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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

 

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934

 

 

Filed by the Registrant  ☒                             Filed by a Party other than the Registrant  ☐

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☒		Definitive Proxy Statement.
☐		Definitive Additional Materials.
☐		Soliciting Material Pursuant to §240.14a-12.

Aramark

(Name of Registrant as Specified In Its Charter)

 

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

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NOTICE OF 2017 ANNUAL

MEETING OF SHAREHOLDERS

AND PROXY STATEMENT

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DEAR FELLOW SHAREHOLDERS:

Our DNA

Our purpose at Aramark is to enrich and nourish the lives of the customers, consumers and communities we serve around the world every day. We do that by Dreaming and Doing – by innovating and executing to deliver service excellence everywhere we operate. Our 270,000 associates take great pride in providing service excellence wherever people learn, work, play and recover.

Our Strong Momentum I am pleased to report that 2016 was another year of considerable progress in Aramark’s transformative journey – one denoted by record setting financial results and total shareholder return that significantly outpaced the broader markets. Leveraging the strong corporate governance actions we took in 2015, we continued to make progress in the areas of Board composition and diversity, as well as in our compensation practices. And once again, we undertook a shareholder outreach process to facilitate continuous improvement and adoption of best practices in the management of our company.   Our focus over the past number of years on improving our financial performance, innovating for our clients and engaging our employees has helped to build a strong and powerful foundation for our company, one that I like to think of as:   ●  Proven – The ability to drive consistent and sustained results. ●  Powerful – A leader in an established & resilient industry with a blue-chip client base. ●  Promising – Executing a clear & focused strategy to create shareholder value.		Eric J. Foss Chairman, President and Chief Executive Officer

This foundation delivered strong financial results* in 2016 including:

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A 21% increase in earnings per share and an 11% increase in adjusted earnings per share1.

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80 basis points of operating income margin expansion to 5.2% and nearly 40 basis points of adjusted operating income margin expansion1 to 6.5%.

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A 30 basis point reduction in Aramark’s total debt to covenant adjusted EBITDA ratio to 3.9x.

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An 8% increase in our dividend.

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All of which supported total shareholder return of 25% for the fiscal year.

Please see Annex A of the proxy statement for a reconciliation of non-GAAP financial measures to our results as reported under GAAP.

Our Three-Year Goal

Over the past few years we have been focused on strengthening our company through the execution of a three pronged strategy – Accelerating Growth, Activating Productivity and Attracting and Retaining the Best Talent. Our focus on Accelerating Growth has led to an expansion of our sales force and a sharply honed approach to winning in the marketplace. This has allowed us to reap strong rewards over the past few years. Through our Activating Productivity anchor we are achieving savings in food, labor and SG&A costs which allow us to reinvest in the business while expanding margins. We need the right people to execute this strategy, so through Attracting and Retaining the Best Talent, we are striving to make Aramark a great place to work.

This has not been a small undertaking, and has required, and will continue to require, significant investments in the business, particularly in the area of technology. The great news is that these investments are working - the food and labor tools we spent the last few years developing are delivering meaningful cost reductions as they are rolled-out. The success of these pilots has provided us with good line-of-sight on our deployment plans, which has in turn given us the confidence to communicate 3-year earnings targets. In December 2015, we were excited to announce a goal of increasing Aramark’s adjusted operating margin¹ by 100 basis points and adjusted earnings per share¹ to $2.20 by the end of fiscal 2018. With nearly 40 basis points of adjusted operating income margin expansion delivered in 2016, we are well on the way to delivering this goal and the associated shareholder value.

 

 

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Our Commitment to Sound Corporate Governance

We have always been committed to a sound corporate governance structure to promote transparency and accountability among our Board of Directors and management for the benefit of our shareholders. Our Board of Directors has continued to evolve Aramark’s governance structure and over the past two years our Board has undertaken a number of actions to enhance our governance including:

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Created and granted multi-year performance periods for performance stock units.

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Realigned our compensation peer group.

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Appointed an independent Lead Director with oversight responsibilities.

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Established a clawback policy for executive officers and other direct reports of the Chairman, President and Chief Executive Officer.

In addition to ongoing peer benchmarking, in 2016 we undertook another outreach effort with the holders of a majority of our common stock. The combination of these efforts has led to the following incremental actions this year:

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Related to our equity compensation plan that is being proposed at our 2017 Annual Meeting:

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The elimination of liberal share recycling provisions;

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The establishment of 1-year minimum vesting requirements for grants to employees.

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Continued refreshment of our Board of Directors to enhance diversity and add new and relevant skills and experience.

We strive for continuous improvement in all we do. We are committed to evolving our governance foundation as our company, the industry and our shareholder base evolves. You can count on our commitment to accountability and open dialogue with shareholders as a hallmark of our governance processes.

Our Bright Future and Your Support

Looking forward, I remain exceptionally confident in the worldwide Aramark team and the outlook for our company. Our Proven, Powerful and Promising foundation is enabling us to build a strong platform designed to deliver sustainable long-term shareholder value.

I greatly appreciate your ongoing interest and investment in our company. Your confidence in us has enabled our success so far, and your continued support is instrumental to our future success. I am pleased to invite you to attend Aramark’s Annual Meeting of Shareholders on Wednesday, February 1, 2017, at 10:00 am EST at the Philadelphia Marriott Downtown (1201 Market Street, Philadelphia, PA 19107). It will be my pleasure to welcome you and provide details about our 2016 performance and our efforts to reshape Aramark to drive new and meaningful shareholder value.

I hope to see you at our 2017 Annual Meeting of Shareholders. Whether or not you are able to attend, your voice is important, and I ask you to vote at your earliest convenience. Thank you.

 

 

Eric J. Foss

Chairman, President and Chief Executive Officer

¹ Constant Currency

* Annex A of the proxy statement includes reconciliations of financial measures presented in accordance with generally accepted accounting principles (“GAAP”) to non-GAAP financial measures included in this letter and the proxy statement. A reconciliation of our fiscal 2018 goals to GAAP measures is not provided due to the inherent difficulty in forecasting and quantifying certain amounts that are necessary for such reconciliation.

 

 

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Notice of 2017 Annual Meeting of Shareholders

 

 

DATE AND TIME:

Wednesday, February 1, 2017, at 10:00 am (Eastern Standard Time)

PLACE:

Philadelphia Marriott Downtown, 1201 Market Street, Philadelphia, Pennsylvania 19107

ITEMS OF BUSINESS:

 

1.	To elect the 10 director nominees listed in the proxy statement to serve until the 2018 annual meeting of shareholders and until their respective successors have been duly elected and qualified;

 

2.	To consider and vote upon a proposal to ratify the appointment of KPMG LLP as Aramark’s independent registered public accounting firm for the fiscal year ending September 29, 2017;

 

3.	To hold a non-binding advisory vote on executive compensation;

 

4.	To approve the Company’s Amended and Restated 2013 Stock Incentive Plan;

 

5.	To approve the Company’s Amended and Restated Senior Executive Performance Bonus Plan; and

 

6.	To transact such other business as may properly come before the meeting or any adjournment or postponement thereof.

RECORD DATE:

The Board of Directors has fixed December 13, 2016, as the record date for the meeting. This means that only shareholders as of the close of business on that date are entitled to receive this notice of the meeting and vote at the meeting and any adjournments or postponements of the meeting.

HOW TO VOTE:

Shareholders of record can vote their shares by using the Internet or the telephone or by attending the meeting in person and voting by ballot. Instructions for voting by using the Internet or the telephone are set forth in the Notice of Internet Availability that has been provided to you. Shareholders of record who received a paper copy of the proxy materials also may vote their shares by marking their votes on the proxy card provided, signing and dating it, and mailing it in the envelope provided, or by attending the meeting in person and voting by ballot.

 

December 22, 2016

 

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Proxy Voting Methods

 

 

 

If at the close of business on December 13, 2016, you were a shareholder of record, you may vote your shares by proxy through the Internet, by telephone or by mail, or you may vote in person at the Annual Meeting. For shares held through a broker, bank or other nominee at the close of business on December 13, 2016, you may vote by submitting voting instructions to your broker, bank or other nominee. For convenience and efficiency, we recommend that you vote through the Internet or by telephone, both of which are available 24 hours a day. You may revoke your proxies at the times and in the manners described in this proxy statement.

If you are a shareholder of record and are voting by proxy through the Internet or by telephone, your vote must be received by 11:59 p.m., Eastern Standard Time, on Tuesday, January 31, 2017 to be counted.

To vote by proxy if you are a shareholder of record:

BY INTERNET

 

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Go to the website www.proxyvote.com and follow the instructions, 24 hours a day, seven days a week.

 

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You will need the 16-digit number included on your Notice of Internet Availability or your proxy card (if you received a paper copy of the proxy materials) to obtain your records and to vote.

BY TELEPHONE

 

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You can vote by calling 1-800-690-6903. The telephone voting system is available 24 hours a day in the United States. Once you enter the telephone voting system, a series of prompts will tell you how to record and confirm (or change) your voting instructions.

 

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You will need the 16-digit number included on your Notice of Internet Availability or your proxy card (if you received a paper copy of the proxy materials) in order to vote by telephone.

BY MAIL

If you received a paper copy of the materials and wish to vote by mail, you should:

 

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If you have not already received a proxy card, request a proxy card from us by following the instructions on your Notice of Internet Availability.

 

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When you receive the proxy card, mark your selections on the proxy card.

 

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Date and sign your name exactly as it appears on your proxy card.

 

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Mail the proxy card in the postage-paid envelope provided to you with your proxy card.

If you hold your shares in street name, you may submit voting instructions to your broker, bank or other nominee. In most instances, you will be able to do this over the Internet, by telephone or by mail. Please refer to information from your broker, bank, or other nominee on how to submit voting instructions.

YOUR VOTE IS IMPORTANT TO US. THANK YOU FOR VOTING.

 

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Proxy Statement Summary			2
Corporate Governance Highlights			2
2016 Business Performance Highlights			5
Executive Compensation			6
Corporate Governance Matters			7
Proposal No. 1 – Election of Directors			7
Director Nominees			8
Corporate Governance			15
Director Compensation			21
Audit Committee Matters			23
Proposal No.  2 – Ratification of Independent Registered Public Accounting Firm			23
Fees to Independent Registered Public Accounting Firm			24
Report of Audit and Corporate Practices Committee			25
Compensation Matters			26
Proposal No.  3 – Advisory Vote to Approve Executive Compensation			26
Compensation Discussion and Analysis			27
Compensation Committee Report			44
Compensation Tables			45
Equity Compensation Plan Information			65
Proposal No. 4 – Vote to Approve Amended and Restated 2013 Stock Incentive Plan			66
Proposal No. 5 – Vote to Approve Amended and Restated Senior Executive Performance Bonus Plan			75
Certain Relationships and Related Transactions			79
Security Ownership of Certain Beneficial Owners and Management			80
Section 16(a) Beneficial Ownership Reporting Compliance			82
General Information			83
2017 Annual Shareholders Meeting			83
2018 Annual Shareholders Meeting			87
Annex A			Annex-1
Appendix A			A-1
Appendix B			B-1

 

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Proxy Statement Summary

 

 

This summary highlights information contained elsewhere in this proxy statement, which is first being sent or made available to shareholders on or about December 22, 2016. You should read the entire proxy statement carefully before voting. For more information regarding the Company’s 2016 performance, please review the Company’s Annual Report.

2017 ANNUAL MEETING OF SHAREHOLDERS

 

Date and Time:		Wednesday, February 1, 2017 at 10:00 am EST
Record Date:		December 13, 2016
Place:		Philadelphia Marriott Downtown, 1201 Market Street, Philadelphia, PA 19107

 

VOTING MATTERS AND RECOMMENDATIONS
PROPOSAL		BOARD’S RECOMMENDATION
Election of 10 Director Nominees (page 7)		FOR Each Director Nominee
Ratification of KPMG LLP as Independent Registered Public Accounting Firm for 2017 (page 23)		FOR
Advisory Approval of Executive Compensation (page 26)		FOR
Approval of Company Amended and Restated 2013 Stock Incentive Plan (page 66)		FOR
Approval of Company Amended and Restated Senior Executive Performance Bonus Plan (page 75)		FOR

CORPORATE GOVERNANCE HIGHLIGHTS

We are committed to strong corporate governance practices, which promote the long-term interests of shareholders, strengthen financial integrity, and foster attractive Company performance as demonstrated by the following:

 

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10 Director Nominees, of Which 9 Are Independent

 

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Annual Election of All Directors

 

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Alignment of Director and Shareholder Interests Through Director Equity Grants, which, in 2017, comprise 62% of base annual compensation

 

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Robust Director Nominee Selection Process

 

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Independent Lead Director

 

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Annual Board Skills and Experience Assessment

 

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Executive Sessions of Independent Directors Held at Each Regularly Scheduled Board Meeting

 

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Director Nominee Overview

The following is an overview of the individuals who have been nominated for election to Aramark’s Board of Directors (the “Board”) at the 2017 Annual Meeting of Shareholders. The Board believes this group of nominees is diverse in background, skills, and experience and would result in a board that would be well-balanced and effective in overseeing the Company’s strategy and management.

 

NAME

AGE

DIRECTOR  SINCE

PRIMARY OCCUPATION

INDEPENDENT

AC

CC

FC

NC

SC

Eric J. Foss

58

2012

Chairman, President and Chief Executive Officer, Aramark

No

Pierre-Olivier Beckers-Vieujant

56

2015

Honorary President and Chief Executive Officer, Delhaize Group

Yes

X

X

Lisa G. Bisaccia

60

2016

Executive Vice President and Chief Human Resources Officer, CVS Health Corporation

Yes

X

X

Richard Dreiling

63

2016

Former Chairman and Chief Executive Officer, Dollar General Corporation

Yes

X

X

Irene M. Esteves

57

2015

Former Chief Financial Officer, Time Warner Cable Inc.

Yes

X

X

Daniel J. Heinrich

60

2013

Former Executive Vice President and Chief Financial Officer, The Clorox Company

Yes

C

X

Sanjeev K. Mehra Lead Director

57

2007

Advisory Director and Former Vice Chairman, Global Private Equity, Merchant Banking Division, Goldman, Sachs & Co.

Yes

X

C

Patricia Morrison

57

New Nominee

Executive Vice President, Customer Support Services & Chief Information Officer, Cardinal Health, Inc.

Yes

John A. Quelch

65

2016

Charles Edward Wilson Professor of Business Administration, Harvard Business School; Professor in Health Policy and Management, Harvard School of Public Health

Yes

X

X

Stephen I. Sadove

65

2013

Former Chairman and Chief Executive Officer, Saks Incorporated

Yes

X

X

X

AC = Audit and Corporate Practices Committee; CC = Compensation and Human Resources Committee; FC = Finance Committee;

NC = Nominating and Corporate Governance Committee; SC = Stock Committee; C = Chairperson

 

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Director Nominee Characteristics Highlights

The following graphics highlight the balance in age and the diversity in tenure and gender and ethnicity of the group of director nominees. Also highlighted are the variety of skills, experience, and background of the director nominee group. The Board believes this balance, and effective mix of diversity, skills, experience, and background will help bring broad and valuable perspectives to the Board that will lead to a well-functioning board of directors.

 

 

 

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2016 BUSINESS PERFORMANCE HIGHLIGHTS

As we evaluate our compensation approach for the year, we note that Aramark reported another record year in 2016. We delivered an 11% increase in adjusted earnings per share¹ (“EPS”), the third consecutive year of double-digit growth. We also achieved improvements in numerous other financial metrics*, including strong growth in constant currency adjusted operating income, a 30 basis point improvement in our leverage ratio, and an 80% improvement in our free cash flow generation. We continued to execute against a focused strategy to accelerate growth, activate productivity, and attract the best talent, and our strong results this year reflect the success of this strategy.

 

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GAAP operating income was $746 million, up from $628 million in 2015

 

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Adjusted operating income1 was $952 million, up from $881 million in 2015

 

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GAAP net income was $288 million compared to $236 million in 2015

 

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Adjusted net income1 was $433 million compared to $386 million in 2015

 

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GAAP EPS of $1.16, up from $0.96 in 2015

 

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Adjusted EPS1 of $1.74, up from $1.57 in 2015

 

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Reduction in Total Debt to Covenant Adjusted EBITDA from 4.2x in 2015 to 3.9x

*See Annex A of this proxy statement for a reconciliation of non-GAAP financial measures to our results as reported under GAAP.

Total Shareholder Return of 95% since our IPO vs. 29% for the S&P 500. Our cost and productivity initiatives have improved adjusted operating income and margins…

 

 

…which have accelerated adjusted earnings per share growth, allowing us to increase the financial flexibility of the Company for the long run.

 

 

¹ Constant currency

² As of the end of fiscal 2016

 

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EXECUTIVE COMPENSATION

Our Executive Compensation Programs

Our compensation programs are designed to support our overall commitment to continued growth and the provision of quality and innovative services to our clients and customers in order to ensure continued shareholder value creation. Our programs are focused on three important goals:

Market Competitiveness: Attract and retain key executives with the capability to lead the business forward by providing innovative and effective service to our clients and customers;

Performance Based: Tie significant portions of compensation to performance in order to achieve our short-term and long-term business goals; and

Align with Shareholder Interests: Align each executive’s interests with shareholders’ interests by requiring significant stock ownership, tying significant portions of pay to performance, paying a significant portion of compensation in equity and subjecting equity compensation to performance conditions and multi-year vesting periods.

