-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, cVLGoZ0ZQr5KJUWoExM8maENIprtqzHzmaJtNHHIGUF5/UeV3YM1BbvH7okgtS6Y wOxKm4IxkU/Gkl9NXqEIAw== 0000950129-94-000712.txt : 19941007 0000950129-94-000712.hdr.sgml : 19941007 ACCESSION NUMBER: 0000950129-94-000712 CONFORMED SUBMISSION TYPE: DEF 14A PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19941104 FILED AS OF DATE: 19940930 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: SYSCO CORP CENTRAL INDEX KEY: 0000096021 STANDARD INDUSTRIAL CLASSIFICATION: 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: 94551037 BUSINESS ADDRESS: STREET 1: 1390 ENCLAVE PKWY CITY: HOUSTON STATE: TX ZIP: 77077 BUSINESS PHONE: 7135841390 DEF 14A 1 SYSCO CORP. N & PS 1 SCHEDULE 14A (RULE 14A-101) INFORMATION REQUIRED IN PROXY STATEMENT SCHEDULE 14A INFORMATION PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934 (AMENDMENT NO. ) Filed by the registrant /x/ Filed by a party other than the registrant / / Check the appropriate box: / / Preliminary proxy statement /x/ Definitive proxy statement / / Definitive additional materials / / Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12 SYSCO CORPORATION - - - -------------------------------------------------------------------------------- (Name of Registrant as Specified in Its Charter) JOHN F. WOODHOUSE - - - -------------------------------------------------------------------------------- (Name of Person(s) Filing Proxy Statement) Payment of filing fee (Check the appropriate box): /X/ $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2). / / $500 per each party to the controversy pursuant to Exchange Act Rule 14a-6(i)(3). / / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11. (1) Title of each class of securities to which transaction applies: - - - -------------------------------------------------------------------------------- (2) Aggregate number of securities to which transactions applies: - - - -------------------------------------------------------------------------------- (3) Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11:(1) - - - -------------------------------------------------------------------------------- (4) Proposed maximum aggregate value of transaction: - - - -------------------------------------------------------------------------------- / / 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: - - - -------------------------------------------------------------------------------- (2) Form, schedule or registration statement no.: - - - -------------------------------------------------------------------------------- (3) Filing party: - - - -------------------------------------------------------------------------------- (4) Date filed: - - - -------------------------------------------------------------------------------- - - - --------------- (1) Set forth the amount on which the filing fee is calculated and state how it was determined. 2 [LOGO] SYSCO CORPORATION 1390 ENCLAVE PARKWAY HOUSTON, TEXAS 77077-2099 NOTICE OF ANNUAL MEETING OF STOCKHOLDERS TO BE HELD NOVEMBER 4, 1994 NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Sysco Corporation, a Delaware corporation (the "Company"), will be held November 4, 1994, at 10:00 A.M., in the Conference Center of the Sysco Corporate Headquarters located at 1390 Enclave Parkway, Houston, Texas, for the following purposes: A. To elect five directors for terms of office as shown in the attached Proxy Statement B. To approve the Amended and Restated Sysco Corporation Management Incentive Plan C. To transact such other business as may properly come before the meeting or any adjournment thereof. Only Common Stockholders of record on the books of the Company at the close of business on September 9, 1994, will be entitled to vote at the meeting. We hope you will be able to attend the meeting in person but if you cannot be present, it is important that you sign, date and promptly return the enclosed proxy in order that your vote may be cast at the meeting. JOHN F. WOODHOUSE Chairman of the Board Dated: September 30, 1994 Enclosure: A copy of the Annual Report of Sysco Corporation for the fiscal year ended July 2, 1994, containing financial statements, is enclosed herewith. 3 SYSCO CORPORATION 1390 ENCLAVE PARKWAY HOUSTON, TEXAS 77077-2099 1994 ANNUAL MEETING OF STOCKHOLDERS PROXY STATEMENT September 30, 1994 The following information is furnished in connection with the solicitation of proxies for the 1994 Annual Meeting of Sysco Corporation (hereinafter called the "Company"). A form of proxy for use at the meeting is enclosed. Any stockholder who executes and delivers a proxy has the right to revoke the same at any time before it is voted. The solicitation of proxies is made by and on behalf of the management of the Company. The cost of solicitation of proxies will be borne by the Company. The Company will authorize banks, brokerage houses and other custodians, nominees or fiduciaries to forward copies of proxy material to the beneficial owners of shares or to request authority for the execution of the proxies and will reimburse such banks, brokerage houses and other custodians, nominees or fiduciaries for their out-of-pocket expenses incurred in connection therewith. The Company has retained Kissel-Blake Inc. to assist in the solicitation of proxies from such nominees and certain individual stockholders, in writing or by telephone, at an estimated fee of $7,000 plus reimbursement for reasonable out-of-pocket expenses. This Proxy Statement and form of proxy were first mailed to stockholders on or about September 30, 1994. As of September 9, 1994, the record date, there were outstanding 183,421,732 shares of the Company's Common Stock, $1 par value ("Common Stock"). The holders of Common Stock vote as a single class and are entitled to one vote per share, noncumulative. As of September 9, 1994, no person or group was known to the Company to own more than five percent of the Company's Common Stock. All directors and executive officers of the Company as a group (20 persons) owned beneficially 8,567,441 shares (constituting approximately 4.67%) of the Company's outstanding Common Stock as of September 9, 1994. As stated in the Notice of Annual Meeting of Stockholders attached hereto, only holders of Common Stock of record at the close of business on September 9, 1994 will be entitled to notice of and to vote at the meeting or any adjournment thereof. The stock transfer book will not be closed. ELECTION OF DIRECTORS Five directors are to be elected. The Company's bylaws provide for the election of directors for staggered terms, with each director serving a three-year term. The Board of Directors has renominated four directors, John F. Baugh, Charles H. Cotros, Jonathan Golden, and Thomas B. Walker, Jr., and has nominated one additional person, Arthur J. Swenka, for three-year terms of office. The proxyholders intend to vote for the first five persons named below as directors. Messrs. Herbert Irving and James A. Schlindwein, whose terms of office as directors of the Company expire at the 1994 Annual Meeting, have chosen not to stand for re-election at that meeting. Messrs. Irving and Schlindwein will be retiring after 25 and 14 years, respectively, of distinguished service to the Company. The remaining ten persons named in the table below will continue in office for the terms which expire at the Annual Meeting of Stockholders in the year opposite their respective names. Management recommends that the five nominees named below be elected to the Board of Directors for the above-referenced terms of office. The five nominees have consented to being named in the Proxy Statement and to serve if elected. Unless otherwise directed in the proxy form, the proxyholders intend to vote in favor of electing Messrs. Baugh, Cotros, Golden, Swenka and Walker as directors for three-year terms of office and until their respective successors are elected and shall qualify. 1 4 Although management does not contemplate the possibility, in the event any nominee is not a candidate or is unable to serve as a director at the time of the election, the proxies will be voted for any nominee who shall be designated by the present Board of Directors to fill such vacancy. The name and age of each nominee, the term of office for which he is proposed to be elected, his principal occupation, the period during which he has served as a director, the number of shares of Common Stock beneficially owned directly or indirectly by each nominee as of the close of business on September 9, 1994 (according to information received by the Company) and the percentage of outstanding shares of Common Stock such ownership represented at September 9, 1994, are set out below. Similar information is also provided for those directors whose terms expire in future years.
SHARES OF COMMON STOCK BENEFICIALLY OWNED AS OF PERCENT SEPTEMBER OF PRINCIPAL DIRECTOR TERM 9, OUTSTANDING NAME OCCUPATION AGE SINCE EXPIRES 1994(1)(2) SHARES - - - ------------------------ ------------------------------------ --- ---- ---- --------- ----- Directors Standing for Election for Three-Year Terms of Office - - - -------------------- John F. Baugh........... Senior Chairman of the Board of 78 1969 1994 811,350 .442% Directors and Chairman of the Executive Committee* Charles H. Cotros....... Executive Vice President of the 57 1985 1994 182,357 .099% Company; President, Foodservice Operations of the Company Jonathan Golden......... Partner, Arnall Golden & Gregory 57 1984 1994 24,000(4) .013% (counsel for the Company)*(3) Arthur J. Swenka........ President and Chief Executive 57 - - 87,431(5) .048% Officer, Nobel/Sysco Food Services Company; Chairman and Chief Executive Officer, Sysco Food Services of Montana, Inc. Thomas B. Walker, Jr.... Limited Partner, The Goldman Sachs 70 1970 1994 136,000 .074% Group, L.P. (investment bankers)*(6) Directors with Continuing Terms - - - ---------------- Colin G. Campbell....... President, Rockefeller Brothers Fund 58 1989 1995 1,000 .001% (private philanthropic foundation)(7) Frank A. Godchaux III... Chairman, Riviana Foods Inc. (food 67 1987 1995 27,000(8) .015% manufacturer) Donald J. Keller........ Retired, formerly President, Chief 62 1986 1995 6,200 .003% Operating Officer and Director, WestPoint Pepperell (textile manufacturer)*(9) Frank H. Richardson..... Retired, formerly President and 61 1993 1995 2,000 .001% Chief Executive Officer of Shell Oil Company John F. Woodhouse....... Chairman of the Board of Directors 63 1969 1995 665,722 .363% and Chief Executive Officer of the Company*(10) John W. Anderson........ Retired, formerly Vice President -- 62 1981 1996 12,202 .007% Customer Services, Southwestern Bell Telephone Company (telecommunications) Bill M. Lindig.......... President, Chief Operating Officer 57 1983 1996 400,953(12) .219% of the Company*(11) Richard G. Merrill...... Retired, formerly Executive Vice 63 1983 1996 11,065 .006% President, The Prudential Insurance Company of America*(13)
(Table continued on following page) 2 5
SHARES OF COMMON STOCK BENEFICIALLY OWNED AS OF PERCENT SEPTEMBER OF PRINCIPAL DIRECTOR TERM 9, OUTSTANDING NAME OCCUPATION AGE SINCE EXPIRES 1994(1)(2) SHARES - - - ------------------------ ------------------------------------ --- ---- ---- --------- ----- Donald H. Pegler, Jr.... Chairman, Pegler-Sysco Food Services 67 1987 1996 1,218,776(15) .665% Company; Chairman, Sysco Food Services of Iowa, Inc.(14) Phyllis S. Sewell....... Retired, formerly Senior Vice 63 1991 1996 5,000 .003% President, Federated Department Stores, Inc.(16) All Executive Officers and Directors as a Group (20 persons) (17)(18)(19)(20) 8,567,441 4.671%
