SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934 (Amendment No. )
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Filed by a Party other than the Registrant / /
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[_] Preliminary Proxy Statement
[_] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to 240.14a-11(c) or 240.14a-12
ARAMARK CORPORATION
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(Name of Registrant as Specified in Its Charter)
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[LOGO]Aramark
Notice of Annual Meeting of Stockholders
To our stockholders:
ARAMARK Corporation will hold its annual stockholders meeting on the
sixteenth floor of ARAMARK Tower, 1101 Market Street, Philadelphia,
Pennsylvania, on Tuesday, February 12, 2002, at 3:00 p.m. Philadelphia time,
for the following purposes:
1. To elect the Class I directors to serve until the 2005
annual meeting of stockholders.
2. To transact such other business as may properly come before
the meeting.
The board of directors has fixed the close of business on December 24,
2001 as the record date for determination of the stockholders entitled to
notice of and to vote at the meeting. During the ten days prior to the meeting,
stockholders may examine a stockholder list for any purpose germane to the
meeting at ARAMARK's offices at ARAMARK Tower, 1101 Market Street,
Philadelphia, Pennsylvania.
You can vote your shares by proxy using a toll-free telephone number or
the internet (or by fax from outside the United States). We have provided
instructions for using these convenient services on the proxy card. Of course,
you may also vote your shares by marking your votes on the proxy card, signing
and dating it, and mailing it in the envelope provided.
Whether or not you expect to attend the meeting in person, please vote
your shares in one of the ways described above.
Bart J. Colli
Executive Vice President, General
Counsel
and Secretary
January 9, 2002
[LOGO]Aramark
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
Solicitation by Board of Directors
We are furnishing this proxy statement in connection with the
solicitation by the board of directors of ARAMARK Corporation (ARAMARK or the
Company) of proxies for use at the annual stockholders meeting to be held on
February 12, 2002, and at any adjournment or postponement of the meeting.
Stockholders may submit proxies by mail or phone, or electronically via the
internet by following the instructions on the proxy card included with this
proxy statement. Stockholders who submit proxies may revoke them at any time
before they are voted by submitting a later-dated proxy, or by delivering
written notice of revocation to the Secretary of ARAMARK, or by personally
notifying the Secretary of ARAMARK at the meeting.
ARAMARK's executive offices are located at ARAMARK Tower, 1101 Market
Street, Philadelphia, Pennsylvania 19107 (telephone: 215-238-3000). This proxy
statement and proxy card are being mailed to our stockholders on or about
January 9, 2002.
Shares Outstanding and Voting Rights
On December 14, 2001, we completed the merger of ARAMARK with its wholly
owned subsidiary ARAMARK Worldwide Corporation followed by a public offering of
our new class B common stock. In connection with the merger, our old class A
common stock was converted into twenty shares of our new class A-1 common stock
and our old class B common stock was converted into two shares of our new class
A common stock, divided as equally as possible among our new class A-1, class
A-2 and class A-3 common stock. Throughout this proxy statement, references to
share amounts and related information have been adjusted to take into account
the effect of the merger. We use the term "class A common stock" to refer to
the class A-1, class A-2 and class A-3 common stock. Our certificate of
incorporation provides for a conversion of class A-1, class A-2 and class A-3
common stock into class B-1, class B-2 and class B-3 common stock,
respectively, if an employee that is the holder thereof leaves our company. In
addition, our certificate of incorporation permits holders of our class A-1,
class A-2, and class A-3 common stock to convert such shares into class B-1,
class B-2 and class B-3 common stock, respectively, at any time. Unless the
distinction is relevant, we use the term "class B common stock" to refer to our
unrestricted class B common stock and our class B-1, class B-2 and class B-3
common stock.
Only holders of shares of class A common stock and class B common stock
of record at the close of business on December 24, 2001, are entitled to vote
at the meeting. On that date, 163,876,953 shares of class A common stock and
34,500,000 shares of class B common stock (together, the common stock) were
outstanding. Each holder of record of shares of class A common stock entitled
to vote will have the right to ten votes for each such share standing in his,
her, or its name on the books of ARAMARK and each holder of record of shares of
class B common stock entitled to vote will have the right to one vote for each
such share standing in his, her or its name on the books of ARAMARK.
1
Vote Required and Quorum
Directors will be elected by the vote of the holders of a majority of
the votes of the shares having voting power represented in person or by proxy
at the meeting and entitled to vote in the election of directors. Any other
matter coming before the meeting, of which the board of directors knows of
none, will be decided by the vote of the holders of a majority of the votes of
the shares having voting power represented in person or by proxy at the
meeting and entitled to vote on the matter.
All shares represented in person or by proxy will be counted for quorum
purposes. Where a stockholder does not specify a choice on a properly
submitted proxy, the shares will be voted as recommended by the board of
directors. Where a stockholder withholds authority to vote on the election of
any director, the shares of such stockholder will be counted as entitled to
vote with respect to that election and will have the effect of a vote against
the election of the director. Abstentions with respect to the election of a
director will have the effect of a vote against the election of the director.
Broker non-votes with respect to the election of a director (shares held by a
broker or nominee who is present or represented at the meeting, but with
respect to which the broker or nominee is not empowered to vote on proposals)
will be counted for purposes of determining the quorum, but will have no
effect on the vote of an election of a director.
1.Election of Directors
The persons listed below have been nominated by the board of directors
to be elected to serve until the 2005 annual meeting of stockholders and the
election and qualification of their respective successors:
James E. Ksansnak Thomas H. Kean
Leonard S. Coleman, Jr. James E. Preston
The board of directors recommends that you vote "For" the election of
these four persons.
2
MANAGEMENT
Directors
The following table presents the names and positions of our directors,
their ages as of November 1, 2001 and the length of time they have been
directors:
Name Age Position Since
- ------------------------ --- ------------------------------------------------------- -----
Joseph Neubauer......... 60 Chairman and Chief Executive Officer and Director (/2/) 1979
Lawrence T. Babbio,
Jr. ................... 56 Director (/3/) (/4/) 1999
Patricia C. Barron...... 58 Director (/1/) 1997
Robert J. Callander..... 70 Director (/2/) (/3/) (/4/) (/5/) 1986
Leonard S. Coleman,
Jr. ................... 52 Director (/1/) 2000
Ronald R. Davenport..... 65 Director (/1/) (/4/) (/5/) 1980
Thomas H. Kean.......... 66 Director (/3/) (/4/) 1994
James E. Ksansnak....... 61 Director (/3/) 1997
James E. Preston........ 68 Director (/2/) (/3/) (/4/) 1993
Karl M. von der Heyden.. 65 Director 2001
- ----------------
The numbers following the positions held by the directors indicate membership
in the following board committees at September 28, 2001:
(1) Audit and Corporate Practices
(2) Executive
(3) Finance
(4) Human Resources, Compensation and Public Affairs
(5) Stock
Our certificate of incorporation provides for a board of directors that
is divided into three classes, one of which will be elected each year at the
annual meeting of stockholders for terms of office expiring after three years.
Class I directors initially have terms expiring at the annual meeting to be
held in calendar year 2002, Class II directors initially have terms expiring at
the annual meeting to be held in calendar year 2003 and Class III directors
initially have terms expiring at the annual meeting to be held in calendar year
2004. Messrs. Coleman, Kean, Ksansnak and Preston are members of Class I, Ms.
Barron, Messrs. Callander, and Davenport are members of Class II and Messrs.
Neubauer, Babbio and von der Heyden are members of Class III. Each director
serves until the expiration of his or her term and thereafter until his or her
successor is duly elected and qualified.
Directors Meetings and Committees
On December 26, 2001, Edward G. Jordan, one of our Class II directors,
passed away. No successor has been appointed to date.
ARAMARK's board of directors held nine meetings during fiscal 2001. The
board has certain standing committees, which are described below. During fiscal
2001, each director attended at least 75% of the aggregate of all board
meetings and all meetings of committees on which he or she served.
The Audit and Corporate Practices Committee consists entirely of
directors who the board has determined are independent. The board has
determined in its business judgement that each of the members of the committee
is independent as defined in the New York Stock Exchange listing standards,
does not have a business or other relationship to ARAMARK or its management
that would interfere with his or her exercise of independent judgement, and
that each is financially literate and that at least one member of the committee
has accounting or related financial management expertise. The committee reviews
the periodic financial reports and the accounting principles used by ARAMARK
and the adequacy of ARAMARK's system of internal controls. It also reviews with
the independent public accountants and the internal audit department the scope
of their audits, their audit reports, and any recommendation made by them to
determine whether these activities are reasonably designed to assure the
soundness of accounting and financial procedures. It
3
recommends the action to be taken with respect to the appointment of and
approves the compensation of ARAMARK's independent public accountants and
monitors compliance with ARAMARK's business conduct policy. It held four
meetings during fiscal 2001. A copy of the charter of the committee is attached
to this proxy statement.
