfood Holdings,
Inc., Super Food Services, Inc., Supervalu Stores, Inc. and U.S. Foodservice,
Inc., which was created as a result of the acquisition of Rykoff-Sexton, Inc. by
JP Foodservice, Inc. These distributors of grocery or foodservice products were
selected since they comprise a broad group of publicly held corporations with
food distribution operations similar in some respects to the Company's
operations. U.S. Foodservice, Inc., through its predecessor Rykoff-Sexton, Inc.,
is the only other publicly held foodservice distributor to be in existence
throughout the five and ten-year periods, although, unlike the Company, it also
manufactured certain food products during these periods. Each other member of
the peer group is in the business of distributing grocery products to retail
supermarkets. The Company considers this to be a more representative peer group
than the "S&P Foods Wholesaler" index maintained by Standard & Poor's
Corporation and consisting of the Company, Fleming Companies, Inc. and Supervalu
Stores, Inc. During the past few years, two foodservice distributors have become
publicly owned companies. These are JP Foodservice, Inc. (now known as U.S.
Foodservice, Inc.) and Performance Food Group Company ("PFG"). PFG has not been
included in the peer group because of the lack of available historical financial
data.
The returns of each member of the peer group are weighted according to each
member's stock market capitalization as of the beginning of each period
measured. The graphs assume that the value of the
12
<PAGE> 15
investment in each of the Company's Common Stock, the index and the peer group
was $100 at each of June 26, 1993 and June 26, 1988, and that all dividends were
reinvested. Performance data for the Company is provided as of the last trading
day of each of the Company's last five and ten fiscal years, respectively.
Performance data for the S&P 500 Index and for each member of the peer
group is provided for the latest fiscal year and the last trading day closest to
June 30 of each year.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
<TABLE>
<CAPTION>
MEASUREMENT PERIOD
(FISCAL YEAR COVERED) SYSCO S&P 500 PEER GROUP
<S> <C> <C> <C>
1993 100.00 100.00 100.00
1994 95.53 101.41 91.20
1995 123.09 127.84 94.90
1996 145.10 161.08 99.83
1997 157.30 216.98 117.76
1998 225.05 282.42 129.23
1997
1998
</TABLE>
13
<PAGE> 16
COMPARISON OF TEN-YEAR CUMULATIVE TOTAL RETURN
<TABLE>
<CAPTION>
MEASUREMENT PERIOD
(FISCAL YEAR COVERED) SYSCO S&P 500 PEER GROUP
<S> <C> <C> <C>
1988 100.00 100.00 100.00
1989 162.00 120.55 116.26
1990 235.87 140.43 118.45
1991 284.30 150.82 124.75
1992 333.62 171.05 113.66
1993 347.63 194.36 145.07
1994 332.09 197.10 132.31
1995 427.90 248.48 137.68
1996 504.41 313.09 144.82
1997 546.83 421.73 170.85
1998 782.36 548.92 187.49
</TABLE>
CERTAIN RELATIONSHIPS AND OTHER INFORMATION
The Company's Nominating Committee, consisting of Jonathan Golden
(Chairman), Colin G. Campbell, Frank A. Godchaux III, Richard G. Merrill, Frank
H. Richardson, Phyllis S. Sewell and Thomas B. Walker, Jr., held five (5)
meetings during fiscal 1998. The function of the Nominating Committee is to
propose directors and officers for election or reelection. The Nominating
Committee will consider nominees recommended in writing by stockholders.
The Company's Compensation and Stock Option Committee consisted of Richard
G. Merrill (Chairman), John W. Anderson, Colin G. Campbell, Judith B. Craven,
Frank H. Richardson and Phyllis S. Sewell. The Compensation and Stock Option
Committee held four (4) meetings during fiscal 1998. The function of the
Compensation Committee is to consider for recommendation to the Board of
Directors of the Company the annual compensation of directors and officers of
the Company, to oversee the administration of the Company's 1995 Management
Incentive Plan and the 1991 Stock Option Plan, and to provide guidance in the
area of employee benefits, including retirement plans and group insurance.
The Board of Directors held six (6) meetings during fiscal 1998 and all
directors of the Company attended 75% or more of the aggregate of (1) the total
number of meetings of the Board of Directors and (2) the total number of
meetings held by all committees of the Board on which he or she served during
fiscal 1998.
Mr. Golden is the sole stockholder of Jonathan Golden, P.C., a partner in
the law firm of Arnall Golden & Gregory, LLP, Atlanta, Georgia, counsel to the
Company. The Company believes that fees paid to such firm were fair and
reasonable in view of the level and extent of services rendered.
14
<PAGE> 17
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Pursuant to Section 16(a) of the Securities Exchange Act of 1934 and the
rules issued thereunder, the Company's executive officers and directors and any
persons holding more than ten percent (10%) of the Company's Common Stock are
required to file with the Securities and Exchange Commission and the New York
Stock Exchange reports of their initial ownership of the Company's Common Stock
and any changes in ownership of such Common Stock. Specific due dates have been
established and the Company is required to disclose in its Annual Report on Form
10-K and Proxy Statement any failure to file such reports by these dates. Copies
of such reports are required to be furnished to the Company. Based solely on its
review of the copies of such reports furnished to the Company, or written
representations that no reports were required, the Company believes that, during
fiscal 1998, all of its executive officers (including the named executive
officers), directors and persons owning more than 10% of its Common Stock
complied with the Section 16(a) requirements except that Frank H. Richardson
filed one late report on Form 4 disclosing one transaction and one late report
on Form 5 with respect to a gift made in 1997, Thomas H. Lankford and Arthur J.
Swenka each filed a late Form 3 correcting previously filed Forms 3 and James D.
Wickus filed one late report on Form 4 disclosing one transaction and a late
Form 3 correcting a previously filed Form 3.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Messrs. Anderson, Campbell, Keller,(1) Merrill, and Richardson, and Mmes.