- - - --------------- * Member of Executive Committee (1) Includes shares of Common Stock owned by the wives and/or dependent children of each of the following named individuals: John F. Baugh, 251,456 shares; Colin G. Campbell, 500 shares; Frank A. Godchaux III, 6,000 shares; Donald J. Keller, 200 shares; Donald H. Pegler, Jr., 5,216 shares and Arthur J. Swenka, 519 shares. Includes 14,800 shares owned by the wives and/or dependent children of other current executive officers and directors. (2) Includes shares of Common Stock subject to currently exercisable options as follows: John F. Baugh, 10,916 shares; Charles H. Cotros, 10,916 shares; and Bill M. Lindig, 4,316 shares. (3) Mr. Golden is a partner of Arnall Golden & Gregory, counsel for the Company. (4) Includes 20,000 shares held by a trust created under the estate of Sol I. Golden, of which Mr. Golden is a co-trustee. (5) Includes 12,264 shares held by a trust of which he is a trustee. (6) Mr. Walker is also a director of A.H. Belo Corporation and NCH Corp. (7) Mr. Campbell is also a director of Pitney-Bowes Inc., Hartford Steam Boiler Inspection and Insurance Company and Rockefeller Financial Services, Inc. (8) Includes 10,000 shares held by Riviana Foods Inc. of which Mr. Godchaux and his wife are affiliates. (9) Mr. Keller served as President and a director of WestPoint Pepperell from January 1986 through April 1989 and is currently a director of Air Express International, Inc. (10) Mr. Woodhouse is also a director of Shell Oil Company. (11) Mr. Lindig is also a director of Santa Fe Pacific Corporation. (12) Includes 46,300 shares held by trusts of which his wife is trustee. (13) Mr. Merrill is also a director of Dr. Pepper/7-Up Companies and W.R. Berkley Corporation. (14) Mr. Pegler is also a director of the National Bank of Commerce and Lincoln Telecommunications Co. (15) Includes 24,000 shares held by the Pegler Family Foundation, of which Mr. Pegler is a trustee. (16) Mrs. Sewell is also a director of Pitney-Bowes Inc., U.S. Shoe Corp. and Lee Enterprises, Inc. (17) Includes 46,848 shares subject to currently exercisable options held by current executive officers and directors. (18) Unless otherwise noted, the persons named in the table have been engaged in the principal occupation shown therein for the past five years or longer. (19) Messrs. Irving and Schlindwein, whose terms of office as directors of the Company expire at the 1994 Annual Meeting, have chosen not to stand for re-election at that Meeting. As of September 9, 1994, Messrs. Irving and Schlindwein owned 4,726,745 and 208,005 shares of Company Common Stock, respectively, constituting 2.577% and .113%, respectively, of the outstanding shares of Company Common Stock. Mr. Irving's ownership includes 168,742 shares held by his wife. As of September 9, 1994, Gregory K. Marshall, Senior Vice President, Multi-Unit Sales and an executive named in the Summary Compensation Table on page 8 hereof, owned 19,834 shares of Company Common Stock constituting .011% of the outstanding shares of Company Common Stock. Mr. Marshall's ownership includes currently exercisable options to purchase 2,996 shares. (20) On December 31, 1993 E. James Lowrey retired from his position as Executive Vice President -- Finance & Administration of the Company and resigned as a director of the Company. On February 9, 1994 the Board of Directors was reduced to 16 directors. The Board of Directors has chosen to nominate individuals for the vacancies created by five of the six directors whose terms expire at the 1994 Annual Meeting and currently intends to reduce the Board of Directors to 15 directors after the 1994 Annual Meeting. Proxies may not be voted for more than five (5) persons. 3 6 DIRECTOR COMPENSATION Directors whose principal occupation is other than employment with the Company are compensated at the rate of $32,400 per year plus reimbursement of expenses for all services as a director, including committee participation or special assignments. Such directors are given the opportunity to defer their annual compensation until their retirement from the Board or until the occurrence of certain other events. Such deferred compensation accrues interest at a rate equal to a long-term index (the index utilized is the monthly average for the previous calendar year of the highest of the 20-year Treasury Bond, 10-year Treasury Note and Moody's Corporate Bond Yield Indices) plus 1%. The current rate of interest in effect is 8.54% per annum. Messrs. Godchaux, Golden, Merrill and Walker and Mrs. Sewell elected to defer their annual compensation for 1994. No other remuneration was paid for services as a director during the fiscal year ended July 2, 1994. EXECUTIVE COMPENSATION REPORT OF COMPENSATION AND STOCK OPTION COMMITTEE ON EXECUTIVE COMPENSATION This report of the Compensation and Stock Option Committee of the Company documents the components of the Company's compensation programs for its executive officers and describes the basis on which fiscal 1994 compensation determinations were made with respect to the executive officers of the Company, including Mr. Woodhouse, the Chief Executive Officer. Prior to January 1, 1994, compensation decisions with respect to the Company's 1991 Stock Option Plan were made by the Company's Stock Option/SAR Committee, and all other compensation decisions were made by the Company's Compensation Committee. On January 1, 1994, these two committees were combined into one committee -- the Compensation and Stock Option Committee. All members of the prior two committees are members of the Compensation and Stock Option Committee (the "Committee"). In addition, Mrs. Phyllis S. Sewell was appointed to the Committee as of January 1, 1994. OVERALL EXECUTIVE COMPENSATION PHILOSOPHY Since it became a publicly held corporation in 1970, the Company has always directly linked the compensation of its executive officers to the performance of the Company. Specifically, the Company has tied the level of its executive compensation to increases in the Company's earnings and return on shareholders' equity. This has been accomplished through the following means: - - - - A "pay-for-performance" orientation based upon Company performance for corporate officers and a combination of operating company and corporate performance for operating company senior management; - - - - Competitive base salaries; - - - - Potentially significant annual incentive bonuses under the Company's Management Incentive Plan; - - - - The issuance of performance-based stock options; and - - - - Customary benefits, including a supplemental retirement plan. The factors and criteria upon which the determination of the fiscal 1994 compensation of Mr. Woodhouse, the Chief Executive Officer of the Company, was based were the same as those discussed below with respect to all executive officers named in the Summary Compensation Table. BASE SALARIES The Company has established base salaries of the executive officers of the Company in the range of compensation payable to executive officers of United States industrial corporations without reference to specific Company performance criteria. This range of compensation is generally reexamined biannually through a survey of compensation practices 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 graphs on pages 12 and 13 due to the differing size, management responsibilities and organizational structures 4 7 of those corporations relative to the Company. The most recent survey conducted for the use of the Committee and Company management (the "Survey") was performed by an independent compensation consultant in October 1992. Base salaries for all of the executive officers were last reviewed on November 4, 1993, and adjustments were made in compensation which became effective January 1, 1994. At that time, Mr. Woodhouse's base salary was increased approximately 4.3%. It has been the consistent practice of the Company to maintain the chief executive officer's base salary at or below the median of the range of base salaries payable to chief executive officers of the surveyed industrial corporations which have job content for their chief executive officers comparable to that of the Company's. These base salaries along with the incentive compensation described below are intended to provide an appropriate financial reward to its executive officers. ANNUAL INCENTIVE COMPENSATION The Committee provides annual incentive compensation to all executive officers of the Company through the Company's Management Incentive Plan ("MIP"). The MIP was adopted by the Board of Directors and approved by the shareholders in 1974. Although the incentive criteria have been modified from time to time since 1974, the plan itself has remained substantially the same since that time. The MIP is proposed to be amended. See "Proposal to Approve Amended and Restated Management Incentive Plan." The MIP is designed to offer significant opportunities for compensation which is directly tied to Company performance. In addition, the MIP is designed to foster significant equity ownership in the Company by the executive officers and all other participants in the MIP. The MIP is available not only to Mr. Woodhouse and the other executive officers, but to approximately 100 others who are members of the Company's corporate management or are managing officers of the Company's operating subsidiaries and divisions. Compensation decisions under the MIP are made with respect to all executive officers as a group, and as a result, the same compensation criteria are utilized with respect to all executives. For executive officers, incentive bonuses under the MIP are calculated in two parts. The first part depends on the overall performance of the Company and is based upon the interplay between the percentage increase in earnings per share and the return on shareholders' equity. The MIP utilizes a matrix based on these two factors to determine a percentage number which is applied to 70% of the participant's base salary. With respect to the determination of whether or not there has been an increase in earnings per share for a fiscal year during which the federal income tax rate has changed, such determination is made as if federal income tax rates had not changed during such fiscal year. The percentage determined by the matrix in fiscal 1994 was 70%, resulting in an award of 49% of base salary to each executive officer participating in this portion of the MIP, including Mr. Woodhouse, who was awarded $294,000. The second portion of the annual incentive bonus for executive officers under the MIP is dependent upon the number of Sysco operating companies which achieve a target return on capital. For the first ten operating companies achieving this goal, the participant earns 9% of the participant's base salary. In order for this portion of the incentive bonus to be paid, the operating companies achieving the goals, in the aggregate, must employ at least 50% of the total capital of all of the Company's operating companies. For each additional operating company achieving this goal, the participant earns 1 1/2% of the participant's base salary. In fiscal 1994, forty-one (41) Sysco operating companies met this goal, resulting in an award of 55.5% of base salary to each executive officer participating in this portion of the MIP, including Mr. Woodhouse, who was awarded $333,000. In order to encourage significant equity ownership in the Company by its executive officers and the management of its operating companies, the MIP provides that participants may elect to receive up to 40% of their annual incentive bonus in the form of Sysco Common Stock, based on a per share price equal to the closing price on the New York Stock Exchange of Sysco Common Stock on the last day of the fiscal year for which the MIP bonus is calculated. If the participant makes such election, the participant is awarded one additional share for each two shares received in accordance with the foregoing calculation. Although such stock is owned by the participant who receives dividends on the shares, for the first two years following the date of issue certain restrictions apply to the shares. In addition, participants who elect to receive Common 5 8 Stock are also entitled to receive an additional cash bonus ("Supplemental Bonus") equal to the product of (i) the value of such matching shares received by the participant (which is equal to the closing price of such shares on the last trading day of the fiscal year) and (ii) the effective tax rate applicable to the Company as described in the "Income Taxes" footnote to financial statements contained in the Company's Annual Report to Stockholders. In fiscal 1994, Mr. Woodhouse elected to receive 40% of his bonus in Sysco Common Stock. The stock portion of the bonus awarded Mr. Woodhouse under the MIP consisted of 16,180 shares valued at $376,185; he also received a Supplemental Bonus of $51,414. Finally, MIP participants are entitled to defer under the Company's Deferred Compensation Plan up to 40% of their annual incentive bonus (without considering any election to receive a portion of the bonus in stock). For deferrals of up to 20% of the annual incentive bonus, the Plan provides for the Company to make a payment equal to 50% of the amount deferred. This matching payment vests upon the earliest to occur of (i) the tenth anniversary of the date the matching payment is made, (ii) the participant's reaching age sixty, (iii) the death or permanent disability of the participant, or (iv) a change in control of the Company. In fiscal 1994, Mr. Woodhouse deferred 30% of his MIP bonus. As determined by the Committee, based upon the foregoing criteria, over half of fiscal 1994 aggregate compensation (other than options, which are discussed under "1991 Employee Stock Option Plan" in this Report below) for the executive officers named in the Summary Compensation Table, including Mr. Woodhouse, was in the form of bonuses and therefore directly dependent upon Company performance. BENEFITS Executives also participate in the Company's regular employee benefit programs, which include a pension program, a retirement and savings plan, group medical and dental coverage, group life insurance and other group benefit plans. In addition, executives are provided with a supplemental retirement plan which is designed, generally, to provide annual payments equal to 50% of the participant's final average annual compensation (i.e., the average compensation over the five consecutive calendar years out of the ten calendar years preceding retirement that provide the highest average annual compensation), less all Company and other retirement plan benefits and Social Security payments available to the participant upon retirement. Further details with respect to the Company's qualified pension plan are provided on pages 10 to 12, below. All decisions with respect to such benefits are made on a group basis; therefore, no individual decisions were made with respect to Mr. Woodhouse and the other executives named in the Summary Compensation Table. 