FIRST AMENDED AND RESTATED
EXECUTIVE SEVERANCE AGREEMENT
THIS FIRST AMENDED
AND RESTATED EXECUTIVE SEVERANCE AGREEMENT (this “
Agreement ”) is entered into as of the 24th day of
November, 2008 by and between Sysco Corporation, a Delaware
corporation (the “ Company ”), and Richard J.
Schnieders (“ Executive ”).
WHEREAS, the
Company and Executive are parties to that certain Executive
Severance Agreement dated as of July 14, 2004, as amended by
that certain First Amendment to the Executive Severance Agreement
dated as of September 3, 2004, (the “ Current
Agreement ”); and
WHEREAS, the
American Jobs Creation Act of 2004 added Section 409A to the
Internal Revenue Code of 1986, as amended (the “ Code
”), and Section 409A of the Code (“ Section
409A ”) imposes certain restrictions on compensation
deferred on and after January 1, 2005; and
WHEREAS, the
Treasury Regulations promulgated under Section 409A which
become effective as of January 1, 2009, require all deferred
compensation arrangements, including certain provisions of the
Current Agreement, to be in documentary compliance with the
requirements of Section 409A on or before December 31,
2008; and
WHEREAS, the
Company and Executive desire to amend and restate the Current
Agreement to comply with Section 409A and to make certain
other changes and clarifications to the Current Agreement;
and
WHEREAS, the
Compensation Committee of the Board has authorized the Company to
enter into this Agreement.
NOW, THEREFORE,
for and in consideration of the premises and the mutual covenants
and agreements herein contained, the Company and Executive hereby
agree as follows:
1.
Definitions : As used in this Agreement, the following terms
shall have the respective meanings set forth below:
(a)
“Board” means the Board of Directors of the
Company.
(b)
“Cause” as determined by the Board in good faith,
means: (1) a material breach by Executive of the duties and
responsibilities of Executive or any written policies or directives
of the Company (other than as a result of incapacity due to
physical or mental illness) which is (i) willful or involves gross
negligence, and (ii) not remedied within fifteen
(15) days after receipt of written notice from the Company
which specifically identifies the manner in which such breach has
occurred; (2) Executive
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commits any
felony or any misdemeanor involving willful misconduct (other than
minor violations such as traffic violations) that causes damage to
the property, business or reputation of the Company, as determined
in good faith by the Board; (3) Executive engages in a
fraudulent or dishonest act, as determined in good faith by the
Board; (4) Executive engages in habitual insobriety or the use
of illegal drugs or substances; or (5) Executive breaches his
fiduciary duties to the Company, as determined in good faith by the
Board. The Company must notify Executive of any event constituting
Cause within ninety (90) days following the Company’s
knowledge of its existence or such event shall not constitute Cause
under this Agreement.
(c)
“Date of Termination” means the effective date on which
Executive’s employment by the Company is terminated as
specified in a prior written notice from the Company to Executive
or from Executive to the Company, as the case may be, pursuant to
Section 11(b) hereof.
(d)
“Good Reason” means (i) (A) for periods prior to
January 1, 2009, the Company’s demotion of the Executive
to a lesser position than the position in which he is serving prior
to such demotion or (B) for periods on or after
January 1, 2009, the Company’s demotion of the Executive
to a materially lesser position than the position in which he is
serving prior to such demotion, (ii) the assignment to Executive of
duties materially inconsistent with his position or material
reduction of the Executive’s duties, responsibilities or
authority, in either case without the Executive’s prior
written consent; (iii) (A) for periods prior to
January 1, 2009, any reduction in Executive’s base
salary without the Executive’s prior consent unless other
executives who are parties to agreements similar to this one also
suffer a comparable reduction in their base salaries, or
(B) for periods on or after January 1, 2009, any material
reduction in Executive’s base salary without the
Executive’s prior consent unless other executives who are
parties to agreements similar to this one also suffer a comparable
reduction in their base salaries; or (iv) unless agreed to by
Executive, the relocation of Executive’s principal place of
business outside of the metropolitan area of Houston, Texas, in
each case not remedied by the Company within thirty (30) days
after receipt by the Company of written notification from Executive
as provided in Section 11(b) which specifically identifies the Good
Reason. The Executive must notify Company of any event that
constitutes Good Reason within ninety (90) days following
Executive’s knowledge of its existence or such event shall
not constitute Good Reason under this Agreement.