Sewell and Craven were the only members of the Company's Board of Directors to
serve on the Company's Compensation Committee during fiscal 1998 and were not,
during fiscal 1998 or prior thereto, officers or employees of the Company or any
subsidiary thereof. Mr. Godchaux is chairman of Riviana Foods Inc., a food
products company which had sales to the Company or its wholly-owned subsidiaries
of approximately $206,000 during fiscal 1998. The Company believes that the
terms of such transactions were fair and no less favorable to the Company than
those available from other suppliers.
PROPOSAL TO APPROVE THE
SYSCO CORPORATION
NON-EMPLOYEE DIRECTORS STOCK PLAN
On May 13, 1998, the Board of Directors adopted, subject to stockholder
approval, the Sysco Corporation Non-Employee Directors Stock Plan (the
"Directors Plan"). The purpose of the Directors Plan is to make available shares
of Common Stock for award to or purchase by non-employee directors of the
Company in order to attract and retain the services of experienced and
knowledgeable non-employee directors for the benefit of the Company and its
stockholders and to enable non-employee directors to increase their financial
stake in the Company through the ownership of the Company's Common Stock, in
addition to underscoring their common interest with stockholders in increasing
the value of the Company over the long term. If approved, the Directors Plan
will supersede the Company's existing Non-Employee Directors Stock Option Plan
(the "1995 Plan") and no further options will be granted under the 1995 Plan. A
copy of the Directors Plan is attached hereto as Appendix A.
Eligibility
All members of the Company's Board of Directors who are not employees of
the Company or any of its subsidiaries are eligible to participate in the
Directors Plan. There currently are ten non-employee directors on the Board.
Shares Reserved for the Directors Plan
The Company's Directors Plan provides for the grant of options ("Options"),
retainer stock awards ("Retainer Stock Awards"), elected shares in lieu of a
portion of annual cash retainer fees ("Elected Shares") and additional matching
shares issued with respect to Elected Shares ("Additional Shares") with
- - ---------------
(1) Donald J. Keller resigned as a director of the Company effective December 1,
1997.
15
<PAGE> 18
respect to an aggregate maximum of 400,000 shares of the Company's Common Stock.
The number of shares covered by the Directors 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 the corporate structure or shares of the Company.
Any such adjustment will be made if adjustments are made to awards under the
Company's incentive plans for management then in effect. Shares issued under the
Directors Plan may consist, in whole or in part, of authorized and unissued
shares, treasury shares or shares purchased on the open market.
To the extent any Option granted under the Directors Plan expires or
terminates for any reason prior to exercise, the number of shares subject to the
portion of the Option not so exercised will be available for future grants under
the Directors Plan. If the exercise price of any Option granted under the
Directors Plan is paid with shares of Common Stock, then the number of shares of
Common Stock available for issuance under the Directors Plan will be reduced
only by the net number of shares of Common Stock issued to the holder of such
Option, and not by the gross number of shares for which the Option is exercised.
Shares subject to Retainer Stock Awards that are forfeited or cancelled shall
again be available for new grants under the Directors Plan.
Administration of the Directors Plan
The Directors Plan shall be administered by the Board. The Board shall have
the authority to terminate or amend the Directors Plan, to determine the terms
and provisions of the respective Option and award agreements, to construe such
Option and award agreements and the Directors Plan, and to make all other
determinations in the judgment of the Board necessary or desirable for the
administration of the Directors Plan, including amending the vesting and
exercisability terms set forth in Exhibit A attached to the Directors Plan.
However, the Directors Plan may not be amended by the Board to revoke or alter
any provision in a manner which is unfavorable to the grantee ("Grantee") of
Options, Retainer Stock Awards, Elected Shares or Additional Shares then
outstanding without the approval of the Company's stockholders.
Automatic Grant of Stock Options and Exercise Price
Beginning with the Company's 1998 Annual Meeting, on the first business day
(the "Grant Date") following each Annual Meeting, each individual who is at the
time elected, reelected or continuing as a non-employee director automatically
will be granted an option to purchase 4,000 shares of the Company's Common Stock
(the "Annual Grant"), provided the Company achieved for the preceding fiscal
year an increase in after-tax basic earnings per share ("EPS") of 10% or more
over the EPS for the prior fiscal year, unless the Board shall waive this
requirement. However, if the General Counsel of the Company determines that the
Company is in possession of material, undisclosed information about the Company
on the Grant Date, then the Annual Grant of Options to non-employee directors
shall be suspended until the second day after public dissemination of such
information, and the exercise price, exercisability dates and Option period
shall be determined by reference to such later date. Stockholder approval of the
Directors Plan also shall constitute pre-approval of each Option granted
pursuant to the provisions of the Directors Plan, and of the subsequent exercise
of that Option in accordance with the Directors Plan.
The option price per share shall be at the last closing price of the
Company's Common Stock on the New York Stock Exchange prior to the date an award
or Option is granted.
Means of Exercise of Options
Upon exercise of the option, the option price for purchased shares shall be
payable immediately in cash or shares of Company Common Stock having an
aggregate Fair Market Value equal to the Option exercise price (for this
purpose, "Fair Market Value" shall mean the average of the quoted daily high and
low prices of Company Common Stock on the New York Stock Exchange on the last
business day prior to the date of exercise) or any combination of the foregoing.
An Option holder will have none of the rights of a stockholder with respect to
any shares covered by the Option until such individual has exercised the Option,
paid the Option price and been issued a stock certificate for the purchased
shares.
16
<PAGE> 19
Vesting and Exercisability of Options
Each Option shall vest and become exercisable as follows:
(a) One-third of the total number of shares covered by an Option shall
vest at the conclusion of any of the five fiscal years of the Company
following the Base Year (as defined below), provided that the EPS of the
Company increased at least 20% in such fiscal year over the Company's EPS
for the prior fiscal year. If EPS of the Company should increase less than
20% in any such fiscal year over the prior fiscal year, the Option can be
vested at the conclusion of any fiscal year ending within the five-year
period following the Grant Date of the Option (the Vesting Period ) in
which EPS of the Company for the fiscal years during the Vesting Period
after the Base Year have grown at a minimum rate of 15%, compounded
annually, with one-third of the total number of shares covered by the
Option to vest for each fiscal year after the Base Year included in the
calculation of the 15% compounded minimum growth rate. The fiscal year
immediately prior to the fiscal year in which the Option is granted is the
Base Year for determining whether vesting requirements have been met.
