0000950129-01-503134.txt : 20011009
0000950129-01-503134.hdr.sgml : 20011009
ACCESSION NUMBER: 0000950129-01-503134
CONFORMED SUBMISSION TYPE: DEF 14A
PUBLIC DOCUMENT COUNT: 1
CONFORMED PERIOD OF REPORT: 20011109
FILED AS OF DATE: 20010924
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: SYSCO CORP
CENTRAL INDEX KEY: 0000096021
STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-GROCERIES & RELATED PRODUCTS [5140]
IRS NUMBER: 741648137
STATE OF INCORPORATION: DE
FISCAL YEAR END: 0630
FILING VALUES:
FORM TYPE: DEF 14A
SEC ACT: 1934 Act
SEC FILE NUMBER: 001-06544
FILM NUMBER: 1742560
BUSINESS ADDRESS:
STREET 1: 1390 ENCLAVE PKWY
CITY: HOUSTON
STATE: TX
ZIP: 77077
BUSINESS PHONE: 2815841390
DEF 14A
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h90794def14a.txt
SYSCO CORPORATION
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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 Under Rule 14a-12
SYSCO CORPORATION
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(Name of Registrant as Specified in Its Charter)
N/A
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(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)(1)
and 0-11.
(1) Title of each class of securities to which transaction applies:
--------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
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(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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(4) Proposed maximum aggregate value of transaction:
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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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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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[SYSCO LOGO]
SYSCO CORPORATION
1390 ENCLAVE PARKWAY
HOUSTON, TEXAS 77077-2099
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD NOVEMBER 9, 2001
To the Stockholders of Sysco Corporation:
The Annual Meeting of Stockholders of Sysco Corporation, a Delaware
corporation, will be held November 9, 2001 at 10:00 a.m. at The Houstonian Hotel
located at 111 North Post Oak Lane, Houston, Texas 77024, for the following
purposes:
1. To elect three directors;
2. To approve the Amended and Restated Non-Employee Directors Stock
Plan;
3. To consider a shareholder proposal submitted by the International
Brotherhood of Teamsters; and
4. To transact any other business as may properly be brought before
the meeting or any adjournment thereof.
Only stockholders of record at the close of business on September 14, 2001
will be entitled to receive notice of and to vote at the Annual Meeting. You may
inspect a list of stockholders of record at the company's offices during regular
business hours during the 10-day period before the Annual Meeting. You may also
inspect this list at the Annual Meeting.
We hope you will be able to attend the Annual Meeting in person. Whether or
not you plan to attend in person, we urge you to promptly vote your shares by
telephone, by the Internet or by returning the enclosed proxy card in order that
your vote may be cast at the Annual Meeting.
By Order of the Board of Directors
/s/ CHARLES H. COTROS
Charles H. Cotros
Chairman of the Board and
Chief Executive Officer
September 28, 2001
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SYSCO CORPORATION
1390 ENCLAVE PARKWAY
HOUSTON, TEXAS 77077-2099
PROXY STATEMENT
2001 ANNUAL MEETING OF STOCKHOLDERS
September 28, 2001
INFORMATION ABOUT ATTENDING THE ANNUAL MEETING
Our Annual Meeting will be held on Friday, November 9, 2001, at 10:00 a.m.
at The Houstonian Hotel located at 111 North Post Oak Lane, Houston, Texas
77024.
INFORMATION ABOUT THIS PROXY STATEMENT
We sent you these proxy materials because our Board of Directors is
soliciting your proxy to vote your shares at the Annual Meeting. We began
mailing these proxy materials to stockholders on or about September 28, 2001.
WHO CAN VOTE
You can vote at the Annual Meeting if you owned shares at the close of
business on September 14, 2001. You are entitled to one vote for each share you
owned on that date on each matter presented at the Annual Meeting.
On September 14, 2001, there were 672,081,874 shares of common stock
outstanding. We do not know of any person or group who owned more than 5% of our
common stock as of this date. All of our directors and executive officers (24
persons) owned an aggregate of 5,290,937 shares, which was less than 1% of our
outstanding stock as of September 14, 2001. We expect that these officers and
directors will vote their shares in favor of electing the three nominees named
below, in favor of approving the Amended and Restated Non-Employee Directors
Stock Plan and against the shareholder proposal.
HOW TO VOTE
You may vote your shares as follows:
- in person at the Annual Meeting;
- by telephone (see the enclosed proxy card for instructions);
- by Internet (see the enclosed proxy card for instructions); or
- by mail by signing, dating and mailing the enclosed proxy card.
If you vote by proxy, the individuals named on the proxy card (your
proxies) will vote your shares in the manner you indicate. You may specify
whether your shares should be voted for all, some or none of the nominees for
director, whether your shares should be voted for or against approval of the
Amended and Restated Non-Employee Directors Stock Plan, and whether your shares
should be voted for or against the shareholder proposal.
If you sign and return your proxy card without indicating your
instructions, your shares will be voted FOR the election of the three nominees
for director, FOR approval of the Amended and Restated Non-Employee Directors
Stock Plan and AGAINST the shareholder proposal.
If your shares are not registered in your own name and you plan to attend
the Annual Meeting and vote your shares in person, you should contact your
broker or agent in whose name your shares are registered to obtain a proxy
executed in your favor and bring it to the Annual Meeting in order to vote.
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HOW TO REVOKE OR CHANGE YOUR VOTE
You may revoke or change your proxy at any time before it is exercised by:
- delivering written notice of revocation to SYSCO's Corporate Secretary in
time for her to receive it before the Annual Meeting;
- voting again by telephone, Internet or mail; or
- voting in person at the Annual Meeting.
The last vote that we receive from you will be the vote that is counted.
QUORUM REQUIREMENT
A quorum is necessary to hold a valid meeting. A quorum will exist if the
holders of at least 35% of all the shares entitled to vote at the meeting are
present in person or by proxy. Abstentions and broker non-votes are counted as
present for establishing a quorum. A broker non-vote occurs when a broker votes
on some matter on the proxy card but not on others because the broker does not
have the authority to do so.
VOTES NECESSARY FOR ACTION TO BE TAKEN
Three directors will be elected at the meeting by a plurality of all the
votes cast at the meeting, meaning that the three nominees for director with the
most votes will be elected. The affirmative vote of a majority of all of the
votes cast is required to approve the Amended and Restated Non-Employee
Directors Stock Plan and shareholder proposal. Abstentions will have no effect
on the election of directors, but will be counted as votes "against" the other
proposals. Broker non-votes will have no effect on the election of directors or
on any other proposal.
WHO WILL COUNT VOTES
We will select one or more Inspectors of Election who will determine the
number of shares of voting stock outstanding, the voting power of each, the
number of shares represented at the Annual Meeting, the existence of a quorum
and whether or not proxies are valid and effective.
The Inspectors of Election will determine any challenges and questions
arising in connection with the right to vote and will count all votes cast for
and against and any abstentions with respect to all proposals and will determine
the results of each vote.
COST OF PROXY SOLICITATION
We will pay the cost of solicitation of proxies including preparing,
printing and mailing this proxy statement. We will authorize banks, brokerage
houses and other custodians, nominees and fiduciaries to forward copies of proxy
materials and will reimburse them for their costs in sending the materials.
We have retained Georgeson Shareholder Communications Inc. to help us
solicit proxies from these nominees and certain individual stockholders, in
writing or by telephone, at an estimated fee of $10,500 plus reimbursement for
their expenses.
RECEIVING PROXY MATERIALS ON THE INTERNET
Registered stockholders may sign up on the Internet to receive future proxy
materials and other stockholder communications on the Internet instead of by
mail. This will reduce our printing and postage costs. In order to receive the
communications electronically, you must have an e-mail account, access to the
Internet through an Internet service provider and a web browser that supports
secure connections. You can access the Internet site at www.econsent.com/syy for
additional information and to sign up. You will be asked to enter the number of
your stock account with our transfer agent, EquiServe Trust Company, N.A. That
number is shown on dividend checks, on stock certificates and on your proxy
card. After you have provided identification and transmitted your e-mail
address, the transfer agent will send you an e-mail message confirming your
acceptance of electronic stockholder communications.
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When proxy materials for next year's Annual Meeting are ready for
distribution, those who have accepted electronic receipt will receive e-mail
notice of their Control Numbers and the Internet site for viewing proxy
materials and for voting. Acceptance of electronic receipt will remain in effect
until it is withdrawn; it can be withdrawn at any time by contacting the
transfer agent. If you change your e-mail address, please follow the procedures
at the above-referenced Internet site to enter your new address.
Many brokerage firms and banks are also offering electronic proxy materials
to their clients. If you are a beneficial owner of SYSCO stock that is held for
you by a broker or bank, you should contact that broker or bank to find out
whether this service is available to you.
OTHER MATTERS
We do not know of any other matter that will be presented at the Annual
Meeting other than the election of directors and the proposals discussed in this
proxy statement. However, if any other matter is properly presented at the
Annual Meeting, your proxies will act on such matter in their best judgment.
ANNUAL REPORT
A copy of our 2001 Annual Report to Shareholders is enclosed. We will
furnish a copy of our Annual Report on Form 10-K for fiscal 2001, without
exhibits and as filed with the SEC, without charge upon your written request if
you are a record or beneficial owner of common stock whose proxy we are
soliciting in connection with the Annual Meeting. Please address requests for a
copy of the Annual Report on Form 10-K to the Investor Relations Department,
SYSCO Corporation, 1390 Enclave Parkway, Houston, Texas 77077-2099. The Annual
Report on Form 10-K is also available on our website at www.sysco.com.
ELECTION OF DIRECTORS
ITEM NO. 1 ON THE PROXY CARD
The Board of Directors currently consists of 13 members divided into three
classes of five, four and four directors, respectively. The directors in each
class serve for a three-year term. A different class is elected each year to
succeed the directors whose terms are expiring. In November 2000, after the 2000
Annual Meeting, Gordon Bethune resigned from the Board and the Board's size was
reduced to 12. In September 2001, the size of the Board was increased to 13 and
Jackie M. Ward was elected to fill the vacancy created by such increase. Frank
A. Godchaux III and John F. Woodhouse, whose terms expire at this year's Annual
Meeting, have declined to stand for re-election. The Board has determined to
reduce the size of the Board to 11 effective on November 9, 2001. As a result of
the reduction in size, the classes of directors will consist of three, four and
four members after the Annual Meeting.
