<PAGE> 1
ANNEX B
MORRISON RESTAURANTS INC.
3300 HIGHLANDS PARKWAY
SUITE 130
ATLANTA, GEORGIA 30082
INFORMATION STATEMENT PURSUANT TO
SECTION 14(f) OF THE SECURITIES
EXCHANGE ACT OF 1934 AND
RULE 14f-1 THEREUNDER
April 29, 1998
This information is being furnished by Morrison Restaurants Inc., a Georgia
corporation (the "Company"), to its shareholders in connection with the possible
designation by Piccadilly Acquisition Corporation, a Georgia corporation (the
"Offeror") and a wholly-owned subsidiary of Piccadilly Cafeterias, Inc., a
Louisiana corporation ("Parent"), pursuant to the Plan and Agreement of Merger
dated as of April 22, 1998 (the "Merger Agreement") among the Company, Parent
and the Offeror, of persons to be elected to the Board of Directors of the
Company other than at a meeting of the Company's shareholders.
Pursuant to the Merger Agreement, the Offeror commenced a tender offer (the
"Offer") disclosed in the Tender Offer Statement on Schedule 14D-1 dated April
29, 1998. The terms and conditions of the Offer are set forth in the Offer to
Purchase dated April 29, 1998 (the "Offer to Purchase") and related Letter of
Transmittal, which are being mailed by the Offeror to the Company's shareholders
concurrently herewith. The Merger Agreement also provides, among other things,
for the merger (the "Merger") of the Offeror into the Company, with the Company
surviving as a wholly-owned subsidiary of Parent, as more fully described in the
Offer to Purchase and in the Company's Solicitation/Recommendation Statement on
Schedule 14D-9 (the "Schedule 14D-9") being mailed to the Company's shareholders
concurrently herewith.
The Company had 9,236,440 shares of common stock $.01 par value per share
("Common Stock"), outstanding as of April 20, 1998.
BOARD OF DIRECTORS
OF THE COMPANY
GENERAL
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. 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. There is currently one vacancy in Class I of the Board of Directors.
The Merger Agreement provides that, promptly upon acceptance for payment by
the Purchaser of shares of Common Stock pursuant to the Offer, the Offeror will
be entitled to designate such number of directors, rounded up to the next whole
number, as will give the Offeror representation on the Board of Directors equal
to at least that number of directors equal to the product of (i) the total
number of directors on the Board of Directors and (ii) the percentage that the
number of shares of Common Stock so accepted for payment bears
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to the number of shares of Common Stock outstanding, and the Company will, at
such time, at the election of the Offeror either increase the size of the Board
of Directors or use its best efforts to cause the appropriate number of
directors who are members of the Board of Directors as of the date of the Merger
Agreement to resign and the Offeror's designees to be appointed or elected to
fill the vacancies thereby created in conformity with the Georgia Business
Corporation Code (the "GBCC"), the Company's Articles of Incorporation and the
Bylaws and other applicable law. In addition, until the Effective Time, there
will be at least three directors on the Board of Directors who are directors as
of the date of the Merger Agreement and who are neither designees nor officers,
directors, full-time employees or affiliates of Parent or the Offeror nor
full-time employees of the Company (the "Independent Directors"); provided,
however, that if the number of Independent Directors is reduced below three for
any reason, the Board of Directors will, subject to the approval of the
remaining Independent Directors, if any, designate a person or persons to fill
the vacancy or vacancies who are directors on the date of the Merger Agreement
and not an officer, director, full-time employee or affiliate of Parent or the
Offeror nor a full-time employee of the Company, and such persons will be deemed
to be Independent Directors for purposes of the Merger Agreement.
The Offeror has informed the Company that in the event the Offeror accepts
for payment 66 2/3% of the outstanding shares of Common Stock, the Offeror will
request the Company to use its best efforts to cause three of the existing
members of the Board of Directors to resign and to cause four nominees of the
Offeror to be appointed to the Board of Directors. The Company currently intends
to request Dolph W. von Arx, Dr. Donald Ratajczak and J. Veronica Biggins to
serve as Independent Directors.
Information concerning the Offeror's director designees is set forth in
Attachment I hereto. Such information was provided by Parent and the Company
assumes no responsibility for the accuracy or completions thereof.
