Sysco Corp 8-K, filed Jan 16, 2020
Sysco Corp (SYY)
About this 8-K
Sysco Corp filed this 8-K on January 16, 2020, reporting on events of January 10, 2020.
Items reported
- Item 5.02: Director or officer change, or executive pay
- Item 9.01: Financial statements and exhibits
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
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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 (see General Instruction A.2. below):
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Securities registered pursuant to Section 12(b) of the Act:
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Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
section 5 – corporate governance and management
| 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
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.
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 |
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| 10.2 |
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| 99.1 |
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| 104 |
Cover Page Interactive Data File (embedded within the Inline XBRL document). | |||
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, Sysco Corporation has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| Sysco Corporation | ||||||
| Date: January 16, 2020 |
By: |
/s/ Eve M. McFadden | ||||
| Eve M. McFadden | ||||||
| Vice President, Legal, General Counsel and Corporate Secretary | ||||||
Exhibit 10.1
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| Sysco Corporation 1390 Enclave Parkway Houston, Texas 77077 Telephone: 281-584-1390
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PERSONAL AND CONFIDENTIAL |
January 10, 2020
Kevin Hourican
Via hand delivery
Dear Kevin:
On behalf of the Sysco Board of Directors (the “Board”), I am delighted to offer you the Sysco leadership role of President and Chief Executive Officer, reporting to the Chairman of the Board, with such duties commensurate with the position of President and Chief Executive Officer of a similarly-sized company operating in the same industry, along with any other duties consistent with such position as may be reasonably assigned to you by the Board. Your employment with Sysco is expected to commence on the Confirmed Start Date set forth below (the actual date employment commences with Sysco, the “Start Date”). Your principal location of employment will be Sysco’s Houston, Texas headquarters, although you may be required to travel from time to time in connection with the fulfillment of your duties.
Your compensation package includes:
| • | Your annual base salary will be $1,300,000 per year (the “Base Salary”), paid in accordance with Sysco’s regular payroll practices. The Base Salary is subject to annual review and, in the discretion of the Board, increase (but not decrease). Any increased amount is “Base Salary” for all applicable purposes thereafter. Your next compensation review date is expected to be September 2020. |
| • | For Sysco’s fiscal year 2020 (“FY2020”), you will be eligible for an annual cash bonus with actual payment based on achievement of the Company’s financial performance and strategic bonus objectives, which will be consistent with applicable objectives currently in place for other senior executives of the Company. Your target annual bonus each fiscal year during your employment will be 150% of your Base Salary. Your bonus during FY2020 will be prorated from January 1, 2020 for FY2020 unless the Start Date is after February 15, 2020 (except at the request of the Company), in which case your bonus will be pro-rated based on your period of actual service with Sysco during FY2020. Eligibility for the bonus is contingent upon your continued employment with Sysco through the end of the fiscal year (except as set forth below). |
| • | For FY2020, you will be granted a long-term incentive award under the Company’s 2018 Omnibus Incentive Plan (“Plan”) for FY2020 with a grant date fair value equal to $8,500,000 as soon as practicable (but not later than fifteen (15) days) after the Start Date. This award will be in the form of 40% non-statutory stock options and 60% performance share units (“PSUs”) (such stock options and PSUs, the “2020 Annual Equity Award”). The stock options will vest, based on continued service to Sysco, 33% on each of August 21, 2020, August 21, 2021 and August 21, 2022 and have a 10-year term, and the PSUs will have a performance period from June 30, 2019 until July 2, 2022. The 2020 Annual Equity Award will have such other terms and conditions as the stock options and PSUs granted to other senior executives in FY2020, except that vesting of 50% of the unvested portion of the 2020 Annual Equity Award will fully accelerate (with performance deemed met at the target level) upon a termination of your employment by Sysco without Cause or resignation by you for Good Reason. Thereafter, you will be eligible to receive annual equity awards in the amounts and with such terms as determined by the Compensation and Leadership Development Committee of the Board (the “Committee”) in its discretion. |
| • | You will receive a one-time, initial cash lump sum sign-on bonus of $2,000,000, payable within 30 days after the Start Date (the “Initial Sign-On Bonus”). |
| • | You will also be eligible to receive an additional bonus (the “Make-Whole Bonus”) in respect of any forfeited annual cash bonus for 2019 from your current employer in an amount equal to (1) your current target bonus opportunity of $1,450,000, paid within thirty (30) days after the Start Date, plus (2) an amount equal to any annual cash bonus above the target bonus opportunity of $1,450,000 that would have been earned based on actual performance as reported in your current employer’s 2020 annual stockholders meeting definitive proxy statement (with any individual performance requirements to be deemed fully satisfied), paid within thirty (30) days after the date such definitive proxy statement is filed. |
| • | In the event your employment is terminated by Sysco for Cause or you voluntarily resign without Good Reason, you agree to repay, (1) with respect to the Initial Sign-On Bonus and the Make-Whole Bonus, if occurring prior to the first anniversary of your Start Date, 100% of the net (after tax) amount or (2) solely with respect to the Sign-On Bonus, if occurring on or after the first anniversary of your Start Date but prior to the second anniversary of your Start Date, 50% of the net (after tax) amount, in each case, repaid within thirty (30) days after your termination date. |