Elements of 2016 Total Direct Compensation

Our compensation programs are an integral part of attracting and retaining our named executive officers (“NEOs”). To attract new executives, we set our total compensation packages to be competitive with the market for talent from which we recruit. We aim to achieve retention through equity grants with cliff or multi-year vesting schedules in order to encourage a focus on long-term performance. Our stock options, restricted stock units and performance stock units generally vest within three or four years, which encourages executives who receive these grants to continue to remain with us and support our goal of sustainable shareholder value creation.

 

ELEMENT		COMPONENT		DESCRIPTION		BUSINESS STRATEGY
Salary		Base Salary		•  Fixed cash compensation that reflects the value of a particular position – to us and the marketplace – and the value the individual contributes to our business.   •  Reviewed annually and adjusted as appropriate.		•  Competitive base salaries assist in attracting and retaining highly qualified executives.   •  Increases are not guaranteed which preserves our performance-focused culture.
Annual Cash Incentive		Senior Executive Performance Bonus Plan or Management Incentive Bonus Plan		•  Our Amended and Restated Management Incentive Bonus Plan (the “Management Bonus Plan”) is designed to encourage and reward performance that is consistent with our financial objectives and individual performance goals and targets.   •  When determining the bonus for each of our NEOs who participate in our Amended and Restated Senior Executive Performance Bonus Plan (the “Senior Executive Bonus Plan”), the amount that the NEO would have received under the Management Incentive Bonus Plan is a main factor, along with the overall performance of the Company. The Compensation and Human Resources Committee (the “Compensation Committee”) is also able to use negative discretion to determine the actual bonus awarded.		•  Metrics and targets are evaluated each year for alignment with business strategy.
Long Term Incentives (“LTIs”)		2016 Equity Grants		•  Consists of a mix of equity vehicles, including performance restricted stock or performance stock units (“PSUs”), time-vesting stock options, and time-vesting restricted stock units.   •  Generally, PSUs and performance restricted stock cliff vest following a three-year period subject to the achievement of an adjusted EPS target for 2018 and continued employment with the Company.   •  Generally, time-based awards vest 25% per year over four years.   •  Certain performance restricted stock, restricted stock units, and stock options granted to the CEO cliff vest in three years and are subject to an additional performance condition relating to the Company’s relative total shareholder return.		•  Intended to align NEO’s business objectives with shareholder interests, reward the achievement of long-term goals, and focus NEOs on delivering shareholder value.   •  Increases retention and continuity of NEOs and other key leadership for the Company.   •  Ensures direct alignment to and focus on stock price appreciation.   •  Award mix and performance metrics are reviewed annually for alignment with business strategy.

 

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Corporate Governance Matters

 

 

 

 

PROPOSAL NO. 1 - ELECTION OF DIRECTORS

 

 

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DIRECTOR NOMINEES

The following information describes certain information regarding our director nominees as of December 22, 2016.

Director Nominee Composition

 

 

Director Nominee Skills, Experience, and Background

The Board regularly reviews the skills, experience, and background that it believes are desirable to be represented on the Board and, in conjunction with the Board’s refreshment process described below, has recently re-evaluated these skills and qualifications to better align with the Company’s strategic vision and business and operations. The following is a description of some of these skills, experience, and background:

 

 

 

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The following is a summary of the some of the skills, experience, and background that our director nominees bring to the Board:

 

 

 

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CORPORATE GOVERNANCE

Board Structure and Leadership

The Board manages or directs the business and affairs of the Company, as provided by Delaware law, and conducts its business through meetings of the Board and five standing committees: the Audit and Corporate Practices Committee (the “Audit Committee”), the Compensation Committee, the Nominating Committee, the Finance Committee and the Stock Committee. The Board is currently led by Mr. Foss, our Chairman, President and Chief Executive Officer.

The Board, upon the recommendation of the Nominating Committee, has determined that, at this time, combining the positions of Chairman and Chief Executive Officer as part of a governance structure that includes a lead independent director (the “Lead Director”) is the best board organization for Aramark. Aramark has a strong and effective Board that works very well together and 9 of the 10 Board nominees, if elected, will be independent directors. The Board’s committees are composed solely of, and chaired by, independent directors. Our independent directors meet at each regularly scheduled Board meeting in separate executive sessions, without Mr. Foss present, chaired by Mr. Mehra, the Lead Director.

The role of the Lead Director is to: (i) preside at all meetings of the Board at which the Chairman and Chief Executive Officer is not present, including executive sessions, (ii) in collaboration with the Chairman and Chief Executive Officer, establish agendas and materials for Board meetings, and in consultation with other directors, establish agendas for executive sessions, (iii) serve as principal liaison between the independent directors and the Chairman and Chief Executive Officer (however, all independent directors are encouraged to communicate directly with the Chairman), (iv) call meetings of independent directors, (v) if requested by shareholders, ensure that he is available for consultation and direct communication, (vi) with the Chairman of the Nominating Committee, if applicable, participate in the Board’s annual self-evaluation and provide Board-related performance feedback to the Chairman and Chief Executive Officer, (vii) with the Chairman of the Compensation Committee, participate in the annual discussion of the Chairman and Chief Executive Officer’s performance feedback and leadership succession and (viii) perform other duties as the Board may specify on a situational basis.

Aramark’s strong Board, with a proactive Lead Director and independent committee chairs, ensures that the Board, and not the Chairman alone, determines the Board’s areas of focus. The Chairman is guided by the strong independent directors, including the Lead Director. In addition, having the Chief Executive Officer also serve as Chairman creates a bridge to management that helps provide the Board with the management support that it needs.

Director Independence and Independence Determinations

Under our Corporate Governance Guidelines and NYSE rules, a director is not independent unless the Board affirmatively determines that he or she does not have a direct or indirect material relationship with the Company or any of its subsidiaries.

The Board has established guidelines of director independence to assist it in making independence determinations, which conform to the independence requirements in the NYSE listing standards. In addition to applying these guidelines, which are set forth in our Corporate Governance Guidelines (which may be found on the Corporate Governance page of the Investor Relations section on our website at www.aramark.com), the Board will consider all relevant facts and circumstances in making an independence determination. Our Corporate Governance Guidelines provide that none of the following relationships will disqualify any director or nominee from being considered “independent” and such relationships will be deemed to be an immaterial relationship with Aramark:

 

•

A director’s or a director’s immediate family member’s ownership of five percent or less of the equity of an organization that has a relationship with Aramark;

 

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A director’s service as an executive officer or director of or employment by, or a director’s immediate family member’s service as an executive officer of, a company that makes payments to or receives payments from Aramark for property or services in an amount which, in any fiscal year, is less than the greater of $1 million or two percent of such other company’s consolidated gross revenues; or

 

•

A director’s service as an executive officer of a charitable organization that received annual contributions from Aramark and its Foundation that have not exceeded the greater of $1 million or two percent of the charitable organization’s annual gross revenues (Aramark’s automatic matching of employee contributions will not be included in the amount of Aramark’s contributions for this purpose).

 

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The policy of the Board is to review the independence of all directors at least annually. The Nominating Committee undertook its annual review of director independence and made a recommendation to the Board of Directors regarding director independence. In making its independence determinations, the Nominating Committee and the Board considered various transactions and relationships between Aramark and the directors and nominees or between Aramark and certain entities affiliated with a director or nominee. The Nominating Committee and the Board considered that each of Messrs. Abbrecht, Mehra, and Quelch and Ms. Bisaccia are or were employed by organizations that do business with Aramark, where (i) each of such transactional relationships was for the purchase or sale of goods and services in the ordinary course of Aramark’s business, and the amount received by Aramark or such company in each of the previous three years did not exceed the greater of $1 million and 1% of either Aramark’s or such organization’s consolidated gross revenues or (ii) in the case of transactions with Goldman Sachs and its affiliates, of which Mr. Mehra is currently an advisory director and was an employee during fiscal 2016, also included Goldman Sachs and its affiliates’ participation as a lender in the ordinary course of business in the Company’s revolving credit facility, along with approximately 15 other lenders, for which Goldman’s lending commitment and associated interest payments was less than 1% of the consolidated gross revenues of Goldman Sachs. As a result of this review, the Board affirmatively determined that each of Messrs. Abbrecht, Babbio, Beckers-Vieujant, Coleman, Dreiling, Heinrich, Mehra, Quelch and Sadove, Ms. Bisaccia, and Ms. Esteves is independent and David A. Barr, who served as a director during a portion of fiscal 2016, was independent under the guidelines for director independence set forth in our Corporate Governance Guidelines and for purposes of applicable NYSE standards. In connection with her nomination to the Board, the Board affirmatively determined that Ms. Morrison is independent under the guidelines for director independence set forth in our Corporate Governance Guidelines and for purposes of applicable NYSE standards. The Board has also determined that each of Messrs. Beckers-Vieujant, Coleman, Heinrich, and Quelch and Ms. Esteves is “independent” for purposes of Rule 10A-3 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).

Board Committees and Meetings

The Board held six meetings during fiscal 2016. During fiscal 2016, each director attended at least 75% of the aggregate of all Board meetings and all meetings of committees on which he or she served, in each case with respect to the portion of fiscal 2016 that they each served. All Aramark directors standing for election are expected to attend the annual meeting of shareholders and all but one of the directors standing for election attended the 2016 Annual Meeting.

Each of our five standing committees operates under a written charter approved by the Board. The charters of each of our standing committees are available in the Investor Relations section of our website at www.aramark.com. The Board and each of our standing committees, other than the Stock Committee, perform self-evaluations on an annual basis.

The current composition of each Board committee is set forth below:

 

DIRECTOR		AUDIT      COMMITTEE		COMPENSATION      COMMITTEE		FINANCE      COMMITTEE		NOMINATING      COMMITTEE		STOCK     COMMITTEE
Eric J. Foss
Todd M. Abbrecht				X		Chair
Lawrence T. Babbio, Jr.				Chair		X
Pierre-Olivier Beckers-Vieujant		X						X
Lisa G. Bisaccia				X				X
Leonard S. Coleman, Jr.		X						X		X
Richard Dreiling				X		X
Irene M. Esteves		X				X
Daniel J. Heinrich		Chair				X
Sanjeev K. Mehra, Lead Director				X				Chair
John A. Quelch		X						X
Stephen I. Sadove				X				X		X

 

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Oversight of Risk Management

Aramark’s management is responsible for day-to-day risk management activities. The Board, acting directly and through its committees, is responsible for the oversight of Aramark’s risk management.

Our Audit Committee periodically reviews our accounting, reporting and financial practices, including the integrity of our financial statements, the surveillance of administrative and financial controls and our compliance with legal and regulatory requirements. In addition, our Audit Committee reviews risks related to compliance with ethical standards, including our Business Conduct Policy, the Company’s approach to enterprise risk management and operational risks, including those related to information security and system disruption. Through its regular meetings with management, including the accounting, finance, legal, and internal audit functions, our Audit Committee reviews and discusses the risks related to its areas of oversight and reports to the Board with regard to its review. Our Finance Committee focuses on financial risks associated with the Company’s capital structure and acquisitions and divestitures that the Company is considering. Our Compensation Committee oversees compensation-related risk management, as discussed further in this proxy statement under “Board Committees and Meetings-Compensation and Human Resources Committee” and “Compensation Matters-Compensation Discussion and Analysis-Compensation Risk Disclosure.” Our Nominating Committee oversees risks associated with board structure and other corporate governance policies and practices. Our Finance, Compensation and Nominating Committees also regularly report their findings to the Board.

 

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Our Chief Executive Officer and other executive officers regularly report to the non-executive directors and the Audit, the Compensation, the Nominating and the Finance Committees to ensure effective and efficient oversight of our activities and to assist in proper risk management and the ongoing evaluation of management controls. In addition, the Board receives periodic detailed operating performance reviews from management. Our vice president of internal audit reports functionally and administratively to our chief financial officer and directly to the Audit Committee. We believe that the leadership structure of the Board provides appropriate risk oversight of our activities.

Management Succession Planning

The Board’s responsibilities include succession planning for the Chief Executive Officer and other executive officer positions. The Compensation Committee oversees the development and implementation of our succession plans. At least once annually, the Chief Executive Officer provides the Board with an assessment of senior managers and their potential to succeed to the position of Chief Executive Officer. This assessment is developed in consultation with the Lead Director and the Chair of the Compensation Committee. The Compensation Committee is also responsible for follow-up actions with respect to succession planning as may be delegated by the Board from time to time. High potential executives meet regularly with the members of the Board.

Executive Sessions

From time to time, and, consistent with our Corporate Governance Guidelines, at least semi-annually, the Board meets in executive session without members of management present. Mr. Mehra, as Lead Director, presides at these executive sessions.

Code of Conduct

We have a Business Conduct Policy that applies to all of our directors, officers and employees, including our principal executive officer, principal financial officer and principal accounting officer, which is available on the Investor Relations section of our website at www.aramark.com. Our Business Conduct Policy contains a “code of ethics,” as defined in Item 406(b) of Regulation S-K. We will make any legally required disclosures regarding amendments to, or waivers of, provisions of our code of ethics on our Internet website.

Committee Charters and Corporate Governance Guidelines

The charters of the Compensation Committee, the Nominating Committee, the Audit Committee, the Finance Committee and the Stock Committee and our Corporate Governance Guidelines are available under the Investor Relations section of our website at www.aramark.com. Please note that all references to our website in this Proxy Statement are intended to be inactive textual references only.

Copies of our Business Conduct Policy, the charters of the Compensation Committee, the Nominating Committee, the Audit Committee, the Finance Committee and the Stock Committee and our Corporate Governance Guidelines also are available at no cost to any shareholder who requests them by writing or telephoning us at the following address or telephone number:

Aramark

1101 Market Street

Philadelphia, PA 19107

Attention: Investor Relations

Telephone: (215) 409-7287

Director Nomination Process

The Nominating Committee does not set specific, minimum qualifications that directors must meet in order for the Nominating Committee to recommend them to the Board. Rather, it believes that each director and director candidate should be evaluated based on his or her individual merits, taking into account Aramark’s needs and the composition of the Board. In nominating a slate of directors, the Nominating Committee’s objective is to select individuals with skills and experience that can be of assistance in operating our business. All candidates are evaluated in the same manner regardless of who recommended such candidate for nomination. When reviewing the qualifications of potential director candidates, the Nominating Committee considers:

 

•

whether individual directors possess the following personal characteristics: integrity, education, accountability, business judgment, business experience, reputation and high performance standards, and

 

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•

all other factors it considers appropriate, which may include accounting and financial expertise; industry knowledge; corporate governance background; executive compensation background; strategic leadership experience; senior management experience; prior public company board service; international experience or background; age, gender and ethnic and racial background; civic and community relationships; existing commitments to other businesses; potential conflicts of interest with other pursuits; legal considerations, such as antitrust issues; and the size, composition and combined expertise of the existing Board.

The Board believes that, as a whole, it should strive to possess the following core competencies: accounting and finance, management, crisis response, industry knowledge, international leadership and strategy/vision, among others. While the Board does not have a formal policy with regard to diversity, the Nominating Committee and the Board strive to ensure that the Board is composed of individuals who together possess a breadth and depth of experience relevant to the Board’s oversight of Aramark’s business and strategy.

In our most recent director candidate search, a third-party director search firm was retained by the Nominating Committee to assist in identifying and evaluating candidates for board membership who best satisfy Aramark’s criteria for directors. Messrs. Mehra and Foss vetted the candidates proposed by our third-party director search firm and determined which candidates should be reviewed by the Nominating Committee. The Nominating Committee then discussed the finalist candidates and the Chairman of the Nominating Committee reported on such candidates to the Board. Individual members of the Board were given the opportunity to meet with the candidates either in person or by phone. Following that process, and upon recommendation by the Nominating Committee, the Board nominated Ms. Morrison for election to the Board.

Board Refreshment

The Board and the Nominating Committee regularly consider the long-term make up of our Board and how the members of our Board change over time. The Board and Nominating Committee also consider the skills, experience, and backgrounds needed for the Board as our business and the industries and sectors in which we do business evolve. The Board and Nominating Committee also understand the importance of Board Refreshment and aim to strike a balance between the knowledge that comes from longer-term service on the board with the new experience, ideas and energy that can come from adding directors to the Board. Assuming the election of this year’s proposed director nominees, since Mr. Foss joined the Company as Chief Executive Officer, and in connection with the exit of the private equity sponsors and the Company’s initial public offering, we will have added 8 new independent directors to the Board and have had 8 directors step down or not stand for re-election. We believe the average tenure for our director nominees of approximately 2.8 years reflects the new and independent Board that is well-positioned to continue the Company’s growth as a public company.

 

 

 

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DIRECTOR COMPENSATION

Annual Cash Compensation for Board Service

Until December 31, 2015, each non-employee director received $100,000 annually for service on the Board, payable quarterly in arrears. The chairman of the Audit Committee was eligible to receive an additional annual retainer of $20,000, the chairmen of the Compensation Committee and the Nominating Committee were each eligible to receive an additional annual retainer of $15,000 and the chairman of the Finance Committee was eligible to receive an additional annual retainer of $10,000, provided, in each case, that such committee chairman was a non-employee, non-Sponsor director. Directors who join the Board during the fiscal year or serve as a committee chairman for a portion of the fiscal year receive a prorated amount of the relevant annual cash compensation.

Effective January 1, 2016, the Lead Director became eligible to receive an additional annual retainer of $50,000, and the additional annual retainers for the chairpersons of the Compensation Committee, Nominating Committee and Finance Committee were increased to $20,000 and paid to all chairpersons who are non-employee directors (whether or not affiliated with our former Sponsors). In 2016, Messrs. Mehra, Heinrich, Babbio and Abbrecht each received additional fees for serving as Lead Director and/or chairing the Nominating, Audit, Compensation or Finance Committee.

