-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, KA7+IEXXssMXzKKRJVfrfoeTdyl4OONQyI/CYrcWr5jWX/qZIvDow6VYfLWXqFKZ n79QZpenmRZygat6DiGt3g== 0000950129-96-002286.txt : 19961028 0000950129-96-002286.hdr.sgml : 19961028 ACCESSION NUMBER: 0000950129-96-002286 CONFORMED SUBMISSION TYPE: DEF 14A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19961101 FILED AS OF DATE: 19960926 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: 96635259 BUSINESS ADDRESS: STREET 1: 1390 ENCLAVE PKWY CITY: HOUSTON STATE: TX ZIP: 77077 BUSINESS PHONE: 7135841390 DEF 14A 1 SYSCO CORPORATION - PROXY STATEMENT 1 SCHEDULE 14A (RULE 14A-101) INFORMATION REQUIRED IN PROXY STATEMENT SCHEDULE 14A INFORMATION PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934 (AMENDMENT NO. ) Filed by the Registrant /X/ Filed by a Party other than the Registrant / / Check the appropriate box: / / Preliminary Proxy Statement / / Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) /X/ Definitive Proxy Statement / / Definitive Additional Materials / / Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12 SYSCO CORPORATION - - -------------------------------------------------------------------------------- (Name of Registrant as Specified in its Charter) - - -------------------------------------------------------------------------------- (Name of Person(s) Filing Proxy Statement, if other than the Registrant) Payment of Filing Fee (Check the appropriate box): /X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2) or Item 22(a)(2) of Schedule 14A. / / $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 transaction applies: - - -------------------------------------------------------------------------------- (3) Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is calculated and state how it was determined): - - -------------------------------------------------------------------------------- (4) Proposed maximum aggregate value of transaction: - - -------------------------------------------------------------------------------- (5) Total fee paid: - - -------------------------------------------------------------------------------- / / Fee paid previously with preliminary materials. / / Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. (1) Amount Previously Paid: - - -------------------------------------------------------------------------------- (2) Form, Schedule or Registration Statement No.: - - -------------------------------------------------------------------------------- (3) Filing Party: - - -------------------------------------------------------------------------------- (4) Date Filed: - - -------------------------------------------------------------------------------- 2 [SYSCO LOGO] SYSCO CORPORATION 1390 ENCLAVE PARKWAY HOUSTON, TEXAS 77077-2099 NOTICE OF ANNUAL MEETING OF STOCKHOLDERS TO BE HELD NOVEMBER 1, 1996 NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Sysco Corporation, a Delaware corporation (the "Company"), will be held November 1, 1996, at 10:00 a.m., at the Omni Houston Hotel located at Four Riverway, Houston, Texas, for the following purposes: A. To elect five directors for terms of office as shown in the attached Proxy Statement. B. To approve the reservation of 5,000,000 additional shares of Sysco Corporation Common Stock under the Sysco Corporation 1974 Employees' Stock Purchase Plan as set forth in the attached Proxy Statement. C. To transact such other business as may properly come before the meeting or any adjournment thereof. Only Common Stockholders of record on the books of the Company at the close of business on September 6, 1996, 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 27, 1996 Enclosure: A copy of the Annual Report of Sysco Corporation for the fiscal year ended June 29, 1996, containing financial statements, is enclosed herewith. 3 SYSCO CORPORATION 1390 ENCLAVE PARKWAY HOUSTON, TEXAS 77077-2099 1996 ANNUAL MEETING OF STOCKHOLDERS PROXY STATEMENT September 27, 1996 The following information is furnished in connection with the solicitation of proxies for the 1996 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 27, 1996. As of September 6, 1996, the record date, there were outstanding 179,651,013 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 6, 1996, no person or group was known to the Company to own more than five percent of the Company's Common Stock. All directors and executive officers of the Company as a group (22 persons) owned beneficially 2,721,365 shares (constituting approximately 1.51%) of the Company's outstanding Common Stock as of September 6, 1996. 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 6, 1996 will be entitled to notice of and to vote at the meeting or any adjournment thereof. The stock transfer book will not be closed. ELECTION OF DIRECTORS Five directors are to be elected. The Company's bylaws provide for the election of directors for staggered terms, with each director serving a three-year term. The Board of Directors has nominated five directors, John W. Anderson, Judith B. Craven, Bill M. Lindig, Richard G. Merrill and Phyllis S. Sewell for three-year terms of office. The proxyholders intend to vote for the first five persons named below as directors. Donald H. Pegler, Jr., whose term of office as a director expires at the 1996 Annual Meeting, has determined for personal reasons to retire and therefore not stand for reelection. The remaining ten persons named in the table set forth on page 3 will continue in office for the terms which expire at the Annual Meeting of Stockholders in the year opposite their respective names. Management recommends that the five nominees named below be elected to the Board of Directors for the above-referenced terms of office. The five nominees have consented to being named in the Proxy Statement and to serve if elected. Unless otherwise directed in the proxy form, the proxyholders intend to vote in favor of electing Messrs. Anderson, Lindig and Merrill, Mrs. Sewell and Dr. Craven as directors for three-year terms of office and until their respective successors are elected and shall qualify. 4 The following information has been furnished to the Company by the five members of the Board of Directors who are nominees for reelection at the 1996 Annual Meeting: JOHN W. ANDERSON, 64, has served as a director of the Company since 1981. Mr. Anderson is retired, having formerly served as the Vice-President Customer Services of Southwestern Bell Telephone Company. JUDITH B. CRAVEN, 50, has served, since July 1992, as President of the United Way of the Texas Gulf Coast. From February to June 1992, Dr. Craven served as Dean of the School of Allied Sciences of the University of Texas Health Science Center at Houston and from September 1987 to June 1992 as Vice President of Multicultural Affairs for the University of Texas Health Science Center. Dr. Craven is also a director of A.H. Belo Corporation and of the Houston Branch, Federal Reserve Bank of Dallas. BILL M. LINDIG, 59, has served as a director of the Company since 1983. Mr. Lindig is the President and Chief Executive Officer of the Company and is a member of the Executive Committee of the Board of Directors of the Company. He also serves as a director of Burlington Northern Santa Fe Corporation. RICHARD G. MERRILL, 65, has served as a director of the Company since 1983. Currently retired, he formerly served as Executive Vice President of The Prudential Insurance Company of America. Mr. Merrill is also a director of W.R. Berkley Corporation. Mr. Merrill is a member of the Executive Committee of the Board of Directors of the Company. PHYLLIS S. SEWELL, 65, has served as a director of the Company since 1991. Mrs. Sewell, currently retired, formerly served as Senior Vice President of Federated Department Stores, Inc. Mrs. Sewell is also a director of Pitney-Bowes Inc. and Lee Enterprises, Inc. The following information has been furnished to the Company by the ten members of the Board of Directors of the Company whose terms of office extend beyond the 1996 Annual Meeting: JOHN F. BAUGH, 80, has served as a director and officer of the Company since its formation in 1969. Mr. Baugh currently serves as Senior Chairman of the Board of Directors of the Company and is a member of the Executive Committee of the Board of Directors of the Company. COLIN G. CAMPBELL, 60, has served as a director of the Company since 1989. Mr. Campbell is the President of Rockefeller Brothers Fund, a private philanthropic foundation, and also serves as a director of Pitney-Bowes Inc., Hartford Steam Boiler Inspection and Insurance Company and Rockefeller Financial Services, Inc. CHARLES H. COTROS, 59, has served as a director of the Company since 1985. Mr. Cotros serves as Executive Vice President and Chief Operating Officer of the Company and is a member of the Executive Committee of the Board of Directors of the Company. Mr. Cotros also serves as a director of COREStaff, Inc. FRANK A. GODCHAUX III, 69, has served as a director of the Company since 1987. Mr. Godchaux is the Chairman of the Board of Directors of Riviana Foods Inc., a food manufacturer. JONATHAN GOLDEN, 59, has served as a director of the Company since 1984. Mr. Golden is a partner of Arnall Golden & Gregory, counsel to the Company, and is a member of the Executive Committee of the Board of Directors of the Company. DONALD J. KELLER, 64, has served as a director of the Company since 1986. Mr. Keller served as the President, Chief Operating Officer and a director of WestPoint Pepperell, a textile manufacturer, from January 1986 through April 1989 and currently serves as a director of Air Express International, Inc. Mr. Keller is a member of the Executive Committee of the Board of Directors of the Company. FRANK H. RICHARDSON, 63, has served as a director of the Company since 1993. Mr. Richardson served as President and Chief Executive Officer of Shell Oil Company until his retirement in 1993. 