SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Report
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): June 14, 2005
SYSCO CORPORATION
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation)
1-06544 74-1648137
(Commission File Number) (IRS Employer Identification No.)
1390 Enclave Parkway, Houston, Texas 77077-2099
(Address of principal executive offices, including zip code)
(281) 584-1390
(Registrant's telephone number, including area code)
--------------------------------
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions:
[_] Written communications pursuant to Rule 425 under the Securities Act (17
CFR 230.425)
[_] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14A-12)
[_] Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
[_] Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
ITEM 1.01. ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT
Separation Agreement and Mutual Release
As further described under Items 1.02 and 5.02 below, and in the press release
filed as an exhibit hereto, the contents of which are incorporated herein by
reference, on June 14, 2005, Mr. Tom Lankford, the President and Chief Operating
Officer of Sysco Corporation ("SYSCO"), and SYSCO entered into a Separation
Agreement and Mutual Release (the "Agreement") under which Mr. Lankford is
retiring from his positions as President and Chief Operating Officer as of July
2, 2005, and from all other officer and director positions with SYSCO and its
affiliates. The Agreement amends his Executive Severance Agreement, which
remains in effect as so amended. By law, Mr. Lankford has the right to revoke
the Agreement within 7 days after signing the Agreement, and the Agreement does
not become binding until that time has elapsed. Set forth below is a description
of the material terms of the Agreement.
Date of Termination. Mr. Lankford has agreed to remain employed by SYSCO and
available to assist its Board of Directors until October 1, 2005, at which time
he will resign from all employment from SYSCO. Until October 1, 2005, Mr.
Lankford will continue to receive his base salary and other benefits at current
levels.
Post-Termination Benefits. The Agreement amends his Executive Severance
Agreement to provide Mr. Lankford with the right to receive the following
termination benefits and payments:
1. Accrued Vacation Time.
On October 1, 2005 (the "Separation Date") Mr. Lankford will receive a
cash lump sum payment, not to exceed $72,115.25, for all of his earned, but
not taken vacation days in 2005 through the Separation Date.
2. Severance.
On the Separation Date, in satisfaction of SYSCO's severance
obligations under the Severance Agreement, Mr. Lankford will receive the
following amounts:
o $1.5 million, which is 24 months of Mr. Lankford's monthly base
salary;
o Two times the greater of (a) Mr. Lankford's average annual bonus
for the 5 fiscal years 2001 to 2005, or (b) Mr. Lankford's
average annual bonus for the 5 fiscal years 2000 to 2004 ;
o an amount equal to 24 months of the monthly cost to Mr. Lankford
for continued coverage under SYSCO's group health plans under
COBRA, not to exceed $30,669; and
o an additional payment of $810,606.
3. 2005 Bonus.
When bonuses, if any, are paid for fiscal year 2005 under SYSCO's 2000
Management Incentive Plan ("MIP"), Mr. Lankford will receive a bonus equal
to the amount earned under the MIP based on Company performance. Mr.
Lankford's existing election to defer receipt 40% of any MIP bonus will be
applied to this bonus payment, and Mr. Lankford will be entitled to receive
a matching contribution into the Executive Deferred Compensation Plan equal
to 10% of the amount of such bonus. Mr. Lankford's existing election to
receive 40% of any MIP bonus in stock will also be applied to this bonus
payment, and Mr. Lankford will receive a matching stock distribution equal
to 50% of the number of shares so elected, plus the additional cash bonus
provided for under the MIP.
2
4. Medical, Dental and Vision Coverage.
Mr. Lankford's regular coverage under SYSCO's medical, dental and
vision plans will end as of October 31, 2005. SYSCO will provide Mr.
Lankford, Mr. Lankford's spouse and eligible dependents continued coverage
through COBRA under its applicable group health plans for a period of 18
months beginning November 1, 2005, subject to Mr. Lankford's election to
participate and payment of the applicable premium. Following the 18-month
period, Mr. Lankford will be eligible for continued coverage for his spouse
and dependents under SYSCO's Early Retiree Healthcare Plan until age 65.
5. Life Insurance and Disability Coverage.
Mr. Lankford's coverage under SYSCO's group life plan will continue
through October 31, 2005. Mr. Lankford may purchase conversion coverage at
his election. Coverage under SYSCO's disability plan will cease as of the
Separation Date.
6. SERP Benefits.
For purposes of the Company's Supplemental Executive Retirement Plan
("SERP"), Mr. Lankford shall be deemed to be age 62 with 25 years of
service and shall be considered fully vested in his SERP benefits. Payment
of benefits shall commence beginning on the date 6 months following the
Separation Date (the "Delayed Starting Date").
7. Executive Deferred Compensation Plan.
For purposes of SYSCO's Executive Deferred Compensation Plan ("EDCP"),
Mr. Lankford will be deemed age 60 and will be considered fully vested in
his entire account balance, including the amount credited to the EDCP as a
matching contribution with respect to Mr. Lankford's fiscal year 2005 MIP
bonus payout. Mr. Lankford's final EDCP balance will be increased by the
contribution payable with respect to his fiscal year 2005 MIP bonus payout
and the associated matching contribution, plus the value of any earnings to
be credited to his account. Following the Separation Date, Mr. Lankford
will be entitled to receive a distribution of his account balance in the
form previously elected, with any installment payments beginning as of the
Delayed Starting Date, to the extent required under Section 409A of the
Internal Revenue Code. In the event other EDCP participants are given the
opportunity to change payout elections consistent with Section 409A,
similar opportunities will be offered to Mr. Lankford.
