<PAGE>
===============================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (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 (S) 240.14a-11(c) or (S) 240.14a-12
MORRISON MANAGEMENT SPECIALISTS, 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:
-------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-------------------------------------------------------------------------
(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):
-------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-------------------------------------------------------------------------
(5) Total fee paid:
-------------------------------------------------------------------------
[_] 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:
-------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-------------------------------------------------------------------------
(3) Filing Party:
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(4) Date Filed:
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Notes:
Reg. (S) 240.14a-101.
SEC 1913 (3-99)
<PAGE>
PROXY STATEMENT
AND NOTICE OF
1999
ANNUAL
SHAREHOLDERS
MEETING
[MORRISON LOGO APPEARS HERE]
<PAGE>
LETTER TO THE SHAREHOLDERS
[LETTERHEAD OF MORRISON APPEARS HERE]
August 27, 1999
To Our Shareholders:
It is our pleasure to invite you to attend our Annual Meeting of Shareholders,
which will be held this year on Tuesday, September 28, 1999, at the Georgia
International Convention Center, 1902 Sullivan Road, College Park, Georgia. The
meeting will start at 1:00 p.m., local time.
On the ballot at this year's meeting is the proposal for the election of three
Class I directors and one Class III director. We also look forward to answering
any questions you may have at the meeting.
As all of you know by now, effective June 30, 1999, we changed our name from
Morrison Health Care, Inc. to Morrison Management Specialists, Inc. We believe
that this new name more aptly describes our business.
As you review the Proxy Statement, you will notice that we simplified and made
it easier to read. We urge you to read this document carefully before you send
in your proxy.
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 shares.
Thank you for your support.
Sincerely,
/s/ GLENN A. DAVENPORT
-------------------------------------
Glenn A. Davenport
Chairman of the Board,
President and Chief Executive Officer
<PAGE>
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TIME:1:00 p.m. on Tuesday, September 28, 1999
PLACE: Georgia International Convention Center
1902 Sullivan Road
College Park, Georgia 30337-0508
ITEMS OF BUSINESS: 1) To elect three Class I directors and one Class III
director.
2) To transact any other business properly
coming before the meeting.
WHO MAY VOTE:You can vote if you were a shareholder of record on August
13, 1999.
ANNUAL REPORT: A copy of the Annual Report is enclosed.
DATE OF MAILING: This notice and the Proxy Statement are first being
mailed to shareholders on or about August 27, 1999.
MAILING ADDRESS: The mailing address of the Company is 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
<PAGE>
ABOUT THE MEETING
What am I voting on?
You will be voting to elect three Class I directors and one Class III director.
Who is entitled to vote?
You may vote if you owned stock as of the close of business on August 13, 1999.
Each share of stock is entitled to one vote. As of August 13, 1999, we had
12,071,204 shares of common stock ("Common Stock") outstanding.
How can I vote my shares?
You may vote your shares:
. By proxy; or
. In person at the meeting.
How do I vote by proxy?
You may vote by proxy by completing, signing and returning to us the enclosed
proxy card. Please follow the directions on your proxy card carefully. If you
send the completed proxy card on time, your "proxy" (the persons named on the
proxy card) will vote your shares as you have directed.
How can I vote at the meeting?
You may vote your shares at the meeting if you attend in person. If you attend
the meeting, we will give you a ballot to vote your shares if you wish to vote
in person. Even if you plan to be present at the meeting, we encourage you to
vote your shares by proxy because it will make it easier for us to count the
votes.
Can I change my mind after I send in the proxy?
You may change your mind and revoke your proxy at any time before the voting
takes place at the meeting. You may do this by:
. Signing another proxy with a later date and returning it to us prior to the
meeting;
. Giving the Secretary of the Company written notice of revocation prior to the
meeting; or
. Voting in person at the meeting.
What if I return my proxy card but do not provide voting instructions?
Proxies that are signed and returned but do not contain instructions will be
voted:
. FOR the election of the nominees named in this Proxy Statement; and
. In accordance with the best judgment of the proxy holder on any other matter
properly brought before the meeting.
What does it mean if I receive more than one proxy card?
It means that you have multiple accounts with brokers and/or our transfer
agent. Please vote all of these shares. We recommend that you contact your
broker and/or our transfer agent to consolidate as many accounts as possible
under the same name and address. Our transfer agent is SunTrust Bank, Atlanta,
which may be reached at Mail Code 258, P.O. Box 4625, Atlanta, Georgia 30302.
If I hold my shares in "street name" in a brokerage account, how do I vote my
shares?
Your broker will send you a form requesting instructions from you as to how to
vote your shares. You should follow the directions provided on the form to
properly instruct your broker how you would like your shares to be voted. Your
brokerage firm has the authority under the New York Stock Exchange rules to
vote your shares in its discretion on certain "routine" matters, including the
election of directors, if you have not provided proper instructions on how your
shares should be voted. If you have instructed your broker how to vote your
shares and wish to change your instructions, you must follow the procedure
outlined in the form provided by your broker.
1
<PAGE>
ABOUT THE MEETING
How many shares must be present to hold the meeting?
In order for us to conduct our meeting, a majority of our outstanding shares as
of August 13, 1999 must be present or represented by proxy at the meeting. This
is referred to as a quorum. Shares voted by brokerage firms under their
discretionary voting authority as described above will be counted for purposes
of establishing a quorum. As of August 13, 1999, we had 12,071,204 shares
outstanding.
How many votes does each share represent?
Each share outstanding on August 13, 1999 is entitled to one vote.
How many votes are needed to elect directors?
The three nominees in Class I and the one nominee in Class III who receive the
most votes at the meeting will be elected as directors. This is called an
election by a plurality of the votes cast. Because directors are elected by a
plurality of votes cast, withholding authority to vote for a particular nominee
on the proxy card will have no effect on determining whether that nominee has
been elected.