Annual Deferred Stock Unit Grant

Under the Company’s current director compensation policy, which has been in effect since January 1, 2016, non-employee directors are eligible for an annual grant of deferred stock units (“DSUs”) with a value of $160,000 each February and directors have the right to elect whether the DSUs granted will deliver shares on: (i) the vesting date of the DSUs or (ii) the first day of the seventh month after the date the director ceases to serve on the Board.

In accordance with the director compensation policy, each member of the Board who was not an employee of the Company received a grant of approximately $160,000 worth of DSUs under the 2013 Stock Plan in February 2016. These DSUs will vest on the day prior to the Company’s first annual meeting of shareholders that occurs after the grant date, subject to the director’s continued service on the Board through the vesting date, and will be settled in shares of the Company’s common stock pursuant to each director’s election as described above. Directors who are appointed to the Board during the year will be entitled to a prorated grant of DSUs. All DSUs accrue dividend equivalents from the date of grant until the date of settlement.

Ownership Guidelines

Effective November 11, 2015, the Board of Directors has adopted a minimum ownership guideline, providing that each director must retain at least five times the value of the annual cash retainer in shares of common stock, and that the required level of ownership be attained five years after the later of the date of approval of the guidelines and the director’s start date.

Director Deferred Compensation Plan

Effective January 1, 2016, our non-employee directors were able to elect with respect to all or a portion of their cash board retainer fees to (i) to receive all or a portion of such cash fees in the form of DSUs or (ii) to defer all or a portion of such cash fees under our 2005 Deferred Compensation Plan. The DSUs that a director elects to receive in lieu of cash fees will be awarded under our 2013 Stock Plan and will be fully vested on grant and settled in shares of our common stock on the first day of the seventh month after the director ceases to serve on the Board. Cash amounts that a director elects to defer under the unfunded 2005 Deferred Compensation Plan are credited at an interest rate based on Moody’s Long Term Corporate Baa Bond Index rate for October of the previous year, which was 5.34% for October 2015. The 2005 Deferred Compensation Plan permits participants to select a payment date and payment schedule at the time they make their deferral election, subject to a three-year minimum deferral period. All or a portion of the amount then credited to a deferral account may be withdrawn, if the withdrawal is necessary in light of a severe financial hardship.

Other Benefits

All directors are eligible for an annual matching contribution to a college or other non-profit organization in an amount up to $10,000.

 

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Non-Employee Directors

The following table sets forth compensation information for our non-employee directors in 2016. Mr. Barr did not stand for re-election at our 2016 Annual Meeting of Shareholders in February 2016, and Messrs. Dreiling and Quelch and Ms. Bisaccia joined the Board of Directors on February 2, 2016.

 

NAME		FEES EARNED OR PAID IN CASH(1) ($)				STOCK AWARDS(2) ($)				OPTION AWARDS ($)				CHANGE IN PENSION VALUE AND NONQUALIFIED DEFERRED COMPENSATION EARNINGS ($)				ALL OTHER COMPENSA- TION(3) ($)				TOTAL ($)
Todd M. Abbrecht			120,004				159,996				—				—				2,432				282,432
Lawrence T. Babbio, Jr.			120,004				159,996				—				—				24,058				304,058
David A. Barr			34,066				—				—				—				11,707				45,773
Pierre-Olivier Beckers-Vieujant			100,004				159,996				—				—				—				260,000
Lisa G. Bisaccia			66,212				159,996				—				—				—				226,209
Leonard S. Coleman, Jr.			100,004				159,996				—				—				28,058				288,058
Richard Dreiling			66,212				159,996				—				—				—				226,209
Irene M. Esteves			100,004				159,996				—				—				—				260,000
Daniel J. Heinrich			120,004				159,996				—				—				6,279				286,279
Sanjeev K. Mehra			157,504				159,996				—				—				2,432				319,932
John A. Quelch			66,212				159,996				—				—				—				226,209
Stephen I. Sadove			100,004				159,996				—				—				10,279				270,279

 

(1)

Includes base director fees of $100,000, as well as a Lead Director fee of $37,500 for Mr. Mehra and chairperson fees of $20,000 for each of Messrs. Abbrecht, Babbio, Heinrich, and Mehra. Messrs. Dreiling, Mehra and Quelch and Ms. Bisaccia and Ms. Esteves elected to defer 100% of their cash retainers (inclusive of fees) into DSUs.

 

(2)

Represents the aggregate grant date fair value computed in accordance with FASB ASC Topic 718 with respect to the DSUs granted on February 2, 2016 (which had a grant date fair value of $32.48 per DSU). As of the end of fiscal 2016, directors held the following deferred stock units (including dividend equivalent units):

 

Name		DSUs and Equivalents								Name		DSUs and Equivalents
Todd M. Abbrecht			15,394.7199							Richard Dreiling			6,182.3858
Lawrence T. Babbio, Jr.			72,693.4198							Irene M. Esteves			10,430.6898
David A. Barr			—							Daniel J. Heinrich			14,988.5660
Pierre-Olivier Beckers-Vieujant			8,949.8641							Sanjeev K. Mehra			17,912.6285
Lisa G. Bisaccia			6,182.3858							John A. Quelch			6,182.3858
Leonard S. Coleman, Jr.			72,693.4198							Stephen I. Sadove			14,988.5660

For additional information on the valuation assumptions and more discussion with respect to the deferred stock units, refer to Note 10 to our audited consolidated financial statements in our Annual Report on Form 10-K for the fiscal year ended September 30, 2016.

 

(3)	The following are included in this column:

 

(a)

Charitable contributions of $4,000 made in the name of or on behalf of each of Messrs. Coleman and Heinrich and $8,000 made in the name of or on behalf of Mr. Sadove in accordance with the Company’s director charitable contribution matching program and a charitable contribution of $10,000 in the name of or on behalf of Mr. Barr in recognition of his service on the Board.

 

(b)

The dollar value of dividend equivalents accrued on deferred stock units granted prior to February 5, 2014 (the date the Company announced the payment of its first quarterly dividend), where dividends were not factored into the grant date fair value required to be reported for such awards. The total value of dividend equivalents accrued on deferred stock units for the directors during fiscal 2016, in each case for awards granted prior to February 5, 2014, is as follows: for Mr. Abbrecht, $2,432, for Mr. Babbio, $24,058, for Mr. Coleman, $24,058, for Mr. Heinrich, $2,279, for Mr. Mehra, $2,432, and for Mr. Sadove, $2,279. For awards granted on or after February 5, 2014, the value of dividend equivalents allocated to deferred stock units in the form of additional units with the same vesting terms as the original awards is not included in this column because their value is factored into the grant date fair value of awards. Additional units awarded in connection with dividend adjustments are subject to vesting and delivery conditions as part of the underlying awards.

 

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Audit Committee Matters

 

 

 

PROPOSAL NO. 2 – RATIFICATION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

The Audit Committee assists the Board in its oversight of the Company’s independent registered public accounting firm, which assistance includes the responsibility to appoint, compensate, retain, and oversee the firm. The independent registered public accounting firm reports directly to the Audit Committee. The Audit Committee reviews the independent registered public accounting firm’s qualifications, independence, and performance at least annually. In connection with this review, the Audit Committee considers whether there should be a regular rotation of the independent registered public accounting firm to assure continuing auditor independence. Further, in conjunction with the mandated rotation of the independent audit firm’s lead engagement partner, the Audit Committee is involved in the selection of the independent audit firm’s lead engagement partner.

 

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The Audit Committee has appointed KPMG as the Company’s independent registered public accounting firm for fiscal 2017. KPMG has served as the Company’s independent registered public accounting firm since 2002. The Audit Committee believes that the continued retention of KPMG as the Company’s independent registered public accounting firm is in the best interests of the Company and its shareholders. In addition to KPMG’s independence, the Audit Committee considered:

 

•  KPMG’s capabilities, expertise, and historical performance on the Company’s audits;		•  KPMG’s compliance with regulations; and
•  The effectiveness of KPMG’s processes, including its quality control, timeliness, and responsiveness and interaction with management;		•  KPMG’s efforts towards efficiency, including with respect to process improvements and fees.

Benefits of KPMG’s tenure as the Company’s independent registered public accounting firm include:

 

Increased Audit Quality After years of experience as the Company’s independent auditor, KPMG has gained institutional knowledge of and deep expertise in the Company’s global operations and businesses, accounting policies and practices, and internal control over financial reporting that increases the quality of their audit.		Competitive Fees KPMG’s fees are competitive with their peers because of their familiarity with the Company and its businesses.		Avoid Transition to New Auditor Engaging a new independent auditor would likely result in additional costs and require a significant time commitment from management, which could distract management from its focus on other areas, such as financial reporting and internal controls.

FEES TO INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Set forth below is information relating to the aggregate fees billed by KPMG for professional services rendered for each of the last two fiscal years as well as a description of each fee category.

 

		FISCAL 2015				FISCAL 2016
Audit Fees		$	5,844,899			$	6,427,405
Audit-related Fees		$	190,112			$	110,076
Tax Fees		$	687,345			$	266,740
All Other Fees			—				—
TOTAL		$	6,722,356			$	6,804,221

Audit fees include the audit of annual financial statements, the review of quarterly financial statements, the performance of statutory audits, procedures and comfort letters related to registration statements.

Audit-related fees include assurance and related services that were reasonably related to the audit of annual financial statements and reviews of quarterly financial statements, but not reported under Audit Fees. Audit-related fees include: retirement plan audits, accounting consultations for proposed transactions and certain reports.

Tax fees include domestic and international tax consulting.

The Audit Committee considered whether providing the non-audit services shown in this table was compatible with maintaining KPMG’s independence and concluded that it was.

Policy for the Pre-Approval of Audit and Permissible Non-Audit Services

The Audit Committee annually reviews and pre-approves the services that may be provided by the Company’s independent registered public accounting firm without obtaining further specific pre-approval from the Audit Committee. The Audit Committee has also adopted a Pre-Approval Policy that contains a list of pre-approved services, which the Audit Committee may revise from time to time, based on subsequent determinations. The Audit Committee has delegated pre-approval authority to the chairman of the Audit Committee, or in his absence or unavailability, to another specified member of the Audit Committee. The chairman of the Audit Committee or such specified member will report any pre-approval decisions to the Audit Committee at its next scheduled meeting. All of the audit fees, audit-related fees and tax fees were pre-approved by the Audit Committee or the chairman of the Audit Committee.

 

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REPORT OF AUDIT AND CORPORATE PRACTICES COMMITTEE

The Audit Committee represents and assists the Board and is composed solely of directors who satisfy the independence and financial literacy requirements, and the heightened independence criteria applicable to audit committee members, of the NYSE Rules and applicable securities laws. In addition, the Board has determined that each of Daniel J. Heinrich and Irene M. Esteves is an audit committee financial expert as defined under the rules of the SEC.

The Audit Committee operates under a written charter approved and adopted by the Board, which sets forth its duties and responsibilities. This charter can be found on the Company’s website at www.aramark.com under the Investor Relations section. This charter is reviewed annually and updated as appropriate to reflect the Audit Committee’s evolving role, changes in regulatory requirements and oversight practices, and investor feedback.

The Audit Committee’s purpose is to assist the Board in its oversight of:

 

•

The performance of the Company’s internal audit function;

 

•

The qualifications, independence, and performance of the independent auditors;

 

•

The Company’s compliance with legal and regulatory requirements; and

 

•

The accounting, reporting, and financial practices of the Company, including the quality and integrity of the Company’s financial statements.

The Audit Committee met nine times in fiscal 2016 and fulfilled each of its duties and responsibilities as outlined in its charter. The Audit Committee regularly conferred with KPMG, the Company’s internal auditors, and senior management in separate executive sessions to discuss any matters that the Audit Committee, KPMG, the Company’s internal auditors, or senior management believed should be discussed privately with the Audit Committee. The Audit Committee has direct access to KPMG and the Company’s internal auditors, which each report directly to the Audit Committee.

2016 Audited Financial Statements and Internal Controls

The Company’s management has primary responsibility for establishing and maintaining effective internal control over financial reporting and preparing the Company’s financial statements and disclosures. KPMG, the Company’s independent registered public accounting firm for fiscal 2016, is responsible for performing an independent audit of the Company’s consolidated financial statements and expressing opinions on the conformity of the Company’s audited financial statements with generally accepted accounting principles in the United States and on the effectiveness of the Company’s internal control over financial reporting. The Audit Committee oversees the performance of these responsibilities by KPMG and management, including the processes by which these responsibilities are fulfilled.

In the performance of its oversight function and in accordance with its responsibilities under its charter, the Audit Committee has reviewed and discussed with management and KPMG the Company’s audited financial statements as of and for the fiscal year ended September 30, 2016. The Audit Committee also discussed with KPMG the matters required to be discussed by Public Company Accounting Oversight Board Auditing Standard No. 16 “Communications with Audit Committees.” Finally, the Audit Committee received the written disclosures and the letter from KPMG required by applicable requirements of the Public Company Accounting Oversight Board regarding KPMG’s communications with the Audit Committee concerning independence, and discussed with KPMG their independence.

Based on the review and discussions referred to above, the Audit Committee recommended to the Board that the financial statements referred to above be included in the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2016 filed with the SEC.

Members of the Audit and Corporate Practices Committee:

Daniel J. Heinrich, Chairman

Pierre-Olivier Beckers-Vieujant

Leonard S. Coleman, Jr.

Irene Esteves

John Quelch

 

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Compensation Matters

 

 

 

PROPOSAL NO. 3 – ADVISORY VOTE TO APPROVE EXECUTIVE COMPENSATION

 

 

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COMPENSATION DISCUSSION AND ANALYSIS

2016 Company Financial Highlights

Aramark delivered strong results in fiscal 2016 by increasing constant currency adjusted operating income by 8% and constant currency adjusted earnings per share by 11% and expanding constant currency adjusted operating income margin by nearly 40 basis points. The Company also reduced its total debt to covenant adjusted EBITDA leverage ratio by 30 basis points to 3.9x. Free cash flow was improved by 80% versus the prior year to $321 million.

 

 

This performance supported the 8% increase in our shareholder dividend and we continue to reinvest in the business to support our goal of building value in the future.

See Annex A of this proxy statement for a reconciliation of non-GAAP financial measures to our results as reported under GAAP.

Compensation paid in fiscal 2016 and the new long-term incentives granted in fiscal 2017 reflect Aramark’s strong fiscal 2016 performance and are consistent with the Compensation Committee’s philosophy for compensation described on page 29 below.

Shareholder Engagement and Corporate Governance Enhancements

Following the Company’s return to the public market in fiscal 2014, the Board and the senior management team decided to develop a more robust shareholder engagement program. Following the exit of the Company’s private equity sponsors, investment funds affiliated with one or more of GS Capital Partners, CCMP Capital Advisors, J.P. Morgan Partners, Thomas H. Lee Partners and Warburg Pincus, LLC, as controlling shareholders in 2015 and the valuable feedback received in connection with the Company’s 2015 and 2016 annual meetings, the Board and senior management further increased their effort in this area.

 

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In 2015, we initiated our shareholder outreach program and reviewed our policies and programs against published guidelines of shareholders and proxy advisory firms, and we continued to improve our program in 2016. In 2016, we approached many of our large investors, whose holdings represented approximately two-thirds of the outstanding shares of Aramark common stock, to discuss governance matters, including the results of the most recent “say on pay” vote, and any other feedback or concerns the shareholder might have. We engaged in substantive discussions with several of these shareholders, as well as a leading proxy advisory firm. Management then reported the feedback to the Board, including the Compensation Committee. The Board and the Compensation Committee considered the feedback, the favorable results of our annual shareholder vote on executive compensation for the previous fiscal year and the review of our practices against published guidelines, and responded as follows:

 

SHAREHOLDER/PROXY ADVISORY FIRM FEEDBACK		COMPANY’S RESPONSE		INTENDED OUTCOME		EFFECTIVE DATE
Performance awards are measured against only one-year performance periods		Began granting performance stock units/performance restricted stock measured against a three-year performance period and to cliff vest at the end of such three-year period		Better alignment of NEO equity compensation to Company’s long-term goals		November 2015 (fiscal 2016)
Lack of a clawback policy		Adopted a clawback policy that applies in the event of a financial restatement under certain conditions		Better protection against NEOs receiving compensation for performance that was not actually achieved		February 2015
Annual cash incentive program for senior executives provides a higher than typical amount of discretion regarding the amount of bonus payments		The Compensation Committee bases the annual cash incentives provided to senior executives on the Company’s management incentive bonus plan that is applicable to other management and is 90% driven by formula-based quantitative financial results for fiscal 2016		Increase transparency regarding annual cash incentives awarded and better align awards of annual cash incentives with Company’s financial results		Fiscal 2015 and 2016
Limit dilution of current shareholders and their equity holdings caused by equity grants under your equity plan		Proposed elimination of liberal share recycling provision for shares under the proposed Amended and Restated 2013 Stock Incentive Plan		Limit dilution of current shareholders		February 2017

Which Executives are Covered

As required by SEC rules, this compensation discussion and analysis provides information regarding our executive compensation programs for the following executive officers (the “named executive officers”) in fiscal 2016:

 

NAME		TITLE
Eric J. Foss		Chairman, President and Chief Executive Officer
Stephen P. Bramlage		Executive Vice President and Chief Financial Officer
Lynn B. McKee		Executive Vice President, Human Resources
Stephen R. Reynolds		Executive Vice President, General Counsel and Secretary
Harrald Kroeker		Senior Vice President, Transformation

 

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Executive Compensation Philosophy

The Compensation Committee of the Board designed the executive compensation program to support one of the anchors of the Company’s transformation strategy – attracting and retaining the best talent – which in turn supports the two other anchors of the Company’s strategy: accelerating growth and activating productivity. The program includes three key goals:

 

•

Market Competitiveness: Attract and retain key executives with the capability to lead the business forward by providing innovative and effective service to our clients and customers;

 

•

Performance Based: Tie significant portions of compensation to performance in order to achieve our short-term and long-term business goals; and

 

•

Align with Shareholder Interests: Align each executive’s interests with shareholders’ interests by requiring significant stock ownership, tying significant portions of pay to performance, paying a significant portion of compensation in equity and subjecting equity compensation to multi-year performance conditions and vesting periods.