The Merger Agreement provides that following the election or appointment of
the Offeror's designees pursuant to the provisions described above and until the
effective time of the Merger (the "Effective Time"), any amendment of the Merger
Agreement or the Articles of Incorporation or Bylaws of the Company, any
termination of the Merger Agreement by the Company, any extension by the Company
of the time for the performance of any of the obligation or other acts of Parent
or the Offeror, any waiver of any of the Company's rights thereunder, or any
transaction between Parent (or any affiliate or associate thereof) and the
Company will require the concurrence of a majority of the Independent Directors.
The Independent Directors will have the authority to retain such counsel and
other advisors at the expense of the Company as are reasonably appropriate to
assist them in the exercise of their duties in connection with Merger Agreement.
In addition, the Independent Directors will have the authority to institute any
action on behalf of the Company to enforce performance of the Merger Agreement.
CURRENT DIRECTORS
CLASS II -- TERM EXPIRING 2000
J. VERONICA BIGGINS
Director of the Company since 1996 Age: 51
Ms. Biggins has been Executive Search Consultant in the Atlanta, Georgia
office of Heidrick & Struggles since February 1995 and is a Partner in such
office. Prior thereto, Ms. Biggins served as Assistant to the President of the
United States and Director of Presidential Personnel from February 1994 to
February 1995 and in various capacities with NationsBank Corporation from 1974
to February 1994, most recently as Executive Vice President-Director of
Corporate Community Affairs. Ms. Biggins is also a director of National Data
Corporation, Avnet, Inc. and Cameron Ashley Building Products, Inc.
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RONNIE L. TATUM
Director of the Company since 1996 Age: 57
Mr. Tatum has been Chief Executive Officer of the Company since March 1996.
Mr. Tatum was President of the Family Dining Division of MRI's Morrison Group
from March 1994 until the Distribution in March 1996. Mr. Tatum served as Senior
Vice President of MRI's Family Dining Group from 1990 to March 1993.
CLASS I -- TERM EXPIRING 1999
E. EUGENE BISHOP
Director of the Company since 1996 Age: 67
Mr. Bishop was Chairman of the Board of MRI from June 1992 until his
retirement in May 1995. From June 1986 to June 1993, he was Chairman of the
Board and Chief Executive Officer of MRI. Mr. Bishop was a director of MRI from
1963 until the Distribution in March 1996. Mr. Bishop also is a director of
Delchamps, Inc. and Morrison Health Care, Inc.
ARTHUR R. OUTLAW
Director of the Company since 1996 Age: 71
Mr. Outlaw was Vice Chairman of the Board of MRI from December 1984 until
the Distribution in March 1996. From October 1985 to October 1989, he was Mayor,
City of Mobile, Alabama. Mr. Outlaw is currently a director of Ruby Tuesday,
Inc. and director emeritus of AmSouth Bank, N.A.
CLASS III -- TERM EXPIRING 1998
DR. DONALD RATAJCZAK
Director of the Company since 1996 Age: 55
Dr. Ratajczak is Professor and Director, Economic Forecasting Center,
Georgia State University. Dr. Ratajczak was a director of MRI from 1981 until
the Distribution in March 1996. Dr. Ratajczak also is a director of Morgan
Keegan Inc., CIM High Yield Securities Fund and Ruby Tuesday, Inc.
DOLPH W. VON ARX
Director of the Company since 1996 Age: 63
Mr. von Arx was Chairman of the Board, President and Chief Executive
Officer of Planters LifeSavers Company, an affiliate of RJR Nabisco, Inc. until
his retirement in 1991. Mr. von Arx was a director of MRI from 1992 until the
Distribution in March 1996. Mr. von Arx is also a director of Cree Research,
Inc., BMC Fund, Inc., International MultiFoods, Inc., Mackenzie Investment
Management, Inc. and Ruby Tuesday, Inc.
BENEFICIAL OWNERSHIP OF COMMON STOCK
The following table sets forth certain information as of April 20, 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 of the Company,
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each Named Executive (as defined below), and all directors and executive
officers of the Company as a group. An asterisk indicates beneficial ownership
of less than one percent of the outstanding Common Stock.