The Executive Committee has the full power of the board of directors when
the board is not in session, except with respect to actions or matters
expressly required by the Delaware General Corporation Law to be submitted to
stockholders for approval and adopting, amending or approving the by-Laws of
the company. The committee did not hold any meetings in fiscal 2001.
The Finance Committee reviews the overall financial plans of ARAMARK,
including capital expenditures, acquisitions and divestitures, securities
issuances and incurrences of debt, and the performance of ARAMARK's retirement
benefit plans. It recommends to the board specific transactions involving the
foregoing, and it has been empowered by the board to approve certain financial
commitments and acquisitions and divestitures by ARAMARK up to specified
levels. It held four meetings during fiscal 2001.
The Human Resources, Compensation and Public Affairs Committee consists
entirely of directors who ARAMARK believes are both "non-employees" (within the
meaning of SEC Rule 16b-3(b)(3)(i)) and "outside directors" (within the meaning
of Section 162(m) of the Internal Revenue Code). The committee determines the
base salary of each of the chairman and chief executive officer and the
president and chief operating officer (subject to review and approval by the
board) and approves the salaries and bonuses paid to officers and other
employees who are in senior management positions or whose current or proposed
base salary exceeds $200,000 per annum. It reviews appointments to senior
management positions and the nature and scope of ARAMARK's employee benefit
plans. It also reviews and recommends the compensation of outside directors and
reviews ARAMARK's contribution policy and practices for its retirement benefit
plans. The committee assists the board in identifying, screening and
recommending qualified candidates to serve as directors. The committee will
consider nominees proposed by stockholders. Any stockholder who wishes to
recommend a prospective nominee for the board of directors for the committee's
consideration may do so by submitting the candidate's name and qualifications
in writing to the following address: ARAMARK Corporation, ARAMARK Tower, 1101
Market Street, Philadelphia, PA 19107, Attn: Secretary. During fiscal 2001, the
committee held six meetings.
The Stock Committee consists of two outside directors. The committee has
concurrent authority, with the Human Resources, Compensation and Public Affairs
Committee, to approve specific transactions involving ARAMARK stock between
officers and directors and ARAMARK. It did not hold any meetings during fiscal
2001.
Business Experience
The principal occupations of ARAMARK's directors during the past five
years and other directorships currently held by the directors are as follows:
Joseph Neubauer has been our chief executive officer since February 1983
and the chairman since April 1984; he was our president from February 1983 to
May 1997. He is a director of Verizon Communications Inc., formerly Bell
Atlantic Corporation, CIGNA Corporation, Federated Department Stores, Inc. and
Wachovia Corporation.
Lawrence T. Babbio, Jr. has been vice-chairman and president of Verizon
Communications Inc., formerly Bell Atlantic Corporation, since July 2000. He
was president and chief operating officer of Verizon from December 1998 until
July 2000. He was president and chief executive officer of Verizon's Network
Group and chairman of Verizon's Global Wireless Group from August 1997 until
December 1998. From January 1995 to August 1997 he was vice chairman of Verizon
Communications and prior to that was executive vice president and chief
operating officer of Verizon. He is a director of Compaq Computer Corporation.
4
Patricia C. Barron has been clinical associate professor at the Leonard
N. Stern School of Business of New York University since September 1999 and
prior to that was an executive-in-residence and senior fellow. She was vice
president of Business Operations Support of Xerox Corporation from April 1997
to July 1998. From 1995 to 1997, she was president of Engineering Systems of
Xerox Corporation and from 1992 to 1994, was president of Office Document
Products of Xerox Corporation. She is a director of Quaker Chemical
Corporation, Teleflex Corporation, Ultralife Batteries, Inc. and United
Services Automobile Association.
Robert J. Callander was executive-in-residence at the Business School of
Columbia University from 1992 to June 2000. He was president of Chemical Bank
and Chemical Banking Corporation from August 1990 to June 1992. He is a
director of Omnicom Group, Inc., Scudder Global High Income Fund Inc., Scudder
New Asia Fund Inc., The Korea Fund Inc., The Brazil Fund Inc. and The Argentina
Fund Inc.
Leonard S. Coleman, Jr. has been the chairman of Arena Co. since
September 2001 and Senior Advisor, Major League Baseball since November 1999.
He was President of the National League of Professional Baseball Clubs from
1994 to 1999. He is a director of Cendant Corporation, Churchill Downs
Incorporated, Electronic Arts Inc., H.J. Heinz Company, New Jersey Resources
Corporation, Omnicom Group, Inc., Owens Corning and Radio Unica Communications
Corp.
Ronald R. Davenport has been the chairman of Sheridan Broadcasting
Corporation since 1972. He is a director of Mellon Private Asset Management.
Former Governor Thomas H. Kean was the Governor of the State of New
Jersey from 1982 until 1990. He has been the president of Drew University since
1990. He is a director of Amerada Hess Corporation, Fiduciary Trust Company
International, The Pepsi Bottling Group, Inc. and United HealthCare
Corporation.
James E. Ksansnak was our vice chairman from May 1997 until February
2001. From February 1991 to May 1997, he was our executive vice president; from
May 1986 to February 1991, he was our senior vice president; and from May 1986
to May 1997, he was our chief financial officer. He is a director of Advanta
Corp. and CSS Industries, Inc.
James E. Preston was the chairman of Avon Products, Inc. from 1989 to
1999 and president and chief executive officer from September 1988 until June
1998. He is a director of Reader's Digest Association, and Venator Group, Inc.
Karl M. von der Heyden was the vice chairman of PepsiCo, Inc. from
February 1998 until February 2001 and vice chairman and chief financial officer
from September 1996 to February 1998. Between December 1993 and August 1994 he
was president and chief executive officer of Metallgesellschaft Corp. In May
1993, he retired as co-chairman and chief executive officer of RJR Nabisco Inc.
He is a director of AstraZeneca PLC and Federated Departments Stores, Inc.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires our
directors, executive officers and persons who own beneficially more than 10% of
our common stock to file reports of ownership and changes in ownership of such
stock with the SEC. Directors, executive officers and greater than 10%
stockholders are required by SEC regulations to furnish us with copies of all
such forms they file. To our knowledge, our directors and executive officers
complied during fiscal year 2001 with all applicable Section 16(a) filing
requirements.
5
Executive Compensation
The following table sets forth information with respect to the
compensation of the named executive officers for services in all capacities for
us in the years indicated:
Long-term
Annual Compensation Compensation
--------------------------------------- ------------
Name and Current Fiscal Other Annual Options Other
Principal Position Year Salary Bonus Compensation(/1/) Granted Compensation(/2/)
- ------------------------ ------ ------ ----- ----------------- ------- -----------------
Joseph Neubauer......... 2001 $1,000,000 $1,300,000 $11,000 -- $67,500
Chairman and 2000 1,000,000 1,200,000 -- 1,200,000 47,500
Chief Executive Officer 1999 999,000 1,100,000 -- 0 37,000
William Leonard......... 2001 629,000 600,000 -- -- 6,500
President and 2000 586,500 575,000 -- 400,000 6,500
Chief Operating Officer 1999 549,000 550,000 -- 0 6,500
L. Frederick
Sutherland............. 2001 443,500 300,000 -- -- 6,500
Executive Vice
President 2000 415,500 265,000 -- 200,000 6,500
and Chief Financial 1999 390,000 275,000 -- 0 6,500
Officer
Brian G. Mulvaney....... 2001 389,000 280,000 -- -- 6,500
Executive Vice
President, 2000 350,500 265,000 -- 300,000 6,500
Human Resources and 1999 325,000 275,000 -- 0 6,500
Public Affairs
John J. Zillmer......... 2001 386,500 280,000 -- 150,000 6,500
Executive Vice
President 2000 330,500 220,000 -- 190,000 6,500
and President, Food and 1999 267,500 150,000 -- 0 6,500
Support Services
Bart J. Colli........... 2001 368,500 300,000 -- 60,000 6,500
Executive Vice
President, 2000 202,000 246,000 -- 700,000 0
General Counsel and
Secretary
- ----------------
(1) This is above market interest received or accrued on deferred
compensation.
(2) Other compensation includes employer contributions to the Stock Unit
Retirement Plan ($6,500 per individual annually), plus, with respect to
Mr. Neubauer, the value of interest foregone and not recaptured by us
relating to payment of premiums for split dollar life insurance ($61,000
for fiscal 2001, $41,000 for fiscal 2000 and $30,000 for fiscal 1999).
6
Stock Purchase Opportunities
Option Grants
The following table sets forth information with respect to the named
executive officers concerning individual grants of stock purchase opportunities
made in fiscal 2001.