2
<PAGE>
ELECTION OF DIRECTORS AND NOMINEE BIOGRAPHIES
Who are the nominees this year?
E. Eugene Bishop, Arthur R. Outlaw, Jr. and Fred L. Brown are each nominated
for election as Class I directors. Each nominee for Class I, if elected, will
hold office until the 2002 annual meeting of shareholders and until his
successor is elected and qualified.
Additionally, Michael F. Corbett is nominated for election as a Class III
director. If elected, he will hold office until the 2001 annual meeting of
shareholders and until his successor is elected and qualified. Mr. Corbett was
elected to the Board following the 1998 shareholders' meeting to fill a newly-
created Class III directorship. Under the Georgia Business Corporation Code,
directors elected by the Board to fill newly-created directorships serve until
the next annual meeting of shareholders regardless of whether or not the term
of their Class expires at such meeting.
What are the backgrounds of this year's nominees?
CLASS I--TERM EXPIRING 2002
The Class I directors standing for election this year are:
E. EUGENE BISHOP, 69, Director since 1996
. Retired since 1995
. Chairman of the Board of Morrison Restaurants Inc., 1986-1995
. Chief Executive Officer of Morrison Restaurants Inc., 1986-1992
. Director of Morrison Restaurants Inc., 1963-1996
ARTHUR R. OUTLAW, JR., 45, Director since 1996
. Chairman of the Board and Chief Executive Officer of Marshall Biscuit
Company, 1985-present
. Founder of Marshall Biscuit Company, 1985
. Cafeteria management and finance for Morrison Restaurants Inc., 1978-1985
FRED L. BROWN, 58, Director since 1996
. Chairman of the American Hospital Association since January, 1999
. Vice Chairman of St. Louis-based BJC Health System since January, 1999
. Founding President and Chief Executive Officer of BJC Health System, 1993-
December, 1998
. Member of President Clinton's Council on Year 2000 (Y2K) Conversion since
January, 1999
. Chairman of the Advisory Board of AmericasDoctor.com
. Adjunct professor at Washington University in St. Louis and guest lecturer at
George Washington University and St. Louis University
. Member of the Board of:
. Citation Computers, Inc.
. Commerce Bancshares, Inc.
. Superior Consulting Advisory Board
. The Healthcare Research and Development Institute
CLASS III--TERM EXPIRING 2001
The Class III director standing for election this year is:
MICHAEL F. CORBETT, 47, Director since 1998
. President of Michael F. Corbett & Associates, LTD. since 1996
. Chairman and Executive Director of The Outsourcing Research Council since
1997
. Chairman of The Corbett Group since 1998
. Member of the Advisory Board of Human Capital Services, Inc. since 1998
. Member of the Editorial Board of InfoServices since 1998
. Member of the Editorial Board of The Outsource Report since 1997
. Co-founder and Director of The Outsourcing Institute, 1993-1996
. Assistant Director of The Graduate Center for Public Policy & Administration,
Marist College, 1992-1995
. Member of the Board of:
. Janus Associates, Inc.
. Providyn LLP
WE RECOMMEND
THAT YOU VOTE
FOR THE ELECTION
OF THESE DIRECTORS
3
<PAGE>
STANDING DIRECTOR BIOGRAPHIES
What is the background of the directors not standing for election this year?
CLASS II--TERM EXPIRING 2000
The incumbent directors with terms expiring in 2000 are:
CLAIRE L. ARNOLD, 52, Director since 1996
. Chairman and Chief Executive Officer of Leapfrog Services, Inc., a privately-
held technical outsourcing company, 1998-present
. President and Chief Executive Officer of Nicotiana Enterprises, Inc., 1979-
1995
. Chief Executive Officer of NCC L.P., 1992-1994
. Chairman, Chief Executive Officer and President of NCC L.P., 1979-1992
. Director of Morrison Restaurants Inc., 1994-1996
. Member of the Board of:
. Schweitzer-Mauduit International, Inc.
. Ruby Tuesday, Inc.
. International Multifoods, Inc.
GLENN A. DAVENPORT, 45, Director since 1996
. Chairman of the Board, President and Chief Executive Officer of the Company,
July 1999-present
. President, Chief Executive Officer and Director of the Company, 1996-July
1999
. President of the Health Care Division of Morrison Restaurants Inc.'s Morrison
Group, 1993-1996
. Senior Vice President of Morrison Restaurants Inc.'s Hospitality Group, 1990-
1993
CLASS III--TERM EXPIRING 2001
The incumbent directors with terms expiring in 2001 are:
JOHN B. McKINNON, 64, Director since 1996
. Retired since 1995
. Chairman of the Board of the Company, 1996-July 1999
. Director of Morrison Restaurants Inc., 1989-1996
. Dean of Babcock Graduate School of Management at Wake Forest University,
1989-1995
. President of Sara Lee Food Service, 1988-1989
. President of Sara Lee Corporation, 1986-1988
. Member of the Board of:
. Premark International, Inc.
. Ruby Tuesday, Inc.
DR. BENJAMIN F. PAYTON, 66, Director since 1996
. President of Tuskegee University, 1981-present
. Member of the Board of:
. AmSouth Bancorporation
. AmSouth Bank, N.A.
. The Liberty Corporation
. Sonat, Inc.
. Praxair, Inc.
. Ruby Tuesday, Inc.
4
<PAGE>
BOARD OF DIRECTORS INFORMATION
What is the makeup of the Board of Directors?
Our Board of Directors currently has eight members. The directors are divided
into three classes, with each class serving for a staggered, three-year period.
The shareholders elect approximately one-third of the members of the Board of
Directors each year.
What if a nominee is unwilling or unable to serve?
That is not expected to occur. If it does, proxies will be voted for a
substitute nominee selected by the persons named in the proxy.
How are directors compensated?
Each director who is not an employee of the Company receives $16,000 annually.
Directors who are also employees of the Company are not separately compensated
for their services as directors.
What benefit plans are available to directors?