2 5 ARTHUR J. SWENKA, 59, has served as a director of the Company since 1994. Mr. Swenka was elected Senior Vice President, Operations of the Company in December 1994. Previously, Mr. Swenka had served since 1984 as President and Chief Executive Officer of Nobel/Sysco Food Services Company. THOMAS B. WALKER, JR., 72, has served as a director of the Company since 1970. Mr. Walker is a limited partner of The Goldman Sachs Group, L.P. and is a director of A. H. Belo Corporation, Riviana Foods Inc. and NCH Corp. Mr. Walker is a member of the Executive Committee of the Board of Directors of the Company. JOHN F. WOODHOUSE, 65, has served as a director and officer of the Company since its formation in 1969. Mr. Woodhouse is Chairman of the Board of Directors of the Company. From 1985 until November 1994, Mr. Woodhouse served as Chairman and Chief Executive Officer of the Company. Mr. Woodhouse also serves as a director of Shell Oil Company. Mr. Woodhouse is Chairman of the Executive Committee of the Board of Directors of the Company. Unless otherwise noted, the persons named above have been engaged in the principal occupations shown for the past five years or longer. Although management does not contemplate the possibility, in the event any nominee is not a candidate or is unable to serve as a director at the time of the election, the proxies will be voted for any nominee who shall be designated by the present Board of Directors to fill such vacancy. The name of each nominee, the term of office for which the nominee is proposed to be elected, the number of shares of Common Stock beneficially owned directly or indirectly by each nominee as of the close of business on September 6, 1996 (according to information received by the Company) and the percentage of outstanding shares of Common Stock such ownership represented at September 6, 1996, are set out below. Similar information is also provided for those directors whose terms expire in future years.
SHARES OF COMMON STOCK BENEFICIALLY CURRENT OWNED AS OF PERCENT OF TERM SEPTEMBER 6, OUTSTANDING NAME EXPIRES 1996(1)(2) SHARES(3) - - --------------------------------------------------------- ------- ------------ ----------- Directors Standing for Election for Three-Year Terms of Office John W. Anderson....................................... 1996 11,565 .01% Judith B. Craven....................................... 1996 None -- Bill M. Lindig......................................... 1996 422,921(4) .24% Richard G. Merrill..................................... 1996 11,618 .01% Phyllis S. Sewell...................................... 1996 5,000 * Directors with Continuing Terms Colin G. Campbell...................................... 1998 1,000 * Frank A. Godchaux III.................................. 1998 27,000(5) .02% Donald J. Keller....................................... 1998 6,200 * Frank H. Richardson.................................... 1998 4,000 * John F. Woodhouse...................................... 1998 684,415 .38% John F. Baugh.......................................... 1997 791,498 .44% Charles H. Cotros...................................... 1997 162,845 .09% Jonathan Golden........................................ 1997 24,000(6) .01% Arthur J. Swenka....................................... 1997 71,233 .04% Thomas B. Walker, Jr................................... 1997 136,000 .08% All Executive Officers and Directors as a Group (22 persons)(7)(8)...................................... 2,721,365 1.51%
- - --------------- * Less than .01% of outstanding shares, after rounding 3 6 (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; and Arthur J. Swenka, 233 shares. Includes 36,990 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, 12,414 shares; Charles H. Cotros, 2,818 shares; Bill M. Lindig, 1,498 shares; and Arthur J. Swenka, 4,051 shares. (3) Rounded to the nearest 1/100 of one percent. (4) Includes 46,300 shares held by trusts of which Mr. Lindig's wife is trustee. (5) Includes 10,000 shares held by Riviana Foods Inc. of which Mr. Godchaux and his wife are affiliates. (6) Includes 20,000 shares held by a trust created under the estate of Sol I. Golden, of which Mr. Golden is a co-trustee. (7) Includes 62,612 shares subject to currently exercisable options held by current executive officers and directors other than as set forth in note (2) above. (8) As of September 6, 1996, Gregory K. Marshall, Senior Vice President, Multi-Unit Sales and an executive named in the Summary Compensation Table on page 10 hereof, beneficially owned 17,326 shares of Common Stock, constituting .01% of the outstanding shares of Company Common Stock. Mr. Marshall's ownership includes currently exercisable options to purchase 5,814 shares. As of September 6, 1996, Thomas E. Lankford, Senior Vice President, Operations and an executive named in the Summary Compensation Table on page 10 hereof, beneficially owned 148,687 shares of Common stock, constituting .08% of the outstanding shares of Company Common Stock. Mr. Lankford's ownership includes currently exercisable options to purchase 17,826 shares. DIRECTOR COMPENSATION Directors whose principal occupation is other than employment with the Company are compensated at the rate of $42,000 per year plus reimbursement of expenses for all services as a director, including committee participation or special assignments. Such directors are given the opportunity to defer their annual compensation until their retirement from the Board or until the occurrence of certain other events. Such deferred compensation accrues interest at a rate equal to a long-term index (the index utilized is the monthly average for the previous calendar year of the highest of the 20-year Treasury Bond, 10-year Treasury Note and Moody's Corporate Bond Yield Indices) plus 1%. The current rate of interest in effect is 8.84% per annum. Messrs. Godchaux, Golden, Merrill and Walker and Mrs. Sewell elected to defer their annual compensation for 1996. The non-employee directors also receive a grant of options to purchase 2,000 shares of Company Common Stock each November under the Company's Non-Employee Directors Stock Option Plan if the earnings per share of the Company for the preceding fiscal year increased by 10% or more over the earnings per share of the Company for the last prior year. In addition to requiring a 10% increase in earnings per share before options are issued to non-employee directors, rigorous performance goals generally must be met before such options will vest and the grantee may exercise such option. Pursuant to this plan, each non-employee director (other than Judith B. Craven who was first elected to the Board in 1996) received a grant of options to purchase 2,000 shares of Company Common Stock in 1994 and in 1995, and no portion of either grant is currently exercisable. No other remuneration was paid for services as a director during the fiscal year ended June 29, 1996. 