(b) If neither of the criteria set forth in (a) is met, (i) one-third
of the Option shall vest for any fiscal year within the Vesting Period in
which (A) the Company's annual return on stockholders equity equals or
exceeds 17.5% and (B) the increase in EPS of the Company over the prior
fiscal year equals or exceeds 15%, or (ii) the Option shall fully vest, if
the Company's average annual return on stockholders' equity for the five
fiscal years ending within the Vesting Period equals or exceeds 17.5% and
the increase in EPS of the Company over such five fiscal years equals or
exceeds 10%, compounded annually.
(c) If none of the vesting requirements set out in paragraph (a) or
(b) above are met within the Vesting Period as to any portion of an Option,
such Option (or portion thereof) will nonetheless vest and become
exercisable six months prior to the expiration thereof (the Supplemental
Vesting Date ) provided that the Grantee of the Option continues to serve
on the Company's Board of Directors as a non-employee director on the
Supplemental Vesting Date. Notwithstanding the foregoing, if any Option (or
portion thereof) has not vested by the end of the Vesting Period, such
Option (or portion thereof) shall be automatically forfeited when the
Grantee ceases to serve as a non-employee director if such cessation occurs
prior to the Supplemental Vesting Date. However, any unvested portion of an
Option shall become vested and immediately exercisable upon the occurrence
of a Change of Control prior to the expiration or forfeiture of the Option.
For purposes of the Director's Plan, "Change of Control" means that a
person or persons who are acting together for the purposes of acquiring an
equity interest in the Company acquire beneficial ownership (as defined in
Rule 13d-3 promulgated under the Securities Exchange Act of 1934, as
amended) of 20% or more of the outstanding Common Stock.
Subject to the limitations set forth in the Directors Plan, the vested
portion of an Option may be exercised at any time following the earlier to occur
of the end of the fiscal year in which it vests or the Supplemental Vesting
Date. No portion of any Option may be exercised prior to the first anniversary
of the Grant Date. Each Option granted under the Directors Plan shall expire on
the tenth anniversary of the Grant Date or such shorter period as set forth in
the Directors Plan.
Transferability of Options
Options will not be assignable or transferable other than by will or the
laws of descent and distribution, and during the Grantee's lifetime the option
may be exercised only by the Grantee or the Grantee's guardian or legal
representative.
Retainer Stock Awards
The Directors Plan also provides for the automatic grant of Retainer Stock
Awards. Immediately following the 1998 Annual Meeting, a one-time Retainer Stock
Award of 2,000 shares shall be made to each non-employee director who is serving
on the Board at that time. Thereafter, as of the date of each subsequent Annual
Meeting of Stockholders, each newly elected director who has not previously
received such an award shall be granted a one-time Retainer Stock Award of 2,000
shares. Retainer Stock Awards will vest (i) one-third on the second anniversary
of the Grant Date if the average increase in EPS of the Company over the two
17
<PAGE> 20
most recent fiscal years ending prior to the second anniversary of the Grant
Date is 10% or more; (ii) one-third on the fourth anniversary of the Grant Date
if the average increase in EPS of the Company over the two most recent fiscal
years ending prior to the fourth anniversary of the Grant Date is 10% or more
(and if the first third of the Retainer Stock Award did not vest under (i)
above, the first third will also vest on such fourth anniversary if the average
increase in EPS over the four most recent fiscal years ending prior to the
fourth anniversary of the Grant Date is 10% or more); and (iii) one-third on the
sixth anniversary of the Grant Date if the average increase in EPS of the
Company over the two most recent fiscal years ending prior to the sixth
anniversary of the Grant Date is 10% or more.
Notwithstanding the foregoing, 100% of any unvested portion of a Retainer
Stock Award shall vest if the average increase in EPS over the six most recent
fiscal years ending prior to the sixth anniversary of the Grant Date is 10% or
more, and any unvested portion of the Retainer Stock Award which has not
previously expired or been forfeited shall vest upon the occurrence of a Change
of Control. Any portion of the Retainer Stock Award which is not vested on the
sixth anniversary of the Grant Date thereof shall be forfeited.
Common Stock granted as a Retainer Stock Award may not be sold, assigned,
transferred or pledged prior to the date it is vested. Each director, as the
owner of shares of Common Stock granted to him or her as a Retainer Stock Award,
shall have all the rights of a Company stockholder, including but not limited
to, the right to vote such shares and the right to receive all dividends paid on
such shares; provided, however, that all such rights shall lapse immediately at
such time as any Retainer Stock Award is forfeited by such director.
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 may elect to forego up to 50%
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 Common Stock of the Company, in
an amount determined as set forth below. Upon making such an election, the
electing director shall have credited to his account on the date of each
quarterly payment of the annual retainer fee ("Quarterly Payment Date") that
number of shares of Common Stock determined by dividing his or her elected
amount by the Fair Market Value of one share of Company Common Stock as of such
Quarterly Payment Date ("Elected Shares"). In addition, he or she shall also
receive that number of shares of Common Stock determined by dividing 50% of the
elected amount by the Fair Market Value on 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 50% of his or her annual
retainer fee shall be 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 shall be 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 two years after the date on which
they are issued 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 departure in good standing (determined as set forth below), the
Restriction shall lapse and be of no further force or effect on or after the
date of such death, disability or departure in good standing; and (ii) the
Restriction shall lapse and be of no further force or effect on the date of a
Change in Control.