Our 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 interest equal to 90-day U.S. Treasury Bills, based on
the weighted average balance of that account during that fiscal quarter. A
director who defers compensation will not receive it until:
. the date of the director's 70th birthday; or
. the date the director ceases to be a member of the Board of Directors.
Under our Directors' Plan, non-employee directors who do not attain the Target
Ownership Level, as defined below, are deemed to have elected to direct that 60
percent of their retainer be allocated to the purchase of Common Stock on their
behalf. Non-employee directors may elect that up to 100 percent of their
retainer be allocated to the purchase of Common Stock on their behalf
(collectively, the "Stock Awards"). A director will be treated as having
attained the "Target Ownership Level" 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 equal to 10 multiplied by that director's annual retainer.
Each director who has a discretionary or deemed election in effect for a fiscal
quarter to purchase Stock Awards will be issued the number of shares of Common
Stock equal to the amount of the retainer 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.
Our Directors' Plan provides that each non-employee director who receives a
Stock Award for a fiscal quarter will be awarded an option as of the first day
of that fiscal quarter to purchase shares of Common Stock equal to three times
the number of shares issued pursuant to the discretionary election or deemed
election, as the case may be.
Under our Directors' Plan, each non-employee director receives a one-time
option award of 5,000 shares of Common Stock as of the date he or she is first
elected to the Board of Directors. Each non-employee director who is re-elected
to the Board of Directors receives an option award of 2,000 shares of Common
Stock as of the date he or she is re-elected.
Options issued under our Directors' Plan:
. Will become fully exercisable six months following the date of grant;
. Will be exercisable at the fair market value of our Common Stock as of the
date of the option grant; and
. Will generally expire upon the fifth anniversary of the date on which it was
granted.
5
<PAGE>
BOARD OF DIRECTORS INFORMATION
What are the committees of the Board?
Our Board of Directors has the following committees:
Name of Functions of the Committee Number of
Committee & Meetings in
Members Fiscal 1999
- --------------------------------------------------------------------------------
AUDIT COMMITTEE
- --------------------------------------------------------------------------------
E. Eugene Bishop, . Maintains communications with the 4
Chairman Company's independent auditors as to
Claire L. Arnold the nature of the auditors' services,
Fred L. Brown fees and other significant matters.
Arthur R. Outlaw, . Reviews the Company's internal control
Jr. procedures.
Michael F. Corbett . Makes recommendations to the Board with
Dr. Benjamin F. respect to the Company's internal
Payton control procedures.
John B. McKinnon*
- --------------------------------------------------------------------------------
COMPENSATION AND
STOCK OPTION
COMMITTEE:
- --------------------------------------------------------------------------------
Claire L. Arnold, . Reviews and recommends compensation of 2
Chairman officers.
E. Eugene Bishop . Reviews and recommends the granting of
Arthur R. Outlaw, stock options.
Jr.
Fred L. Brown
Michael F. Corbett
Dr. Benjamin F.
Payton
John B. McKinnon*
- --------------------------------------------------------------------------------
NOMINATING
COMMITTEE:**
- --------------------------------------------------------------------------------
Fred L. Brown, . Reviews the structure of the Board to 0**
Chairman assure proper skills and experience are
Claire L. Arnold represented on the Board.
E. Eugene Bishop . Proposes nominees for Board membership
Michael F. Corbett to the full Board based upon
John B. McKinnon recommendations of the Chairman, and
Arthur R. Outlaw, other Board members, in consultation
Jr. with the Chief Executive Officer.
Dr. Benjamin F. . Reviews potential conflicts of
Payton prospective Board members.
. Periodically reviews and recommends to
the full Board the size of the Board.
. Recommends membership of the committees
to the Board.
*John B. McKinnon was elected to serve as a member of the Audit Committee and
the Compensation and Stock Option Committee on July 1, 1999.
**The Nominating Committee was established at the Board Meeting held on July 1,
1999, and the members of such committee were appointed to serve for fiscal year
2000.
6
<PAGE>
BOARD OF DIRECTORS INFORMATION
How often did the Board meet in fiscal 1999?
The Board of Directors met six times during fiscal 1999. Each director other
than Mr. Payton attended more than 75% of the meetings of the Board and of
committees of which they were members. Mr. Payton missed the March 23, 1999
meetings of the Board of Directors, the Audit Committee and the Compensation
Committee and the May 3, 1999 meeting of the Board of Directors due to deaths
in his family.
How are committee members compensated?
A non-employee director serving on a Committee (other than the Chairman of such
Committees) will receive $1,000 for every Committee meeting he or she attends
that is not held in conjunction with a Board meeting. Non-employee Committee
members also receive $200 an hour for services performed on special
assignments. Committee Chairmen receive $1,000 for every Committee meeting they
attend.
Will the Nominating Committee consider nominees recommended by shareholders?
The Nominating Committee does not solicit director nominations but will
consider recommendations from shareholders that are submitted to our Secretary
in writing, indicating the nominee's qualifications and other relevant
biographical information and providing confirmation of the nominee's consent to
serve as a director.