4 7 PROPOSAL TO INCREASE THE NUMBER OF SHARES RESERVED FOR ISSUANCE UNDER THE 1974 EMPLOYEES' STOCK PURCHASE PLAN The Company's 1974 Employees' Stock Purchase Plan (the "Stock Purchase Plan") originally provided that 100,000 shares of Company Common Stock be reserved for issuance under the Stock Purchase Plan. This amount has been increased to 12,000,000 shares as a result of the 3-for-2 stock splits by way of stock dividends effected on June 21, 1979 and December 22, 1980, and the 2-for-1 stock splits by way of stock dividends effected on June 25, 1982, March 28, 1986, October 17, 1989 and June 19, 1992, as well as the additional 2,400,000 shares (as adjusted for the March 1986, October 1989 and June 1992 stock splits) and 6,000,000 shares (as adjusted for the October 1989 and June 1992 stock splits) reserved for issuance under the Stock Purchase Plan by action of the Board of Directors and approved by the stockholders of the Company on November 12, 1982 and November 14, 1986, respectively. A copy of the Stock Purchase Plan is attached as Exhibit A hereto. The Board of Directors believes that because only 583,588 shares so reserved were available for issuance under the Stock Purchase Plan as of September 6, 1996, it is necessary to increase the number of reserved shares. In light of the historical rate at which shares have been issued under the Stock Purchase Plan, the Board of Directors, on July 12, 1996, approved (subject to stockholder approval) the reservation of 5,000,000 additional shares for issuance under the Stock Purchase Plan and recommends a vote FOR the proposal to reserve 5,000,000 additional shares of Sysco Corporation Common Stock for issuance under the Stock Purchase Plan. The primary provisions of the Stock Purchase Plan are as follows. All full-time employees of the Company and its subsidiaries who have been employed for at least twelve (12) months (including officers of the Company who are not directors) (but excluding directors of the Company and holders of five percent (5%) or more of the Company's outstanding shares) are eligible to participate in the Stock Purchase Plan by means of payroll deductions which accumulate during each calendar quarter and are applied as of the last business day of each calendar quarter toward the purchase of shares of Company Common Stock at a price per share equal to eighty-five percent (85%) of the closing price thereof on the New York Stock Exchange on the last trading day of such quarter. A participant's payroll deductions may not exceed five percent (5%) of his or her total annual compensation for the previous calendar year. The Company receives the discounted purchase price of the shares issued under the Stock Purchase Plan less the cost of commissions and other charges incurred in connection with the operation and administration of the Stock Purchase Plan. As of September 20, 1996, the closing price of Company Common Stock on the New York Stock Exchange was $33.75. No participant may purchase shares in any calendar year under the Stock Purchase Plan having a market value of more than $25,000 on the date of the grant of the right to purchase shares (i.e. the first business day of each calendar quarter). Since purchases of shares pursuant to the Stock Purchase Plan are a function of the decisions of eligible employees as to payroll deductions, it is impossible to determine the dollar value of benefits in the form of discounted purchase price to which any individuals would be entitled during fiscal 1997 pursuant to the Stock Purchase Plan. As directors of the Company are not eligible to participate in the Stock Purchase Plan, no executive officers named in the Summary Compensation Table may participate in the Plan other than Messrs. Marshall and Lankford who each chose not to participate in the Plan during fiscal 1996. During fiscal 1996, 1,007 shares were purchased by executive officers who are not directors as a group and 521,943 shares were purchased by employees (including officers who are not executive officers), in each case at prices ranging from $23.16 to $29.11 per share. The Stock Purchase Plan is intended to qualify as an employee stock purchase plan within the meaning of Section 423 of the Internal Revenue Code of 1986, as amended (the "Code"). Under the Code, an employee who elects to participate in the Stock Purchase Plan will not realize income at the time the purchase rights are granted or when the shares purchased under the Stock Purchase Plan are transferred to him or her. If an employee disposes of any shares of such stock within either two years after the date the right to purchase the shares was granted or one year after the transfer of such shares to such employee, the excess of the fair market 5 8 value of the stock when the option to purchase shares was exercised over the price actually paid for the shares by the employee is reportable by the employee as ordinary income. The employee's cost basis in the disposed shares is increased by the amount of ordinary income which must be recognized upon such disposition so that the excess of the proceeds from the sale or exchange over the employee's recomputed basis in the stock is treated as a capital gain. If the amount realized on the sale or exchange of the shares is less than the price paid for the shares, no ordinary income is recognized and the employee recognizes a capital loss. In the event of a disposition within such two-year or one-year period, the Company will be entitled to a deduction from income equal to the amount the employee is required to include in income as a result of such disposition. When an employee disposes of any shares of stock after satisfying the holding periods discussed in the immediately preceding paragraph, the employee realizes ordinary income to the extent of the lesser of: (i) the excess of the fair market value of the shares at the time of disposition over the amount paid by the employee for the shares or (ii) the excess of the fair market value of the shares at the time the right to purchase was granted over the option price at that time (i.e., 85% of the fair market value of the shares at the time the right to purchase was granted). The amount of ordinary income which the employee is required to recognize is added to the basis of the shares so that the portion of the proceeds in excess of the sum of the cost thereof plus the ordinary income will be treated as a capital gain. In the event of such dispositions, the Company will not be entitled to any deductions from income. THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF THE PROPOSAL TO RESERVE ADDITIONAL SHARES OF SYSCO CORPORATION COMMON STOCK FOR ISSUANCE UNDER THE STOCK PURCHASE PLAN. 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 1996 compensation determinations were made with respect to the executive officers of the Company, including Mr. Lindig, the Chief Executive Officer. All compensation decisions are made by the Company's Compensation and Stock Option Committee (the "Committee"). OVERALL EXECUTIVE COMPENSATION PHILOSOPHY Since it became a publicly held corporation in 1970, the Company has always directly linked the compensation of its executive officers to the performance of the Company. Specifically, the Company has tied the level of its executive compensation to increases in the Company's earnings and return on shareholders' equity. This has been accomplished through the following means: - A "pay-for-performance" orientation based upon Company performance for corporate officers other than senior vice presidents, operations and a combination of operating company and Company performance for corporate senior vice presidents, operations and operating company senior management; - Competitive base salaries; - Potentially significant annual incentive bonuses under the Company's management incentive plan; - The issuance of performance-based stock options; and - Customary benefits, including a supplemental executive retirement plan. The factors and criteria upon which the determination of the fiscal 1996 compensation of Mr. Lindig, the Chief Executive Officer of the Company, was based were the same as those discussed below with respect to all executive officers named in the Summary Compensation Table, except as otherwise described below with respect to Mr. Lankford and the Company's other senior vice presidents, operations. 6 9 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 from time to time 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 14 and 15 due to the differing size, management responsibilities and organizational structures 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 1994. Base salaries for all of the executive officers were last reviewed on November 2, 1995, and adjustments were made in compensation which became effective January 1, 1996. At that time, Mr. Lindig's base salary was increased approximately 5%. It has been the consistent practice of the Company to maintain the chief executive officer's base salary at or below the median of the range of base salaries payable to chief executive officers of the surveyed industrial corporations which have chief executive officers with job content and/or responsibilities comparable to those of the Company's chief executive officer. These base salaries, along with the incentive compensation described below, are intended to provide an appropriate financial reward to the Company's executive officers. ANNUAL INCENTIVE COMPENSATION The Committee provides annual incentive compensation to all executive officers of the Company through the Sysco Corporation 1995 Management Incentive Plan ("MIP"). The MIP is designed to offer opportunities for compensation which are 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. Lindig and the other executive officers, but also to approximately 102 others who are members of the Company's corporate management or are managing officers of each of the Company's operating subsidiaries and divisions. For executive officers, fiscal 1996 