Options Granted in Fiscal 2001 (Stock Purchase Opportunities)
Potential
Realizable Value
at Assumed Annual
Rates of Stock
Price
Appreciation
for Option
Individual Grants Term(/2/)
--------------------------------------------------------- -----------------
Percentage of
Total Options
Granted to All Exercise or Base
Options Employees in Price Expiration
Name Granted(/1/) Fiscal 2001 ($ per share)(/1/) Date(/1/) 5% 10%
- ---- ------------ -------------- ------------------ ---------- -- ---
Joseph Neubauer......... 0 0.0% -- $ 0 $ 0
William Leonard......... 0 0.0% -- 0 0
L. Frederick
Sutherland............. 0 0.0% -- 0 0
Brian G. Mulvaney....... 0 0.0% -- 0 0
John J. Zillmer......... 150,000 1.4% $8.75 2006 378,593 840,849
Bart J. Colli........... 30,000 0.3% 8.75 2006 42,961 92,472
Bart J. Colli........... 30,000 0.3% 8.75 2006 75,719 168,170
- ----------------
(1) See "--The ARAMARK Ownership Program." The exercise prices of all option
grants reflected in the table are equal to the appraisal prices of the
shares at the respective times of grant. Mr. Zillmer was granted 150,000
cumulative installment stock purchase opportunities (CISPOs); these CISPOs
expire on January 15, 2006. Mr. Colli was granted 30,000 CISPOs and 30,000
installment stock purchase opportunities (ISPOs); these CISPOs expire on
January 15, 2006 and the ISPOs expire on varying dates through January 15,
2006.
(2) Realizable value refers to the assumed value (which was calculated using
the appraisal price then in existence) of the underlying shares at the time
such purchase opportunity expires minus the exercise price.
Options Exercised and Unexercised
The following table sets forth information with respect to the named
executive officers concerning the exercise of options in fiscal 2001 and the
unexercised options held as of September 28, 2001.
Aggregate Option Exercises in Last Fiscal Year and Fiscal Year End Option
Values
(Stock Purchase Opportunities)
Number of Options Current Value of Options
Shares Held(/2/)(/3/) Held(/2/)(/3/)
Acquired Value ------------------------- -------------------------
Name on Exercise Realized(/1/) Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- ------------- ----------- ------------- ----------- -------------
Joseph Neubauer......... 90,000 $ 202,500 0 1,050,000 0 $7,350,000
William Leonard......... 234,000 1,467,180 0 446,000 0 3,507,920
L. Frederick
Sutherland............. 75,000 432,750 0 235,000 0 1,909,000
Brian G. Mulvaney....... 99,000 480,825 0 856,500 0 7,840,800
John J. Zillmer......... 138,498 797,696 0 504,502 0 3,655,958
Bart J. Colli........... 48,000 80,550 0 682,000 0 4,367,450
7
- ----------------
(1) Value realized refers to the appraisal price of the underlying shares at
the time the option was exercised minus the exercise price of the option.
(2) Options currently exercisable and current values of options are determined
as of September 28, 2001. Current value of an option refers to the
appraisal price of the underlying shares minus the exercise price of the
option.
(3) CISPOs that have vested but are not exercisable at September 28, 2001 are
categorized as unexercisable.
Five Year Cumulative Total Shareholder Return
The following graph compares the five year cumulative return of class B
common stock (measured by the appraisal price) to the Standard & Poor's 500
Stock Index and the Dow Jones Consumer Non-Cyclical Index.
[GRAPH]
Cumulative total return is stated as a percentage of the base year (1996)
stock price. Cumulative total return equals (i) the cumulative amount of
dividends paid since the base year, assuming dividend reinvestment, plus the
stock price, (ii) divided by the base year stock price.
Dow Jones
Fiscal Year S&P Consumer
Ended ARAMARK 500 Non-Cyclical
----------- ------- ------ ------------
1996 100.00 100.00 100.00
1997 123.52 140.37 130.00
1998 208.33 153.51 132.60
1999 262.96 196.27 143.04
2000 324.07 222.93 139.48
2001 522.22 166.45 146.76
8
The ARAMARK Ownership Program
General. We have designed our ARAMARK Ownership Program to provide an
opportunity for some of our management employees to acquire an ownership
interest in our company and thus give them a more direct continuing interest in
the future success of our business. Under the ARAMARK Ownership Program, direct
ownership in our company has increased from 62 original management investors in
December 1984 to more than 3,500 management investors directly owning
approximately 70% of the equity. At October 26, 2001, management employees and
directors held stock purchase opportunities and options to acquire
approximately 32.0 million shares of our class A common stock, as adjusted to
reflect the merger.
Purchase Price. The purchase price for shares subject to stock purchase
opportunities granted prior to the public offering was the appraisal price of
the shares (based upon the most recent available independent appraisal) on the
date of the grant. Shares purchased through purchase opportunities previously
were subject to a stockholders' agreement. In connection with the stockholder
vote on the merger, the stockholders' agreement was terminated.
Installment Stock Purchase Opportunity. Each installment stock purchase
opportunity (ISPO) that we granted has an installment schedule that limits the
number of shares of common stock that may be purchased during each annual
installment period. Unless the employee exercises the first installment before
its expiration date by purchasing a minimum number of shares, the entire
installment purchase opportunity is canceled. If the employee does exercise the
first installment, subsequent annual installments may be exercised, as long as
the employee exercises for a certain minimum number of shares, for up to the
maximum number of shares specified in the installment certificate. If the
employee does not exercise a portion of his or her annual installment by the
appropriate expiration date, the installment is canceled. Each installment
stock purchase opportunity is exercisable only while the holder is an employee
or director of our company or a subsidiary.
Cumulative Installment Stock Purchase Opportunity. We also granted
cumulative ISPOs, which are similar to regular ISPOs except that if a portion
of an annual installment is not exercised during the corresponding exercise
period, then it becomes vested and is not canceled, and may be exercised during
any subsequent exercise period. Other stock purchase opportunities, similar to
cumulative ISPOs, provide that once vested, the entire opportunity or a portion
(in 100 share increments) may be exercised during any of the specified annual
exercise periods. Upon termination of employment, an employee can exercise his
or her stock purchase opportunity if it is vested, within three months after
termination (but not beyond its expiration date). If it is not vested at such
time, the purchase opportunity is canceled.
Deferred Payment Program. In connection with the exercise of ISPOs and
non-qualified stock options, we have adopted a deferred payment program whereby
an employee may choose to defer a portion of the purchase price for certain
installments for approximately three years. We have in the past renewed these
loans. We have sold to a financial institution most of the outstanding deferred
payment obligations previously received. The deferred payment obligation is a
full recourse obligation of the employee, accrues interest, and is secured by a
pledge of shares of common stock. The interest rate for deferred payment
obligations received in the most recent exercise period has varied between 7.1%
and 7.3%. Approximately 750 employees (including executive officers) are
currently participating in the program. At September 28, 2001, the amount of
the deferred payment obligations of Messrs. Neubauer, Leonard, Sutherland,
Mulvaney, Zillmer and Colli were $8,495,733, $3,767,918, $3,501,861,
$2,669,679, $1,151,885 and $40,622, respectively. At September 28, 2001, all of
these deferred payment obligations had been sold to financial institutions.
In connection with the public offering of our new class B common stock,
our board of directors has adopted a new 2001 Equity Incentive Plan and a 2001
Stock Unit Retirement Plan. We intend to issue new options and other equity
incentives from time to time under these plans, and not to issue additional
options or deferred stock units under plans that were in effect prior to the
public offering and merger.
9
The 2001 Equity Incentive Plan
Our board of directors has adopted, with the approval of our
stockholders, the ARAMARK 2001 Equity Incentive Plan. The 2001 Equity Incentive
Plan will form a part of the ARAMARK Ownership Program described above, and is
the source of new equity-based awards on and following the public offering. The
2001 Equity Incentive Plan permits us to grant to our key employees, directors
and consultants incentive stock options, non-qualified stock options, reload
stock options, stock appreciation rights, restricted stock, performance-based
awards and other awards based on our class A and class B common stock.
Administration. Our Human Resources, Compensation and Public Affairs
Committee will administer the 2001 Equity Incentive Plan. The committee may
delegate its authority under the 2001 Equity Incentive Plan in whole or in part
as it determines, including to a subcommittee consisting solely of at least two
outside directors within the meaning of Section 162(m) of the Internal Revenue
Code. The committee will determine who will receive awards under the 2001
Equity Incentive Plan, as well as the form of the awards, the number of shares
underlying the awards, and the terms and conditions of the award consistent
with the terms of the plan.
Shares Reserved for Awards and Limits on Awards. The total number of
shares of our class A and class B common stock available under the 2001 Equity
Incentive Plan initially will be 30 million, with an additional 3% of our
common stock outstanding as of the end of the prior calendar year becoming
available under the plan on each January 1 following the adoption of the plan.
Awards may be issued in respect of class B common stock, in lieu of class A
common stock.
Under the 2001 Equity Incentive Plan, no participant may receive an award
that relates to more than 3 million shares of our class A or class B common
stock in any calendar year; the maximum amount of a performance-based award is
limited to $10 million in any calendar year; and the maximum number of shares
that may be used to award incentive stock options under the 2001 Equity
Incentive Plan is 30 million shares in the aggregate.
