<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] 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 Section 240.14a-11(c) or Section 240.14a-12
MORRISON HEALTH CARE, INC.
- - --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- - --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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Notes:
<PAGE>
LOGO
August 18, 1997
Dear Shareholders:
We are holding your 1997 Annual Meeting on Tuesday, September 23, 1997 at
1:00 p.m., local time, at the Renaissance Atlanta Hotel-Concourse, One
Hartsfield Centre Parkway, Atlanta, Georgia 30354. We sincerely hope that you
will be able to attend the meeting, and we look forward to seeing you. Matters
on which action will be taken at the meeting are explained in detail in the
Notice and Proxy Statement following this letter.
We hope that you will be able to attend the meeting in person. Whether or
not you expect to be present, please complete, date, sign and mail the
enclosed proxy in the envelope provided. If you attend the meeting, you may
withdraw your proxy and vote your own shares.
Sincerely,
MORRISON HEALTH CARE, INC.
/s/Glenn A. Davenport
Glenn A. Davenport
President and
Chief Executive Officer
MORRISON HEALTH CARE, INC.
- - --------------------------------------------------------------------------------
1955 Lake Park Drive . Suite 400 . Smyrna, Georgia 30080-8855 . (770) 437-3300
. Telefax: (770) 437-3343
<PAGE>
MORRISON HEALTH CARE, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD
SEPTEMBER 23, 1997
The Annual Meeting of Shareholders of Morrison Health Care, Inc. will be
held at the Renaissance Atlanta Hotel-Concourse, One Hartsfield Centre
Parkway, Atlanta, Georgia 30354 on Tuesday, September 23, 1997, at 1:00 p.m.,
local time, for the following purposes:
1. To elect two Class II directors to the Board of Directors for a term
of three years.
2. To approve an amendment to the Company's 1996 Stock Incentive Plan to
increase the number of shares available for issuance thereunder by 900,000.
Upon approval of this amendment by the shareholders, the number of shares
reserved for issuance under certain of the Company's non-executive plans
and programs will be reduced by 900,000 shares.
3. To transact such other business as may properly come before the
meeting or any adjournment or adjournments thereof.
Only shareholders of record at the close of business on August 8, 1997 are
entitled to vote at the meeting.
The mailing address of the Company's principal executive office is 1955 Lake
Park Drive, S.E., Suite 400, Smyrna, Georgia 30080-8855.
We hope you will be able to attend the meeting in person. Whether or not you
expect to be present, please complete, date, sign, and mail the enclosed proxy
in the envelope provided. If you attend the meeting, you may withdraw your
proxy and vote your own shares.
By Order of the Board of Directors,
/s/John E. Fountain
John E. Fountain
Vice President, General Counsel
and Secretary
August 18, 1997
Atlanta, Georgia
<PAGE>
MORRISON HEALTH CARE, INC.
1955 LAKE PARK DRIVE, S.E.
SUITE 400
SMYRNA, GEORGIA 30080-8855
PROXY STATEMENT FOR 1997 ANNUAL MEETING OF SHAREHOLDERS
GENERAL INFORMATION
Morrison Health Care, Inc., a Georgia corporation (the "Company"), became an
independent publicly-owned company in March 1996 as a result of the
distribution (the "Distribution") by Morrison Restaurants Inc., a Delaware
corporation ("MRI"), to its shareholders of all the issued and outstanding
shares of common stock of the Company. In the Distribution, MRI also
distributed to its shareholders all of the issued and outstanding shares of
common stock of Morrison Fresh Cooking, Inc., a Georgia corporation ("MFCI"),
which held the family dining assets and business of MRI. Simultaneously with
the Distribution, MRI reincorporated as a Georgia corporation (the
"Reincorporation"), effected a one-for-two reverse stock split and changed its
name to Ruby Tuesday, Inc. ("RTI"). As a result of the Distribution and the
Reincorporation, MRI's shareholders received one share of MFCI common stock
for every four shares of MRI common stock held, one share of Company common
stock for every three shares of MRI held, and one share of common stock of
RTI, successor to the MRI's casual dining business, for every two shares of
MRI held. Certain of the executive compensation information presented in this
Proxy Statement for fiscal years prior to the Distribution relates to
compensation paid or awarded by MRI.
The following Proxy Statement and the accompanying proxy card, first mailed
to shareholders on or about August 18, 1997, are furnished in connection with
the solicitation by the Board of Directors of the Company of proxies to be
used in voting at the Annual Meeting of Shareholders of the Company to be held
on Tuesday, September 23, 1997, at the Renaissance Atlanta Hotel-Concourse,
One Hartsfield Centre Parkway, Atlanta, Georgia 30354 and at any
adjournment(s) thereof (the "Annual Meeting").
Any shareholder returning a proxy has the power to revoke it prior to the
Annual Meeting by giving the Secretary of the Company written notice of
revocation, by returning a later dated proxy or by expressing a desire to vote
in person at the Annual Meeting. All shares of the Company's common stock,
$.01 par value per share ("Common Stock"), represented by valid proxies
received pursuant to this solicitation and not revoked before they are
exercised will be voted in the manner specified therein. If no specification
is made, the proxy will be voted (i) in favor of the election of the two
nominees for directors named in this Proxy Statement, (ii) in favor of the
proposed amendment to the Company's 1996 Stock Incentive Plan (the "Stock
Incentive Plan") to increase the number of shares available for issuance
thereunder by 900,000, and (iii) in accordance with the best judgment of the
proxy holders on any other matter that may properly come before the Annual
Meeting.
The entire cost of soliciting these proxies will be borne by the Company. In
following up the original solicitation of the proxies by mail, the Company
will request brokers and others to send proxy forms and other proxy material
to the beneficial owners of the Common Stock and will reimburse them for
expenses incurred in so doing. If necessary, the Company also may use some of
its employees to solicit proxies from the shareholders personally or by
telephone.
August 8, 1997 has been fixed as the record date for determination of
shareholders entitled to notice of, and to vote at, the Annual Meeting and,
accordingly, only holders of Common Stock of record at the close of business
on that date will be entitled to notice of, and to vote at, the Annual
Meeting. The presence in person or by proxy of shareholders holding of record
a majority of shares of Common Stock outstanding and entitled to vote at the
Annual Meeting will constitute a quorum for the transaction of business at the
Annual Meeting. Shares represented by a valid proxy on which the authority to
vote for one or more Director Nominees is withheld, abstentions and broker
non-votes, if any, are counted as shares present for determination of a
quorum. The number of shares of outstanding Common Stock on August 8, 1997 was
12,195,650, each of which is entitled to one vote.
1
<PAGE>
Election of each of the Director Nominees named in Proposal 1 requires the
approval of a plurality of the votes cast in the election and approval of the
amendment to the Stock Incentive Plan described in Proposal 2 requires the
affirmative vote of the holders of a majority of the shares of Common Stock of
the Company present or represented and entitled to vote at the Annual Meeting.
For purposes of determining whether a Director Nominee has been elected or
whether Proposal 2 has been approved by the shareholders, (i) shares as to
which authority is withheld with respect to such Director Nominee will have no
effect on the outcome of the voting on Proposal 1 and broker non-votes do not
occur in the election of directors, and (ii) abstentions will have the same
effect as votes against Proposal 2, but broker non-votes will have no effect
on the voting on such proposal.
PROPOSAL 1
ELECTION OF DIRECTORS
The Company's Articles of Incorporation provide for three classes of
directors with staggered, three-year terms of office and provide that upon the
expiration of the term of office for a class of directors, the nominees for
that class will be elected for a term of three years to serve until the
election and qualification of their successors or until their earlier
resignation, death or removal from office. At the Annual Meeting, the two
nominees are for the Class II directors. The Class I and Class III directors
have two years and one year, respectively, remaining on their terms of office.
The Company's Articles of Incorporation and its Bylaws provide that the Board
of Directors shall consist of not less than three nor more than 12 directors
and authorize the exact number to be fixed from time to time by resolution of
a majority of the Board of Directors or by the affirmative vote of the holders
of at least 80% of all outstanding shares entitled to be voted in the election
of directors voting together as a single class. The Board of Directors has
fixed the exact number of members of the Board of Directors at seven and has
nominated Claire L. Arnold and Glenn A. Davenport to serve in Class II of the
Board of Directors for a term of three years. Both nominees are currently
serving as directors of the Company.
It is intended that persons named in the accompanying form of proxy will
vote for the two nominees listed below unless authority to so vote is
withheld. Although the Board of Directors does not expect that any of the
nominees identified herein will be unavailable for election, in the event a
vacancy in the slate of nominees occurs, the shares represented by proxies in
the accompanying form may be voted for the election of a substitute nominee
selected by the persons named in the proxy.