| • | In order to compensate you for the forfeiture of equity awards with your current employer that is anticipated to be incurred in connection with your employment by Sysco, you will receive a special one-time, make-whole equity grant (the “Make-Whole Equity Grant”) having a grant date fair value of $12,800,000, which will be made as soon as practicable (but not later than fifteen (15) days) after the Start Date. This award will be granted 33% in the form of non-statutory stock options, 33% in the form of time-based restricted stock units (“RSUs”) and 33% in the form of PSUs. The stock options will vest, based on continued service to Sysco, 33% on each of August 21, 2020, August 21, 2021 and August 21, 2022 and have a 10-year term. The RSUs will vest (and be settled promptly |
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| upon vesting), based on continued service to Sysco, 50% on each of the 12 month and 18 month anniversaries of the Start Date. The PSUs will have a performance period from June 30, 2019 until July 2, 2022 and be settled promptly following a determination of achievement of the performance objectives. The Make-Whole Equity Grant will have such other terms and conditions as awards granted to other senior executives in FY2020, except that vesting of the Make-Whole Equity Grant will fully accelerate (with performance deemed met at the target level) upon a termination of your employment by Sysco without Cause or resignation by you for Good Reason. |
Severance and Benefits. You will also be eligible to receive the following benefits:
| • | Upon a termination of your employment by Sysco without Cause or upon your resignation for Good Reason that in either case is not a Change in Control Termination, you will be entitled to receive, subject to execution and non-revocation of the Company’s standard release of claims (which becomes irrevocable no later than fifty-five (55) days after your date of termination), (1) an amount equal to two (2) times the sum of your Base Salary plus target Annual Performance Bonus, payable in substantially equal payroll installments for twenty-four (24) months after your date of termination beginning on the first regular payroll date following the date on which the release becomes irrevocable, provided that the first such payment will include all payments that would have been made to you had such payments commenced on the first regular payroll date following your date of termination; (2) a pro rata bonus based on the number of days you are employed during the then-current fiscal year until your date of termination, subject to attainment of applicable Sysco performance goals for such fiscal year and payable at the time annual cash bonuses are paid to other Sysco executives (the “Pro-Rata Bonus”); and (3) continuation of health, dental and vision benefits at active employee rates for twenty-four (24) months after your date of termination, which shall run concurrently with any period in which you are eligible to receive health benefits under COBRA (“Health Care Continuation”). |
| • | Upon a Change in Control Termination, you will be entitled to receive, subject to execution and non-revocation of the Company’s standard release of claims, (1) an amount equal to three (3) times the sum of your Base Salary plus target Annual Performance Bonus, paid in a lump sum within thirty (30) days following your date of termination; provided, if the Change in Control is not a “change in control event” under Section 409A (as defined below), then such sum will be payable in substantially equal payroll installments for twenty-four (24) months after your date of termination beginning on the first regular payroll date following the date on which the release becomes irrevocable (which shall be no later than fifty-five (55) days after your date of termination), provided that the first such payment will include all payments that would have been made to you had such payments commenced on the first regular payroll date following your date of termination; (2) the Pro-Rata Bonus; and (3) Health Care Continuation for thirty-six (36) months after your date of termination. |
| • | You will be eligible for full participation in Sysco’s standard health and welfare benefit plans and programs as in effect from time to time, including approved leave policies, and not less than four (4) weeks’ annual vacation, on the same basis as made available to |
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| similarly situated senior executives. Medical, dental, vision, and life / AD&D insurance will be effective the first day of the month coincident with or next following 60 days after your Start Date. For the duration of any such waiting period until you become eligible to receive benefits under Sysco’s health plan, Sysco will reimburse you for the employer-portion of COBRA health coverage continuation from your current employer, such that you would only pay Sysco active employee rates for such period. |
| • | You will be eligible to participate in the Sysco Corporation Employees 401(k) Plan effective on your hire date. |
| • | You will be eligible to receive reimbursement for all reasonable business expenses in accordance with Sysco’s business expense reimbursement policy and, in addition, up to $30,000 in legal fees incurred by you in connection with the preparation and negotiation of this letter agreement and related agreements. |
| • | In addition to Sysco’s standard employee benefits, you will also be eligible to participate in the following significant executive benefit programs: |
| • | A Management Savings Plan, which is a non-qualified deferred compensation program that allows you to defer salary and bonus on a pre-tax basis above amounts limited under the company’s 401(k) plan |
| • | A Disability Income Plan that will provide you with benefits in case of personal disability; and |
| • | Additional group life and accidental death and dismemberment insurance coverage. |
| • | You will either be provided with security monitoring services for your primary residence, or, if Sysco determines not to provide such services, you will be reimbursed for the reasonable cost of procuring such services. |
| • | Sysco will reimburse you for tax and financial planning services not to exceed $15,000 per fiscal year. |
| • | All payments and benefits under this letter agreement and any other agreement with Sysco are subject to applicable tax withholding. |
Other Conditions of Employment. The following additional terms and conditions apply to your offer of employment with Sysco:
| • | In addition to your role as President and Chief Executive Officer, Sysco will appoint you as a member of the Board effective the Start Date and thereafter cause you to be nominated as a member of the Board, and you agree, as so appointed or thereafter if elected, to serve as a member of the Board without additional compensation. |
| • | You agree to relocate to the Houston, Texas area no later than December 31, 2020 and Sysco agrees to provide you with relocation benefits in accordance with the terms and conditions of Sysco’s current domestic relocation policy applicable to your position, a |
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| copy of which has been previously provided to you, except that notwithstanding anything in the policy, the miscellaneous expense reimbursement will be up to $25,000 and Sysco will pay a gross-up for all taxes incurred by you on all benefits, payments and reimbursements under the relocation policy (including the miscellaneous expense reimbursement). |
| • | Concurrently with execution of this letter agreement, you agree to enter into a restrictive covenants agreement with Sysco providing for customary restrictive covenants (the “Protective Covenants Agreement”), including confidentiality, non-disparagement, intellectual property covenants and two (2) year post-employment non-compete and non-solicit of customers, vendors and employees’ restrictions, a copy of which has been provided to you. By your execution of this letter agreement, you represent and warrant that you are not subject to any restrictive covenant with your current employer or otherwise that would interfere with your employment with Sysco and Sysco agrees that you have satisfied this representation with respect to the agreement between you and your current employer that you have furnished to Sysco. |
| • | Sysco will at all times indemnify you to the maximum extent permitted under Sysco’s corporate charter, by-laws and applicable law. Sysco will at all times cover you under any contract of directors’ and officers’ liability insurance that covers members of the Board. Such indemnification and insurance coverage to survive any termination of your employment or service as a member of the Board. |
Treatment of Payments Under Sections 280G and 409A
Notwithstanding anything in this letter agreement or any other plan, arrangement or agreement to the contrary:
In the event that any payment or benefit received or to be received by you (whether pursuant to the terms of this letter agreement or any other plan, arrangement or agreement) (all such payments and benefits, the “Total Payments”) would fail to be deductible under Section 280G of the Internal Revenue Code (“Section 280G”) or otherwise would be subject (in whole or part) to the excise tax imposed by Section 4999 of the Internal Revenue Code (the “Excise Tax”) then, the payments or benefits to be received by you that are subject to Section 280G shall be reduced to the extent necessary so that no portion of the Total Payments is subject to the Excise Tax but only if the net amount of such Total Payments, as so reduced (and after subtracting the net amount of federal, state and local income taxes on such reduced Total Payments) is greater than or equal to the net amount of such Total Payments without such reduction (but after subtracting the net amount of federal, state and local income and employment taxes on such Total Payments and the amount of Excise Tax to which you would be subject in respect of such unreduced Total Payments).
Payments and benefits under this letter agreement are intended to comply with Section 409A of the Internal Revenue Code (“Section 409A”), to the extent subject thereto, and accordingly, such payments and benefits will be interpreted and administered to be in compliance with or exempt from Section 409A. Notwithstanding anything to the contrary in this letter agreement, you will not be considered to have terminated employment with Sysco for purposes of any payments or
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benefits under this letter agreement which are subject to Section 409A until you have incurred a “separation from service” within the meaning of Section 409A. Each amount to be paid or benefit to be provided under this letter agreement will be construed as a separate identified payment for purposes of Section 409A. To the extent required in order to avoid accelerated taxation and/or tax penalties as a “specified employee” under Section 409A, payments and benefits that would otherwise be paid or provided pursuant to this letter agreement or any other arrangement between you and Sysco during the six-month period immediately following your separation from service will instead be paid on the first business day after the date that is six months following your separation from service (or, if earlier, your date of death). To the extent required to avoid any accelerated or additional tax under Section 409A, amounts reimbursable to you under this letter agreement will be paid to you on or before the last day of the year following the year in which the expense was incurred and the amount of expenses eligible for reimbursement (and in-kind benefits provided to you) during one year may not affect amounts reimbursable or provided in any subsequent year. If your date of termination occurs after November 1 of a given calendar year, any severance payments provided in this letter agreement shall be paid (or commence to be paid) in January of the immediately following calendar year. Sysco makes no representation that any or all of the payments and benefits described in this letter agreement will be exempt from or comply with Section 409A and will exercise commercially reasonable efforts to preclude Section 409A from applying to any such payment.
Definitions. For purposes of this letter agreement, the following terms have the meanings set forth as follows:
“Cause” means your (1) conviction of, or plea of nolo contendere to a felony under federal law or the law of the state in which such action occurred, (2) dishonesty in the course of fulfilling your employment or service duties, (3) willful and deliberate failure to perform your employment or service duties in any material respect or (4) your violation of any non-competition, non-solicitation, confidentiality or other restrictive covenants agreement or code of conduct applicable to you.
“Change in Control Termination” means a termination of your employment by Sysco without
Cause or your resignation of employment with Sysco for Good Reason, either occurring during the period beginning on the date a Change in Control (as defined in the Plan) occurs and ending on the second anniversary thereof.