Market Competitiveness

The Compensation Committee structures the compensation program to recruit and retain key executives and maintain our competitive position for talent in the overall market from which we recruit. To help the Compensation Committee establish our market competitive compensation practices, it refers, in part, to peer group data and a subset of the Towers Watson 2016 CDB General Industry Executive Compensation Survey – U.S. that is size-adjusted based on Aramark’s revenue (“Survey Data” and together with the Company’s applicable peer group data, “Market Practice”). More information about the Company’s peer group data and use of surveys can be found on page 39 below.

When attracting new executives, and retaining current executives, the Compensation Committee considers their compensation at their prior employer or current compensation to determine the amount necessary to induce them to join us or to remain with us. We motivate retention, in part, through long term incentives with multi-year vesting schedules. Our stock options, restricted stock units, performance stock units and performance restricted stock generally vest in or over three or four years, which encourages executives who receive these grants to remain with us for extended periods of time.

Performance Based

Aramark’s business requires management to lead employees to deliver exceptional, value-driven experiences to Aramark’s clients and customers. To motivate strong performance and promote retention, our compensation philosophy is for a significant percentage of our NEO compensation to be variable and “at-risk” and that compensation be tied to the Company’s performance, the executive’s continued employment with us and the performance of the Company’s common stock. For fiscal 2016, the components of NEO compensation that are variable and “at-risk” are: our annual cash incentive and our long term incentives (consisting of performance restricted stock or PSUs, restricted stock units, stock options, and dividend equivalents and cash dividends accrued or credited on these incentives). The charts below highlight the significant percentage of the CEO’s compensation and the average compensation of our other NEOs as a group for fiscal 2016 that is variable and “at-risk.”

 

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(1)

The mix described differs from the grouping of amounts in the Summary Compensation Table. SEC rules require that dividend equivalents and cash dividends accrued or credited on LTI awards awarded prior to February 5, 2014 (the date the Company commenced paying dividends), be shown in the “All Other Compensation” column. However, because these dividend equivalents possess the same characteristics as the LTI under which they are accrued or credited and these cash dividends would be paid out only on the applicable vesting date of the LTI under which they are accrued, these amounts have been categorized as LTIs in these charts.

Consistent with our performance-based compensation philosophy; as illustrated in the graph below, the total compensation of our CEO generally tracks or is lower than expected given the performance of the Company (as measured by adjusted EPS). For fiscal 2016, our CEO’s total compensation decreased despite the improved performance of the Company (as measured by adjusted EPS). See Annex A of this proxy statement for a reconciliation of non-GAAP financial measures to our results as reported under GAAP.

 

 

 

(1)	Constant currency

(2)	Total Compensation is as presented in the “Total” column of the Summary Compensation Table.

 

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Annual Cash Incentive

Under the administration of the Senior Executive Bonus Plan, which applies to Messrs. Foss, Bramlage, and Reynolds and Ms. McKee in fiscal 2016, it is unlikely that an executive would receive the portion of the annual cash incentive attributable to financial results unless the thresholds for the financial performance measures under the Management Bonus Plan applicable to our other executives were achieved, because the Compensation Committee uses the Management Bonus Plan criteria as the main factor in determining actual bonuses awarded under the Senior Executive Bonus Plan. In 2016, the Management Bonus Plan was modified from the fiscal 2015 composition of 80% financial objectives and 20% functional or business objectives to be comprised of 90% financial objectives and 10% functional or business objectives to further drive financial performance. These financial objectives consist of explicit Company financial performance goals established for each fiscal year. For fiscal 2016, the company-wide financial objectives under the Management Bonus Plan were:

 

PERFORMANCE METRIC		TARGET
Adjusted EBIT		$930.7 million
Adjusted Sales		$14.55 billion
Adjusted EBIT Margin		6.40%

The Compensation Committee establishes these performance targets so that they are consistent with the Company’s long-term expectations for the business. These expectations include mid-to-high single-digit growth in adjusted operating income or adjusted EBIT, organic or adjusted sales growth of three percent to five percent, and low double digit percentage growth of adjusted earnings per share. For the Compensation Committee to award each of Messrs. Foss, Bramlage, and Reynolds and Ms. McKee his or her target annual cash incentive, the Company would need to achieve the financial objectives identified in the table above at least at a threshold level and the individual would have to achieve his or her functional or business objectives. Further, the Compensation Committee may use negative discretion to further reduce the annual cash incentives earned under the Senior Executive Bonus Plan to levels below what the Management Bonus Plan payouts would provide. Mr. Kroeker participated in the Management Bonus Plan in fiscal 2016, so his annual cash incentive is based on these same company-wide and individual functional performance goals. See “Company Performance Data Relevant to Compensation Actions” and “Narrative Disclosure to Summary Compensation Table and Grants of Plan-Based Awards Table” for more information on the operation of our annual cash incentive programs. All of our named executive officers were granted annual cash incentive awards for fiscal 2017 under the Senior Executive Bonus Plan, contingent upon the approval of such plan by our shareholders at the 2017 Annual Meeting of Shareholders. “See “Personal Performance Data and Specific Compensation Actions for the Named Executives” below for more information on fiscal 2017 awards.

Long Term Incentives

In addition to time vesting stock options and restricted stock units which vest over a period of four years, in fiscal 2016, 47% of the long term incentives granted to Mr. Foss and 40% of the long term incentives granted to Messrs. Bramlage, Reynolds and Kroeker and Ms. McKee consist of performance based awards. With regard to Messrs. Bramlage, Reynolds and Kroeker and Ms. McKee, these performance based awards are in the form of performance restricted stock or PSUs granted in November 2015, the vesting of which would occur at the end of fiscal 2018 subject to the Company achieving an adjusted EPS target in fiscal 2018. Subject to continued employment through such date, between 50% of the target number of awards (for achievement of threshold performance) and 200% of the target number of awards (for achievement of maximum performance or greater) will vest.

In fiscal 2016, 36% of the long term incentives granted to Mr. Foss were in the form of performance restricted stock with the vesting and payout terms described in the paragraph above. The remaining 11% of the long term incentives granted to Mr. Foss that are performance based consist of stock options, restricted stock units, and performance restricted stock, the vesting and payout of which will occur at the end of fiscal 2018 if the Company’s relative total shareholder return is at or above the 90th percentile of the Company’s peer group over the three-year performance period beginning October 3, 2015, and ending September 28, 2018. The performance restricted stock that is subject to this relative total shareholder return requirement is also subject to the Company achieving the fiscal 2018 adjusted EPS target similar to the performance restricted stock described in the paragraph above. The Compensation Committee introduced this new additional performance requirement on this portion of the grants to Mr. Foss in fiscal 2016 to increase the performance orientation of Mr. Foss’s long term incentives and further align these long term incentives with shareholder interests.

 

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See “Narrative Disclosure to Summary Compensation Table and Grants of Plan-Based Awards Table” for more information on the operation of our fiscal 2016 equity grants.

In November 2016, the Compensation Committee approved fiscal 2017 grants of time vesting stock options and restricted stock units and performance restricted stock, where the performance restricted stock has a performance target based on a cumulative adjusted EPS target for the 2017, 2018 and 2019 fiscal years and such performance restricted stock is not scheduled to vest until the end of fiscal 2019, subject to the achievement of the threshold level of performance. Similar to fiscal 2016, approximately 13% of Mr. Foss’s fiscal 2017 grants of stock options, restricted stock units and performance stock are also subject to an additional performance vesting requirement that the Company’s relative total shareholder return be one of the top five of the Company’s peer group over the three-year performance period beginning October 1, 2016, and ending September 27, 2019.

Align with Shareholders’ Interests

The Compensation Committee promotes alignment of our named executive officers’ and other executives’ interests with those of our shareholders in a number of ways, including compensation through long term equity incentives, stock ownership guidelines, restrictions on hedging and pledging and a clawback policy.

Significant Portions of Compensation are Paid in Equity

For 2016, 66% of total compensation awarded to the CEO and 51% of total compensation awarded to all other NEOs was paid in long term equity incentives (including dividend equivalents and cash dividends accrued or credited on LTIs) with multi-year vesting in order to encourage a focus on long-term performance.

Stock Ownership Requirements

The Compensation Committee has instituted stock ownership guidelines for our named executive officers requiring that they obtain and maintain ownership of Aramark stock equal to six times (for Mr. Foss) and three times (for Messrs. Bramlage, Reynolds and Kroeker and Ms. McKee) their base salaries within five years after joining the Company or, for current executives, five years after November 10, 2015 (the date of the adoption of the timing requirement). See page 42 below for more details.

Restrictions on Hedging and Pledging

We also restrict hedging and pledging of Aramark stock and none of our named executive officers have reported that they have engaged in any hedging or pledging of their Aramark stock. See page 42 below for more details.

Clawback Policy

In fiscal 2015, the Compensation Committee and the Board approved an incentive compensation recoupment or “clawback” policy. The policy provides that if the Compensation Committee or the Board determines that an executive officer or other direct report of the CEO was overpaid incentive compensation as a result of reported financial or operating results that were misstated and that such person has engaged in misconduct that contributed to the misstatement, the Compensation Committee or the Board may cause the Company to seek to recover the amount of any overpayment or cancel such excess incentive compensation. Incentive compensation covered by the policy includes annual cash incentives and performance based long term incentives such as PSUs and performance restricted stock. The policy became effective for annual cash incentives paid and LTIs granted after February 3, 2015.

Discussion of Compensation Actions in Relation to Fiscal 2016

Overview of the Compensation Components

The principal components of Aramark’s executive compensation program are base salary, an annual cash incentive and long term incentives. We also provide employee benefits, post-employment benefits and perquisites. Below is background information on how each component is structured.

Base Salary – Base salary reflects the value of the position and the attributes the executive brings to Aramark, including tenure, experience and skill level. Salary levels for our executives are reviewed at least annually.

 

 

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Annual Cash Incentive – The annual cash incentive bonus is designed to drive and reward performance and is based on the financial objectives and individual performance goals and objectives established by the Compensation Committee. Our executives are entitled to earn an annual cash incentive either under our Senior Executive Bonus Plan, under which a bonus pool is established each year and funded with a percentage of adjusted EBIT, or our Management Bonus Plan, which awards annual bonuses based on achievement against specified financial objectives and functional or business objectives set at the beginning of each year. For fiscal 2016, the metrics under the Management Bonus Plan included adjusted EBIT, adjusted sales, adjusted EBIT margin and functional objectives specific to each executive’s function. See “Narrative Disclosure to Summary Compensation Table and Grants of Plan-Based Awards Table – Annual Cash Incentive” for more information on the operation of our annual cash incentive programs.

Long Term Incentives – Long term equity incentives are granted in order to align our executives’ interests with those of our shareholders, encourage them to focus on long-term performance and motivate retention. PSUs or performance restricted stock, time-vesting restricted stock units and time-vesting stock options are issued to senior executives and typically in the following mix: 40% in the form of PSUs or performance restricted shares, 20% in time-vesting restricted stock units, and 40% in time-vesting stock options. For grants that were made in November 2015, the Compensation Committee granted PSUs and performance restricted stock with a performance target based on fiscal 2018 adjusted earnings per share, eligible to cliff vest at the end of fiscal 2018 in order to ensure a longer-term focus on the part of the senior executives and to better align with market practice for performance based equity awards. A portion of the grants made to Mr. Foss in fiscal 2016 are also subject to a performance vesting requirement that the Company’s relative total shareholder return be at or above the 90th percentile of the Company’s peer group over the three-year performance period consisting of the 2016, 2017 and 2018 fiscal years. The Compensation Committee added this specific performance condition based on relative total shareholder return to increase the performance orientation of Mr. Foss’s long term incentives and the alignment of these long term incentives with shareholder interests. See “Narrative Disclosure to Summary Compensation Table and Grants of Plan-Based Awards Table – Equity Incentive Awards” for more information on the operation of our fiscal 2016 equity grants. For grants that were made in November 2016 the Compensation Committee granted performance restricted stock with a performance target based on a cumulative adjusted EPS target for the 2017, 2018 and 2019 fiscal years, eligible to cliff vest at the end of fiscal 2019 in order to ensure a continued long-term focus on the part of the senior executives. A portion of the grants made to Mr. Foss are also subject to an additional performance vesting requirement that the Company’s relative total shareholder return be one of the top five of the Company’s peer group over the three-year performance period consisting of the 2017, 2018 and 2019 fiscal years.

Other Compensation Components – The Compensation Committee includes in executive compensation additional benefits that it believes are customary for executives of similar rank and enable our executives to focus on our business and enhance their commitment to us. These benefits include:

 

•

Savings Incentive Retirement Plan: A non-qualified savings plan intended as a substitute for those employees ineligible to participate in our 401(k) plan because of certain legal requirements.

 

•

Severance Arrangements and Payments upon a Change of Control: Our executives are entitled to certain payments and benefits in connection with certain terminations of employment. These provisions are intended to align executive and shareholder interests by enabling executives to consider corporate transactions that are in the best interests of the shareholders and our other constituents without concern over whether the transactions may jeopardize the executives’ own employment. While certain of the equity awards granted while we were a private company contain provisions which provide for accelerated vesting solely upon a change of control, LTIs granted since the IPO and agreements with our NEOs that provide for other payments in connection with a change of control contain a “double trigger” in order for the executive to receive compensation. We chose to implement a “double trigger” for Mr. Foss and the other named executive officers based on advice from Frederic W. Cook & Co., Inc. (“FW Cook”), the Compensation Committee’s independent compensation consultant. For more information about change of control and severance payments for our named executive officers, see the disclosure under “Potential Post-Employment Benefits.”

 

 

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•

Perquisites: We provide our NEOs with other benefits, reflected in the All Other Compensation column in the Summary Compensation Table, that we believe are reasonable and encourage retention. We believe that these benefits enable our executives to focus on our business and enhance their commitment to us. These benefits include premiums paid on life insurance, a survivor income protection plan (a plan that entitles a surviving spouse or domestic partner and dependent children to receive the executive’s full base salary for one year after the executive’s death and one half of the executive’s base salary for the subsequent nine years, or alternatively, an amount equal to his or her base salary upon retirement or death for a participant who is at least 65 years old and has attained five years of employment; only Ms. McKee is covered under this plan), disability insurance, excess health insurance, receipt of a car allowance, no cost parking at a garage near Company offices, an executive physical, financial planning services and personal use of Company tickets or the Company box and related items at sporting or other events. The costs of these benefits constitute a small percentage of each named executive officer’s total compensation.

Our Compensation Committee has established a policy, which it has determined to be in our business interest, that directs the CEO to use the Company’s aircraft, whenever possible, for all air travel, whether personal or business. Under the policy, the CEO may also designate other members of senior management to use the Company aircraft for air travel. Mr. Foss reimburses the Company for the amount by which the aggregate incremental cost to the Company attributable to his personal use of the Company’s aircraft exceeds $250,000 per fiscal year. Some of Mr. Foss’s business use of the corporate aircraft in fiscal 2016 included flights to attend outside board meetings at the companies or organizations for which he served as a director. We believe that Mr. Foss’s service on these boards, and his ability to conduct Company business while traveling to these board meetings, provides benefits to us and therefore deem it to be business use. Mr. Foss has a car and driver that we provide to him. Much of his use of the Company-provided car and driver, which generally enables him to make efficient use of travel time, is business use, although Mr. Foss utilizes the car and driver for commuting to and from the office, which is considered personal use, and for other limited personal use.

Company Performance Data Relevant to Compensation Actions

As mentioned in the Summary above, Aramark operational and financial performance was strong in 2016.

In awarding annual cash incentives for Messrs. Foss, Bramlage, and Reynolds and Ms. McKee, the Compensation Committee first calculated the maximum amount that could have been awarded to these executives under the Senior Executive Bonus Plan based on the Company’s fiscal 2016 adjusted EBIT under the Senior Executive Bonus Plan and each executive’s percentage bonus opportunity and then calculated what they would have received under the Management Bonus Plan if each had been a participant in the plan. Mr. Kroeker participates in the Management Bonus Plan and therefore his annual cash incentive was calculated based on that plan.

Specific performance metrics under the Management Bonus Plan and the Company’s achievement against those metrics relevant to incentive pay components determined in 2016 are as follows:

 

INCENTIVE PAY COMPONENT		PERFORMANCE METRIC(1)		TARGET		ACHIEVEMENT
Annual Cash Incentive		Adjusted EBIT (40%)		$930.7 million		939.3 million (100.9%)
		Adjusted Sales (25%)		$14.55 billion		$14.37 billion (98.8%)
		Adjusted EBIT Margin (25%)		6.40%		6.54% (102.2%)
		Factors Specific to Executive’s Function (10%)		Varies based on NEO’s function		See “Narrative Disclosure to Summary Compensation Table and Grants of Plan-Based Awards Table – Annual Cash Incentive”

 

(1)	The Performance Metrics under the Management Bonus Plan, which are the basis for payments under the Senior Executive Bonus Plan, are applicable following the establishment of the Senior Executive Bonus Plan’s annual cash incentive pool based on the Company’s adjusted EBIT.