The number of shares of our class A or class B common stock issued or
reserved pursuant to the 2001 Equity Incentive Plan, the maximum individual
award and the number of shares issuable pursuant to outstanding awards, are
subject to adjustment on account of stock splits, stock dividends and other
dilutive changes in the relevant class of common stock. Class A common stock
and class B common stock covered by awards that terminate, lapse, or are
cancelled will again be available for the grant of awards under the 2001 Equity
Incentive Plan.
Stock Options. The 2001 Equity Incentive Plan will permit the committee
to grant key employees incentive stock options, which qualify for special tax
treatment in the U.S., and to key employees, directors and consultants
nonqualified stock options. The committee will establish the duration of each
option at the time it is granted. The maximum duration of an incentive stock
option is ten years after the date of grant. The exercise price of an incentive
stock option may not be less than the fair market value of the underlying
common stock on the date of grant. The committee may establish vesting and
performance requirements that must be met prior to the exercise of options.
Stock option grants may include provisions that permit the option holder
to exercise all or part of the holder's vested options, or to satisfy
withholding tax liabilities, by tendering shares of our class A common stock or
class B common stock, as applicable, already owned by the option holder for at
least six months (or another period consistent with the applicable accounting
rules). Stock option grants also may include provisions that permit the option
holder to exercise all or part of the holder's vested options through a
cashless exercise procedure, which requires the delivery of irrevocable
instructions to a broker to sell the shares obtained upon exercise of the
option and deliver promptly to us the proceeds of the sale equal to the
exercise price of the common stock being purchased plus any required tax
withholding.
10
Stock Appreciation Rights. The committee also may grant stock
appreciation rights, either singly or in tandem with underlying stock options.
Stock appreciation rights entitle the holder upon exercise to receive an amount
in any combination of cash or shares of our class A or class B common stock (as
determined by the committee) equal in value to the excess of the fair market
value of the shares over the grant price.
Performance Standards and Section 162(m). Performance criteria for
performance-based awards under the 2001 Equity Incentive Plan may relate to any
combination of the total corporation, a subsidiary, and/or any business unit.
Performance targets may be set at a specific level or may be expressed relative
to measures at comparison companies or a defined index. The committee can
establish specific targets for recipients.
In general, Section 162(m) of the Internal Revenue Code prevents the
deductibility of compensation in excess of one million dollars paid in any
taxable year to an individual who on the last day of that year is the company's
chief executive officer or is among its four other most highly compensated
executive officers, except that a deduction may be taken for compensation that
qualifies as performance-based compensation under Section 162(m). Options
granted at fair market value ordinarily satisfy the performance-based
requirements of Section 162(m), if shareholder disclosure and approval
requirements are met. If restricted stock or performance-based awards are
intended to satisfy Section 162(m) deductibility requirements, payments under
such awards must be conditioned on attainment of pre-established objective
performance measures that have been established and certified by a committee of
outside directors and approved by shareholders. The performance criteria that
may be utilized under the 2001 Equity Incentive Plan are: earnings before
interest and taxes, income, net income, earnings per share, book value per
share, total shareholder return, return on shareholder's equity, expense
management, return on investment, improvements in capital structure,
profitability, profit margins, stock price, market share, sales, cost, cash
flow, operating cash flow, free cash flow, working capital, return on assets,
total business return and return on gross investment.
Reload Options. The committee may grant a reload option that permits the
option holder to purchase a number of shares of our class A common stock or
class B common stock, as applicable, equal to the number of shares of common
stock delivered by the option holder to exercise the underlying option.
Other Stock-Based Awards. The 2001 Equity Incentive Plan also will permit
the committee to grant awards that are valued by reference to, or otherwise
based on the fair market value of, our class A common stock and/or class B
common stock. These awards will be in such form and subject to such conditions,
as the committee may determine, including the satisfaction of performance
goals, the completion of periods of service or the occurrence of events.
Change-in-Control Provisions. The committee may provide that, in the
event of a change in control, any outstanding awards that are unexercisable or
otherwise unvested will become fully vested and immediately exercisable, and
may, in its sole discretion, provide for the termination of an award upon the
consummation of the change of control and the payment of a cash amount in
exchange for the cancellation of an award, and/or the issuance of substitute
awards that will substantially preserve the otherwise applicable terms of any
affected award.
Amendment. Our board of directors may amend the 2001 Equity Incentive
Plan at any time, provided that no amendment will be made that (i) would
increase the number of shares available for awards under the Plan or (ii)
diminishes the rights of the holder of any award, and except that the committee
may amend the plan in such manner as it deems necessary to permit awards to
meet the requirements of the Internal Revenue Code or other applicable laws.
Director Awards. Non-employee directors are eligible to receive awards
under the 2001 Equity Incentive Plan, including awards of non-qualified stock
options and, beginning in 2002, awards
11
in the form of deferred stock instead of an immediate cash retainer. See "--
Compensation of Directors" for a description of the options and deferred stock
awards we anticipate awarding to non-employee directors in fiscal 2002. Our
board of directors has the ability to modify the terms of options and deferred
stock awards described in that paragraph.
A total of 3,718,100 shares of class A common stock were granted pursuant
to the 2001 Equity Incentive Plan on December 10, 2001 in the form of non-
qualified stock options to ARAMARK employees and a non-employee director at a
grant price of $23.00 per share. Messrs. Neubauer, Leonard, Sutherland and
Mulvaney were not granted stock options at this time; Messrs. Zillmer and Colli
were each granted 80,000 options on December 10, 2001 at a grant price of
$23.00 per share.
Retirement Savings Plans
General. Our Retirement Savings Plan (RSP) and Uniform and Career Apparel
Group Retirement Savings (AUCA) Plan are defined contribution plans intended to
qualify under Section 401(k) of the Internal Revenue Code. These plans also are
collectively referred to as the 401(k) plans. Substantially all of our U.S.,
non-union, full-time salaried employees are eligible to participate in one of
these plans, except that highly compensated salaried employees no longer are
eligible to participate in our RSP, but may be eligible to participate in our
Stock Unit Retirement Plan, as described below.
Contributions. Employees participating in the RSP or the AUCA Plan may
make elective pre-tax salary contributions of up to 15% of their eligible
earnings, subject to statutory prescribed annual limits. We make annual
matching contributions to the RSP based on the first 6% of a participating
employee's earnings, ranging from 25% to 75% of the employee's contributions.
We also make matching contributions to the AUCA Plan each quarter in an amount
equal to 100% of the first 2% of a participating employee's earnings, and 25%
of the next 4% of the employee's earnings. At the end of each plan year under
the AUCA Plan, we also may make an additional matching contribution to
participating employees who contributed at least 2% of their earnings. This
contribution could range up to 50% of the participating employee's
contributions, up to 6% of the employee's earnings. Company matching
contributions have historically been made in shares of our class A common
stock. It is currently anticipated that our matching contributions under the
RSP and AUCA Plan will be made in shares of class A common stock and class B
common stock. All of our matching contributions are subject to prescribed
annual limits.
Vesting. Employee contributions to the RSP and the AUCA Plan are always
immediately 100% vested. Our matching contributions under the RSP vest fully
after two years of plan participation or five years of service with us,
whichever occurs first. Our matching contributions under the AUCA Plan vest
annually over a six year period of service with us.
Investments, Voting and Trust. Each employee's contributions, our
matching contributions and any investment earnings, are generally not taxable
to participating employees until withdrawn. All contributions under the RSP and
AUCA Plans are held in trust as required by law. U.S. Trust Company, N.A. is
the independent trustee of the company stock fund portion of the RSP and the
AUCA Plan. Participating employees may direct the investment of their employee
contributions among authorized investment alternatives under the relevant plan.
Participating employees also may instruct the trustee how to vote the shares of
our common stock held on their behalf under the RSP or AUCA Plan with respect
to major corporate transactions.
Other Plans. In addition to the RSP and the AUCA Plan, we sponsor or
contribute to a number of other tax-qualified savings and pension plans, none
of which currently holds any shares of our common stock. These plans include
our Money Purchase Retirement Plan for Non-Salaried Employees, our Capital
Accumulation Plan, our Pension Plan for Non-Salaried Employees, and our Uniform
Retirement (Pension) Plan.
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Stock Unit Retirement Plan
Our Stock Unit Retirement Plan, or SURP, is a non-qualified retirement
plan for highly compensated employees who are not eligible to participate in
any company-sponsored qualified retirement plan. The SURP is intended to
provide to participants benefits similar to those provided to participating
employees in our RSP. Participants in the SURP may defer up to 15% of their
earnings, with interest deemed to accrue on those deferrals. We credit each
participant's account with a matching contribution annually, equal to between
25% and 75% of the participant's first 6% of compensation deferred in that year
and limited to the same maximum as our RSP. Our matching contributions
historically have been made in deferred stock units, which are substantially
equivalent to an investment in our class A common stock. Deferred compensation,
deemed interest and shares of stock are distributed to the participant at the
time of the participant's termination of employment, unless deferred by the
participant. Employee deferrals are immediately 100% vested. Matching
contributions generally vest following two years of participation or five years
of service. Distributed shares had historically been subject to a stockholders'
agreement, and our policy had been to repurchase such shares shortly after
their distribution at their then-current appraisal price. In connection with
the stockholder vote on the merger, we terminated the stockholders' agreement.