“Good Reason” means the occurrence of one or more of the following, without your consent: (1) a material diminution in your authority, duties or responsibilities; (2) a material change in the geographic location at which you must perform services for the Company or its subsidiaries; (3) a material diminution in the authority, duties or responsibilities of the Chairman (unless you are then reporting to the Board); or (4) a material diminution in your Base Salary. You must provide written notice of your intent to terminate for Good Reason to Sysco within 30 days after the event constituting Good Reason. Sysco shall have a period of 30 days in which it may correct the act or failure to act that constitutes the grounds for Good Reason as set forth in your notice of termination. If Sysco does not correct the act or failure to act, you must terminate your employment for Good Reason within 30 days after the end of the cure period, in order for the termination to be considered a Good Reason termination.
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Miscellaneous
| • | As Chief Executive Officer of Sysco Corporation, you will be required to comply with all applicable Sysco policies including the Stock Ownership Requirements as set forth in Sysco’s Corporate Governance Guidelines. Five years from your date of hire, you will be required to own Sysco stock valued at seven (7) times your salary. During that five-year period, you will be subject to retention requirements until your holdings meet or exceed the ownership requirements. |
| • | You will be required to complete Form I-9 (Employment Eligibility Verification). You will need to provide the required forms of identification within 3 business days of the Start Date. Please review the attached list of acceptable documents and bring either a single List A document or both List B and a List C document to your meeting with Human Resources and Payroll. |
| • | This offer is contingent upon your execution of the Protective Covenants Agreement and successful completion of the pre-employment drug check process. Any employee may terminate his/her employment at any time, with or without reason, and the company retains the same right, subject to the terms of this letter agreement. |
| • | This letter agreement is governed by the laws of the State of Texas, without regard to its conflicts of laws principles. |
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Kevin, we are excited to have you join the Sysco team and look forward to your contributions to our future success.
| Sincerely, |
| /s/ Edward D. Shirley |
| Edward D. Shirley |
| Member, Board of Directors of Sysco Corporation |
| Agreed and Accepted: | Confirmed Start Date: | |
| /s/ Kevin Hourican |
February 1, 2020 | |
| Kevin Hourican | ||
| cc: | John M. Cassaday, Chair, Compensation and Leadership Development Committee of the Board of Directors of Sysco Corporation |
Paul T. Moskowitz, Executive Vice President, Human Resources
Eve McFadden, Vice President, Legal, General Counsel and Corporate Secretary
Exhibit 10.2
| Personal & Confidential
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| Sysco Corporation | ||||||
| 1390 Enclave Parkway | ||||||
| Houston, Texas 77077 | ||||||
| Telephone: 281-584-1390 | ||||||
| January 12, 2020 | ||||||
Thomas L. Bené
2139 Bancroft Drive
Houston, Texas 77027
| Re: | Employment with Sysco Corporation |
Dear Tom:
This letter agreement (this “Agreement”) sets forth the payments and benefits you will be entitled to upon your departure from Sysco Corporation (the “Company”), subject to the terms of this Agreement.
1. Timing of Your Departure: Your last date of employment will be March 1, 2020 (the “Separation Date”). Effective as of January 13, 2020, you hereby resign as Chairman and a member of the Board of Directors of the Company. Effective January 31, 2020, you hereby resign from all positions you hold with the Company and its affiliates, including as President and Chief Executive Officer as well as all other positions or appointments that you may hold by or through the Company and its affiliates, including but not limited to any industry panels or benefit plans. Between February 1, 2020 and March 1, 2010, you will serve in an Executive Advisor role. Effective February 1, 2020 you will no longer be an officer of Sysco Corporation or a participant in the Management Incentive Plan (MIP). Because you will no longer be an MIP participant, you will cease participation in the Disability Income Plan and any additional group life and accidental death and dismemberment benefits that have been in effect for you as a member of the plan. In addition, you will cease participation in the Management Savings Plan and any associated salary/incentive deferrals will end. During the period between February 1, 2020 and the Separation Date, you will remain eligible for your base pay and other non-MIP benefits.
Effective as of the Separation Date, you will no longer be eligible for a fiscal year 2020 annual incentive award under the Management Incentive Plan or otherwise. You agree to execute, promptly upon request by the Company or its affiliate, any additional documents reasonably necessary to effectuate any such resignation.
2. Separation Benefits: Upon the Separation Date, you will be eligible for the benefits described as follows, contingent upon your compliance with the terms of this Agreement, including, but not limited to, your timely execution, without revocation, of a general release of claims (the “General Release”), provided to you concurrently with this Agreement:
Severance Payment: You will be paid a one-time lump sum cash severance payment equal to two (2) times the sum of your current base salary plus your target annual MIP bonus, in the aggregate amount of $6,000,000, less applicable taxes and deductions (the “Severance Payment”). The Severance Payment will not be considered compensation under any compensation or benefit plan sponsored or maintained by Sysco. You will not be eligible for any other severance payment except as described herein, and there will be no duplication of benefits. The Severance Payment will be made as soon as practicable but no later than thirty (30) days following the effective date of your executed and non-revoked General Release.