For additional information about actual annual cash incentives awarded under our annual cash incentive programs and the calculations of such amounts, see “Summary Compensation Table” and “Narrative Disclosure to Summary Compensation Table and Grants of Plan-Based Awards Table – Annual Cash Incentive.”

 

 

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The performance metrics above are intended to incentivize executives to achieve results consistent with the Company’s long-term framework for its financial performance which consists of mid to high single digit growth in adjusted operating income or adjusted EBIT, 3% to 5% organic or adjusted sales growth, and low double digit percentage growth in adjusted EPS. The relative weighting of adjusted EBIT, adjusted sales, and adjusted EBIT margin for purposes of determining the annual cash incentives of the NEOs reflects the fact that all three performance measures are important with more weight given to the combination of adjusted EBIT and adjusted EBIT Margin or profitability versus adjusted sales.

In addition to the specific performance metrics, the Compensation Committee also considered corporate performance generally in setting salaries and making other decisions about the total compensation provided to the executives.

Personal Performance Data and Specific Compensation Actions for the Named Executives

In addition to the performance metrics for incentive compensation components and the corporate performance criteria noted above, the Compensation Committee also considers individual performance when making compensation decisions, including its consideration of the total compensation package for each executive, and in determining whether to apply negative discretion to reduce the size of certain incentive awards. The Compensation Committee also considers total compensation and other factors relevant to its compensation philosophy (including, for example, market and competitive data provided by its independent compensation consultant) when making compensation decisions.

For the CEO, the Compensation Committee assesses his performance annually. For the other executives, the CEO, Executive Vice President, Human Resources and, if any, other executives within the executive’s chain of command annually assess his or her performance. Those assessments are shared with the Compensation Committee, which also may factor in perceptions of the executive’s performance based on his or her interaction with the Board.

 

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Mr. Foss – In considering Mr. Foss’s performance, the Compensation Committee noted his leadership of Aramark’s transformation, evolution of his leadership style to reflect new requirements now that Aramark is publicly traded, and his active involvement with clients and customers to ensure that Aramark fulfills its mission.   The Compensation Committee took the following compensation actions for Mr. Foss in November 2015 related to fiscal 2016:   •   Maintained his salary for calendar year 2016 at the same level as calendar year 2015.   •   Maintained his annual cash incentive target of $3,400,000 for fiscal 2016, which is the same as his target for fiscal 2015, and established a maximum award under the Senior Executive Bonus Plan of 0.63% of adjusted EBIT (up to a maximum of $6 million).   •   Awarded long term incentives with a grant date fair value of $9.9 million consisting of 40% performance restricted stock, 40% time-vesting stock options and 20% time-vesting restricted stock units, which represented a 24% decrease from the $13 million awarded in November 2014, in order to result in his total direct compensation (with the value of equity awards measured by grant date fair value, but excluding the relative shareholder return awards discussed below) being at the 86th percentile of the Peer Group. Including the value of the relative shareholder return awards described below, Mr. Foss’s total direct compensation would be above the 90th percentile of the Peer Group.   •   In addition, the Compensation Committee awarded Mr. Foss additional equity incentives that will cliff vest on September 28, 2018 upon achievement of an additional performance vesting requirement that the Company’s relative total shareholder return be at or above the 90th percentile of the Company’s peer group over the three-year performance period from October 3, 2015, to September 28, 2018. This award consists of 40% stock options, 20% restricted stock units, and 40% performance restricted stock with the same fiscal 2018 adjusted EPS target as the other performance restricted stock awarded to Mr. Foss, in each case, subject to the additional relative shareholder return performance condition. The purpose of the additional relative total shareholder return condition on this award was to increase the performance orientation of Mr. Foss’s long term incentives. Due to the rigor of the performance condition, the grant date fair value of this award was $1,192,000 instead of the $3 million grant date fair value it would have had in the absence of the relative total shareholder return vesting condition.

In November 2016, the Compensation Committee considered Mr. Foss’s performance during fiscal 2016, his compensation relative to the Peer Group and the value of Mr. Foss’s outstanding equity awards in terms of both wealth creation opportunity and retention power. As a result of that analysis, the Compensation Committee took the following actions for Mr. Foss:   •   Exercised negative discretion under the Senior Executive Bonus Plan and awarded him a cash incentive bonus of $3,726,000 for fiscal 2016, which was the amount that he would have received had he participated in the Management Bonus Plan.   •   Maintained his base salary for calendar year 2017 at the same level as calendar year 2016.   •   Maintained his annual cash incentive target of $3,400,000 for fiscal 2017 and established a maximum award under the Senior Executive Bonus Plan of 1.01% of adjusted EBIT (up to a maximum of $10 million), subject to the approval of the Amended and Restated Senior Executive Bonus Plan by our shareholders at the 2017 annual meeting.   •   Awarded long term incentives with a grant date fair value of $9.9 million consisting of 40% performance restricted stock, 40% time-vesting stock options and 20% time-vesting restricted stock units, which was the same value of such awards awarded the prior fiscal year and is intended to result in his total direct compensation (with the value of equity awards measured by grant date fair value, but excluding the relative shareholder return awards discussed below) being at the 89th percentile of the Peer Group. Including the value of the relative shareholder return awards described below, Mr. Foss’s total direct compensation would be above the 90th percentile of the Peer Group.   •   In addition, in order to increase the performance orientation of Mr. Foss’s long-term incentives, the Compensation Committee awarded Mr. Foss additional equity incentives that will cliff vest on September 27, 2019 upon achievement of an additional performance vesting requirement that the Company’s relative total shareholder return results in the Company’s total shareholder return being among the top five total shareholder returns of the Company’s peer group over the three-year performance period from October, 1, 2016, to September 27, 2019. This award consists of 40% stock options, 20% restricted stock units and 40% performance restricted stock with the same 2017-2019 cumulative adjusted EPS target as the other performance restricted stock awarded to Mr. Foss, in each case subject to the additional relative shareholder return performance condition.

 

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Mr. Bramlage – In November 2015 the Compensation Committee took the following actions for Mr. Bramlage:   •   Raised his base salary for calendar 2016 by two percent to $612,000, which is generally consistent with the overall annual salary increase budget for the Company.   •   Established a maximum award under the Senior Executive Bonus Plan of 0.26% of adjusted EBIT and an annual cash incentive target for fiscal 2016 of $612,000 which represents the same annual cash incentive target, as a percentage of base salary, that he had in fiscal 2015.   •   Awarded long term incentives with a grant date fair value of $1,600,000 consisting of 40% performance restricted stock, 40% time-vesting stock options and 20% time-vesting restricted stock units. This award was the same value granted to the former Executive Vice President and Chief Financial Officer in the previous year even though such award was below the median of the Peer Group.

In November 2016 the Compensation Committee took the following actions for Mr. Bramlage:   •   Exercised negative discretion under the Senior Executive Bonus Plan and awarded him a cash incentive bonus of $670,700 for fiscal 2016, which was the amount that he would have received had he participated in the Management Bonus Plan.   •   Raised his base salary for calendar year 2017 by eight percent to $660,960 in order to increase his compensation to closer to the median of base salary of the Peer Group.   •   Established a maximum award under the Senior Executive Bonus Plan of 0.25% of adjusted EBIT and an annual cash incentive target for fiscal 2017 of $660,960, subject to the approval of the Amended and Restated Senior Executive Bonus Plan by our shareholders at the 2017 annual meeting, which represents the same annual cash incentive target, as a percentage of base salary, that he had in fiscal 2016.   •   Awarded long term incentives with a grant date fair value of $1,600,000 consisting of 40% performance restricted stock, 40% time-vesting stock options and 20% time-vesting restricted stock units, which was the same value awarded in November 2015.

 

Ms. McKee – The Compensation Committee took the following compensation actions for Ms. McKee in November 2015 related to fiscal 2016:   •   Raised her base salary for calendar 2016 by two percent to $683,200, which is generally consistent with the overall annual salary increase budget for the Company.   •   Established a maximum award under the Senior Executive Bonus Plan of 0.21% of adjusted EBIT and an annual cash incentive target for fiscal 2016 of $683,200 which represents the same annual cash incentive target, as a percentage of base salary, that she had in fiscal 2015.   •   Awarded long term incentives with a grant date fair value of $1,600,000 consisting of 40% performance restricted stock, 40% time-vesting stock options and 20% time-vesting restricted stock units. This award was the same amount granted to her last year and such award was below the median of the Peer Group but above the median of Survey Data.
In November 2016 the Compensation Committee took the following actions for Ms. McKee.   •   Exercised negative discretion under the Senior Executive Bonus Plan and awarded her an annual cash incentive of $748,700 for fiscal 2016, which is what she would have received had she participated in the Management Bonus Plan.   •   Raised her base salary for calendar 2017 by two and one half percent to $700,232, which is generally consistent with the overall annual salary increase budget for the Company.   •   Established a maximum award under the Senior Executive Bonus Plan of 0.20% of adjusted EBIT and an annual cash incentive target for fiscal 2017 of $700,232, subject to the approval of the Amended and Restated Senior Executive Bonus Plan by our shareholders at the 2017 annual meeting, which represents the same annual cash incentive target, as a percentage of base salary, that she had in fiscal 2016.   •   Awarded long term incentives with a grant date fair value of $1,600,000 consisting of 40% performance restricted stock, 40% time-vesting stock options and 20% time-vesting restricted stock units, which was the same value awarded in November 2015.

 

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Mr. Reynolds – The Compensation Committee took the following compensation actions for Mr. Reynolds in November 2015 related to fiscal 2016:   •   Raised his base salary for calendar 2016 by two percent to $530,600, which is generally consistent with the overall annual salary increase budget for the Company.   •   Established a maximum award under the Senior Executive Bonus Plan of 0.21% of adjusted EBIT and an annual cash incentive target for fiscal 2016 of $530,600 which represents the same annual cash incentive target, as a percentage of base salary, that he had in fiscal 2015.   •   Awarded long term incentives with a grant date fair value of $1,600,000 consisting of 40% performance restricted stock, 40% time-vesting stock options and 20% time-vesting restricted stock units. This award was the same amount granted to him last year and such award was below the median of the Peer Group but above the median of Survey Data.

In November 2016 the Compensation Committee took the following actions for Mr. Reynolds.   •   Exercised negative discretion under the Senior Executive Bonus Plan and awarded him an annual cash incentive of $581,500 for fiscal 2016, which is what he would have received had he participated in the Management Bonus Plan.   •   Raised his base salary for calendar 2017 by two and one half percent to $543,869 which is generally consistent with the overall annual salary increase budget for the Company.   •   Established a maximum award under the Senior Executive Bonus Plan of 0.20% of adjusted EBIT and an annual cash incentive target for fiscal 2017 of $543,869, subject to the approval of the Amended and Restated Senior Executive Bonus Plan by our shareholders at the 2017 annual meeting, which represents the same annual cash incentive target, as a percentage of base salary, that he had in fiscal 2016.   •   Awarded long term incentives with a grant date fair value of $1,600,000 consisting of 40% performance restricted stock, 40% time-vesting stock options and 20% time-vesting restricted stock units, which was the same value awarded in November 2015.

 

Mr. Kroeker – The Compensation Committee took the following compensation actions for Mr. Kroeker in November 2015 related to fiscal 2016:   •   Raised his base salary for calendar 2016 by two percent to $535,500, which is generally consistent with the overall annual salary increase budget for the Company.   •   Established an annual cash incentive target under the Management Bonus Plan of $455,175, which is consistent with the annual cash incentive targets set, as a percentage of base salary, for executives of the Company at his level.   •   Awarded long term incentives with a grant date fair value of $850,000 consisting of 40% PSUs, 40% time-vesting stock options and 20% time-vesting restricted stock units. This grant was consistent with those received by other executives at his level.

In November 2016, the Compensation Committee took the following actions for Mr. Kroeker.   •   Awarded him an annual cash incentive bonus of $498,800 for fiscal 2016, which was the amount earned under the Management Bonus Plan.   •   Raised his base salary for calendar year 2016 by two and one half percent to $548,888, which was generally consistent with the overall annual salary increase budget for the Company.   •   Established a maximum award under the Senior Executive Bonus Plan of 0.20% of adjusted EBIT and an annual cash incentive target for fiscal 2017 of $466,555, subject to the approval of the Amended and Restated Senior Executive Bonus Plan by our shareholders at the 2017 annual meeting.   •   Awarded long term incentives with a grant date fair value of $1,200,000 consisting of 40% performance restricted stock, 40% time-vesting stock options and 20% time-vesting restricted stock units. The value of this grant was consistent with the value received by other executives at his level.

 

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Information About How the Compensation Committee Makes Decisions and Interacts with Others

Peer Group

The Compensation Committee refers to a peer group in order to benchmark executive pay, consider the retention value of compensation and provide a foundation for other compensation design and award decisions. At Aramark, the Compensation Committee uses the same peer group when considering the compensation of Messrs. Foss, Bramlage, Reynolds and Kroeker and Ms. McKee and in addition uses Survey Data when considering the compensation of Messrs. Reynolds and Kroeker and Ms. McKee.

In 2015, the Compensation Committee requested that its independent compensation consultant re-evaluate the peer group. The peer group had been the same since 2008, while the Company had changed significantly over that time, including becoming a public company and ceasing to be controlled by our former private equity sponsor shareholders. Taking into account the advice of the independent compensation consultant, the peer group was modified in 2015 and now includes the companies identified in the table below (the “Peer Group”).

When re-evaluating the peer group in 2015, the Compensation Committee’s independent compensation consultant screened all U.S.-based publicly traded companies using a variety of quantitative and qualitative factors. Following the screening, companies were determined to be peers based on the following criteria (in each case relative to the Company in fiscal 2014):

 

Comparable in Size		Revenue between 0.3 times and 3 times
		Enterprise value between 0.25 times and 5 times
		Operating margin between 2.5% and 10%
Similar Industry/Operating Model		Provides business services
		Logistics-centered business model
		Repeatable business model and consumer facing
Competitor for Talent		Attracting new employees to the Company and retaining current executives

The independent compensation consultant reviewed Aramark’s Peer Group in 2016 utilizing criteria similar to the criteria used in 2015 described above and did not recommend any changes. Based on our fiscal 2016 results, as compared to the Peer Group, our revenues are between the 25th and 50th percentiles, our enterprise value is below the 25th percentile, and the number of our employees is above the 75^th percentile.

 

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Peer Group and Characteristics

The following table sets forth characteristics of the Peer Group companies based on Aramark’s fiscal 2016 performance and results:

 

COMPARABLE IN SIZE

SIMILAR INDUSTRY/OPERATING MODEL

COMPANY NAME

REVENUE

ENTERPRISE  VALUE

OPERATING  MARGIN

BUSINESS SERVICES

LOGISTICS

CONSUMER FACING WITH REPEATABLE BUSINESS MODEL

COMPETITOR FOR TALENT

Carnival

X

X

X

X

C.H. Robinson Worldwide

X

X

X

X

X

Darden Restaurants

X

X

X

X

X

FedEx

X

X

X

X

X

Hertz Global Holdings

X

X

X

X

X

X

Macy’s

X

X

X

X

X

Manpower

X

X

X

X

X

Marriott International

X

X

X

X

X

McDonalds

X

X

X

MGM Resorts International

X

X

X

X

PepsiCo

X

X

RR Donnelley & Sons

X

X

X

X

X

Starbucks

X

X

X

X

Sysco

X

X

X

X

Tyco International(1)

X

X

X

United Parcel Service

X

X

X

Waste Management

X

X

X

X

Yum! Brands

X

X

X

X

 

(1)	Tyco International was acquired by Johnson Controls on September 2, 2016.

Survey Data

In evaluating the compensation of certain of our named executive officers, the Compensation Committee also references certain survey data. In 2016, the Compensation Committee referred to a subset of the Towers Watson 2016 CDB General Industry Executive Compensation Survey – U.S. that is size adjusted based on Aramark’s revenue (211 companies from the overall survey of 484 companies), along with peer group data described above, to perform a market check of the individual components of their compensation, as well as their total compensation. We do not consider any specific company included in the survey data to be a material factor in the review of the compensation of our named executive officers.

Independence of the Compensation Consultant

The Compensation Committee recognizes the importance of using an independent compensation consultant that is appropriately qualified and that provides services solely to the Compensation Committee and not to the Company.

Since 2007, the Compensation Committee has engaged FW Cook as its independent consultant. It did so again in 2016.

The Compensation Committee annually reviews its relationship with the independent compensation consultant and determines whether to renew the engagement. Only the Compensation Committee has the right to approve services to be provided by, or to terminate the services of, FW Cook as the Compensation Committee’s independent

 

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compensation consultant. FW Cook and its affiliates do not provide any services to the Company or any of the Company’s affiliates other than advising the Compensation Committee on director and executive compensation.

During 2016, the Compensation Committee considered FW Cook’s independence and determined that the engagement of FW Cook did not raise any conflict of interest or other issues that would adversely impact FW Cook’s independence, including using the six factors set forth in the SEC and New York Stock Exchange rules regarding compensation advisor conflicts of interest and independence. The Compensation Committee determined FW Cook to be independent and free from conflicts of interest.

Role of Independent Compensation Consultant

The Compensation Committee’s independent compensation consultant provides the Compensation Committee with general services about executive compensation each year. These services include market intelligence, compensation trends, suggestions about compensation program design, general views on specific requests to the Compensation Committee from management regarding compensation program design or decisions, the review of the peer group, benchmarking executive pay against the peer group and against the broader market for executive talent, and an analysis of the risk profile of the compensation system. In particular years, the services also have included thorough analyses of particular compensation issues.

