Item 5.02 Departure of Directors or Certain Officers; Election of Directors;
Appointment of Certain Officers; Compensatory Arrangements of Certain
Officers.
On January 10, 2020, the Board of Directors (the "Board") of Sysco Corporation
(the "Company") named Mr. Kevin P. Hourican as President and Chief Executive
Officer and as a member of the Board and the Executive Committee of the Board,
with an expected effective date of February 1, 2020. Mr. Hourican will succeed
Mr. Thomas L. Bené, who is separating from his officer and director positions
with the Company as described below. In addition, the Board named Mr. Edward D.
Shirley, currently Lead Independent Director of the Board, as Executive Chair of
the Board, effective as of January 10, 2020. The Board also named Mr. Bradley M.
Halverson as the Lead Independent Director of the Board, effective as of
January 10, 2020.
Mr. Hourican, 46, most recently served as executive vice president of CVS Health
and president of CVS Pharmacy, overseeing CVS' $85 billion retail business,
including its 9,900 retail stores and over 200,000 employees, as well as
merchandising, marketing, supply chain, real estate, front store operations,
pharmacy growth, pharmacy clinical care and pharmacy operations. He previously
held the role of executive vice president, retail pharmacy and supply chain, and
led CVS' pharmacy operations, professional services and retail pharmacy product
innovation and development functions, as well as the company's supply chain
organization. Prior to joining CVS Health, Kevin held executive leadership roles
at Macy's, most recently serving as senior vice president, regional director of
stores, responsible for the management of 110 department stores in the
Mid-Atlantic region. He holds an undergraduate degree in economics and a
master's degree in supply chain management from The Pennsylvania State
University.
President and Chief Executive Officer Compensation Arrangements
In connection with Mr. Hourican's appointment as President and Chief Executive
Officer, Mr. Hourican will receive an annual base salary of $1,300,000 and will
be eligible to receive a target annual cash incentive opportunity equal to 150%
of his annual base salary, pro-rated to January 1, 2020 for fiscal year 2020,
unless his start date is after February 15, 2020 (other than at the Company's
request), in which case his fiscal year 2020 annual cash incentive opportunity
will be pro-rated for the period of actual service. Mr. Hourican will be
eligible to receive annual equity awards in the amounts and on such terms as are
determined by the Compensation and Leadership Committee of the Board. For the
Company's fiscal year 2020, he will receive an annual equity award with a grant
date fair value equal to $8,500,000 that consists 40% of stock options that vest
33% on each of August 21, 2020, August 21, 2021 and August 21, 2022, and 60% of
performance share units ("PSUs") with a performance period from June 30, 2019
through July 2, 2022. If Mr. Hourican's employment is terminated without cause
or upon his resignation for good reason, as such terms are defined in the letter
agreement (together, an "involuntary termination"), 50% of the unvested portion
of the fiscal year 2020 annual equity award will vest.
In order to compensate Mr. Hourican for the forfeiture of his 2019 annual cash
bonus from his prior employer, Mr. Hourican will receive a one-time cash payment
equal to his forgone target bonus of $1,450,000, plus an amount equal to any
additional annual bonus that would have been earned based on actual performance
as reported in his prior employer's 2020 annual stockholders meeting definitive
proxy statement (the "make-whole bonus"). Mr. Hourican will also receive a
one-time cash sign-on bonus equal to $2,000,000, which is intended to compensate
him for forfeiture of equity awards from his prior employer that were scheduled
to vest within 90 days of his expected start date. The after-tax amount of both
the make-whole bonus and the sign-on bonus will be repayable to the Company if
Mr. Hourican is terminated for cause or resigns prior to the first anniversary
of his start date, and 50% of the after-tax amount of the sign-on bonus will be
repayable if he is terminated for cause or resigns on or after the first
anniversary but prior to the second anniversary of the start date.
As a replacement for the forfeiture of Mr. Hourican's equity awards from his
prior employer that were scheduled to vest more than 90 days after his start
date, he will receive a one-time, make-whole equity award (the "make-whole
equity award") with a grant date fair value of $12,800,000. The make-whole
equity award will consist (i) 33% of time-based non-statutory stock options that
vest 33% on each of August 21, 2020, August 21, 2021 and August 21, 2022,
subject to Mr. Hourican's continued service through the applicable vesting date,
and have a 10-year term, (ii) 33% of time-based restricted stock units that vest
50% on each of the 12 month and 18 month anniversaries of Mr. Hourican's start
date, subject to Mr. Hourican's continued service through the applicable vesting
date, and (iii) 33% of PSUs with a performance period from June 30, 2019 through
July 2, 2022. The make-whole equity award will have such other terms and
conditions as awards granted to senior executives of the Company in fiscal year
2020, except that vesting will fully accelerate (with performance deemed met at
the target level) upon an involuntary termination of Mr. Hourican's employment.