The Board of Directors has nominated the following three persons for
election as directors of the company to serve for three-year terms or until
their successors are elected and qualified:
- Colin G. Campbell
- Frank H. Richardson
- Jackie M. Ward
All of the nominees are currently serving as directors of SYSCO and all
have consented to serve if elected. 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 vote for any nominee
who is designated by the present Board of Directors to fill the vacancy.
Set forth below is biographical information for each director who is a
nominee for election at the 2001 Annual Meeting:
Colin G. Campbell, 65, has served as a director of SYSCO since 1989. Mr.
Campbell is Chairman, President and Chief Executive Officer of the Colonial
Williamsburg Foundation, a private philanthropic foundation. He also serves as a
director of Pitney Bowes Inc. and Rockefeller Financial Services, Inc. From 1988
to 2000,
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Mr. Campbell served as the President of Rockefeller Brothers Fund. Mr. Campbell
is Chairman of the Audit Committee and he is also a member of the Executive
Committee, Nominating and Corporate Governance Committee and Compensation and
Stock Option Committee.
Frank H. Richardson, 68, has served as a director of SYSCO since 1993. Mr.
Richardson served as President and Chief Executive Officer of Shell Oil Company
until his retirement in 1993. He is a Trustee of the Baylor College of Medicine.
Mr. Richardson is Chairman of the Finance Committee and he is also a member of
the Audit Committee, Compensation and Stock Option Committee and Nominating and
Corporate Governance Committee.
Jackie M. Ward, 63, has served as a director of SYSCO since September 2001.
Ms. Ward is an Outside Managing Director of Intec Telecom Systems PLC. In 1968,
Ms. Ward founded, and later served as Chairman, President and Chief Executive
Officer of, Computer Generation Incorporated, which was acquired by Intec
Telecom in December 2000. Ms. Ward is also a director of Bank of America,
Equifax, Flowers Industries, Matria Healthcare, The Profit Recovery Group
International, SCI Systems and Trigon Healthcare.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE NOMINEES LISTED ABOVE.
The following directors will continue in office until the 2002 Annual
Meeting:
John W. Anderson, 69, has served as a director of SYSCO since 1981.
Currently retired, Mr. Anderson formerly served as Vice President of Customer
Service at Southwestern Bell Telephone Company. Mr. Anderson is a member of the
Audit Committee and Compensation and Stock Option Committee.
Judith B. Craven, M.D., 55, has served as a director of SYSCO since 1996.
Dr. Craven served as President of the United Way of the Texas Gulf Coast from
1992 until her retirement in September 1998. Dr. Craven is also a director of
Belo Corporation, Compaq Corporation, Luby's Cafeterias, Inc. and VALIC. She is
also a Regent for the University of Texas Board of Regents. Dr. Craven is a
member of the Audit Committee, Compensation and Stock Option Committee and
Finance Committee.
Richard G. Merrill, 70, has served as a director of SYSCO 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 Chairman of the Compensation and Stock
Option Committee and he is also a member of the Executive Committee, Audit
Committee and Nominating and Corporate Governance Committee.
Phyllis S. Sewell, 70, has served as a director of SYSCO since 1991.
Currently retired, she formerly served as Senior Vice President of Federated
Department Stores, Inc. Mrs. Sewell is also a director of Lee Enterprises, Inc.
Mrs. Sewell is a member of the Audit Committee, Compensation and Stock Option
Committee and Nominating and Corporate Governance Committee.
The following directors will continue in office until the 2003 Annual
Meeting:
Charles H. Cotros, 64, has served as a director of SYSCO since 1985. Mr.
Cotros has served as Chairman of the Board since July 2000 and as Chief
Executive Officer since January 2000. He served as Chief Operating Officer from
1995 until January 2000 and as President from 1999 until July 2000. He has been
employed by SYSCO since 1974. Mr. Cotros is Chairman of the Executive Committee
and he is also a member of the Finance Committee.
Jonathan Golden, 64, has served as a director of SYSCO since 1984. Mr.
Golden is a partner of Arnall Golden Gregory LLP, counsel to SYSCO. Mr. Golden
also serves as a director of The Profit Recovery Group International. Mr. Golden
is Chairman of the Nominating and Corporate Governance Committee and he is also
a member of the Executive Committee and Finance Committee.
Thomas E. Lankford, 54, has served as a director of SYSCO since July 2000.
Mr. Lankford has served as Executive Vice President of Foodservice Operations
since July 2000. He served as Executive Vice President of Merchandising and
Multi-Unit Sales from 1999 until July 2000 and as Senior Vice President of
Operations -- Northeast Region from 1995 until 1999. Mr. Lankford served as
President of Lankford-Sysco Food Services, LLC from 1981 until 1995. Mr.
Lankford is a member of the Executive Committee.
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Richard J. Schnieders, 53, has served as a director of SYSCO since 1997.
Mr. Schnieders has served as President since July 2000 and as Chief Operating
Officer since January 2000. Mr. Schnieders served as Executive Vice President,
Foodservice Operations from January 1999 to July 2000 and as Senior Vice
President, Merchandising Services and Multi-Unit Sales from 1997 until January
1999. From 1992 until 1997, he served as Senior Vice President, Merchandising
Services. From 1988 until 1992, Mr. Schnieders served as President and Chief
Executive Officer of Hardin's-Sysco Food Services, LLC. He has been employed by
SYSCO since 1982. Mr. Schnieders also serves as a director of Aviall, Inc. He is
a member of the Executive Committee and Finance Committee.
Unless otherwise noted, the persons named above have been engaged in the
principal occupations shown for the past five years or longer.
DIRECTOR COMPENSATION
Fees
We pay non-employee directors $60,000 per year plus reimbursement of
expenses for all services as a director, including committee participation or
special assignments. These directors may defer all or a portion of their annual
retainer, which earns interest until their retirement from the Board or until
the occurrence of certain other events. The current rate of interest in effect
is 8.98% per year. Messrs. Godchaux, Golden and Woodhouse, Dr. Craven and Mrs.
Sewell elected to defer a portion of their annual compensation for 2001.
Non-Employee Directors Stock Plan
In May 1998, the Board of Directors adopted, and our stockholders
subsequently approved, the SYSCO Non-Employee Directors Stock Plan. Under this
plan, non-employee directors currently receive:
- a one-time retainer stock award of 4,000 shares of common stock when
first elected as a non-employee director; and
- an automatic grant of options to purchase 8,000 shares of common stock
each year if our earnings per share for the previous year increased by
10% or more as compared to the prior year.
In order for the annual options to vest and become exercisable, certain
performance goals must be met during the five-year period after we issue the
options. Options may continue to vest if the non-employee director retires in
good standing. If the options do not vest during the five-year period after they
are issued, they will vest six months before the expiration of the ten-year life
of the grant if the director is still serving on the Board or will otherwise
expire unvested. During fiscal 2001, we granted options to purchase an aggregate
of 72,000 shares under this plan to nine non-employee directors. All historical
data with respect to grants of stock or options under our benefit plans has been
adjusted to reflect stock splits.
Additionally, this plan permits each non-employee director to elect to
receive up to one-half of his or her annual retainer in common stock, in which
case we will provide a matching grant of 50% of the number of shares received as
a portion of the retainer. Messrs. Anderson, Campbell, Godchaux, Golden,
Merrill, Richardson and Woodhouse, Dr. Craven and Mrs. Sewell made this election
during fiscal 2001.
In September 2001, the Board of Directors adopted certain amendments to the
Non-Employee Directors Stock Plan, including an amendment that would give the
Board the ability to exercise discretion in determining the size of annual
option grants and other terms and conditions, including vesting terms. These
proposed amendments are discussed in detail under Item 2 below.
No other compensation was paid for director services during the fiscal year
ended June 30, 2001.
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BOARD MEETINGS AND COMMITTEES OF THE BOARD
The Board of Directors held six meetings during fiscal 2001 and all
directors, except for Mr. Godchaux, attended 75% or more of the aggregate of:
- the total number of meetings of the Board of Directors, and
- the total number of meetings held by all committees of the Board on which
he or she served during fiscal 2001.
The following Directors serve on the committees indicated:
NOMINATING AND
CORPORATE GOVERNANCE COMPENSATION AND AUDIT
NAME COMMITTEE STOCK OPTION COMMITTEE COMMITTEE
---- -------------------- ---------------------- ---------
John W. Anderson................. x x
Colin G. Campbell................ x x x*
Judith B. Craven................. x x
Frank A. Godchaux III**.......... x x
Jonathan Golden.................. x*
Richard G. Merrill............... x x* x
Frank H. Richardson.............. x x x
Phyllis S. Sewell................ x x x
---------------
* Chairman of the Committee
** Not seeking re-election.
The Nominating and Corporate Governance Committee held four meetings during
fiscal 2001. The function of the Nominating and Corporate Governance Committee
is to propose directors, committee members and officers for election or
reelection, to evaluate the performance of the Chief Executive Officer, Chief
Operating Officer and members of the Board, and to review and make
recommendations regarding the organization and effectiveness of the Board and
its committees, the conduct of meetings, succession planning and SYSCO's
governing documents.
The Compensation and Stock Option Committee held three meetings during
fiscal 2001. The function of the Compensation and Stock Option Committee is to
consider the annual compensation of directors and officers for recommendation to
the Board of Directors, to oversee the administration of SYSCO's Management
Incentive Plan, Stock Option Plans and the Split Dollar Life Insurance Plan and
to provide guidance in the area of employee benefits, including retirement plans
and group insurance.
The Audit Committee held three meetings during fiscal 2001. The function of
the Audit Committee is to review and report to the Board with respect to various
auditing and accounting matters, including recommendations of the selection of
our independent public accountants, the scope of the audit procedures, the
nature of the services to be performed, the fees to be paid to the independent
public accountants, the performance of our independent public accountants and
our accounting practices.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Messrs. Anderson, Campbell, Merrill and Richardson, Dr. Craven and Mrs.
Sewell served on the Compensation and Stock Option Committee during fiscal 2001.
During fiscal 2001, none of the members was an officer or employee of SYSCO or
any of its subsidiaries or served as an officer of any company with respect to
which any executive officer of SYSCO served on such company's board of
directors, and none had any relationship with the company requiring disclosure
under Item 404 of Regulation S-K.
