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EXHIBIT 10(n)
EXECUTIVE COMPENSATION ADJUSTMENT AGREEMENT
This Executive Compensation Adjustment Agreement ("Agreement") made and
entered into between Sysco Corporation ("Sysco") and Xxxx X. Xxxxxx ("Officer")
W I T N E S S E T H
WHEREAS, the Officer is currently the Chairman and Chief Executive Officer
of Sysco and his experience and knowledge of the affairs of Sysco, his
reputation and contacts in the industry are all extremely valuable to Sysco; and
WHEREAS, the Officer is currently a participant in the Sysco Corporation
Executive Deferred Compensation Plan ("EDCP") and the Sysco Corporation
Supplemental Executive Retirement Plan ("SERP"); and
WHEREAS, Sysco has adopted the Sysco Corporation Split Dollar Life
Insurance Plan ("the Split Dollar Plan") which is designed to encourage certain
employees to continue in the service of Sysco by offering such employees
assistance in providing life insurance protection for the employees' families;
and
WHEREAS, Sysco wishes to offer split dollar life insurance coverage for the
Officer's family as an alternative to part of the benefits provided under the
EDCP and the SERP; and
WHEREAS, the Officer wishes to take advantage of the split dollar life
insurance coverage offered by Sysco as an alternative to some of the Officer's
benefits provided under the EDCP and the SERP;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements contained herein, Sysco and the Officer agree as follows:
1. Split Dollar Plan. Contemporaneously with the execution of this
Agreement, the Compensation and Stock Option Committee of the Sysco Board of
Directors appointed under the Split Dollar Plan will designate the Officer as a
participant in the Split Dollar Plan and Sysco and Xxxxx Xxxxx Xxxxxx and Xxxx
Xxxxxxx Xxxxxx, co-trustees (as the Officer's designee), of the Xxxxxx 1999
Family Trusts ("Trust"), created by that certain instrument dated September 30,
1999, shall execute the Split Dollar Life Insurance Agreement ("Split Dollar
Agreement") attached hereto as Exhibit A and incorporated herein for all
purposes.
2. Partial Waiver of EDCP Benefits. Subject to the conditions of paragraph
4, as a requirement for participation in the Split Dollar Plan, Officer hereby
irrevocably waives, renounces, and forfeits any and all rights to the Officer's
benefits credited to his Account in the Deferred Compensation Ledger maintained
by the EDCP plan Committee under the EDCP as of 10-14, 1999; provided, however,
this waiver, renunciation, and forfeiture does not apply to amounts which may be
credited to the Officer's said Account in the special Deferred Compensation
Ledger under the EDCP from and after said date; provided
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further any interest credited to the Officer's said Account under the EDCP will
apply only to Officer deferrals and Sysco's Company Matches (as defined in the
EDCP) from and after said date.
3. Partial Waiver of SERP Benefits. Subject to the conditions of paragraph
4, as a requirement for participation in the Split Dollar Plan, Officer hereby
irrevocably waives, renounces, and forfeits $13,487.50 of the monthly SERP
retirement benefit for the Officer in the form of an age 65, 5 year certain and
life annuity as calculated under Article 4.1 of the SERP prior to the adjustment
for vesting. After such reduction and the application of vesting, the resulting
amount will be adjusted for the form and time of payment as specified under
Article 4.2 of the SERP. In calculating the death benefit under Article 5 of the
SERP, the commuted lump sum values referenced in Article 5 will be reduced by
the commuted lump sum value of the monthly retirement benefit forfeited above.
4. Conditions on Waiver. The partial waivers, renunciations, and
forfeitures contained in paragraphs 2 and 3 are conditioned upon each of the two
insurance policies initially covered by the Split Dollar Agreement not being set
aside for material misrepresentations in its application and the death proceeds
of each such policy not being limited to premiums paid because an insured dies
by suicide. Such conditions will lapse with regard to each such policy two years
after the date of issue of such policy. Should only one of such policies fail to
meet the conditions of this paragraph, the partial waiver, renunciation and
forfeiture of EDCP and SERP benefits in paragraphs 2 and 3 shall be reduced by
67.2% if the Xxxx Xxxxxxx Mutual Life Insurance Company policy fails to meet
said conditions or by 33.8% if the Pacific Life Insurance Company policy fails
to meet said conditions. If both of the insurance policies initially covered by
the Split Dollar Agreement fail to meet either of the conditions of this
paragraph, the partial waiver, renunciation, and forfeiture of EDCP and SERP
benefits in paragraphs 2 and 3 shall be null and void and this Agreement shall
terminate.