Termination of Service
Following retirement from the Board of Directors in good standing
(determined by the Board of Directors in its sole discretion, provided that a
non-employee director who serves out his or her term but does not stand for
reelection shall be deemed to have retired from the Board in good standing), a
non-employee director's Options and Retainer Stock Awards shall remain in
effect, vest, become exercisable and expire as if he or she had remained a
non-employee director of the Company. Upon a non-employee director's death, his
or her
18
<PAGE> 21
legal representatives or heirs have one year within which to exercise those
Options which were exercisable at the time of death, but in no event may the
Options be exercised beyond the last date on which they could have been
exercised had the non-employee director not died. All other Options not
exercisable at the non-employee director's death will terminate as of the date
of death. Should an individual cease to serve as a non-employee director for any
other reason, all Options held by such person, whether or not then exercisable,
and all unvested Retainer Stock Awards shall be forfeited upon cessation of
service. With regard to Additional Shares, upon a non-employee director's death,
all Restrictions with respect to the Additional Shares shall lapse and be of no
further force or effect.
No Impairment of the Company's Rights
Nothing in the Directors Plan will be construed or interpreted so as to
affect adversely or otherwise impair the Company's right to remove any
non-employee director from service on the Board at any time in accordance with
the provisions of applicable law, and no non-employee director shall have any
claim or right to be granted or issued an Option, Retainer Stock Award, Elected
Shares or Additional Shares, except as provided in the Directors Plan.
Effective Date and Term of Plan
The Directors Plan shall be effective as of the date of approval thereof by
the Company's stockholders. No grants will be made under the Directors Plan
unless the Directors Plan is approved by the stockholders at the 1998 Annual
Meeting. The Directors Plan will terminate upon the earliest to occur of (i) ten
years from the date of stockholder approval, (ii) the date on which all shares
available for issuance under the Directors Plan have been issued, or (iii) the
date on which all outstanding grants or awards are terminated or have vested or
been forfeited. If the date of termination is determined under clause (i) above,
then any Option grants and Retainer Stock Awards outstanding on such date will
not be affected by the termination of the Directors Plan and will continue to
have force and effect in accordance with the provisions of the instruments
evidencing such grants or awards and the Plan, and Additional Shares shall
continue to be subject to the applicable provisions of the Directors Plan.
Federal Tax Consequences
Options granted under the Directors Plan are not intended to satisfy the
requirements of Section 422 of the Internal Revenue Code of 1986, as amended
(the "Code"). The federal income tax treatment of such options may be summarized
as follows:
The grant of an Option to a non-employee director will not result in the
recognition of any taxable income to such non-employee director. A non-employee
director will recognize ordinary income on the date of exercise of an Option in
an amount equal to the difference between (i) the fair market value of the
shares acquired pursuant to the exercise of the Option, and (ii) the exercise
price of the Option.
A non-employee director who exercises an Option by tendering shares (the
"Tendered Shares") will not recognize income as a result of the exercise of the
Option with respect to that number of shares received ("Acquired Shares") which
equals the number of Tendered Shares and will receive a carryover of the basis
and holding period of the Tendered Shares for such number of Acquired Shares.
Any Acquired Shares which exceed the number of Tendered Shares will cause the
non-employee director to recognize ordinary income (and entitle the Company to a
deduction) in an amount equal to the fair market value of such excess Acquired
Shares on the date the Option was exercised. The non-employee director's basis
for such number of excess Acquired Shares will equal the amount of ordinary
income recognized as a result of the exercise of the Option and their capital
gain holding period will begin on the date the Option is exercised.
A non-employee director who receives a Retainer Stock Award should not
recognize any taxable income upon the receipt of the Retainer Stock Award unless
such non-employee director makes a timely election pursuant to Section 83(b) of
the Code (an "83(b) Election"). However, a non-employee director who does not
make an 83(b) Election will recognize taxable compensation income at the time
his or her interest in the Retainer Stock Award is no longer subject to a
substantial risk of forfeiture under the terms of the grant. The
19
<PAGE> 22
tax basis of the Retainer Stock Award to the non-employee director should be
equal to the amount includable in the non-employee director's gross income as
compensation, and the non-employee director's holding period for the Retainer
Stock Award should normally commence on the day following the date on which the
value of such Shares is includable in income. Dividends paid on Retainer Stock
Awards prior to the lapse of the restrictions (if an 83(b) Election is not made)
should be included in the income of the non-employee director as taxable
compensation income when received.
If the non-employee director makes a timely 83(b) Election, the
non-employee director will recognize the fair market value of the Retainer Stock
Awards as taxable compensation income at the time of their receipt. Any gain
recognized on a subsequent sale of the Retainer Stock Awards, after a holding
period of twelve (12) months has elapsed, will be treated as a long term capital
gain.
A non-employee director who elects to receive Elected Shares and Additional
Shares will recognize ordinary compensation income in the amount of the fair
market value of such shares as of the date they are credited to his or her
account. With respect to shares received by non-employee directors pursuant to
exercise of Options, Retainer Stock Awards, Elected Shares and Additional
Shares, the Company will be entitled to a deduction for the amount included in
the income of a non-employee director for the Company's taxable year within
which the non-employee director's taxable year ends.
The above is a general summary of the federal income tax consequences under
current tax law. It does not purport to cover all of the special rules, or the
state or local income or other tax consequences inherent in the ownership and
exercise of stock options, vesting of awards and the ownership or disposition of
the underlying shares.
New Plan Benefits
The following table indicates the number of shares of Common Stock that
could be received in fiscal 1999 under the Directors Plan and the estimated
dollar value thereof:
<TABLE>
<CAPTION>
NUMBER OF SHARES
UNDERLYING OPTIONS DOLLAR
NAME AND POSITION STOCK GRANTS VALUE
----------------- ------------------ ----------
<S> <C> <C>
Non-Employee Director Group (10 persons)
Stock Options (subject to performance criteria)....... 40,000 $ 251,200(1)
Retainer Stock Awards (subject to performance
criteria).......................................... 20,000 467,500(2)
Elected Shares in Lieu of Annual Retainer Fees........ 10,690(3) 249,879(2)
Additional Shares in Lieu of Annual Retainer Fees..... 5,340(3) 124,823(2)
------ ----------
Total (10 persons)............................ 76,030 $1,093,402
</TABLE>
- - ---------------
(1) Assumes a value of $6.28 per share which is the same as the hypothetical
grant value determined for options granted in fiscal 1998 to individuals in
the Summary Compensation Table. See note (2) to the chart "Option Grants in
Last Fiscal Year" on p. 10.