1991 EMPLOYEE STOCK OPTION PLAN In fiscal 1994, the Company granted options to purchase shares of Company Common Stock to 616 key employees, including the Company's executive officers, pursuant to its 1991 Employee Stock Option Plan (the "Plan"). Under the Plan, the Company is permitted to issue stock options which are qualified as incentive stock options under the Internal Revenue Code of 1986, as amended (the "Code"), options which are not so qualified and stock appreciation rights. To date, the Company has issued only stock options under the Plan and has no current plans to issue stock appreciation rights. All fiscal 1994 grants were made in September 1993. No options which have an exercise price less than the fair market value of the Company's Common Stock may be granted. Prior to January 1, 1994, the Plan was administered by the Stock Option/SAR Committee of the Board of Directors (the "Option Committee"). As of January 1, 1994, the duties of the Option Committee were assumed by the Committee. In general, it was the practice of the Option Committee to consider issuing options under the Plan only when participants in the Management Incentive Plan are entitled to receive an annual incentive bonus thereunder. In other words, option grants generally were considered only in years when the Company achieves certain earnings per share and return on shareholders' equity targets. See "Annual Incentive Compensation" above. It is the current intention of the Committee to continue this practice, although it is not required to do so by the terms of the Plan. If the threshold earnings level for the grant of options is met, the Committee will determine whether or not to grant options to purchase Common Stock to the Chief Executive Officer and the other executive officers 6 9 of the Company, along with certain managing officers of the Company's significant operating subsidiaries and divisions. In addition, the Committee, with the advice of Company senior management based upon input from the managing officers of the respective operating companies, will determine whether or not to grant option shares to those operating companies which have met their own individual earnings requirements for option grants. Finally, the Committee, with the advice of Company senior management, determines several other levels of option grants which will be made available to corporate management employees of the Company who have made significant contributions to the Company over the prior fiscal year. Although certain Company performance goals must be met before options are issued to any Plan participant, it has been the consistent practice of the Option Committee to impose additional Company performance goals before participants may exercise their options. Therefore, all stock options contain vesting requirements which, in the case of corporate employees, are based upon increases in Company earnings and return on shareholders' equity. These vesting requirements must be met in the first five fiscal years after the options are granted. In effect, therefore, there are two different sets of performance goals, one for the grant of the option and one for the exercise of the option. The Committee currently anticipates continuing this practice. The options granted under the Plan expire ten years after the date of grant, although the options must vest within the five-year vesting period or they will expire at the end of such five-year period. During fiscal 1994, Mr. Woodhouse received one (1) grant of 3,700 options at an exercise price of $28.875 per share. These options contain vesting requirements which are identical to those discussed above. REVIEW OF POTENTIAL EFFECT OF SECTION 162(M) Section 162(m) of the Code ("Section 162(m)") generally sets a limit of $1 million on the amount of compensation (other than certain types of compensation, including "performance-related" compensation that complies with the requirements of Section 162(m)) that the Company can deduct for federal income tax purposes in any given year with respect to the compensation of each of the executive officers named in the Summary Compensation Table in the proxy statement with respect to such year for taxable years beginning on or after January 1, 1994. The Committee and the Board have determined, after reviewing the effect of Section 162(m), that their policy will be to structure the performance-based compensation arrangements for such named executive officers, to the extent feasible and taking into account all relevant considerations, so as to satisfy Section 162(m)'s conditions for deductibility. The proposal submitted to the stockholders for approval of the Amended and Restated Management Incentive Plan is intended to facilitate the Company's ability to qualify such compensation for the performance-based compensation exemption from the general limitation imposed by Section 162(m) on the Company's ability to deduct compensation paid to such named executive officers. See "Proposal to Approve Amended and Restated Management Incentive Plan" below. COMPENSATION AND STOCK OPTION COMMITTEE: Thomas B. Walker, Jr., Chairman John W. Anderson Colin G. Campbell Frank A. Godchaux III Jonathan Golden Donald J. Keller Richard G. Merrill Phyllis S. Sewell 7 10 The following tables set forth information with respect to the Chief Executive Officer and the four most highly compensated executive officers of the Company and its subsidiaries employed at the end of fiscal 1994 as to whom the total annual salary and bonus for the fiscal year ended July 2, 1994, exceeded $100,000: SUMMARY COMPENSATION TABLE
LONG-TERM COMPENSATION ANNUAL COMPENSATION AWARDS(5) ---------------------------------------- ------------------- (E) (G) (I) OTHER (F) SECURITIES ALL ANNUAL RESTRICTED UNDERLYING OTHER (C) (D) COMPEN- STOCK OPTIONS COMPEN- (A) (B) SALARY BONUS SATION AWARDS /SARS SATION NAME AND PRINCIPAL POSITION YEAR ($) ($)(1)(2) ($)(3) ($)(4) (#)(4) ($)(6) - - - ----------------------------------------- ---- -------- -------- -------- -------- ----- -------- John F. Woodhouse........................ 1994 $587,500 $427,629 -- $376,185 3,700 $ 97,349 Chairman of the Board of Directors 1993 562,500 403,664 -- 403,628 3,960 70,008 and Chief Executive Officer 1992 537,500 292,057 292,039 4,494 51,564 Bill M. Lindig........................... 1994 $512,500 $374,163 -- $329,174 3,700 $ 3,299 President and Chief Operating 1993 487,500 351,013 -- 350,980 3,960 2,733 Officer and Director 1992 462,500 252,231 252,216 4,494 44,927 Charles H. Cotros........................ 1994 $402,500 $299,340 -- $263,330 3,700 $ 47,178 Executive Vice President and 1993 367,500 270,277 -- 270,259 3,960 47,778 President, Foodservice Operations and 1992 341,500 185,855 -- 185,843 4,494 33,864 Director James A. Schlindwein..................... 1994 $377,500 $274,399 -- $241,382 3,700 $ 43,338 Executive Vice President, 1993 360,000 259,753 -- 259,720 3,960 46,023 Procurement and Director 1992 341,500 185,855 -- 185,843 4,494 33,864 Gregory K. Marshall...................... 1994 $245,000 $178,195 $118,934 $156,728 3,700 $209,220 Senior Vice President, 1993 213,442 101,531 -- 101,505 3,960 2,183 Multi-Unit Sales 1992 195,000 121,087 -- 121,070 4,494 22,194
- - - --------------- (1) Includes amounts deferred pursuant to the Company's Executive Deferred Compensation Plan. (2) Does not include that portion of a participant's bonus which the participant elected to receive in the form of restricted Common Stock of the Company. See column (f). (3) Does not include perquisites and other personal benefits, if any, the aggregate of which in the case of each named individual does not exceed the lesser of $50,000 or 10% of such individual's annual salary and bonus as reported. The $118,934 paid to Mr. Marshall in fiscal 1994 represents reimbursement for a portion of the tax liability resulting from the amount paid to Mr. Marshall described in Note (6) below. (4) The amount presented is determined by multiplying the number of shares earned by the closing price of the Company's Common Stock on the New York Stock Exchange on the date as of which the shares were earned, without taking into consideration the following restrictions on the shares. The shares are not transferable by the recipient for two years following receipt thereof and are subject to certain repurchase rights on the part of the Company in the event of termination of employment other than pursuant to normal retirement or disability. The recipient receives dividends on the shares during the restricted two-year period. During fiscal 1994, the number of restricted shares received by the named individuals was as follows: Mr. Woodhouse -- 16,180 shares; Mr. Lindig -- 14,158 shares; Mr. Cotros -- 11,326 shares; Mr. Schlindwein -- 10,382 shares; and Mr. Marshall -- 6,741 shares. At the end of fiscal 1994, the aggregate number and dollar amount (computed as described above) of restricted shares held by the named individuals were as follows: Mr. Woodhouse -- 24,376 shares at $577,999; Mr. Lindig -- 21,285 shares at $504,664; Mr. Cotros -- 16,814 shares at $398,460; Mr. Schlindwein -- 15,656 shares at $371,143; and Mr. Marshall -- 8,802 shares at $207,451. (5) Column (h), Long Term Incentive Plan Payouts, is not included in the table since no compensation required to be reported thereunder was paid to the named individuals during the periods covered by the (Footnotes continued on following page) 8 11 table nor does the Company have any compensation plans which provide for the payment of such compensation. (6) With respect to Mr. Marshall, the amount shown includes payments made by the Company to Mr. Marshall of $182,905 to reimburse him for the loss on and cost of the sale of his home in Denver, Colorado upon his relocation to Houston, Texas and $23,196 in moving costs paid by the Company in connection with the relocation. In addition to the foregoing, the amounts shown include the Company match equal to 50% of the amount each individual elected to defer under the Company's Executive Deferred Compensation Plan and the amount the Company paid for term life insurance coverage for each individual as follows:
1994 1993 1992 ---------------------------- ---------------------------- ---------------------------- DEFERRED TERM DEFERRED TERM DEFERRED TERM TOTAL MATCH INSURANCE TOTAL MATCH INSURANCE TOTAL MATCH INSURANCE ------- ------- ------ ------- ------- ------ ------- ------- ------ John F. Woodhouse............. $97,349 $94,050 $3,299 $70,008 $67,275 $2,733 $51,564 $48,675 $2,889 Bill M. Lindig................ 3,299 None 3,299 2,773 None 2,733 44,927 42,038 2,889 Charles H. Cotros............. 47,178 43,830 3,288 47,778 45,045 2,733 33,864 30,975 2,889 James A. Schlindwein.......... 43,338 40,233 3,105 46,023 43,290 2,733 33,864 30,975 2,889 Gregory K. Marshall........... 3,119 None 3,119 2,183 None 2,183 22,194 20,180 2,014
The following table provides, as to the individuals named in the Summary Compensation Table, information regarding the grants of stock options during the last fiscal year. The Company did not grant any stock appreciation rights during the last fiscal year. OPTION/SAR GRANTS IN LAST FISCAL YEAR
GRANT DATE INDIVIDUAL GRANTS VALUE - - - ------------------------------------------------------------------------------------ ----- (A) (B) (C) (D) (E) (F) PERCENTAGE OF TOTAL NUMBER OF OPTIONS/SARS SECURITIES GRANTED TO GRANT UNDERLYING EMPLOYEES EXERCISE DATE OPTIONS/SARS IN OR BASE PRESENT GRANTED FISCAL PRICE EXPIRATION VALUE NAME (#)(1) 1994 ($/SHARE) DATE ($)(2) - - - ---------------------------- ----- ---- ------- ---------- ------- John F. Woodhouse........... 3,700 .58% $28.875 9/3/2003 $48,951 Bill M. Lindig.............. 3,700 .58% 28.875 9/3/2003 48,951 Charles H. Cotros........... 3,700 .58% 28.875 9/3/2003 48,951 James A. Schlindwein........ 3,700 .58% 28.875 9/3/2003 48,951 Gregory K. Marshall......... 3,700 .58% 28.875 9/3/2003 48,951
- - - --------------- (1) The options do not vest and become exercisable unless the Company attains certain levels of increases in pre-tax earnings and return on shareholders' equity. If these increases are not attained within five years of the date of grant, the options expire. (2) The hypothetical grant value for the options was determined using a modified Black-Scholes pricing model. In applying the model, the Company assumed a 12-month volatility of 26.74%, a 7.16% risk-free rate of return, a dividend yield at the date of grant of 1.4%, and a 10-year option term. The Company did not assume any option exercises or risk of forfeiture during the 10-year term. If used, such assumptions could have reduced the reported grant date value. The actual value, if any, an executive may realize upon exercise of options will depend on the excess of the stock price over the exercise price on the date the option is exercised. Consequently, there is no assurance that the value realized will be at or near the value estimated by the modified Black-Scholes model. 9 12 The following table provides information with respect to aggregate option exercises in the last fiscal year and fiscal year-end option values for the executive officers named in the Summary Compensation Table. AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION/SAR VALUES