(e)
“Management Incentive Plan” means the Sysco Corporation
2000 Management Incentive Plan, the Sysco Corporation 2005
Management Incentive Plan or such plan’s successor or
replacement plan; as such plans may be amended from time to
time.
(e)
“Permanent Disability” means the failure of the
Executive to perform the Executive’s duties with the Company
on a full-time basis as a result of an incapacity due to mental or
physical illness and such incapacity results in Executive being
eligible for and entitled to receive disability payments under the
Disability Income Plan sponsored by the Company.
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(g)
“Short-Term Deferral Period” means the period ending on
the later of (i) the 15 th day of the third month following the end of the
Executive’s taxable year in which the Date of Termination
occurs; or (ii) the 15 th day of the third month following the end of the
Company’s fiscal year in which the Date of Termination
occurs.
(h)
“Specified Employee” means a “specified
employee” as defined in Section 409A(a)(2)(B)(i) of the
Code. By way of clarification, “specified employee”
means a “key employee” (as defined in Section 416(i) of
the Code, disregarding Section 416(i)(5) of the Code) of the
Company. Executive shall be treated as a key employee if the
Executive meets the requirement of Section 416(i)(1)(A)(i), (ii),
or (iii) of the Code at any time during the twelve
(12) month period ending on an “identification
date”. If Executive is a key employee as of an identification
date, he shall be treated as a Specified Employee for the twelve
(12) month period beginning on the first day of the fourth
month following such identification date. For purposes of any
“Specified Employee” determination hereunder, the
“identification date” shall mean the last day of the
calendar year.
2.
Payments Upon Termination of Employment by Death, Permanent
Disability, for Cause or Executive’s Resignation without Good
Reason .
(a) The
Executive’s employment shall terminate automatically upon the
Executive’s death during the period of his employment or
resignation without Good Reason.
(b) If
Executive resigns as an employee without Good Reason prior to
reaching age 60, notwithstanding anything contained in the Sysco
Corporation Supplemental Executive Retirement Plan (the “
SERP ”) to the contrary, Executive shall forfeit all
benefits under the SERP. For purposes of this Section 2(b),
Executive’s termination of employment by reason of death or
Permanent Disability shall not be deemed a
“resignation.”
(c) If
the Company determines in good faith that a Permanent Disability of
the Executive has occurred while Executive is employed, it may give
the Executive written notice in accordance with Section 11(b) of
its intention to terminate the Executive’s employment. In
such event, the Executive’s employment with the Company shall
terminate effective on the day specified in such notice to the
Executive.
(d) In
the event the Executive dies, becomes Permanently Disabled during
the period of his employment, resigns without Good Reason or the
Company terminates Executive’s employment for Cause by giving
written notice as provided in Section 11(b), the Company shall
have no obligation to make any severance payments or provide any
severance benefits to Executive pursuant to this Agreement.
Executive shall be paid his base salary through the date of death
or the effective date of the resignation without Good Reason or the
Date of Termination and the amounts that would be owed under
Section 3(a)(2) hereof.
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3.
Payments Upon Termination of Employment by Company Without
Cause .