DIRECTOR AND DIRECTOR NOMINEE INFORMATION
NOMINEES FOR DIRECTORS
CLASS II -- TERM EXPIRING 2000
CLAIRE L. ARNOLD
Director of the Company since 1996 Age: 50
Ms. Arnold is currently a private investor. Ms. Arnold served as President
and Chief Executive Officer of Nicotiana Enterprises, Inc., a family holding
company holding stock in NCC L.P., from August 1979 to February 1995 and was
Chief Executive Officer of NCC L.P., a major distributor of grocery, tobacco,
candy, health and beauty, and allied products to retail stores, from November
1992 to April 1994. Prior thereto, Ms. Arnold was Chairman and Chief Executive
Officer of NCC L.P. from August 1979 to November 1992. Ms. Arnold was a
director of MRI from 1994 until the Distribution in March 1996. Ms. Arnold
also is a director of Schweitzer-Mauduit International, Inc. and Ruby Tuesday,
Inc.
GLENN A. DAVENPORT
Director of the Company since 1996 Age: 43
Mr. Davenport has served as President, Chief Executive Officer and Director
of the Company since the Distribution in March 1996. Mr. Davenport was
President of the Health Care Division of MRI's Morrison Group from November
1993 through March 1996. Prior thereto, he served as Senior Vice President of
MRI's Hospitality Group from February 1990 through November 1993 and in
various other capacities since he first joined MRI in November 1973.
2
<PAGE>
DIRECTORS CONTINUING IN OFFICE
CLASS III -- TERM EXPIRING 1998
JOHN B. MCKINNON
Director of the Company since 1996 Age: 62
Mr. McKinnon has served as Chairman of the Board of Directors of the Company
since the Distribution in March 1996. Prior to his retirement in May 1995, Mr.
McKinnon was Dean of Babcock Graduate School of Management at Wake Forest
University. Prior thereto, he was President, Sara Lee Food Service from July
1988 through June 1989, and President, Sara Lee Corporation from July 1986
through June 1988. Mr. McKinnon served as a director of MRI from 1989 until
the Distribution in March 1996. Mr. McKinnon also is a director and interim
President and Chief Executive Officer of Integon Corporation, and serves as a
director of Premark International, Inc., MedCath, Inc. and Ruby Tuesday, Inc.
DR. BENJAMIN F. PAYTON
Director of the Company since 1996 Age: 64
Dr. Payton has been the President of Tuskegee University since 1981. Dr.
Payton was a director of MRI from 1993 until the Distribution in March 1996.
Dr. Payton also is a director of AmSouth Bancorporation, The ITT Corporation,
The Liberty Corporation, Sonat, Inc., Praxair, Inc. and Ruby Tuesday, Inc.
CLASS I -- TERM EXPIRING 1999
E. EUGENE BISHOP
Director of the Company since 1996 Age: 67
Mr. Bishop was Chairman of the Board of MRI from June 1992 until his
retirement in May 1995. From June 1986 to June 1992, he was Chairman of the
Board and Chief Executive Officer of MRI. Mr. Bishop was a director of MRI
from 1963 until the Distribution in March 1996. Mr. Bishop also is a director
of Delchamps, Inc. and Morrison Fresh Cooking, Inc.
ARTHUR R. OUTLAW, JR.
Director of the Company since 1996 Age: 43
Mr. Outlaw is Chairman of the Board and Chief Executive Officer of Marshall
Biscuit Company, which he founded in 1985. Prior thereto, Mr. Outlaw was
employed in cafeteria management and finance for MRI from 1978 through 1985.
FRED L. BROWN
Director of the Company since 1996 Age: 56
Mr. Brown is President and Chief Executive Officer of St. Louis-based BJC
Health System. Prior thereto he served as President and CEO of Christian
Health Services, one of BJC's founding member organizations. BJC is an
integrated healthcare provider serving Missouri and southern Illinois through
more than 100 inpatient and outpatient academic and community based service
sites. He is a member of the board of trustees of the American Hospital
Association, the Voluntary Hospital Association of America and the Healthcare
Research and Development Institute. He also serves as a Governor of the
American College of Healthcare Executives. He currently serves as a director
of Citation Computers, Inc. and Commerce Bancshares, Inc.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE ELECTION
OF THE TWO NOMINEES FOR CLASS II DIRECTORS NAMED ABOVE.
3
<PAGE>
BENEFICIAL OWNERSHIP OF COMMON STOCK
The following table sets forth certain information as of August 8, 1997
(except as otherwise noted) regarding the amount of Common Stock beneficially
owned by all persons known to the Company who beneficially own more than five
percent of the outstanding Common Stock, each director and director nominee of
the Company, each Named Executive (as defined below), and all directors and
executive officers of the Company as a group. An asterisk indicates beneficial
ownership of less than one percent of the outstanding Common Stock.
<TABLE>
<CAPTION>
NUMBER OF SHARES
BENEFICIALLY PERCENT OF
NAME OR GROUP OWNED(1) CLASS(2)
------------- ---------------- ----------
<S> <C> <C> <C>
5% STOCKHOLDERS:
GeoCapital(3)................................. 1,093,018 9.0%
David L. Babson & Co.(4)...................... 927,300 7.6
Arthur R. Outlaw(5)........................... 1,217,051(6) 10.0
DIRECTORS AND NAMED EXECUTIVE OFFICERS:
C.L. Arnold................................... 6,396 *
E.E. Bishop................................... 384,259(7) 3.1
F.L. Brown.................................... 4,142 *
G.A. Davenport................................ 63,899(8) *
J.B. McKinnon................................. 11,541 *
A.R. Outlaw, Jr............................... 206,461 1.7
B.F. Payton................................... 6,640 *
G.L. Anderson................................. 2,446 *
K.W. Engwall.................................. 13,448 *
C.L. Kolesar.................................. 2,120 *
J.D. Underhill................................ 12,699 *
All directors and executive officers
as a group (12 persons)...................... 723,843 5.8
</TABLE>
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(1) Includes shares subject to currently exercisable options and options
exercisable within 60 days after August 8, 1997 held by the named persons
and group as follows: Ms. Arnold, 3,281; Mr. Bishop, 231,897; Mr. Brown,
1,617; Mr. Davenport, 24,399; Mr. McKinnon, 6,828; Mr. Payton, 3,281; Mr.
Anderson, 1,924; Mr. Engwall, 8,904; Ms. Kolesar, 1,120; Mr. Underhill,
7,973; and all directors and executive officers as a group, 295,968.
(2) "Percent of Class" has been calculated by taking into account all shares
as to which the indicated person has sole or shared voting or investment
power (including shares subject to currently exercisable options and
options exercisable within 60 days after August 8, 1997), without regard
to any disclaimers of beneficial ownership by the person indicated.
(3) GeoCapital Corp.'s address is 45th Floor, 767 Fifth Avenue, New York, NY
10153-0001. The information presented is based on the holder's Schedule
13G which reports beneficial ownership as of December 31, 1996.
(4) The address of David L. Babson & Co. is Suite 1000, One Memorial Drive,
Cambridge, Massachusetts 02142-1301. The information presented represents
share ownership as of July 31, 1997.
(5) Mr. Outlaw's address is 4721 Morrison Drive, Mobile, Alabama 36609.
(6) Includes 16,570 shares owned by Mr. Outlaw's spouse.
(7) Includes 2,053 shares owned by Mr. Bishop's spouse.
(8) Includes 29 shares owned by Mr. Davenport and his spouse as tenants in
common.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
executive officers, directors and greater than 10% shareholders ("Reporting
Persons") to file certain reports ("Section 16 Reports") with
4
<PAGE>
respect to beneficial ownership of the Company's equity securities. Based
solely on its review of the Section 16 Reports furnished to the Company by its
Reporting Persons and, where applicable, any written representation by any of
them that no Form 5 was required, all Section 16(a) filing requirements
applicable to the Reporting Persons during and with respect to fiscal year
1997 have been complied with on a timely basis.
DIRECTORS' FEES AND ATTENDANCE
The Board of Directors of the Company met four times during fiscal year
1997. Each director attended at least 75% of these meetings and of the
meetings of any committee of which he or she was a member which were held
during the fiscal year.
Directors who are employees of the Company receive no directors' fees. All
non-employee directors currently receive a $16,000 annual retainer and $1,000
per Board meeting attended. Non-employee directors serving on the Audit
Committee or the Compensation and Stock Option Committee (other than the
Chairmen of such committees) receive a fee of $1,000 for each committee
meeting attended not held in conjunction with a Board meeting. Committee
Chairmen receive a fee of $1,000 for each committee meeting attended. Non-
employee directors serving on any committee are compensated at a rate of $200
an hour for services performed on special assignments.