In November 2016, FW Cook reviewed Mr. Foss’s compensation compared to the Peer Group and in particular analyzed his equity awards to ensure that they motivated him to drive performance and provided a wealth creation opportunity, while encouraging retention. The independent compensation consultant provided advice to the Chairman of the Compensation Committee who then, based on such advice, made recommendations to the Compensation Committee with respect to Mr. Foss’s 2017 compensation including the grant of $9.9 million in regular long term incentives and additional long term incentives subject to relative shareholder return vesting discussed above.

FW Cook, after evaluating current NEO compensation levels and Market Practice, also advised that no significant changes to base salaries of Messrs. Reynolds and Kroeker and Ms. McKee are required to support the competitiveness of the Company’s compensation programs and that among companies surveyed in general, base salary increases for calendar 2017 are projected to be approximately three percent. FW Cook also indicated that target bonus opportunities for Messrs. Bramlage, Reynolds and Kroeker and Ms. McKee are at or above the median of Market Practice. The Compensation Committee then determined to increase the base salaries for calendar 2017 of Messrs. Reynolds, Kroeker and Ms. McKee by two and one half percent, which is generally consistent with the overall annual salary increase budget for the Company and to increase the base salary of Mr. Bramlage by eight percent in order for his base salary to be closer to the median of the Peer Group. The Compensation Committee also determined to maintain the same percentage bonus target for Messrs. Bramlage, Reynolds, Kroeker and Ms. McKee for fiscal 2017 as they had for fiscal 2016.

In 2016, FW Cook also advised the Compensation Committee with respect to certain features of the Company’s Amended and Restated 2013 Stock Incentive Plan and Amended and Restated Senior Executive Performance Bonus Plan which are proposed to be approved by shareholders at the Annual Meeting.

Interaction of the Compensation Committee with Executive Officers and Others

The Compensation Committee regularly seeks the advice of the CEO. In 2016 they sought his input on the performance of his direct reports whose pay is approved by the Compensation Committee. They also sought his input on how performance metrics and goals will motivate executives and the workforce.

The Compensation Committee also discusses with the CEO matters relating to the retention of key executives and employees and sought his input on his performance results in 2016 and his objectives for 2017.

The Compensation Committee regularly asks Ms. McKee, Executive Vice President, Human Resources to attend portions of the Compensation Committee’s meetings, in order to discuss their thoughts on compensation design and award issues, allow her to review and respond to their suggestions about compensation matters, and ask for her input about compensation decisions. In addition, as necessary, the Executive Vice President and Chief Financial Officer attends Compensation Committee meetings to discuss and review financial metrics relating to our compensation programs, and the Executive Vice President and General Counsel or the Senior Vice President and Deputy General Counsel attend Compensation Committee meetings to advise about legal requirements and provide regulatory updates.

 

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In administering the annual cash and long term equity incentive plans of the Company, the Compensation Committee approves cash and equity awards to executive officers and/or recommends such approval by the Stock Committee, as appropriate for purposes of obtaining certain exemptions under Rule 16b-3 of the Exchange Act and exceptions under Section 162(m) of the Internal Revenue Code.

Long Term Incentive Grant Procedures

The Compensation Committee intends to make annual awards of long term equity incentives at its meeting held early in each fiscal year. The Compensation Committee has in the past, and may in the future, make limited grants of long term incentives on other dates to retain key employees, to compensate an employee in connection with a promotion or to compensate newly hired executives for equity or other benefits lost upon termination of their previous employment or to otherwise induce them to join our Company or otherwise at the discretion of the Compensation Committee. The grant date of long term incentives to executives may be the date of Compensation Committee approval or a later date of subcommittee or Stock Committee approval if designated by the Compensation Committee or a date that is designated by the Compensation Committee or Stock Committee. The exercise price of option grants is the closing market price of our common stock on the date of grant.

Stock Ownership Guidelines

The Compensation Committee has adopted the following stock ownership guidelines to help align the interests of each NEO with those of Aramark’s shareholders.

 

EXECUTIVE		STOCK OWNERSHIP GUIDELINE(1)		CURRENT STATUS
CEO		6x annual base salary		Meets or Exceeds Guideline
Executive Vice President and CFO		3x annual base salary		Meets or Exceeds Guideline
Executive Vice President, HR		3x annual base salary		Meets or Exceeds Guideline
Executive Vice President and GC		3x annual base salary		Meets or Exceeds Guideline
Senior Vice President, Transformation		3x annual base salary		Does Not Yet Meet Guideline

 

(1)	Multiple of annual base salary. Prior to attainment, absolute value is determined annually based on then-current salary and the prior year’s average of month-end stock closing prices.

Shares included when determining compliance with the guidelines are limited to those that are directly owned or beneficially owned shares held indirectly, such as through family trusts or by immediate family members, and unvested restricted stock units or restricted shares. Therefore, equity issued to these executives that is not considered when determining compliance include: unexercised vested and unvested stock options and unearned or unvested PSUs or performance restricted stock. The Committee recently amended the guidelines to include unvested restricted stock units or restricted shares when determining compliance with the guidelines to be more consistent with market practice.

These guidelines require that the guideline amount be attained by the fifth anniversary of the later of the named executive officer’s start date with the Company or November 10, 2015 (the date this timing requirement was adopted) and if a named executive officer has not attained the guideline amount by such dates, one half of all shares delivered upon vesting of awards held by such named executive officers (net of withholding for tax obligations) must be retained until the guideline amount has been attained.

All of our named executive officers have met or are on track to meet their guideline amount within the five-year period. For example, as of December 13, 2016, our CEO held shares and RSUs with a value on such date equal to more than 30 times his annual base salary.

Prohibitions on Hedging and Pledging

The Company’s Securities Trading Policy restricts hedging and pledging of Aramark stock. This policy prohibits Aramark directors, officers and employees from engaging in hedging, speculative or other transactions that hedge or offset any decrease in the market value of Aramark stock (including swaps, forwards, options and futures) except in certain very limited circumstances.

To date, no current director or officer has utilized any of the exceptions. None of our directors or named executive officers or other executive officers has currently pledged Aramark stock.

 

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To date, the Board has not approved any exceptions for hedging transactions and does not currently anticipate any situation where it would do so in the future.

Compensation Risk Disclosure

As part of its responsibility to set appropriate executive compensation for Aramark, the Compensation Committee annually considers balance in the compensation program and its impact on Aramark’s risk management profile. Specifically, in 2016, the Compensation Committee considered whether the mix of performance-based pay, the performance metrics and the degree of difficulty of the performance goals was sufficient to encourage management to strive for strong performance without encouraging risk taking beyond established risk parameters. The Compensation Committee also considered the input of its independent compensation consultant about the risk profile of the compensation program as well as various factors that would mitigate risks associated with Aramark’s compensation program, including an effective balance in the cash and equity mix and shorter and longer-term focus; use of multiple performance metrics for the annual incentive programs; substantial stock ownership guidelines; a clawback policy; an anti-hedging policy; and independent committee oversight of the compensation programs.

After discussing all such matters, the Compensation Committee in relation to 2016 determined that Aramark’s compensation program is appropriately structured and does not motivate individuals or groups to take risks that are reasonably likely to have a material adverse effect on the Company.

Impact of Regulatory Requirements on Executive Compensation

Sections 280G and 4999 – Sections 280G and 4999 of the Internal Revenue Code limit Aramark’s ability to take a tax deduction for certain “excess parachute payments” (as defined in Sections 280G and 4999) and impose excise taxes on each executive that receives “excess parachute payments” in connection with his or her severance and other payments from us that are contingent on or in connection with a change of control. The Compensation Committee considered the adverse tax liabilities imposed by Sections 280G and 4999, as well as other competitive factors, when it structured certain post-termination compensation payable to our named executive officers. The potential adverse tax consequences to us and/or the executive, however, are not necessarily determinative factors in such decisions.

Our 2007 agreement with Ms. McKee relating to employment requires us to make a gross-up payment to compensate her for any excise taxes (and income taxes on such gross-up payment) that she incurs under Section 4999.

Subsequently, as market practices changed, the Compensation Committee determined it would no longer provide such gross-up payments. As a result, no gross-up was provided in the agreements entered into with Messrs. Foss, Bramlage, Reynolds and Kroeker.

Section 162(m) – Section 162(m) of the Internal Revenue Code generally limits tax deductions for compensation paid to a public company’s named executive officers (other than the chief financial officer) to $1,000,000. We are not currently subject to the Section 162(m) compensation deduction limit with respect to certain awards granted and payments made under certain of our compensatory plans that were established prior to our initial public offering due to the phase-in period for companies following their initial public offering. We will become subject to the Section 162(m) compensation deduction limit with respect to such plans commencing upon the date of our 2017 Annual Meeting of Shareholders (or earlier, in the event such plans are materially modified).

The Compensation Committee currently expects to structure performance based awards in compliance with Section 162(m) when it becomes applicable, and the Compensation Committee considers the loss of deductibility, as well as other factors, when it structures compensation arrangements for our named executive officers. However, the potential tax consequences to Aramark are not necessarily determinative and the Compensation Committee may from time to time determine that certain compensation awards that would result in non-deductible compensation expenses would be in the best interests of the company, such as if necessary to accomplish particular business objectives or to attract and retain certain executives.

 

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COMPENSATION COMMITTEE REPORT

The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K with management. Based on such review and discussions, the Compensation Committee recommended to the Board that the Compensation Discussion and Analysis be included in the Annual Report on Form 10-K and in this Proxy Statement relating to our 2017 Annual Meeting of Shareholders. Submitted by the Compensation Committee of the Board:

Lawrence T. Babbio, Jr., Chairman

Todd M. Abbrecht

Lisa G. Bisaccia

Richard Dreiling

Sanjeev K. Mehra

Stephen I. Sadove

 

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COMPENSATION TABLES

2016 Summary Compensation Table

The following tables, narrative and footnotes discuss the compensation of the Chairman, President, and Chief Executive Officer, the Chief Financial Officer, and the three other most highly compensated executive officers in 2016, who are referred to as named executive officers or NEOs.

 

NAME AND PRINCIPAL POSITION		YEAR				SALARY(1) ($)				BONUS(1)(2) ($)				STOCK AWARDS(3) ($)				OPTION AWARDS(4) ($)				NON- EQUITY INCENTIVE PLAN COMPEN- SATION(2) ($)				CHANGE IN PENSION VALUE AND NON- QUALIFIED DEFERRED COMPENSATION EARNINGS(5) ($)				ALL OTHER COMPEN- SATION(6) ($)				TOTAL ($)
Eric J. Foss, President and Chief Executive Officer			2016				1,700,000				—				6,516,166				4,575,843				3,726,000				2,355				530,648				17,051,012
			2015				1,622,625				—				7,800,020				7,790,065				3,300,000				1,498				624,198				21,138,406
			2014				1,417,240				5,467,800				17,647,080				6,767,223				—				799				1,122,240				32,422,382
Stephen P. Bramlage, EVP and Chief Financial Officer			2016				609,000				—				960,008				640,002				670,700				68				415,031				3,294,809
			2015				300,000				—				2,200,041				800,003				272,000				—				159,593				3,731,637
Lynn B. McKee, EVP, Human Resources			2016				679,804				—				960,008				640,002				748,700				12,682				74,888				3,116,084
			2015				666,475				—				960,024				640,005				607,000				11,744				77,779				2,963,027
			2014				666,034				1,089,000				2,180,913				3,715,615				—				10,854				75,134				7,737,550
Stephen R. Reynolds, EVP, General Counsel and Secretary			2016				528,003				—				960,008				640,002				581,500				1,467				61,592				2,772,572
			2015				517,650				—				960,024				1,103,130				472,000				953				59,056				3,112,813
			2014				517,307				845,900				1,394,749				418,470				—				346				55,947				3,232,719
Harrald Kroeker Senior Vice President, Transformation			2016				532,875				—				510,026				340,001				498,800				—				24,479				1,906,181

 

(1)

For fiscal years 2014, 2015 and 2016, Messrs. Foss and Reynolds and Ms. McKee, and for fiscal 2016 only, Mr. Bramlage, each deferred a portion of their salaries under the 2007 Savings Incentive Retirement Plan. Mr. Reynolds deferred a portion of his bonus for fiscal 2014 under the 2005 Deferred Compensation Plan. These amounts for fiscal 2016 are reflected in the Non-Qualified Deferred Compensation Table for Fiscal Year 2016 and in the Salary column.

 

(2)

Includes payment under the Senior Executive Bonus Plan for each of Messrs. Foss, Bramlage and Reynolds and Ms. McKee and payment for Mr. Kroeker under the Management Bonus Plan. For fiscal 2014, also includes one-time bonus amounts paid to Messrs. Foss and Reynolds and Ms. McKee in December 2013 in connection with the initial public offering as follows: for Mr. Foss, $2,367,800, for Ms. McKee, $558,000, and for Mr. Reynolds, $432,900.

 

(3)

Includes the aggregate grant date fair value of restricted stock units, performance stock units and performance stock awards granted in the respective fiscal year computed in accordance with FASB ASC Topic 718. Except as set forth below, the grant date fair value per share for restricted stock units, performance stock units and performance stock awards was equal to the price per share of our common stock in our initial public offering for restricted stock units granted on December 11, 2013 and, since December 12, 2013, is based on the closing price of a share of our common stock on the NYSE on the date of grant. For performance stock units and performance stock awards, the grant date fair value reported is based upon the probable outcome of the performance condition at the grant date as described in the table below, which also identifies the grant date fair value at the highest level of performance:

 

		FISCAL 2014 GRANTS								FISCAL 2015 GRANTS								FISCAL 2016 GRANTS
		PROBABLE OUTCOME ($)				HIGHEST LEVEL OF PERFORMANCE ($)				PROBABLE OUTCOME ($)				HIGHEST LEVEL OF PERFORMANCE ($)				PROBABLE OUTCOME ($)				HIGHEST LEVEL OF PERFORMANCE ($)
Eric J. Foss		$	5,098,046			$	10,196,091			$	5,200,013			$	10,400,026			$	4,344,100			$	8,688,200
Stephen P. Bramlage			—				—			$	800,009			$	1,600,018			$	640,005			$	1,280,010
Lynn B. McKee		$	203,492			$	407,884			$	640,006			$	1,280,012			$	640,005			$	1,280,010
Stephen R. Reynolds		$	163,158			$	326,317			$	640,006			$	1,280,012			$	640,005			$	1,280,010
Harrald Kroeker			—				—				—				—			$	340,017			$	680,034

 

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With regard to Mr. Foss, the table immediately above does not include certain awards granted in fiscal 2016 that are subject only to time-based and market-based conditions (relative total shareholder return), because these awards are not subject to any performance-based conditions that would vary the number of shares that vest if the relative total shareholder return condition is achieved. The grant date fair value of awards with market-based conditions is determined based on a Monte Carlo simulation model for market-based total shareholder return. For additional information on the valuation assumptions and more discussion with respect to the valuation of equity awards, refer to Note 10 to the audited consolidated financial statements in our Annual Report on Form 10-K for the fiscal year ended September 30, 2016.

 

(4)

This column represents the aggregate grant date fair value computed in accordance with FASB ASC Topic 718. The amounts shown for fiscal 2014 and 2015 include the grant date fair value for certain performance-based stock options granted prior to such fiscal years for which vesting was subject to EBIT targets where such target was not established at the time the option was granted, as targets for later years had not been determined. For fiscal 2015, these amounts are, for Mr. Foss, $2,590,063 and for Mr. Reynolds, $463,125. For Messrs. Foss and Reynolds, these amounts are attributable to a portion of performance-based stock options that were awarded in fiscal 2012 for Mr. Foss and fiscal 2013 for Mr. Reynolds, but whose annual performance target was established in November 2014, and, for Mr. Reynolds, a portion of performance-based stock options that were awarded in fiscal 2013 and which vested in connection with the achievement of certain returns on sales of shares by our former Sponsors in fiscal 2015. For fiscal 2014, also includes the incremental grant date fair value in connection with amendments to certain performance-based stock options in connection with our initial public offering for Ms. McKee of $3,203,859. See “Narrative Disclosure to Summary Compensation Table and Grants of Plan-Based Awards Table – Other Outstanding Equity Awards – Fiscal 2014 Vesting of Missed-Year Performance-Based Options” for additional information. With regard to Mr. Foss, a portion of the stock options granted in fiscal 2016 have a market-based condition (relative total shareholder return). These options are not subject to any performance-based conditions that would vary the number of options that vest if the relative total shareholder return condition is achieved. The grant date fair value of these options with market-based conditions is determined based on a Monte Carlo simulation model for market-based total shareholder return. For additional information on the valuation assumptions and more discussion with respect to the stock options, refer to Note 10 to the audited consolidated financial statements in our Annual Report on Form 10-K for the fiscal year ended September 30, 2016.

 

(5)	Includes amounts earned on deferred compensation in excess of 120% of the applicable federal rate, based upon the above-market return at the time the rate basis was set.

 

(6)	The following are included in this column for 2016:

 

a.

The aggregate incremental cost to us of the following perquisites: car allowance, premium payments for disability insurance, premium payments for an excess health insurance plan, payments for an executive physical, parking fees paid by the Company, and, for Mr. Foss, costs associated with personal use of Company-owned tickets or the Company-owned suite at sports stadiums and, for Mr. Foss, personal use of a Company-provided car and driver.

 

b.

With regard to Mr. Foss, $250,000 for Mr. Foss’s personal use of the Company aircraft and personal use of the Company’s fractional ownership of an additional aircraft. Pursuant to a resolution adopted by the Compensation Committee and an Aircraft Time Sharing Agreement entered into between Mr. Foss and the Company, Mr. Foss reimburses the Company for the amount by which the aggregate incremental cost to the Company attributable to his personal use of the Company aircraft exceeds $250,000 per year. The calculation of incremental cost for personal use of Company aircraft includes the variable costs incurred as a result of his personal flight activity, including charges for aircraft fuel, landing fees, and any travel expenses for the flight crew. The variable costs for the Company’s fractional ownership share include the regular hourly charge, the fuel variable charge, international flat fees and other fees. Mr. Foss is not reimbursed by the Company for any personal income taxes associated with his personal use of the Company aircraft or the Company’s fractional ownership share.