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CERTAIN RELATIONSHIPS
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 SYSCO.
We believe that the fees paid to this firm were fair and reasonable in view of
the level and extent of services rendered.
STOCK OWNERSHIP
The following table sets forth certain information with respect to the
beneficial ownership of common stock, as of September 14, 2001, by (i) each
director and director nominee, (ii) each Named Executive Officer (as hereinafter
defined), and (iii) all directors and executive officers as a group. To our
knowledge, no person or group beneficially owns 5% or more of our common stock.
Unless otherwise indicated, each stockholder identified in the table has sole
voting and investment power with respect to his or her shares.
SHARES OF
COMMON STOCK PERCENT OF
BENEFICIALLY OUTSTANDING
OWNED(1)(2) SHARES(3)
------------ -----------
Lawrence J. Accardi......................................... 310,167 *
John W. Anderson............................................ 80,230 *
Colin G. Campbell........................................... 58,618 *
Charles H. Cotros........................................... 676,444 *
Judith B. Craven............................................ 38,490 *
Frank A. Godchaux III....................................... 108,020 *
Jonathan Golden(4).......................................... 109,020 *
Thomas E. Lankford.......................................... 731,919 *
Richard G. Merrill.......................................... 80,614 *
Frank H. Richardson......................................... 85,720 *
Richard J. Schnieders....................................... 348,468 *
Phyllis S. Sewell........................................... 73,020 *
John K. Stubblefield, Jr. .................................. 249,853 *
Jackie M. Ward.............................................. 3,500 *
John F. Woodhouse........................................... 2,362,976 *
All Directors and Executive Officers as a Group (24
Persons)(5)............................................... 7,241,445 1.1%
---------------
* Less than 1% of outstanding shares.
(1) Includes shares of common stock owned by the spouses and/or dependent
children of each of the following named individuals: Colin G. Campbell,
2,000 shares; Frank A. Godchaux III, 24,000 shares; Thomas E. Lankford,
61,310 shares; and Richard J. Schnieders, 65,890 shares.
(2) Includes shares of common stock underlying options which are presently
exercisable or will become exercisable within 60 days after the date of this
proxy statement, as follows: Lawrence J. Accardi, 150,533; John W. Anderson,
15,998 shares; Colin G. Campbell, 47,998 shares; Charles H. Cotros, 105,333
shares; Judith B. Craven, 31,998 shares; Frank A. Godchaux III, 10,666
shares; Jonathan Golden, 47,998 shares; Thomas E. Lankford, 173,333 shares;
Richard G. Merrill, 39,998 shares; Frank H. Richardson, 47,998 shares;
Richard J. Schnieders, 125,333 shares; Phyllis S. Sewell, 47,998 shares;
John K. Stubblefield, Jr., 131,421 shares; and John F. Woodhouse, 176,666
shares.
(3) Rounded to the nearest 1/10 of one percent.
(4) Includes 37,000 shares held by a trust created under the estate of Sol I.
Golden, of which Mr. Golden is a co-trustee.
(5) Includes an aggregate of (i) 45,579 shares owned by the spouses and/or
dependent children of current executive officers other than those named in
note (1) above, and (ii) 797,237 shares of common stock underlying options
which are presently exercisable or will become exercisable within 60 days
after the date of this proxy statement held by current executive officers
other than those named in note (2) above.
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SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Pursuant to Section 16(a) of the Securities Exchange Act of 1934 and the
rules issued thereunder, our executive officers and directors and any persons
holding more than ten percent (10%) of our common stock are required to file
with the Securities and Exchange Commission and the New York Stock Exchange
reports of initial ownership of our common stock and any changes in ownership of
such common stock. Copies of these reports are required to be furnished to us.
Specific due dates have been established and we are required to disclose in our
Annual Report on Form 10-K and proxy statement any failure to file the reports
by these dates. Based solely on our review of the copies of the reports
furnished to us, or written representations that no reports were required, we
believe that, during fiscal 2001, all of our executive officers (including the
Named Executive Officers) and directors complied with the Section 16(a)
requirements, except that Mr. Lankford filed a late Form 5 to report a gift that
was made in June 2000. To our knowledge, no person beneficially owns more than
10% of our common stock.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth information with respect to the Chief
Executive Officer and the other four most highly compensated executive officers
of SYSCO and its subsidiaries employed at the end of fiscal 2001 whose total
annual salary and bonus exceeded $100,000 for the fiscal year ended June 30,
2001 (the "Named Executive Officers"):
LONG-TERM
COMPENSATION
-----------------------
ANNUAL COMPENSATION RESTRICTED
---------------------- OTHER ANNUAL STOCK SECURITIES ALL OTHER
NAME AND PRINCIPAL FISCAL BONUS($) COMPENSATION($) AWARDS($) UNDERLYING COMPENSATION($)
POSITION YEAR SALARY($) (1)(2) (3) (4) OPTIONS(#) (5)
------------------ ------ --------- ---------- --------------- ---------- ---------- ---------------
Charles H. Cotros............... 2001 $885,000 $1,515,500 -- $1,344,115 34,000 $710,395
Chairman and Chief 2000 750,000 1,243,003 -- 1,101,569 36,000 568,169
Executive Officer 1999 622,500 702,925 -- 622,042 32,000 104,899
Richard J. Schnieders........... 2001 $630,000 $1,087,204 -- $ 964,259 34,000 $161,740
President and Chief 2000 450,000 731,193 -- 647,967 30,000 109,071
Operating Officer 1999 350,000 432,588 -- 382,776 32,000 64,667
Thomas E. Lankford.............. 2001 $450,000 $ 782,478 -- $ 693,954 28,000 $116,556
Executive Vice President, 2000 375,000 584,938 -- 518,390 30,000 87,318
Foodservice Operations 1999 325,000 359,533 -- 318,140 26,000 53,842
John K. Stubblefield, Jr. ...... 2001 $400,000 $ 700,097 -- $ 620,921 28,000 $104,295
Executive Vice President, 2000 347,500 548,374 -- 485,996 24,000 81,862
Finance and Administration 1999 297,500 346,052 -- 306,239 26,000 51,800
Lawrence J. Accardi............. 2001 $400,000 $ 700,097 -- $ 620,921 28,000 $104,149
Executive Vice President, 2000 345,000 459,085 -- 406,843 24,000 34,762
Merchandising Services 1999 260,000 229,289 -- 202,858 26,000 17,590
---------------
(1) Includes amounts deferred under the 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. See "Restricted
Stock Awards" column.
(3) Does not include perquisites and other personal benefits unless they exceed,
in the aggregate, the lesser of $50,000 or 10% of each 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 our common stock on the New York Stock
Exchange on June 29, 2001, the first trading day prior to 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 and are subject to certain
repurchase rights on the part of SYSCO in the event of termination of
employment other than by normal retirement or disability. The recipient
receives dividends on the shares during the restricted two-year period.
8
11
During fiscal 2001, the number of restricted shares earned by the named
individuals was as follows:
- Mr. Cotros -- 49,507 shares;
- Mr. Schnieders -- 35,516 shares;
- Mr. Lankford -- 25,560 shares;
- Mr. Stubblefield -- 22,870 shares; and
- Mr. Accardi -- 22,870 shares.
At the end of fiscal 2001, the aggregate number and dollar amount (computed
using the closing price of our common stock on June 29, 2001 as described
above) of restricted shares held by the named individuals were as follows:
- Mr. Cotros -- 92,758 shares at $2,518,380;
- Mr. Schnieders -- 55,660 shares at $1,511,169;
- Mr. Lankford -- 45,304 shares at $1,230,004;
- Mr. Stubblefield -- 42,992 shares at $1,167,233; and
- Mr. Accardi -- 32,510 shares at $882,646.
(5) The amounts shown in the table below include a SYSCO match equal to 50% of
the first 20% of the annual incentive bonus which each individual elected to
defer under our Executive Deferred Compensation Plan, the amount we paid for
term life insurance coverage for each individual, and the
actuarially-calculated value of the benefit of premiums we paid in fiscal
2001 and 2000 on split-dollar life insurance policies for certain executive
officers. See page 14 for a discussion of SYSCO's split-dollar life
insurance arrangements.
2001 2000
---------------------------------------------- ----------------------------------------------
SPLIT-DOLLAR SPLIT-DOLLAR
LIFE TERM DEFERRED LIFE TERM DEFERRED
NAME TOTAL INSURANCE INSURANCE MATCH TOTAL INSURANCE INSURANCE MATCH
---- -------- ------------ --------- -------- -------- ------------ --------- --------
Charles H. Cotros.... $710,395 $485,345 $1,030 $224,020 $568,169 $383,345 $1,224 $183,600
Richard J.
Schnieders.......... 161,740 n/a 1,030 160,710 109,071 n/a 1,071 108,000
Thomas E. Lankford... 116,556 n/a 893 115,663 87,318 n/a 918 86,400
John K. Stubblefield,
Jr.................. 104,295 n/a 807 103,488 81,862 n/a 862 81,000
Lawrence J.
Accardi............. 104,149 n/a 661 103,488 34,762 n/a 857 33,905
1999
-------------------------------
TERM DEFERRED
NAME TOTAL INSURANCE MATCH
---- -------- --------- --------
Charles H. Cotros.... $104,899 $1,224 $103,675
Richard J.
Schnieders.......... 64,667 867 63,800
Thomas E. Lankford... 53,842 816 53,026
John K. Stubblefield,
Jr.................. 51,800 760 51,040
Lawrence J.
Accardi............. 17,590 683 16,907
STOCK OPTION GRANTS
The following table provides information regarding stock option grants
during the last fiscal year to the Named Executive Officers. We have never
granted any stock appreciation rights to executive officers under any of our
stock option plans.
