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UNITED STATES
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. )
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:
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[MORRISON HEALTH CARE, INC.
LOGO APPEARS HERE]
August 31, 1998
Dear Shareholders:
We are holding your 1998 Annual Meeting on Tuesday, September 29, 1998 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 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 29, 1998
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 29, 1998, at 1:00 p.m.,
local time, for the following purposes:
1. To elect two Class III directors to the Board of Directors for a term
of three years.
2. 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 14, 1998 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 31, 1998
Atlanta, Georgia
<PAGE>
MORRISON HEALTH CARE, INC.
1955 LAKE PARK DRIVE, S.E.
SUITE 400
SMYRNA, GEORGIA 30080-8855
PROXY STATEMENT FOR 1998 ANNUAL MEETING OF SHAREHOLDERS
GENERAL INFORMATION
The following Proxy Statement and the accompanying proxy card, first mailed
to shareholders on or about August 31, 1998, are furnished in connection with
the solicitation by the Board of Directors of Morrison Health Care, Inc., a
Georgia corporation (the "Company"), of proxies to be used in voting at the
Annual Meeting of Shareholders of the Company to be held on Tuesday, September
29, 1998, 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 and (ii) 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 14, 1998 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, if any, are counted as
shares present for determination of a quorum. The number of shares of
outstanding Common Stock on August 14, 1998 was 12,084,408, each of which is
entitled to one vote.
Election of each of the Director Nominees named in Proposal 1 requires the
approval of a plurality of the votes cast in the election. For purposes of
determining whether a Director Nominee has been elected, shares as to which
authority is withheld will have no effect on the outcome of the voting.
The Company became an independent publicly-owned company in March 1996 as a
result of the distribution ("Distribution") by Morrison Restaurants Inc., a
Delaware corporation ("MRI"), to its shareholders of all of 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. ("MFCI"), which held the
family dining assets and business of MRI.
1
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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 III directors. The Class I and Class II directors
have one year and two years, 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 John B. McKinnon and Dr. Benjamin F. Payton to serve in Class III 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 III -- TERM EXPIRING 2001
JOHN B. MCKINNON
Director of the Company since 1996Age: 63
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 serves as a director of Premark
International, Inc. and Ruby Tuesday, Inc.
DR. BENJAMIN F. PAYTON
Director of the Company since 1996Age: 65
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, AmSouth Bank, N.A.,
The Liberty Corporation, Sonat, Inc., Praxair, Inc. and Ruby Tuesday, Inc.
DIRECTORS CONTINUING IN OFFICE
CLASS I -- TERM EXPIRING 1999
E. EUGENE BISHOP
Director of the Company since 1996Age: 68
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.
2
<PAGE>
ARTHUR R. OUTLAW, JR.
Director of the Company since 1996 Age: 44
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: 57
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 the Chairman-Elect of the American Hospital Association and a
member of the board of 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.
CLASS II -- TERM EXPIRING 2000
CLAIRE L. ARNOLD
Director of the Company since 1996 Age: 51
Ms. Arnold has been Chairperson and Chief Executive Officer of Leapfrog
Services, Inc., a privately-held technical outsourcing company, since April
1998. 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., Ruby Tuesday, Inc. and International Multifoods,
Inc.
GLENN A. DAVENPORT
Director of the Company since 1996 Age: 44
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.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE ELECTION
OF THE TWO NOMINEES FOR CLASS III DIRECTORS NAMED ABOVE.
3
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BENEFICIAL OWNERSHIP OF COMMON STOCK
The following table sets forth certain information as of August 14, 1998
(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 PERCENTOF
NAME OF GROUP OWNED (1) CLASS (2)
------------- ---------------- ---------
<S> <C> <C>
5% STOCKHOLDERS:
GeoCapital, LLC (3)................................ 1,325,595 10.7%
David L. Babson & Company Incorporated(4).......... 1,052,200 8.5
DIRECTORS AND NAMED EXECUTIVE OFFICERS:
C.L. Arnold........................................ 9,074 *
E.E. Bishop........................................ 377,111(5) 3.0
F.L. Brown......................................... 8,649 *
G.A. Davenport..................................... 155,266(6) 1.3
G.L. Gaddy......................................... 250 *
J.B. McKinnon...................................... 13,069 *
A.R. Outlaw, Jr.................................... 208,127 1.7
B.F. Payton........................................ 9,105 *
K.W. Engwall....................................... 18,350 *
F.G. Michels....................................... 9,017 *
J.D. Underhill..................................... 23,250 *
All directors and executive officers
As a group (13 persons)........................... 857,215 7.0
</TABLE>
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(1) Includes shares subject to currently exercisable options and options
exercisable within 60 days after August 14, 1998 held by the named persons
and group as follows: Ms. Arnold, 5,132; Mr. Bishop, 208,748; Mr. Brown,
3,468; Mr. Davenport, 117,377; Mr. Gaddy, 0; Mr. McKinnon, 9,426; Mr.