(2) Assumes a fair market value of $23 3/8 per share based on the closing price
of the Company's Common Stock on the New York Stock Exchange on September
11, 1998.
(3) Under the Directors Plan, up to 50% of the annual retainer fee may be
foregone in exchange for Common Stock of the Company as described herein.
The number of shares to be granted depends upon the fees waived by each
Director. The information reported assumes each Director elected to waive
the maximum amount permitted.
If this proposal is not approved, the 1995 Plan will remain in effect.
Pursuant to the 1995 Plan, each non-employee Director receives options to
purchase 4,000 shares of Company Common Stock per year at the last closing price
of the Company's Common Stock on the New York Stock Exchange prior to the grant
date. This proposal will not affect options already granted under the 1995 Plan.
20
<PAGE> 23
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" APPROVAL OF THE SYSCO CORPORATION
NON-EMPLOYEE DIRECTORS STOCK PLAN
VOTING PROCEDURES AND VOTE REQUIRED
The Board of Directors of the Company will select one or more Inspectors of
Election, who shall determine the number of shares of voting stock outstanding,
the voting power of each, the number of shares of stock represented at the
Annual Meeting, the existence of a quorum (which shall consist of thirty-five
percent (35%) of the shares entitled to vote), and the validity and effect of
proxies. The Inspectors of Election shall receive votes, ballots or consents,
hear and determine any challenges and questions arising in connection with the
right to vote, tabulate all votes cast for and against (and abstentions in
respect of) each proposal and determine the result of such vote.
In accordance with the Delaware General Corporation Law, the election of
the nominees named herein as directors will require the affirmative vote of a
plurality of the votes cast by the shares of Company Common Stock entitled to
vote in the election provided that a quorum is present at the Annual Meeting.
Abstentions and broker non-votes will not be relevant to the outcome.
The proposal for approval of the Sysco Corporation Non-Employee Directors
Stock Plan will require the affirmative vote of a majority of the shares of
Common Stock present in person or by proxy and entitled to vote on the proposal.
Abstentions will have the effect of "negative" votes with respect to the
proposal, while broker non-votes will have no effect on the outcome of the
proposal. There are no rights of appraisal or similar dissenter's rights with
respect to any matter to be acted upon pursuant to this Proxy Statement.
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen LLP served as the independent public accountants providing
auditing, financial and tax services to the Company for fiscal year 1998 and
will provide such services during the current fiscal year 1999. The Company
expects that representatives of Arthur Andersen LLP will be present at the
Annual Meeting with the opportunity to make a statement if they desire to do so
and that they will be available to respond to appropriate questions.
The Company has an Audit Committee of the Board of Directors which is
composed of Colin G. Campbell (Chairman), Richard G. Merrill, Judith B. Craven,
Frank A. Godchaux III, Frank H. Richardson, Phyllis S. Sewell, John W. Anderson
and Thomas B. Walker, Jr. The Audit Committee held four (4) meetings during
fiscal 1998. The Audit Committee reviews and reports to the Company's Board of
Directors with respect to various auditing and accounting matters, including
recommendations as to the selection of the Company's independent public
accountants, the scope of the audit procedures, the nature of the services to be
performed for the Company, the fees to be paid to the Company's independent
public accountants, the performance of the Company's independent public
accountants and the accounting practices of the Company.
STOCKHOLDER PROPOSALS
Appropriate proposals of stockholders intended to be presented at the
Company's 1999 Annual Meeting of Stockholders pursuant to Rule 14a-8 promulgated
under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), must
be received by the Company by May 29, 1999 for inclusion in its Proxy Statement
and form of proxy relating to that meeting. If the date of the next Annual
Meeting is subsequently advanced or delayed by more than 30 calendar days from
the date of the Annual Meeting to which this Proxy Statement relates, the
Company shall, in a timely manner, inform its stockholders of the change and the
date by which proposals of stockholders must be received.
In addition, all stockholder proposals submitted outside of the stockholder
proposal rules promulgated pursuant to Rule 14a-8 under the Exchange Act must be
received by the Company by August 12, 1999, in order to be considered timely. If
such stockholder proposals are not timely received, proxyholders will have
21
<PAGE> 24
discretionary voting authority with regard to any such stockholder proposals
which may come before the 1999 Annual Meeting. With regard to such stockholder
proposals, if the date of the next annual meeting is subsequently advanced or
delayed by more than 30 calendar days from the date of the Annual Meeting to
which this Proxy Statement relates, the Company shall, in a timely manner,
inform stockholders of the change and the date by which proposals must be
received.
OTHER MATTERS TO COME BEFORE THE MEETING
Management does not know of any other matters to come before the Annual
Meeting. However, if any other matters properly come before the Annual Meeting,
it is the intention of the persons designated as proxies to vote in accordance
with their best judgment on such matters.
UPON THE WRITTEN REQUEST OF ANY RECORD OR BENEFICIAL OWNER OF COMMON STOCK
OF THE COMPANY WHOSE PROXY WAS SOLICITED IN CONNECTION WITH THE 1998 ANNUAL
MEETING OF STOCKHOLDERS, THE COMPANY WILL FURNISH SUCH OWNER, WITHOUT CHARGE, A
COPY OF ITS ANNUAL REPORT ON FORM 10-K FOR ITS FISCAL YEAR ENDED JUNE 27, 1998.
REQUEST FOR A COPY OF SUCH ANNUAL REPORT ON FORM 10-K SHOULD BE ADDRESSED TO THE
INVESTOR RELATIONS DEPARTMENT, SYSCO CORPORATION, 1390 ENCLAVE PARKWAY, HOUSTON,
TEXAS 77077-2099.
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. STOCKHOLDERS WHO DO NOT
EXPECT TO ATTEND THE MEETING IN PERSON ARE URGED TO SIGN, DATE AND RETURN THE
PROXY IN THE ENCLOSED ENVELOPE TO WHICH NO POSTAGE NEED BE AFFIXED IF MAILED IN
THE UNITED STATES.