Mr. McKinnon, Chairman of the Company's Board of Directors, provides
strategic planning, investor relations and management consulting services to
the Company on a regular basis. Mr. McKinnon is generally compensated at a
rate of $2,000 per day for such services. For fiscal year 1997, Mr. McKinnon
was paid an aggregate of $6,000 for such services. Mr. McKinnon is also
eligible to participate in a program under the Company's 1996 Stock Incentive
Plan that permits him to elect to direct that up to 60 percent of his
consulting fees for each fiscal quarter be allocated to the purchase of
Company Common Stock on his behalf. Under this program, Mr. McKinnon is
awarded bonus shares and stock options based on formulas and subject to terms
and conditions substantially similar to awards that would be made under the
Company's Directors' Plan, as described below, to a participant who elects to
allocate a portion of his or her retainer for the purchase of Company Common
Stock.
The Morrison Health Care, Inc. Stock Incentive and Deferred Compensation
Plan for Directors (the "Directors' Plan") permits non-employee directors to
defer all or a portion (in 25 percent increments) of their retainer (other
than any portion of the retainer allocated to Stock Awards, as described
below) and/or any additional meeting and committee fees to a deferred
compensation account. Deferred compensation accounts are credited as of the
last day of each fiscal quarter with an assumed rate of income equal to 90-day
U.S. Treasury Bills, based on the weighted average balance of that account
during that fiscal quarter. Amounts credited to a director's deferred
compensation account will be distributed not sooner than the earlier of the
first January 15 or July 15 following (a) the date of the director's
seventieth birthday, or (b) the date the director ceases to be a member of the
Board of Directors.
The Directors' Plan provides that each non-employee director who has not
attained the Target Ownership Level, as defined below, will be deemed to have
elected to direct that 60 percent of his or her retainer payable for each
fiscal quarter be allocated to the purchase of Common Stock on his or her
behalf. Each non-employee director who has attained the Target Ownership Level
may elect to direct, in 10 percent increments and subject to such other
conditions prescribed by the Directors' Plan, that up to 60 percent of his or
her retainer for each fiscal quarter be allocated to the purchase of Common
Stock on his or her behalf (collectively, the "Stock Awards"). A deemed
election will continue in effect until that director, after attaining the
Target Ownership Level, modifies or revokes the election in the manner allowed
for discretionary elections.
A director will be treated as having attained the "Target Ownership Level"
for a fiscal quarter if he or she owns, on the first day of that fiscal
quarter, at least a number of shares of Common Stock with a fair market value,
as determined by the closing price on the last trading day prior to such date
("Fair Market Value"), equal to 10 multiplied by that director's annual
retainer.
5
<PAGE>
Each director who has elected, or who has been deemed to have elected, to
purchase Stock Awards for a fiscal quarter, will be issued the number of
shares of Common Stock equal to the amount of the retainer elected to be so
allocated, multiplied by 1.15 and divided by the Fair Market Value of a share
of Common Stock, as of the issue date. Common Stock so purchased may not be
transferred within three years of the date of purchase, except in the event of
death, disability, retirement on or after age 70 or unless the committee
administering the Directors' Plan waives this restriction.
The Directors' Plan provides that each non-employee director who receives
Stock Awards, whether through a deemed election or a discretionary election,
will be awarded an option to purchase shares of Common Stock (the "Options")
equal to three times the number of shares issued pursuant to the discretionary
election or deemed election, as the case may be.
Options issued under the Directors' Plan will be granted on the first day of
each fiscal quarter for which an election for a Stock Award is in effect; will
become fully exercisable six months following the date of grant; and will be
exercisable at the Fair Market Value of the Common Stock as of the date of the
option grant. Each Option shall expire generally upon the fifth anniversary of
the date on which it was granted.
Under the Directors' Plan, each non-employee director shall receive a one-
time restricted stock award of 2,000 shares of Common Stock as of the date the
individual is first elected to the Board of Directors. Each restricted stock
award shall be evidenced by a Stock Incentive Agreement. One-third of the
Common Stock subject to any restricted stock award will vest on each of the
first three anniversary dates of the date the director was first elected to
the Board of Directors if the individual is a non-employee director on the
applicable anniversary date. However, shares subject to the restricted stock
award shall become 100 percent vested on any earlier to occur of the following
additional vesting dates: the date the individual ceases to be a non-employee
director on account of death, disability, attainment of age 70 or upon a
Change in Control (as defined in the Directors' Plan).
COMMITTEES OF THE BOARD
The Board of Directors is responsible for the overall affairs of the
Company. To assist the Board of Directors in carrying out this responsibility,
the Board has delegated certain authority to two committees. Information
concerning these committees follows.
Audit Committee. The Audit Committee is comprised solely of non-management
directors. The Audit Committee maintains communications with the Company's
independent auditors as to the nature of the auditors' services, fees and such
other matters as the auditors believe may require the attention of the Board.
The Audit Committee reviews the Company's internal control procedures and
makes recommendations to the Board with respect thereto. The Audit Committee
met two times during fiscal year 1997. The current members of the Audit
Committee are E. Eugene Bishop (Chairman), Claire L. Arnold, Arthur R. Outlaw,
Jr., Fred Brown and Dr. Benjamin F. Payton.
Compensation and Stock Option Committee. The Compensation and Stock Option
Committee (the "Compensation Committee") is comprised solely of non-management
directors. The Compensation Committee makes recommendations to the Board of
Directors with respect to compensation of officers and with respect to the
granting of stock options. The Compensation Committee met four times during
fiscal year 1997. The current members of the Compensation Committee are Claire
L. Arnold (Chairman), E. Eugene Bishop, Arthur R. Outlaw, Jr., Fred Brown and
Dr. Benjamin F. Payton.
EXECUTIVE COMPENSATION
This section of the proxy statement discloses compensation awarded, paid to,
or earned by the Company's Chief Executive Officer and each of the four other
executive officers of the Company who were most highly compensated in fiscal
year 1997 for services rendered to MRI prior to the Distribution and the
Company thereafter during each of the three fiscal years in the period ended
May 31, 1997 (together, these persons are sometimes referred to as the "Named
Executives").
6
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL LONG-TERM ALL OTHER
COMPENSATION COMPENSATION COMPENSATION
--------------------------------------- --------------------- ------------
AWARDS PAYOUTS
OTHER ANNUAL OPTIONS/ LTIP
NAME AND POSITION YEAR SALARY($) BONUS($) COMPENSATION($) SARS(#)(1) PAYOUTS($) ($)(2)
----------------- ---- --------- -------- --------------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
G. A. Davenport ........ 1997 262,800 131,400 7,500(3) 63,356 -0- 3,945
President and 1996 234,134 32,850 5,929(3) 266,776 -0- 5,843
Chief Executive Officer 1995 181,432 229,040 N/A 11,292 -0- 6,140
K.W. Engwall ........... 1997 135,170 52,000 56,924(4) 24,911 -0- 4,695
Senior Vice President, 1996 108,421 18,200 33,588(4) 55,583 -0- 3,327
Finance
and Assistant Secretary 1995 97,335 36,987 N/A -0- -0- 1,729
J.D. Underhill ......... 1997 144,362 40,417 3,600(3) 24,911 -0- 1,900
Senior Vice President, 1996 144,362 16,240 5,383(3) 56,731 -0- -0-
Sales and Marketing 1995 138,810 72,593 N/A 1,605 -0- -0-
G.L. Anderson........... 1997 124,708 71,358 -0- 18,500 -0- 625
Senior Vice President 1996 121,108 24,196 841(3) 51,182 -0- -0-
1995 117,846 77,600 N/A 5,771 -0- -0-
C.L. Kolesar ........... 1997 124,334 84,668 -0- 18,500 -0- 3,671
Senior Vice President 1996 116,112 26,307 1,346(3) 51,881 -0- 3,903
1995 115,181 57,500 17,535(5) 5,771 -0- 3,026
</TABLE>
- - --------
(1) For fiscal years 1996 and 1995, the numbers of options shown include
options to purchase shares of Common Stock of the Company issued upon
conversion of options granted by MRI prior to the Distribution. MRI
options were converted in the Distribution into options to purchase shares
of common stock of each of the Company, MFCI and RTI with the number of
shares subject to each such option allocated based on the conversion
ratios used in connection with the Distribution and the related reverse
stock split. See "General Information." The exercise price per share of
the MRI options has been allocated among the options to purchase common
stock of the Company, MFCI and RTI into which the MRI options were
converted based upon a formula that took into account the relative trading
prices of the common stock of the three companies for the first ten
trading days following the Distribution. Such per share exercise price was
allocated as follows: 36.62% to the Company option; 10.22% to the MFCI
option; and 53.16% to the RTI option. Except for the number of shares and
exercise price thereof, the replacement options have the same terms and
conditions as the original MRI options.