Company-Subsidized Health Insurance Coverage: You will be eligible to receive coverage by Sysco of the entire premium cost for health care continuation (the “Company-Subsidized Health Care Coverage”) in accordance with the terms provided herein. You will continue to be eligible for the Company-Subsidized Health Care Coverage until the earlier to occur of: (1) the date twenty-four (24) months after your active employee coverage ends (the “Company Subsidized Health Care Coverage Period”); or (2) the date you are eligible to enroll in the health, dental and/or vision plans of another employer. During the first eighteen (18) months of the Company Subsidized Health Care Coverage Period, your continued health care coverage will be provided through the federal law commonly known as COBRA. To be eligible for the Company- Subsidized Health Care Coverage, your eligible dependents, if any, must be participating in Sysco’s group health, dental and vision plans on the Separation Date and must elect on a timely basis to continue that participation in some or all of the offered plans. In addition, your continued access to the Company-Subsidized Health Care Coverage is dependent on you and your dependents continuing to be eligible to participate in Sysco’s offered plans through COBRA. You agree to notify Sysco promptly if you are eligible to enroll in the plans of another employer or if you or any of your dependents cease to be eligible to continue participation in Company plans through COBRA. You will receive information under separate cover regarding the COBRA enrollment process. After the end of such 18 month period, the Company will allow you and your dependents to continue to participate in, and receive coverage under, the Company’s group health plans for the following six (6) months for your monthly payment of an amount equal to the premium then charged by the
applicable group health plan for comparable continuation coverage under COBRA and the Company will reimburse you for the amount of the premium you pay no later than the last day of the month in which you pay such premium.
In order to receive the Severance Payment and Company-Subsidized Health Care Coverage (the “Separation Benefits”), you must execute a General Release on a timely basis. You will have at least (twenty-one days to consider whether to sign consider the release. As described more fully in the General Release, you have seven days following the date you execute the General Release to revoke your signature by delivering a written revocation to Eve McFadden, Vice President - Legal, General Counsel and Corporate Secretary at the contact specified below. The General Release will not become effective until you sign it and the seven-day revocation period has passed without you having exercised your right to revoke your signature. You will have until March 23, 2020 to execute the General Release and if you do not execute the General Release on or before March 23, 2020 or if you revoke the General Release after you execute it, you will not receive the Separation Benefits. You are advised to consult an attorney prior to executing the General Release.
3. Post-Employment Restrictions: Your receipt of the Separation Benefits is also contingent upon your adherence to your ongoing obligations to the Company regarding intellectual property, confidential information to which you had access by virtue of your employment, restrictions on competitive activities, and non-solicitation of employees and customers, including, but not limited to the restrictions contained in any existing noncompetition agreement with the Company. Failure to comply with restrictions on your post-employment activities entitles Sysco to cease any remaining payments or benefits owed to you under this Agreement and if you breach any of your obligations to the Company or its affiliates related to restrictions on competitive activities or non-solicitation of employees or customers or your obligations under Section 4 of this Agreement, you will be obligated to repay to the Company the Severance Payment within ten (10) business days after a final, non-appealable judgement is rendered by a court that you so breach such provision. Within ten (10) business days after the Separation Date, you will return to the Company all Company property in your possession or control and all documents (electronic or otherwise) that are Company property or contain proprietary or confidential information of the Company or its affiliate.
4. Non-Disparagement; Cooperation. You agree that you will not make or cause to be made, directly or indirectly, any statement or communication (whether oral, written, or electronic) that is, or may reasonably be considered to be, disparaging or negative about: (a) the Company or any of its affiliates; (b) any director, officer or employee of the Company or any of its affiliates; or (c) the reputation or business of any of the foregoing.
The Company agrees that the Company will instruct its directors to not, make or cause to be made, directly or indirectly, any statement or communication (whether oral, written, or electronic) that is, or may reasonably be considered to be, disparaging or negative about you or your service to or employment with the Company. You further agree to reasonably cooperate with and assist the Company and each of its affiliate in any legal dispute or regulatory matter in which the Company or an affiliate may become involved, including providing information, documents, submitting to depositions, and providing testimony, if requested, related to events which predate this Agreement. The Company’s requests for cooperation shall not materially interfere with your work, civic or other responsibilities. The Company shall pay any expenses incurred by you in connection with such cooperation.
5. Career Transition Services: You are immediately eligible for executive outplacement services using a vendor of Sysco’s choice.
6. Other Compensation and Benefits: You will be paid for any earned but unused vacation at the time of your separation from employment, and you also will be reimbursed for eligible business expenses that you incurred during the course of your employment per Company policy and are submitted (along with the requisite documentation) within twenty-one (21) calendar days after the Separation Date, provided that you will not be reimbursed for any such expenses incurred on or after the Separation Date. The automatic company contribution under the 401(k) plan will continue through the Separation Date, but you will not be eligible for the 50% company match for 2020 because you will not be employed by Sysco at the end of calendar 2020. You are not eligible for a company match under the MSP for calendar year 2020. Distributions from your 401k and MSP balances will be governed by the terms of each plan and any applicable distribution elections you have made. You agree that except as specifically stated in this Agreement or with respect to any vested benefits under any tax-qualified employee benefit plan or eligible claims submitted in accordance with the Company’s group health, dental and vision plans and that arose prior to the Separation Date, you are not entitled to any other compensation from the Company or its affiliates. Unless otherwise provided herein, you shall continue to be entitled to benefits under every other employee benefit plan maintained by the Company in which you participate in accordance with the terms of such plan through the Separation Date.