(a) If
the Company terminates the employment of Executive without Cause,
Executive shall be paid his base salary through the date of
Termination. If Executive executes and provides to the Company and
does not revoke a release substantially in the form attached hereto
as Exhibit A , no later than sixty (60) days following
Executive’s Date of Termination (the “ Payment
Forfeiture Date ”), the Company shall provide to the
Executive the payments and benefits described in paragraphs
(1) through (5) below. Notwithstanding any provision in
this Agreement to the contrary, however, none of the payments or
benefits described in paragraphs (1) through (5) below shall
be made prior to the Company’s receipt of such executed
release and the lapse of any revocation period provided for in such
release, and if Executive does not provide to the Company such
executed release or revokes such executed release on or before the
Payment Forfeiture Date, Executive shall forfeit any and all rights
to such payments:
(1) The
Company shall pay to Executive (or Executive’s beneficiary or
estate), subject to Section 3(b) hereof, commencing thirty
(30) days following the later of (A) the Date of
Termination; and (B) the date the Company receives the release
described above executed by Executive for which any revocation
period in such release has lapsed, as compensation for services
rendered to the Company, a monthly payment for twenty-four
(24) months equal to the sum of:
(i) Executive’s
monthly base salary (before any elective deferrals under any
Company plans) in effect on the Date of Termination,
plus;
(ii) An
amount equal to one twelfth (1/12) of the average annual bonus paid
to Executive under the Management Incentive Plan (before any
elective deferrals under any Company plans) for the preceding five
(5) fiscal years ended prior to the Date of Termination;
and
(iii) An
amount equal to the monthly cost to Executive for continued
coverage under the Company’s group health benefit insurance
plans under Section 4980B of the Internal Revenue Code of 1986
(COBRA), regardless of whether Executive elects to be covered by
COBRA.
(2) Within
thirty (30) days of the receipt of the signed release required
under Section 3(a) for which any revocation period has lapsed, the
Company shall pay to Executive any unpaid bonuses earned in a
fiscal year ended prior to the Date of Termination, accrued but
unused vacation time and any unreimbursed business expenses owed
under the Company’s expense reimbursement
policies.
(3) Upon
the latter to occur of both (i) thirty (30) days after
the receipt of the signed release required under Section 3(a) for
which any revocation period has lapsed and (ii) sixty (60)
days following the end of the fiscal year during which the Date of
Termination occurs, the Company shall pay to Executive a fraction
of the bonus
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the Executive
would have earned for such fiscal year (excluding any deferred or
matching amounts to which he would have been entitled) under the
Management Incentive Plan had Executive not been terminated, as
determined by the Company, in its sole discretion, the numerator of
such fraction being the number of days in the fiscal year prior to
the Date of Termination and the denominator being 365.
(4) If
the Date of Termination occurs before Executive has reached the age
of sixty (60), then for purposes of determining Executive’s
vested percentage under the SERP and for no other reason,
notwithstanding Executive’s actual age, he shall be deemed to
be sixty (60) years of age as of the Date of Termination and
entitled to the benefits under the SERP in the amounts and at the
times specified under the terms of the SERP then in
effect.
(5) If
the Date of Termination occurs before Executive has reached the age
of sixty (60), Executive shall be entitled to receive 100% of the
unvested benefits (in addition to all vested benefits) under the
Sysco Corporation Executive Deferred Compensation Plan (“
EDCP ”) and shall be entitled to receive the payment
of such benefits at the time(s) specified under the terms of the
EDCP then in effect pursuant to Executive’s distribution
election then in effect under the EDCP.
(b) Notwithstanding
the provisions of Section 3(a), if at any time within the two
(2) years following the Date of Termination, Executive,
without the prior written consent of the Company, directly or
indirectly owns, operates, manages, controls or participates in the
ownership, management, operation or control of or is employed by,
or is paid as a consultant or other independent contractor to, a
business which competes with the Company (or any subsidiary of the
Company) in a trade area served by the Company (or a subsidiary of
the Company) as of the date of this Agreement, and the Executive
continues to be so engaged sixty (60) days after written
notice has been given to him to cease such activity, he shall
forfeit all amounts thereafter due the Executive under Section 3(a)
hereof.
(c) Any
amounts paid pursuant to Section 3(a) herein shall be in lieu of
any other amount of severance relating to salary or bonus
continuation to be received by Executive upon termination of
employment of Executive under any severance plan or policy of the
Company. For purposes of this Agreement, benefits under the SERP
and EDCP shall not be considered severance, salary or bonus
continuation payments.