5. Reimbursement Bonuses. Sysco agrees to pay the following reimbursement
bonuses to the Officer or his affiliate within a reasonable time after
certification to Sysco of the amount subject to reimbursement:
a. Sysco shall bonus to the Officer or his affiliate an amount equal
to the term premium payment required of the trustee of the Trust pursuant
to section 3.3 of the Split Dollar Agreement.
b. Sysco shall bonus an amount equal to any Federal gift taxes paid by
the Officer or his affiliate because of contributions, whether direct,
indirect or deemed, to the Trust to cover the portion of the premium
required to be paid by the Trust under section 3.3 of the Split Dollar
Agreement or because of any economic benefit attributable to the cost of
current life insurance protection to
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which the Trust is entitled under the Split Dollar Agreement which
constitutes a gift to the Trust by the Officer or his affiliate. As an
administrative convenience, said premium contribution or said current life
insurance benefit will be deemed to be a gift by the Officer or his
affiliate at highest marginal Federal gift tax bracket regardless of
whether the Officer or his affiliate pay any or a lesser amount of gift
tax. The bonus will be paid to the Officer or his affiliate upon
certification to Sysco of the amount of said premium contribution or
current life insurance protection benefit for the taxable year of the
Officer or his affiliate. No bonus is required for any other gift or any
generation-skipping transfer, direct, indirect or deemed, from the Officer
or his affiliate to the Trust caused under the Split Dollar Agreement
except for gifts of said premium contribution or for said current life
insurance protection benefit to which the Trust is entitled.
c. Sysco shall bonus annually to the Officer or his affiliate a fixed
dollar amount to offset fees paid to a tax return preparer by the Officer
or his affiliate for any state or Federal gift tax or generation-skipping
transfer tax return which includes a gift or generation-skipping transfer
which results from this Agreement or the Split Dollar Agreement regardless
of whether such a return was filed and regardless of the amount of tax
return preparer fees paid by the Officer or his affiliate. The fixed dollar
amount in 2000 will be a total of $5,000. For 2001, the fixed dollar amount
will be $1,000 for each gift tax return. For each year beginning in 2002,
the fixed dollar amount for each gift tax return will be the fixed dollar
amount for the previous year increased by 5%.
d. Should a dispute with the Internal Revenue Service or a state tax
authority develop between the Officer or his affiliate concerning the
income, gift or generation-skipping transfer tax results attributable to
this Agreement, the waiver of the Officer's accrued benefit under the EDCP
or the SERP, or the Split Dollar Agreement, Sysco agrees to pay the
Officer's or his affiliate's reasonable accounting and legal fees and court
and other costs incurred in any administrative proceedings or litigation
concerning assessment or proposed assessment of additional taxes involving
their state or Federal gift tax, income tax, or generation-skipping
transfer tax returns based upon such tax results including, litigation of a
notice of tax deficiency, filing a refund claim or suing for a refund in
court which concerns said dispute of income, gift or generation-skipping
transfer tax results. Sysco shall have no liability to pay for any state or
Federal income, gift or generation-skipping transfer tax liability,
including penalties or interest thereon, unless expressly authorized
elsewhere in this Agreement. Sysco
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will pay such fees or costs directly to the provider upon being furnished
by the Officer or his affiliate with a statement or other evidence of the
fee or cost payable in a format acceptable to Sysco.
6. Federal Income Tax Bonuses. Sysco agrees to pay the following
supplemental bonuses within a reasonable time after the close of the calendar
year during which the subject reimbursement bonuses were paid:
a. Sysco shall make a supplemental bonus to the Officer or his
affiliate to cover any Federal income tax liability resulting from a
reimbursement to the Officer or his affiliate pursuant to subparagraphs a,
b and c of paragraph 5 above. The amount of the supplemental bonus shall be
the difference between (i) an amount determined by dividing the amount of
the reimbursement by one minus the highest Federal individual marginal
income tax bracket for the year of such reimbursement under subparagraphs
a, b and c of paragraph 5 above expressed as a decimal, and (ii) the amount
of said reimbursement.
b. With regard to any payment of the Officer's or his affiliate's
reasonable accounting and legal fees or court or other costs pursuant to
subparagraph d of paragraph 5 above, Sysco shall make a supplemental bonus
to the Officer or his affiliate to cover any Federal income tax liability
resulting from such payment. The parties acknowledge that the determination
of such Federal income tax liability is made complicated because of the
potential deductibility by the Officer or his affiliate of such accounting
and legal fees and court and other costs on his or her Federal income tax
return. The parties hereby agree that the supplemental bonus required by
this subparagraph shall be calculated in the following two steps:
i. The Federal income tax caused by such payment shall be
determined by the difference, if any, between (a) all Federal income
taxes payable for the year of reimbursement by the Officer or
affiliate calculated by including the subparagraph d of paragraph 5
payment in gross income reduced by the deduction allowable for the
expenditure covered by such payment, if any, (whether or not the
deduction is taken by the Officer or affiliate on the Federal income
tax return for the taxable year of the reimbursement) and (b) all
Federal income taxes payable for the year of payment by the Officer or
affiliate calculated by excluding
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the subparagraph d of paragraph 5 reimbursement from gross income
without any deduction for the expenditure covered by such
reimbursement.