OPTION GRANTS IN FISCAL 2001
-------------------------------------
PERCENTAGE OF
TOTAL OPTIONS
NUMBER OF SECURITIES GRANTED TO EXERCISE OR GRANT DATE
UNDERLYING OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION PRESENT
NAME GRANTED(#)(1) FISCAL 2001 ($/SHARE) DATE VALUE ($)(2)
---- --------------------- ------------- ----------- ---------- ------------
Charles H. Cotros................. 34,000 0.58% 20.9688 9/06/2010 $271,320
Richard J. Schnieders............. 34,000 0.58% 20.9688 9/06/2010 271,320
Thomas E. Lankford................ 28,000 0.48% 20.9688 9/06/2010 223,440
John K. Stubblefield, Jr. ........ 28,000 0.48% 20.9688 9/06/2010 223,440
Lawrence J. Accardi............... 28,000 0.48% 20.9688 9/06/2010 223,440
---------------
(1) The options do not vest and become exercisable unless we attain 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 until six months before the expiration of
the ten-year life of the grant, and only if the recipient is still an active
employee at that time.
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12
(2) We determined the hypothetical grant date present value for the options of
$7.98 per share using a modified Black-Scholes pricing model. In applying
the model, we assumed a volatility of 24%, a 6.3% risk-free rate of return,
a dividend yield at the date of grant of 1.33%, and an 8-year option term.
We did not assume any option exercises or risk of forfeiture during the
8-year term. If used, such assumptions could have reduced the reported grant
date value. The actual value, if any, an executive may realize upon exercise
of options will depend on the excess of the stock price over the exercise
price on the date the option is exercised. Consequently, there is no
assurance that the value realized will be at or near the value estimated by
the modified Black-Scholes model.
STOCK OPTION EXERCISES AND FISCAL YEAR-END VALUES
The following table provides information with respect to aggregate option
exercises in the last fiscal year and fiscal year-end option values for the
Named Executive Officers.
AGGREGATED OPTION EXERCISES IN FISCAL 2001 AND
FISCAL YEAR-END OPTION VALUES
----------------------------------------------------------
NUMBER OF
SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS
SHARES JUNE 30, 2001(#) AT JUNE 30, 2001 ($)(2)
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISE(#) REALIZED($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- -------------- ----------- ------------- ----------- -------------
Charles H. Cotros........ 80,000 $1,267,339 71,332 68,668 $1,175,469 $643,965
Richard J. Schnieders.... 32,000 434,132 93,332 64,668 1,631,200 600,490
Thomas E. Lankford....... 30,640 446,399 145,332 56,668 2,692,880 530,978
John K. Stubblefield,
Jr. ................... 13,912 213,897 105,420 52,668 1,894,825 487,503
Lawrence J. Accardi...... 16,000 324,200 124,532 52,668 2,314,436 487,503
---------------
(1) Computed based on the difference between the closing price of the common
stock on the day of exercise and the exercise price.
(2) Computed based on the difference between the closing price on June 29, 2001
and the exercise price.
RETIREMENT PLAN
We have a defined benefit retirement plan that was amended and restated
effective July 2, 1989 and was most recently amended effective April 1, 2000. We
are currently in the process of amending and restating the Retirement Plan
again, generally effective January 1, 1997, to comply with statutory and
regulatory changes since 1994 and to make certain discretionary changes in plan
provisions. The Retirement Plan provides for an annual benefit payable monthly
for five years certain and life thereafter, equal to:
- the normal retirement benefit which accrued under the prior plan as of
July 2, 1989, plus
- 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 before 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 2001 under the five years certain and life thereafter
form of payment to an individual retiring at age 65 is $138,264.
Without regard to this maximum limitation, the Named Executive Officers
have accrued the following benefits and credited benefit service as of June 30,
2001:
- Mr. Cotros -- $90,346 and 25 years;
- Mr. Schnieders -- $40,426 and 18 years;
- Mr. Lankford -- $43,014 and 20 years;
- Mr. Stubblefield -- $28,672 and 12 years; and
- Mr. Accardi -- $44,063 and 25 years.
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13
The Named Executive Officers also have anticipated future service to age 65
as follows:
- Mr. Cotros -- 1 year;
- Mr. Schnieders -- 12 years;
- Mr. Lankford -- 11 years;
- Mr. Stubblefield -- 10 years; and
- Mr. Accardi -- 12 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)
YEARS OF CREDITED SERVICE
CAREER AVERAGE COMPENSATION EARNED ----------------------------------------------------------------
ON AND AFTER JUNE 30, 2001(3) 10 15 20 25 30 35
---------------------------------- ------- ------- ------- ------- -------- --------
$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
250,000....................... 27,500 56,250 75,000 93,750 112,500 131,250
---------------
(1) Assumes 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 to $138,264 for 2001
and $158,016 for 2002 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 SYSCO both before and after June 30, 2001. The
Pension Plan Table does not reflect this limitation.
(3) Compensation for benefit calculation purposes is limited by law to $170,000
for 2001 and $200,000 for 2002 and later years subject to statutory
increases and cost-of-living adjustments in future years. 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 SYSCO match under the Executive Deferred Compensation Plan are utilized to
compute career average compensation subject to the pay limitations noted in
footnote (3).
REPORT OF THE COMPENSATION AND STOCK OPTION COMMITTEE
This report documents the components of SYSCO's compensation programs for
its executive officers and describes the basis on which fiscal 2001 compensation
determinations were made with respect to the executive officers of SYSCO,
including Mr. Cotros, who served as the Chief Executive Officer during fiscal
2001. All fiscal 2001 compensation decisions with respect to base salaries,
annual incentive compensation, option grants under stock option plans and
split-dollar life insurance arrangements were made by the Compensation and Stock
Option Committee.
Overall Executive Compensation Philosophy
Since SYSCO became a publicly held corporation in 1970, we have directly
linked the compensation of executive officers to SYSCO's performance.
Specifically, the Committee has tied the level of SYSCO's executive compensation
to increases in SYSCO's earnings per share and return on shareholders' equity.
We have accomplished this through the following means:
- A "pay-for-performance" orientation based upon SYSCO performance for
corporate officers (other than senior vice presidents, foodservice
operations) and a combination of operating company and SYSCO
11
14
performance for corporate senior vice presidents, foodservice operations and
operating company senior management;
- Competitive base salaries;
- Potentially significant annual incentive bonuses under SYSCO's management
incentive plan;
- The issuance of performance-based stock options;
- Customary benefits, including a supplemental executive retirement plan;
and
- Split dollar life insurance and term life insurance policies for certain
executive officers.
The factors and criteria upon which the determination of the fiscal 2001
compensation of the Chief Executive Officer were based were the same as those
discussed below with respect to all executive officers, except as otherwise
described below with respect to SYSCO's senior vice presidents, foodservice
operations.
Base Salaries
We have established base salaries of our executive officers in the range of
compensation payable to executive officers of U.S. industrial corporations
without reference to specific SYSCO performance criteria. We reexamine this
range of compensation 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 sample does not necessarily include
those companies in the peer group included in the performance graph on page 15
due to the differing size, management responsibilities and organizational
structures of those corporations relative to SYSCO. We last reviewed base
salaries for all of the executive officers on November 3, 2000, and made
adjustments in compensation effective January 1, 2001. At that time, Mr. Cotros'
base salary was increased approximately 8%. It has been our consistent practice
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 that have chief executive officers with job content
and/or responsibilities comparable to those of SYSCO's Chief Executive Officer.
Annual Incentive Compensation
SYSCO provides annual incentive compensation to all executive officers
through the SYSCO Corporation Management Incentive Plan (the "MIP"). The MIP is
designed to offer opportunities for compensation which are tied directly to our
performance. In addition, the MIP is designed to foster significant equity
ownership in SYSCO by the executive officers and all other participants in the
MIP.
For executive officers, fiscal 2001 incentive bonuses were calculated under
the MIP in two parts. The first part was based on the overall performance of
SYSCO 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 161% of base salary to each executive officer participating in this
portion of the MIP, including Mr. Cotros, who was awarded $1,481,200.
The second portion of the fiscal 2001 incentive bonus under the MIP for
executive officers was based upon the number of SYSCO operating companies that
achieved a target return on capital. This portion of the incentive bonus is paid
only when the operating companies achieving the goals, in the aggregate,
represent at least 50% of the total capital of all of SYSCO's operating
companies, which was the case during fiscal 2001, resulting in an award of 82.5%
of base salary to each executive officer participating in this portion of the
MIP, including Mr. Cotros, who was awarded $759,000.
For senior vice presidents, foodservice 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 were 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, adjusted in certain instances for
operating companies that are involved in SYSCO's facility expansion ("fold-out")
program.
12
15
In order to encourage significant equity ownership in SYSCO 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 trading 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 equal to the product of:
- the value of such matching shares received by the participant (based on
the closing price of such shares on the last trading day of the fiscal
year), and
- the effective tax rate applicable to SYSCO.
In fiscal 2001, Mr. Cotros elected to receive 40% of his bonus in SYSCO
common stock. In connection with this election, Mr. Cotros received 49,507
shares valued at $1,344,115 and cash in the amount of $171,375.
Finally, MIP participants may defer up to 40% of their annual incentive
bonus (without considering any election to receive a portion of the bonus in
stock) under the Executive Deferred Compensation Plan. For deferrals of up to
20% of the annual incentive bonus, the Executive Deferred Compensation Plan
provides for SYSCO to make a payment to the participant equal to 50% of the
amount deferred. This matching payment vests upon the earliest to occur of:
- the tenth anniversary of the date the matching payment is made;
- the participant's reaching age sixty;
- the death or permanent disability of the participant; or
- a change in control of SYSCO.
In fiscal 2001, Mr. Cotros deferred 40% of his MIP bonus and received a
matching payment equal to 50% of one-half of the amount deferred.
Stock Option Plan
During fiscal 2001, SYSCO granted options to purchase shares of its common
stock to approximately 1,800 key employees, including executive officers, under
the 1991 Stock Option Plan. All fiscal 2001 grants to executive officers were
made in September 2000. On November 3, 2000, adoption of the 2000 Stock
Incentive Plan was approved by the shareholders, and no additional grants have
been or will be made under the 1991 Stock Option Plan. None of the executive
officers received grants under the 2000 Stock Incentive Plan in fiscal 2001.
The Committee administers the stock option plan. 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. In
other words, option grants generally are considered only in years when SYSCO
achieves certain earnings per share and return on shareholders' equity targets.
It is the current intention of the Committee to continue this practice, although
it is not required by the terms of the plan. In July 2001, the Committee
authorized a new program for non-executive employees pursuant to which options
based on tenure were granted in September 2001. These options are not tied to
performance, but will vest over time. In addition, all MIP participants,
including executive officers, received a one-time grant of 15,000 options in
September 2001 that will vest over time. This one-time award was conditioned on
receipt of an executed non-competition agreement.