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<PAGE> 25
APPENDIX A
SYSCO CORPORATION
NON-EMPLOYEE DIRECTORS STOCK PLAN
ARTICLE 1
GENERAL
This 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.
SECTION 1.1 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 hereby reserved for issuance
under this Plan 400,000 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, in the number and kind of shares to be issued
hereunder, in the number and kind of shares covered by outstanding stock options
("Options") under this Plan and in the option price thereof, shall be made if,
and in the same manner as, such adjustments are made to awards issued under the
Corporation's incentive plans for management of the Corporation then in effect.
ARTICLE 2
OPTION AWARDS
SECTION 2.1 Options. No Options granted pursuant to this Plan may be
"Incentive Stock Options" under Section 422 of the Internal Revenue Code of
1986, as amended.
SECTION 2.2 Annual Grant of Stock Options. If the Corporation achieves for
any fiscal year an increase in after-tax basic earnings per share ("EPS") of 10%
or more over EPS for the prior fiscal year, determined consistently with
determinations made in connection with the measurement of the Corporation's
performance under incentive compensation plans for management of the
Corporation, or in the event such increase is not achieved, if the Board of
Directors shall waive this requirement, each individual elected, re-elected or
continuing as a Non-Employee Director shall automatically receive an Option for
4,000 shares of Common Stock on the first business day (the "Award Date") after
the Corporation's Annual Meeting of Stockholders which follows the close of such
fiscal year.
Notwithstanding the foregoing, if, on the Award Date, the General Counsel
of the Corporation determines, in his/her sole discretion, that the Corporation
is in possession of material, undisclosed information about the Corporation,
then the annual grant of Options to Non-Employee Directors shall be suspended
until the second day after public dissemination of such information, and the
price, exercisability dates and option period shall then be determined by
reference to such later date. If Common Stock is not traded on the New York
Stock Exchange ("NYSE") on any date a grant would otherwise be awarded, then
Appendix A -- p. 1
<PAGE> 26
the grant shall be made the next day thereafter on which Common Stock is so
traded. All Option grants pursuant to this Plan shall be evidenced by a written
instrument consistent with the provisions hereof.
SECTION 2.3 Option Price. The price of the Option shall be the last
closing price of the Corporation Common Stock on the NYSE prior to the grant of
the Option.
SECTION 2.4 Option Period. An Option granted under this Plan shall become
exercisable and shall expire in accordance with the vesting and other conditions
contained on Exhibit A hereto, as the same may be amended in accordance with
Section 5.3 hereof, or in accordance with such other vesting requirements as the
Board of Directors shall substitute at or after the date of grant with respect
to any individual or group of individuals; provided, however, that no Option may
be exercised later than ten years after the date of grant thereof.
SECTION 2.5 Payment. The Option exercise price shall be paid in cash in
U.S. dollars at the time the Option is exercised or in shares of Corporation
Common Stock having an aggregate Fair Market Value equal to the Option exercise
price (determined as of the last business day prior to the date of exercise, in
accordance with Section 2.3 above) or by a combination of cash and Common Stock.
For purposes of this plan, "Fair Market Value" means, for any given business
day, the average of the quoted daily high and low prices of Corporation Common
Stock on the NYSE on such day.
SECTION 2.6 Nontransferability of Options. No Option granted under this
Plan is transferable other than by will or the laws of descent and distribution.
During the grantee's lifetime, an Option may be exercised only by the grantee or
the grantee's guardian or legal representative.
ARTICLE 3
RETAINER STOCK AWARDS
SECTION 3.1 Terms and Conditions.
(a) As of the date of the Annual Meeting of Stockholders of the Corporation
held in calendar 1998, each Director who is then a Non-Employee Director shall
be granted a Retainer Stock Award (as defined below). Thereafter, as of the date
of each subsequent Annual Meeting of Stockholders of the Corporation, each
Director who is then a Non-Employee Director (excluding any Non-Employee
Director who has previously received a Retainer Stock Award) shall be granted a
Retainer Stock Award.
(b) The Retainer Stock Award shall consist of the grant of 2,000 shares of
Common Stock, to vest as follows:
(1) One-third of the Retainer Stock Award shall vest after two years
from the date of grant if the average increase in EPS over the two most
recent fiscal years ending prior to the second anniversary of the date of
grant is 10% or more;
(2) An additional one-third of the Retainer Stock Award shall vest
after four years from the date of grant if the average increase in EPS of
the Corporation over the two most recent fiscal years ending prior to the
fourth anniversary date of the grant is 10% or more, and if the first third
of the Retainer Stock Award did not vest under paragraph (b)(1), the first
third will also vest if the average increase in EPS over the four most
recent fiscal years ending prior to the fourth anniversary of the date of
grant is 10% or more;
(3) The final one-third of the Retainer Stock Award shall vest after
six years from the date of grant if the average increase in EPS of the
Corporation over the two most recent fiscal years ending prior to the sixth
anniversary of the date of grant is 10% or more;
(4) Notwithstanding the foregoing, 100% of the Retainer Stock Award
shall vest if the average increase in EPS over the six most recent fiscal
years ending prior to the sixth anniversary of the date of grant is 10% or
more. Any portion of the Retainer Stock Award which is not vested on the
sixth anniversary of the date of grant thereof shall be forfeited.
2
Appendix A -- p. 2
<PAGE> 27
(5) Any unvested portion of the Retainer Stock Award shall vest upon
the occurrence of a Change in Control as defined in Exhibit A.
(c) The Retainer Stock Awards granted under this Section 3.1 shall be
subject to the limitations set forth in Section 3.3.
SECTION 3.2 Fractional Shares. If the number of shares that may be vested
under a Retainer Stock Award for a Non-Employee Director would result in a
fractional share, then the number of shares otherwise available shall be reduced
to the next lowest number that would result in the allocation of no fractional
shares.
SECTION 3.3 Limitations on Stock. Common Stock granted as a Retainer Stock
Award shall be subject to the following limitations:
(a) Such Common Stock may not be sold, assigned, transferred, pledged
or otherwise encumbered prior to the date it is vested.