(A) (B) (C) (D) (E) NUMBER OF UNEXERCISED VALUE OF SECURITIES UNEXERCISED SHARES UNDERLYING IN-THE-MONEY ACQUIRED OPTIONS/SARS AT OPTIONS/SARS AT ON VALUE JULY 2, 1994(#) JULY 2, 1994 ($)(2) EXERCISE REALIZED -------------------- ------------------- NAME (#) ($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE - - - ------------------------ ------ -------- ------- ------ ------- ------ John F. Woodhouse....... 11,170 $133,056 None 4,138 None $1,498 Bill M. Lindig.......... 13,960 205,703 4,316 4,138 $ 2,996 1,498 Charles H. Cotros....... 7,360 122,820 10,916 4,138 55,384 1,498 James A. Schlindwein.... 26,826 448,057 2,850 4,138 1,530 1,498 Gregory K. Marshall..... None None 2,996 4,138 2,996 1,498
- - - --------------- (1) Computed based on the difference between the closing price of the Common Stock on the day prior to exercise and the exercise price. (2) Computed based on the difference between the closing price on July 2, 1994 and the exercise price. DEFINED BENEFIT PENSION PLAN The Company has a defined benefit retirement plan which was amended and restated effective July 2, 1989 ("Retirement Plan"). In addition to the amendment and restatement, all the defined benefit retirement plans for nonunion employees provided by adopting employers of Sysco Corporation were merged into the Retirement Plan. The resulting plan provides for a monthly benefit payable for five years certain and life thereafter, depending upon when an employee became a participant, as set forth below: 1. Employees Who Became Participants in the Retirement Plan Prior to July 2, 1989. Employees who were participants in the Retirement Plan on July 1, 1989, will receive an annual benefit equal to (a) the normal retirement benefit which accrued prior to July 2, 1989, plus (b) an amount equal to 1 1/2% of the participant's aggregate career compensation earned on and after July 2, 1989. 2. Employees Who Became Participants in the Retirement Plan on or after July 2, 1989. Employees who became participants in the Retirement Plan on or after July 2, 1989, will receive an annual benefit equal to 1 1/2% of the participant's aggregate career compensation earned on and after July 2, 1989. In the event of a participant's death prior to his normal retirement age (the first day of the month after age 65) or the commencement of a benefit, if earlier, and if he has five or more years of credited service, the total death benefit is an amount equal to the value of the pension accrued by the deceased participant prior to his death or earlier termination of employment. The surviving spouse receives a portion of that benefit equal to a 50% survivor annuity unless the survivor annuity is waived by the participant with the spouse's consent prior to the participant's death. The remaining death benefit is payable to the participant's beneficiary for ten years certain and life thereafter. 10 13 The following table sets forth the estimated annual retirement benefit payable under the Retirement Plan to persons in the specified compensation and years-of-service classifications, assuming the benefit formula described in clause (b) of paragraph 1 above applies, and therefore that all years of credited service are performed on or after July 2, 1989: PENSION PLAN TABLE(1)
CAREER AVERAGE COMPENSATION EARNED ON YEARS OF CREDITED SERVICE AND AFTER ------------------------------------------------ JULY 2, 1989(2) 10 20 30 40 -------------------------------------- ------- ------- -------- -------- $ 50,000............................ $ 7,500 $15,000 $ 22,500 $ 30,000 100,000............................ 15,000 30,000 45,000 60,000 150,000............................ 22,500 45,000 67,500 90,000 200,000............................ 30,000 60,000 90,000 120,000(3) 250,000............................ 37,500 75,000 112,500 150,000(3)
- - - --------------- (1) Assumes that the annual benefit is payable for five years certain and life thereafter and that Retirement Plan and Social Security retirement age is 65. (2) Compensation for benefit calculation purposes is limited by law as follows as to the plan years commencing in the following calendar years: (a) 1993 to $235,840, (b) 1992 to $228,860, (d) 1991 to $222,220, (d) 1990 to $209,200. The maximum reverted to $150,000 for the plan year commencing in calendar year 1994. Therefore, the table does not extend past $250,000 as the compensation for plan purposes may not exceed the limits specified above. (3) Current law and regulations limit retirement benefits in 1994 to $115,641 if they are payable for five years certain and life thereafter (assuming Retirement Plan and Social Security retirement age of 65). This limitation applies to total retirement benefits under the Retirement Plan as determined by adding benefits accrued with respect to periods of employment with the Company both before and after July 1, 1989. The Pension Plan Table does not reflect this limitation. Messrs. Cotros, Lindig, Schlindwein and Woodhouse, four of the five executive officers named in the Summary Compensation Table, were each employed by the Company prior to July 1, 1989, and are covered by the portion of the Retirement Plan described at paragraph 1 on the previous page. Mr. Marshall, the fifth executive officer named in the Summary Compensation Table, became a participant in the Plan on July 2, 1989 and his retirement benefit is calculated under paragraph 2 on page 10. Each of Messrs. Cotros, Lindig, Schlindwein, Woodhouse and Marshall has five years of credited service after July 1, 1989, and has, respectively, 13 years, 5 years, 9 years, 20 years and 5 years (vesting only) of credited service prior to July 2, 1989. All amounts shown in the Summary Compensation Table, other than deferred bonus, term life insurance payments and the Company match under the Executive Deferred Compensation Plan, are utilized to compute career average compensation. Messrs. Cotros, Lindig, Schlindwein and Woodhouse have received compensation in excess of the maximums permitted for retirement benefit calculations described in footnote (2) to the Pension Plan Table above. As a result, the career average compensation for each of these four named executive officers from July 2, 1989 through July 2, 1994 was $214,224. Since Mr. Marshall received less compensation than the maximum permitted for one year, his career average compensation for this period was $208,384. Messrs. Cotros, Lindig, Schlindwein and Woodhouse are eligible for benefits calculated under both of the benefit formulas described in clauses (a) and (b) of paragraph 1 on page 10. Assuming an annual benefit payable for five years certain and life thereafter and that the individual in question has reached normal Retirement Plan and Social Security retirement age of 65, each of the named executive officers has accrued the maximum benefit permitted under the Retirement Plan for credited service after July 1, 1989, which is $16,067, and has the following benefit calculated for credited service on and before July 1, 1989: 11 14 Mr. Cotros -- $57,629; Mr. Lindig -- $48,047; Mr. Schlindwein -- $57,629; and Mr. Woodhouse -- $152,367. As mentioned above, Mr. Marshall's benefit is calculated under paragraph 2 on page 10 which results in an accrued benefit of $15,629 for credited service on or after July 2, 1989. However, as noted in footnote 3 to the Pension Plan Table, and given the above assumptions, under current law and regulations the maximum retirement benefit that is payable in 1994 if the individual were qualified for retirement and did retire would be $115,641. Therefore, if Mr. Woodhouse retired in 1994 his benefit would be limited to this overall maximum. PERFORMANCE GRAPHS PERFORMANCE GRAPHS The following two performance graphs compare the performance of the Company's Common Stock to the S&P 500 Index and to a peer group for the Company's last five and ten fiscal years, respectively. The peer group is comprised of Fleming Companies, Inc., Nash Finch Company, Richfood Holdings, Inc., Rykoff-Sexton, Inc., Super Food Services, Inc. and Super Value Stores, Inc. These distributors of grocery or foodservice products were selected since they comprise a broad group of publicly held corporations with food distribution operations similar in some respects to the Company's operations. Rykoff-Sexton, Inc. is the only other publicly held foodservice distributor, although, unlike the Company, it also manufactures certain food products. Each other member of the peer group is in the business of distributing grocery products to retail supermarkets. The Company considers this to be a more representative peer group than the "S&P Foods -- Wholesaler" index maintained by Standard & Poor's Corporation and consisting of the Company, Fleming Companies, Inc. and Super Value Stores, Inc. The returns of each member of the peer group are weighted according to each member's stock market capitalization as of the beginning of each period measured. The graphs assume that the value of the investment in each of the Company's Common Stock, the index and the peer group was $100 at each of July 1, 1989 and June 30, 1984, and that all dividends were reinvested. Performance data for the Company is provided as of the last trading day of each of the Company's last five and ten fiscal years, respectively. Performance data for the S&P 500 Index and for each member of the peer group is provided for the last trading day closest to June 30 of each year. COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
MEASUREMENT PERIOD S&P 500 (FISCAL YEAR COVERED) SYSCO INDEX PEER GROUP 1989 100.00 100.00 100.00 1990 145.58 116.49 99.03 1991 175.45 125.10 103.02 1992 205.90 141.88 93.08 1993 214.55 161.22 115.88 1994 204.97 162.84 108.40
12 15 COMPARISON OF TEN-YEAR CUMULATIVE TOTAL RETURN
MEASUREMENT PERIOD S&P 500 (FISCAL YEAR COVERED) SYSCO INDEX PEER GROUP 1984 100.00 100.00 100.00 1985 121.88 130.96 145.25 1986 191.50 177.87 191.31 1987 237.82 222.63 204.38 1988 201.65 207.27 181.09 1989 326.72 249.86 210.44 1990 475.84 291.06 208.40 1991 573.24 312.60 216.80 1992 672.70 354.52 195.88 1993 700.95 402.84 243.87 1994 669.69 406.91 228.12
13 16 OTHER INFORMATION The Company's Nominating Committee, consisting of Jonathan Golden (Chairman), Colin G. Campbell, Donald J. Keller, Richard G. Merrill and Thomas B. Walker, Jr., held three (3) meetings during fiscal year 1994. The function of the Nominating Committee is to propose directors and officers for election or reelection. The Nominating Committee will consider nominees recommended in writing by stockholders. The Company's Compensation Committee, consisting of Thomas B. Walker, Jr. (Chairman), Jonathan Golden, Donald J. Keller and Richard G. Merrill, held two (2) meetings, during fiscal year 1994. Prior to January 1, 1994, the function of the Compensation Committee was to consider for recommendation to the Board of Directors of the Company the annual compensation of directors and officers of the Company, to administer the Management Incentive Plan and to provide guidance in the area of employee benefits, including retirement plans and group insurance. The Company's Stock Option/SAR Committee, consisting of John W. Anderson (Chairman), Colin G. Campbell, Frank A. Godchaux III, Richard G. Merrill and Thomas B. Walker, Jr. held one (1) meeting during fiscal year 1994. The Stock Option/SAR Committee administered the Company's 1991 Employee Stock Option Plan prior to January 1, 1994. The Compensation and Stock Option Committee, consisting of Thomas B. Walker, Jr. (Chairman), Jonathan Golden, Donald J. Keller, Richard G. Merrill, John W. Anderson, Colin G. Campbell, Frank A. Godchaux III and Phyllis S. Sewell, held two (2) meetings during fiscal year 1994. The Compensation and Stock Option Committee succeeded to all functions of the Compensation Committee and the Stock Option/SAR Committee as of January 1, 1994. The Board of Directors held five (5) meetings during fiscal year 1994 and all directors of the Company attended more than 75% of the aggregate of (1) the total number of meetings of the Board of Directors and (2) the total number of meetings held by all committees of the Board on which he or she served during fiscal year 1994. Section 16(a) of the Securities Exchange Act of 1934 requires the Company's executive officers and directors, and persons who beneficially own more than ten percent of the Company's stock, to file initial reports of ownership and reports of changes in ownership with the Securities and Exchange Commission (the "SEC") and the New York Stock Exchange. Executive officers, directors and greater than ten percent beneficial owners are required by SEC regulations to furnish the Company with copies of all Section 16(a) forms they file. Based solely on a review of the copies of such forms furnished to the Company or written representations from the Company's executive officers and directors, the Company believes that with respect to fiscal year 1994 all Section 16(a) filing requirements applicable to its executive officers, directors and greater than ten percent beneficial owners were met. Subsequent to the end of fiscal 1994, Mr. Golden filed one report late on Form 4 which was required to have been filed with respect to fiscal 1993. This report pertained to a change in the beneficial ownership of shares transferred from an estate of which Mr. Golden was an executor to a trust, created under such estate, of which he is a trustee. COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION Messrs. Anderson, Campbell, Godchaux, Golden, Keller, Merrill, and