7
<PAGE>
EXECUTIVE COMPENSATION
The following tables set forth the compensation earned in fiscal years 1997,
1998 and 1999 by our Chairman of the Board, President and Chief Executive
Officer and the four other most highly compensated executive officers in fiscal
year 1999 ("Named Executives"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long Term
Annual Compensation Compensation Awards
------------------- -------------------
Other Annual Restricted Awards All Other
Name and Principal Fiscal Salary Bonus Compensation Stock Options/ Compensation
Position Year ($) ($)(1) ($)(2) Awards($)(3) SARs(4) ($)(5)
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
G.A. Davenport.......... 1999 339,846 172,000 11,127 296,685 97,239 4,049
Chairman of the Board,
President 1998 287,908 145,000 8,145 173,391 69,706 6,121
and Chief Executive
Officer 1997 262,800 131,400 7,500 0 63,356 3,945
G.L. Gaddy(6)........... 1999 173,077 70,000 12,021 120,740 39,735 0
Senior Vice President,
Sales 1998 135,577 85,673 76,440(7) 75,675 29,532 0
and Marketing 1997 N/A N/A N/A N/A N/A N/A
K.W. Engwall............ 1999 188,461 76,400 0 131,793 46,436 4,731
Senior Vice President,
Finance 1998 158,000 63,200 20,000(8) 75,578 30,382 3,653
and Assistant Secretary 1997 135,170 52,000 56,924(8) 0 24,911 4,695
J.D. Underhill.......... 1999 178,077 72,000 6,518 124,202 44,009 3,184
President of Morrison
Healthcare 1998 154,182 62,000 0 91,790 32,897 2,000
Food Services 1997 144,362 40,417 3,600 0 24,911 1,900
F.G. Michels............ 1999 146,567 62,000 5,583 56,927 26,842 5,073
Senior Vice President, 1998 128,000 51,200 2,279 51,700 22,945 4,000
Support Services 1997 111,077 24,840 2,415 0 21,845 4,272
</TABLE>
(1) Does not include bonuses paid in restricted stock (see footnote (2) below).
(2) Under our Management Stock Option Program, eligible employees may purchase
shares of Common Stock up to established annual limits if pre-established
Corporate, Region, or Account goals, as the case may be, are achieved. For
each share purchased under the Management Stock Option Program, the
participant receives .15 of a "bonus share" and an option to purchase three
times the number of shares purchased and the related bonus shares. Stock
options granted in connection with purchases of stock are included in the
Awards Options/SARs column. The shares purchased and the related bonus
shares are subject to a three-year restriction on resale. The amounts in
this column include the value of the bonus shares, if any, received in
connection with the purchase of shares of Common Stock under the Management
Stock Option Program.
(3) Represents the dollar value of restricted stock each executive received
during fiscal 1998 and 1999 under our annual incentive program based on the
closing market price of our Common Stock on the effective date of the
award. Beginning with fiscal year 1998, any bonus in excess of the target
level of performance is paid in restricted stock, which will be valued at
the fair market value of our Common Stock on the last day of the fiscal
year. For each share paid in lieu of bonus, the executive receives an
additional .15 of a share of restricted stock. Additionally, the executive
receives an option to purchase three times the aggregate number of shares
of restricted stock received. Stock options granted in connection with
bonus paid in restricted stock are included in the "Awards Options/SARs"
column. The executive may not transfer the restricted stock for three
years. The executive will forfeit the restricted stock and the related
options if his employment is terminated within 18 months following the date
of the award unless the termination was due to death, retirement or
disability. Holders of restricted stock are paid the same dividends as
holders of non-restricted stock.
(4) Includes stock options granted under the Management Stock Option Program in
connection with shares purchased or restricted stock issued to the Named
Executives as described in footnotes (2) and (3) above.
8
<PAGE>
EXECUTIVE COMPENSATION
(5) "All other compensation" consists of:
. Company contributions to the Deferred Compensation Plan;
. Executive group life and accidental death and dismemberment insurance
premiums paid for by the Company;
. Split-dollar life insurance premiums paid for by the Company; and
. Company contributions to our 401(k) plan.
The following table shows the amount of each category of "all other
compensation" received by each of the named individuals:
ALL OTHER COMPENSATION
<TABLE>
<CAPTION>
Executive Split-
Group dollar
Deferred Life life 401(k)
Compensation Insurance insurance Matching
Name Plan Premiums premiums Contribution
- ---------------------------------------------------------------
<S> <C> <C> <C> <C>
G.A. Davenport 729 179 1,395 1,746
- ---------------------------------------------------------------
G.L. Gaddy -- -- -- --
- ---------------------------------------------------------------
K.W. Engwall 2,280 236 995 1,220
- ---------------------------------------------------------------
J.D. Underhill 2,769 -- -- 415
- ---------------------------------------------------------------
F.G. Michels 3,923 458 -- 692
</TABLE>
(6) G.L. Gaddy became an executive officer of the Company on February 1, 1998.
(7) Represents relocation-related expenses of $76,440.
(8) Represents relocation-related expenses of $20,000 and $53,324 for fiscal
years 1998 and 1997, respectively.