8. Qualified Savings and Pension Plans.
Mr. Lankford will be entitled to his vested benefits under the SYSCO
Corporation Employees' 401(k) Plan and SYSCO Corporation Retirement Plan in
accordance with the terms of such plans.
9. Stock Options.
Each stock option previously granted to Mr. Lankford by SYSCO and
outstanding on the Separation Date will continue to vest and become
exercisable in accordance with its original terms. Mr. Lankford will not be
deemed to be age 60 for the purpose of vesting any option.
10. Restricted Stock.
Mr. Lankford's termination will be treated as a retirement for
purposes of his restricted shares held under the MIP. Accordingly, all
contractual restrictions under the MIP on Mr. Lankford's shares of
restricted stock held under the MIP will lapse as of the Separation Date.
In addition, all contractual restrictions on any shares credited pursuant
to Mr. Lankford's stock election under the MIP for fiscal year 2005 will
lapse upon the Separation Date.
3
11. Cash Performance Units.
Mr. Lankford's termination will be treated as a "Retirement" for
purposes of the LTICP, and he will be entitled to payment at the end of the
relevant Performance Period based on actual Company performance.
12. Legal Fees.
SYSCO will also reimburse Mr. Lankford for the actual cost incurred in
connection with the preparation and review of the Agreement by Mr.
Lankford's legal advisors, up to a maximum of $20,000.
13. Miscellaneous.
The Company will provide Mr. Lankford with reasonable administrative
support through the Separation Date and will continue to maintain his Company
email account and Blackberry service subscription for a period of two years
following the Separation Date. Mr. Lankford shall be entitled to retain his
Blackberry pda device during such period.
14. American Jobs Creation Act of 2004.
The Company and Executive both agree to use reasonable best efforts to
cause any non-qualified deferred compensation to be paid to Executive by the
Company to comply with the provisions of Section 409A of the Internal Revenue
Code. The parties agree that in the event subsequent guidance requires any
amendments to this Agreement to maintain compliance with Section 409A, the
parties will negotiate in good faith to make such amendments as may be necessary
to maintain such compliance. In addition, the Company agrees that it will use
its reasonable best efforts to maintain the Company deferred compensation plans
and arrangements in compliance with Section 409A (to the extent applicable to
Executive) so as to avoid the imposition of an excise tax on Executive pursuant
to such Section.
In exchange, Mr. Lankford has agreed to certain covenants prohibiting
competition, solicitation of employees and disparagement, Mr. Lankford has
provided SYSCO with customary releases and acknowledgements, and SYSCO has
released Mr. Lankford from any claims it may have related to events which are
currently known to it. Mr. Lankford and SYSCO have also indemnified one another
with respect to claims subject to the releases.
The previous terms of Mr. Lankford's severance agreement with SYSCO are
described under the heading, "Severance Agreements," in SYSCO's proxy statement
for its annual meeting of shareholders held November 12, 2004, which description
is incorporated by reference herein. The severance agreement and Mr. Lankford's
other agreements with SYSCO are also filed as exhibits to SYSCO's Form 10-K for
the fiscal year ended July 3, 2004 and subsequent 10-Qs. There are no material
relationships between Mr. Lankford and SYSCO other than Mr. Lankford's positions
with SYSCO and on the Board, his ownership of Company securities, and as
otherwise disclosed in SYSCO's most recently filed proxy statement and periodic
reports filed with the SEC under the Securities Exchange Act of 1934.
ITEM 1.02. TERMINATION OF A MATERIAL DEFINITIVE AGREEMENT.
The contents of Item 1.01 and Item 5.02 of this Form 8-K are incorporated herein
by reference. There are no early termination penalties incurred by SYSCO on
account of Mr. Lankford's retirement apart from the severance benefits discussed
under Item 1.01 above. Certain agreements between Mr. Lankford and SYSCO,
4
including provisions regarding severance and other post-termination benefits,
restrictive covenants and indemnification provisions, survive Mr. Lankford's
departure from SYSCO.
ITEM 5.02. DEPARTURE OF DIRECTORS OR PRINCIPAL OFFICERS; ELECTION OF DIRECTORS;
APPOINTMENT OF PRINCIPAL OFFICERS
As stated under Items 1.01 and 1.02 above, the contents of which are
incorporated herein by reference, on June 14, 2005, Mr. Lankford and SYSCO
agreed upon the terms of a Separation Agreement and Mutual Release under which
he will retire as President and Chief Operating Officer, and resign from the
Board of Directors. Effective July 2, 2005, Richard Schnieders, the Company's
Chairman and Chief Executive Officer, will assume the position of President, as
well as retaining his current duties.
ITEM 9.01. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements of Businesses Acquired.
Not applicable.
(b) Pro Forma Financial Information.
Not applicable.
(c) Exhibits.
Exhibit Number Description
-------------- -----------
99.1* Press Release dated June 15, 2005
5
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, SYSCO has
duly caused this report to be signed on its behalf by the undersigned hereunto
duly authorized.
SYSCO CORPORATION
Date: June 15, 2005 By: /s/ Michael C. Nichols
-------------------------------------
Name: Michael C. Nichols
Title: Vice President, General Counsel and
Corporate Secretary
6
EXHIBIT INDEX
Exhibit Number Description Page
-------------- ----------- ----
99.1 Press Release dated June 15, 2005 8
7