<TABLE>
<CAPTION>
NUMBER OF SHARES
BENEFICIALLY PERCENT OF
NAME OR GROUP OWNED(1) CLASS(2)
- ------------- ---------------- ----------
<S> <C> <C>
Westport Asset Management, Inc.(3)...................... 1,131,263(3) 12.2
The TCW Group Inc./Robert Day(4)........................ 554,275(4) 6.0
Franklin Resources, Inc.(5)............................. 500,125(5) 5.4
Arthur R. Outlaw(6)..................................... 543,599(6) 5.9
J. Veronica Biggins..................................... 16,964 *
E. Eugene Bishop........................................ 270,166(7) 2.9
Dr. Donald Ratajczak.................................... 25,519 *
Ronnie L. Tatum......................................... 63,163 *
Dolph W. von Arx........................................ 74,033(8) *
Craig D. Nelson......................................... 21,441 *
Mitchell S. Block....................................... 15,187 *
Ginny P. Green.......................................... -- *
William M. Byrd......................................... 16 *
Christopher P. Elliott.................................. 925(9) *
Scears Lee, III......................................... 2,621 *
All directors and executive officers as a group (9
persons).............................................. 1,030,072 10.8
</TABLE>
- ---------------
(1) Includes (i) shares subject to options exercisable within 60 days after
April 20, 1998 held by the named persons and group as follows: J.V. Biggins,
8,268; E.E. Bishop, 171,116; D. Ratajczak, 9,935; R.L. Tatum, 49,354; D.W.
von Arx, 29,480; C.D. Nelson, 15,678; M.S. Block, 10,683; S. Lee, 1,862; all
directors and executive officers as a group, 294,514; and (ii) shares held
in the Company's Salary Deferral Plan and Deferred Compensation Plan as
follows: R.L. Tatum, 1,464; C.D. Nelson, 1,285; S. Lee, 759; M.S. Block,
943. Information with respect to shares beneficially owned by Messrs. Byrd,
Elliott and Lee, former executive officers of the Company, is given as of
the latest practicable date, August 8, 1997, the date as of which the
information was provided in the Company's 1997 Proxy Statement.
(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 April 20, 1998), without regard to any
disclaimers of beneficial ownership by the person indicated.
(3) Westport Asset Management, Inc.'s address is 253 Riverside Avenue, Westport,
Connecticut 06880. The information presented is based on the beneficial
owner's Schedule 13G, as amended, which reports beneficial ownership as of
December 31, 1997.
(4) The TCW Group, Inc.'s address is 865 South Figueroa Street, Los Angeles,
California 90017 and Robert Day's address is 200 Park Avenue, Suite 2200,
New York, New York 10166. The information presented is based on the
indicated persons' joint Schedule 13G, as amended, which reports beneficial
ownership as of December 31, 1997. Robert Day is an individual who may be
deemed to control The TCW Group, Inc.
(5) Franklin Resources, Inc.'s address is 777 Mariners Island Boulevard, San
Mateo, California 94404. The information presented is based on the Schedule
13G filed by the indicated person and affiliates, which reports beneficial
ownership as of December 31, 1997.
(6) Mr. Outlaw's address is 4721 Morrison Drive, Mobile, Alabama 36609. The
number of shares indicated includes 12,427 shares owned by Mr. Outlaw's
spouse.
(7) Includes 1,540 shares owned by Mr. Bishop's spouse.
(8) Includes 563 shares held in a family trust.
(9) Owned in an Individual Retirement Account.
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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 1997 have been complied
with on a timely basis.
DIRECTORS' FEES AND ATTENDANCE
The Board of Directors of the Company met five times during fiscal year
1997. Each director attended at least 75% of these meetings and the meetings of
any committee of which he or she was a member which was held during the fiscal
year.
Directors who are employees of the Company receive no directors' fees. All
non-employee directors currently receive a $10,000 annual retainer and $1,000
per Board meeting attended. Non-employee directors serving on the Audit
Committee, the Nominating 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. Committee Chairmen receive a fee of $2,000
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. von Arx, 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. von Arx is generally compensated at a rate of
$2,000 per day for such services. For fiscal year 1997, Mr. von Arx was paid an
aggregate of $27,000 for such services. Mr. von Arx 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 non-retainer
compensation for each fiscal quarter be allocated to the purchase of Company
Common Stock on his behalf. Under this program, Mr. von Arx 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. In
fiscal year 1997, Mr. von Arx purchased 3,177 shares, was awarded 476 bonus
shares and was granted options to purchase 10,959 shares under the program.