Upon execution and subsequent effectiveness of a general release of claims,
Mr. Hourican will be eligible to receive certain severance payments and benefits
upon an involuntary termination of his employment, including a pro-rated annual
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bonus for the year of termination, an amount equal to two times the sum of his
base salary plus his target annual cash incentive opportunity, paid in
substantially equal installments for 24 months after his date of termination,
and health, dental and vision coverage continuation at active employee rates
("benefits continuation") during such period. If an involuntary termination of
Mr. Hourican's employment occurs during the period beginning on a change in
control of the Company (as defined in the Company's 2018 Omnibus Incentive Plan)
and ending on the second anniversary of the change in control, he will receive a
pro-rated annual bonus for the year of termination, a cash lump sum amount equal
to three times the sum of his base salary plus his target annual cash incentive
opportunity, and benefits continuation for 36 months following his date of
termination.
Mr. Hourican will also receive certain benefits, including tax and financial
planning reimbursement up to $15,000, security monitoring services, relocation
benefits including reimbursement for up to $25,000 in miscellaneous relocation
expenses (and a tax make-whole payment for relocation benefits), in addition to
up to $30,000 in legal fees incurred in connection with the preparation and
negotiation of his letter agreement.
Mr. Hourican has entered into the Company's standard protective covenants
agreement, which subjects him to certain restrictive covenants, including
confidentiality, non-disparagement and two-years post-employment restrictions on
competition and solicitation of employees, vendors and customers of the Company.
Executive Chairman Compensation Arrangements
Mr. Shirley, 63, joined the board in 2016 and has served as lead independent
director since November 2018. He has substantial experience in executive
leadership, strategy development, marketing/brand development and business
operations, both domestically and globally, developed in his various senior
executive positions with large consumer products companies. Mr. Shirley served
as president and chief executive officer of Bacardi Limited from 2012 to 2014.
Prior to that, he was vice chairman of Procter & Gamble and held several senior
executive positions during his 27 years with The Gillette Company. Mr. Shirley
is currently a director of the New York Life Insurance Company and has
previously served as a member of the board of directors of Elizabeth Arden, Inc.
and Time Warner Cable Inc. He is also a partner in PTW Capital, a recently
formed consumer goods private equity firm.
In connection with his appointment as Executive Chair, Mr. Shirley will receive
a base salary of $1,000,000 and be eligible to earn a target annual cash
incentive opportunity equal to $1,000,000, pro-rated for fiscal year 2020 for
the period of actual service. Mr. Shirley will receive an equity award with a
grant date fair value of $1,000,000, with the form of such grant and the
applicable vesting and other terms and conditions to be determined in the
discretion of the Board.
Separation Agreement with Mr. Bené
The Company has entered into a separation agreement with Mr. Bené, which
provides that, effective as of January 13, 2020, Mr. Bené resigned as Chairman
and a member of the Board and, effective as of January 31, 2020 (the "separation
date"), Mr. Bené resigned from all positions he holds with the Company and its
affiliates, including as President and Chief Executive Officer, as well as from
any other positions or appointments with the Company and its affiliates, except
that, from the separation date through and including March 1, 2020, Mr. Bené
will remain employed as a non-executive employee of the Company in an advisory
capacity.
In consideration for Mr. Bené's execution of a general release of claims,
Mr. Bené will receive a cash severance payment equal to $6,000,000, payable
within 30 days following the effective date of the release, and subsidized
health, dental and vision care coverage for a period of no longer than 24 months
following the date of termination. Outstanding unvested Company equity awards
held by Mr. Bené upon his separation date will be forfeited and his vested stock
options will be exercisable for 90 days following his date of termination,
pursuant to the applicable award agreements. Mr. Bené remains subject to certain
post-employment restrictions, including restrictions on competitive activities
and non-solicitation of employees and customers of the Company for one-year
post-employment.
The foregoing descriptions of the terms and conditions of the letter agreement
with Mr. Hourican and the separation agreement with Mr. Bené do not purport to
be complete and are qualified in their entirety by reference to such agreements,
which are filed as Exhibits 10.1 and 10.2 hereto, respectively and are
incorporated herein by reference.
A copy of the press release issued by the Company on January 13, 2020, is
attached as Exhibit 99.1 hereto.
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section 9 - financial statements and exhibits
Item 9.01 Financial Statements and Exhibits.
(a) Financial Statements of Businesses Acquired.
Not applicable.
(b) Exhibits.
Not applicable.
(c) Exhibits.
Not applicable.
(d) Exhibits.
Exhibit
Number Description
10.1 Letter Agreement, dated as of January 10, 2020, by and between
Kevin P. Hourican and Sysco Corporation.
10.2 Separation Agreement, dated as of January 12, 2020, by and between
Thomas L. Bené and Sysco Corporation.
99.1 Press Release dated as of January 13, 2020.
104 Cover Page Interactive Data File (embedded within the Inline XBRL
document).
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SYSCO CORPORATION 