(b) Each certificate issued in respect of such Common Stock shall be
registered in the name of the Non-Employee Director and deposited, together
with a stock power endorsed in blank, with the Corporation.
(c) Each Retainer Stock Award shall be evidenced by a written
agreement duly executed on behalf of the Corporation and the Non-Employee
Director for whom such award is granted, dated as of the date of issuance
of the Common Stock to which it relates. Such agreement shall comply with
and be subject to the terms of the Plan.
(d) Except as otherwise provided by this Plan, each Non-Employee
Director, as owner of shares of Common Stock granted to him or her as a
Retainer Stock Award, shall have all the rights of a stockholder, including
but not limited to the right to vote such shares and the right to receive
all dividends paid on such shares; provided, however, that no dividends
shall be payable to or for the benefit of a Non-Employee Director with
respect to record dates for such dividends occurring on or after the date,
if any, on which the Non-Employee Director has forfeited the Common Stock.
ARTICLE 4
ELECTION TO RECEIVE COMMON STOCK
SECTION 4.1 Eligibility. A Non-Employee Director who is otherwise eligible
to receive cash payment for services provided as a Director may elect to receive
up to 50% of his or her annual retainer fee, in 10% increments, exclusive of any
fees or other amounts payable for attendance at the meetings of the Board or for
service on any committee thereof, in the form of Common Stock (a "Stock
Election"), subject to the following terms of this Section 4. The amount of the
fee which a Non-Employee Director 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 in that fiscal year in which the Elected Amount would have
been paid but for the Stock Election.
SECTION 4.2 Common Stock. Any Non-Employee Director who makes a stock
election pursuant to Section 4.1 (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 4 (the "Stock Account"). Each
Electing Director shall 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 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 Elected Amount by the Fair
Market Value on such Quarterly Payment Date (such shares are referred to as
"Additional Shares").
SECTION 4.3 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. Additional Shares, however, may not be sold or
3
Appendix A -- p. 3
<PAGE> 28
transferred for a period of two years after the date as of which they are issued
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
departure in good standing (as defined in Section 5.1), the Restriction shall
lapse and be of no further force or effect on or after the date of such death or
disability; and (ii) the Restriction shall lapse and be of no further force or
effect on the date of a Change in Control.
SECTION 4.4 Date of Issuance. The date of issuance of Common Stock issued
pursuant to this Article 4 (the "Issue Date") shall be December 31 for any year
as to which a Non-Employee Director has made a stock election as described in
Section 4.1 hereof, or if December 31 is not a business day for the
Corporation's transfer agent, on the last business day of the Corporation's
transfer agent prior to December 31. As of 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 each Electing Director's Stock
Account shall be debited by the number of shares issued. Notwithstanding the
foregoing, if a Non-Employee Director ceases to be a director for any reason
when there are shares accrued to such director's Stock Account, certificates for
such shares shall be issued within 60 days of the date such Non-Employee
Director ceases to be a director and the date such shares are issued shall be
the Issue Date of such shares.
SECTION 4.5 Method of Election. A Non-Employee Director who wishes to make
a Stock Election must deliver to the Secretary of the Corporation a written
irrevocable election specifying the Elected Amount by January 31 of the calendar
year to which the Stock Election relates (or at such other time required under
rules established by the Board).
ARTICLE 5
MISCELLANEOUS
SECTION 5.1 Cessation of Service. Upon cessation of service as a
Non-Employee Director (for reasons other than death), all Options, whether or
not exercisable at the date of cessation of service, and all unvested Retainer
Stock Awards shall be forfeited by the grantee; provided, however, that, subject
to Paragraph 3 of Exhibit A, if a grantee leaves the Board of Directors in "good
standing" (for reasons other than death), such grantee's Options and Retainer
Stock Awards shall remain in effect, vest, become exercisable and expire as if
the grantee had remained a Non-Employee Director of the Corporation. Whether or
not a Non-Employee Director has left the Board in "good standing" shall be
determined by the Corporation's Board of Directors, in its sole discretion;
provided, however, that any Non-Employee Director who serves out his/her term
but does not stand for re-election at the end thereof shall be deemed to have
left the Board of Directors in "good standing." Status of Elected Shares and
Additional Shares shall be governed by Section 4.3.
SECTION 5.2 Death. Upon the death of a Non-Employee Director, only those
Options which were exercisable on the date of death shall be exercisable by
his/her legal representatives or heirs. Such Options must be exercised within
one year from date of death or they shall be automatically forfeited (but in no
event may the Options be exercised beyond the last date on which they could have
been exercised if the Non-Employee Director had not died). In addition, in the
event of the death of a Non-Employee Director, all of his/her unvested Retainer
Stock Awards shall be automatically forfeited, but all restrictions with respect
to Additional Shares shall lapse.
SECTION 5.3 Administration and Amendment of the Plan. 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 it deems advisable. No
amendment may revoke or alter in a manner unfavorable to the grantees any
Options, Retainer Stock Awards or Elected Shares then outstanding. No Option,
Retainer Stock Award, Elected Shares or Additional Shares may be issued under
this Plan after that date which is ten years from the date of stockholder
approval of this Plan, but Options granted prior to that date shall continue to
become exercisable and may be exercised according to their terms, Retainer Stock
Awards granted prior to that date shall
4
Appendix A -- p. 4
<PAGE> 29
continue to vest in accordance with their terms and Additional Shares shall
continue to be subject to the provisions hereof.
SECTION 5.4 No Other Rights. Except as provided in this Plan, no
Non-Employee Director shall have any claim or right to be granted or issued an
Option, Retainer Stock Award, 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 in the service of the Corporation.
SECTION 5.5 Prior Plan. This Plan supersedes the Corporation's existing
Non-Employee Directors Stock Option Plan (the "Directors Option Plan"). No
further options will be granted under the Directors Option Plan following
approval of this Plan by the Corporation's Stockholders.
SECTION 5.6 Effective Date. This Plan shall be effective on that date that
it is approved by the Stockholders of the Corporation.