The SURP, unlike the Retirement Savings Plan, is an unfunded plan. The
amounts payable as benefits are not set aside, but rather are carried on our
books as unsecured liabilities. Similarly, the deferred stock units are not
outstanding shares, but rather are obligations to issue shares in the future.
In connection with the public offering, the SURP was frozen for new
deferrals and contributions. Future deferrals (and any matching contributions
on those deferrals) will be made under the new 2001 stock unit retirement plan
described below.
2001 SURP
Our board of directors has adopted, with the approval of the sole
stockholder at the time, the 2001 Stock Unit Retirement Plan, or 2001 SURP. The
2001 SURP is a non-qualified retirement plan for highly compensated employees
who are not eligible to participate in any company-sponsored qualified
retirement plan. The 2001 SURP is intended to provide participants with
benefits similar to those provided under the RSP. Participants are allowed to
defer up to 15% of their earnings, with interest deemed to accrue on those
deferrals. We will match contributions in deferred stock units, which are
substantially equivalent to an investment in our class B common stock. It is
anticipated that matching contributions will equal between 25% and 75% of the
participant's first 6% of compensation deferred in a plan year, limited by the
same maximum as our RSP. Deferred compensation, deemed interest and shares of
stock will be distributed to the participant at the time of the participant's
termination of employment, unless deferred by the participant. Employee
deferrals are immediately 100% vested. Matching contributions generally vest
following two years of participation or five years of service. Upon a change in
control of ARAMARK, existing account balances under the 2001 SURP become fully
vested. The 2001 SURP is an unfunded plan. The amounts payable as benefits will
not be set aside, but rather will be carried on our books as unsecured
liabilities. Similarly, the deferred stock units will not be outstanding
shares, but will be obligations to issue shares in the future.
Senior Executive Annual Performance Bonus Arrangement
General. The Senior Executive Annual Performance Bonus Arrangement, or
bonus arrangement, provides for an annual performance bonus for the chief
executive officer (CEO) and any other of our designated executive officers upon
the attainment of pre-established performance goals, which annual performance
bonus is intended to be excludable from the computation of compensation for
purposes of the U.S. income tax deductibility limitation on executive officer
compensation.
Background. Current U.S. income tax laws deny a deduction for certain
compensation in excess of one million dollars per year paid to a company's
chief executive officer and its four other
13
most highly compensated executive officers. Certain compensation, including
compensation based on the achievement of pre-established performance goals
(performance-based compensation), is not subject to this deduction limit. For
compensation to qualify for the performance-based compensation exclusion, the
material terms pursuant to which the performance-based compensation is to be
paid, including the performance goals, must be disclosed to, and approved by,
the stockholders prior to the payment.
The bonus arrangement is designed to qualify as performance-based
compensation under current U.S. income tax laws. Participants in the bonus
arrangement for any fiscal year may not also participate in our management
incentive bonus plan (described below) for the same fiscal year. However, the
bonus arrangement does not limit the ability of the board of directors to adopt
any additional bonus plan or to pay any other compensation, including any
additional bonus, to any executive officer or other employee. Any such
additional bonus would not be considered performance-based compensation unless
it complied with the stockholder approval and other requirements of U.S. income
tax laws.
Description of the Bonus Arrangement. The Human Resources, Compensation
and Public Affairs Committee has been designated by the board of directors to
administer the provisions of the bonus arrangement. The board of directors
retains the authority to designate a different committee to administer the
bonus arrangement. In any event, only members of the committee who are
independent directors may vote on matters relating to the bonus arrangement.
The committee is required generally to designate participants and, for each
participant, to set one or more performance goals for a fiscal year not later
than 90 days after the beginning of such fiscal year.
The committee may designate as participants for any fiscal year any of
our executive officers. This designation may vary from year to year, and it is
anticipated that it will be based primarily on the committee's judgment as to
which executive officers are likely to be named in our proxy statement and are
expected to have compensation in excess of $1 million. For fiscal 2001, the
committee has designated Mr. Leonard as a participant, in addition to Mr.
Neubauer.
Under the bonus arrangement, the annual performance goals, which may
differ for each participant, must be based on attainment of target levels of,
or a targeted percentage increase in, one or more of the following company or
business group criteria: earnings before interest and taxes (EBIT), return on
net assets (RONA), net income, after tax return on investment (ATROI), sales,
revenues, earnings per share, total stockholder return, return on equity (ROE),
return on investment (ROI), total business return, return on gross investment
(ROGI), operating cash flow or free cash flow. The maximum annual performance
bonus payable to any participant in respect of any fiscal year under the bonus
arrangement is three million dollars, or such lesser amount as may be set by
the committee for such participant at the time it establishes the annual
performance goals. The committee may increase the attainment of performance
goals to offset (a) a change in accounting standards, (b) a significant
acquisition or divestiture, (c) a significant capital transaction, or (d) any
other unusual, nonrecurring items that are separately identified and quantified
in our audited financial statements, so long as such accounting change is
required or such transaction or nonrecurring item occurs after the goals for
the fiscal year are established. The committee in its sole discretion may
reduce, but may not increase, the amount of the annual performance bonus that
would be otherwise payable under the bonus arrangement. In making this
determination, the committee may take into consideration any and all factors
relating to our performance and the participant's performance for such fiscal
year.
The committee may, without further action by the stockholders, amend the
bonus arrangement from time to time as it deems desirable, provided that no
such amendment may increase the employees who may be designated as participants
under the bonus arrangement, change the permitted performance measures,
increase the maximum bonus payable under the bonus arrangement, or make any
other change requiring further approval under U.S. income tax laws. The bonus
arrangement, unless earlier terminated, is effective for each of the five
fiscal years 1999 through 2003. The board may, in its discretion, terminate the
bonus arrangement at any time.
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Management Incentive Bonus Plan
Certain of our senior executive officers participate in a management
incentive bonus program. Bonuses under this program are awarded annually based,
in part, upon the attainment of predetermined financial goals and, in part,
upon the attainment of individual objectives. Generally, non-financial
objectives represent 30% of the bonus potential and are established by the
supervisor of the executive. Financial goals generally represent 70% of the
bonus potential. An executive's bonus under the management incentive bonus
program potential generally varies as a percentage of total cash compensation,
dependent upon the level of responsibility of the employee's position. The
measures of financial performance used are for the business unit that is either
under the managerial direction of the participant or, if a staff executive, is
the unit on which the participant impacts most frequently and significantly. In
the case of Messrs. Neubauer and Leonard, the committee awards bonuses pursuant
to our Senior Executive Annual Performance Bonus Arrangement (described above)
rather than the management incentive bonus program.
15
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Neubauer Registration Rights Agreement
In exchange for Mr. Neubauer's agreement to relinquish the right under
his employment agreement to the benefits of the provisions of the stockholders'
agreement as in effect prior to the public offering, we entered into a
registration rights agreement with Mr. Neubauer, the Neubauer Family Foundation
and certain trusts of which Mr. Neubauer is the settlor. Under the registration
rights agreement, we granted Mr. Neubauer and those related parties three
demand rights and unlimited piggyback registration rights. Mr. Neubauer and
those related parties may exercise demand registration rights with respect to
their shares of common stock for which restricted periods have expired or do
not apply, at any time after 360 days after the pricing of the public offering
and with respect to all of their shares at any time after 540 days after the
pricing of the public offering or, subject to the prior consent of Goldman,
Sachs & Co. and J.P. Morgan Securities Inc., at any time after 180 days and
before 360 days after the pricing of the public offering. In addition, Mr.
Neubauer's estate may exercise demand registration rights with respect to his
shares of common stock in certain limited circumstances at any time after 180
days and before 360 days after the pricing of the public offering. Mr. Neubauer
and those related parties also have unlimited piggyback registration rights
with respect to their shares of common stock for which restricted periods have
expired or do not apply, that commence on the 181st day after the pricing of
the public offering. The provisions of the registration rights agreement with
Mr. Neubauer will not override the applicable transfer restrictions in our
certificate of incorporation. Further, as part of this arrangement with Mr.
Neubauer, our board of directors has approved the transfer by Mr. Neubauer of
up to 1.5 million shares of class A common stock to charitable organizations
and the conversion of such shares into unrestricted class B common stock. Such
transfer is an exception to the lock-up arrangement with the underwriters. Mr.
Neubauer has made the contributions in connection with the transactions for
personal tax planning purposes.
Other Transactions
In March 2000, we acquired from James E. Ksansnak, our director and
former vice chairman, approximately 80% of the capital stock of a corporation
owned by Mr. Ksansnak for nominal consideration. We terminated that
corporation's 401(k) plan and distributed 1,291,826 shares of our class A
common stock held by the plan to Mr. Ksansnak, as the plan's sole participant.