7. Long Term Incentive and Equity Awards: Vesting of any equity awards held by you, including but not limited to stock options, restricted stock units (“RSUs”) and performance share units (“PSUs”), will cease as of the Separation Date and any unvested equity awards that you hold will be forfeited as of the Separation Date. Vested stock options must be exercised no later than the date that is 90 days after the Separation Date, in accordance with the terms of the applicable equity incentive plan and award agreements.
8. Notices. All notices, demands, consents or communications required or permitted hereunder will be in writing and will be deemed to be given if addressed and delivered as provided below (or at such other physical or electronic address as specified by the addressee for purposes of notice under this Agreement):
| To the Company: | Sysco Corporation | |
| 1390 Enclave Parkway Houston, TX | ||
| Attention: General Counsel | ||
| Fax: (281) 584-2510 | ||
| To the executive: | Thomas L. Bené | |
| At address currently on the Company’s records | ||
9. Governing Law and Interpretation. This Agreement will be governed and controlled by and in accordance with the laws of the State of Texas without regard to its conflict of laws provisions. In the event you or the Company breaches any provision of this Agreement, you and the Company affirm that either may institute an action to specifically enforce any term or terms of this Agreement. Should any provision of this Agreement be declared illegal or unenforceable and cannot be modified to be enforceable, excluding the General Release language, such provision will immediately become null and void, leaving the remainder of this Agreement in full force and effect.
10. Section 409A. The Severance Payment is intended to be exempt from the requirements of Section 409A under the short-term deferral exception and the group health plan continuation coverage benefits under this Agreement are intended to comply with Section 409A, to the extent subject thereto, and accordingly, such payments and benefits will be interpreted and administered to be in compliance with or exempt from Section 409A. Notwithstanding anything to the contrary, you will not be considered to have terminated employment with Sysco for purposes of any payments or benefits under this Agreement which are subject to Section 409A until you have incurred a “separation from service” within the meaning of Section 409A. Each amount to be paid or benefit to be provided under this Agreement will be construed as a separate identified payment for purposes of Section 409A. To the extent required in order to avoid accelerated taxation and/or tax penalties under Section 409A, payments and benefits that would otherwise be paid or provided pursuant to any other arrangement between you and Sysco during the six-month period immediately following your separation from service will instead be paid on the first business day after the date that is six months following your separation from service (or, if earlier, your date of death). To the extent required to avoid any accelerated or additional tax under Section 409A, amounts reimbursable to you under this Agreement will be paid to you on or before the last day of the year following the year in which the expense was incurred and the amount of expenses eligible for reimbursement (and in-
kind benefits provided to you) during one year may not affect amounts reimbursable or provided in any subsequent year. Sysco makes no representation that any or all of the payments and benefits described in this Agreement will be exempt from or comply with Section 409A and makes no undertaking to preclude Section 409A from applying to any such payment.
11. Amendment: This Agreement may not be modified, altered or changed except upon express written consent of you and the Company wherein specific reference is made to this Agreement, and in accordance with Section 409A.
12. Attorney’s Fees. The Company will pay or reimburse you for up to $10,000 in attorney’s fees you incur in negotiating this Agreement.
13. Entire Agreement: This Agreement sets forth the entire agreement between you, the Company and its affiliates with respect to the subject matter contained herein and this Agreement fully supersedes any prior agreements or understandings between the parties, except as specified herein. Each party acknowledges that it has not relied on any representations, promises, or agreements of any kind made to it in connection with the other party’s decision to enter into this Agreement.
Please sign below and return an executed original of this Agreement to me by the Release Date to acknowledge your understanding of and agreement with the terms and conditions above.
| Sincerely, |
| /s/ Edward D. Shirley |
| Edward D. Shirley |
| Member, Board of Directors of Sysco Corporation |
| Enclosure |
| cc: | John M. Cassaday, Chair, Compensation and Leadership Development |
Committee of the Board of Directors of Sysco Corporation
Paul T. Moskowitz, Executive Vice President, Human Resources
Eve McFadden, Vice President, Legal, General Counsel and Corporate Secretary
AGREED:
I have read, understand, and agree to the terms and conditions set forth in the Agreement from Edward D. Shirley dated January 12, 2020.