incentive bonuses under the MIP were calculated in two parts. The first part was based on the overall performance of the Company and was based upon the interplay between the percentage increase in earnings per share and the return on shareholders' equity. The MIP utilized a matrix based on these two factors to determine 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 1996 was 70%, resulting in an award of 49% of base salary to each executive officer participating in this portion of the MIP, including Mr. Lindig, who was awarded $308,700. The second portion of the fiscal 1996 incentive bonus under the MIP for executive officers was based upon the number of Sysco operating companies which achieve a target return on capital. This portion of the incentive bonus is only paid when the operating companies achieving the goals, in the aggregate, employ at least 50% of the total capital of all of the Company's operating companies, which was the case during fiscal 1996. For the first ten operating companies achieving this goal, the participant earns 9% of the participant's base salary. For each additional operating company achieving this goal, the participant earns 1.5% of the participant's base salary. In fiscal 1996, forty Sysco operating companies met this goal, resulting in an award of 54% of base salary to each executive officer participating in this portion of the MIP, including Mr. Lindig, who was awarded $340,200. For senior vice presidents, operations, a portion of their bonus was based upon the two-part calculation set forth above and a portion was based upon the aggregate financial results of those operating subsidiaries or divisions for which they are responsible, considered as one company. This portion is based upon the interplay between the aggregate percentage increase in pretax earnings of their supervised operations and the aggregate return on capital of their supervised operations. 7 10 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 such election is made, 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 additional restrictions apply to the shares. In addition, participants who elect to receive Common Stock are also entitled to receive an additional cash bonus ("Supplemental Bonus") equal to the product of (i) the value of such matching shares received by the participant (which is equal to the closing price of such shares on the last trading day of the fiscal year), and (ii) the effective tax rate applicable to the Company as described in the "Income Taxes" footnote to financial statements contained in the Company's Annual Report to Stockholders. In fiscal 1996, Mr. Lindig elected to receive 40% of his bonus in Sysco Common Stock. The stock portion of the bonus awarded Mr. Lindig under the MIP consisted of 11,367 shares valued at $389,320; he has also received a Supplemental Bonus of $50,614. 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 MIP 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 1996, Mr. Lindig deferred 20% of his MIP bonus. As determined by the Committee, based upon the foregoing criteria, over half of fiscal 1996 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. Lindig, 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 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 fiscal years out of the ten fiscal 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 12-13. All decisions with respect to such benefits are made on a group basis; therefore, no individual decisions were made with respect to the executives named in the Summary Compensation Table. 1991 STOCK OPTION PLAN During fiscal 1996, the Company granted options to purchase shares of Company Common Stock to 853 key employees, including the Company's executive officers, pursuant to its 1991 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 1996 grants were made in August 1995. The Plan is administered by the Committee. In general, it is the practice of the Committee to consider issuing options under the Plan only when participants in the Management Incentive Plan are entitled to receive an annual incentive bonus thereunder. In other words, option grants generally are considered only in years when the Company achieves certain earnings per share and return on shareholders' equity targets. See 8 11 "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 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 options to certain key employees of those operating companies which have met the 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. In addition to requiring that certain performance goals must be met before options are issued to any Plan participant, it has been the consistent practice of the Committee to impose rigorous performance goals which must be met before the options will vest and participants may exercise their options. In the case of corporate employees, these performance goals are based upon increases in Company pretax earnings and return on shareholders' equity. In effect, therefore, there have been two different sets of performance goals, one for the grant of the option and one for the exercise of the option. The Company currently anticipates continuing this practice. It also has been the practice of the Committee to provide that options granted under the Plan expire ten years after the date of grant, with a five-year initial vesting period. The Committee currently anticipates continuing the practice of providing that options which have not vested during this five-year period will vest at the end of their ten-year life provided the holder remains in the active employment of the Company or one of its operating companies at that time. During fiscal 1996, Mr. Lindig received one (1) grant of 10,000 options at an exercise price of $28.75 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. 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. 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 9 12 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 1996 as to whom the total annual salary and bonus for the fiscal year ended June 29, 1996, exceeded $100,000: SUMMARY COMPENSATION TABLE
LONG-TERM COMPENSATION ANNUAL COMPENSATION AWARD(6) ------------------------------------------- ------------------------- (A) (B) (C) (D) (E) (F) (G) (I) OTHER ANNUAL RESTRICTED COMPEN- STOCK SECURITIES ALL OTHER NAME AND PRINCIPAL (B) (C) BONUS SATION AWARDS UNDERLYING COMPEN- POSITION YEAR SALARY ($) (1)(2)($) (3)($) (5)($) OPTIONS (#) SATION(7)($) - - ---------------------------------- ---- ---------- --------- -------- ---------- ----------- ------------ Bill M. Lindig 1996 $615,000 $439,974 -- $389,320 10,000 $ 69,732 President and Chief 1995 562,500 483,480 -- 426,600 10,000 76,146 Executive Officer and Director 1994 512,500 374,163 -- 329,174 3,700 5,709 John F. Woodhouse 1996 $615,000 $429,511 -- $380,038 10,000 $ 68,187 Chairman and Director 1995 607,500 495,583 -- 437,249 10,000 77,924 1994 587,500 427,629 -- 376,185 3,700 68,409 Charles H. Cotros 1996 $472,500 $338,703 -- $299,722 10,000 $ 54,797 Executive Vice President 1995 440,000 370,691 -- 327,037 10,000 59,556 and Chief Operating Officer 1994 402,500 299,340 -- 263,330 3,700 49,599 and Director Gregory K. Marshall 1996 $270,000 $192,045 -- $169,949 8,000 $ 3,168 Senior Vice President, 1995 257,500 213,565 -- 188,387 8,000 3,153 Multi-Unit Sales 1994 245,000 178,195 $118,934 156,728 3,700 209,493 Thomas E. Lankford(4) 1996 $232,500 $154,199 -- $136,418 8,000 $ 25,503 Senior Vice President, 1995 205,000 191,246 -- 168,740 6,000 30,679 Operations 1994 -- -- -- -- -- --
- - --------------- (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 (7) below. (4) Does not include information for fiscal 1994 since Mr. Lankford was not an executive officer during such fiscal year. (5) The amount presented is determined by multiplying the number of shares earned by the closing price of the Company's Common Stock on the New York Stock Exchange on June 28, 1996, 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 1996, the number of restricted shares received by the named individuals was as follows: Mr. Lindig -- 11,367 shares; Mr. Woodhouse -- 11,096 shares; Mr. Cotros -- 8,751 shares; Mr. Marshall -- 4,962 shares; and Mr. Lankford -- 3,983 shares. At the end of fiscal 1996, the aggregate number and dollar amount (computed using the closing price of the Company's Common Stock on June 28, 1996 as described above) of restricted shares held by the named individuals were as follows: Mr. Lindig -- 25,828 shares at $884,609; Mr. Woodhouse -- 25,918 shares at $887,692; Mr. Cotros -- 19,837 shares at $679,417; Mr. Marshall -- 11,348 shares at $388,669; and Mr. Lankford -- 9,703 shares at $332,328. 10 13 (6) Column (h), Long Term Incentive Plan Payouts, is not included in the table since no compensation required to be reported thereunder was paid to the named individuals during the periods covered by the table nor does the Company have any compensation plans which provide for the payment of such compensation. (7) With respect to Mr. Marshall, the amount for 1994 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, 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:
1996 1995 1994 ------------------------------ ------------------------------ ------------------------------ DEFERRED TERM DEFERRED TERM DEFERRED TERM TOTAL MATCH INSURANCE TOTAL MATCH INSURANCE TOTAL MATCH INSURANCE ------- -------- --------- ------- -------- --------- ------- -------- --------- Bill M. Lindig................ $69,732 $64,890 $ 4,842 $76,146 $71,100 $ 5,046 $ 5,709 None $ 5,709 John F. Woodhouse............. 68,187 63,345 4,842 77,924 72,878 5,046 68,409 $62,700 5,709 Charles H. Cotros............. 54,797 49,955 4,842 59,556 54,510 5,046 49,599 43,890 5,709 Gregory K. Marshall........... 3,168 None 3,168 3,153 None 3,153 3,392 None 3,392 Thomas E. Lankford............ 25,503 22,740 2,763 30,679 28,124 2,555 -- -- --
The following table provides, as to the individuals named in the Summary Compensation Table, information regarding the grants of stock options during the last fiscal year. The Company did not grant any stock appreciation rights during the last fiscal year. OPTION GRANTS IN LAST FISCAL YEAR
NUMBER OF PERCENTAGE OF SECURITIES TOTAL OPTIONS UNDERLYING GRANTED TO EXERCISE OR GRANT DATE OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION PRESENT VALUE NAME GRANTED (#)(1) FISCAL 1996 ($/SHARE) DATE ($)(2) - - ---------------------------------- -------------- ------------- ----------- ---------- ------------- Bill M. Lindig.................... 10,000 .90% $ 28.75 8/31/2005 $ 126,600 John F. Woodhouse................. 10,000 .90% $ 28.75 8/31/2005 $ 126,600 Charles H. Cotros................. 10,000 .90% $ 28.75 8/31/2005 $ 126,600 Gregory K. Marshall............... 8,000 .72% $ 28.75 8/31/2005 $ 101,280 Thomas E. Lankford................ 8,000 .72% $ 28.75 8/31/2005 $ 101,280
- - --------------- (1) The options do not vest and become exercisable unless the Company attains certain levels of increases in pretax earnings and return on shareholders' equity. If these increases are not attained within five years of the date of grant, the options will not vest thereafter until six months prior to the expiration of the ten-year life of the grant, and only if the recipient is still an active employee of the Company at that time. (2) The hypothetical grant value for the options was determined using a modified Black-Scholes pricing model. In applying the model, the Company assumed a 12-month volatility of 27.42%, a 6.27% risk-free rate of return, a dividend yield at the date of grant of 1.6%, 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. 11 14 The following table provides information with respect to aggregate option exercises in the last fiscal year and fiscal year-end option values for the executive officers named in the Summary Compensation Table. The Company did not grant any stock appreciation rights during the last fiscal year. AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES
(A) (B) (C) (D) (E) NUMBER OF SECURITIES VALUE OF UNEXERCISED UNDERLYING UNEXERCISED IN-THE-MONEY SHARES OPTIONS AT OPTIONS AT ACQUIRED ON VALUE JUNE 29, 1996(#) JUNE 29, 1996(R)(2) NAME EXERCISE(#) ($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE - - ------------------------------ ----------- -------- ---------- ------------- ---------- ------------- Bill M. Lindig................ 4,316 $ 24,094 1,498 26,340 $ 17,976 $ 186,148 John F. Woodhouse............. None None None 26,340 0 186,148 Charles H. Cotros............. 2,996 19,849 2,818 26,340 29,856 186,148 Gregory K. Marshall........... None None 5,814 22,340 65,808 157,648 Thomas E. Lankford............ None None 17,826 13,234 215,270 85,633
- - --------------- (1) Computed based on the difference between the closing price of the Common Stock on the day of exercise and the exercise price. (2) Computed based on the difference between the closing price on June 28, 1996 and the exercise price. DEFINED BENEFIT RETIREMENT PLAN The Company has a defined benefit retirement plan which was amended and restated effective July 2, 1989 ("Retirement Plan") and further amended effective January 1, 1996. The Retirement Plan provides for an annual benefit payable monthly for five years certain and life thereafter, equal to (a) the normal retirement benefit which accrued under the prior plan as of July 2, 1989, plus (b) an amount equal to 1 1/2% of the participant's aggregate career compensation earned on and after July 2, 1989. In the event of a participant's death prior to his or her normal retirement age (age 65) or the commencement of a benefit, if earlier, and if the participant has five or more years of credited service, a death benefit is payable in an amount equal to the value of the pension accrued by the deceased participant prior to his or her death or earlier termination of employment. 12 15 Under current law and regulations the maximum annual retirement benefit that may be payable in 1996 under the five years certain and life thereafter form of payment to an individual retiring at age 65 is $118,512. Without regard to this maximum limitation, the named executive officers have accrued the following benefits and credited benefit service as of June 29, 1996: Mr. Cotros -- $78,196 and 20 years; Mr. Lindig -- $68,614 and 12 years; Mr. Lankford -- $30,863 and 15 years; Mr. Marshall -- $20,128 and 7 years; and Mr. Woodhouse -- $172,934 and 27 years. The named executive officers also have anticipated future service to age 65 as follows (except for Mr. Woodhouse who currently is 65): Mr. Cotros -- 6 years; Mr. Lindig -- 6 years; Mr. Lankford -- 16 years; and Mr. Marshall -- 16 years. In addition to benefits accrued to date, each named executive officer will accrue benefits in the future in accordance with the table below: PENSION PLAN TABLE(1)(2)
CAREER AVERAGE COMPENSATION YEARS OF CREDITED SERVICE EARNED ON AND AFTER -------------------------------------------------------------- JUNE 29, 1996(3) 10 15 20 25 30 35 - - ------------------- ------ ------ ------ ------ ------ ------- $50,000..................... 7,500 11,250 15,000 18,750 22,500 26,250 100,000..................... 15,000 22,500 30,000 37,500 45,000 52,500 150,000..................... 22,500 33,750 45,000 56,250 67,500 78,750 200,000..................... 30,000 45,000 60,000 75,000 90,000 105,000
- - --------------- (1) Assumes that the annual benefit is payable for five years certain and life thereafter and that retirement age is 65. Pension plan benefits are not subject to deduction by social security or any other offsets. (2) Current law and regulations limit retirement benefits in 1996 to $118,512 if they are payable for five years certain and life thereafter (assuming Retirement Plan and Social Security retirement age of 65). This limitation applies to total retirement benefits under the Retirement Plan as determined by adding benefits accrued with respect to periods of employment with the Company both before and after June 29, 1996. The Pension Plan Table does not reflect this limitation. (3) Compensation for benefit calculation purposes is limited by law to $150,000 for 1994 and later years subject to future cost-of-living adjustments. Pay limitations are not taken into account in the Pension Plan Table. All amounts shown in the Summary Compensation Table, other than deferred bonus, term life insurance payments and the Company match under the Executive Deferred Compensation Plan, are utilized to compute career average compensation subject to the pay limitations noted in footnote (3). 13 16 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 Supervalu 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 to be in existence throughout the five and ten-year periods, 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 Supervalu Stores, Inc. During the past few years, two foodservice distributors have become publicly owned companies. These are JP Foodservice, Inc. and Performance Food Group Company. They have not been included in the peer group because of the lack of available historical financial data. The returns of each member of the peer group are weighted according to each member's stock market capitalization as of the beginning of each period measured. The graphs assume that the value of the investment in each of the Company's Common Stock, the index and the peer group was $100 at each of June 29, 1991 and June 28, 1986, and that all dividends were reinvested. Performance data for the Company is provided as of the last trading day of each of the Company's last five and ten fiscal years, respectively. Performance data for the S&P 500 Index and for each member of the peer group is provided for the latest fiscal year and the last trading day closest to June 30 of each year. COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