Outlaw, Jr., 0; Dr. Payton, 5,132; Mr. Engwall, 13,865; Ms. Michels,
5,569; Mr. Underhill, 13,524; and all directors and executive officers as
a group, 396,844.
(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 14, 1998), without regard
to any disclaimers of beneficial ownership by the person indicated.
(3) The address of GeoCapital, LLC is 45th Floor, 767 Fifth Avenue, New York,
NY 10153-4590.
(4) The address of David L. Babson & Company Incorporated, is Suite 1000, One
Memorial Drive, Cambridge, Massachusetts 02142-1300.
(5) Includes 2,053 shares owned by Mr. Bishop's spouse.
(6) Includes 29 shares owned by Mr. Davenport's spouse.
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 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 1998 have been
complied with on a timely basis.
4
<PAGE>
DIRECTORS' FEES AND ATTENDANCE
The Board of Directors of the Company met four times during fiscal year
1998. 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 1998, Mr. McKinnon
was paid an aggregate of $2,400 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 may elect to direct, in 10 percent
increments and subject to such other conditions prescribed by the Directors'
Plan, that up to 100 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.
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,
5
<PAGE>
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 an
option to purchase 5,000 shares of Common Stock as of the date the individual
is first elected to the Board of Directors and shall receive an additional
option to purchase 2,000 shares of Common Stock upon his or her re-election.
Each restricted stock option award shall be evidenced by a Stock Incentive
Agreement.
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 1998. 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 three times during
fiscal year 1998. 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 which has been
awarded to, paid to, or earned by (i) the Company's Chief Executive Officer
and (ii) each of the four other executive officers of the Company who were
most highly compensated and whose salary and bonus exceeded $100,000 in fiscal
year 1998, for services rendered to MRI prior to the Distribution and to the
Company thereafter during each of the three fiscal years in the period ended
May 31, 1998, (together, these persons are sometimes referred to as the "Named
Executives").
6
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ALL OTHER
ANNUAL COMPENSATION LONG-TERM COMPENSATION COMPENSATION
--------------------------------------------- ------------------------- ------------
RESTRICTED AWARDS
OTHER ANNUAL STOCK OPTIONS/
NAME AND POSITION YEAR SALARY ($) BONUS ($)(1) COMPENSATION ($) AWARDS ($)(2) SARS (#)(3) ($)(4)
----------------- ---- ---------- ------------ ---------------- ------------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
G. A. Davenport......... 1998 287,908 145,000 8,145 173,391 109,037 6,121
President and 1997 262,800 131,400 7,500(5) -0- 63,356 3,945
Chief Executive Officer 1996 234,134 32,850 5,929(5) -0- 266,776 5,843
G.L. Gaddy(6)........... 1998 135,577 85,673 76,440(7) 75,675 95,807 -0-
Senior Vice President, 1997 N/A N/A N/A N/A N/A N/A
Sales and Marketing 1996 N/A N/A N/A N/A N/A N/A
K.W. Engwall............ 1998 158,000 63,200 20,000(8) 75,578 47,525 3,653
Senior Vice President,
Finance 1997 135,170 52,000 56,924(8) -0- 24,911 4,695
and Assistant Secretary 1996 108,421 18,200 33,588(8) -0- 55,583 3,327
J.D. Underhill.......... 1998 154,182 62,000 -0- 91,790 49,714 2,000
Senior Vice President, 1997 144,362 40,417 3,600(5) -0- 24,911 1,900
Sales and Marketing 1996 144,362 16,240 5,383(5) -0- 56,731 -0-
F.G. Michels(9)......... 1998 128,000 51,200 2,279 51,700 36,833 4,000
Senior Vice President, 1997 111,077 24,840 2,415 -0- 21,845 4,272
Support Services 1996 78,585 32,063 4,227 -0- 50,000 -0-
</TABLE>
- --------
(1) Does not include bonuses paid in restricted stock (see footnote (2)
below).