The Morrison Restaurants Inc. Stock Incentive and Deferred Compensation
Plan for Directors (the "Directors' Plan") permits non-employee directors to
defer all or a portion (in 25 percent increments) of their retainer (other than
any portion of the retainer allocated to Stock Awards, as described below)
and/or any additional meeting and committee fees to a deferred compensation
account. Deferred compensation accounts are credited as of the last day of each
fiscal quarter with an assumed rate of income equal to 90-day U.S. Treasury
Bills, based on the weighted average balance of that account during that fiscal
quarter. Amounts credited to a director's deferred compensation account will be
distributed not sooner than the earlier of the first January 15 or July 15
following (a) the date of the director's seventieth birthday, or (b) the date
the director ceases to be a member of the Board of Directors.
The Directors' Plan provides that each non-employee director who has not
attained the Target Ownership Level, as defined below, will be deemed to have
elected to direct that 60 percent of his or her retainer payable for each fiscal
quarter be allocated to the purchase of Common Stock on his or her behalf. Each
non-employee director who has attained the Target Ownership Level may elect to
direct, in 10 percent increments and subject to such other conditions prescribed
by the Directors' Plan, that up to 60 percent of his or her retainer for each
fiscal quarter be allocated to the purchase of Common Stock on his or her behalf
(collectively, the "Stock Awards"). A deemed election will continue in effect
until that director, after attaining the Target Ownership Level, modifies or
revokes the election in the manner allowed for discretionary elections.
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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, 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. In fiscal year 1997, directors purchased
4,440 shares and the Company awarded to directors 656 bonus shares as well as
options for the purchase of 15,288 shares under the program.
Under the Directors' Plan, each non-employee director shall receive a
one-time restricted stock award of 5,000 shares of Common Stock as of the date
the individual is first elected to the Board of Directors, provided such
individual did not serve as a director of MRI, the predecessor corporation to
the Company. Each restricted stock award shall be evidenced by a Stock Incentive
Agreement. One-third of the Common Stock subject to any restricted stock award
will vest on each of the first three anniversary dates of the date the director
was first elected to the Board of Directors if the individual is a non-employee
director on the applicable anniversary date. However, shares subject to the
restricted stock award shall become 100 percent vested on any earlier to occur,
of the following additional vesting dates: the date the individual ceases to be
a non-employee director on account of death, disability, attainment of age 70 or
upon a Change in Control (as defined in the Directors' Plan).
COMMITTEES OF THE BOARD
The Board of Directors is responsible for the overall affairs of the
Company. To assist the Board of Directors in carrying out this responsibility,
the Board has delegated certain authority to three committees. Information
concerning these committees follows.
Audit Committee. The Audit Committee is comprised solely of non-employee
directors. The Audit Committee maintains communications with the Company's
independent auditors as to the nature of the auditors' services, fees and such
other matters as the auditors believe may require the attention of the Board.
The Audit Committee reviews the Company's internal control procedures and makes
recommendations to the Board with respect thereto. The Audit Committee met two
times during fiscal year 1997. The current members of the Audit Committee are E.
Eugene Bishop (Chairman), J. Veronica Biggins, Dr. Donald Ratajczak and Arthur
R. Outlaw.
Compensation and Stock Option Committee. The Compensation and Stock Option
Committee (the "Compensation Committee") is comprised solely of non-employee
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 1997. The current members of the Compensation Committee are Dr.
Donald Ratajczak (Chairman), J. Veronica Biggins, Arthur R. Outlaw and E. Eugene
Bishop.
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Nominating Committee. The Nominating Committee recommends individuals to
the Board of Directors for consideration as nominees for directors of the
Company. The Nominating Committee will consider any recommendations made by an
individual shareholder if submitted in writing and addressed to the Chairman of
the Committee or the Secretary of the Company within the time period prescribed
in the Company's Articles of Incorporation. Alternatively, notice of nominations
to be made by a shareholder at a meeting must be submitted to the Secretary of
the Company in the manner and within the time period prescribed in the Articles
of Incorporation. Any such recommendation or notice of nomination should be
mailed to the Company's headquarters at 4893 Riverdale Road, Suite 260, Atlanta,
Georgia 30337. The Nominating Committee met one time during fiscal year 1997.
Current members of the Nominating Committee are Dolph W. von Arx (Chairman), J.
Veronica Biggins, E. Eugene Bishop, Arthur R. Outlaw, Dr. Donald Ratajczak and
Ronnie L. Tatum.
EXECUTIVE OFFICERS OF THE COMPANY
Executive officers of the Company are appointed by and serve at the
discretion of the Company's Board of Directors. Information regarding the
Company's executive officers as of April 29, 1998 is provided below.