| /s/ Thomas L. Bené |
| Thomas L. Bené |
| Date: 01/13/2020 |
Exhibit 99.1
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| For more information contact:
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| Shannon Mutschler | Rachel Lee | |||||
| Media Contact | Investor Contact | Sysco Corporation | ||||
| mutschler.shannon@corp.sysco.com | lee.rachel@corp.sysco.com | 1390 Enclave Parkway | ||||
| T 281-584-4059 | T 281-436-7815 | Houston, TX 77077 | ||||
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SYSCO ANNOUNCES SENIOR LEADERSHIP CHANGES TO ACCELERATE
NEXT PHASE OF DEVELOPMENT
Kevin Hourican Elected as New President and Chief Executive Officer
Ed Shirley Elected Executive Chair
Tom Bené to Step Down January 31, 2020; To Serve as Executive Advisor through March 1, 2020
Brad Halverson Elected Lead Independent Director
HOUSTON, January 13, 2020 – Sysco Corporation (NYSE: SYY) (“the Company”), the leading global foodservice distribution company, announced today that Tom Bené will be stepping down from his roles as president and chief executive officer effective January 31, 2020. Tom will stay on with Sysco as an executive advisor until March 1, 2020, to be available to assist with a smooth and orderly transition of leadership for the Company. The board of directors has unanimously elected Kevin Hourican as the Company’s new president and chief executive officer, starting on February 1, 2020. Kevin most recently served as executive vice president of CVS Health and president of CVS Pharmacy and is a proven business leader with two decades of experience driving market-leading growth for large organizations.
The board has elected lead independent director Ed Shirley as executive chair, replacing Tom Bené, and Brad Halverson has been elected as the new lead independent director, both effective January 13, 2020.
While Sysco’s performance has improved steadily the last few years, the board believes that the senior leadership changes announced today will enable the Company to accelerate performance, fully capitalize on its scale advantages and drive meaningful operating improvements. Specifically, the board believes Kevin’s expertise across key company capabilities – sales, supply chain, logistics, operations and digital technologies – will unlock meaningful value for customers and other key stakeholders.
Larry Glasscock, chairman of the governance and nominating committee, said, “As part of a deliberate and thoughtful process to ensure Sysco is best positioned for its next phase of development, we are pleased to announce Kevin Hourican as the Company’s new president and CEO. The board believes Kevin’s leadership and skillset
align strongly with Sysco’s strategic priorities in this next phase of accelerated growth. Moreover, Ed’s familiarity with the company and deep experience over decades running highly successful consumer businesses will ensure a smooth leadership transition.”
Mr. Shirley said, “We are pleased to welcome Kevin as our new president and CEO. Kevin brings a demonstrated track record of delivering strong growth, market share gains, customer service improvement and operational efficiencies within large and complex environments, having run an $85 billion business and leading large divisions at multi-unit retailers. He takes a strategic approach to winning in underdeveloped markets while driving new innovation. The board is highly confident Kevin has the skillset and vision to capture the opportunities ahead and we look forward to working with him and the full leadership team to deliver enhanced value for shareholders.”
Ed continued, “Tom has made many significant contributions to Sysco and the board and I are grateful for his leadership, integrity and dedication to our associates and customers. During his seven years at Sysco, he led important strategic initiatives that strengthened the Company’s overall performance and increased shareholder value. As CEO, he also renewed our focus on the customer, fostered a culture of empowerment and elevated the importance of corporate social responsibility, all of which will underpin our future success. The entire board thanks Tom for his dedication and service and we wish him well in his next endeavors.”
Mr. Bené said, “I have been honored to lead Sysco over the last few years and I am incredibly proud of all that our team has accomplished. Sysco’s leading market position in the foodservice industry, our unique capabilities and talented associates have positioned us well for the future. It has truly been an honor and a privilege to work alongside our 69,000 dedicated associates to bring our strategy to life.”
Mr. Hourican said, “I am thrilled to join the Sysco team. Sysco has an exceptional business model and significant headroom for profitable growth. I look forward to working with Ed, the board and the talented global team to continue the company’s success and identify new opportunities to enhance our market leadership and long-term growth prospects.”
Kevin Hourican 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.
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Ed Shirley 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. He 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. Ed 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.
As executive chair, Ed will work closely with Kevin to ensure a smooth and successful transition, lead the board of directors and provide input on key strategic priorities.
Brad Halverson joined the board in 2016 and is the former group president, financial products and corporate services and chief financial officer of Caterpillar Inc.
Regarding the financial outlook, the Company remains confident in its ability to achieve its financial objectives and is aligned with current fiscal year consensus estimates.
About Sysco
Sysco is the global leader in selling, marketing and distributing food products to restaurants, healthcare and educational facilities, lodging establishments and other customers who prepare meals away from home. Its family of products also includes equipment and supplies for the foodservice and hospitality industries. With more than 69,000 associates, the company operates more than 320 distribution facilities worldwide and serves more than 650,000 customer locations. For fiscal 2019 that ended June 29, 2019, the company generated sales of more than $60 billion. Information about our CSR program, including Sysco’s 2019 Corporate Social Responsibility Report, can be found at www.Sysco.com/csr2019report.
For more information, visit www.sysco.com or connect with Sysco on Facebook at www.facebook.com/SyscoCorporation or Twitter at https://twitter.com/Sysco. For important news and information regarding Sysco, visit the Investor Relations section of the company’s Internet home page at http://investors.sysco.com/, which Sysco plans to use as a primary channel for publishing key information to its investors, some of which may contain material and previously non-public information. Investors should also follow us at www.twitter.com/SyscoStock and download the Sysco IR App, available on the iTunes App Store and the Google Play Market. In addition, investors
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should continue to review our news releases and filings with the Securities and Exchange Commission. It is possible that the information we disclose through any of these channels of distribution could be deemed to be material information.