(2) Represents the dollar value of shares of restricted stock issued to each
of the Named Executives during fiscal year 1998 pursuant to the Company's
annual incentive program based on the closing market price of the
Company's unrestricted Common Stock on the date of award. Under this
program, beginning with fiscal year 1998, any bonus amount in excess of a
Named Executive's bonus amount earned at the "target" level of
performance is paid in restricted stock valued, for this purpose, at the
fair market value of the Company's unrestricted Common Stock on the date
of the award. In addition, for each share of restricted stock paid in
lieu of bonus, the Named Executive receives an additional .15 of a share
of restricted stock and an option to purchase three times the aggregate
number of shares of restricted stock received at a per share exercise
price equal to the fair market value per share of the Common Stock on the
date of the of the grant of the option. The shares of restricted stock
may not be transferred for a period of three years and are subject to
forfeiture in the event the Named Executive's employment is terminated
within 18 months following the date of award for any reason other than
due to death, retirement or disability. The stock options granted in
connection with the restricted stock have a term of ten years and
generally become exercisable within three years after the date of the
grant. The number of shares of restricted stock awarded under the annual
incentive program and held by each of the Named Executives as of the end
of fiscal year 1998 and the value thereof based on the closing market
price of the Company's unrestricted Common Stock on May 29, 1998 (the
last trading day of fiscal year 1998) were as follows: G. A. Davenport,
10,125 and $173,391; G. L. Gaddy, 4,419 and $75,675; K. W. Engwall, 4,413
and $75,573; J. D. Underhill, 5,360 and $91,790; and F. G. Michels, 3,019
and $51,700. Dividends on restricted stock are paid to the holders
thereof at the same rate payable to the Company's shareholders generally.
(3) For fiscal year 1996, 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.
7
<PAGE>
(4) The amounts in this column include the following: (a) Company
contributions to the Deferred Compensation Plan for fiscal years 1998,
1997 and 1996, respectively: G.A. Davenport, $4,225, $2,406 and $4,705;
G.L. Gaddy, $0, N/A and N/A; K.W. Engwall, $1,623, $3,003 and $3,262;
J.D. Underhill, $1,714, $1,777 and $0; and F.G. Michels, $3,675, $4,150
and $0; (b) executive group life and accidental death and dismemberment
insurance plan premiums paid for fiscal years 1998, 1997 and 1996,
respectively: G. A. Davenport, $179, $540 and $489; and K. W. Engwall,
$198, $1,541 and $65; (c) employee portion of split-dollar life insurance
premiums paid by the Company for fiscal years 1998, 1997 and 1996,
respectively: G.A. Davenport, $1,094, $817 and $649; and K.W. Engwall,
$405, $0 and $0; and (d) Company contributions to the 401(k) plan for
fiscal years 1998, 1997 and 1996, respectively: G.A. Davenport, $624,
$182 and $0; K.W. Engwall, $859, $151 and $0; J.D. Underhill, $286, $123
and $0; and F.G. Michels, $325, $122 and $0.
(5) 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.
(6) G. L. Gaddy became an executive officer of the Company on February 1,
1998.
(7) Represents relocation-related expenses.
(8) Represents relocation related expenses of $20,000, $53,324 and $30,000
for fiscal years 1998, 1997 and 1996, respectively. Also includes $3,600
and $3,588 for fiscal years 1997 and 1996, respectively, representing the
value of bonus shares issued in connection with the purchase of shares of
Common Stock under the Company's Management Stock Option Program after
the Distribution.
(9) F. G. Michels became an executive officer on March 9, 1996.