<TABLE>
<CAPTION>
EXECUTIVE
NAME AGE POSITION WITH THE COMPANY OFFICER SINCE
---- --- ------------------------- -------------
<S> <C> <C> <C>
Ronnie L. Tatum................. Chief Executive Officer 1996
Craig D. Nelson................. Senior Vice President, Finance 1996
and Assistant Secretary
Mitchell S. Block............... Vice President, General Counsel 1996
and Secretary
Ginny P. Green.................. Vice President, Human Resources 1997
</TABLE>
Ronnie L. Tatum is Chief Executive Officer of the Company. He was President
of the Family Dining Division of MRI's Morrison Group from March 1994 until the
Distribution in March 1996. Mr. Tatum served as President of MRI's Family Dining
Group from March 1993 to March 1994, and Senior Vice President of MRI's Family
Dining Group from 1990 to March 1993.
Craig D. Nelson is Senior Vice President of Finance and Assistant Secretary
of the Company. he was Vice President, Controller of MRI's Morrison Group from
July 1994 to March 1996. Mr. Nelson served as Vice
President/Controller -- Family Dining Division from November 1990 to July 1994.
He joined MRI in 1976.
Mitchell S. Block is Vice President, General Counsel and Secretary of the
Company. Previously, he was Real Estate Attorney of MRI's Ruby Tuesday Group
from April 1993 to March 1996. Prior to joining the Company, Mr. Block was Vice
President, General Counsel and Secretary for Wyatt Cafeterias, Inc. in Dallas,
Texas, where he worked from March 1986 to April 1993.
Ginny P. Green has been Vice President, Human Resources of the Company
since August 1997. Prior thereto she was Director of Human Resources for
Southcorp USA in Atlanta. From 1975 to 1996, Ms. Green held various operational
and human resources positions with ARAMARK Services.
EXECUTIVE COMPENSATION
This section discloses compensation awarded, paid to, or earned by the
Company's Chief Executive Officer, each of the three other executive officers of
the Company who were most highly compensated in fiscal year 1997 and two former
executive officers who would have been included in the group of the four most
highly-compensated executive officers in fiscal year 1997 had they been
executive officers at the end of fiscal year 1997, for services rendered to
Morrison Restaurants Inc., a Delaware corporation ("MRI"), prior to the
distribution (the "Distribution") by MRI of the Common Stock of the Company to
its shareholders effective March 9, 1996, and the Company thereafter during each
of the three fiscal years in the period ended May 31, 1997 (together, these
persons are sometimes referred to as the "Named Executives").
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SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM ALL OTHER
ANNUAL COMPENSATION COMPENSATION COMPENSATION
-------------------------------------- ------------------ ------------
AWARDS PAYOUTS
-------- -------
OPTIONS/ LTIP
OTHER ANNUAL SARS(2) PAYOUTS
NAME AND POSITION YEAR SALARY($) BONUS($) COMPENSATION(1) (#) ($) ($)(3)
----------------- ---- --------- -------- --------------- -------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
R. L. Tatum 1997 230,021(4) -0- -0- -0- -0- 7,389
Chief Executive Officer 1996 208,416 -0- 10,050 73,663 -0- 7,141
1995 200,400 104,454 -0- 2,007 -0- 7,008
C.D. Nelson 1997 132,068(4) -0- -0- -0- -0- 6,501
Senior Vice President, 1996 101,228 -0- 3,600 76,011 -0- 21,169
Finance and Assistant 1995 94,000 40,961 -0- 801 -0- 3,092
Secretary
M.S. Block 1997 118,625(4) -0- -0- -0- -0- 1,931
Vice President, General 1996 89,599 -0- 3,600 30,683 -0- 231
Counsel and Secretary 1995 68,738 9,669 -0- -0- -0- -0-
W.M. Byrd 1997 137,500 -0- -0- -0- -0- -0-
Senior Vice President, 1996(5) 81,731 72,500 -0- -0- -0- -0-
Operations 1995 N/A N/A N/A N/A N/A N/A
C.P. Elliott(6) 1997 153,892(4) -0- -0- -0- -0- 28,933
President and 1996 145,600 -0- -0- 232,257 -0- -0-
Chief Operating Officer 1995(5) 48,462 39,000 -0- 2,500 -0- -0-
S. Lee, III(6) 1997 95,102(4) -0- -0- -0- -0- 20,365
Vice President, Human 1996 97,984 -0- 3,150 24,548 -0- 2,765
Resources 1995 94,325 17,248 -0- 870 -0- 2,927
</TABLE>
- ---------------
(1) The amounts in this column include: (a) the following values of bonus shares
issued in connection with the purchase of Common Stock under the Management
Stock Option Program for fiscal year 1996: R.L. Tatum, $7,500; C.D. Nelson,
$3,600; S. Lee, $3,150; and M.S. Block, $3,600; and (b) special pay for
fiscal year 1996: R.L. Tatum, $2,550.