(d) Notwithstanding
anything to the contrary contained herein, to the extent any
portion of the bonuses payable to Executive pursuant to
Sections 3(a)(2) or 3(a)(3) herein are subject to bonus
deferral elections under the EDCP such amounts shall continue to be
deferred under the EDCP and shall be paid to Executive at the time
or times provided under the EDCP.
(e) The
following rules shall apply with respect to the distribution of
payments and benefits, if any, to be provided to Executive under
Section 3(a)(1) of this Agreement, as applicable:
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(1) Notwithstanding
anything to the contrary contained herein, no payments shall be
made to Executive upon Executive’s termination of employment
from the Company under this Agreement unless such termination of
employment is a “separation from service” under
Section 409A. For purposes of this Agreement, Executive shall
have experienced a “separation from service” as a
result of a termination of employment if the level of bona fide
services performed by Executive decreases to a level equal to
twenty-five percent (25%) or less of the average level of services
performed by Executive during the immediately preceding thirty-six
(36) month period, taking into account any periods of
performance excluded by Section 409A.
(2) It
is intended that each installment of the payments and benefits
provided under Section 3(a)(1) shall be treated as a separate
“payment” for purposes of Section 409A. Neither
the Company nor Executive shall have the right to accelerate or
defer the delivery of any such payments or benefits except to the
extent specifically permitted or required by
Section 409A;
(3) If,
as of the date of the “separation from service” of the
Executive from the Company, the Executive is not a Specified
Employee, then each installment of the payments and benefits shall
be made on the dates and terms set forth in Section 3(a)(1),
as applicable;
(4) If,
as of the date of the “separation from service” of the
Executive from the Company, Executive is a Specified Employee,
then:
(i) Each
installment of the payments and benefits due to Executive under
Section 3(a)(1), that, in accordance with the dates and terms
set forth herein, will in all circumstances, regardless of when the
separation from service occurs, be paid within the Short Term
Deferral Period shall be treated as a short-term deferral within
the meaning of Treasury Regulation Section 1.409A-1(b)(4) to
the maximum extent permissible under Section 409A;
and
(ii)
Each installment of the payments and benefits under
Section 3(a)(1) that is not paid within the Short Term
Deferral Period and that would, absent this subsection, be paid
within the six-month period following the separation from service
of the Executive from the Company shall not be paid until the date
that is six months and one day after such separation from service
(or, if earlier, the Executive’s death), with any such
installments that are required to be delayed being accumulated
during such six-month period and paid in a lump sum on the date
that is six months and one day following the Executive’s
separation from service and any subsequent installments being paid
in accordance with the dates and terms set forth herein;
provided however , that the preceding provisions of this
subparagraph shall not apply to any installment of payments and
benefits, or any portion thereof, if and to the maximum extent that
such installment is deemed to be paid under a separation pay plan
that does not provide for a deferral of compensation by reason of
the application of Section 1.409A-1(b)(9)(iii) of the Treasury
Regulations (relating to separation pay upon an involuntary
separation from service). Any installments that qualify for the
exception under Treasury
Regulation Section 1.409A-1(b)(9)(iii) must be paid no
later than the last
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day of the
Executive’s second taxable year following the taxable year in
which the separation from service occurs.
4.
Requirement of an Additional Payment in Certain
Circumstances .
(a) In
the event all or any portion of a payment or acceleration right
pursuant to this Agreement, or any other agreement, plan,
instrument or obligation to which Executive is a party or of which
Executive is a beneficiary (an “ Other Company
Obligation ”) is treated as an “excess parachute
payment” (as defined in Section 280G(b)(1) of the Code)
which is subject to the excise tax (the “ Excise Tax
”) imposed by Section 4999 of the Code, the Company
shall make the Additional Payment (defined below) either directly
to Executive in cash or, with respect to Excise Taxes or other
taxes subject to withholding, by payment of such taxes to the
appropriate taxing authority on Executive’s behalf,
notwithstanding any contrary provision in this Agreement or any
Other Company Obligation.