MEASUREMENT PERIOD S&P 500 IN- (FISCAL YEAR COVERED) SYSCO DEX PEER GROUP 1991 100.00 100.00 100.00 1992 117.35 113.41 90.35 1993 122.28 128.87 112.48 1994 116.82 130.68 105.22 1995 150.53 164.75 159.70 1996 177.45 207.59 166.08
14 17 COMPARISON OF TEN-YEAR CUMULATIVE TOTAL RETURN
MEASUREMENT PERIOD S&P 500 IN- (FISCAL YEAR COVERED) SYSCO DEX PEER GROUP 1986 100.00 100.00 100.00 1987 124.19 125.16 106.83 1988 105.30 116.52 94.65 1989 170.61 140.47 109.99 1990 248.37 163.63 108.93 1991 299.34 175.74 113.32 1992 351.27 199.31 102.38 1993 366.03 226.47 127.47 1994 349.70 229.66 119.23 1995 450.59 289.53 124.74 1996 531.16 364.81 123.36
OTHER INFORMATION The Company's Nominating Committee, consisting of Jonathan Golden (Chairman), Colin G. Campbell, Donald J. Keller, Richard G. Merrill, Frank H. Richardson, Phyllis S. Sewell and Thomas B. Walker, Jr., held three (3) meetings during fiscal 1996. The function of the Nominating Committee is to propose directors and officers for election or reelection. The Nominating Committee will consider nominees recommended in writing by stockholders. The Company's Compensation and Stock Option Committee, 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 four (4) meetings during fiscal 1996. The function of the Compensation and Stock Option Committee is to consider for recommendation to the Board of Directors of the Company the annual compensation of directors and officers of the Company, to oversee the administration of the Company's 1995 Management Incentive Plan and 1991 Stock Option Plan, and to provide guidance in the area of employee benefits, including retirement plans and group insurance. The Board of Directors held five (5) meetings during fiscal 1996 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 1996. SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE Section 16(a) of the Securities Exchange Act of 1934 (the "Act") 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 1996, Section 16(a) filing requirements applicable to its executive officers, directors and 15 18 greater than ten percent beneficial owners were met except (i) a Form 4 was filed late covering one February 1995 transaction attributed to James D. Wickus, and (ii) a Form 4 was filed late covering two May 1996 acquisitions under the Company's dividend reinvestment plan attributed to Richard J. Schnieders. 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 and Stock Option Committee during fiscal 1996 and were not, during fiscal 1996 or prior thereto, officers or employees of the Company or any subsidiary thereof. 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. The Company believes that the terms of such transactions were fair and no less favorable to the Company than those available from other suppliers. VOTING PROCEDURES AND VOTE REQUIRED The Board of Directors of the Company will select one or more Inspectors of Election, who shall determine the number of shares of voting stock outstanding, the voting power of each, the number of shares of stock represented at the Annual Meeting, the existence of a quorum (which shall consist of thirty-five percent (35%) of the shares entitled to vote), and the validity and effect of proxies. The Inspectors of Election shall receive votes, ballots or consents, hear and determine any challenges and questions arising in connection with the right to vote, tabulate all votes cast for and against (and abstentions in respect of) each proposal and determine the result of such vote. In accordance with the Delaware General Corporation Law, the election of the nominees named herein as directors will require the affirmative vote of a plurality of the votes cast by the shares of Company Common Stock entitled to vote in the election provided that a quorum is present at the Annual Meeting. Abstentions and broker non-votes will not be relevant to the outcome. The proposal to approve additional shares for issuance under the Sysco Corporation 1974 Employees' Stock Purchase Plan will require the affirmative vote of the majority of 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 public accountants providing auditing, financial and tax services to the Company for fiscal year 1996 and will provide such services during the current fiscal year 1997. 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 1996. 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. 16 19 STOCKHOLDER PROPOSALS Appropriate proposals of stockholders intended to be presented at the Company's 1997 Annual Meeting of Stockholders must be received by the Company by May 30, 1997 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 1996 ANNUAL MEETING OF STOCKHOLDERS, THE COMPANY WILL FURNISH SUCH OWNER, WITHOUT CHARGE, A COPY OF ITS ANNUAL REPORT ON FORM 10-K FOR ITS FISCAL YEAR ENDED JUNE 29, 1996. REQUEST FOR A COPY OF SUCH ANNUAL REPORT ON FORM 10-K SHOULD BE ADDRESSED TO THE INVESTOR RELATIONS DEPARTMENT, SYSCO CORPORATION, 1390 ENCLAVE PARKWAY, HOUSTON, TEXAS 77077-2099. IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. STOCKHOLDERS WHO DO NOT EXPECT TO ATTEND THE MEETING IN PERSON ARE URGED TO SIGN, DATE AND RETURN THE PROXY IN THE ENCLOSED ENVELOPE TO WHICH NO POSTAGE NEED BE AFFIXED IF MAILED IN THE UNITED STATES. 17 20 EXHIBIT A SYSCO CORPORATION 1974 EMPLOYEES' STOCK PURCHASE PLAN 1. Purpose. The purpose of the 1974 Employees' Stock Purchase Plan (hereinafter referred to as the "Plan") is to encourage and enable the employees of SYSCO Corporation and its subsidiaries (SYSCO Corporation hereinafter being referred to as the "Company") to acquire a proprietary interest in the Company through the ownership of its common stock $1.00 par value (the "Common Stock"), in order to assure a closer identification of employees' interests with those of the Company by providing employees with a more direct stake in its welfare, thereby stimulating the employees' efforts on the Company's behalf and strengthening such employees' desire to remain with the Company. The rights granted under the Plan are intended to meet the requirements of Section 423 of the Internal Revenue Code, and the Plan and the rights granted hereunder shall be interpreted consistently with such intent. 2. Amount of Stock Subject to the Plan. The total number of shares of Common Stock which may be sold pursuant to the Plan shall not exceed twelve million shares (12,000,000)** (except as otherwise provided in Paragraph 16). The shares sold under the Plan may be either authorized and unissued shares, or issued shares reacquired by the Company at any time as the Board of Directors of the Company, from time to time, may determine. If rights granted under the Plan terminate or expire for any reason without having been exercised in full, the shares not purchased hereunder pursuant to such rights shall be available again for purposes of the Plan. 3. Administration of the Plan. The Board of Directors shall appoint a committee (hereinafter called the "Committee"), which shall consist of the President of the Company and one or more of the directors. The Board of Directors may from time to time remove members from and add members to the Committee. Subject to the provisions of the Plan, the Committee shall have the authority to construe the Plan, to prescribe, amend and rescind rules and regulations relating to the Plan, and to make all other determinations necessary or advisable for administering the Plan. The Committee may correct any defect, supply any omission or reconcile any inconsistency in the Plan in the manner and to the extent that it shall deem expedient to carry it into effect, and it shall be the sole and final judge of such expediency. The determination of the Committee on the matters referred to in this paragraph, unless revised by the Board of Directors, shall be conclusive. All action by the Committee may be taken at any meeting at which a majority of the members of the Committee are present. The Company's sole contribution toward the Plan will consist of making its Common Stock available for purchase by employees at the discounted purchase price as set forth in Paragraph 7 and bearing all costs of administration in carrying out the Plan. 4. Eligibility. The Committee, from time to time as it shall in its sole discretion determine, will grant rights to purchase Common Stock to those employees of the Company and its subsidiaries: (a) who are at the time of the grant in the employ of the Company or any subsidiary on a full-time basis (i.e., more than twenty (20) hours per week for at least five (5) months per year) and have been so employed for at least twelve (12) consecutive months immediately prior thereto (provided, however, that any person who has been employed on such full-time basis for at least one (1) year immediately prior to the time of the grant by a corporation or other entity acquired [or whose business has been acquired] by the Company or any of its subsidiaries through the acquisition of stock or assets or by merger or - - --------------- ** Increased from 100,000 shares as a