Mr. Ksansnak provided consulting services to us with respect to our Educational
Resources segment for which he has been compensated. At September 28, 2001, Mr.
Ksansnak had outstanding deferred payment obligations of $975,605.
Employment Agreements and Change of Control Arrangements
General. We have employment agreements or arrangements with all of our
officers under which they are currently being paid annual salaries ranging up
to $1,000,000. Generally, these contracts are for indeterminate periods
terminable by either party, in most cases subject to advance notice and post-
employment severance and benefit obligations.
Agreement with Mr. Neubauer. Mr. Neubauer's agreement provides for his
services as chief executive officer at a current annual base salary of
$1,000,000 plus a bonus under the applicable bonus plan. The agreement's term
generally ends upon either party giving two years' advance notice, but may be
terminated earlier subject to certain severance obligations. In general, upon
Mr. Neubauer's termination of employment by us without cause or by Mr.
Neubauer's resignation with good reason (which terms are defined in the
agreement), including a resignation by Mr. Neubauer within 12 months following
a change of control (as defined in the agreement), he will receive the
following payments or benefits:
. a lump sum payment equal to the sum of four times his base salary
plus two times his average bonus over the three immediately preceding
years, except that if the termination is
16
by us without cause and occurs following two years' advance notice, Mr.
Neubauer instead will receive a pro rata bonus for the year of
termination based on his average bonus over the three immediately
preceding years;
. full vesting of all outstanding stock purchase opportunities; and
. continuation of certain welfare benefits for a period of three years.
In addition, following any termination of Mr. Neubauer's employment, we
will pay him a supplemental retirement benefit for the rest of his life
generally equal to one-half of his base salary plus his average bonus over the
three immediately preceding years, with one-half of those payments continuing
after his death to his surviving spouse for her lifetime.
If Mr. Neubauer's employment is terminated by us without cause or by his
resignation with good reason, in either case upon two year's advance notice,
Mr. Neubauer will provide consulting services to us for a period of two years,
but not more than 20 hours in any month. For such consulting services, he will
continue to receive the same base salary that he had been receiving upon his
termination of employment, plus continued coverage under certain benefits
arrangements.
Mr. Neubauer is subject to a non-competition covenant for a period of
two years following his termination of employment or consulting period.
We have agreed to use our best efforts to cause Mr. Neubauer to be a
member of our board during the term of Mr. Neubauer's employment agreement. In
addition, if any payment or benefit payable to Mr. Neubauer after a change in
ownership or control of the company would be considered a parachute payment
subject to a federal excise tax, then we will pay Mr. Neubauer an additional
payment or benefit to gross-up the amount of the excise tax.
We have a split dollar life insurance agreement with Mr. Neubauer. The
agreement relates to life insurance policies owned by a trust created by Mr.
Neubauer. Pursuant to the agreement, we pay a substantial portion of the
premiums on the policies, such amounts to be repaid from the proceeds of the
policies upon their termination. At September 28, 2001, the amount thus
outstanding was $2,260,123. We do not charge interest in each fiscal year on
this amount. However, we capture at least some of the foregone interest
because we reduce the amount of the interest that would otherwise accrue on
Mr. Neubauer's deferred compensation. We hold a security interest in the
policies to secure the repayment of the premium amount paid by us. This
arrangement terminates upon the termination of Mr. Neubauer's employment
(other than by reason of his retirement).
Agreements with Messrs. Leonard, Sutherland, Mulvaney, Zillmer and
Colli. Beginning in 2002, Messrs. Leonard, Sutherland, Mulvaney, Zillmer and
Colli will have annual base salaries of $675,000, $475,000, $425,000, $425,000
and $415,000, respectively.
Severance pay policy. We currently have a severance pay policy, pursuant
to which severance payments are made to executive officers and certain other
key employees on the basis of continuous service, generally equal to between 6
and 18 months of pay if their employment is terminated for reasons other than
cause plus the continuation of certain other benefits during the period of
such payment.
Change in Control Agreements. We have entered into agreements with
Messrs. Leonard, Sutherland, Mulvaney, Zillmer and Colli that provide
severance benefits if the executive's employment is terminated under certain
circumstances in connection with a change in control of the company. In
general, if the executive's employment is terminated by us without cause or if
the executive resigns with good reason (as defined in the agreement),
following a change in control, the executive is entitled to cash severance
benefits based on a multiple of two times the executive's base salary and
target bonus (or the prior year's actual bonus, if higher), a pro rata portion
of the target bonus for the
17
fiscal year of termination, plus cash severance benefits of up to 18 months of
pay based on the executive's length of service with the company. The executive
is also entitled to continuation of certain welfare benefits for a period of 24
months and certain outplacement benefits. Under certain circumstances, the
severance benefits payable under these agreements might constitute parachute
payments subject to federal excise tax, in which case the executive will
receive a gross-up payment to compensate the executive for the excise taxes.
Compensation Committee Interlocks and Insider Participation
Mr. Neubauer serves as a director of Verizon Communications, Inc. Mr.
Babbio, who is vice chairman and president of Verizon, is our director and
serves on the Human Resources, Compensation and Public Affairs Committee. The
members of the Human Resources, Compensation and Public Affairs Committee at
October 26, 2001 were Messrs. Babbio, Callander, Davenport, Kean and Preston.
Compensation of Directors
Beginning in 2002, each non-employee director will receive an annual cash
retainer of $50,000, payable in quarterly installments of $12,500, plus non-
qualified stock options to purchase shares of our class A common stock, awarded
quarterly. The number of shares subject to the quarterly option awards will be
calculated by dividing $31,000 by the closing price of a share of our class B
common stock on the grant date. Options will have a 10-year term and will be
immediately 100% vested on the date of grant. Non-employee directors may elect
to receive all or part of the annual retainer in the form of deferred shares
and deferred cash. Under this deferral arrangement, the non-employee director
will be credited at the end of each quarter, under a notional deferral account,
with the amount of cash deferred or with a number of shares of our class A
common stock calculated by dividing the amount of cash deferred by the closing
price of a share of our class B common stock on the computation date. Deferred
shares and deferred cash will be issued or paid to the director 3 years after
the date credited to the director's account, unless the director elects to
defer issuance or payment to a later date. Deferred cash will accrue interest
at a rate determined annually by us. In addition, directors who are not our
employees will receive $5,000 each year for services as chairman of a board
committee.
In fiscal year 2001, directors who were not our employees received an
annual retainer of $30,000 for serving on the board, $3,000 for services as
chairman of a board committee and $1,000 for otherwise serving on a committee.
They also received meeting fees of $1,000 per day for attendance at meetings of
the board and for each committee meeting. Directors who were not our employees
also were eligible for grants of non-qualified stock options.
Committee Report on Executive Compensation
ARAMARK's compensation programs are designed to support ARAMARK's overall
commitment to continued growth and quality services to customers. The programs
are intended, among other things, to enable ARAMARK to recruit and retain the
best performers, to provide compensation levels consistent with the level of
contribution and degree of accountability, to use performance measures
consistent with ARAMARK's goals, to provide compensation consistent with
competitive market rates and to include a significant portion of incentive
compensation.
Performance measures. ARAMARK uses various financial measures to evaluate
the performance of ARAMARK and its business units, with the specific measures
in some cases varying depending upon the line of business involved. Generally,
the measures currently used are Sales Growth, EBIT, ROGI, and in addition, for
overall corporate performance, Net Income. EBIT is Earnings Before Interest and
Taxes. ROGI is Return on Gross Investment. Targets for each of these
performance measures are established annually in ARAMARK's business plan, which
is approved at the beginning of the fiscal year by the board.
Salary. Salary levels for all salaried employees are generally reviewed
annually. Guideline increases are established generally based upon overall
financial performance of ARAMARK, the current rate of inflation, and general
compensation levels in the industries in which ARAMARK
18
operates. For increases effective at the beginning of calendar 2002, the
guideline increase for executive officers, including the five named
individuals, was 4%. The specific salary increase for each individual executive
officer is based upon a review of his or her individual performance and
development. In the case of Mr. Neubauer, the review is conducted independently
by the Human Resources, Compensation and Public Affairs Committee without any
officers present, subject to final review and approval by the board; for all
other executive officers, the individual's supervisor and more senior
executives, along with the corporate human resources department, conduct the
review and make a recommendation to the Committee.
Bonus. Senior executive officers participate in ARAMARK's management
incentive bonus program. Bonuses are awarded annually based, in part, upon the
attainment of predetermined financial goals and, in part, upon the attainment
of individual objectives. Generally, non-financial objectives represent 30% of
the bonus potential and are established by the supervisor of the executive.