ii. The amount of supplemental bonus required by this
subparagraph shall be the difference between (a) an amount determined
by dividing the Federal income tax difference determined by
subparagraph bi of paragraph 6 above by one minus the highest Federal
individual marginal income tax bracket for the year of such payment
under subparagraph d of paragraph 5 above expressed as a decimal, and
(b) the Federal income tax difference determined by subparagraph bi of
paragraph 6 above.
Should the Internal Revenue Service finally determine with regard to a
Federal income tax return for the Officer or his affiliate that any of the
assumptions pursuant to subparagraph bi(a) of paragraph 6 concerning
inclusion of the payment in gross income or the deductibility of all or
part of the expenditure covered by the payment is incorrect, the
calculations in subparagraph bi(a) of paragraph 6 above shall be adjusted
to reflect such final determination and the amount of supplemental bonus by
this subparagraph b of paragraph 6 shall be recalculated and Sysco shall
pay, without interest, to the Officer or his affiliate any increase in such
supplemental bonus caused by the recalculation and the Officer or his
affiliate shall return to Sysco that part of any supplemental bonus
received in excess of such recalculation.
c. For years during which there are no premium reimbursements by Sysco
pursuant to subparagraph a of paragraph 5 above but the Officer or his
affiliate realizes an economic benefit equal to the cost of current life
insurance protection (calculated as specified in section 3.3 of the Split
Dollar Agreement) to which the Trust is entitled under the Split Dollar
Agreement, Sysco shall bonus the Officer or his affiliate an amount to
cover Federal income tax liability resulting from the realized economic
benefit equal to the cost of current life insurance protection to which the
Trust is entitled under the Split Dollar Agreement. The amount of the bonus
shall be the difference between (i) an amount determined by dividing the
amount of said economic benefit by one minus the highest Federal individual
marginal income tax bracket for the year said economic benefit is realized
expressed as a decimal, and (ii) the amount of said economic benefit. No
bonus is required for any economic benefit realized by the Officer or his
affiliate under the Split Dollar Agreement except for the cost of current
life insurance protection to which the Trust is entitled.
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7. Ceiling on Reimbursement and Federal Income Tax Bonuses. The bonuses
specified in paragraphs 5 and 6 above, in the aggregate, shall not exceed
$3,898.202.
8. Payment of Taxes and Withholding. The Officer or his affiliate will be
required to pay his share of any Federal or state income, social security or
other taxes that are required to be paid due to the bonuses specified in
paragraphs 5 and 6 above and Sysco will withhold such taxes to the extent
required by applicable law and regulations.
9. Special Deduction Bonus. The parties do not anticipate that there will
be any additional income tax consequences to the Officer or his affiliate from
this Agreement, the waiver of his accrued benefit under the EDCP or the SERP,
and the Split Dollar Agreement other than that attributable to the benefit from
the cost of current life insurance protection to which the Trust is entitled and
the bonuses discussed in paragraphs 5 and 6. However, should additional income
be realized by the Officer or his affiliate because of this Agreement, the
waiver of his accrued benefit under the EDCP or the SERP, or the Split Dollar
Agreement and should Sysco be entitled to a Federal income tax deduction against
its gross income for such other income realized by the Officer or his affiliate,
then Sysco agrees to bonus to the Officer or his affiliate who realized such
other income pursuant to this Agreement, the waiver of the Officer's benefit
under the EDCP or the SERP or the Split Dollar Agreement an amount equal to the
difference between (i) an amount determined by dividing the amount of said
deduction by one minus the highest Federal corporate marginal income tax bracket
for the year such deduction is available to Sysco expressed as a decimal, and
(ii) the amount of said deduction.
10. Dispute Resolution. Sysco and the Officer have entered into this
Agreement in good faith and in belief that it is mutually advantageous to them.
It is with the same spirit of cooperation that they pledge to attempt to resolve
any dispute amicably without the necessity of litigation. Accordingly, they
agree that if any dispute arises between them relating to this Agreement or the
Split Dollar Agreement (a "Dispute"), they will first utilize the mediation
procedures specified in this paragraph prior to any arbitration.
a. Initiation of Mediation. The party seeking to initiate mediation
(the "Initiating Party") shall give written notice to the other party,
describing in general terms the nature of the Dispute, and the Initiating
Party's claim for relief. Sysco and the Officer or the Officer's affiliate
shall have thirty business days from the date of notice to select a
mutually agreeable mediator. In consultation with the mediator selected,
the parties shall promptly designate a mutually convenient time and place
for mediation, and unless circumstances require otherwise, such time to be
not later than forty-five days after the selection of the mediator.