9
<PAGE>
EXECUTIVE COMPENSATION
OPTION GRANTS IN FISCAL YEAR 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
% of Total
Number Options/
of SARs
Options/ Granted to Exercise
SARs Employees or Base Potential Realizable Value at Assumed Annual Rate
Granted in Fiscal Price Expiration of Stock Price Appreciation for Option Term (2)
(#)(1) Year (%) ($/Sh) Date
5% ($) 10%($)
- ---------------------------------------------------------------------------------------------------------------------
Market Price Market Price
Dollar Required to Required to
Gains Realize Dollar Dollar Realize Dollar
($) Gains ($/Share) Gains ($) Gains ($/Share)
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
G.A. Davenport 14,607 1.7036% 17.1250 5/31/08 157,315 27.8948 398,667 44.4178
---------------------------------------------------------------------------------------------------------
29,553 3.4467% 19.5625 5/31/09 363,583 31.8653 921,391 50.7401
---------------------------------------------------------------------------------------------------------
7,581 0.8842% 19.5625 5/31/09 93,267 31.8653 236,357 50.7401
---------------------------------------------------------------------------------------------------------
45,498 5.3064% 19.5625 5/31/09 559,751 31.8653 1,418,518 50.7401
- ---------------------------------------------------------------------------------------------------------------------
G.L. Gaddy 3,021 0.3523% 17.1250 5/31/08 32,536 27.8948 82,452 44.4178
---------------------------------------------------------------------------------------------------------
12,027 1.4027% 19.5625 5/31/09 147,965 31.8653 374,973 50.7401
---------------------------------------------------------------------------------------------------------
6,171 0.7197% 19.5625 5/31/09 73,920 31.8653 192,397 50.7401
---------------------------------------------------------------------------------------------------------
18,516 2.1595% 19.5625 5/31/09 227,798 31.8653 577,284 50.7401
- ---------------------------------------------------------------------------------------------------------------------
K.W. Engwall 6,363 0.7421% 17.1250 5/31/08 68,528 27.8948 173,664 44.4178
---------------------------------------------------------------------------------------------------------
13,127 1.5310% 19.5625 5/31/09 161,498 31.8653 409,268 50.7401
---------------------------------------------------------------------------------------------------------
6,735 0.7855% 19.5625 5/31/09 82,859 31.8653 209,981 50.7401
---------------------------------------------------------------------------------------------------------
20,211 2.3572% 19.5625 5/31/09 248,651 31.8653 630,130 50.7401
- ---------------------------------------------------------------------------------------------------------------------
J.D. Underhill 6,243 0.7281% 17.1250 5/31/08 67,236 27.8948 170,589 44.4178
---------------------------------------------------------------------------------------------------------
12,371 1.4428% 19.5625 5/31/09 152,197 31.8653 385,698 50.7401
---------------------------------------------------------------------------------------------------------
6,348 0.7404% 19.5625 5/31/09 78,098 31.8653 197,915 50.7401
---------------------------------------------------------------------------------------------------------
19,047 2.2214% 19.5625 5/31/09 234,331 31.8653 593,839 50.7401
- ---------------------------------------------------------------------------------------------------------------------
F.G. Michels 5,157 0.6015% 17.1250 5/31/08 55,540 27.8948 140,749 44.4178
---------------------------------------------------------------------------------------------------------
10,309 1.2023% 19.5625 5/31/09 126,829 31.8653 321,410 50.7401
---------------------------------------------------------------------------------------------------------
2,646 0.3086% 19.5625 5/31/09 32,553 31.8653 82,496 50.7401
---------------------------------------------------------------------------------------------------------
8,730 1.0182% 19.5625 5/31/09 107,403 31.8653 272,180 50.7401
</TABLE>
(1) The options were granted under the Stock Incentive Plan. They expire in ten
years and become exercisable three years after the date of the grant. In
the event of certain changes of control of the Company, the options will
vest fully unless the Compensation and Stock Option Committee elects to
cash-out the options.
(2) The potential realizable values are:
. Calculated using the following formula: [Market Price at Grant x (1 +
Stock Price Appreciation Rate)-Exercise Price x Number of Underlying
Shares];
. Based on 5% or 10% annualized compound rates of increase over the option
term.
10
<PAGE>
EXECUTIVE COMPENSATION
AGGREGATED OPTION EXERCISES IN FISCAL YEAR 1999
AND FISCAL YEAR-END OPTION VALUES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number of Unexercised Value of Unexercised
Shares Value Options at Fiscal Year In-the-Money Options at
Acquired on Realized End(#) Fiscal Year End ($)(2)
Name Exercise (#) ($)(1) --------------------------------------------------------------
Exercisable/Unexercisable Exercisable/Unexercisable
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
G.A. Davenport 8,896 10,151 292,754/216,945 947,142/527,388
- -------------------------------------------------------------------------------------------------------
G.L. Gaddy 3,064 0 0/119,267 0/173,048
- -------------------------------------------------------------------------------------------------------
K.W. Engwall 5,866 10,315 64,416/95,318 224,943/208,660
- -------------------------------------------------------------------------------------------------------
J.D. Underhill 4,197 0 66,177/120,406 215,006/214,498
- -------------------------------------------------------------------------------------------------------
F.G. Michels 4,101 10,151 53,602/68,287 177,167/187,592
</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 Fiscal Year End is calculated
as follows: [(Per Share Closing Sale Price on May 31, 1999)-(Per Share
Exercise Price)] x Number of Shares Subject to Unexercised Options. The per
share closing sale price on May 31, 1999, the last trading day of fiscal
1999, was $19.5625.
What benefit plans are available for the Company's executive officers?
Our executive officers are entitled to participate in all benefit plans which
are generally available to our employees. In addition, our executive officers
are entitled to participate in the following benefit plans, subject to the
individual terms of each plan, as described below:
Retirement Plan
Following the distribution of our stock and the stock of Morrison Fresh
Cooking, Inc. (which was subsequently acquired by Piccadilly Cafeterias, Inc.
through a merger in May 1998) by our predecessor, Morrison Restaurants Inc.
("MRI"), to its shareholders in March, 1996 (the "Distribution"), we 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
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 the following, as applicable:
. 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
. 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.
11
<PAGE>
EXECUTIVE COMPENSATION
Executive Supplemental Pension Plan
Eligible Named Executives participate in our Executive Supplemental Pension
Plan ("ESPP") adopted in March, 1996. The ESPP is a nonqualified, unfunded,
defined benefit retirement plan for selected employees. Our employees who
previously 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
Morrison Fresh Cooking, Inc. 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 base salary. Benefits are paid to a participant in the
same manner as benefits may be paid under the Retirement Plan and become vested
if the participant has completed ten years of service. If the participant is
also entitled to benefits under the Retirement Plan, benefits payable under the
ESPP must be in the same form as those payable under the Retirement Plan.
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 and change of control provisions allow designated
participants to receive unreduced benefits as early as age 55 depending upon
criteria specified in the ESPP. Change of control provisions also allow
eligible participants to receive credit for up to three years of vesting
service 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.