5
Appendix A -- p. 5
<PAGE> 30
EXHIBIT A TO SYSCO CORPORATION
NON-EMPLOYEE DIRECTORS STOCK PLAN
In addition to the conditions set out in the Plan, the exercise of an
Option is contingent upon satisfying the below requirements:
1. The fiscal year immediately prior to the fiscal year in which the
Option is granted is the "Base Year" for determining if vesting
requirements have been met. One-third of the total number of shares covered
by an Option shall vest at the conclusion of any of the five fiscal years
of the Corporation following the Base Year, provided that the after tax
basic earnings per share of the Corporation ("EPS") increased at least 20%
in such fiscal year over the Corporation's EPS for the prior fiscal year.
If EPS of the Corporation should increase less than 20% in any one fiscal
year over the prior fiscal year, the Option can be vested at the conclusion
of any fiscal year ending within the five-year period following the date of
grant of the Option (the "Vesting Period") in which EPS of the Corporation
for the fiscal years after the Base Year have grown at a minimum rate of
15%, compounded annually, with one-third of the total number of shares
covered by the Option to vest for each fiscal year after the Base Year
included in the calculation of the 15% compounded minimum growth rate.
2. If neither of the vesting requirements set out in the paragraph
immediately above is met, an Option may still vest, in part or in whole,
subject to the following criteria:
(a) For any fiscal year within the Vesting Period in which the
Corporation's annual return on shareholders' equity (computed in a
manner consistent with the computation of the Corporation's annual
return on shareholders' equity under the Corporation's incentive
compensation plans for management of the Corporation) equals or exceeds
17.5% and the increase in EPS of the Corporation over the prior fiscal
year equals or exceeds 15%, one-third of the Option will vest.
(b) If the Corporation's average annual return on shareholders'
equity (computed in a manner consistent with the computation of the
Corporation's annual return on shareholders' equity under the
Corporation's incentive compensation plans for management of the
Corporation) for the five fiscal years ending within the Vesting Period
equals or exceeds 17.5% and the increase in EPS of the Corporation over
such five fiscal years equals or exceeds 10%, compounded annually, the
Option will fully vest.
3. If none of the vesting requirements set out above are met within
the Vesting Period as to any portion of an Option, such Option (or portion
thereof) will nonetheless vest and become exercisable six months prior to
the expiration thereof (the "Supplemental Vesting Date") provided that the
grantee of the Option (the "Grantee") continues to serve on the
Corporation's Board of Directors as a Non-Employee Director on the
Supplemental Vesting Date.
Notwithstanding anything in Section 5.1 of the Plan to the contrary,
if any Option (or portion thereof) has not vested by the end of the Vesting
Period, said Option (or portion thereof) shall be automatically forfeited
when the Grantee ceases to serve as a Non-Employee Director (for reasons
other than death) if such cessation occurs prior to the Supplemental
Vesting Date.
4. Subject to the limitations set forth in the Plan, the vested
portion of an Option may be exercised at any time following the conclusion
of the fiscal year in which it vests, provided that at the time of exercise
all of the conditions set forth in the Plan have been met. No portion of
any Option may be exercised prior to one calendar year following the date
of grant thereof.
5. Notwithstanding anything to the contrary contained in the Plan, all
unvested options shall become vested and immediately exercisable upon the
occurrence of a Change in Control. For purposes of this Plan, "Change in
Control" means that a person or persons who are acting together for the
purpose of acquiring an equity interest in the Corporation acquire
beneficial ownership (as defined in Rule 13d-3 promulgated under the
Securities Exchange Act of 1934 (as amended) of 20% or more of the
outstanding Common Stock.
Appendix A -- p. 6
<PAGE> 31
SYSCO-PS-98
<PAGE> 32
DETACH HERE
PROXY
SYSCO CORPORATION
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
SYSCO CORPORATION
FOR THE ANNUAL MEETING OF STOCKHOLDERS
NOVEMBER 6, 1998, 10:00 A.M.
The undersigned hereby constitutes and appoints John F. Woodhouse and Arthur J.
Swenka, 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 (the
"Company") to be held on November 6, 1998 at 10:00 a.m., at the Omni Houston
Hotel, Four Riverway, Houston, Texas 77056-1999, or any adjournment thereof.
The undersigned acknowledges the receipt of Notice of the aforesaid Annual
Meeting and Proxy Statement, each dated September 25, 1998, 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.
- - ---------------- ----------------
SEE REVERSE CONTINUED AND TO BE SIGNED ON REVERSE SIDE SEE REVERSE
SIDE SIDE
- - ---------------- ----------------
<PAGE> 33
DETACH HERE
- - --- PLEASE MARK
X VOTES AS IN
- - --- THIS EXAMPLE
1. Election of Directors.
NOMINEES: Gordon M. Bethune, Colin G. Campbell,
Frank A. Godchaux III, Frank H. Richardson
and John F. Woodhouse
FOR [ ] [ ] WITHHELD
[ ] -----------------------------
FOR all nominees except those
whose name(s) are written
above.
FOR AGAINST ABSTAIN
2. Approval of the Sysco Corporation
Non-Employee Directors Stock Plan. [ ] [ ] [ ]
3. On all other matters which may properly come before the
meeting or any adjournment thereof.
ALL PROXIES SIGNED AND RETURNED WILL BE VOTED OR NOT VOTED IN ACCORDANCE WITH
YOUR INSTRUCTIONS, BUT THOSE WITH NO CHOICE WILL BE VOTED "FOR" EACH OF THE
NOMINEES FOR DIRECTOR NAMED HEREON AND "FOR" APPROVAL OF THE SYSCO CORPORATION
NON-EMPLOYEE DIRECTORS STOCK PLAN.
MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT [ ]
(Signature should conform to name and title stenciled hereon. Where there is
more than one owner, each should sign. Executors, administrators, trustees,
guardians and attorneys should add their title upon signing.)
Please sign below, date and return promptly.
No postage required if this proxy is returned in the enclosed envelope and
mailed in the United States.
Signature: Date:
--------------------------------- ----------------------
Signature: Date:
--------------------------------- ----------------------