OPTION GRANTS IN FISCAL 1998
The following table presents information regarding fiscal year 1998 grants
of options to purchase shares of Common Stock to the Named Executives. The
Company has no outstanding SARs and granted no SARs during fiscal year 1998.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE(2)
AT ASSUMED ANNUAL RATES OF
STOCK PRICE APPRECIATION FOR OPTION TERM
---------------------------------------------
INDIVIDUAL GRANTS 5% 10%
------------------------------------------ ---------------------- ----------------------
% OF TOTAL MARKET PRICE MARKET PRICE
OPTIONS/ OPTIONS/SARS EXERCISE REQUIRED TO REQUIRED TO
SARS GRANTED TO OR BASE REALIZE REALIZE
GRANTED EMPLOYEES IN PRICE EXPIRATION DOLLAR DOLLAR GAINS DOLLAR DOLLAR GAINS
NAME (#) (1) FISCAL YEAR ($/SHARE) DATE GAINS ($) ($/SHARE) GAINS ($) ($/SHARE)
---- -------- ------------ --------- ---------- --------- ------------ --------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
G.A. Davenport.......... 30,375 7.8193 17.1250 5/31/08 327,133 27.8948 829,020 44.4178
39,331 10.1248 17.1250 5/31/08 423,588 27.8948 1,073,455 44.4178
G.L. Gaddy.............. 25,000 6.4357 16.5000 7/07/02 259,419 26.8768 657,419 42.7968
25,000 6.4357 18.8750 2/05/08 296,760 30.7454 752,047 48.9569
13,257 3.4127 17.1250 5/31/08 142,776 27.8948 361,821 44.4178
16,275 4.1896 17.1250 5/31/08 175,279 27.8948 444,191 44.4178
K.W. Engwall............ 13,239 3.4081 17.1250 5/31/08 142,582 27.8948 361,330 44.4178
17,143 4.4131 17.1250 5/31/08 184,627 27.8948 467,881 44.4178
J.D. Underhill.......... 16,080 4.1394 17.1250 5/31/08 173,179 27.8948 438,869 44.4178
16,817 4.3291 17.1250 5/31/08 181,116 27.8948 458,984 44.4178
F.G. Michels............ 9,057 2.3315 17.1250 5/31/08 97,542 27.8948 247,191 44.4178
13,888 3.5751 17.1250 5/31/08 149,571 27.8948 379,043 44.4178
</TABLE>
- --------
(1) The indicated options have a term of either five years or ten years and
were granted pursuant to the Company's Stock Incentive Plan and 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."
(2) 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 1998 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 1998 by the Named
Executives and the value of unexercised options to purchase Company Common
Stock held at May 31, 1998. There were no Company SARs outstanding during
fiscal 1998.
<TABLE>
<CAPTION>
NUMBER OF
UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT IN-THE-MONEY OPTIONS
FY-END (#) AT FY-END (#)(2)
SHARES VALUE --------------- --------------------
ACQUIRED ON REALIZED EXERCISABLE/ EXERCISABLE/
NAME EXERCISE (#) ($)(1) UNEXERCISABLE UNEXERCISABLE
---- ------------ -------- ------------- --------------------
<S> <C> <C> <C> <C>
G. A. Davenport..... 0 0 115,308/240,806 86,824.80/365,630.63
G. L. Gaddy......... 0 0 0/50,000 0/15,625.00
K. W. Engwall....... 0 0 13,920/75,478 18,589.35/133,708.44
J. D. Underhill..... 0 0 15,129/75,736 3,219.28/132,253.00
F. G. Michels....... 0 0 2,224/71,845 6,963.45/121,138.75
</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 29, 1998)--(Per Share
Exercise Price)] x Number of Shares Subject to Unexercised Options. The
per share closing sale price on May 29, 1998, the last trading day of
fiscal 1998, was $17.125.
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
1/4 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 1/4 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, 24 years, $290,000; and Mr. Engwall, 15 years, $158,000.