12
<PAGE>
EXECUTIVE COMPENSATION
EXECUTIVE SUPPLEMENTAL PENSION PLAN
ESTIMATED ANNUAL BENEFITS FOR REPRESENTATIVE YEARS OF SERVICE TO AGE 65(1)
<TABLE>
<CAPTION>
Annual
Average
Base 30 or
Salary 10 15 20 25 more
- ---------------------------------------------------
<S> <C> <C> <C> <C> <C>
$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
- ---------------------------------------------------
325,000 81,250 121,875 162,500 178,750 195,000
- ---------------------------------------------------
350,000 87,500 131,250 175,000 192,500 210,000
- ---------------------------------------------------
375,000 93,750 140,625 187,500 206,250 225,000
- ---------------------------------------------------
400,000 100,000 150,000 200,000 220,000 240,000
</TABLE>
(1) 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 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; minus
. Single life annuity payments payable to the participant at age 65 under
the Retirement Plan; minus
. The participant's primary Social Security benefits.
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, 25 years, $339,846;
. Mr. Engwall, 16 years, $188,461; and
. Ms. Michels, 29 years, $146,567.
Management Retirement Plan
Effective as of March 7, 1996, we adopted our 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 us from time to
time. Our 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, Ruby Tuesday, Inc. and
Morrison Fresh Cooking, Inc. 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
13
<PAGE>
EXECUTIVE COMPENSATION
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:
. The participant's Retirement Plan benefits; plus
. The participant's Social Security benefits; plus
. 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
us 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. Change of control provisions also
allow eligible employees to receive service credit for up to three years for
purposes of determining eligibility for participation in the MRP. 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(1)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Final
Average 30 or
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>
(1) Single life annuity benefits equal:
. 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 participant's Retirement Plan benefits; minus
. The participant's Social Security benefits; minus
. The participant's ESPP Benefits.
14
<PAGE>
EXECUTIVE COMPENSATION
Years of credited service and salary covered by the MRP for the eligible
Named Executives are:
. Mr. Davenport, 25 years, $100,000;
. Mr. Engwall, 16 years, $100,000; and
. Ms. Michels, 29 years, $100,000.
Contracts with Executives
We have 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 us 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:
. Certain changes in the composition of more than 20 percent of the Board of
Directors; or
. 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 our outstanding voting stock.
Events that do not constitute a Change of Control include:
. Any Business Combination approved by at least 80 percent of the Continuing
Directors (as defined in the Change of Control Agreement);
. Any Business Combination transaction that satisfies certain price and
procedural requirements specified in our Articles of Incorporation; and
. Any acquisition by us, any of our subsidiaries, or any employee benefit plan
of ours or any of our 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, we have 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:
. 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
. 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 we terminate 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:
. 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;
. 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;
. Any other accrued obligations;
. Accelerated vesting of 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
. Certain employee benefits consisting of retirement, savings and various
health and welfare insurance benefits.
15
<PAGE>
EXECUTIVE COMPENSATION
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. We estimate 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
obligations relating to stock options and employee benefits) would be as shown
in the following table. Other executives may be made subject to a Change of
Control Agreement by the Board of Directors.
COMPENSATION IN THE EVENT OF A CHANGE OF CONTROL(1)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
G.A. Davenport $1,604,000
- -------------------------------------
G.L. Gaddy 768,000
- -------------------------------------
K.W. Engwall 845,000
- -------------------------------------
J.D. Underhill 781,000
- -------------------------------------
F.G. Michels 659,000
</TABLE>
(1) Assumes a change of control had occurred and the termination provisions of
the Change of Control Agreement were to take effect immediately.
16
<PAGE>
COMPENSATION COMMITTEE REPORT
Filings made by companies with the Securities and Exchange Commission sometimes
"incorporate information by reference." This means a company is referring you
to information that has been previously filed with the SEC and that this
information should be considered as part of the filing you are reading. The
Compensation Committee Report and Performance Graph in this Proxy Statement are
not incorporated by reference into any other filings with the Securities and
Exchange Commission.
The Compensation Committee of the Board of Directors, which is composed solely
of non-employee directors, has furnished the following report on executive
compensation:
What are the components of executive compensation?
Our compensation program for executives consists of three key elements:
. Annual base salary;
. Annual incentive opportunities; and
. Equity devices.
What is the philosophy of executive compensation?
Our executive compensation policies and programs emphasize performance-based
elements of executive compensation. Our executive compensation programs closely
align performance measures with current business strategy and are designed to
motivate executive behavior. In general, we control base salaries and
compensate 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 our peer group of public companies in the
contract food services industry;
. A very significant portion of executive compensation is tied to our success
in meeting predetermined annual and long-term performance goals, including,
our profitability and appreciation in our stock price; and
. Executives are required to own specified amounts of our stock, 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 our executives to achieve the goals
inherent in our business strategy.
What is the Company's approach to base compensation?
Our 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 Chairman of the Board, President and Chief Executive
Officer and the other executives named in the Summary Compensation Table, we
have 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.
What is the Company's approach to incentive compensation?
Our 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 15 percent to 50 percent of base
salary if 100 percent of predetermined corporate goals are achieved and
maximums range from 75 percent to 125 percent of base salary. For executives at
the Division Vice President level and above, annual incentive
17
<PAGE>
COMPENSATION COMMITTEE REPORT
compensation in excess of the target level of performance is paid in restricted
stock valued at the fair market value of our Common Stock on the last day of
the fiscal year. For each share paid as annual incentive compensation, the
executive receives an additional .15 of a restricted shares. The shares of
restricted stock are forfeitable for a period of 18 months upon termination of
employment for any reason other than death, retirement or disability and may
not be transferred for a period of three years. In addition, the executives
receive options to purchase three times the aggregate number of shares of
restricted stock received in lieu of annual incentive awards at an exercise
price equal to the fair market value of our Common Stock on the effective date
of the grant.
Performance with respect to the measures named in the annual incentive plan for
fiscal 1999 resulted in average annual incentive compensation (including the
value of restricted stock in lieu of bonus) of 101 percent of base salaries for
the Named Executives. Such awards represented approximately 94 percent of the
total incentive awards that could have been earned by the Named Executives.
Occasionally we may establish a special incentive award for an individual
officer or other employee aimed at achieving a specified performance goal.
Does the Company encourage stock ownership by its employees?