It has been our practice to provide that options granted under the plan
expire ten years after the date of grant. Beginning with grants made in
September 2001, options will vest ratably over a specified number of years.
Previously issued options will continue to vest if and when certain performance
goals are met. The Committee has not historically considered the current number
of outstanding options held by an officer when making its grant decisions.
13
16
During fiscal 2001, Mr. Cotros received one grant of 34,000 options at an
exercise price of $20.9688 per share. These options contain performance vesting
requirements relating to earnings per share and return on shareholders' equity.
Benefits
Executives also participate in SYSCO's regular employee benefit programs,
which include a pension plan, a retirement savings plan, group medical and
dental coverage, group life insurance and other group benefit plans. Further
details with respect to SYSCO's qualified pension plan are provided on pages 10
and 11. In addition, executives are provided with a Supplemental Executive
Retirement Plan (the "SERP") which is designed, generally, to provide annual
payments equal to 50% of the participant's final average annual compensation, in
combination with all SYSCO and other qualified retirement plan benefits and
social security payments available to the participant upon retirement.
In February 1999, the Committee approved SYSCO's providing split-dollar
life insurance arrangements to certain key executive officers in lieu of all or
part of their accrued and future benefits under the Executive Deferred
Compensation Plan and the SERP. In September 1999, the Committee designated Mr.
Cotros as a participant under these split-dollar life insurance arrangements. In
approving this participation, the Committee considered that SYSCO would
experience a positive impact on its earnings with these split-dollar life
insurance arrangements in place, as compared to the earnings impact of Mr.
Cotros' then current participation in the Executive Deferred Compensation Plan
and SERP. SYSCO will pay all premiums on the life insurance policies purchased
for the benefit of the participants under the split-dollar life insurance
arrangements and will retain a collateral interest in those policies equal to
the amount of premiums paid by SYSCO. The present value cost of any life
insurance purchased under the split-dollar life insurance arrangements by SYSCO
will not exceed the net present value of the projected after tax cost of the
benefits waived under the Executive Deferred Compensation Plan and SERP.
Income Deduction Limitations
Section 162(m) of the Internal Revenue Code of 1986, as amended (the
"Code"), generally sets a limit of $1 million on the amount of compensation
(other than certain "performance-based" compensation that complies with the
requirements of Section 162(m)) that SYSCO can deduct for federal income tax
purposes in any given year with respect to the compensation of each of the Named
Executive Officers. The Board and the Committee have determined, after reviewing
the effect of Section 162(m), that our policy will be to structure the
performance-based compensation arrangements for such Named Executive Officers to
satisfy Section 162(m)'s conditions for deductibility, to the extent feasible
and taking into account all relevant considerations.
COMPENSATION AND STOCK OPTION
COMMITTEE
Richard G. Merrill, Chairman
John W. Anderson
Colin G. Campbell
Judith B. Craven
Frank H. Richardson
Phyllis S. Sewell
14
17
STOCK PERFORMANCE GRAPH
The following stock performance graph compares the performance of SYSCO's
common stock to the S&P 500 Index and to a peer group for SYSCO's last five
fiscal years. The members of the peer group are Fleming Companies, Inc., Nash
Finch Company, Supervalu, Inc. and Performance Food Group Company.
The companies in the peer group were selected because they comprise a broad
group of publicly held corporations with food distribution operations similar in
some respects to our operations. Performance Food Group is a foodservice
distributor and the other members of the peer group are in the business of
distributing grocery products to retail supermarkets. We consider the peer group
to be a more representative peer group than the "S&P Distributors (Food &
Health)" index maintained by Standard & Poor's Corporation which consists of
SYSCO, Supervalu, Inc., Cardinal Health, Inc. and McKesson HBOC, Inc., two of
which are healthcare service distributors.
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 graph assumes that the value of the investment in our common
stock, the S&P 500 Index, and the peer group was $100 on the last trading day of
June 1996, and that all dividends were reinvested. Performance data for SYSCO,
the S&P 500 Index and for each member of the peer group is provided as of the
last trading day of each of our last five fiscal years.
(PERFORMANCE GRAPH)
-------------------------------------------------------------------------------------------
COMPANY NAME/INDEX 28 JUN 96 27 JUN 97 26 JUN 98 2 JUL 99 30 JUN 00 29 JUN 01
-------------------------------------------------------------------------------------------
SYSCO $100 $109.89 $154.34 $188.85 $261.15 $341.06
S&P 500 Index 100 135.01 175.19 218.09 230.78 196.55
Peer Group 100 123.35 137.37 148.77 126.85 175.58
15
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REPORT OF THE AUDIT COMMITTEE
The Audit Committee operates under a written charter adopted by the Board
of Directors, a copy of which is attached hereto as Appendix A. The Audit
Committee is composed of seven independent directors as defined in Sections
303.01(B)(2)(a) and (3) of the New York Stock Exchange's listing standards. Each
member of the Audit Committee is able to understand fundamental financial
statements and at least one member has accounting or related financial
management expertise. The members of the Audit Committee are Messrs. Anderson,
Campbell (Chairman), Godchaux, Merrill and Richardson, Dr. Craven and Mrs.
Sewell. The Audit Committee held three meetings during fiscal 2001.
The function of the Audit Committee is to review and report to the Board
with respect to various auditing and accounting matters, including
recommendations of the selection of the independent public accountants, the
scope of audit procedures, the nature of services to be performed, the fees to
be paid to the independent public accountants, the performance of the
independent public accountants and the Company's accounting practices.
The Audit Committee has met and held discussions with management and the
independent public accountants. Management represented to the Audit Committee
that SYSCO's consolidated financial statements were prepared in accordance with
generally accepted accounting principles, and the Audit Committee has reviewed
and discussed the audited consolidated financial statements with management and
the independent public accountants. The Audit Committee also discussed with the
independent public accountants the matters required to be discussed by Statement
on Auditing Standards No. 61. SYSCO's independent public accountants provided to
the Audit Committee the written disclosures required by the Independence
Standards Board's Standard No. 1, and the Audit Committee discussed with the
independent public accountant that firm's independence.
Based on the Audit Committee's discussion with management and the
independent public accountants and the Audit Committee's review of the
representations of management and the report of the independent public
accountants to the Audit Committee, the Audit Committee recommended that the
Board of Directors include the audited consolidated financial statements in
SYSCO's Annual Report on Form 10-K for the year ended June 30, 2001 filed with
the Securities and Exchange Commission.
AUDIT COMMITTEE
Colin G. Campbell, Chairman
John W. Anderson
Judith B. Craven
Frank A. Godchaux III
Richard G. Merrill
Frank H. Richardson
Phyllis S. Sewell
FEES PAID TO INDEPENDENT PUBLIC ACCOUNTANTS IN FISCAL 2001
During fiscal 2001, SYSCO incurred the following fees for services
performed by Arthur Andersen LLP:
Audit Fees.................................................. $1,378,500
Financial Information Systems Design and Implementation
Fees...................................................... $ -0-
All Other Fees(1)(2)........................................ $3,576,200
---------------
(1) The Audit Committee determined that the provision of these non-audit
services was compatible with maintaining the independence of the Company's
Independent Public Accountants.
(2) Includes fees related to tax and other consulting, tax compliance, due
diligence procedures related to acquisitions, work performed in connection
with registration statements and various statutory and other audits.
16
19
PROPOSAL TO APPROVE THE
AMENDED AND RESTATED NON-EMPLOYEE DIRECTORS STOCK PLAN
ITEM 2 ON THE PROXY CARD
BACKGROUND
On May 13, 1998, the Board of Directors adopted the Sysco Corporation
Non-Employee Directors Stock Plan (the "Original Directors Plan"), subject to
stockholder approval. The Original Directors Plan was approved by the
stockholders on November 6, 1998. On September 12, 2001, the Amended and
Restated Non-Employee Directors Stock Plan (the "Proposed Directors Plan") was
approved by the Board of Directors and the Board unanimously recommends it to
the stockholders for approval.
The material changes to the Original Directors Plan, as adopted in the
Proposed Directors Plan, are as follows:
- Options may only be granted if, for the immediately previous fiscal year,
SYSCO has achieved an increase in after-tax basic earnings per share of
10% over the previous year (under the Original Directors Plan, the Board
of Directors had the ability to waive this requirement; however, under
the Proposed Directors Plan, this condition cannot be waived);
- The number of options is no longer automatically set at 8,000 for each
Non-Employee Director who receives them, but is left to the discretion of
the Board;
- Options may include the right to receive dividends (or equivalents) with
respect to common stock subject to the options, subject to any conditions
and restrictions specified by the Board of Directors;
- Vesting will occur at the times specified by the Board of Directors at
the time of grant; and
- The circumstances leading to lapse of the two year restriction on
transfer of Additional Shares (defined below) have been clarified.
The following is a summary of the principal provisions of the Proposed
Directors Plan. The full text of the Proposed Directors Plan is attached hereto
as Appendix B. Material differences from the Original Directors Plan are
identified.
PURPOSE
The purpose of the Proposed Directors Plan is to make available shares of
common stock for award to or purchase by non-employee directors of SYSCO in
order to attract and retain the services of experienced and knowledgeable
non-employee directors for the benefit of SYSCO and its stockholders and to
enable non-employee directors to increase their financial stake in the Company
through the ownership of SYSCO's common stock, in addition to underscoring their
common interest with stockholders in increasing the value of SYSCO over the long
term.
ELIGIBILITY
All members of SYSCO's Board of Directors who are not employees of SYSCO or
any of its subsidiaries are eligible to participate in the Proposed Directors
Plan. There currently are ten non-employee directors on the Board. Assuming the
Board's nominees are elected at the Annual Meeting, there will be eight
non-employee directors as of the date of the Annual Meeting.