Walker, and Mrs. Sewell were the only members of the Company's Board of Directors to serve on the Company's Compensation, Stock Option/SAR or Compensation and Stock Option Committees during fiscal 1994 and were not, during fiscal year 1994 or prior thereto, officers or employees of the Company or any subsidiary thereof. Mr. Walker is a limited partner of The Goldman Sachs Group, L.P., an affiliate of Goldman, Sachs & Co. Goldman, Sachs & Co. is an investment banking firm which performed management services in connection with the Company's commercial paper program and brokerage services in connection with the Company's stock repurchase program. Mr. Golden is the sole stockholder of Jonathan Golden, P.C., a partner in the law firm of Arnall Golden & Gregory, Atlanta, Georgia, counsel to the Company. The Company believes that fees paid to such firm were fair and reasonable in view of the level and extent of services rendered. Mr. Godchaux is Chairman and the owner, with his wife, of 14% of the outstanding capital stock of Riviana Foods Inc., a food products company which had sales to the Company of approximately $858,000 during fiscal 1994. The Company 14 17 believes that the terms of such transactions were fair and no less favorable to the Company than those available from other suppliers. PROPOSAL TO APPROVE AMENDED AND RESTATED MANAGEMENT INCENTIVE PLAN As noted in the Report of Compensation and Stock Option Committee under "Annual Incentive Compensation" above, the Company has had a Management Incentive Plan in effect since 1974 (the "Prior MIP"). On September 2, 1994, however, the Board of Directors adopted, subject to stockholder approval, an Amended and Restated Management Incentive Plan ("Restated MIP"). One of the primary purposes for adopting the Restated MIP was to ensure that, with respect to any given year, any compensation in excess of $1 million payable to each of the executive officers listed in the Summary Compensation Table in the proxy statement with respect to such year will remain deductible for income tax purposes. See "Review of Potential Effect of Section 162(m)" in the Report of the Compensation and Stock Option Committee. Set forth below are a brief description of the material differences between the Restated MIP and the Prior MIP and a summary of certain material provisions of the Restated MIP. Except as noted below, the Restated MIP is materially unchanged from the Prior MIP. If the shareholders do not approve the Restated MIP, no compensation will be paid pursuant thereto. MATERIAL DIFFERENCES BETWEEN THE AMENDED AND RESTATED MANAGEMENT INCENTIVE PLAN AND THE COMPANY'S PRIOR MANAGEMENT INCENTIVE PLAN. As discussed in the Report of Compensation and Stock Option Committee on Executive Compensation, "Review of Potential Effect of Section 162(m)," above, Section 162(m) of the Code sets a limit of $1 million on the amount of compensation that the Company can deduct for federal income tax purposes for a given year with respect to the compensation of each of the executive officers listed in the Summary Compensation Table in the proxy statement with respect to such year for taxable years beginning on or after January 1, 1994; provided, however, that certain types of "performance-based" compensation may be deducted regardless of such limit if the material terms under which such compensation is paid, including the performance goals related thereto, are approved by the Company's stockholders and the Company complies with certain other provisions of Section 162(m). SECTION 162(M) AMENDMENTS Subject to stockholder approval, the Prior MIP has been amended as follows in order to comply with Section 162(m) and the regulations promulgated pursuant thereto: Composition of Administering Committee The committee which administers the Restated MIP (the "Committee") is required to be composed of persons who are both "disinterested" within the meaning of Rule 16b-3 promulgated pursuant to the Securities Exchange Act of 1934, as amended, and "outside directors" for purposes of Section 162(m), as defined in the regulations thereunder. The Prior Plan was administered by the Company's Compensation Committee, members of which were required only to be "disinterested" pursuant to Rule 16b-3. It is currently anticipated that the Restated MIP will be administered by the Company's Compensation and Stock Option Committee or a subcommittee thereof. Classes of Participants The Restated MIP provides for three classes of participants, to be designated by the Committee prior to each fiscal year: corporate participants selected from officers of the Company elected by the Board of Directors and employed by the Company or a subsidiary or division thereof ("Corporate Participants"), certain officers of a division or subsidiary of the Company ("Subsidiary Participants") and "covered employees" of the Company within the meaning of such term as contained in Section 162(m) and the 15 18 regulations thereunder ("Senior Executive Participants"). If a participant qualifies as both a Senior Executive Participant and a Corporate or Subsidiary Participant during any fiscal year, he or she shall be considered to be a Senior Executive Participant and not a Corporate or a Subsidiary Participant with respect to such fiscal year. There are 21 Corporate Participants and 76 Subsidiary Participants with respect to fiscal 1995. Of these individuals, the chief executive officer and the four most highly compensated executive officers of the Company other than the chief executive officer will automatically be designated as Senior Executive Participants at the end of the fiscal year pursuant to the provisions of the Restated MIP. The Prior MIP provided for only Corporate and Subsidiary Participants (and contained a provision for an additional class of designated participants which was never utilized). Those provisions of the Restated MIP which apply specifically to Senior Executive Participants were not contained in the Prior MIP and are described at "Summary of Certain Material Provisions of Amended and Restated Management Incentive Plan, Senior Executive Participants" below. Delegation of Committee's Duties The Prior MIP provided that in certain circumstances the Committee could delegate a number of its duties to the Chairman of the Board or the President of the Company. The Restated MIP has eliminated the Committee's ability to delegate its authority with respect to Senior Executive Participants since any such delegation would violate the Section 162(m) "outside director" requirement. Committee Certification The Restated MIP provides that no payments may be made thereunder with respect to Senior Executive Participants prior to the Committee's certification that the relevant performance goals have been satisfied. This certification is required by Section 162(m). Amendments and Termination The Prior MIP provided that it could be amended and/or terminated at any time by the Compensation Committee of the Company. The Restated MIP may be amended and/or terminated only by the Board of Directors of the Company. In addition, any amendment to the performance goals contained in the Restated MIP that is "material" within the meaning of Section 162(m) or any regulations promulgated pursuant thereto must be approved by the stockholders of the Company prior to the payment to any Senior Executive Participant of any amounts pursuant to the terms of such amendment. ADDITIONAL AMENDMENTS In addition to amendments made in order to comply with Section 162(m) and the regulations promulgated pursuant thereto, the Prior MIP has also been amended, subject to stockholder approval, as follows: Additional Bonus The Restated MIP provides for an "Additional Bonus" which is potentially available only to Subsidiary Participants. This bonus is discussed further in connection with the "Summary of Certain Material Provisions of the Amended and Restated Management Incentive Plan" below. The Prior MIP did not explicitly provide for the payment of such bonus. Ninety Day Designation Requirement Deleted The Restated MIP provides that the Committee shall designate participants prior to the commencement of each fiscal year or as soon as practicable thereafter. The Prior MIP required such designation to be made by the Company's Compensation Committee at least ninety (90) days prior to the commencement of the fiscal year except in certain circumstances. 16 19 SUMMARY OF CERTAIN MATERIAL PROVISIONS OF AMENDED AND RESTATED MANAGEMENT INCENTIVE PLAN Corporate Participants Compensation to be paid to Corporate Participants in the Restated MIP is determined in accordance with the performance criteria described in the "Report of Compensation and Stock Option Committee on Executive Compensation -- Annual Incentive Compensation" above. Subsidiary Participants Incentive bonuses under the Restated MIP for Subsidiary Participants are calculated in up to four parts. The first part depends upon the results of operations of the subsidiary or division employing such participant, and is based upon the interplay between the percentage increase in pre-tax earnings and return on capital ("Operations Bonus"). The Restated MIP utilizes a matrix based on these two factors to determine a percentage number which is applied to 70% of the participant's base salary. The second portion of the annual incentive bonus for Subsidiary Participants is based upon the interplay, for the Company as a whole, between the percentage increase in earnings per share and the return on shareholders' equity. The Restated MIP utilizes a matrix based on these two factors to determine a percentage number which is applied to 20% of the Subsidiary Participant's base salary. Subsidiary Participants may also elect to receive up to 40% of their annual incentive bonus in the form of Company Common Stock, pursuant to the same conditions discussed with respect to Corporate Participants under the heading "Report of Compensation and Stock Option Committee on Executive Compensation -- Annual Incentive Compensation" above. If this election is made, Subsidiary Participants are eligible to receive the Supplemental Bonus discussed in the "Report of Compensation and Stock Option Committee on Executive Compensation -- Annual Incentive Compensation" above. Subsidiary Participants may also receive an additional bonus (the "Additional Bonus") to be awarded in the sole discretion of the Committee administering the Restated MIP. The Additional Bonus is based, at the discretion of the Committee, upon (i) annual sales increases over the prior year's sales in excess of 15%, (ii) the development of management personnel made available to other operations of the Company, (iii) the supervision of another subsidiary or division of the Company in addition to the subsidiary or division which employs the participant and to which he or she is primarily responsible, and (iv) such other criteria as the Committee may develop in its sole discretion. Unless otherwise determined by the Committee in its sole discretion, only Subsidiary Participants whose operation achieved a 20% or greater pretax return on capital for the fiscal year preceding the fiscal year for which the bonus is being determined will be entitled to a bonus determined in the manner described above. For any Subsidiary Participant whose operation did not achieve a 20% or greater pretax return on capital for the prior fiscal year, the Committee may establish a special bonus formula for, or it may decline to award a bonus to, such Subsidiary Participant for the current fiscal year. Finally, Subsidiary Participants are entitled to defer up to 40% of their annual incentive bonus under the Company's Deferred Compensation Plan (without considering any election to receive a portion of the bonus in stock). The vesting, matching and other conditions applicable thereto are identical to those described with respect to Corporate Participants under the heading "Report of Compensation and Stock Option Committee on Executive Compensation -- Annual Incentive Compensation" above. Senior Executive Participants Senior Executive Participants are compensated pursuant to the Restated MIP in accordance with the criteria described above utilized in connection with Corporate Participants and Subsidiary Participants, as applicable; provided, however, that no Senior Executive Participant may in any event receive an aggregate bonus under the Restated MIP, determined by aggregating the value of all cash and securities received, which is in excess of one percent (1%) of the Company's earnings before income taxes, as disclosed in the "Consolidated Results of Operations" section of the Company's Annual Report to the Securities and 17 20 Exchange Commission on Form 10-K for the applicable fiscal year. In addition, Senior Executive Participants who would otherwise be Subsidiary Participants are ineligible to receive Additional Bonuses. AMENDED AND RESTATED PLAN BENEFITS It is impossible to determine the benefits which will be paid to any individuals with respect to fiscal 1995 pursuant to the Restated MIP should it be approved by the Company's stockholders. The following table sets forth the dollar value of the bonuses paid to each of the following with respect to fiscal 1994 pursuant to the Prior MIP. The amounts which would have been paid with respect to fiscal 1994 pursuant to the Restated MIP if it had been in effect are identical to the amounts set forth below:
NAME AND POSITION DOLLAR VALUE($) ------------------------------------------------------ --------------- John F. Woodhouse $ 803,814 Chairman of the Board of Directors and Chief Executive Officer Bill M. Lindig $ 703,337 President and Chief Operating Officer and Director Charles H. Cotros $ 562,670 Executive Vice President and President, Foodservice Operations and Director James A. Schlindwein $ 515,781 Executive Vice President Procurement and Director Gregory K. Marshall $ 334,923 Senior Vice President Multi-Unit Sales Executive Group $ 3,538,458 Non-Executive Director Group $ 192,492 Non-Executive Officer $ 1,651,508 Employee Group
THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF APPROVAL OF THE AMENDED AND RESTATED MANAGEMENT INCENTIVE PLAN. VOTING PROCEDURES AND VOTE REQUIRED The Board of Directors of the Company will select one or more Inspectors of Election, who shall determine the number of shares of voting stock outstanding, the voting power of each, the number of shares of stock represented at the Annual Meeting, the existence of a quorum (which shall consist of thirty-five percent (35%) of the shares entitled to vote), and the validity and effect of proxies. The Inspectors of Election shall receive votes, ballots or consents, hear and determine any challenges and questions arising in connection with the right to vote, tabulate all votes cast for and against (and abstentions in respect of) each proposal and determine the result of such vote. 18 21 In accordance with the Delaware General Corporation Law, the election of the nominees named herein as directors will require a plurality of the votes cast by the shares of Company Common Stock entitled to vote in the election provided that a quorum is present at the Annual Meeting. Abstentions and broker non-votes will not be relevant to the outcome. The proposal for approval of the Amended and Restated Management Incentive Plan will require the affirmative vote of a majority of the shares of Common Stock present in person or by proxy and entitled to vote on the proposal. Abstentions will have the effect of "negative" votes with respect to this proposal, while broker non-votes will have no effect on the outcome of the proposal. RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS Arthur Andersen LLP served as the independent certified public accountants providing auditing, financial and tax services to the Company for fiscal year 1994 and will provide such services during the current fiscal year 1995. The Company expects that representatives of Arthur Andersen LLP will be present at the Annual Meeting with the opportunity to make a statement if they desire to do so and that they will be available to respond to appropriate questions. The Company has an Audit Committee of the Board of Directors which is composed of Richard G. Merrill (Chairman), Colin G. Campbell, Frank A. Godchaux III, Frank H. Richardson, Phyllis S. Sewell and Thomas B. Walker, Jr. The Audit Committee held three (3) meetings during fiscal year 1994. The Audit Committee reviews and reports to the Company's Board of Directors with respect to various auditing and accounting matters, including recommendations as to the selection of the Company's independent public accountants, the scope of the audit procedure, the nature of the services to be performed for the Company, the fees to be paid to the Company's independent public accountants, the performance of the Company's independent public accountants and the accounting practices of the Company. STOCKHOLDER PROPOSALS Appropriate proposals of stockholders intended to be presented at the Company's 1995 Annual Meeting of Stockholders must be received by the Company by June 2, 1995 for inclusion in its Proxy Statement and form of proxy relating to that meeting. If the date of the next Annual Meeting is advanced by more than 30 calendar days or delayed by more than 90 calendar days from the date of the Annual Meeting to which the Proxy Statement relates, the Company shall, in a timely manner, inform its stockholders of the change and the date by which proposals of stockholders must be received. OTHER MATTERS TO COME BEFORE THE MEETING Management does not know of any other matters to come before the Annual Meeting. However, if any other matters properly come before the Annual Meeting, it is the intention of the persons designated as proxies to vote in accordance with their best judgment on such matters. UPON THE WRITTEN REQUEST OF ANY RECORD OR BENEFICIAL OWNER OF COMMON STOCK OF THE COMPANY WHOSE PROXY WAS SOLICITED IN CONNECTION WITH THE 1994 ANNUAL MEETING OF STOCKHOLDERS, THE COMPANY WILL FURNISH SUCH OWNER, WITHOUT CHARGE, A COPY OF ITS ANNUAL REPORT ON FORM 10-K FOR ITS FISCAL YEAR ENDED JULY 2, 1994. REQUEST FOR A COPY OF SUCH ANNUAL REPORT ON FORM 10-K SHOULD BE ADDRESSED TO MRS. LA DEE G. RIKER, VICE PRESIDENT AND SECRETARY, SYSCO CORPORATION, 1390 ENCLAVE PARKWAY, HOUSTON, TEXAS 77077-2099. IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. STOCKHOLDERS WHO DO NOT EXPECT TO ATTEND THE MEETING IN PERSON ARE URGED TO SIGN, DATE AND RETURN THE PROXY IN THE ENCLOSED ENVELOPE TO WHICH NO POSTAGE NEED BE AFFIXED IF MAILED IN THE UNITED STATES. 19 22 PROXY SYSCO CORPORATION PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF SYSCO CORPORATION FOR THE ANNUAL MEETING OF STOCKHOLDERS NOVEMBER 4, 1994, 10:00 A.M. The undersigned hereby constitutes and appoints John F. Baugh and Herbert Irving, and each of them jointly and severally, proxies, with full power of substitution to vote all shares of Common Stock which the undersigned is entitled to vote at the Annual Meeting of Stockholders of Sysco Corporation (the ""Company'') to be held on November 4, 1994, at 10:00 A.M., in the Conference Center of the Sysco Corporate Headquarters located at 1390 Enclave Parkway, Houston, Texas, or any adjournment thereof. The undersigned scknowledges the receipt of Notice of the aforesaid Annual Meeting and Proxy Statement, each dated September 30, 1994, 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 SEE REVERSE SIDE 23 /X/ PLEASE MARK VOTES AS IN THIS EXAMPLE. ALL PROXIES SIGNED AND RETURNED WILL BE VOTED OR NOT VOTED IN ACCORDANCE WITH YOUR INSTRUCTIONS, BUT THOSE WITH NO CHOICE SPECIFIED WILL BE VOTED "FOR" EACH OF THE NOMINEES FOR DIRECTOR NAMED BELOW AND "FOR" APPROVAL OF THE AMENDED AND RESTATED SYSCO CORPORATION MANAGEMENT INCENTIVE PLAN. 1. Election of Directors. NOMINEES: John F. Baugh, Charles H. Cotros, Jonathan Golden, Arthur J. Swenka and Thomas B. Walker, Jr. FOR WITHHELD / / / / / / FOR all nominees except those whose name(s) are written above 2. Approval of the Amended and Restated Sysco Corporation Management Incentive Plan. FOR AGAINST ABSTAIN / / / / / / 3. On all other matters which may properly come before the meeting or any adjournment thereof. NO POSTAGE REQUIRED IF THIS PROXY IS RETURNED IN THE ENCLOSED ENVELOPE AND MAILED IN THE UNITED STATES. Mark here for address change and note at left / / (Signature should conform to name and title stenciled hereon. Where there is more than one owner each should sign. Executors, administrators, trustees, guardians and attorneys should add their titles upon signing). PLEASE SIGN BELOW, DATE AND RETURN PROMPTLY. Signature: _______________________________ Date ____________ Signature: _______________________________ Date ____________ 24 INDEX TO EXHIBITS EXHIBIT NUMBER - - - ------- 99 AMENDED AND RESTATED MANAGEMENT INCENTIVE PLAN FOR SYSCO CORP. EX-99 2 AMENDED MANAGEMENT INCENTIVE PLAN FOR SYSCO CORP 1 SYSCO CORPORATION AMENDED AND RESTATED MANAGEMENT INCENTIVE PLAN Effective As Of July 3, 1994 This Sysco Corporation Amended and Restated Management Incentive Plan (the "Plan") was adopted by unanimous action of the Plan Compensation Committee (as hereinafter defined) of Sysco Corporation (the "Company") on September 1, 1994, and by the Board of Directors of the Company (the "Board of Directors") on September 2, 1994. 1. STATEMENT OF PRINCIPLE The purpose of the Plan is to reward (i) certain key management personnel for outstanding performance in the management of the divisions or subsidiaries of the Company (both a division and subsidiary of the Company are herein referred to as a "Subsidiary") and (ii) certain corporate personnel for managing the operations of the Company as a whole. Except as otherwise provided in Section 8 hereof, the total number of shares of Sysco Common Stock, $1 par value ("Common Stock"), which may be awarded pursuant to this Plan shall not exceed 2,367,118 shares. All references to periods in the Plan are to fiscal periods unless otherwise specifically noted. 2. PLAN COMPENSATION COMMITTEE The Board of Directors has established a committee (the "Plan Compensation Committee") which is charged with structuring, proposing the implementation of, and implementing the terms and conditions of, the Plan. The Plan Compensation Committee shall, at all times, consist of two or more directors of the Company. The Plan Compensation Committee shall have the authority to adopt, alter and repeal such rules, guidelines and practices governing the Plan as it shall, from time to time, deem advisable; to interpret the terms and provisions of the Plan and any award issued under the Plan (and any agreements relating thereto); to otherwise supervise the administration of the Plan; and, except as to the application of this Plan to Senior Executive Participants (as defined in Section 3 below), to delegate such authority provided to it hereunder as it may deem necessary or appropriate to the Chairman of the Board, Chief Executive Officer, President, Chief Operating Officer and any Executive Vice President with authority over food service operations, and any of them individually. All decisions made by the Plan Compensation Committee pursuant to the provisions of the Plan shall be made in the Plan Compensation Committee's sole discretion and shall be final and binding on all persons, including the Company and Participants. Each director while a member of the Plan Compensation Committee shall (i) meet the definition of "disinterested person" contained in Rule 16b-3 promulgated pursuant to Section 16 of the Securities Exchange Act of 1934, as amended, and (ii) - 1 - 2 be an "outside director", within the meaning of Section 162(m) of the Internal Revenue Code of 1986, as amended (the "Code"), any regulations interpreting Section 162(m) of the Code, or any other applicable Internal Revenue Service pronouncements pertaining thereto. 3. PARTICIPANTS The participants in the Plan for a fiscal year shall be designated by the Plan Compensation Committee from the persons who are employed by any Subsidiary ("Subsidiary Participants") or the Company ("Corporate Participants"), in the following capacities (Subsidiary Participants, Corporate Participants, and Senior Executive Participants are referred to collectively as "Participants" or individually as a "Participant"): Subsidiary Participants - Persons who serve as the Chairman of the Board of Directors, Chief Executive Officer, Chief Operating Officer, President, or an Executive Vice President of a Subsidiary, regardless of whether such Participant works for a division or a subsidiary of the Company. Corporate Participants - Persons (i) who serve as Chairman of the Board of Directors, Chief Executive Officer, Chief Operating Officer, President, Executive or Senior Vice President, Vice President, Secretary, Treasurer, Controller, Assistant Secretary, Assistant Treasurer, Assistant Controller, General Counsel or any other officer of the Company elected by the Board of Directors, and (ii) who are also employees of the Company or a Subsidiary. Senior Executive Participants - In addition to the participants described above, persons who are "covered employees" of the Company within the meaning of Code Section 162(m) and proposed Treasury Regulation 1.162-27(c)(2) (or any successor statute or regulating section, or any administrative interpretation thereof) (the "Executive Compensation Provisions") during a fiscal year of the Company shall be participants in the Plan for such fiscal year. If a Participant is both a Senior Executive Participant and a Corporate or a Subsidiary Participant during a fiscal year as a result of the application of the Executive Compensation Provisions, he or she shall be considered a Senior Executive Participant, and not a Corporate or a Subsidiary Participant, during such fiscal year, and shall be subject to any and all restrictions applicable to Senior Executive Participants hereunder during such fiscal year. To the extent possible, the Plan Compensation Committee shall designate Participants in the Plan prior to the commencement of the fiscal year in which such designated Participants will be entitled to a bonus under the Plan, or as soon as practicable during the fiscal year in which a person first becomes eligible to be a Participant. Once designated as a Participant, the Plan Compensation Committee can remove an employee as a Participant with or without cause at any time and the Participant shall not be entitled to any bonus under the Plan for the year in which he or she is removed regardless of when during such year he or she is removed. -2- 3 4. DEFINITIONS (A) For Table A Calculations: (i) Total Capital - for any Subsidiary, the sum of the following