(b) The
term “ Additional Payment ” means a payment in
an amount equal to the sum of (1) the Excise Taxes payable by
Executive on any payment or acceleration right pursuant to this
Agreement or any Other Company Obligation which is treated as an
excess parachute payment, plus (2) the additional Excise Taxes,
federal and state income taxes and employment taxes to the extent
such taxes are imposed in respect of the Additional Payment, such
that Executive shall be in the same after-tax position and shall
have received the same benefits that he would have received if the
Excise Taxes had not been imposed. For purposes of calculating the
income taxes attributable to the Additional Payment, the maximum
state and federal income tax rates applicable to Executive’s
actual income, net of the maximum reduction in federal income taxes
that could be obtained from deduction of such state taxes, shall be
used. An example of the calculation of an Additional Payment is set
forth below. Assume that the Excise Tax rate is 20%, the highest
marginal federal income tax rate is 40%, Executive is subject to
federal employment taxes at a rate of 2.9% and Executive is not
subject to state income taxes. Further assume that Executive has
received an excess parachute payment in the amount of $200,000, on
which $40,000 ($200,000 x 20%) in Excise Taxes are payable. The
amount of the required Additional Payment is thus computed to be
$107,817, i.e., the Additional Payment of $107,817, less
additional Excise Taxes on the Additional Payment of $21,563 (i.e.,
20% x $107,817), income taxes of $43,127 (i.e., 40% x $107,817),
employment taxes of $3,127 (i.e., 2.9% x $107,817) yields $40,000,
the amount of the Excise Taxes payable in respect of the original
excess parachute payment.
(c) Executive
agrees to reasonably cooperate with the Company to minimize the
amount of parachute payments or excess parachute payments,
including, without limitation, assisting the Company in
establishing that some or all of the payments received by Executive
are not “contingent on a change,” as described in
Section 280G(b)(2)(A)(i) of the Code and the regulations
thereunder, or that some or all of such payments are reasonable
compensation for personal services actually rendered by Executive
before the date of such change or to be rendered by Executive on or
after the date of such change if such arguments are reasonably
available. In the event that the Company is able to establish that
the amount of an excess parachute payment is less than
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originally
anticipated by Executive, or if Executive becomes entitled to
receive a tax refund with respect to Excise Taxes or Additional
Payments, Executive shall refund to the Company any excess
Additional Payment to the extent not required to pay Excise Taxes,
income or employment taxes (including those incurred in respect of
receipt of any Additional Payment). Notwithstanding the foregoing,
except as otherwise required by Section 4(g) hereof, Executive
shall not be required to take any action which his attorney or tax
advisor advises him in writing that exposes him to any penalties
imposed by the Code. Executive may require the Company to deliver
to Executive an indemnification agreement in form and substance
reasonably satisfactory to Executive as a condition to taking any
action required by this subsection (c).
(d) The
Company shall make the Additional Payments required to be made
under this Section 4 not less than thirty (30) days
before the Excise Tax with respect to any excess parachute payment
to which Section 4(a) is applicable is due and in no event later
than the end of Executive’s taxable year next following the
taxable year in which Executive (or, if applicable, the Company)
remits the related taxes. Any Additional Payment required to be
paid by the Company under this Section 4 which is not paid
within thirty (30) days of receipt by the Company of
Executive’s written demand therefor shall thereafter be
deemed delinquent, and the Company shall pay to Executive
immediately upon demand interest at a variable rate equal to the
prime rate, as reported in the Wall Street Journal
“Money Rates” from time to time (the “ Prime
Rate ”) from the date such Additional Payment becomes
delinquent to the date of payment of such delinquent sum with
interest.
(e) In
the event that there is any change to the Code which results in the
recodification of Section 280G or Section 4999 of the
Code, or in the event that either such sections of the Code is
amended, replaced or supplemented by other provisions of the Code
having a similar effect (“ Successor Provisions
”), then this Agreement shall be applied and enforced with
respect to such new Code provisions in a manner consistent with the
intent of the parties as expressed herein, which is to assure that
Executive is in the same after-tax position and has received the
same benefits that he would have been in and received if
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