SHARES RESERVED FOR THE PROPOSED DIRECTORS PLAN
The Proposed 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"). An aggregate
maximum of 800,000 shares of the Company's common stock may be issued under the
Proposed Directors Plan, including previous grants under the Original Directors
Plan. The Original Directors Plan also authorized the issuance of
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800,000 shares. As a result, no change is being made in the number of shares
available for issuance. The number of shares covered by the Proposed 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
SYSCO's corporate structure or shares. Any such adjustment will be made only if
adjustments are made to awards under the Company's incentive plans for
management then in effect. Shares issued under the Proposed 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 Original Directors Plan or the
Proposed 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 Proposed Directors Plan. If the
exercise price of any Option granted under the Proposed Directors Plan is paid
with shares of common stock, then the number of shares of common stock available
for issuance under the Proposed 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 will again be available
for new grants.
ADMINISTRATION OF THE PROPOSED DIRECTORS PLAN
The Proposed Directors Plan is administered by the Board. The Board has the
authority to terminate or amend the Proposed Directors Plan, to determine the
terms and provisions of the respective Option and award agreements, to construe
Option and award agreements and the Proposed Directors Plan, and to make all
other determinations in the judgment of the Board necessary or desirable for the
administration of the Proposed Directors Plan, including amending the vesting
and exercisability terms of any Options. However, the Proposed Directors Plan
may not be amended by the Board to revoke or alter any provision in a manner
which is unfavorable to the grantee of Options, Retainer Stock Awards, Elected
Shares or Additional Shares then outstanding.
GRANT OF STOCK OPTIONS AND EXERCISE PRICE
Under the Proposed Directors Plan, the Board will be entitled to grant
options in its discretion, 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. Grants will not be automatic. The
option exercise price per share to be established by the Board of Directors
shall be not less than the last closing price of the Company's common stock on
the New York Stock Exchange on the day prior to the date of determination of
such value (the "Fair Market Value").
Under the Original Directors Plan, on the first business day (the "Grant
Date") following each Annual Meeting, each individual who had been elected,
reelected or was continuing as a non-employee director automatically received an
option to purchase 8,000 shares of SYSCO's common stock (the "Annual Grant"), if
the minimum EPS condition was met. The Board had the authority to waive this
requirement. However, if the General Counsel of the Company determined that the
Company was in possession of material, undisclosed information about the Company
on the Grant Date, then the Annual Grant of Options to non-employee directors
was suspended until the second day after public dissemination of such
information, and the exercise price, exercisability dates and Option period was
determined by reference to such later date. The option price per share is the
last closing price of SYSCO's common stock on the New York Stock Exchange prior
to the date an Option or award is granted.
DIVIDENDS AND DIVIDEND EQUIVALENT RIGHTS
Under the Proposed Directors Plan, an Option may include the right to
receive dividend payments or dividend equivalent payments with respect to the
common stock subject to the Option. Such payments may be credited to an account
for the grantee or settled in cash or common stock as determined by the Board.
Any such crediting or settlements may be subject to such conditions as the Board
of Directors establishes. The Original Directors Plan did not provide for the
availability of dividends or dividend equivalents.
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MEANS OF EXERCISE OF OPTIONS
Upon exercise of the Option, the option price for purchased shares is
payable immediately in cash or shares of SYSCO common stock having an aggregate
Fair Market Value equal to the Option exercise price or any combination of the
foregoing. Under the Proposed Directors Plan, the Board of Directors may also
permit a recipient to pay the exercise price by irrevocably authorizing a third
party to sell shares of SYSCO common stock and instructing that party to pay the
exercise price and any required withholding to the Company. With the exception
of any dividends or dividend equivalent rights specifically granted under the
Proposed Directors Plan, 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.
VESTING AND EXERCISABILITY OF OPTIONS
Under the Proposed Directors Plan, vesting of Options will occur as
specified by the Board of Directors at the time of grant.
The Original Directors Plan provided that each Option vested and became
exercisable as follows:
(a) One-third of the total number of shares covered by an Option 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 vests 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 fully vests 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) is 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 becomes vested and immediately exercisable upon the occurrence of a
Change of Control prior to the expiration or forfeiture of the Option.
Under both plans, "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 Original Directors Plan, the
vested portion of an Option granted under the Original Directors Plan 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 Original Directors Plan expires on the tenth
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anniversary of the Grant Date or such shorter period as set forth in the Option
grant agreement. Options granted under the Proposed Directors Plan will expire
on the dates specified by the Board of Directors at the time of grant.
TRANSFERABILITY OF OPTIONS
Options are not 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 Proposed Directors Plan also provides for the automatic grant of
Retainer Stock Awards. As of the date of each Annual Meeting of SYSCO's
Stockholders, each newly elected director who has not previously received such
an award is granted a one-time Retainer Stock Award of 4,000 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 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 vests 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 vests 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 is 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,
has all the rights of a SYSCO 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 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 SYSCO common stock, in an
amount determined as set forth below. Upon making such an election, the electing
director's account is credited on the date of each quarterly payment of the
annual retainer fee ("Quarterly Payment Date") with that number of shares of
SYSCO common stock determined by dividing his or her elected amount by the Fair
Market Value of one share of SYSCO common stock as of such Quarterly Payment
Date ("Elected Shares"). In addition, he or she also receives 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 is December 31 of
the calendar year as to which the director has elected to receive stock in lieu
of cash retainer payments or the last business day prior to December 31, if
December 31 is not a business day of the Company's transfer agent. If a director
who has elected to receive common stock in lieu of cash retainer payments ceases
to be a director for any reason, certificates for such shares shall be issued
within 60 days following the date such director ceases to serve on the Board.
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All Elected Shares and Additional Shares are 100% vested as of the date
they are credited to the electing director. Additional Shares, however, may not
be sold or transferred for a period of two years after the date on which they
are issued (the "Restriction"). The Restriction remains in effect after the date
an electing director ceases to be a director; provided, however, that the
Restriction lapses (i) if an electing director ceases to be a director under
circumstances which would not cause forfeiture of Options or unvested Retainer
Stock Awards, or by reason of disability; or (ii) on the date of a Change of
Control.
TERMINATION OF SERVICE
Under the Proposed Directors Plan, unless otherwise determined by the Board
of Directors, upon cessation of service as a non-employee director (for reasons
other than death), all unvested Options and unvested Retainer Stock Awards are
forfeited, unless:
- The non-employee director serves out his term but does not stand for
reelection at the end of the term; or
- The non-employee director retires from service prior to the expiration of
his or her term or after attaining age 71.
Under the Original Directors Plan, following retirement from the Board of
Directors in good standing (as 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 is deemed to have retired from the Board in
good standing), a non-employee director's Options and Retainer Stock Awards
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 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. With
regard to Additional Shares, upon a non-employee director's death, all
Restrictions with respect to the Additional Shares lapse.
NO IMPAIRMENT OF THE COMPANY'S RIGHTS
Nothing in the Proposed 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 has any claim or
right to be granted or issued an Option, Retainer Stock Award, Elected Shares or
Additional Shares, except as provided in the Proposed Directors Plan.
EFFECTIVE DATE AND TERM OF THE AMENDED AND RESTATED DIRECTORS PLAN
The Proposed Directors Plan shall be effective as of the date of approval
thereof by the Company's stockholders. The Proposed Directors Plan will
terminate upon the earliest to occur of (i) November 9, 2011, (ii) the date on
which all shares available for issuance under the Proposed 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) or (ii) above, then any Options and Retainer Stock
Awards outstanding on such date will not be affected by the termination of the
Proposed 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 Proposed Directors Plan.
FEDERAL TAX CONSEQUENCES
Options granted under the Proposed Directors Plan are not intended to
satisfy the requirements of Section 422 of 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
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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.
The receipt of 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 tax basis of
the Retainer Stock Award to the non-employee director should be equal to the
amount included 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 Award
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 2002 under the Proposed Directors Plan and the
estimated dollar value thereof assuming that awards are made commensurate with
those made in fiscal 2001:
NUMBER OF SHARES
NAME AND POSITION UNDERLYING GRANTS DOLLAR VALUE
----------------- ----------------- ------------
Non-Employee Director Group (8 persons)
Stock Options (grants subject to performance
criteria).......................................... 64,000(1) $510,720(2)
Retainer Stock Awards................................. 4,000 111,160(3)
Elected Shares in Lieu of Annual Retainer Fees........ 8,636(4) 240,000(3)
Additional Shares in Lieu of Annual Retainer Fees..... 4,318(4) 120,000(3)
Total......................................... 80,954 $981,880
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(1) Assumes grants of options to purchase up to 8,000 shares are made to each
non-employee director.
(2) Assumes a value of $7.98 per share which is the same as the hypothetical
grant value determined for options granted in fiscal 2001 to the Named
Executive Officers. See note (2) to the chart "Option Grants in Fiscal
2001."
(3) Assumes a fair market value of $27.79 per share based on the closing price
of the Company's common stock on the New York Stock Exchange on September
10, 2001.
(4) Under the Proposed Directors Plan, up to 50% of the annual retainer fee may
be exchanged for common stock of the Company as described herein. The number
of shares to be granted depends upon the amount of fees waived by each
non-employee director. The information reported assumes each non-employee
director elects to waive the maximum amount permitted.
If this proposal is not approved, the Original Directors Plan will remain
in effect. This proposal will not affect options or other awards already granted
under the Original Directors Plan.
REQUIRED VOTE
Approval of the Amended and Restated Non-Employee Directors Stock Plan
requires the affirmative vote of a majority of the total voting power
represented by the outstanding shares of common stock present or represented at
the Annual Meeting and entitled to vote.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE AMENDED AND
RESTATED NON-EMPLOYEE DIRECTORS STOCK PLAN.
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SHAREHOLDER PROPOSAL
ITEM NO. 3 ON THE PROXY CARD
The International Brotherhood of Teamsters, 25 Louisiana Avenue, N.W.,
Washington, D.C. 20001, owning 280 shares of common stock of the Company, has
given notice that it intends to present for action at the Annual Meeting the
following resolution:
"RESOLVED: That the stockholders of Sysco ("the Company") urge the
Board of Directors to take the necessary steps, in compliance with state
law, to declassify the Board for the purpose of director elections. The
Board's declassification shall be completed in a manner that does not
affect the unexpired terms of directors previously elected."
The Teamsters submitted the following statement in favor of the resolution:
"SUPPORTING STATEMENT: The Company's Board is divided into three
classes of directors serving staggered three-year terms. This means an
individual director faces election only once every three years, and
shareholders only vote on roughly a third of the Board each year.
"Companies often defend classified boards by suggesting that they
preserve continuity. We think continuity is ensured through director
re-elections. When directors are performing well they routinely are re-
elected with majorities of shares voted.