components: (a) Stockholders' equity - the average of the amounts outstanding for such Subsidiary at the end of each quarter for which the computation is being made (quarterly average basis). (b) Long-term debt - the average of the long-term portion of debt of such Subsidiary outstanding at the end of each quarter for which the computation is being made (quarterly average basis). (c) Intercompany borrowings - the average of the amount outstanding at the end of each day during the period for which the computation is being made (daily average basis). (d) FASB No. 13 leases - the average of the capitalized value of long-term leases at the end of each quarter during the period for which the computation is being made (quarterly average basis). (e) Imputed plant and equipment - for Subsidiaries which are leasing major capital items, the estimated present value of the cost of such items as of the end of the fiscal year will be included in the determination of Total Capital. (ii) Return on Capital - the Return on Capital for any Subsidiary is expressed as a percentage and is computed by dividing the Subsidiary's pretax earnings by the Subsidiary's Total Capital. (iii) Increase in Pretax Earnings - the Increase in Pretax Earnings is expressed as a percentage increase of the Subsidiary's actual pretax earnings for the current year compared to the greater of (a) the Subsidiary's actual pretax earnings for the prior year, or (b) those earnings which would have been required to have been earned by the Subsidiary in the prior year in order to have obtained a 20% return on such Subsidiary's Total Capital. (B) For Table B Calculations: (i) Return on Stockholders' Equity - expressed as a percentage and computed by dividing the Company's net after-tax earnings for the year by the Company's average stockholders' equity at the end of each quarter during the year. -3- 4 (ii) Increase in Earnings Per Share - expressed as a percentage increase of the net after-tax earnings per share for the year over the prior year's net after-tax earnings per share. (C) Method of Calculating Quarterly Averages: In determining the average amount outstanding of stockholders' equity, long-term debt, and capitalized value of long-term leases under paragraphs 4(A)(i)(a), (b) and (d), above, and the quarterly average stockholders' equity under paragraph 4(B)(i) above, such averages shall be determined by dividing five (5) into the sum of the amounts outstanding of the relevant category at the end of each of the four quarters of the fiscal year plus the amount outstanding of the relevant category at the beginning of the fiscal year. 5. METHOD OF OPERATION The bonus which a Participant can earn is based on the performance of the Company as a whole and either the performance of the Subsidiary which employs such Participant (as to Subsidiary Participants) or of a select group of Subsidiaries (as to Corporate Participants). The bonus is calculated with respect to an entire fiscal year and, if earned, shall be paid in accordance with Section 7 hereof. (A) Subsidiary Participants and certain Senior Executive Participants. With respect to each Subsidiary Participant and each Senior Executive Participant who would be a Subsidiary Participant but for the application of the Executive Compensation Provisions, a portion of the bonus may be earned on the basis of the results of operations of the Subsidiary employing such Participant, and the balance of the bonus on the basis of the results of operations of the Company as a whole, all as shown on Tables A and B attached hereto and made a part hereof. The bonus for such a Participant shall equal the sum of (i) 70% of the Participant's annual base salary in effect at the fiscal year end times the applicable percentage determined from Table A, the "Operations of the Subsidiary" (as adjusted, if applicable, as provided in Section 5(B), plus (ii) 20% of the Participant's annual base salary in effect at the fiscal year end times the applicable percentage determined from Table B, the "Operations of the Company", subject to the further adjustments and additions provided for in the Plan, unless the Plan Compensation Committee shall formulate a different bonus structure as to any Subsidiary Participant. No bonus shall be paid to a Subsidiary Participant or to a Senior Executive Participant who would be a Subsidiary Participant but for the application of the Executive Compensation Provisions based upon the Table B calculation unless he or she is entitled to a bonus based upon the Table A calculation. For Subsidiary Participants and Senior Executive Participants who would be Subsidiary Participants but for the application of the Executive Compensation provisions, the portion of the bonus based upon the results of Operations of the Subsidiary is determined by multiplying the appropriate percentage shown on Table A which coincides for the relevant Subsidiary with the appropriate level of Return on Capital and Increase in Pretax Earnings by -4- 5 70% of the Participant's base salary. Accordingly, such a Participant will not be entitled to any bonus under this Section 5(A) unless the Subsidiary that employs the Participant achieves, as a minimum, an Increase in Pretax Earnings of 4% and a 12% Return on Capital, unless the Plan Compensation Committee formulates a different bonus structure for such Participant. By way of example based upon Table A, if the Subsidiary achieves only these minimum results, the Participant will be entitled to a bonus of 70% of his or her base salary multiplied by a bonus factor of 5%. Subject to the further adjustments and additions provided for in this Plan, the remaining portion of the bonus for Subsidiary Participants and Senior Executive Participants who would be Subsidiary Participants but for the application of the Executive Compensation Provisions is based upon the Operations of the Company. This portion of such a Participant's bonus is calculated by determining the appropriate percentage shown on Table B which coincides with the appropriate Increase in Earnings Per Share and Return on Stockholders' Equity for the Company as a whole, and multiplying that percentage by 20% of the Participant's base salary. A Subsidiary Participant or a Senior Executive Participant who would be a Subsidiary Participant but for the application of the Executive Compensation provisions will receive no bonus as a result of the Table B calculation unless the Company achieves an Increase in Earnings Per Share of at least 10% and achieves a Return on Stockholders' Equity of at least 14%, unless the Plan Compensation Committee formulates a different bonus structure for such Participant. By way of example, if the Company achieves only these minimum results, such a Participant would receive, based upon Table B, a bonus of 20% of his or her base salary multiplied by the bonus factor of 10%, provided that the Participant is entitled to a bonus based upon the Operations of the Subsidiary employing such Participant. Notwithstanding the foregoing, unless otherwise determined by the Plan Compensation Committee in its sole discretion, only Subsidiary Participants whose Subsidiary achieved a 20% or greater Return on Capital for the fiscal year preceding the fiscal year for which the bonus is being determined (the "Prior Fiscal Year"; the fiscal year for which the bonus is being calculated is the "Current Fiscal Year") shall be entitled to a bonus determined from Tables A and B in the manner provided in this paragraph 5(A). For any Subsidiary Participant whose Subsidiary did not achieve a 20% or greater Return on Capital for the Prior Fiscal Year, the Plan Compensation Committee may establish a special bonus formula for, or it may decline to award a bonus to, such Subsidiary Participant for the Current Fiscal Year. (B) Additional Bonus. In addition to the bonus calculated in accordance with Section 5(A) above, a Subsidiary Participant may also be entitled to an additional bonus ("Additional Bonus") if awarded by the Plan Compensation Committee in its sole discretion. The Additional Bonus shall be established by the Plan Compensation Committee, in its sole discretion, at one or more times during such fiscal year or within ninety (90) days following the end of such fiscal year. The Plan Compensation Committee shall determine the Additional Bonus applicable to a particular Subsidiary Participant, if any, based upon (i) annual sales increases of the Subsidiary which employs such Participant over prior year's sales in excess of 15%, (ii) the development of management personnel at the Subsidiary which employs such Participant who are made available -5- 6 for transfer to other Subsidiaries or the corporate headquarters of the Company, (iii) such Participant's supervision of another Subsidiary or Subsidiaries in addition to the Subsidiary which employs them and to which they are primarily responsible, and (iv) such other criteria as the Plan Compensation Committee may develop in its sole discretion. A Senior Executive Participant who would be a Subsidiary Participant but for the application of the Executive Compensation Provisions shall not be entitled to an Additional Bonus. (C) Corporate Participants and certain Senior Executive Participants. With respect to a Corporate Participant or Senior Executive Participant who would be a Corporate Participant but for the application of the Executive Compensation Provisions and subject to the further adjustments and additions provided for in this Plan, a portion of the bonus shall depend upon the results of the Operations of the Company as shown on Table B, and the balance of his or her bonus shall depend on the number of Subsidiaries obtaining a 20% or greater Return on Capital. The portion of such Participant's bonus based upon the Operations of the Company is calculated in the same manner as that portion of a Subsidiary Participant's bonus which is based upon the Operations of the Company except that it is equal to the product of (i) a percentage of such Participant's base salary (the "Salary Percentage") and (ii) the appropriate percentage shown on Table B which coincides with the appropriate Increase in Earnings per Share and Return on Stockholder's Equity for the Company as a whole. The Salary Percentage of a Corporate Participant or Senior Executive Participant who would be a Corporate Participant but for the application of the Executive Compensation Provisions shall be one hundred percent (100%) unless reduced by the Plan Compensation Committee at such time as the Plan Compensation Committee shall determine in its sole discretion. A Corporate Participant or Senior Executive Participant who would be a Corporate Participant but for the application of the Executive Compensation Provisions will not receive any bonus (as a result of the Table B calculation or otherwise) unless the Company achieves an Increase in Earnings Per Share of at least 10% and achieves a Return on Stockholders' Equity of at least 14%. Subject to the further adjustments and additions provided for in this Plan, the remainder of the bonus payable hereunder to a Corporate Participant or a Senior Executive Participant who would be a Corporate Participant but for the application of the Executive Compensation Provisions is calculated by determining the number of Subsidiaries of the Company that have attained at least a 20% or greater Return on Capital. If a minimum of ten Subsidiaries have obtained a 20% or greater Return on Capital, and all Subsidiaries which have obtained a 20% or greater Return on Capital employ at least 50% or more of the aggregate of the Total Capital of all Subsidiaries, then such Participant will be entitled to receive an additional bonus equal to the product of (i) the Participant's Salary Percentage and (ii) 9% of the Participant's base -6- 7 salary for the first ten Subsidiaries which obtain such a Return on Capital and an additional 1-1/2% of the Participant's base salary for each additional Subsidiary which obtains such a Return on Capital. By way of example, if 18 Subsidiaries (which, in the aggregate, employ 51% of the Total Capital of all Subsidiaries) obtain a 20% or greater Return on Capital, a Corporate Participant or Senior Executive Participant who would be a Corporate Participant but for the application of the Executive Compensation Provisions will receive a bonus equal to the product of (i) the Participant's Salary Percentage and (ii) 21% of the Participant's base salary (9% for the performance of the first ten Subsidiaries in the group, and 12% for the performance of the additional eight Subsidiaries in the group). (D) General Rules Regarding Bonus Calculation. In determining whether or not the results of operations of a Subsidiary or the Company for a given fiscal year results in a bonus, generally accepted accounting principles shall be applied on a basis consistent with prior periods, and such determination shall be based on the calculations made by the Company, approved (in the case of Senior Executive Participants) by the Plan Compensation Committee and binding on each Participant. Except as provided in Section 11 as to Senior Executive Participants, there is no limit to the bonus that can be obtained. Although Tables A and B to the Plan have only been calculated to 160% and 142%, respectively, the "grids" shall be deemed to continue to increase in the same ratios as set forth. (E) Tax Law Changes. If the Internal Revenue Code is amended during any year and, as a result of such amendment(s), the effective tax rate applicable to the earnings of the Company (as described in the "Summary of Accounting Policies" section of the Company's annual report to the Securities and Exchange Commission on Form 10-K) changes during a year, the calculation of the net after-tax earnings per share of the Company (which calculations determine the appropriate "grid" set forth in Table B applicable to a Participant) for the year in which such rate change becomes effective (the "Rate Change Year") shall be made as if such rate change had not occurred during the Rate Change Year. In determining the appropriate "grid" applicable to a Participant in the year following the Rate Change Year, the calculation of the net after-tax earnings per share of the Company for such following year shall be made after taking into account such rate change, and shall be compared, for purposes of computing the appropriate Increase in Earnings Per Share for such year, with the net after-tax earnings per share of the Company for the Rate Change Year, computed after taking into account such rate change. 