(2) The amounts in this column include the following: (a) Company
contributions to the Deferred Compensation Plan for fiscal years 1997,
1996 and 1995, respectively: G. A. Davenport, $2,406, $4,705 and $4,947;
K. W. Engwall, $3,003, $3,262 and $1,729; J. D. Underhill, $1,777, N/A and
N/A; G. L. Anderson, $510, N/A and N/A; and C.L. Kolesar, $2,320, $2,847
and $1,944; and (b) executive group life and accidental death and
dismemberment insurance plan premiums paid for fiscal years 1997, 1996 and
1995, respectively: G. A. Davenport $540, $489 and $660; K. W. Engwall,
$1,541, $65 and N/A; and C.L. Kolesar, $267, $251 and $505; and (c)
employee portion of split-dollar life insurance premiums paid by the
Company for fiscal years 1997, 1996 and 1995, respectively: G. A.
Davenport, $817, $649 and $533; and C.L. Kolesar, $969, $805 and $577; and
(d) Company contributions to the 401(k) plan for fiscal years 1997, 1996
and 1995, respectively; G. A. Davenport, $182, N/A and N/A; K. W. Engwall,
$151, N/A and N/A; J. D. Underhill, $123, N/A and N/A; G. L. Anderson
$115, N/A and N/A; and C. L. Kolesar, $115, N/A and N/A.
(3) Represents the value of bonus shares issued in connection with the
purchase of (a) shares of Common Stock under the Company's Management
Stock Option Program following the Distribution, and (b) shares of common
stock of MRI under the MRI Management Stock Option Program prior to the
Distribution. See "General Information."
7
<PAGE>
(4) Represents relocation related expenses of $53,324 and $30,000 for fiscal
years 1997 and 1996, respectively. Also includes $3,600 and $3,588 for
fiscal years 1997 and 1996, respectively, of the value of bonus shares
issued in connection with the purchase of shares of Common Stock under the
Company's Management Stock Option Program after the Distribution. See
"General Information."
(5) Represents relocation and related expenses.
OPTION GRANTS IN FISCAL 1997
The following table presents information regarding fiscal year 1997 grants
of options to purchase shares of Common Stock to the Named Executives. The
Company has no outstanding SARs and granted no SARs during fiscal year 1997.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE(3)
AT ASSUMED ANNUAL RATES OF
STOCK PRICE APPRECIATION FOR OPTION TERM
----------------------------------------
INDIVIDUAL GRANTS 5% 10%
--------------------------------------------- ------------------- --------------------
MARKET MARKET
PRICE PRICE
% OF TOTAL REQUIRED REQUIRED
OPTIONS/ OPTIONS/SARS EXERCISE TO REALIZE TO REALIZE
SARS GRANTED TO OR BASE DOLLAR DOLLAR
GRANTED EMPLOYEES IN PRICE EXPIRATION DOLLAR GAINS DOLLAR GAINS
NAME (#) FISCAL YEAR ($/SHARE) DATE GAINS($) ($/SHARE) GAINS($) ($/SHARE)
---- -------- ------------ --------- ----------- -------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
G.A. Davenport... 50,000(2) 10.94 13.1250 25-Mar-2007 412,500 21.38 1,046,000 34.04
6,969(1) 1.52 12.3750 31-Aug-2001 23,834 15.79 52,686 19.93
6,387(1) 1.40 13.5000 28-Feb-2002 23,824 17.23 52,629 21.74
K.W. Engwall............ 3,345(1) 0.73 12.3750 31-Aug-2001 11,440 15.79 25,288 19.93
18,500(2) 4.05 13.1250 25-Mar-2007 152,625 21.38 387,020 34.04
3,066(1) 0.67 13.5000 28-Feb-2002 11,436 17.23 25,264 21.74
J.D. Underhill.......... 3,345(1) 0.73 12.3750 31-Aug-2001 11,440 15.79 25,288 19.93
18,500(2) 4.05 13.1250 25-Mar-2007 152,625 21.38 387,020 34.04
3,066(1) 0.67 13.5000 28-Feb-2002 11,436 17.23 25,264 21.74
G.L. Anderson........... 18,500(2) 4.05 13.1250 25-Mar-2007 152,625 21.38 387,020 34.04
C.L. Kolesar............ 18,500(2) 4.05 13.1250 25-Mar-2007 152,625 21.38 387,020 34.04
</TABLE>
- - --------
(1) The indicated options have a term of five years and were granted pursuant
to the Company's Stock Incentive Plan and generally become exercisable two
years after date of grant. In the event of a change of control of the
Company, the Committee administering the plan may accelerate vesting,
otherwise adjust the options or terminate the options. Option holders also
have certain rights with respect to these options pursuant to their Change
of Control Agreements. See "Contracts with Executives."
(2) The indicated options have a term of ten years and were granted pursuant
to the Company's Stock Incentive Plan and generally become exercisable
three years after date of grant. In the event of a change of control of
the Company, the Committee administering the plan may accelerate vesting,
otherwise adjust the options or terminate the options. Option holders also
have certain rights with respect to these options pursuant to their Change
of Control Agreements. See "Contracts with Executives."
(3) The Potential Realizable Values are calculated as follows: [[Market Price
at Grant x (1 + Stock Price Appreciation Rate)]--Exercise Price] x Number
of Underlying Shares. The Potential Realizable Values are based on
annualized compound rates of increase over a five or ten-year term, with
annual appreciation rates of 5% and 10%, respectively.
8
<PAGE>
AGGREGATED OPTION EXERCISES IN
FISCAL 1997 AND FISCAL YEAR END VALUES
The following table presents information regarding exercises of options to
purchase shares of Common Stock of the Company during fiscal 1997 by the Named
Executives and the value of unexercised options to purchase Company Common
Stock held at May 31, 1997. There were no Company SARs outstanding during
fiscal 1997.
<TABLE>
<CAPTION>
VALUE OF
NUMBER OF UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
FY-END(#) FY-END($)(2)
SHARES VALUE -------------- --------------
ACQUIRED ON REALIZED EXERCISABLE/ EXERCISABLE/
NAME EXERCISE(#) ($)(1) UNEXERCISABLE UNEXERCISABLE
---- ----------- -------- -------------- --------------
<S> <C> <C> <C> <C>
G. A. Davenport............. 4,452 1,670 19,430/336,684 21,365/201,760
K. W. Engwall............... 2,137 546 7,452/81,946 12,267/80,165
J. D. Underhill............. 2,137 894 7,973/85,392 0/79,206
G. L. Anderson.............. 0 0 1,924/70,515 0/57,813
C. L. Kolesar............... 0 0 257/72,911 0/57,813
</TABLE>
- - --------
(1) Value Realized is calculated as follows: [(Per Share Closing Price on date
of exercise)--(Per Share Exercise Price)] x Number of Shares for which the
option was exercised.
(2) Value of Unexercised, In-the-Money Options at FY-End is calculated as
follows: [(Per Share Closing Sale Price on May 30, 1997) - (Per Share
Exercise Price)] x Number of Shares Subject to Unexercised Options. The
per share closing sale price on May 30, 1997, the last trading day of
fiscal 1997, was $16.25.
RETIREMENT PLAN
Following the Distribution and in conjunction therewith, the Company became
a co-sponsor of the Morrison Restaurants Inc. Retirement Plan (the "Retirement
Plan"). Under the Retirement Plan, participants are entitled to receive
benefits based upon salary and length of service. The Retirement Plan was
frozen as of December 31, 1987, so that no additional benefits have accrued,
and no new participants have been permitted since that date. The Retirement
Plan is a tax-qualified, funded, defined benefit plan, which covers employees
of the Company who had attained age 21 and had completed at least one year of
full-time service with MRI by July 1, 1987. A participant's accrued annual
benefit is determined generally by adding A and B below, as applicable:
(A) 1/4 percent of pay up to that year's Social Security Wage Base, plus 1
percent of pay over the Social Security Wage Base for each credited
year of service (as defined in the Retirement Plan) commencing on or
after January 1, 1986; and
(B) 1/4 percent of average pay for the highest consecutive five years from
1976 through 1985 up to $14,400, plus 1 percent of such pay in excess
of $14,400, both multiplied by the number of credited years of service
with MRI up to January 1, 1986.
Normal retirement for purposes of the Retirement Plan is age 65, although a
participant with at least five years of service may retire with a reduced
benefit as early as age 55. Generally, benefits are paid in the form of a
single life annuity if the participant is unmarried or a joint and survivor
annuity if the participant is married, unless an alternative form of benefit
payment is selected by the participant from among a range of options made
available under the Retirement Plan. A participant's accrued benefit becomes
vested upon completion of five years of service after age 18.
Benefits payable under the Retirement Plan reduce the amount of benefits
payable to a participant in the Executive Supplemental Pension Plan or the
Management Retirement Plan, described below.