"We believe that annual elections can pave the way for improved board
sensitivity to important shareholder issues. In particular, it can help
speed the diversification of the Company's Board and introduce new
perspectives.
"In addition, a declassified board allows the company to respond
quickly to changes, such as the recent developments in the economy, by
giving the board the ability to appoint more qualified candidates each
year. The Teamsters General Fund believes a declassified board can help
give the Company the flexibility it needs as it moves into the next
century.
"The evidence shows that shareholders are dissatisfied with classified
boards. In May, 2001, 70% of Alaska Air's shareholders voted for a
declassified board. Last year, majorities of shareholders voted to
declassify boards at many companies, including:
- Baxter International (60.4%);
- Eastman Chemical (70%);
- Eastman Kodak (60.7%);
- Lonestar Steakhouse & Saloon, Inc. (79%);
- Silicon Graphics (81.1%);
- United Health Group (75.7%);
- Kmart(1) (68.5%);
- Weyerhaeser (58%); and
- Kroger (63.5%).
"In 1999, shareholders voted to declassify boards with a majority at:
- Cendant, Cooper Tire & Rubber;
- Kaufman & Broad Home;
- Oregon Steel;
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(1) At Kmart, the proposal was binding and received 68.5% of ballots cast,
45.78% of shares outstanding. Kmart's by-laws require support of 58% of
shares outstanding.
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- Airborne Freight;
- Kroger; and
- Tenneco.
"In 1998, Walt Disney Company agreed to change the by-laws after the
resolution passed with 65% of the vote. More than 70% of shareholders
demanded the same at Fleming and Eastman Kodak.
"By adopting annual elections, the Company can demonstrate its
commitment to fuller accountability to shareholders, accountability that
honors shareholder prerogatives.
"We urge shareholders to vote YES for this proposal."
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST THIS PROPOSAL.
This proposal is sponsored by the International Brotherhood of Teamsters.
Thirty-seven of SYSCO's operating companies have negotiated collective
bargaining agreements with various Locals of the International Brotherhood of
Teamsters. The Board of Directors recommends that you vote AGAINST the
International Brotherhood of Teamsters' proposal to declassify the Board.
SYSCO's Board has been divided into three classes, with directors serving
staggered three-year terms, since its inception in 1970. During this period,
SYSCO has grown from a company generating $115 million in sales to one that
generated $21.8 billion in sales in fiscal 2001. In addition, our stock price
has increased 430% in value, or 18% on a compound annual basis, over the last 10
fiscal years. We are proud of SYSCO's 31-year history of solid growth and
performance, and we are unclear as to why the International Brotherhood of
Teamsters has raised this challenge.
A majority of the companies in the S&P 500 currently have classified
boards. Board classification means that the majority of the Board at any given
time will have experience in the Company's business and affairs, promoting
continuity and stability of the Company's business strategies and policies. The
Board believes that the continuity and quality of leadership that results from a
classified Board creates long-term shareholder value and is in the best
interests of the Company and its shareholders.
A classified Board also affords the Company and its shareholders a measure
of protection against hostile and unsolicited takeover attempts that do not
offer the greatest value to all shareholders. The existence of a classified
Board encourages a potential acquirer to negotiate with the Board, giving the
Board additional time and bargaining power to negotiate a transaction that is in
the best interests of the shareholders and other constituencies.
The proponent suggests that declassifying the Board would lead to fuller
accountability to the shareholders. However, the Board notes that certain
measures currently in place, such as granting options to directors only
following years that the Company experiences increases in earnings per share,
already align the interests of the Directors with those of the shareholders.
Furthermore, the Board believes that directors who are elected for staggered
terms are just as accountable to shareholders as directors who are elected
annually since the same duties and standards of performance apply regardless of
the length of the term.
We suggest that our performance speaks for itself. We do not believe that
the International Brotherhood of Teamsters' proposal is in your best interest,
and we encourage you to vote AGAINST it.
Finally, shareholders should note that this proposal, if approved, is not
binding and would not result in a declassified Board. Under Delaware law and the
Company's Bylaws, if the Board were to determine to undertake declassification,
additional shareholder approval would be required.
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INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen LLP served as the company's independent public accountants
providing auditing, financial and tax services for fiscal 2001 and will continue
to provide such services during fiscal 2002. We expect that representatives of
Arthur Andersen LLP will be present at the Annual Meeting and will have the
opportunity to make a statement if they desire to do so. They will also be
available to respond to appropriate questions.
STOCKHOLDER PROPOSALS
PRESENTING BUSINESS
If you want to present a proposal under Rule 14a-8 of the Exchange Act at
our 2002 Annual Meeting of Stockholders, send the proposal in time for us to
receive it by May 31, 2002. If the date of our 2002 Annual Meeting is
subsequently changed by more than 30 days from the date of this year's Annual
Meeting, we will inform you of the change and the date by which we must receive
proposals. If you want to present business at our 2002 Annual Meeting outside of
the shareholder proposal rules of Rule 14a-8 of the Exchange Act, the Secretary
must receive notice of your proposal by August 11, 2002, but not before July 2,
2002 and you must be a stockholder of record on the date notice to stockholders
is mailed and on the record date for determining stockholders entitled to notice
of the meeting and to vote.
NOMINATING DIRECTORS FOR ELECTION
The Nominating Committee will consider any director nominees you recommend
in writing for the 2002 Annual Meeting if the Secretary receives notice by
August 11, 2002, but not before July 2, 2002 and you are a stockholder of record
on the date notice to stockholders is mailed and on the record date for
determining stockholders entitled to notice of the meeting and to vote.
Your notice must include the following information for each person you are
nominating for election as a director:
- the name, age, business address and residence address of the person;
- the principal occupation or employment of the person;
- the class or series and number of shares of SYSCO capital stock which the
person owns beneficially or of record; and
- any other information relating to the person that must be disclosed in a
proxy statement or other filings required to be made in connection with
solicitations of proxies for election of directors under Section 14 of
the Exchange Act and its rules and regulations.
In addition, your notice must include the following information about
yourself:
- your name and record address;
- the class or series and number of shares of capital stock of SYSCO that
you own beneficially or of record;
- a description of all arrangements or understandings between you and each
proposed nominee and any other person or persons, including their names,
pursuant to which the nomination(s) are to be made;
- a representation that you intend to appear in person or by proxy at the
meeting to nominate the person or persons named in your notice; and
- any other information about yourself that must be disclosed in a proxy
statement or other filings required to be made in connection with
solicitations of proxies for election of directors under Section 14 of
the Exchange Act and its rules and regulations.
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The notice must include a written consent by each proposed nominee to being
named as a nominee and to serve as a director if elected. No person will be
eligible for election as a director of SYSCO unless nominated by the Nominating
Committee or in accordance with the procedures set forth above.
If the date of next year's Annual Meeting is advanced by more than 30 days
prior to or delayed by more than 60 days after the date of this year's Annual
Meeting, we will inform you of the change and we must receive your director
nominee notices by the latest of 90 days before the Annual Meeting, 10 days
after we mail the notice of the changed date of the Annual Meeting or 10 days
after we publicly disclose the changed date of the Annual Meeting.
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APPENDIX A
SYSCO CORPORATION
AUDIT COMMITTEE CHARTER
ORGANIZATION
The Board of Directors of SYSCO Corporation shall establish an Audit
Committee. The Audit Committee shall be composed of directors who are
independent of the management of SYSCO, are free of any relationship that, in
the opinion of the Board, would interfere with their exercise of independent
judgment as a committee member and who are financially literate. The Committee
shall number at least four independent directors and may include all independent
directors. At least one committee member will have accounting or related
financial management expertise.
STATEMENT OF POLICY
The Audit Committee shall provide assistance to the directors in fulfilling
their responsibilities to shareholders, potential shareholders, and the
investment community with respect to corporate accounting, reporting practices,
and quality and integrity of the financial reports of SYSCO. In the performance
of its responsibilities, the Audit Committee must maintain free and open means
of communication between the directors, the independent auditors, Operations
Review, and executive and financial management. The Audit Committee shall have
full access, without restriction, to all information which it believes, in its
judgment, is required to fulfill its responsibilities.
RESPONSIBILITIES
In executing its responsibilities, the Audit Committee's policies and
procedures should be flexible in order to best react to changing conditions, and
to insure that the accounting and reporting practices of SYSCO are in accordance
with all applicable requirements.
In carrying out its responsibilities, the Audit Committee shall meet at
least three times annually to perform the following procedures:
- Review and recommend to the Directors the independent auditors to be
selected to audit the consolidated financial statements of SYSCO
Corporation and its divisions and subsidiaries. The independent auditors
are accountable to the Board of Directors and the Audit Committee as
shareholder representatives.
- Meet with the independent auditors, Operations Review, and executive and
financial management to review the scope of the proposed audit for the
ensuing fiscal year including the audit procedures to be employed. At the
conclusion of the audit, review the results with the independent
auditors, including any comments or recommendations.
- Review with the independent auditors, Operations Review, and executive
and financial management the adequacy and effectiveness of SYSCO's
accounting and financial controls. Elicit any recommendations for the
improvement of such controls, including particular areas where new or
more detailed controls or procedures are desirable. Particular emphasis
should be given to the adequacy of such internal controls to expose any
payments, transactions, or procedures that might be deemed illegal or
otherwise improper. The Committee should review periodically SYSCO's Code
of Business Conduct, including the results of the auditors' review of
operating company compliance with the Code, particularly with regard to
the functioning of the ethics committees.
- Review SYSCO's Operations Review function including the independence and
authority of its reporting obligations, its proposed audit plans and
scope for the ensuing year, and the coordination of such plans with the
independent auditors.
- Receive prior to each meeting as appropriate, from the Operations Review
function and the independent auditors, reports summarizing the findings
of completed internal reviews, and a progress report of
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accomplished versus planned activities. Any deviations from planned
activities should be adequately explained.
- Review before they are released to the public, the financial statements
contained in the annual report to shareholders with executive and
financial management and the independent auditors to determine that they
are satisfied with the disclosures and content of the financial
statements to be submitted to the shareholders. Review any changes in
accounting principles for propriety.