Forward-Looking Statements
Statements made in this press release that look forward in time or that express management’s beliefs, expectations or hopes are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements reflect the views of management at the time such statements are made and are subject to a number of risks, uncertainties, estimates, and assumptions that may cause actual results to differ materially from current expectations.
These statements include: our expectations that the leadership changes announced will enable the Company to accelerate performance, fully capitalize on its scale advantages and drive meaningful operating improvements; our expectations that Mr. Hourican’s expertise, skillset and vision will deliver meaningful value for customers, shareholders and other key stakeholders; and our expectations regarding the Company’s ability to achieve its financial objectives and deliver results aligned with the current fiscal year consensus estimates.
The ability of our leadership team to achieve the results reflected in the forward-looking statements is subject to the general risks associated with our business, including the risks of interruption of supplies due to lack of long-term contracts, severe weather, crop conditions, work stoppages, intense competition, technology disruptions, dependence on large, long-term regional and national customers, inflation risks, the impact of fuel prices, adverse publicity, labor issues, political or financial instability, trade restrictions, tariffs, currency exchange rates, transport capacity and costs and other factors relating to foreign trade, any or all of which could delay our receipt of product or increase our input costs. Risks and uncertainties also include risks impacting the economy generally, including the risks that the current general economic conditions will deteriorate, or consumer confidence in the economy or consumer spending, particularly on food-away-from-home, may decline. Market conditions may not improve. Competition and the impact of GPOs may reduce our margins and make it difficult for us to maintain our market share, growth rate and profitability. We may not be able to fully compensate for increases in fuel costs, and fuel hedging arrangements intended to contain fuel costs could result in above market fuel costs. Our ability to meet our long-term strategic objectives depends on our ability to grow gross profit, leverage our supply chain costs and reduce administrative costs. This will depend largely on the success of our various business initiatives, including efforts related to revenue management, expense management, our digital e-commerce strategy and any efforts related to restructuring or the reduction of administrative costs. There are various risks related to these efforts, including the risk that if sales from our locally managed customers do not grow at the same rate as sales from regional and national customers, or if we are unable to continue to
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accelerate local case growth, our gross margins may decline; the risk that we are unlikely to be able to predict inflation over the long term, and lower inflation is likely to produce lower gross profit; the risk that our efforts to modify truck routing, including our small truck initiative, in order to reduce outbound transportation costs may not be effective; the risk that our efforts to mitigate increases in warehouse costs may be unsuccessful; the risk that we may not be able to accelerate and/or identify additional administrative cost savings in order to compensate for any gross profit or supply chain cost leverage challenges; the risk that these efforts may not provide the expected benefits in our anticipated time frame, if at all, and may prove costlier than expected; the risk that the actual costs of any initiatives may be greater or less than currently expected; and the risk of adverse effects to our business, results of operations and liquidity if past and future undertakings, and the associated changes to our business, do not prove to be cost effective or do not result in the cost savings and other benefits at the levels that we anticipate. Our plans related to and the timing of any initiatives are subject to change at any time based on management’s subjective evaluation of our overall business needs. If we are unable to realize the anticipated benefits from our efforts, we could become cost disadvantaged in the marketplace, and our competitiveness and our profitability could decrease. Adverse publicity about us or lack of confidence in our products could negatively impact our reputation and reduce earnings. Capital expenditures may vary based on changes in business plans and other factors, including risks related to the implementation of various initiatives, the timing and successful completion of acquisitions, construction schedules and the possibility that other cash requirements could result in delays or cancellations of capital spending. Periods of significant or prolonged inflation or deflation, either overall or in certain product categories, can have a negative impact on us and our customers, as high food costs can reduce consumer spending in the food-away-from-home market, and may negatively impact our sales, gross profit, operating income and earnings, and periods of deflation can be difficult to manage effectively. Fluctuations in inflation and deflation, as well as fluctuations in the value of foreign currencies, are beyond our control and subject to broader market forces. Expanding into international markets presents unique challenges and risks, including compliance with local laws, regulations and customs and the impact of local political and economic conditions, including the impact of Brexit and the “yellow vest” protests in France against a fuel tax increase and the French government, and such expansion efforts may not be successful. Any business that we acquire may not perform as expected, and we may not realize the anticipated benefits of our acquisitions. Expectations regarding the financial statement impact of any acquisitions may change based on management’s subjective evaluation. A divestiture of one or more of our businesses may not provide the anticipated effects on our operations. Meeting our dividend target objectives depends on our level of earnings, available cash and the success of our various strategic initiatives. Changes in applicable tax laws or regulations and the resolution of tax disputes could negatively affect our financial results. We rely on technology in our business and any cybersecurity incident, other technology disruption
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or delay in implementing new technology could negatively affect our business and our relationships with customers. For a discussion of additional factors impacting Sysco’s business, see our Annual Report on Form 10-K for the year ended June 29, 2019, as filed with the SEC, and our subsequent filings with the SEC. We do not undertake to update our forward-looking statements, except as required by applicable law.
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