6. NO EMPLOYMENT ARRANGEMENTS IMPLIED Nothing herein shall imply any right of employment for a Participant and if a Participant is terminated, voluntarily or involuntarily, with or without cause, prior to the end of a given fiscal year, such Participant shall not be entitled to any bonus for such fiscal year regardless of whether -7- 8 or not such bonus had been or would have been earned in whole or in part, but any unpaid bonus earned with respect to a prior fiscal year shall not be affected. 7. PAYMENT Within 90 days following the end of each fiscal year, the Company shall determine, and, in the case of Senior Executive Participants, the Plan Compensation Committee shall approve, the amount of any bonus earned by each Participant pursuant to the provisions of Section 5 above. Such bonus shall be payable in cash unless the Participant has given notice to the Plan Compensation Committee within 90 days after the commencement of such fiscal year that such Participant has elected the option provided in Section 7(A) below. The amount of any bonus that a Participant is entitled to receive for a fiscal year shall be determined as of the last day of such fiscal year and each Participant shall be deemed to have constructively received his bonus (including the value of the shares of stock if he or she elects to receive a portion of his or her bonus in stock) as of the last day of such fiscal year notwithstanding the fact that it may be paid or delivered to him or her thereafter. (A) Each Participant shall be entitled to receive, in increments of 5%, up to 40% of his or her bonus in shares of Common Stock (with the exact percent fixed by the Participant) with such shares to be valued at the closing price of the Common Stock on the primary securities exchange on which such stock is traded on the last trading day of such fiscal year. Such election shall be made no later than 90 days after the beginning of the fiscal year in respect of which the bonus is to be calculated and once made shall be irrevocable for such fiscal year. If the Participant elects to receive such shares, the Participant shall receive as additional compensation an additional number of shares of Common Stock equal to 50% of the number of shares received by reason of this election (the "Additional Shares"), plus the Additional Cash Bonus (as defined in Section 7(B) below). For example, if a Participant earns a $10,000 bonus and the Common Stock is selling at $50 per share, and the Participant elects to receive 40% of the bonus in the form of Common Stock in a timely manner, the Participant would receive $6,000 plus 120 shares of Common Stock (80 shares pursuant to his election, plus 40 Additional Shares), plus the Additional Cash Bonus (as defined in Section 7(B) below). (B) If a Participant elects to receive Common Stock in accordance with Section 7(A) above, he or she shall also receive, as an additional bonus pursuant to the Plan, a cash amount equal to the value of the Additional Shares (which shall be the aggregate closing price of the Additional Shares on the last trading day of such fiscal year), multiplied by the effective tax rate applicable to the Company for the fiscal year for which the bonus is calculated, as described in the "Summary of Accounting Policies" section of the Company's annual report to the Securities and Exchange Commission on Form 10-K for such fiscal year (the "Additional Cash Bonus"). 8. RECAPITALIZATION OF COMPANY In the event of a recapitalization of the Company or its merger into or consolidation with another corporation, a Participant shall be entitled to receive such securities which he or she -8- 9 would have been entitled to receive had he or she been a shareholder of the Company holding shares pursuant to this Plan at the time of such recapitalization, merger or consolidation. In the event of a stock split, stock, dividend or combination of shares with respect to the Common Stock of the Company after the determination of the number of shares to which a Participant is entitled but before delivery of such shares to the Participant, then the number of shares that such Participant shall be entitled to receive shall be proportionately adjusted. 9. INVESTMENT REPRESENTATION AND RESTRICTIONS ON THE STOCK AND RIGHT OF REPURCHASE BY THE COMPANY (A) The shares to be issued to a Participant may, at the option of the Company, be unregistered and in such event the Participant shall execute an investment letter in form satisfactory to the Company, which letter shall contain an agreement that the Participant will not sell, transfer, give or otherwise convey any of such shares for a period of two years from the date on which such shares were issued to the Participant, except in the event of the Participant's death or termination of employment due to disability or retirement under normal Company benefit plans, but then only in accordance with the requirements of the Securities Act of 1933, as amended, and the rules and regulations thereunder, and the shares shall bear a legend reflecting the investment representation and the unregistered status of the shares. (B) If the shares to be issued to a Participant are registered pursuant to the registration provisions of the Securities Act of 1933, as amended, then the Participant shall enter into an agreement at the time of issuance of such shares that the Participant will not sell, transfer, give or otherwise convey any of such shares for a period of two years from the date on which such shares were issued to the Participant, except in the event of death or termination of employment due to disability or retirement under the normal Company benefit plans, and such shares shall bear a legend reflecting the terms of such restriction. (C) If a Participant's employment is terminated at any time within the first year following the issuance of shares for any reason, with or without cause, other than his death or termination of employment due to disability or retirement under normal Company benefit plans, then upon demand of the Company made in writing within 30 days from the date of termination, such Participant will sell to the Company all of the stock issued to the Participant within the twelve months preceding the date of termination at a purchase price equal to the lower of the then market price of the stock as hereinafter determined or the price at which the stock was valued for purposes of issuing it pursuant to this Plan. If a Participant's employment is terminated after one year but before two years from the date on which any shares of Common Stock were issued to him pursuant to this Plan, on the demand of the Company made in writing within 30 days from the date of termination, such Participant will sell to the Company, in addition to the shares he or she may be required to sell under the preceding sentence, 50% of the stock issued to the Participant within twenty-four months but more than twelve months preceding the date of termination at a purchase price equal to the lower of the then market price of the stock as hereinafter determined, or the price at which the stock was valued for purposes of issuing it pursuant to this Plan. The market price of the Common Stock shall be deemed to be the closing price of such stock on the -9- 10 primary securities exchange on which such stock is traded on the date of termination; and if such stock did not trade on such date, then on the next day on which it does trade. The shares of Common Stock issued under this Plan shall bear a legend reflecting these restrictions. 10. AMENDMENTS AND TERMINATION This Plan may be amended at any time by the Board of Directors and any such amendment shall be effective as of commencement of the fiscal year during which the Plan is amended, regardless of the date of the amendment, unless otherwise stated by the Board of Directors, provided that if such an amendment affects any material term of a performance goal hereunder, and thus would affect the ability of the Corporation to deduct payments of compensation to Senior Executive Participants because of the provisions of Code Section 162(m), any regulations issued interpreting Code Section 162(m), or any other applicable Internal Revenue Service pronouncements pertaining thereto, such amendment must be approved by the stockholders of the Company after disclosure of the terms of such amendment to the stockholders, prior to the payment of any amounts pursuant to the terms of such amendment to any Senior Executive Participant. This Plan may be terminated at any time by the Board of Directors and termination will be effective as of the commencement of the fiscal year in which such action to terminate the Plan is taken. 11. OVERALL LIMITATION UPON PAYMENTS UNDER PLAN TO SENIOR EXECUTIVE PARTICIPANTS. Notwithstanding any other provision in this Plan to the contrary, in no event shall any Senior Executive Participant be entitled to a bonus amount for any fiscal year (which bonus amount shall include, if applicable, the value of the Additional Shares (as defined in Section 7(A) above, and the Additional Cash Bonus (as defined in Section 7(B) above)) in excess of one percent (1%) of the Company's earnings before income taxes as publicly disclosed in the "Consolidated Results of Operations" section of the Company's annual report to the Securities and Exchange Commission on Form 10-K for such fiscal year. -10- 11 EXHIBIT 1 - TABLE A MANAGEMENT INCENTIVE PLAN OPERATIONS OF THE SUBSIDIARY SUBSIDIARY PARTICIPANT - 70% OF PARTICIPANT'S BASE SALARY MULTIPLIED BY PERCENTAGE DETERMINED FROM TABLE A
PERCENTAGE INCREASE IN PRETAX EARNINGS RETURN ON CAPITAL 4-6 6-8 8-10 10-12 12-14 14-16 16-18 18-20 20-23 23-25 25-28 28-30 30-33 33-35 35-38 38-40 40-43 43-45 45-48 48-50 50-53 - - - ----------------------------------------------------------------------------------------------------------------------------------- 12-16 5 7 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 95 100 16-20 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 95 100 102 105 20-24 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 95 100 102 105 107 110 24-28 30 35 40 45 50 55 60 65 70 75 80 85 90 95 100 102 105 107 110 112 115 28-32 40 45 50 55 60 65 70 75 80 85 90 95 100 102 105 107 110 112 115 117 120 32-36 50 55 60 65 70 75 80 85 90 95 100 102 105 107 110 112 115 117 120 122 125 36-40 60 65 70 75 80 85 90 95 100 102 105 107 110 112 115 117 120 122 125 127 130 40-44 70 75 80 85 90 95 100 102 105 107 110 112 115 117 120 122 125 127 130 132 135 44-48 80 85 90 95 100 102 105 107 110 112 115 117 120 122 125 127 130 132 135 137 140 48-52 90 95 100 102 105 107 110 112 115 117 120 122 125 127 130 132 135 137 140 142 145 52-56 100 102 105 107 110 112 115 117 120 122 125 127 130 132 135 137 140 142 145 147 150 56-60 105 107 110 112 115 117 120 122 125 127 130 132 135 137 140 142 145 147 150 152 155 60-64 110 112 115 117 120 122 125 127 130 132 135 137 140 142 145 147 150 152 155 157 160
12 EXHIBIT 2 - TABLE B MANAGEMENT INCENTIVE PLAN OPERATIONS OF THE COMPANY SUBSIDIARY PARTICIPANT - 20% OF THE PARTICIPANT'S BASE SALARY MULTIPLIED BY PERCENTAGE DETERMINED FROM TABLE B CORPORATE PARTICIPANT - 70% OF PARTICIPANT'S BASE SALARY MULTIPLIED BY PERCENTAGE DETERMINED FROM TABLE B
Return on PERCENTAGE INCREASE IN EARNINGS PER SHARE Stockholders' Equity 10-11 11-12 12-13 13-14 14-15 15-16 16-17 17-18 18-19 19-20 20-21 21-22 22-23 23-24 24-25 25-26 26-27 27-28 28-29 29-30 ---------------------------------------------------------------------------------------------------------------------------- 14% 10 20 30 35 40 45 50 55 60 65 70 75 80 85 90 95 100 102 105 107 15% 30 35 40 45 50 55 60 65 70 75 80 85 90 95 100 102 105 107 110 112 16% 40 45 50 55 60 65 70 75 80 85 90 95 100 102 105 107 110 112 115 117 17% 50 55 60 65 70 75 80 85 90 95 100 102 105 107 110 112 115 117 120 122 18% 60 65 70 75 80 85 90 95 100 102 105 107 110 112 115 117 120 122 125 127 19% 70 75 80 85 90 95 100 102 105 107 110 112 115 117 120 122 125 127 130 132 20% 80 85 90 95 100 102 105 107 110 112 115 117 120 122 125 127 130 132 135 137 21% 90 95 100 102 105 107 110 112 115 117 120 122 125 127 130 132 135 137 140 142
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