result of the 3-for-2 stock splits by way of stock dividends effected on June 21, 1979 and December 22, 1980, the 2-for-1 stock splits by way of stock dividends effected on June 25, 1982, March 28, 1986, October 17, 1989 and June 19, 1992, and the additional 300,000 shares of Common Stock (as adjusted for the March 1986, October 1989 and June 1992 stock splits) and 1,500,000 shares of Common Stock (as adjusted for the October 1989 and June 1992 stock splits) reserved for issuance under the Plan by action of the Board of Directors and approved by the stockholders of the Company on November 12, 1982 and November 14, 1986, respectively. A-1 21 otherwise, and who is an employee of the Company or any of its subsidiaries at the time of the grant shall be deemed to satisfy Paragraph 4(a) hereof); (b) who do not own five percent (5%) or more of the outstanding Common Stock (for purposes of this paragraph, an employee shall be considered as owning Common Stock which is subject to any other options to purchase Common Stock or owned directly or indirectly by or for the employee's brothers, sisters, spouse, ancestors or lineal descendants); and (c) who are not directors. For the purpose of this Plan, the term "employee" shall include all employees and officers of the Company and its subsidiaries. Leaves of absence due to short term disability or the Family and Medical Leave Act of 1993 during which an absent employee is nevertheless treated as an employee for purposes of Section 423 of the Internal Revenue Code, shall not terminate the eligibility of such employee to participate in the Plan if such employee is otherwise entitled to receive rights hereunder to participate in the Plan. The Committee may, in its sole discretion, make such provisions as it deems desirable regarding the effect of other leaves of absence for employees entitled to receive rights hereunder. 5. Allotment. Each employee who is otherwise eligible to participate hereunder shall be granted rights to purchase shares of Common Stock as follows: (a) all eligible employees shall receive the right to purchase quarterly that number of shares (including fractional shares calculated to four (4) decimal places) determined by dividing eighty-five percent (85%) of the per share fair market value of the Common Stock on the last business day of each calendar quarter into the amount accumulated on such date in the employee's stock purchase deduction account provided for under Paragraph 9; (b) if the total of all shares to be granted as computed pursuant to (a) above exceeds the number of shares under this Plan, then all such allotments shall be adjusted proportionately to eliminate such excess; and (c) if there are more shares authorized than are granted pursuant to (a) above or if rights granted terminate for any reason prior to exercise, all such additional shares shall be available for further grants. 6. Time of Granting Rights. Neither anything contained in the Plan or in any resolution adopted or to be adopted by the Board of Directors or the stockholders of the Company, nor any action taken by the Committee, shall constitute the granting of any rights. Rather, the granting of a right to purchase Common Stock shall be made automatically and without further action by the Company on the first business day of each calendar quarter following the effective date of the Plan to each employee eligible on such date. 7. Exercise of Grant and Purchase Price. Each right to purchase Common Stock which is granted and accepted in accordance with Paragraph 8 shall be exercised on the last business day of the calendar quarter during which the grant is made (the "Exercise Date"). The purchase price per share shall be eighty-five percent (85%) of the fair market value on the last business day of each calendar quarter. For purposes of this paragraph, the fair market value on such date shall be deemed to be the closing price on the New York Stock Exchange for the Common Stock, or if there is no trading in the Common Stock on that date, then the closing price of such Common Stock on the last preceding trading date; provided, however, that if such method is inconsistent with any regulations applicable to Section 423 of the Internal Revenue Code adopted by the Commissioner of Internal Revenue, then the fair market value shall be determined by the Committee consistent with such regulations. 8. Elections to Purchase Stock. Subject to the terms and conditions of this Plan, an eligible employee may elect to purchase the shares allotted to such employee by written notice to the Company or any of its subsidiaries, delivered no later than fifteen (15) days prior to the beginning of a calendar quarter for which such employee will be eligible to receive a grant. The notice is to be completed on a form prescribed by the A-2 22 Committee, and delivered to the Company or its subsidiary by which an employee is employed. The notice must be accompanied by an authorization directing equal weekly, bi-weekly, semi-monthly or monthly payroll deductions and retentions on terms and conditions more fully described in Paragraph 9 hereof. Once a written notice and authorization has been received by the Company or its subsidiary by which an employee is employed, such notice and authorization shall be deemed to automatically accept all subsequent grants, until such acceptance is revoked in writing by the employee. 9. Method of Payment. Payment for Common Stock purchased under the Plan shall be on the basis of payroll deductions ("stock purchase deductions") with no right of prepayment. As soon as possible after receipt by the Company of the employee's authorization for stock purchase deductions, but subject to the requirements of Paragraph 8 above, the Company or its subsidiary with whom an employee is employed will commence to make equal weekly, bi-weekly, semi-monthly or monthly stock purchase deductions, depending on the employee's normal pay period. Each deduction shall be in amounts rounded down to the nearest five dollars ($5.00) equal to five percent (5%) or less, as elected by the employee, of such employee's total annual compensation as reflected by Form W-2 (excluding moving expenses and the imputed value of group term life insurance in excess of $50,000), before all deductions for taxes, social security, unemployment withholding, pretax contributions to a Section 401(k) or Section 125 plan under the Internal Revenue Code for the previous calendar year, divided by the number of pay periods in the calendar year in which the grant is made. In the case of a second-year employee whose first Form W-2 reflects less than a full year of employment, stock purchase deductions shall be based on such employee's total annualized compensation calculated upon such employee's first Form W-2. The Committee shall establish for each employee who exercises rights to purchase Common Stock granted hereunder a noninterest-bearing stock purchase deduction account, to which there will be credited the amounts deducted from payroll, as hereinabove described. An employee may change the amount of stock purchase deductions per pay period, in an amount rounded down to the nearest five dollars ($5.00), by delivering written notice to the Company or its subsidiary by which an employee is employed no later than fifteen (15) days prior to the beginning of a calendar quarter for which an employee will be eligible to receive a grant. An employee may, at any time upon written notice delivered to the Company or its subsidiary by which an employee is employed, cancel participation in the Plan. Upon an employee's cancellation, the balance in an employee's stock purchase deduction account shall be used to purchase shares of Common Stock on the next Exercise Date, which shall thereafter be delivered in accordance with the provisions of Paragraph 11. 10. Use of Funds. Funds credited to stock purchase deduction accounts by the Company, pursuant to Paragraph 9 hereof, are to be added to the general funds of the Company and may be used by the Company for any lawful purpose. 11. Delivery of Stock. As soon as practicable after the end of each calendar quarter, shares of Common Stock purchased for each employee pursuant to the Plan with the balance in such employee's stock purchase deduction account on the Exercise Date shall be delivered directly to an individual Plan account established for each such employee with a brokerage firm selected by the Company. Shares of Common Stock deposited in such Plan accounts may be thereafter sold or transferred by each employee or certificates may be issued for such shares. Any such sale, transfer or certificate issuance shall be subject to the policies, procedures and payment of any fees and charges as may be imposed by the brokerage firm where such Plan accounts are located. No employee shall, by reason of the Plan or any rights granted pursuant thereto, or by the fact that there is credited to such employee's stock purchase deduction account sufficient funds to purchase shares which the employee has elected to purchase, have any rights of a stockholder of the Company until shares of Common Stock have been delivered to such employee in the manner provided in this Paragraph 11. 