(2) For fiscal years 1996 and 1995, the number of options shown includes 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, MHCI 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 "Introduction." The
exercise price per share of the MRI options has been allocated among the
options to purchase common stock of the Company, MHCI 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: 10.22% to the Company option; 32.62% to the
MHCI 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.
(3) The amounts in this column include the following: (a) Company contributions
to the Deferred Compensation Plan for fiscal years 1997, 1996 and 1995,
respectively: R.L. Tatum, $3,800, $3,800 and $3,696; C.D. Nelson, $4,174,
$3,172 and $3,092; S. Lee, $2,182, $2,765 and $2,927; and M.S. Block $1,931,
$231 and N/A; (b) executive group life and accidental death and
dismemberment insurance plan premiums paid for fiscal years 1997, 1996 and
1995, respectively: R.L. Tatum, $781, $661 and $704; and C.D. Nelson $1,273,
$257 and N/A; (c) employee portion of split-dollar life insurance premiums
paid by the Company for fiscal years 1997, 1996 and 1995, respectively: R.L.
Tatum, $2,808, $2,680 and $2,608; and C.D. Nelson $1,054, N/A and N/A; (d)
tax gross-up on moving expense reimbursement for fiscal year 1996: C.D.
Nelson, $17,740; and (e) severance payments (see "Severance Agreements"
below) made during fiscal year 1997: C.P. Elliott $28,933 and S. Lee
$18,183.
(4) Amounts for fiscal year 1997 include a retroactive pay increase covering 13
weeks of fiscal year 1996 as follows: R.L. Tatum, $4,321; C.D. Nelson,
$6,168; M.S. Block, $3,725; C.P. Elliott, $7,000; S. Lee, $2,787.
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(5) Mr. Byrd joined the Company in October 1995; therefore, the amounts shown
for fiscal 1996 represent compensation earned for eight months of
employment. Mr. Elliott joined the Company in January 1995; therefore, the
amounts shown for fiscal 1995 represent compensation earned for five months.
(6) The indicated person resigned his position with the Company effective April
4, 1997. See "Severance Agreements" below.
OPTION GRANTS IN FISCAL 1997
The Company granted no stock options to Named Executives during fiscal year
1997. The Company has no outstanding SARs and granted no SARs during fiscal year
1997.
AGGREGATED OPTION EXERCISES IN
FISCAL 1997 AND FISCAL YEAR END VALUES
The following table presents information regarding exercises of options to
purchase shares of Common Stock of the Company during fiscal 1997 by the Named
Executives and the value of unexercised options to purchase Company Common Stock
held at May 31, 1997. There were no Company SARs outstanding during fiscal 1997.
<TABLE>
<CAPTION>
NUMBER OF
UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT IN-THE-MONEY
FY-END (#) OPTIONS AT FY-END
SHARES VALUE ------------- --------------------
ACQUIRED ON REALIZED EXERCISABLE/ EXERCISABLE/
NAME EXERCISE(#) ($)(1) UNEXERCISABLE UNEXERCISABLE
- ---- ----------- -------- ------------- --------------------
<S> <C> <C> <C> <C>
R. L. Tatum................ -0- -0- 24,451/77,268 9,258/-0-
C. D. Nelson............... -0- -0- 3,548/77,130 913/-0-
M. S. Block................ -0- -0- -0-/30,683 -0-/-0-
W. M. Byrd................. -0- -0- -0-/26,875 -0-/-0-
C. P. Elliott(3)........... -0- -0- -0-/2,500 -0-/-0-
S. Lee, III(3)............. -0- -0- 1,862/200 -0-/-0-
</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 30, 1997) - (Per Share
Exercise Price)] X Number of Shares Subject to Unexercised Options. The per
share closing sale price on May 30, 1997, the last trading day of fiscal
year 1997, was $5.00.