 

c.

With regard to Mr. Bramlage, $357,837 for relocation expenses incurred by Mr. Bramlage and paid under our relocation program (including a tax gross up of $63,025 as provided for in the program).

 

d.

Premium payments for term life insurance or the Survivor Income Protection Plan as follows: for Mr. Foss, $1,308, for Mr. Bramlage, $1,308, for Ms. McKee, $6,355, for Mr. Reynolds, $1,308 and for Mr. Kroeker, $1,308.

 

e.

Amounts that constitute the Company match to the Savings Incentive Retirement Plan for fiscal 2016 of $11,700 for each of Messrs. Foss, Bramlage and Reynolds and Ms. McKee.

 

f.

The dollar value of dividend equivalents accrued or credited on certain restricted stock units and performance stock units granted prior to February 5, 2014 (the date the Company announced the payment of its first quarterly dividend), where dividends were not factored into the grant date fair value required to be reported for such awards. Also includes the cash dividends accrued on restricted stock awards, which will be paid out on the applicable vesting date. The total value of dividend equivalents accrued or credited on restricted stock units and performance stock units and the total value of cash dividends accrued on restricted stock for the executive officers during fiscal 2016, in each case for awards granted prior to February 5, 2014, is as follows: for Mr. Foss, $206,434, for Ms. McKee, $23,656, for Mr. Reynolds, $16,263, and for Mr. Kroeker, $3,240. For awards granted on or after February 5, 2014, the value of dividend equivalents credited or otherwise allocated to restricted stock units or performance stock units in the form of additional units with the same vesting terms as the original awards is not included in the “All Other Compensation” column because their value is factored into the grant date fair value of awards. Additional units awarded in connection with dividend adjustments are subject to vesting and delivery conditions as part of the underlying awards.

 

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Grants of Plan-Based Awards for Fiscal Year 2016

The following table provides information about equity and non-equity awards granted or deemed granted to our named executive officers in fiscal 2016.

 

Name		Type(1)		Grant Date				Committee Meeting Date				Estimated Future Payouts under Non-Equity Incentive Plan Awards(2)												Estimated Future Payouts under Equity Incentive Plan Awards												All Other Stock Awards: Number of Shares of Stock or Units				All Other Option Awards: Number of Securities Underlying Options				Exercise or Base Price of Option Awards ($/sh)				Grant Date Fair Value of Stock and Option Awards(3)
												Thres- hold				Target				Max				Thres- Hold (#)				Target (#)				Max (#)
Foss		ACI											850,000				3,400,000				6,000,000
		NQSOs(4)			11/20/2015				11/10/2015																																418,163			$	32.65			$	3,960,004
		PSAs(5)			11/20/2015				11/10/2015																60,644				121,287				242,574															$	3,960,021
		RSUs(6)			11/20/2015				11/10/2015																												60,644											$	1,980,027
		TSR_NQSOs(7)			11/20/2015				11/20/2015																				126,716															$	32.65			$	615,840
		TSR_PSAs(8)			11/20/2015				11/20/2015																18,377				36,754				73,508															$	384,079
		TSR_PSUs(9)			11/20/2015				11/20/2015																				18,377																			$	192,040
Bramlage		ACI											153,000				612,000				1,193,400
		NQSOs(4)			11/20/2015				11/10/2015																																67,582			$	32.65			$	640,002
		PSAs(5)			11/20/2015				11/10/2015																9,801				19,602				39,204															$	640,005
		RSUs(6)			11/20/2015				11/10/2015																												9,801											$	320,003
McKee		ACI											170,788				683,153				1,332,148
		NQSOs(4)			11/20/2015				11/10/2015																																67,582			$	32.65			$	640,002
		PSAs(5)			11/20/2015				11/10/2015																9,801				19,602				39,204															$	640,005
		RSUs(6)			11/20/2015				11/10/2015																												9,801											$	320,003
Reynolds		ACI											132,651				530,604				1,034,678
		NQSOs(4)			11/20/2015				11/10/2015																																67,582			$	32.65			$	640,002
		PSAs(5)			11/20/2015				11/10/2015																9,801				19,602				39,204															$	640,005
		RSUs(6)			11/20/2015				11/10/2015																												9,801											$	320,003
Kroeker		ACI											113,794				455,175				887,591
		NQSOs(4)			11/20/2015				11/10/2015																																35,903			$	32.65			$	340,001
		PSUs10)			11/20/2015				11/10/2015																5,207				10,414				20,828															$	340,017
		RSUs(6)			11/20/2015				11/10/2015																												5,207											$	170,009

 

(1)	ACI = Annual Cash Incentive; NQSO = Non-Qualified Stock Option; RSU = Restricted Stock Unit; PSU = Performance Stock Unit; PSA = Performance Stock Award; TSR = Total Shareholder Return (Outperformance award).

 

(2)

The amounts represent the threshold, target, and maximum payouts under the Management Bonus Plan for the 2016 performance period in which Mr. Kroeker directly participated and which serves as the basis for the annual cash incentive payments under the Senior Executive Bonus Plan in which Messrs. Foss, Bramlage, and Reynolds and Ms. McKee participated in 2016. With regard to Mr. Foss, the maximum shown is the maximum allowed under the Senior Executive Bonus Plan. The maximum bonuses under the Senior Executive Bonus Plan for fiscal 2016 as a percentage of the aggregate bonus amount under the Senior Executive Bonus Plan are: for Mr. Foss, 48%; for Mr. Bramlage, 20%; and for each of Mr. Reynolds and Ms. McKee, 16%.

 

(3)

This column shows the full grant date fair value of non-qualified stock options, restricted stock units, performance stock units and performance stock awards granted to our named executive officers in fiscal 2016 under FASB ASC Topic 718. The grant date fair value for performance stock units and performance stock awards granted in fiscal 2016 assumes achievement of the target amount. For additional information on the valuation assumptions, refer to Note 10 to our audited consolidated financial statements in our Annual Report on Form 10-K for the fiscal year ended September 30, 2016. These amounts do not correspond to the actual value that will be received by the named executive officers.

 

(4)	These stock options were granted under the 2013 Stock Plan, vest annually 25% per year over four years and have a ten-year term, subject to the grantee’s continued employment with the Company.

 

(5)	These performance stock awards were granted under the 2013 Stock Plan, and vest at the end of fiscal 2018, provided that the performance target, based on adjusted earnings per share, is met for fiscal 2018.

 

(6)	These restricted stock units were granted under the 2013 Stock Plan and vest annually 25% per year over four years, subject to the grantee’s continued employment with the Company.

 

(7)	These performance based non-qualified stock options are subject to the achievement of a relative TSR performance target for the three-year period ending September 28, 2018, and will vest following the completion of fiscal year 2018, provided that the performance target is met.

 

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(8)

These performance stock awards are subject to the achievement of a relative TSR performance target for the three-year period ending September 28, 2018, and an adjusted earnings per share performance target for fiscal year 2018, and will vest following the completion of fiscal year 2018, provided that the performance targets are met.

 

(9)	These performance stock units are subject to the achievement of a relative TSR performance target for the three-year period ending September 28, 2018, and will vest following the completion of fiscal year 2018, provided that the performance target is met.

 

(10)	These performance stock units were granted under the 2013 Stock Plan, and vest at the end of fiscal 2018, provided that the performance target, based on adjusted earnings per share, is met for fiscal 2018.

Narrative Disclosure to Summary Compensation Table and Grants of Plan-Based Awards Table

Annual Cash Incentive

Senior Executive Bonus Plan

In fiscal 2016, Messrs. Foss, Bramlage and Reynolds and Ms. McKee participated in the Senior Executive Bonus Plan. Under the Senior Executive Bonus Plan, the Compensation Committee approved in November 2015 the establishment of a bonus pool that was funded based on 1.32% of adjusted EBIT. For purposes of the Senior Executive Bonus Plan and the formula used to determine the bonus pool approved by the Compensation Committee, adjusted EBIT is income from both continuing and discontinued operations before income taxes, if any, and before interest expense and other financing costs, in each case as shown on our consolidated financial statements and notes thereto in our Annual Report on Form 10-K for the fiscal year ended September 30, 2016. In addition, adjusted EBIT for purposes of the pool excluded incremental customer relationship amortization and incremental depreciation that resulted from the 2007 going private transaction (the “2007 Transaction”) and share-based compensation expense. These adjustments were made to normalize the adjusted EBIT number so that it does not reflect certain non-operational items.

As described in the Compensation Discussion and Analysis, the primary reference points the Compensation Committee considers when determining the use of negative discretion in awarding annual cash incentives to the executive officers participating in the Senior Executive Bonus Plan is a target of base salary and reference to how each such executive would have been compensated under the Management Bonus Plan.

Management Bonus Plan

In fiscal 2016, Mr. Kroeker participated in the Management Bonus Plan, and as described above, each of the other named executive officers participates in the Senior Executive Bonus Plan, which the Compensation Committee administers with reference to hypothetical achievement under the Management Bonus Plan.

Each November (or at another time during the year in the case of a new hire or promotion), the Compensation Committee sets an annual cash incentive target in dollars for each executive who participates in the Management Bonus Plan. For fiscal 2016, the Management Bonus Plan was composed of two parts: a financial portion, based on the Company’s adjusted EBIT, adjusted sales and adjusted EBIT margin, which determines 90% of the overall potential Management Bonus Plan award, and an individual portion, based on functional or business group objectives, which determines the remaining 10% of the award.

Adjusted EBIT: The adjusted EBIT target for fiscal 2016 was $930.7 million, which determines 40% of the total target. Actual 2016 adjusted EBIT was $939.3 million, representing 100.9% of target achievement. The adjusted EBIT target for purposes of the Management Bonus Plan excludes the impact of currency translation, acquisitions and divestitures, the incremental customer relationship amortization and incremental depreciation from the 2007 Transaction and share-based compensation expense and includes an adjustment for severance and other charges and branding charges and an amount intended to normalize the plan targets for corporate functional participants.

Adjusted Sales: The adjusted sales target for fiscal 2016 was $14.55 billion, which determines 25% of the total target. Actual 2016 adjusted sales was $14.37 billion, representing 98.8% of target achievement. The sales target for purposes of the Management Bonus Plan is adjusted for the impact of currency translation and acquisitions and divestitures and includes an amount intended to normalize the plan targets for corporate functional participants.

Adjusted EBIT Margin: The adjusted EBIT Margin target for fiscal 2016 was 6.40%, which determines 25% of the total target. Actual 2016 adjusted EBIT Margin was 6.54%, representing 102.2% of target achievement. The

 

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adjusted EBIT Margin target for purposes of the Management Bonus Plan excludes the impact of currency translation, acquisitions and divestitures, the incremental customer relationship amortization and incremental depreciation from the 2007 Transaction and share-based compensation expense and includes an adjustment for severance and other charges and branding charges and an amount intended to normalize the plan targets for corporate functional participants.

Functional Objectives: The functional objectives that comprised 10% of the overall Management Bonus Plan award for Mr. Kroeker and the executives who earned annual cash incentives under the Senior Executive Bonus Plan were as follows: for Mr. Foss, developing and maintaining a high performing leadership team, improving the Company’s governance, formulating and implementing the Company’s strategy and driving financial performance, for Messrs. Bramlage, Reynolds and Kroeker, and for Ms. McKee, improving overall employee engagement.

The following table describes the threshold, targets and maximum for each of the components of the Management Bonus Plan for fiscal 2016:

 

MEASURE		PERFORMANCE						PAYOUT
		(PERCENTAGE OF TARGET PERFORMANCE)						(PERCENTAGE OF TARGET INCENTIVE)
		THRESHOLD		TARGET		MAXIMUM		THRESHOLD		TARGET		MAXIMUM
Adjusted EBIT (40%)		90		100		110		25		100		200
Adjusted Sales (25%)		95		100		105		25		100		200
Adjusted EBIT Margin (25%)		90		100		110		25		100		200
Functional Objective (10%)		1		100		150		1		100		150

As the table illustrates, the Company must attain a threshold, or minimum, performance on each measure of the financial portion of the Management Bonus Plan for the participant to receive any payout under the financial portion. If the threshold performance is achieved, the participant would receive 25% of the payout for that financial measure, which would increase to 100% when 100% of the financial measure is attained. If greater than 100% of the target for a particular financial measure is achieved, the participant would receive more than 100% payout on that financial measure up to the maximum amount set forth in the table. The payout under the individual portion of the Management Bonus Plan is directly proportional to the level of achievement of the functional objective and the maximum payout for this measure is as described in the table. Therefore, if the maximum performance of all measures was achieved, the executive would receive up to 195% of his or her target bonus amount.

Fiscal 2016 Annual Cash Incentive Opportunities and Payouts and Fiscal 2017 Annual Cash Incentive Opportunities

For fiscal 2016, our adjusted EBIT under the Management Bonus Plan was $939.3 million and our adjusted sales under the Management Bonus Plan was $14.37 billion and our Adjusted EBIT Margin under the Management Bonus Plan was 6.54%. The following table sets forth for the named executive officers participating in the Senior Executive Bonus Plan (and for Mr. Kroeker, to the extent applicable under the Management Bonus Plan for fiscal 2016), the bonus opportunity as percentages of adjusted EBIT, the maximum amount that could have been awarded to him or her for fiscal 2016 based on the Company’s achievement of adjusted EBIT, the target annual cash incentive opportunities set by the Compensation Committee, the actual annual cash incentives awarded (which was equal to what the executive would have received under the Management Bonus Plan), as well as the percentages of the adjusted EBIT and target annual cash incentive the Compensation Committee established in November 2016 in respect of fiscal 2017 awards:

 

 

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EXECUTIVE		FISCAL 2016 PERCENTAGE OF ADJUSTED EBIT		MAXIMUM INCENTIVE POTENTIAL BASED ON FISCAL 2016 RESULTS		FISCAL 2016 TARGET INCENTIVE OPPORTUNITY AS A PERCENTAGE OF SALARY		ACTUAL INCENTIVE AWARDED FOR FISCAL 2016		FISCAL 2017 PERCENTAGE OF ADJUSTED EBIT		FISCAL 2017 TARGET INCENTIVE OPPORTUNITY AS A PERCENTAGE OF SALARY
Mr. Foss		0.63% (up to a maximum of $6 million)		$6.0 million		200%		$3.726 million		1.01% (up to a maximum of $10 million)		200%
Mr. Bramlage		0.26%		$2.514 million		100%		$670,700		0.25%		100%
Ms. McKee		0.21%		$2.011 million		100%		$748,700		0.20%		100%
Mr. Reynolds		0.21%		$2.011 million		100%		$581,500		0.20%		100%
Mr. Kroeker		N/A		N/A		85%		$498,800		0.20%		85%

The Compensation Committee reviewed Mr. Foss’s functional objectives described above that it had set for him at the beginning of fiscal 2016 and his performance against such objectives and determined that he had achieved a 150% level of performance of his functional objectives. The Compensation Committee then determined that each of Messrs. Bramlage, Reynolds, and Kroeker and Ms. McKee had achieved a 150% level of performance of their functional objectives, in each case based upon an assessment of the performance of each of the respective executives and departments against the objectives described above as well as the overall financial performance of the Company. As a result of this level of financial and functional objective achievement, Mr. Foss’s payout under the Management Bonus Plan as well as Messrs. Bramlage, Reynolds, and Kroeker and Ms. McKee would have been 109.6% of his or her respective target.

Equity Incentive Awards

Fiscal 2016 Awards

In November 2015, the Compensation Committee granted an annual award to each of the Company’s named executive officers in respect of fiscal 2016 compensation.

Time-vesting Awards: restricted stock units and stock options granted in fiscal 2016 are generally subject to a vesting schedule with 25% of the award vesting on each of the first four anniversaries of the date of grant, subject to the participant’s continued employment with the Company or one of its subsidiaries through each such anniversary.

Performance-based Awards: Shares of performance restricted stock and performance stock units granted in fiscal 2016 generally vest at the end of a three-year period, subject to achievement of a specified performance target and the participant’s continued employment with the Company. The performance metric for the shares of performance restricted stock and performance stock units granted in fiscal 2016 was based upon an adjusted earnings per share target for fiscal 2018. The adjusted earnings per share target is equal to adjusted net income divided by a constant share number. The adjusted net income target is calculated as reported net income excluding the impact of currency translation, acquisitions and divestitures, the incremental customer relationship amortization and incremental depreciation from the 2007 Transaction, any expenses or charges related to any equity offering, acquisition, disposition, refinancing or similar transaction, share-based compensation expense and gains, losses and settlements impacting comparability and including an adjustment for severance and other charges and the tax impact related to these adjustments.

 

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No awards may become earned in fiscal 2016, however, the number of shares of performance restricted stock and performance stock units that can be earned in fiscal 2018 was based upon the percentage of the adjusted earnings per share target that is achieved as follows:

 

ADJUSTED EARNINGS PER SHARE PERFORMANCE LEVEL AS A PERCENTAGE OF TARGET		PERCENTAGE OF TARGET NUMBER OF PSUs EARNED
less than 90.0%		0%
90%		50%
92.5%		75%
100%		100%
107.5%		150%
110% or greater		200%

If the performance target is satisfied at or above 90%, the shares of performance stock and performance stock units earned effectively convert into time-vesting restricted stock units, vesting in entirety, upon certification of performance, subsequent to the completion of the performance period.