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b. Conduct of Mediation. In the mediation, each party shall be
represented by one or more individuals with authority to settle the Dispute
and may be represented by counsel. In addition, each party may, with
permission of the mediator, bring such additional persons as needed to
respond to questions, contribute information, and participate in the
negotiations. The parties agree to sign a document that provides that the
mediator shall be governed by the provisions of Chapter 154 of the Texas
Civil Practice and Remedies Code or such other rules as the mediator shall
prescribe. The parties commit to participate in the proceedings in good
faith and with the intention of resolving the Dispute if at all possible.
c. Termination of Procedure. The parties agree to participate in the
mediation procedure to its conclusion. The mediation shall be terminated
(i) by the execution of a settlement agreement by the parties, (ii) by a
declaration of the mediator that mediation is terminated, or (iii) by a
written declaration by one of the parties to the effect that the mediation
process is terminated at the conclusion of one full day's mediation
session.
d. Arbitration. The parties agree to participate in good faith in the
mediation to its conclusion. If the parties are not successful in resolving
the Dispute through mediation, then the parties agree that the Dispute
shall be settled by arbitration in accordance with the provisions of the
Commercial Arbitration Rules of the American Arbitration Association, and
judgment upon the award rendered by the arbitrator(s) shall be final and
may be entered in any court having jurisdiction. The parties further agree
that the award rendered by the arbitrator(s) may include an award of
attorneys' fees and costs related to the arbitration.
e. Fees of Mediation; Disqualification. The fees and expenses of the
mediator shall be shared equally by the parties. The mediator shall be
disqualified as a witness, consultant, expert or counsel by any party with
respect to the Dispute and any related matters.
f. Confidentiality. The entire mediation process is confidential, and
no stenographic, visual or audio records shall be made. All conduct,
statements, promises, offers, views and opinions, whether oral or written,
made in the course of mediation by any party, agent, employee,
representative, or other invitee and by the mediator are confidential and
shall, in addition and where appropriate, be deemed privileged. Such
conduct, statements, promises, offers, views and opinions shall not be
disclosed to anyone, not an agent, employee, expert, witness, or
representative of any of the parties.
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11. Officer's Affiliate. References to an affiliate of the Officer include
such persons and entities who are the successors of the Officer (e.g.,
administrator or executor of his estate, his assigns, or his heirs, legatees, or
devisees) or who are related to the Officer in connection with this Agreement or
the Split Dollar Agreement (e.g., the Officer's wife, the Trust, or the trustee
of the Trust and their heirs or successors).
12. Binding Effect. This Agreement shall be binding upon and inure to the
benefit of the Officer and Sysco, their successors, assigns, heirs, executors,
administrators, and other beneficiaries.
13. Amendment. No amendment or variations of the terms of this Agreement
shall be valid, unless made in writing and signed by Sysco and the Officer.
14. Not Employment Contract. This Agreement is not the basic employment
contract between Sysco and the Officer nor is it evidence of any agreement or
understanding, express or implied, that Sysco will employ the Officer in any
particular position or at any particular rate of remuneration. Sysco reserves
the unqualified and unrestricted right to terminate the services of the Officer
on exactly the same basis as if this Agreement had never been entered into
although any rights or obligations of Sysco and the Officer under this Agreement
shall survive such termination of employment.
15. Governing Law. The provisions of this Agreement shall be construed and
enforced according to the laws of the State of Texas.
16. Entire Agreement. This Agreement contains the entire contract between
Sysco and the Officer and constitutes a complete integration of the
representations, covenants and promises of Sysco and the Officer.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on this
25th day of October, 1999.
SYSCO CORPORATION
By: /s/ XXXXXXX X. XXXXXXX
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XXXXXXX X. XXXXXXX, Vice President
/s/ XXXX X. XXXXXX
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XXXX X. XXXXXX, Officer
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The Officer's wife is fully aware, understands, and fully consents and
agrees to the provisions of this Agreement including its binding effect upon any
community property interest she may have in the EDCP and SERP benefits
irrevocably waived, renounced, and forfeited by the Officer and any economic
benefits realized under the Split Dollar Agreement. Such awareness,
understanding, consent and agreement is evidenced by signing this Agreement.
/s/ XXXXXXX X. XXXXXX
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XXXXXXX X. XXXXXX
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