Believing that equity ownership plays a key role in aligning interests of our
personnel with our shareholders, we encourage all employees to make a personal
investment in our stock. In addition, we developed ownership requirements for
our 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, open market purchases, stock
held in the Salary Deferral Plan, and subject to certain limitations, stock
equivalent units credited to the accounts of the executives under the Deferred
Compensation Plan. Members of the management group must achieve target
ownership levels to be eligible to receive future awards under stock-based
plans. In addition, as discussed above, any incentive award under the annual
incentive plan in excess of the target is paid in restricted stock.
What is the Company's approach to long-term incentive compensation?
Awards under our stock-based compensation plans directly link potential
participant rewards to increases in shareholder value. We maintain 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
We have 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 effective date of
the grant. During fiscal 1999, option grants ranging from 2,500 to 29,553
shares, for a total of 226,643 shares, were made under this program.
Management Stock Option Program
We also have a Management Stock Option Program for key employees. Based on
organization level, eligible employees may purchase shares of our stock up to
established annual limits. For each share purchased, 1.15 shares will be issued
and the participant will receive an option to purchase three times the number
of shares of our stock obtained at a per share exercise price equal to the fair
market value of a share on the effective date of the grant. There is a three-
year restriction on the sale of shares acquired through this program other than
through the exercise of stock options. We granted options to purchase an
aggregate of 386,186 shares to key employees under this program during fiscal
year 1999.
In addition, as discussed earlier in this report, for executives at the
Division Vice President level and above, any annual incentive in excess of the
target level of performance is paid in restricted stock and the executives
receive options to purchase three
18
<PAGE>
COMPENSATION COMMITTEE REPORT
times the number of shares of restricted stock received in lieu of annual
incentive awards. We granted options to purchase 220,726 shares to executives
under this part of the Management Stock Option Program during fiscal year 1999.
We 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.
How is the Chief Executive Officer compensated?
The base salary for Mr. Davenport, our Chief Executive Officer, for fiscal year
1999 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 our 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 account
retention are achieved by us. For fiscal year 1999, the Chief Executive
Officer's bonus opportunity was 25 percent, 50 percent, 100 percent and 125
percent of his salary if we achieved or exceeded "threshold," "target,"
"maximum" and "maximum plus" growth levels, respectively, with a proportional
increase in the bonus between such performance levels.
As is the case with all other executives at the Division Vice President level
and above, any annual bonus earned by Mr. Davenport in excess of the target
level of performance is paid in restricted stock and Mr. Davenport receives an
option to purchase three times the number of shares of restricted stock
received.
Mr. Davenport is eligible to participate in the Executive Stock Option Program
described above. The Compensation Committee approved a grant of options to
purchase 75,082 shares of Common Stock to Mr. Davenport during fiscal year
1999.
What about deductibility limitations on 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 us 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.
Who prepared this report?
This report has been furnished by the members of the Compensation Committee:
. Claire L. Arnold, Chairman
. E. Eugene Bishop
. Arthur R. Outlaw, Jr.
. Fred L. Brown
. Michael F. Corbett
. Dr. Benjamin F. Payton
. John B. McKinnon*
- -------
*John B. McKinnon was elected to serve as a member of the Compensation
Committed on July 1, 1999, and did not participate in any deliberations with
respect to executive compensation decisions for fiscal year 1999.
19
<PAGE>
STOCK PERFORMANCE GRAPH
This graph and table compare the cumulative total return of our Common Stock
with the cumulative total return of the NYSE Stock Market Index, the NYSE
Eating and Drinking Places Index and the Russell 2000 Index. The graph assumes
$100 invested at the per share closing price of our Common Stock and of each of
the indicated indices on March 11, 1996, and reinvestment of dividends.
COMPARISON OF RETURNS FOR
MORRISON MANAGEMENT SPECIALISTS, INC.
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
March 11, May 31, May 31, May 31, May 31,
1996 1996 1997 1998 1999
--------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
MHI................................... $100.00 $ 79.75 $ 95.86 $105,70 $121.80
NYSE.................................. 100.00 104.87 131.45 171.73 194.25
Peer Group............................ 100.00 97.65 103.27 129.94 155.91
R2000................................. 100.00 112.64 120.49 146.08 142.16
</TABLE>
20
<PAGE>
STOCK OWNERSHIP
This table shows how much of our Common Stock is owned by directors, named
executive officers and owners of more than 5% of our outstanding Common Stock
as of August 13, 1999. An asterisk indicates beneficial ownership of less than
one percent of the outstanding shares.
BENEFICIAL OWNERSHIP TABLE
<TABLE>
<CAPTION>
Shares Right to
Name of Beneficial Owner Owned(1) Acquire(2) Percent of Class
- ----------------------------------------------------------------------------
<S> <C> <C> <C>
GeoCapital, LLC(3) 1,388,383(3) 0 11.5%
- ----------------------------------------------------------------------------
Arthur R. Outlaw(4) 633,474(4) 0 5.2%
- ----------------------------------------------------------------------------
C.L. Arnold 4,997 8,168 *
- ----------------------------------------------------------------------------
E.E. Bishop 214,687(5) 6,819 1.8%
- ----------------------------------------------------------------------------
F.L. Brown 7,895 6,504 *
- ----------------------------------------------------------------------------
G.A. Davenport 66,580(6) 292,754 2.9%
- ----------------------------------------------------------------------------
G.L. Gaddy 13,905 0 *
- ----------------------------------------------------------------------------
J.B. McKinnon 9,985 11,247 *
- ----------------------------------------------------------------------------
A.R. Outlaw, Jr. 209,491 0 1.7%
- ----------------------------------------------------------------------------
B.F. Payton 4,748 6,953 *
- ----------------------------------------------------------------------------
K.W. Engwall 16,576 64,416 *
- ----------------------------------------------------------------------------
J.D. Underhill 25,677 66,177 *
- ----------------------------------------------------------------------------
M.F. Corbett 592 6,389 *
- ----------------------------------------------------------------------------
F.G. Michels 4,525 53,602 *
- ----------------------------------------------------------------------------
Directors and executive officers
as a group (15 people) 611,816 569,297 9.3%
</TABLE>
(1) These amounts include shares for which the named person has sole or shared
voting and investment power.