- Provide sufficient opportunity for Operations Review and the independent
auditors to meet with the members of the Audit Committee without the
presence of executive or financial management. Among the matters to be
discussed in these meetings are the independent auditors' evaluation of
SYSCO's financial, accounting, and auditing personnel, and the extent of
cooperation that the independent auditors received during their
examination.
- Review the quality and sufficiency of the accounting and financial
resources required to meet the financial and reporting objectives as
determined by the Audit Committee. Review the succession planning process
for the accounting and financial areas.
- Submit the minutes of all meetings of the Audit Committee to, or orally
report the matters discussed at each committee meeting with, the Board of
Directors.
- Require that the independent auditors conduct a SAS 71 Interim Financial
Review before the company files its Form 10-Q.
- Require the independent auditors to provide a formal written statement
that delineates all relationships between the independent auditor and
SYSCO. The Audit Committee also must ensure, through communicating with
the independent auditor, that no relationship or services will impact the
auditor's objectivity.
- Investigate any matter brought to its attention within the scope of its
duties. The Audit Committee shall have the power to retain outside
counsel and/or advisors, including a public accounting firm other than
the current independent auditor, if, in its judgment, that is
appropriate.
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APPENDIX B
SYSCO CORPORATION
AMENDED AND RESTATED 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 reserved for issuance under
this Plan 800,000 shares of the Corporation's Common Stock, $1.00 par value
("Common Stock") (as adjusted for the Company's two-for-one stock split
effected by way of a stock dividend on December 15, 2000), 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. Awards may be made under this Plan of Options to
purchase Common Stock; provided, however, that Options may not be granted during
any fiscal year unless the Corporation has achieved for the immediately previous
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. No Options granted pursuant to this Plan may be "Incentive Stock
Options" under Section 422 of the Internal Revenue Code of 1986, as amended. The
grant of an Option entitles the recipient to purchase shares of Stock at an
exercise price established by the Board of Directors.
SECTION 2.2 Exercise Price. The exercise price of each Option granted
under this Section 2 shall be established by the Board of Directors or shall be
determined by a method established by the Board of Directors at the time the
Option is granted. The exercise price shall not be less than 100% of the Fair
Market Value of a share of Common Stock on the date of grant of the Option. For
purposes of determining the "Fair Market Value" of a share of Common Stock as of
any date, then the "Fair Market Value" as of that date shall be the last closing
price of the Common Stock on the first business day prior to that date on the
New York Stock Exchange or, if the Common Stock is not listed on the New York
Stock Exchange, on any other exchange or quotation system on which the Common
Stock is listed or quoted.
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SECTION 2.3 Exercise. An Option shall be exercisable in accordance with
such terms and conditions and during such periods as may be established by the
Board of Directors.
SECTION 2.4 Payment of Option Exercise Price. The payment of the exercise
price of an Option granted under this Section 2 shall be subject to the
following:
(a) Subject to the following provisions of this subsection 2.4, the
full exercise price for shares of Common Stock purchased upon the exercise
of any Option shall be paid at the time of such exercise (except that, in
the case of an exercise arrangement approved by the Board of Directors and
described in paragraph 2.4(c), payment may be made as soon as practicable
after the exercise).
(b) The exercise price shall be payable in cash or by tendering, by
either actual delivery of shares or by attestation, shares of Common Stock
acceptable to the Board of Directors that have been held by the optionee
for at least six months and valued at Fair Market Value as of the day of
exercise, or in any combination thereof, as determined by the Board of
Directors.
(c) The Board of Directors may permit an Option recipient to elect to
pay the exercise price upon the exercise of an Option by irrevocably
authorizing a third party to sell shares of Common Stock (or a sufficient
portion of the shares) acquired upon exercise of the Option and remit to
the Company a sufficient portion of the sale proceeds to pay the entire
exercise price and any tax withholding resulting from such exercise.
SECTION 2.5 Settlement of Award. Shares of Common Stock delivered
pursuant to the exercise of an Option shall be subject to such conditions,
restrictions and contingencies as the Board of Directors may establish in the
applicable Option grant agreement. The Board of Directors, in its discretion,
may impose such conditions, restrictions and contingencies with respect to
shares of Common Stock acquired pursuant to the exercise of an Option as the
Board of Directors determines to be desirable.
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.
SECTION 2.7 Dividends and Dividend Equivalents. An Option, at the time of
grant or subsequent thereto, may provide the grantee with the right to receive
dividend payments or dividend equivalent payments with respect to Common Stock
subject to the Option. Such payments may either be made currently or credited to
an account for the grantee, and may be settled in cash or Common Stock as
determined by the Board. Any such settlements, and any such crediting of
dividends or dividend equivalents or reinvestment in shares of Stock, may be
subject to such conditions, restrictions and contingencies as the Board shall
establish, including the reinvestment of such credited amounts in Common Stock
equivalents.
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 4,000
shares of Common Stock (this amount has been adjusted for the Company's
two-for-one stock split effected by way of a stock dividend on December 15,
2000), 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;
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(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.
(5) Any unvested portion of the Retainer Stock Award shall vest
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.
(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
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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 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 under the circumstances
described in Section 5.1 (a) or (b), or as otherwise determined by the Board of
Directors, the Restriction shall lapse and be of no further force or effect on
or after the date of such death, disability or departure; 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. Except as set forth below and unless
otherwise determined by the Board, upon cessation of service as a Non-Employee
Director (for reasons other than death), all 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, unless otherwise
determined by the Board, if (a) any Non-Employee Director serves out his/her
term but does not stand for re-election at the end thereof or (b) any
Non-Employee Director shall retire from service on the Board (for reasons other
than death) prior to the expiration of his or her term and on or after the date
he or she attains age 71, such grantee's 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. The status of Elected
Shares and Additional Shares shall be governed by Section 4.3.
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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 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.
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ELECTION TO OBTAIN FUTURE MATERIALS
OF SYSCO CORPORATION
ELECTRONICALLY INSTEAD OF BY MAIL
SYSCO stockholders may elect to receive future materials through the
Internet instead of by mail. SYSCO is offering this service to provide added
convenience to its stockholders and to reduce printing and mailing costs.
To take advantage of this option, stockholders must subscribe to one of the
various commercial services that offer access to the Internet. Costs normally
associated with electronic access, such as usage and telephone charges, will be
borne by the stockholder.
To elect this option, go to www.econsent.com/syy. You will be asked to
enter the nine-digit Account Number located in the second group of numbers
appearing beneath the perforation line on the reverse side. Stockholders who
elect this option will be notified each year by e-mail how to access the proxy
materials and how to vote their shares on the Internet.
If you consent to receive the Company's future materials electronically,
your consent will remain in effect unless it is withdrawn. You may withdraw your
consent by contacting our Transfer Agent at 1-800-730-4001 or go to
www.econsent.com/syy.
You may access the SYSCO Corporation annual report and proxy
statement at:
www.sysco.com
PROXY
SYSCO CORPORATION
Proxy for the Annual Meeting of Stockholders
November 9, 2001
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby constitutes and appoints Charles H. Cotros and
Richard J. Schnieders, and each of them jointly and severally, proxies, with
full power of substitution, to vote all shares of common stock which the
undersigned is entitled to vote at the Annual Meeting of Stockholders of Sysco
Corporation to be held on November 9, 2001 at 10:00 a.m., at The Houstonian
Hotel, 111 North Post Oak Lane, Houston, Texas 77024, or any adjournment
thereof.
The undersigned acknowledges receipt of the notice of annual meeting and
proxy statement, each dated September 28, 2001, 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.
(CONTINUED AND TO BE SIGNED ON REVERSE SIDE)
38
SYSCO CORPORATION
1390 Enclave Parkway
Houston, Texas 77077
Vote by Telephone or Internet
It's fast, convenient, and your vote is immediately confirmed and posted!
FOR TELEPHONE VOTING, FOLLOW THESE FOUR EASY STEPS: FOR INTERNET VOTING, FOLLOW THESE FOUR EASY STEPS:
1. Read the accompanying Proxy Statement 1. Read the accompanying Proxy Statement
and Proxy Card. and Proxy Card.
2. Using a touch-tone phone, call the toll-free number 2. Go to the Website
1-877-PRX-VOTE (1-877-779-8683). Stockholders http://www.eproxyvote.com/syy
residing outside the United States can call collect 3. Enter your 14-digit Voter Control Number
on a touch-tone phone 1-201-536-8073. located on your Proxy Card above your name.
3. Enter your 14-digit Voter Control Number located 4. Follow the instructions provided.
on your Proxy Card above your name.
4. Follow the recorded instructions.
Your vote is important! Your vote is important!
Call 1-877-PRX-VOTE anytime! Go to http://www.eproxyvote.com/syy anytime!
Do not return your Proxy Card if you are voting by Telephone or Internet.
Proxies voted by Telephone or Internet must be received by
11:59 P.M. EST - November 8, 2001
Please Mark
[X] Votes As In
This Example
The Board of Directors recommends a vote "FOR" Proposals 1 and 2.
1. Election of three directors 2. Approval of Amended and Restated Non-Employee Directors Stock Plan
NOMINEES: (01) Colin G. Campbell, [ ] FOR [ ] AGAINST [ ] ABSTAIN
(02) Frank H. Richardson and (03) Jackie
M. Ward
FOR [ ] WITHHELD [ ] The Board of Directors recommends a vote "AGAINST"
ALL FROM ALL Proposal 3.
NOMINEES NOMINEES
3. Shareholder Proposal on Declassified Board
[ ] [ ] FOR [ ] AGAINST [ ] ABSTAIN
--------------------------------------
For all nominees except as noted above.
All proxies signed and returned will be voted in accordance with your
instructions. Those with no choice indicated will be voted "FOR" Proposals 1 and
2, "AGAINST" Proposal 3, and in the discretion of the proxy holder on any other
matter that may properly come before the meeting and any adjournment or
postponement of the Annual Meeting.
MARK HERE FOR ADDRESS [ ]
CHANGE AND NOTE AT LEFT
Please sign, date and return promptly. No postage required if this proxy is
returned in the enclosed envelope and mailed in the United States.
Please sign as name appears on this card. Joint owners should each sign. When
signing as attorney, executor, administrator, trustee or guardian, please give
full title. If signer is a corporation, please sign with the full corporation
name by authorized officer or officers.
Signature: Date:
---------------------------- ---------------------------------
Signature: Date:
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