Financial goals generally represent 70% of the bonus potential. An employee's
bonus potential generally varies as a percentage of total cash compensation,
dependent upon the level of responsibility of the employee's position. The
measures of financial performance used are for the business unit that is either
under the managerial direction of the participant or, if a staff executive, is
the unit on which the participant impacts most frequently and significantly. In
the case of Messrs. Neubauer and Leonard, the Committee awards bonuses pursuant
to the Senior Executive Annual Performance Bonus Arrangement rather than the
management incentive bonus program. Pursuant to the arrangement, the Committee
selected Sales, Net Income and ROGI of ARAMARK as the financial performance
measures for Messrs. Neubauer and Leonard and set goals for each measure. As
required by the arrangement, the attainment of the net income performance goals
set by the Committee was increased to offset the net income reduction due to
the Campbell Brewley and CFM acquisitions. All of the events for which these
adjustments were made occurred after the Committee set the goals for each
measure. Mr. Neubauer was awarded 52% of his maximum bonus potential for fiscal
2001.
Stock Purchase Opportunities. The Human Resources, Compensation and
Public Affairs Committee believes that management ownership contributes to
ARAMARK's success, and supports senior management's goal of expanding both the
number of management investors and their percentage ownership. The Human
Resources, Compensation and Public Affairs Committee, accordingly, grants stock
purchase opportunities and options to selected management employees. The terms
of the stock purchase opportunities and options are generally described under
"The ARAMARK Ownership Program." Individual grants are generally made by the
Human Resources, Compensation and Public Affairs Committee in connection with
hires and promotions, and other recognition of performance. The amount of a
grant generally varies depending upon the level of responsibility of the
employee's position, the number of purchase opportunities and options
previously granted, and the number of shares owned. The individual's supervisor
and other senior executives, along with the corporate human resources
department, make recommendations to the Human Resources, Compensation and
Public Affairs Committee. ARAMARK has in the past also made broad-based grants
to management employees.
Compliance with Internal Revenue Code Section 162(m). Section 162(m) of
the Internal Revenue Code disallows a Federal income tax deduction to publicly
held companies for compensation paid to certain of their executive officers, to
the extent that compensation exceeds $1 million per covered officer in any
fiscal year. This limitation applies only to compensation which is not
considered performance-based. The "ARAMARK Ownership Program" has been
structured so that any compensation deemed paid in connection with the exercise
of option grants made under the program will qualify as performance-based
compensation which will not be subject to the $1 million limitation. The Senior
Executive Annual Performance Bonus Arrangement has also been structured so that
awards will qualify as performance-based compensation not subject to the $1
million limitation.
Members of the Human Resources, Compensation and Public Affairs
Committee:
Robert J. Callander, Chair Ronald R. Davenport
James E. Preston The Honorable Thomas H. Kean
Lawrence T. Babbio, Jr.
19
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding beneficial
ownership of our common stock as of December 14, 2001 by:
. each person known to us to be the beneficial owner of more than 5% of
either class of the common stock;
. each of our named executive officers;
. each director; and
. all current directors and executive officers as a group.
Shares Beneficially Owned
---------------------------
Class B
Class A Common
Common Stock Stock
---------------- ----------
Name of Beneficial Owner Shares/1/ % Shares %
- ----------------------------------------------- ----------- - ------ ---
Trustee for the RSP and the AUCA Plan(/2/) 29,490,300 18.0 -- --
Blum RMK, L.P.(/3/) 6,757,980 4.1 -- --
Joseph Neubauer(/4/) 28,813,592 17.6 -- --
Lawrence T. Babbio, Jr. 140,000 * -- --
Patricia C. Barron 248,100 * -- --
Robert J. Callander 544,576 * -- --
Leonard S. Coleman, Jr. 64,000 * -- --
Ronald R. Davenport 204,000 * -- --
Thomas H. Kean 786,000 * -- --
James E. Ksansnak 4,325,654 2.6 -- --
James E. Preston 900,000 * -- --
Karl M. von der Heyden 30,000 * -- --
William Leonard 4,298,226 2.6 -- --
L. Frederick Sutherland 3,665,172 2.2 -- --
Brian G. Mulvaney 2,097,644 1.3 -- --
John J. Zillmer 955,126 * -- --
Bart J. Colli 127,500 * -- --
All directors and executive officers as a group
(21 persons) 50,118,774 30.4 -- --
All employees, directors and employee benefit
plans as a group(/5/) 155,232,800 89.7 -- --
- ----------------
(1) The share amounts for each of the beneficial owners listed include
shares issuable upon the exercise of stock purchase opportunities and
options that are exercisable within 60 days of December 14, 2001 in
the following amounts: 90,000 shares by Mr. Neubauer, 60,000 shares
by Mr. Babbio, 141,894 shares by Ms. Barron, no shares by Mr.
Callander, 24,000 shares by Mr. Coleman, no shares by Mr. Davenport,
no shares by Mr. Kean, no shares by Mr. Ksansnak, no shares by
Mr. Preston, 30,000 shares by Mr. von der Heyden, 126,000 shares by
Mr. Leonard, 75,000 shares by Mr. Sutherland, 446,500 shares by
Mr. Mulvaney, 90,500 shares by Mr. Zillmer, 49,500 shares by Mr.
Colli, 1,282,994 shares by all directors and executive officers as a
group, and 9,341,504 shares by all employees, directors and employee
benefit plan as a group.
(2) The independent trustee of the company stock fund portion of the RSP
and the AUCA Plan is U.S. Trust Company, N.A. The independent
trustee's address is 14 West 47th Street, New York, NY 10036. With
respect to matters relating to certain significant corporate events,
the vote is passed through by the independent trustee to the
participant in the relevant plan.
(3) The address of this stockholder is 909 Montgomery Street, Suite 400,
San Francisco, CA 94133. These shares are held of record by
MetLife/Blum RMK Holdings, LLC.
(4) The address of this stockholder is ARAMARK Corporation, ARAMARK
Tower, 1101 Market Street, Philadelphia, PA 19107. This number of
shares includes 26,361,960 shares held by Mr. Neubauer in his
individual capacity and 2,361,632 shares held by The Neubauer Family
Foundation of which Mr. Neubauer is the sole trustee and has sole
power to vote and dispose or direct a disposition of such shares.
This number of shares does not include shares held by certain trusts
for the benefit of family members with respect to which Mr. Neubauer
has no voting or dispositive power and disclaims beneficial
ownership.
(5) Includes permitted transferees (primarily children and other
transferees for estate planning purposes).
* Less than 1%.
20
Report of Audit and Corporate Practices Committee
In the performance of its oversight function and in accordance with its
responsibilities under its charter, the Audit and Corporate Practices Committee
(the "Audit Committee") has reviewed and discussed with management and the
independent auditors the Company's audited financial statements as of and for
the fiscal year ended September 28, 2001.
The Audit Committee has also discussed with the independent auditors the
matters required to be discussed by Statement on Auditing Standards No. 61,
Communication with Audit Committees, as amended by the Auditing Standards Board
of the American Institute of Certified Public Accountants.
Finally, the Audit Committee has received and reviewed the written
disclosures and the letter from the independent auditors required by
Independence Standard No. 1, Independence Discussions with Audit Committees, as
amended, has considered whether the provision of information technology
consulting services relating to financial information systems design and
implementation and other non-audit services by the independent auditors to
ARAMARK is compatible with maintaining the auditor's independence, and has
discussed with the auditors the auditors' independence.
Based on the review and discussions referred to above, the Audit
Committee recommended to the Board of Directors 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 28, 2001.
Members of the Audit and Corporate Practices Committee:
Edward G. Jordan, Chair Ronald R. Davenport
Patricia C. Barron Leonard S. Coleman, Jr.
Relationship with Independent Public Accountants
The board of directors is expected to reappoint the firm of Arthur
Andersen LLP as independent auditors for ARAMARK for the 2002 fiscal year. A
representative of Arthur Andersen LLP is expected to be present at the annual
meeting and will be offered the opportunity to make a statement if desiring to
do so and will be available to respond to appropriate questions.
Set forth below is information relating to the aggregate Arthur Andersen
fees for professional services rendered during fiscal year 2001.
Audit fees
The aggregate fees for all professional services rendered in connection
with the audit of our consolidated financial statements for the fiscal year
ended September 28, 2001, and for the reviews of the unaudited consolidated
financial statements included in our Quarterly Reports on Form 10-Q for the
fiscal year were $1,330,000.
Audit-related fees
Audit related fees include services traditionally performed by the
auditor such as compliance and employee benefit audits, reviews of registration
statements, accounting consultation and other services. The aggregate fees for
audit-related services rendered for the fiscal year ended September 28, 2001
were $1,572,350.
Financial Information Systems Design and Implementation Fees
The aggregate fees for professional services rendered for information
technology services related to financial information systems design and
implementation for the fiscal year ended September 28, 2001, were zero.
21
All Other Fees
The aggregate fees for professional services rendered, other than the
services described above, for the fiscal year ended September 28, 2001 were
$2,509,207. These consist principally of fees for assistance with various tax
matters and other business advisory services.
Financial Statements
A copy of ARAMARK's annual report on Form 10-K for the fiscal year ended
September 28, 2001 (annual report) is being delivered to stockholders with this
proxy statement. Stockholders are referred to the annual report for financial
and other information about ARAMARK.