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 Ruby Tuesday, Inc., successor to MRI, from liability
for benefits accrued prior to the Distribution under the MRI Management
Retirement Plan. (However, both Ruby Tuesday, Inc. 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, 24 years, $100,000; and Mr. Engwall, 15
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, $1,351,974; Mr. Underhill, $648,308; Mr. Engwall,
$771,447; and Ms. Michels, $584,117. 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 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. Any incentive
compensation earned by Named Executives over their targeted amount (40 percent
to 50 percent) will be paid in restricted stock and will be subject to
forfeiture in the event executive's employment is terminated
13
<PAGE>
within 18 months following the date of the award, except for termination due
to death, retirement or disability. Performance with respect to the measures
named in the annual incentive plan for fiscal 1998 resulted in average annual
incentive compensation of 97.48 percent of base salaries for the five
executive officers named in the Summary Compensation Table. Such awards
represented approximately 85.17 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.
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 ten years and generally vest two or three years after the date of the
grant. During fiscal 1998, option grants ranging from 200 to 39,331 shares,
for a total of 278,072 shares 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. In addition, at the level of senior vice
president and above, any bonus earned in excess of the target amount will be
paid in restricted stock which is subject to forfeiture in the event the
executive's employment is terminated within 18 months following the date of
the award, except for termination due to death, retirement or disability. For
each share purchased, 1.15 shares will be issued and the participant will
receive a ten-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 offered to individuals who are eligible for the
Company's Bonus/Commission Plan. There is a three-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 6,648
shares to key employees under this program during fiscal year 1998.
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.
14
<PAGE>
CHIEF EXECUTIVE OFFICER COMPENSATION
The base salary for Mr. Davenport, the Company's Chief Executive Officer,
for fiscal year 1998 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 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 1999, 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. Mr.
Davenport is also eligible to participate in the Management Stock Option
Program.
Mr. Davenport is eligible to participate in the Executive Stock Option
Program described above. The Compensation Committee approved a grant of
options to purchase 39,331 shares of Common Stock to Mr. Davenport during
fiscal year 1998.
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 1998.
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.
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
3/11/96 5/31/96 8/30/96 11/29/96 2/28/97 5/30/97 8/29/97 11/28/97 2/27/98 5/29/98
------- ------- ------- -------- ------- ------- ------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
MORRISON HEALTH CARE,
INC.................... $100.0 79.8 69.7 81.7 78.5 95.9 102.6 108.0 122.2 105.7
NYSE Stock Market (US
Companies)............. $100.0 104.9 103.0 117.6 123.2 131.4 140.9 150.3 164.8 171.7
NYSE Eating and Drinking
Places (SIC 5810-5819
US Companies).......... $100.0 97.8 93.8 95.6 89.8 103.3 102.3 104.9 114.7 129.9
</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>
INDEPENDENT AUDITORS
The firm of Ernst & Young LLP served as the Company's independent auditors
for fiscal year 1998. 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 1999.
SHAREHOLDER PROPOSALS
Any shareholder of the Company wishing to submit a proposal for action at
the Company's 1999 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 May 7, 1999, and must otherwise comply with
rules of the Securities and Exchange Commission relating to shareholder
proposals.
The proxy or proxies designated by the Company will have discretionary
authority to vote on any matter properly presented by a shareholder for
consideration at the 1999 Annual Meeting of Shareholders but not submitted for
inclusion in the proxy materials for such meeting unless (i) with respect to
any nomination for director, written notice of the intent to make the
nomination is submitted to the Company at least 90 days in advance of the
meeting and is otherwise made in accordance with the nomination procedures
contained in the Articles of Incorporation of the Company, or (ii) with
respect to any other shareholder proposal, notice of the matter is received by
the Company at its principal executive office not later than July 21, 1999
and, in either case, certain other conditions of the applicable rules of the
Securities and Exchange Commission are satisfied.
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 1998 (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, 1998.
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 31, 1998
Atlanta, Georgia
17
<PAGE>
MORRISON HEALTH CARE, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby acknowledges receipt of the Notice of Annual Meeting
of Shareholders and Proxy Statement, each dated August 31, 1998, 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 29,
1998, at any adjournment(s) thereof:
1.TO ELECT TWO CLASS III DIRECTORS FOR A TERM OF THREE YEARS.
JOHN B. MCKINNON and DR. BENJAMIN F. PAYTON
[_] FOR all nominees [_] WITHHOLD AUTHORITY to
above (except as vote for ALL nominees
marked to the 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. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before this meeting.
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.
Dated:___________________________, 1998.
--------------------------------------------
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.