12. Nontransferability. Rights to purchase Common Stock granted under the Plan to any employee are not transferable by such employee otherwise than by will or the laws of descent and distribution, in accordance with Paragraph 14 hereof, and are exercisable during an employee's lifetime only by the employee. In the A-3 23 event of violation of this provision, the Committee shall terminate the employee's right to purchase Common Stock and refund the amount in such employee's Plan account. 13. Termination of Employment. If an employee shall cease to be employed by the Company or by a subsidiary of the Company for any reason other than death, all rights to purchase stock granted to the employee hereunder, except as provided below, shall immediately cease (unless otherwise directed by the Committee in its sole discretion). Any balance remaining in such former employee's stock purchase deduction account shall be used to purchase shares of Common Stock on the next Exercise Date, which shall thereafter be delivered in accordance with the provisions of Paragraph 11. 14. Death of Employee. In the event of the death of an employee while in the employ of the Company or of a subsidiary of the Company, the person or persons to whom the employee's rights hereunder shall pass shall be entitled to receive such number of shares of Common Stock which may be purchased with the balance in the stock purchase deduction account of the deceased employee on the next Exercise Date. 15. Retirement; Long Term Disability. If an employee retires or goes on long term disability while an election to purchase Common Stock is in effect, the employee's payments may be continued in cash until the Exercise Date as provided in the employee's original election to purchase. Thereafter, eligibility in the Plan shall terminate as to such individual. 16. Dilution or Other Adjustments. In the event that there is any change in the Common Stock, through merger, consolidation or reorganization, or in the event of any change in the capital structure of the Company, the Board of Directors of the Company shall make such adjustments as the Board, in its sole discretion, deems equitable to prevent dilution or enlargement of the employee's rights hereunder. If the Company should declare a stock dividend on its Common Stock, or split its Common Stock, the number of shares which are the subject of this Plan (both shares which are not subject to an outstanding grant as well as those that are subject to a grant), shall be adjusted proportionately. 17. Miscellaneous. Notwithstanding any other provision of this Plan, no employee may be included in this Plan if immediately after the employee's election to purchase the employee owns, actually or constructively, or has an option to purchase, as much as five percent (5%) (either in voting power or value) of the Common Stock. Nor may any employee elect to purchase Common Stock in any one calendar year under the Plan having a market value of more than $25,000 on the date of the granting of the employee's right to purchase such shares. 18. Termination and Amendment of the Plan. The Plan may be abandoned or terminated at any time by the Board of Directors of the Company. The Board of Directors or the Committee, at any time prior to the termination of the Plan, may make such changes and additions to the Plan as the Board of Directors or the Committee shall deem advisable; provided, however, that except as provided in Paragraph 16 hereof, the Board of Directors or the Committee may not increase the maximum number of shares as to which rights may be granted under the Plan or change the purchase price, or otherwise amend the Plan so that an option granted pursuant to it would fail to be an option under an "employee stock purchase plan" within the meaning of Section 423 of the Internal Revenue Code. No termination or amendment of the Plan may, without the consent of the holder of a right to purchase then outstanding, terminate or materially and adversely affect the employee's rights under the Plan. 19. Plan Not an Employment Contract. This Plan does not and shall not be deemed to constitute a contract of employment with any employee. Terms of employment and the right of the Company or any of its subsidiaries to terminate the employment of any employee, with or without cause, shall depend entirely upon the terms of employment otherwise existing between any employee and the Company or any of its subsidiaries without regard to this Plan. 20. Indemnification of Committee. In addition to such other rights of indemnification as they may have, the members of the Committee shall be indemnified by the Company against all costs and expenses reasonably incurred by them in connection with any action, suit or proceeding to which they or any of them may be a party by reason of any action taken or failure to act under or in connection with the Plan or any rights granted thereunder and against all amounts paid by them in settlement thereof or paid them in satisfaction of a A-4 24 judgment in any such action, suit or proceeding, except a judgment based upon a finding of bad faith. Upon the institution of any such action, suit or proceeding, the Committee member or members shall notify the Company in writing, giving the Company an opportunity at its own cost to defend the same before such Committee member or members undertake to defend the same on their own behalf. 21. Effectiveness of the Plan. The Plan shall become effective on such date as the Board of Directors shall determine but not prior to (a) the approval of the Company's stockholders, (b) the effectiveness of a registration statement filed pursuant to the Securities Act of 1933, as amended, covering the shares subject to the Plan and (c) a favorable ruling from the Internal Revenue Service that the Plan constitutes an "employee stock purchase plan" within the meaning of Section 423 of the Internal Revenue Code. 22. Section 16 Requirements. Any other provisions of the Plan notwithstanding, to the extent that any employee participating in the Plan is subject to the provisions of Section 16 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the rules and regulations promulgated thereunder, such employee's participation in the Plan shall be subject to, and such employee shall be required to comply with, any and all additional restrictions and/or requirements imposed by the Committee, in its sole discretion, in order to insure that the exemption made available pursuant to Rule 16b-3 promulgated pursuant to the Exchange Act is available with respect to all transactions pursuant to the Plan affected by or on behalf of any such employee. 23. Governing Law. The Plan shall be governed by, and all questions arising hereunder shall be determined in accordance with, the laws of the State of Delaware. A-5 25 SYSCO CORPORATION PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF SYSCO CORPORATION FOR THE ANNUAL MEETING OF STOCKHOLDERS NOVEMBER 1, 1996, 10:00 A.M. The undersigned hereby constitutes and appoints John F. Baugh and Arthur J. Senka, 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 1, 1996, at 10:00 A.M., at the Omni Houston Hotel, Four Riverway, Houston, Texas 77056-1999, or any adjournment thereof. The undersigned acknowledges the receipt of Notice of the aforesaid Annual Meeting and Proxy Statement, each dated September 27, 1996, 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 below. /X/ Please mark votes as in this example. 1. Election of Directors. NOMINEES: John W. Anderson, Judith L. Craven, Bill M. Lindig, Richard G. Merrill and Phyllis S. Sewell. / / FOR / / WITHHELD / / FOR all nominees except those whose name(s) are written [above]. 26 2. Approval of the reservation of 5,000,000 additional shares of Sysco Corporation Common Stock under the Sysco Corporation 1974 Employees' Stock Purchase Plan. / / FOR / / WITHHELD 3. On all other matters which may properly come before the meeting or any adjournment thereof. ALL PROXIES SIGNED AND RETURNED WILL BE VOTED OR NOT VOTED IN ACCORDANCE WITH YOUR INSTRUCTIONS, BUT THOSE WITH NO CHOICE SPECIFIED WILL BE VOTED "FOR" EACH OF THE NOMINEES FOR DIRECTOR NAMED ABOVE AND "FOR" APPROVAL OF THE RESERVATION OF ADDITIONAL SHARES FOR ISSUANCE UNDER THE COMPANY'S STOCK PURCHASE PLAN. Mark Here for Address Change and Note at Left Signature: _________________________________ Date: ______________________________________ Signature: _________________________________ Date: ______________________________________ (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. No Postage Required If This Proxy Is Returned In The Enclosed Envelope And Mailed In The United States. -----END PRIVACY-ENHANCED MESSAGE-----