In November 2015, the Compensation Committee also granted to Mr. Foss stock options and restricted stock units that will each vest on the third anniversary of the grant date and performance restricted stock with the same vesting and payout subject to the achievement of the fiscal 2018 adjusted EPS target as the performance restricted stock described above, which stock options, restricted stock units, and performance restricted stock are subject to an additional performance vesting requirement that the Company’s relative total shareholder return be at or above the 90th percentile of the Company’s peer group over the three-year performance period from October, 3, 2015, to September 28, 2018.

See “Grants of Plan Based Awards for Fiscal Year 2016” for further information regarding the November 2015 equity grants.

All restricted stock units and performance stock units will accrue dividend equivalents from the date of grant until the date of settlement in shares (with the dividend equivalents earned on performance stock units determined based upon the actual achievement against target performance). Shares of performance restricted stock accrue cash dividends that are payable only upon the vesting of the underlying performance restricted stock. Time-vesting restricted stock units, performance stock units, performance restricted stock and stock options also vest in connection with certain termination events, as described in more detail in “Potential Post-Employment Benefits.”

Other Outstanding Equity Awards

Fiscal 2014 Vesting of Missed-Year Performance-Based Options

On November 11, 2013, the Compensation Committee approved an amendment to all outstanding non-qualified stock option agreements containing performance-based conditions that modified the vesting provisions relating to outstanding performance-based options granted prior to our initial public offering and awarded under the 2007 Management Stock Incentive Plan, the equity plan under which the Company granted awards prior to its IPO. The amendment provided that in the event of an initial public offering of the Company, subject to the option holder’s continued employment on that date, 50% of any then-unvested performance-based options that did not meet applicable performance thresholds in prior years (the “Missed Year Options”) would become vested if the initial public offering price for the common stock of the Company equaled or exceeded $20.00 per share. In addition, if, during the 18-month period following the initial public offering, the closing trading price for common stock of the Company equaled or exceeded $25.00 per share over any consecutive twenty-day trading period, 100% of the Missed Year Options would become vested. Both thresholds were satisfied during fiscal 2014 and all of the Missed Year Options vested.

 

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Vesting of Outstanding Performance-Based Options

Under the original terms of the option agreements negotiated in connection with the 2007 Transaction, performance-based options granted through June 2013 were scheduled to vest subject to time-vesting and performance-based conditions. The performance targets for the 50% of the stock options that were subject to performance conditions were generally based on achievement of specified EBIT targets, but would also vest if certain other events were to occur, including the achievement of a specified internal rate of return by our former Sponsors. On May 27, 2015 our former Sponsors completed a sale of 25 million shares in an underwritten block trade. The receipt of the proceeds of that sale along with those of prior sales by our former Sponsors and their receipt of shares of Seamless Holdings resulted in our former Sponsors achieving an internal rate of return of greater than 15% on their investment in us, which was the required internal rate of return for outstanding performance-based options to vest. Accordingly all of the outstanding performance-based stock options vested as of such date.

Employment Agreements and Change of Control Arrangements

We have employment agreements with all of the named executive officers for indeterminate periods terminable by either party, in most cases subject to post-employment severance and benefit obligations. While we do have these agreements in place, from time to time, it has been necessary to renegotiate some terms upon actual termination. For more information regarding change of control and severance payments for our named executive officers, see the disclosure under “Potential Post-Employment Benefits.”

 

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Outstanding Equity Awards at 2016 Fiscal Year-End

The following table provides information with respect to outstanding equity awards held by our named executive officers at 2016 fiscal year-end.

 

				Option Awards																				Stock Awards
Name		Type		Number of Securities Underlying Unexercised Options(#) Exercisable(1)				Number of Securities Underlying Unexercised Options(#) Unexercisable(2)				Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#)				Option Exercise Price				Option Expiration Date				Number of Shares or Units of Stock That Have Not Vested (#)				Market Value of Shares or Units of Stock That Have Not Vested				Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#)				Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units, or Other Rights That Have Not Vested ($)
Foss		FY12   NQSO			1,450,000				—				—			$	13.90	(4)			6/6/2022				—				—				—				—
		FY13   NQSO			935,727				311,911				—			$	16.21				6/20/2023				—				—				—				—
		FY13   NQSO			257,250				85,748				—			$	16.21				7/31/2022				—				—				—				—
		FY14   NQSO			385,208				385,209				—			$	23.92				12/20/2023				—				—				—				—
		FY15   NQSO			156,815				470,447				—			$	28.66				11/19/2024				—				—				—				—
		FY16   NQSO			—				418,163				—			$	32.65				11/20/2025				—				—				—				—
		FY16   NQSO   (TSR)			—				—				126,716	(3)		$	32.65				11/20/2025				—				—				—				—
		RSA(5)			—				—				—				—				—				14,252			$	542,004				—				—
		RSU(6)			—				—				—				—				—				427,580			$	16,260,857				—				—
		PSA(7)			—				—				—				—				—				—				—				158,041			$	6,010,299
		PSU(8)			—				—				—				—				—				228,035			$	8,672,172				18,582	(9)		$	706,687
Bramlage		FY15   NQSO			22,472				67,416				—			$	31.40				4/6/2025				—				—				—				—
		FY16   NQSO			—				67,582				—			$	32.65				11/20/2025				—				—				—				—
		RSU(6)			—				—				—				—				—				52,007			$	1,977,826				—				—
		PSA(7)			—				—				—				—				—				—				—				19,602			$	745,464
		PSU(8)			—				—				—				—				—				17,270			$	656,784				—				—
McKee(11)		FY08   NQSO			50,000				—				—			$	9.74	(4)			3/5/2018				—				—				—				—
		FY10   NQSO			150,000				—				—			$	9.48	(4)			3/2/2020				—				—				—				—
		FY11   NQSO			250,000				—				—			$	11.63	(4)			6/22/2021				—				—				—				—
		FY13   NQSO			70,887				23,631				—			$	16.21				7/9/2023				—				—				—				—
		FY13   NQSO			25,828				—				—			$	16.21				7/31/2021				—				—				—				—
		FY14   NQSO			15,408				15,409				—			$	23.92				12/20/2023				—				—				—				—
		FY15   NQSO			19,300				57,902				—			$	28.66				11/19/2024				—				—				—				—
		FY16   NQSO			—				67,582				—			$	32.65				11/20/2025				—				—				—				—
		RSU(6)			—				—				—				—				—				60,838			$	2,313,669				—				—
		PSA(7)			—				—				—				—				—				—				—				19,602			$	745,464
		PSU(8)			—				—				—				—				—				19,397			$	737,677				—				—

 

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				Option Awards																				Stock Awards
Name		Type		Number of Securities Underlying Unexercised Options(#) Exercisable(1)				Number of Securities Underlying Unexercised Options(#) Unexercisable(2)				Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#)				Option Exercise Price				Option Expiration Date				Number of Shares or Units of Stock That Have Not Vested (#)				Market Value of Shares or Units of Stock That Have Not Vested				Number of Shares or Units of Stock That Have Not Vested (#)				Market Value of Shares or Units of Stock That Have Not Vested
Reynolds		FY13   NQSO			31,250				31,250				—			$	14.99				12/5/2022				—				—				—				—
		FY13 NQSO			—				18,906				—			$	16.21				7/9/2023				—				—				—				—
		FY13   NQSO			44,388				11,096				—			$	16.21				7/31/2023				—				—				—				—
		FY14   NQSO			12,326				12,328				—			$	23.92				12/20/2023				—				—				—				—
		FY15   NQSO			19,300				57,902				—			$	28.66				11/19/2024				—				—				—				—
		FY16   NQSO			—				67,582				—			$	32.65				11/20/2025				—				—				—				—
		RSA(5)			—				—				—				—				—				904			$	34,379				—				—
		RSU(6)			—				—				—				—				—				46,353			$	1,762,799				—				—
		PSA(7)			—				—				—				—				—				—				—				19,602			$	745,464
		PSU(8)			—				—				—				—				—				18,564			$	706,001				—				—
Kroeker		FY14 NQ			21,404				21,404				—			$	20.00				12/11/2023				—				—				—				—
		FY15 NQ			12,062				36,189				—			$	28.66				11/19/2024				—				—				—				—
		FY16 NQ			—				35,903				—			$	32.65				11/20/2025				—				—				—				—
		RSU(6)			—				—				—				—				—				18,252			$	694,131				—				—
		PSU(8)			—				—				—				—				—				9,514			$	361,815				10,530	(10)		$	400,470

 

(1)

The amounts in this column are time-vesting and performance-based options that have vested, generally based on the vesting schedules described below in footnote 2, provided that a certain portion of these options which were subject to performance conditions may have vested at an earlier or later time when such performance conditions were satisfied.

 

(2)

These are options subject to time-vesting and, other than as set forth below, vest 25% per year over four years from the date of grant, provided that the named executive officer is still employed by us, with certain exceptions (disability, retirement or death). See “Potential Post-Employment Benefits.” Other than as set forth below, all options were granted on the date that is ten years prior to the listed expiration date. Certain options included in this column were granted in connection with an equity exchange offer in fiscal 2013 and have vesting schedules based upon the original vesting schedule of the award that was exchanged, as set forth below.

 

NAME		EXPIRATION DATE		GRANT DATE		VESTING SCHEDULE
McKee		July 31, 2021		July 31, 2013		One-third on each of December 15, 2013, 2014 and 2015
Foss		July 31, 2022		July 31, 2013		25% on each of December 15, 2013, 2014, 2015 and 2016
Reynolds		July 31, 2023		July 31, 2013		20% vested on grant and 20% vest on each of December 15, 2013, 2014, 2015 and 2016

 

(3)	These are stock options subject to relative TSR for the three-year period ending September 28, 2018, and will not vest until the completion of fiscal year 2018.

 

(4)

Exercise price reflects the reduction of $1.06 per share, which was the portion of the appraisal price of a share of Company common stock allocated to each share of Seamless Holdings Corporation common stock. Seamless Holdings Corporation was spun off by the Company on October 26, 2012 and the exercise prices of all stock options issued prior to that time were adjusted to reflect the spinoff.

 

(5)	These are shares of restricted stock that were granted as part of an equity exchange offer on July 31, 2013 and vest as follows:

 

NAME		VESTING SCHEDULE
Foss		Of the 57,002 originally granted, 25% on each of December 15, 2013, 2014, 2015 and 2016
Reynolds		Of the 4,516 shares originally granted, 20% vested immediately upon grant and 20% vest on each of December 15, 2013, 2014, 2015 and 2016

 

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(6)

These are restricted stock units that are subject to time-vesting and vest in accordance with the vesting schedule below, provided that the named executive officer is still employed by us on such dates. The number of restricted stock units listed includes dividend equivalents accrued with respect to such award.

 

Name		Award Date				Number of Shares or Units of Stock That Have Not Vested (#)				Vesting Schedule from Date of  Grant
Foss			6/20/2013				69,954.3109			4 equal annual installments
			12/11/2013				171,809.2145			3 equal annual installments
			12/20/2013				54,926.6228			4 equal annual installments
			11/19/2014				69,567.8640			4 equal annual installments
			11/20/2015				61,321.7136			4 equal annual installments
Bramlage			4/6/2015				9,714.8443			4 equal annual installments
			4/6/2015				32,380.7808			100% on the third anniversary
			11/20/2015				9,910.5289			4 equal annual installments
McKee			7/9/2013				7,950.9231			4 equal annual installments
			12/11/2013				32,213.9698			3 equal annual installments
			12/20/2013				2,198.7966			4 equal annual installments
			11/19/2014				8,563.0640			4 equal annual installments
			11/20/2015				9,910.5289			4 equal annual installments
Reynolds			7/9/2013				6,360.3261			4 equal annual installments
			12/11/2013				19,759.2759			3 equal annual installments
			12/20/2013				1,759.6560			4 equal annual installments
			11/19/2014				8,563.0640			4 equal annual installments
			11/20/2015				9,910.5289			4 equal annual installments
Kroeker			12/11/2013				7,634.4534			3 equal annual installments
			11/19/2014				5,352.5541			4 equal annual installments
			11/20/2015				5,265.1897			4 equal annual installments

 

(7)

These are shares of performance restricted stock granted on November 20, 2015 that are subject to the achievement of an adjusted earnings per share target for fiscal 2018, and will not vest until the completion of fiscal year 2018. Performance restricted stock awards do not accrue dividend equivalents, but instead accrue cash dividends to be delivered only upon vesting of the underlying shares.

 

(8)

Unless otherwise noted, these are performance stock units, subject to the achievement of an adjusted earnings per share target outlined below, which vest in three equal annual installments, provided that the named executive officer is still employed by us on such dates. The adjusted earnings per share target achievement and resulting percentage at which the awards were earned is outlined below. The number of performance stock units listed includes dividend equivalents accrued with respect to such award. With regard to Mr. Foss, a portion of the outstanding shares of performance restricted stock, 36,754, are also subject to the achievement of relative TSR for the three-year period ending September 28, 2018, and will not vest until the completion of fiscal year 2018.

 

Name		Award Date				Number of Shares or Units of Stock That Have Not Vested (#)				Adj. EPS Target				Adj. EPS Target Achievement				Percentage of Underlying PSU Becoming Earned
Foss			12/20/2013				104,360				FY 2014				108.5	%			142.5	%
			11/19/2014				123,675				FY 2015				100.0	%			100.0	%
Bramlage			4/6/2015				17,270				FY 2015				100.0	%			100.0	%
McKee			12/20/2013				4,175				FY 2014				108.5	%			142.5	%
			11/19/2014				15,222				FY 2015				100.0	%			100.0	%
Reynolds			12/20/2013				3,342				FY 2014				108.5	%			142.5	%
			11/19/2014				15,222				FY 2015				100.0	%			100.0	%
Kroeker			11/19/2014				9,514				FY 2015				100.0	%			100.0	%

 

(9)

These are performance stock units granted on November 20, 2015 that are subject to the achievement of relative TSR for the three-year period ending September 28, 2018, and will not vest until the completion of fiscal year 2018 subject to continued service through the vesting date. The number of performance stock units listed includes dividend equivalents accrued with respect to such award.

 

(10)

These are performance stock units granted on November 20, 2015 that are subject to the achievement of an adjusted earnings per share target for fiscal 2018, and will not vest until the completion of fiscal year 2018. The number of performance stock units listed includes dividend equivalents accrued with respect to such award.

 

(11)

If a participant’s service with the Company or any of its subsidiaries terminates due to retirement (as defined in the 2007 Stock Plan or the 2013 Stock Plan, as applicable), the installment of stock options, restricted stock and restricted stock units that are scheduled to vest on the next vesting date following such termination will immediately vest. With regard to performance awards, a participant is entitled to a portion of the award proportionate to the timing of the retirement and performance period (subject to achievement of the performance targets). Only Ms. McKee is retirement eligible as of the end of fiscal 2016. For information on the value of equity awards which would have vested upon retirement as of the end of fiscal 2016, see the table of estimated payments presented in “Potential Post-Employment Benefits” below.

 

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Table of Contents

Option Exercises and Stock Vested Table for Fiscal Year 2016

The following table sets forth information with respect to the named executive officers concerning the exercise of options and the vesting of restricted stock, restricted stock unit and performance stock unit awards in fiscal 2016.

 

NAME		OPTION AWARDS						STOCK AWARDS
		NUMBER OF SHARES ACQUIRED ON EXERCISE (#)				VALUE REALIZED ON EXERCISE(1) ($)		NUMBER OF SHARES ACQUIRED ON VESTING(2)(3) (#)				VALUE REALIZED ON VESTING(1) ($)
Foss			—			—			469,239			$	15,443,290
Bramlage			—			—			11,808			$	391,086
McKee			300,000			$8,110,335			58,847			$	1,961,836
Reynolds			244,209			$4,404,914			41,372			$	1,377,995
Kroeker			—			—			10,252			$	338,034

 

(1)	Value realized on exercise and vesting is calculated based upon the closing price of our common stock on the NYSE at the date of exercise or vesting, as applicable.

 

(2)	This column includes restricted stock, restricted stock units and performance stock units that have vested during the fiscal year. For restricted stock units and performance stock units, the number of shares acquired on vesting includes dividend equivalents.

 

(3)	For each named executive officer, shares actually delivered upon vesting of restricted stock, restricted stock units and performance stock units were net of amounts withheld related to taxes.

Pension Benefits for Fiscal 2016

No named executive officer participated in a pension benefit plan during fiscal 2016.

Non-Qualified Deferred Compensation for Fiscal Year 2016

Our named executive officers are eligible to participate in two deferred compensation plans: the 2007 Savings Incentive Retirement Plan and the 2005 Deferred Compensation Plan, each of which is discussed in further detail below. Ms. McKee participated in predecessor plans to the 2007 Savings Incentive Retirement Plan and retains balances in these older plans, all of which are reflected in the table.

 

NAME		EXECUTIVE CONTRIBUTIONS IN LAST FY(1) ($)				REGISTRANT CONTRIBUTIONS IN LAST FY(2) ($)				AGGREGATE EARNINGS IN LAST FY(3) ($)				AGGREGATE WITHDRAWALS/ DISTRIBUTIONS ($)				AGGREGATE  BALANCE AT LAST FYE(3)(4) ($)
Foss
2007 SIRP			102,000				11,700				18,201				—				427,142
2005 Deferred Comp Plan			—				—				—				—				—
Bramlage
2007 SIRP			26,820				11,700				526				—				39,046
2005 Deferred Comp Plan			—				—				—				—				—
McKee
2007 SIRP			40,757				11,700				98,001				—				1,989,437
2005 Deferred Comp Plan			—				—				—				—				—
Reynolds
2007 SIRP			47,485				11,700				9,073				—				217,567