9
<PAGE>
EXECUTIVE SUPPLEMENTAL PENSION PLAN
Eligible Named Executives of the Company participate in the Company's
Executive Supplemental Pension Plan ("ESPP") adopted March 7, 1996. The ESPP
is a nonqualified, unfunded, defined benefit retirement plan for selected
employees. Company employees who participated in the MRI Executive
Supplemental Pension Plan prior to the Distribution are eligible to
participate and receive full credit for benefit accrual purposes for their
service with MRI prior to the Distribution, provided such employees have
released Ruby Tuesday, Inc., the successor to MRI, from liability for benefits
accrued prior to the Distribution under the MRI Executive Supplemental Pension
Plan. (However, both Ruby Tuesday, Inc. and MFCI have agreed to be secondarily
liable for certain benefits accrued under the ESPP to the extent of the
amounts these employees had earned under the MRI Executive Supplemental
Pension Plan as of the Distribution.) As a condition of entry to the ESPP,
future participants must complete five years of consecutive service in one or
more qualifying job positions and must have achieved a minimum salary
threshold, as described in the ESPP.
A participant's accrued benefit in the ESPP equals 2.5 percent of the
participant's highest five-year average base salary multiplied by the
participant's years and fractional years of continuous service (as defined in
the ESPP) not in excess of 20 years; plus 1 percent of the participant's
highest five-year average base salary multiplied by the participant's years
and fractional years of continuous service in excess of 20 years, but not in
excess of 30 years of such service; less the retirement benefit payable at the
age of 65 in the form of a single life annuity payable to the participant
under the Retirement Plan; and less the participant's primary Social Security
benefits. Base salary includes commissions but excludes bonuses and other
forms of remuneration other than salary. Benefits are paid to a participant in
the same manner as benefits are paid to the participant under the Retirement
Plan and become vested if the participant has completed ten years of service.
Normal retirement for purposes of the ESPP is age 65, although a participant
with at least five years of service may retire with a reduced benefit as early
as age 55. Early retirement provisions allow designated participants to
receive unreduced benefits as early as age 55 depending upon criteria
specified in the ESPP. A participant's receipt of unreduced early retirement
benefits is conditioned upon not competing with the Company for a period of
two years following retirement.
Estimated annual benefits payable upon retirement to persons in specified
remuneration and years of continuous service classifications are shown in the
following table. All amounts shown are for a single life annuity and assume
that active participation in the ESPP continues until age 65. In accordance
with the ESPP, the amounts shown are subject to reduction for Social Security
benefits and benefits received under the Retirement Plan.
EXECUTIVE SUPPLEMENTAL PENSION PLAN
ESTIMATED ANNUAL BENEFITS FOR REPRESENTATIVE YEARS OF SERVICE TO AGE 65
<TABLE>
<CAPTION>
30 OR
ANNUAL AVERAGE BASE SALARY 10 15 20 25 MORE
- - -------------------------- ------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
$ 75,000........................... $18,750 $ 28,125 $ 37,500 $ 41,250 $ 45,000
100,000........................... 25,000 37,500 50,000 55,000 60,000
125,000........................... 31,250 46,875 62,500 68,750 75,000
150,000........................... 37,500 56,250 75,000 82,500 90,000
175,000........................... 43,750 65,625 87,500 96,250 105,000
200,000........................... 50,000 75,000 100,000 110,000 120,000
225,000........................... 56,250 84,375 112,500 123,750 135,000
250,000........................... 62,500 93,750 125,000 137,500 150,000
275,000........................... 68,750 103,125 137,500 151,250 165,000
300,000........................... 75,000 112,500 150,000 165,000 180,000
</TABLE>
Years of continuing service, to the nearest year, and current remuneration
covered by the ESPP (base salary) for the eligible Named Executives are: Mr.
Davenport, 23 years, $262,800; Ms. Kolesar, 18 years, $124,334; and Mr.
Engwall, 14 years, $135,170.
10
<PAGE>
MANAGEMENT RETIREMENT PLAN
Effective as of March 7, 1996, the Company adopted the Morrison Health Care,
Inc. Management Retirement Plan ("MRP") to provide for a select group of
management or highly compensated employees the security of receiving a defined
level of retirement benefits. The MRP is a nonqualified, unfunded, defined
benefit retirement plan for employees with 15 or more years of credited
service (as defined in the MRP) and whose average annual compensation over a
consecutive three calendar-year period equals or exceeds $40,000, which amount
may be adjusted by the Company from time to time. Company employees who
participated in the MRI Management Retirement Plan prior to the Distribution
are eligible to participate and receive full credit for benefit accrual
purposes for their service with MRI prior to the Distribution, provided such
employees have released RTI, successor to MRI, from liability for benefits
accrued prior to the Distribution under the MRI Management Retirement Plan.
(However, both RTI and MFCI have both agreed to be secondarily liable for
certain benefits accrued under the MRP to the extent of the amounts these
employees had earned under the MRI Management Retirement Plan as of the
Distribution.)
A participant's single-life annuity accrued benefit in the MRP equals 1.5
percent of the participant's average compensation determined over the five-
year period immediately preceding termination of employment multiplied by the
participant's years of credited service not in excess of 20 years; plus 2
percent of the participant's average compensation determined over the five-
year period immediately preceding termination of employment multiplied by the
participant's years of credited service in excess of 20 years, but not in
excess of 30 years; minus the sum of (a) the participant's Retirement Plan
benefits, (b) the participant's Social Security benefits, and (c) the
participant's ESPP Benefit (as defined in the MRP). For purposes of
determining a participant's accrued benefit, a year's compensation includes
commissions and bonuses, but generally no form of remuneration is counted in
excess of $100,000, which amount may be adjusted by the Company from time to
time.
Normal retirement for purposes of the MRP is age 65, although a participant
may retire with a benefit as early as age 55. Generally, benefits are paid in
the form of a single life annuity if the participant is unmarried or a joint
and survivor annuity if the participant is married. If the participant is also
entitled to benefits under the Retirement Plan, benefits payable under the MRP
must be in the same form as those payable under the Retirement Plan. The MRP
allows payment of a participant's accrued benefit, commencing as early as age
55, even if the participant terminated employment prior to attainment of age
55.
Estimated annual benefits payable upon retirement to persons in specified
remuneration and years of credited service classifications are shown in the
following table. All amounts shown are for a single life annuity and assume
that active participation continues in the MRP until age 65. In accordance
with the MRP, the amounts shown are subject to reduction for Social Security
benefits, benefits received under the Retirement Plan and benefits payable
under the ESPP. A participant is ineligible for benefits under the MRP while
receiving any long-term disability benefits.
MANAGEMENT RETIREMENT PLAN
ESTIMATED ANNUAL BENEFITS FOR REPRESENTATIVE YEARS OF SERVICE TO AGE 65
<TABLE>
<CAPTION>
30 OR
FINAL AVERAGE SALARY 15 20 25 MORE
-------------------- ------- ------- ------- -------
<S> <C> <C> <C> <C>
$ 40,000........................................ $ 9,000 $12,000 $16,000 $20,000
60,000........................................ 13,500 18,000 24,000 30,000
80,000........................................ 18,000 24,000 32,000 40,000
100,000........................................ 22,500 30,000 40,000 50,000
</TABLE>
Years of credited service and salary covered by the MRP for the eligible
Named Executives are: Mr. Davenport, 23 years, $100,000; and Ms. Kolesar, 18
years, $100,000.
11
<PAGE>
CONTRACTS WITH EXECUTIVES
The Company entered into a Change of Control Agreement (the "Change of
Control Agreement") with each of the Named Executives. The Change of Control
Agreement is designed to diminish the distraction of executives by virtue of
the personal uncertainties and risks created by a threatened or pending Change
of Control (as defined in the Change of Control Agreement and set forth below)
and to encourage their full attention and dedication to the Company currently
and in the event of any pending or threatened Change of Control.
Under the Change of Control Agreement, a "Change of Control" is defined as
either (a) certain changes in the composition of more than 20 percent of the
Board of Directors, or (b) with certain exceptions, any "Business Combination"
(as defined in the Change of Control Agreement) that has not been approved by
the holders of 80 percent or more of the Company's outstanding voting stock.
Events that do not constitute a Change of Control include (a) any Business
Combination approved by at least 80 percent of the Continuing Directors (as
defined in the Change of Control Agreement), (b) any Business Combination
transaction that satisfies certain price and procedural requirements specified
in the Company's Articles of Incorporation, and (c) any acquisition by the
Company, any of its subsidiaries, or any employee benefit plan of the Company
or any of its subsidiaries.
Prior to the first date on which a Change of Control occurs (the "Effective
Date"), each covered executive remains an at-will employee, except as may be
provided in any other agreement, and any termination of his employment will
terminate his rights under the Change of Control Agreement. If and when the
Effective Date occurs, the Company has agreed to continue the employment of
the executive, and the executive has agreed to remain in the employ of the
Company, for a three-year period (the "Employment Period") commencing on the
Effective Date. During the Employment Period, the executive (a) shall receive
an annual base salary no less than that received prior to the Effective Date
and an annual bonus no less than the average of the last three annual bonuses
received prior to the Effective Date, and (b) generally shall be entitled to
continuation of retirement, savings and welfare benefit plan participation and
practices, expense reimbursements and other fringe benefits on a basis at
least comparable to that obtaining prior to the Effective Date.