(2) These amounts reflect shares that could be purchased by the exercise of
stock options which are currently exercisable or which are exercisable
within 60 days of August 13, 1999.
(3) The address of GeoCapital, LLC is 45th Floor, 767 Fifth Avenue, New York,
NY 10153-4590. The information presented is based on Schedule 13G, as
amended, filed by GeoCapital, LLC reporting beneficial ownership as of
December 31, 1998.
(4) The address of Arthur R. Outlaw is 4721 Morrison Drive, Mobile, Alabama
36609. The number listed under "Shares Owned" does not include 16,570
shares owned by Mr. Outlaw's spouse, for which Mr. Outlaw disclaims
beneficial ownership.
(5) Includes 2,053 shares owned by Mr. Bishop's spouse.
(6) Includes 1,000 shares owned by Mr. Davenport's spouse.
21
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GENERAL
COMPENSATION COMMITTEE INTERLOCKS
None of the members of the Compensation Committee were officers or employees of
the Company or had any relationship with us requiring disclosure under
Securities and Exchange Commission regulations.
COMPLIANCE WITH SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING REQUIREMENTS
Section 16(a) of the Securities Exchange Act of 1934 requires our directors and
executive officers and persons who own more than ten percent of a registered
class of our equity securities to file with the SEC and the New York Stock
Exchange reports of ownership and changes in ownership of our Common Stock.
Directors, executive officers and greater than ten percent shareholders are
required by SEC regulations to furnish us with copies of all Section 16(a)
forms they file. Based solely on review of the copies of these reports
furnished to us or written representations that no other reports were required,
we believe that during fiscal year 1999, all our directors, executive officers
and greater than ten percent beneficial owners complied with these
requirements, except that (i) all of the executive officers of the Company who
received long-term incentive stock options during fiscal 1999 did not report
the grant of such options timely on Forms 5 for fiscal 1999, and (ii) Messrs.
Davenport and Engwall did not include in the Forms 4 filed by them to report
the exercise of stock options in August, 1998 information concerning the
transfer of 3,992 and 1,757 shares, respectively, to the Company in payment of
the exercise price and tax withholding obligations in connection with such
exercises. These errors were due to administrative oversight on the Company's
part in processing the applicable filings and were promptly corrected by means
of late or amended reports. In addition, GeoCapital, LLC, which according to
its Schedule 13G, as amended, beneficially owned 11.3% of the Company's Common
Stock as of December 31, 1998, did not, to the Company's knowledge, file any
reports pursuant to Section 16.
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Ernst & Young LLP was our independent auditor during fiscal 1999 and will be
our independent auditor for fiscal year 2000. A representative of that firm
will be present at the annual meeting, will be given an opportunity to make a
statement and will be available to respond to appropriate questions.
AVAILABILITY OF FORM 10-K AND ANNUAL REPORT TO SHAREHOLDERS
SEC rules require us to provide an Annual Report to shareholders who receive
this Proxy Statement. We will also provide copies of the Annual Report to
brokers, dealers, banks, voting trustees and their nominees for the benefit of
their beneficial owners of record. Additional copies of the Annual Report on
Form 10-K for the fiscal year ended May 31, 1999 (not including documents
incorporated by reference), are available without charge to shareholders upon
written request to Investor Relations Department, Morrison Management
Specialists, Inc., 1955 Lake Park Drive, S.E., Suite 400, Smyrna, Georgia
30080-8855.
SHAREHOLDER LIST
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.
22
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GENERAL
SHAREHOLDER PROPOSALS
To be considered for inclusion in next year's proxy statement, shareholder
proposals must be submitted in writing no later than April 28, 2000. Any
shareholder proposal to be considered at next year's meeting, but not included
in the proxy statement, must be submitted in writing no later than 90 days in
advance of the meeting if the proposal relates to the nomination of a director,
and no later than July 13, 2000 with respect to any other proposal, or the
persons appointed as proxies may exercise their discretionary voting authority
with respect to the proposal. Although Management is not aware of any other
business being presented at the Annual Meeting, persons appointed as proxies
may exercise their discretionary voting authority with respect to any matters
which properly arise. All written proposals should be submitted to the
Corporate Secretary, Morrison Management Specialists, Inc., 1955 Lake Park
Drive, S.E., Suite 400, Smyrna, Georgia 30080-8855.
SOLICITATION BY BOARD; EXPENSES OF SOLICITATION
Our Board of Directors has sent you this Proxy Statement. We will bear the
entire cost of soliciting these proxies. We will also reimburse brokers,
nominees and fiduciaries to send proxies and proxy materials to our
shareholders so they can vote their shares. If necessary, our employees may
solicit proxies from shareholders or authorized representatives personally or
by telephone.
23
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MORRISON MANAGEMENT SPECIALISTS, 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 27, 1999, 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 Management
Specialists, Inc. Common Stock which the undersigned would be entitled to vote
if personally present at the Annual Meeting of Shareholders of Morrison
Management Specialists, Inc., to be held at the Georgia International
Convention Center, 1902 Sullivan Road, College Park, Georgia 30337-0508 at
1:00 p.m., local time, on September 28, 1999, and at any adjournment(s)
thereof:
1. TO ELECT THREE CLASS I DIRECTORS FOR A TERM OF THREE YEARS AND ONE CLASS III
DIRECTOR FOR A TERM OF TWO YEARS.
CLASS I:
E. Eugenen Bishop, Arthur R. Outlaw, Jr. and Fred L. Brown
CLASS III:
Michael F. Corbett
[_] 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:___________________________, 1999.
__________________________________________
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.