Proxy Solicitation
Proxies will be solicited by mail. Proxies may be solicited by directors,
officers and a small number of regular employees of ARAMARK personally or by
mail or telephone, but such persons will not be specially compensated for such
services. The entire cost of solicitation will be borne by ARAMARK.
Discretionary Authority
Management does not intend to present, and does not have any reason to
believe that others will present, any item of business at the annual meeting
other than those specifically set forth in the notice of the meeting. However,
if other matters are presented for a vote, the proxy agents will have the right
to vote the shares represented by proxy cards on such matters in accordance
with their discretion.
Stockholder Proposals
Stockholders may submit proposals on matters appropriate for stockholder
action at future annual meetings of ARAMARK in accordance with regulations
adopted by the Securities and Exchange Commission and the company by-laws. Such
proposals must be received by ARAMARK no later than September 10, 2002, to be
considered for inclusion in ARAMARK's proxy statement and form of proxy for
next year's annual meeting and, in any event, must be received by ARAMARK no
later than November 25, 2002, to be eligible for presentation for stockholder
action at next year's annual meeting. Proposals should be directed to the
attention of the Secretary.
22
Appendix A
AUDIT AND CORPORATE PRACTICES COMMITTEE CHARTER
Purposes of the Committee
The purposes of the Committee, as delegated to it by the Board of Directors,
include:
1. Oversight of the Corporation's accounting and financial reporting
principles and policies, and internal audit, controls and procedures;
2. Oversight of the Corporation's financial statements and the independent
audit thereof;
3. Selecting, evaluating and, where deemed appropriate, replacing the
outside auditors; and
4. Evaluating the independence of the outside auditors.
The function of the Committee is oversight. In fulfilling their
responsibilities hereunder, it is recognized that members of the Committee are
not full-time employees of the Corporation and are not, and do not represent
themselves to be accountants or auditors by profession or experts in the fields
of accounting or auditing, including in respect of auditor independence.
Committee Access, Membership and Qualifications
1. The Committee shall have direct and confidential access to the personnel
of ARAMARK's Audit and Control Services and Security Departments and to
the secretary of management's Business Conduct Policy Committee; and the
Audit and Control Services and Security Departments and the members of
the Business Conduct Policy Committee shall have direct access to the
members of the Committee. The Committee shall meet annually in executive
session with the outside auditor.
2. The Committee shall consist of at least three directors, all of whom
shall be independent (i.e., shall have no relationship with the
Corporation that may interfere with the exercise of their independence
from management and the Corporation), as the Board interprets such
qualification in its business judgement.
3. Each member of this Committee shall be financially literate, as the Board
interprets such qualification in its business judgement, or must become
financially literate within a reasonable period of time after his or her
appointment to this Committee. At least one member of this Committee
shall have accounting or related financial management experience, as the
Board interprets such qualification in its business judgement.
4. The Committee shall review and reassess the adequacy of its charter on an
annual basis.
The Committee shall perform the following functions and shall have and
may exercise such powers as are appropriate for the performance thereof:
Financial Reporting
1. Review the quarterly and year-end financial reports prior to their
filing.
A-1
2. Review the accounting principles used by the Corporation for corporate
and tax reporting purposes and any actual or impending changes in
financial or accounting requirements which may materially affect the
Corporation.
3. Review and approve the Committee report on the audited financial
statements for inclusion in the Corporation's proxy and information
statements.
4. Review with the general counsel legal matters that may have a material
impact on the financial statements.
Accounting Controls and Personnel
1. Review the adequacy of the Corporation's system of internal accounting
controls with the Corporation's financial and audit personnel and its
outside auditor.
2. Review the scope and results of internal auditing procedures.
3. Review the appointment and replacement of the director of audit and
controls, and the competency of the Corporation's financial, audit, and
accounting personnel.
Audits and Outside Auditors
1. Review and recommend to the Board the firm of independent public
accountants to be employed as outside auditor by the Corporation. The
outside auditor is ultimately accountable to the Board and this
Committee; and the Board and this Committee have the ultimate authority
and responsibility to select, evaluate and, where appropriate, replace
the outside auditor.
2. Review with the outside auditor prior to the audit the scope of the
audit, and after the audit the audit report and any internal control
recommendations and management's response to such recommendations.
3. Review and approve the compensation of the outside auditor.
4. Review non-audit services requested of the outside auditor and in so
doing, consider the possible effect of such engagement on their
independence. Review and approve the disclosures required to be included
in the Corporation's proxy statement regarding fees billed by the outside
auditor.
5. Request and obtain from the outside auditor annually a formal written
statement delineating all relationships between the outside auditor and
the Corporation; engage in a dialog with the outside auditor with respect
to any disclosed relationships or services that may impact the
objectivity and independence of the outside auditor; and recommend to the
Board any appropriate action in response to the outside auditor's report
to satisfy itself of the outside auditor's independence.
Business Conduct
1. Monitor compliance with the Corporation's Business Conduct Policy.
2. Conduct special investigations of allegations of management misconduct
when deemed necessary or desirable.
A-2
3. Determine whether or not to seek reimbursement on behalf of the
Corporation from employees or agents of the Corporation for any improper
payments made at their direction, if such action or inaction is in the
best interest of the Corporation.
4. Determine on behalf of the Corporation whether or not to advance expenses
or to provide indemnification under the certificate of incorporation, by-
laws or otherwise, to a director, officer, employee or agent where
claimed or requested in a particular case.
A-3
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSAL 1. Please mark your
vote as indicated
in this example [X]
1. Election of Directors Nominees:
01 Leonard S. Coleman, Jr., 02 Thomas H. Kean,
FOR all nominees listed WITHHOLD 03 James E. Ksansnak, 04 James E. Preston
to the right AUTHORITY
(except as marked to vote for all nominees (To withhold authority to vote FOR write name(s) on line:
to the contrary) listed to the right )
[_] [_] ----------------------------------------------------------
2. In their discretion, the proxies are authorized to vote upon
such other matters as may properly come before the meeting and
at any adjournments thereof.
- -----------------------------------------------------------------------------------------------------------------------------------
Signature Signature Date
----------------------- ---------------------- -----------
Please sign exactly as name appears. If shares are held as joint tenants, both
joint tenants should sign. Attorneys-in-fact, executors, administrators,
trustees, guardians, corporation officers or others signing in a representative
capacity should indicate the capacity in which they are signing.
- --------------------------------------------------------------------------------
/\ FOLD AND DETACH HERE /\
Vote by Internet or Telephone or Mail
24 Hours a Day, 7 Days a Week
Your telephone or Internet vote authorizes the named proxies to vote your
shares in the same manner as if you marked, signed and returned your proxy
card.
- --------------------------------------------------------------------------------
Internet http://www.eproxy.com/rmk
Use the Internet to vote your proxy. Have your proxy card in hand when you
access the web site. You will be prompted to enter your control number, located
in the box below, to create and submit an electronic ballot.
- --------------------------------------------------------------------------------
OR
- --------------------------------------------------------------------------------
Telephone 1-800-435-6710
Use any touch-tone telephone to vote your proxy. Have your proxy card in hand
when you call. You will be prompted to enter your control number, located in the
box below, and then follow the directions given.
- --------------------------------------------------------------------------------
OR
- --------------------------------------------------------------------------------
Mail
Mark, sign and date your proxy card and return it in the enclosed postage-paid
envelope.
- --------------------------------------------------------------------------------
IF you vote your proxy by Internet or by telephone,
you do NOT need to mail back your proxy card.
ARAMARK CORPORATION
PROXY CARD
SOLICITED BY THE BOARD OF DIRECTORS
Joseph Neubauer, Bart J. Colli and L. Frederick Sutherland (each with power of
substitution) are hereby authorized to vote all the shares which the undersigned
would be entitled to vote if personally present at the annual meeting of
stockholders of ARAMARK Corporation (the "Company") to be held on February 12,
2002 and at any adjournment.
IF YOU SPECIFY A CHOICE AS TO THE ACTION TO BE TAKEN ON AN ITEM, THIS PROXY WILL
BE VOTED IN ACCORDANCE WITH SUCH CHOICE. IF YOU DO NOT SPECIFY A CHOICE, IT WILL
BE VOTED FOR PROPOSAL 1 AND AT THE DISCRETION OF THE PROXY HOLDER AS TO ANY
OTHER MATTER THAT MAY PROPERLY COME BEFORE THE MEETING.
see other side
- --------------------------------------------------------------------------------
/\ FOLD AND DETACH HERE /\
YOUR VOTE IS IMPORTANT!
You can vote in one of three ways:
1. Call toll free 1-800-435-6710 on a Touch Tone telephone and follow the
instructions on the reverse side. There is NO CHARGE to you for this call.
Outside the United States you may fax your SIGNED proxy card to
201-296-4956. You must fax both the front and back of the card.
or
--
2. Vote by Internet at our Internet Address: http://www.eproxy.com/rmk
or
--
3. Mark, sign and date your proxy card and return it promptly in the enclosed
envelope.
PLEASE VOTE