If during the Employment Period the Company terminates the executive's
employment other than for cause, death or disability, or if the executive
terminates his employment for "good reason" (as defined in the Change of
Control Agreement), or if the executive terminates his employment for any
reason during the 30-day period immediately following the first anniversary of
the Effective Date, the executive becomes entitled to receive (a) any unpaid
portion of his accrued annual base salary plus a pro rata portion of his
highest annual bonus paid or payable for the three fiscal years immediately
preceding his date of termination, (b) an amount equal to either three, two or
one times the sum of his annual base salary and his highest annual bonus,
depending upon the particular multiplier stipulated in his Change of Control
Agreement, (c) any other accrued obligations, (d) rights with respect to any
outstanding stock options granted to him prior to his date of termination or a
cash amount equal to the difference between the option price and the then
value of Company stock for which any such option was granted, and (e) certain
employee benefits consisting of retirement, savings and various health and
welfare insurance benefits. The multiplier referred to in clause (b) of the
preceding sentence is three for each of the persons named in the Summary
Compensation Table. If this package of compensation and benefits constitutes
"excess parachute payments" as defined under the Internal Revenue Code, the
Company will pay an additional amount sufficient to reimburse the executive
for all taxes payable by the executive with respect to the parachute payments.
The Company estimates that the obligations to the Named Executives as of the
date of this Proxy Statement if a Change of Control had occurred and the
employment termination provisions of the Change of Control Agreement were to
take effect immediately (excluding retirement benefits) would be approximately
as follows: Mr. Davenport, $1,626,000; Mr. Underhill, $515,000; Mr. Engwall,
$610,000; and Ms. Kolesar, $683,000. Other executives may be made subject to a
Change of Control Agreement by the Board of Directors.
12
<PAGE>
COMPENSATION COMMITTEE REPORT
The Compensation Committee of the Board of Directors of the Company, which
is composed solely of non-employee directors of the Company, has furnished the
following report on executive compensation.
OVERALL COMPENSATION PHILOSOPHY
The Company's executive compensation policies and programs emphasize
performance-based elements of executive compensation. The Company's executive
compensation programs closely align performance measures with current business
strategy and are designed to motivate executive behavior. In general, the
Company controls base salaries and compensates outstanding performance through
more highly leveraged annual and longer-term incentive programs. As a result,
the following principles apply to executive compensation:
. Base salaries are competitive with the Company's peer group of public
companies in the health care food and nutrition services industry;
. A very significant portion of executive compensation is tied to the
Company's success in meeting predetermined annual and long-term
performance goals, including the Company's profitability and
appreciation in the Company's stock price; and
. Executives are required to own specified amounts of stock in the
Company, resulting in direct linkage between executive and shareholder
interests.
The overall objectives of this strategy are to attract and retain the best
possible executive talent and to motivate the Company's executives to achieve
the goals inherent in the Company's business strategy.
The key components of the Company's executive compensation packages are base
salary, annual incentive opportunities, and equity devices. The Compensation
Committee's policies with respect to each of these elements, including the
basis for the compensation awarded to Mr. Glenn A. Davenport, the Company's
President and Chief Executive Officer, are discussed below.
BASE SALARIES
The Company's general approach for base compensation is to establish salary
ranges with midpoints which are at the 50th percentile of the competitive
market in the contract food services industry. Each salary range provides a
lower and upper limit on the value of jobs assigned to that range. However,
for its executive officers, including the President and Chief Executive
Officer and the other executives named in the Summary Compensation Table, the
Company has capped base salaries at the midpoint of the salary range. This
reflects the previously mentioned objective of controlling base salary costs
and emphasizing incentive compensation. Future adjustments to base salaries
and salary ranges will reflect average movement in the competitive market.
ANNUAL INCENTIVE COMPENSATION
The Company's annual incentive plan directly links annual incentive payments
to the accomplishment of predetermined and Board-approved financial and
operating goals. Corporate and individual performance objectives are
established at the beginning of each fiscal year.
Each executive's potential incentive is tied to growth in net income as well
as certain qualitative measures. Depending upon an executive's organizational
level and responsibilities, as well as competitive market practices, annual
incentive compensation targets range from 14 percent to 50 percent of base
salary if 100 percent of predetermined corporate goals are achieved and
maximums range from 80 percent to 125 percent of base salary. Performance with
respect to the measures named in the annual incentive plan for fiscal 1997
resulted in average annual incentive compensation of 35.6 percent of base
salaries for the five executive officers named in the Summary Compensation
Table. Such awards represented approximately 32.8 percent of the total
incentive awards that could have been earned by the five executive officers.
Occasionally the Company may establish a special incentive award for an
individual officer or other employee aimed at achieving a specified
performance goal.
13
<PAGE>
EXECUTIVE STOCK OWNERSHIP
Believing that equity ownership plays a key role in aligning the interests
of Company personnel with Company shareholders, the Company encourages all
employees to make a personal investment in Company stock. In addition,
ownership requirements have been developed for the Company's top management
group. These objectives will be phased in over a period of five years that
commenced with fiscal year 1997 with the minimum to be fully achieved at the
end of that period, and may be accomplished through the exercise of stock
options, other stock incentives or open market purchases. Members of the
management group must achieve target ownership levels to be eligible to
receive future awards under stock-based plans.
LONG-TERM INCENTIVE COMPENSATION
Awards under the Company's stock-based compensation plans directly link
potential participant rewards to increases in shareholder value. The Company
maintains stock incentive plans for executive officers and other employees.
These plans provide for grants of a variety of stock incentives, including
stock options, restricted stock, stock appreciation rights, stock purchase
rights and performance shares or units. The programs described below have been
established under one or more of these plans.
Executive Stock Option Program
The Company has an Executive Stock Option Program which provides for option
grants to key employees. The options are issued at fair market value, have a
term of five or ten years and generally vest two or three years after the date
of the grant. During fiscal 1997, option grants ranging from 150 to 50,000
shares, for a total of 350,700 shares (including options to purchase 160,200
shares issued to non-executive employees to replace previously issued
options), were made under this program.
Management Stock Option Program
The Company has a Management Stock Option Program for key employees. Based
on organization level, eligible employees may purchase shares of Company stock
up to established annual limits. For each share purchased, 1.15 shares will be
issued and the participant will receive a five-year option to purchase three
times the number of shares of Company stock obtained at a per share exercise
price equal to the fair market value of a share on the date of grant. The
right to purchase Common Stock under this program is conditioned on the
achievement of Corporate, Region, or Account goals, as the case may be. There
is a two-year restriction on the sale of shares acquired through this program
other than through the exercise of stock options. The Company granted options
to purchase an aggregate of 121,821 shares to key employees under this program
during fiscal year 1997 (including options to purchase 15,309 shares issued to
non-executive employees to replace previously issued options).
The Company may occasionally grant restricted stock or other stock rights to
ensure retention of key executives or as a part of the compensation provided
to a new executive hired from outside the Company.
CHIEF EXECUTIVE OFFICER COMPENSATION
The base salary for Mr. Davenport, the Company's Chief Executive Officer,
for fiscal year 1997 was determined by the Compensation Committee in
accordance with compensation practices and policies in effect. Mr. Davenport's
annual base salary was determined in the same manner described previously for
other executives.
Mr. Davenport is eligible to participate in the Company's annual incentive
plan under which he may earn a cash bonus determined as a percentage of his
salary if predetermined levels of net income growth, new account sales and
other items are achieved by the Company. For fiscal year 1998, the Chief
Executive Officer's bonus opportunity is 25 percent, 50 percent, 100 percent
and 125 percent of his salary if the Company achieves or exceeds "threshold,"
"target," "maximum" and "maximum plus" growth levels, respectively, with a
proportional increase in the bonus between such performance levels.
14
<PAGE>
Mr. Davenport is eligible to participate in the Executive Stock Option
Program described above. The Compensation Committee approved a grant of
options to purchase 50,000 shares of Common Stock to Mr. Davenport during
fiscal year 1997.
DEDUCTIBILITY OF EXECUTIVE COMPENSATION
Section 162(m) of the Internal Revenue Code of 1986, as amended (the
"Code"), limits the amount of individual compensation for certain executives
that may be deducted by the employer for federal tax purposes in any one
fiscal year to $1 million unless such compensation is "performance-based." The
determination of whether compensation is performance-based depends upon a
number of factors, including shareholder approval of the plan under which the
compensation is paid, the exercise price at which options or similar awards
are granted, the disclosure to and approval by the shareholders of applicable
performance standards, the composition of the Compensation Committee, and
certification by the Compensation Committee that performance standards were
satisfied. While it is possible for the Company to compensate or make awards
under incentive plans and otherwise that do not qualify as performance-based
compensation deductible under Section 162(m), the Compensation Committee, in
structuring compensation programs for its top executive officers, intends to
give strong consideration to the deductibility of awards.
BOARD OF DIRECTORS AND COMPENSATION COMMITTEE
The Board of Directors of the Company has a standing Compensation Committee
whose purpose is to review and make recommendations concerning the base
salaries of all officers of the Company and to authorize all other forms of
compensation including stock options. Members of the Compensation Committee
also administer the Company's stock-based incentive plans. The Compensation
Committee met four times during the fiscal year. The Board of Directors
approved all decisions of the Compensation Committee during fiscal year 1997.
The members of the Compensation Committee are as follows:
Claire L. Arnold (Chairman) Dr. Benjamin F. Payton
E. Eugene Bishop Arthur R. Outlaw, Jr.
Fred Brown
15
<PAGE>
PERFORMANCE GRAPH
The following chart and table compare the cumulative total return of the
Company's Common Stock with the cumulative total return of the NYSE Stock
Market Index and the Index of NYSE Eating and Drinking Places Index.
COMPARISON OF RETURNS*
FOR
MORRISON HEALTH CARE, INC.
[PERFORMANCE GRAPH--TO BE INSERTED HERE]
<TABLE>
<CAPTION>
03/11/96 05/31/96 08/30/96 11/29/96 02/28/97 05/30/97
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
MORRISON HEALTH CARE,
INC..................... $100.0 $ 79.8 $ 69.7 $ 81.7 $ 78.5 $ 95.9
NYSE Stock Market (US
Companies).............. $100.0 $104.9 $103.0 $117.6 $123.2 $131.4
NYSE Eating and Drinking
Places
(SIC 5810-5819 US Compa-
nies)................... $100.0 $ 97.8 $ 93.8 $ 95.6 $ 89.8 $103.3
</TABLE>
- - --------
* Assumes $100 invested in the Common Stock of the Company and in the
indicated indices on March 11, 1996, the first business day following the
Distribution, and reinvestment of dividends.
16
<PAGE>
PROPOSAL 2
APPROVAL OF AMENDMENT TO THE 1996 STOCK INCENTIVE PLAN
The Board of Directors of the Company has approved, and recommends the
shareholders of the Company approve, an amendment to the Company's 1996 Stock
Incentive Plan (the "Stock Incentive Plan") to increase the number of shares
authorized for issuance under the Stock Incentive Plan by 900,000 shares.
Shareholder approval is being sought, among other things, to preserve the
Company's ability to deduct, for Federal income tax purposes, compensation
expense attributable to stock options and stock awards. Under Section 162(m)
of the Internal Revenue Code, shareholder approval of performance-based
compensation plans (including material amendments thereto) is necessary to
qualify for the performance-based compensation exception to the limitation on
a company's ability to deduct compensation paid to certain specified
individuals in excess of $1 million. Approval of the proposed amendment to the
Stock Incentive Plan requires the affirmative vote of the holders of at least
a majority of the outstanding shares of Common Stock of the Company
represented and entitled to vote at the Annual Meeting.
After the Distribution in March 1996, the Company engaged William M. Mercer,
Incorporated, a leading human resource consultant, to help evaluate the long
term incentive compensation plans of the Company's management in relation to
the industry and to assist in the alignment of the long term incentives with
the goals of the Company's shareholders. Since operating as an independent
company for over fifteen months, the Company is in a better position to
anticipate actual utilization under its stock incentive plans and programs
which were in place at the time of the Distribution. IN ORDER TO ACHIEVE THESE
GOALS, THE COMPANY DESIRES TO REALLOCATE CURRENT SHARES AVAILABLE FOR FUTURE
GRANTS AMONG ITS STOCK INCENTIVE PLANS AND PROGRAMS TO REFLECT THE PROJECTED
NEEDS OF EACH OF THESE PLANS AND PROGRAMS. THIS REALLOCATION WILL ENABLE THE
COMPANY TO IMPLEMENT ITS LONG TERM INCENTIVES STRATEGY WITHOUT INCREASING THE
OVERALL NUMBER OF AUTHORIZED STOCK OPTIONS AVAILABLE UNDER THE COMPANY'S STOCK
INCENTIVE PLANS AND PROGRAMS. THEREFORE, UPON APPROVAL OF THE INCREASE IN THE
NUMBER OF SHARES RESERVED FOR ISSUANCE UNDER THE STOCK INCENTIVE PLAN BY
900,000 SHARES, THE NUMBER OF SHARES RESERVED FOR ISSUANCE UNDER CERTAIN OF
THE COMPANY'S NON-EXECUTIVE PLANS AND PROGRAMS WILL BE REDUCED BY THE SAME
AMOUNT.
The following is a description of the Stock Incentive Plan, if amended as
proposed hereby.
Reserved Shares. The shares of Common Stock reserved for issuance pursuant
to awards made or that may be made under the Stock Incentive Plan will be
1,750,000, of which approximately 46,000 shares were previously issued and
approximately 797,000 are subject to stock options which are outstanding. The
maximum number of shares of Common Stock with respect to which options or
stock appreciation rights may be granted during any fiscal year to any
eligible recipient who is a "covered employee," within the meaning of Section
162(m) of the Internal Revenue Code, will not exceed 300,000. The Stock
Incentive Plan provides for further adjustments to the number of shares
reserved for issuance in the event of certain recapitalizations.
Disinterested Administration. Awards under the Stock Incentive Plan are
determined by the Compensation Committee of the Board of Directors (the
"Committee"), the members of which are selected by the Board of Directors.
Only persons who satisfy the criteria of "non-employee directors" set forth in
Rule 16b-3 under the Exchange Act and the criteria of "outside directors" set
forth in regulations under Section 162(m) of the Internal Revenue Code may be
members of the Committee. The Committee shall have at least two members.
Awards. The Stock Incentive Plan permits the Committee to make awards of
shares of Common Stock, awards of derivative securities related to the value
of the Common Stock and certain cash awards to directors, officers and
employees of the Company or its affiliates ("Eligible Persons"). These
discretionary awards may be made on an individual basis, or pursuant to a
program approved by the Committee for the benefit of a group of Eligible
Persons. The Stock Incentive Plan permits the Committee to make awards of a
variety of Stock Incentives (as defined below), including, but not limited to,
stock awards, options to purchase shares of Common Stock, stock appreciation
rights, so-called "cashout" or "limited stock appreciation rights" (which the
Committee may make exercisable in the event of a Change in Control of the
Company (as defined therein) or
17
<PAGE>
other event), phantom shares, performance incentive rights, dividend
equivalent rights and similar rights (together, "Stock Incentives").
Outstanding Stock Incentives may be adjusted by the Committee to reflect
certain corporate events such as corporate reorganizations.
The Company anticipates that most stock awards will be restricted for some
period of time, although the Committee does have the discretion to make such
awards freely transferable at the time of grant. Stock Incentives may be made
exercisable or settled at such prices and will terminate under such terms as
will be established by the Committee. For example, options may be made
exercisable at a price equal to, less than or more than, the fair market value
of the Common Stock on the date that the option is awarded, or based upon an
average fair market value of the Common Stock at the time the option is
awarded or at the time the option is exercised. The Committee may permit an
option exercise price to be paid in cash or by the delivery of previously-
owned shares of Common Stock, or to be satisfied through a cashless exercise
executed through a broker or by having a number of shares of Common Stock
otherwise issuable at the time of exercise withheld. The Stock Incentive Plan
permits the grant of both incentive and nonqualified stock options.
Stock appreciation rights may be granted separately or in connection with
another Stock Incentive, and the Committee may provide that they are
exercisable at the discretion of the holder or that they will be paid at a
time or times certain or upon the occurrence or non-occurrence of certain
events. Stock appreciation rights may be settled in shares of Common Stock or
in cash, according to terms established by the Committee with respect to any
particular award. The Committee may make cash awards designed to cover tax
obligations of employees that result from the receipt or exercise of a Stock
Incentive.
The terms of particular Stock Incentives may provide that they terminate or
expire upon the occurrence of one or more events, including, but not limited
to, the holder's termination of employment or other status with respect to the
Company, passage of a specified period of time, the holder's death or
disability, or the occurrence of a Change in Control of the Company. Stock
Incentives may include exercise, conversion or settlement rights to a holder's
estate or legal representative in the event of the holder's death or
disability. At the Committee's discretion, Stock Incentives that are held by
an employee who suffers a termination of employment may be cancelled,
accelerated, paid or continued. The Board of Directors at any time may
terminate the Stock Incentive Plan or amend it in any respect without
shareholder approval. Amendments that may be adopted without shareholder
approval include amendments that increase the cost of the Stock Incentive Plan
to the Company or alter the allocation of benefits thereunder among executive
officers, directors and other employees. No such termination or amendment
without the consent of the holder of a Stock Incentive shall adversely affect
the rights of the holder under such Stock Incentive. The Board also may
condition any such amendment upon shareholder approval if shareholder approval
is deemed necessary or appropriate in consideration of tax, securities or
other laws.
Tax Consequences. A participant will not recognize income upon the grant of
an option or at any time prior to the exercise of the option or a portion
thereof. At the time the participant exercises a nonqualified option or
portion thereof, he or she will recognize compensation taxable as ordinary
income in an amount equal to the excess of the fair market value of the Common
Stock on the date the option is exercised over the price paid for the Common
Stock, and the Company will then be entitled to a corresponding deduction.
A participant who exercises an incentive stock option will not be taxed at
the time he or she exercises his or her option or a portion thereof. Instead,
he or she will be taxed at the time he or she sells the Common Stock purchased
pursuant to the option. The participant will be taxed on the difference
between the price he or she paid for the stock and the amount for which he or
she sells the stock. If the participant does not sell the stock prior to two
years from the date of grant of the option and one year from the date the
stock is transferred to him or her, the gain will be capital gain and the
Company will not be entitled to a corresponding deduction. If the participant
sells the stock at a gain prior to that time, the difference between the
amount the participant paid for the stock and the lesser of the fair market
value on the date of exercise or the amount for which the stock is sold will
be taxed as ordinary income and the Company will be entitled to a
corresponding deduction. If the stock is sold for an amount in excess of the
fair market value on the date of exercise, the excess amount is taxed as
18
<PAGE>
capital gain. If the participant sells the stock for less than the amount he
or she paid for the stock prior to the one or two year periods indicated, no
amount will be taxed as ordinary income and the loss will be taxed as a
capital loss. Exercise of an incentive option may subject a participant to, or
increase a participant's liability for, the alternative minimum tax.
A participant generally will not recognize income upon the grant of a stock
appreciation right, dividend equivalent right, performance unit award or
phantom share (the "Equity Incentives"). At the time a participant receives
payment under any Equity Incentive, he or she generally will recognize
compensation taxable as ordinary income in an amount equal to the cash or the
fair market value of the Common Stock received, and the Company then will be
entitled to a corresponding deduction.
A participant will not be taxed upon the grant of a stock award if such
award is not transferable by the participant or is subject to a "substantial
risk of forfeiture," as defined in the Internal Revenue Code. However, when
the shares of Common Stock that are subject to the stock award are
transferable by the participant and are no longer subject to a substantial
risk of forfeiture, the participant will recognize compensation taxable as
ordinary income in an amount equal to the fair market value of the stock
subject to the stock award, less any amount paid for such stock, and the
Company then will be entitled to a corresponding deduction. However, if a
participant so elects at the time of receipt of a stock award, he or she may
include the fair market value of the stock subject to the stock award, less
any amount paid for such stock, in income at that time and the Company also
will be entitled to a corresponding deduction at that time.
The Stock Incentive Plan is not qualified under Section 401(a) of the
Internal Revenue Code.
The following table sets forth information regarding stock options granted
under the Stock Incentive Plan during fiscal year 1997 to each of the Named
Executives, all persons who serve as executive officers of the Company as a
group, and all persons who are employees of the Company as a group.
<TABLE>
<CAPTION>
OPTIONS TO
PURCHASE
COMPANY
COMMON
NAME AND POSITION WITH THE COMPANY OR GROUP STOCK (#)
------------------------------------------- ----------
<S> <C>
G.A. Davenport............................................................ 63,356
President and Chief Executive Officer
J.D. Underhill............................................................ 24,911
Senior Vice President, Sales and Marketing
G.L. Anderson............................................................. 18,500
Senior Vice President
C.L. Kolesar.............................................................. 18,500
Senior Vice President
K.W. Engwall.............................................................. 24,911
Senior Vice President, Finance and Assistant Secretary
All executive officers of the Company as a group.......................... 179,523
All directors who are not executive officers of the Company as a group.... 11,346
All other employees of the Company as a group............................. 266,370
</TABLE>
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE PROPOSED
AMENDMENT TO THE 1996 STOCK INCENTIVE PLAN.
19
<PAGE>
INDEPENDENT AUDITORS
The firm of Ernst & Young LLP served as the Company's independent auditors
for fiscal year 1997. Representatives of Ernst & Young LLP will be present at
the Annual Meeting to respond to appropriate questions and will have an
opportunity to make a statement if they so desire.
The appointment of auditors is a matter for determination by the Board of
Directors for which no shareholder approval or ratification is necessary. The
Board of Directors has selected the firm of Ernst & Young LLP to audit the
books of the Company for fiscal year 1998.
SHAREHOLDER PROPOSALS
Any shareholder of the Company wishing to submit a proposal for action at
the Company's 1998 Annual Meeting of Shareholders and desiring the proposal to
be considered for inclusion in the Company's proxy materials must provide a
written copy of the proposal to the management of the Company at its principal
executive office not later than April 20, 1998, and must otherwise comply with
rules of the Securities and Exchange Commission relating to shareholder
proposals.
GENERAL
Management does not know of any other business to come before the Annual
Meeting. If, however, other matters do properly come before the Annual
Meeting, it is the intention of the persons named in the accompanying proxy to
vote on such matters in accordance with their best judgment.
A list of shareholders entitled to be present and vote at the Annual Meeting
will be available for inspection by the shareholders at the time and place of
the Annual Meeting.
The Annual Report of the Company for fiscal year 1997 (which is not part of
the proxy soliciting material) is being mailed with this proxy statement to
all shareholders of record as of the record date for the Annual Meeting.
THE COMPANY WILL, UPON THE WRITTEN REQUEST OF ANY SHAREHOLDER, FURNISH
WITHOUT CHARGE A COPY OF ITS ANNUAL REPORT ON FORM 10-K WITHOUT EXHIBITS FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION FOR THE YEAR ENDED MAY 31, 1997.
REQUESTS FOR COPIES SHOULD BE DIRECTED TO THE SHAREHOLDERS' RELATION
DEPARTMENT, MORRISON HEALTH CARE, INC., 1955 LAKE PARK DRIVE, S.E., SUITE 400,
SMYRNA, GEORGIA 30080-8855.
By Order of the Board of Directors,
/s/John E. Fountain
John E. Fountain
Vice President, General Counsel
and Secretary
August 18, 1997
Atlanta, Georgia
20
<PAGE>
<TABLE>
<CAPTION>
MORRISON HEALTH CARE, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
<S> <C>
The undersigned hereby acknowledges receipt of the Notice of Annual Meeting of Shareholders and Proxy Statement, each dated August
18, 1997, and does hereby appoint Glenn A. Davenport, and K. Wyatt Engwall, and either of them, with full power of substitution, as
proxy or proxies of the undersigned to represent the undersigned and to vote all shares of Morrison Health Care, Inc. Common Stock
which the undersigned would be entitled to vote if personally present at the Annual Meeting of Shareholders of Morrison Health Care,
Inc., to be held at the Renaissance Atlanta Hotel--Concourse, One Hartsfield Centre Parkway, Atlanta, Georgia 30354 at 1:00 p.m.,
local time, on September 23, 1997, at any adjournment(s) thereof:
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
1. To elect two Class II Directors for a term of three years.
Claire L. Arnold and Glenn A. Davenport
[_] FOR all nominees above [_] WITHHOLD AUTHORITY
(except as marked to the to vote for ALL nominees listed above
contrary above)
INSTRUCTION: TO WITHHOLD AUTHORITY FOR ANY INDIVIDUAL NOMINEE, MARK THE FIRST BOX ABOVE AND LINE THROUGH THAT NOMINEE'S
NAME AS IT APPEARS ABOVE.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ALL DIRECTOR NOMINEES LISTED ABOVE.
2. To approve amendments to the Company's 1996 Stock Incentive Plan to increase the number of shares available for issuance
thereunder by 900,000.
[_] FOR the amendment [_] AGAINST the amendment [_] ABSTAIN
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE AMENDMENT.
3. In their discretion, the proxies are authorized to vote upon such other business as may properly come before this meeting.
(CONTINUED ON OTHER SIDE)
PLEASE COMPLETE, DATE, SIGN AND RETURN THIS PROXY PROMPTLY.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN ACCORDANCE WITH THE DIRECTIONS GIVEN BY THE UNDERSIGNED SHAREHOLDER. IF NO
DIRECTION IS MADE, IT WILL BE VOTED FOR ALL DIRECTOR NOMINEES LISTED ABOVE.
PROXY NUMBER NUMBER OF SHARES
------------ ---------------- Dated: ________________________ , 1997.
-----------------------------------
Signature
-----------------------------------
Signature, if held jointly
Please sign exactly as your name(s)
appear hereon. If shares are held
jointly, each shareholder named should
sign. When signing as attorney, executor,
administrator, trustee or guardian, give
your full title as such. If the signatory
is a corporation, sign the full corporate
name by a duly authorized officer.
PLEASE COMPLETE, DATE, SIGN AND
RETURN THIS PROXY PROMPTLY USING
THE ENCLOSED ENVELOPE.
</TABLE>