(3) C.P. Elliott and S. Lee, III resigned on April 4, 1997, forfeiting 232,257
and 24,348 unexercisable options, respectively.
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-9
<PAGE> 10
(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, 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.
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. ("RTI"),
the successor to MRI, from liability for benefits accrued prior to the
Distribution under the MRI Executive Supplemental Pension Plan. (However, both
RTI and Morrison Health Care, Inc. ("MHCI"), a company whose shares were also
distributed by MRI in the Distribution, 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
B-10
<PAGE> 11
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
</TABLE>
Years of continuing service, to the nearest year, and the five-year average
base salary covered by the ESPP for the eligible Named Executives are: Mr.
Tatum, over 30 years, $185,787 and Mr. Nelson, 21 years, $97,630.
MANAGEMENT RETIREMENT PLAN
Effective as of March 7, 1996, the Company adopted the Morrison Restaurants
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 Retirement Plan prior to the Distribution are eligible to participate and
receive full credit for benefit accrual purposes for their service with MRI
prior to the Distribution, provided such employees have released RTI, successor
to MRI, from liability for benefits accrued prior to the Distribution under the
Retirement Plan. (However, both RTI and MHCI have agreed to be secondarily
liable for certain benefits accrued under the MRP to the extent of the amounts
these employees had earned under the 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, bonuses and certain
types of deferred income, 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 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. 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.
B-11
<PAGE> 12
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>
FINAL AVERAGE SALARY 15 20 25 30 OR MORE
- -------------------- ------- ------- ------- ----------
<S> <C> <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 five-year average base salary covered by the
MRP for the eligible Named Executives are: Mr. Tatum, over 30 years, $100,000;
Mr. Nelson, 21 years, $97,630; and Mr. Lee, 18 years, $89,718.
CONTRACTS WITH EXECUTIVES
The Company has entered into a Change of Control Agreement (the "Change of
Control Agreement") with each of the Named Executives who are currently employed
by the Company. 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
B-12
<PAGE> 13
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 Mr. Tatum, Mr. Nelson, Mr. Byrd and Mr. Block.
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 would be
approximately as follows: Mr. Tatum $2,828,322; Mr. Nelson $1,725,008; Mr.
Block, $1,193,596; and Mr. Byrd $1,536,778. Other executives may be made subject
to a Change of Control Agreement by the Board of Directors.
On April 22, 1998, concurrently with the execution and delivery of the
Merger Agreement and as required by the terms thereof, each of Messrs. Tatum,
Nelson and Block and Ms. Green entered into a letter agreement with the Company
pursuant to which he or she waived any rights under the Change of Control
Agreement resulting from the transactions contemplated by the Merger Agreement,
created by the Offer or the Merger and agreed that his or her Change of Control
Agreement will be deemed terminated effective upon the effective date of the
Merger.
SEVERANCE AGREEMENTS
In connection with Mr. Elliott's resignation effective April 4, 1997, he
entered into a severance agreement with the Company pursuant to which: (a) the
Company agreed to pay Mr. Elliott an amount of $14,466.67 per month for six
months following his termination of employment and for an additional period of
up to three months in the event that he had not obtained other employment
provided that Mr. Elliott had exercised all due diligence as determined by the
Company to obtain such employment; (b) the Company waived any restrictions on
the sale of the 37,419 shares of Common Stock acquired by Mr. Elliott under the
Company's Management Stock Option Program and agreed to pay him an amount equal
to the difference between $7.75 per share (the amount paid by Mr. Elliott upon
purchase of such shares) and the closing price per share of Common Stock on the
date of any sale that occurs prior to December 31, 1997; (c) each stock option
held by Mr. Elliott, other than any stock option issued to him during the fourth
quarter of fiscal 1996 under the Company's Executive Stock Option Program and
the Management Stock Option Program which would otherwise expire upon
termination of employment continued to remain outstanding for a period equal to
the lesser of two years from the date of termination of employment or the
expiration of the original option period and may be exercised by him when such
option becomes exercisable within such period in accordance with its terms; (d)
the Company agreed to pay Mr. Elliott any bonus earned by him during fiscal 1997
on a pro rata basis through the date of termination of employment; and (e) the
Company agreed to reimburse Mr. Elliott for that portion of his COBRA cost equal
to the amount the Company contributes for the same type of employee coverage for
a period equal to the lesser of six months or the duration of COBRA contribution
period. The severance agreement also provides that Mr. Elliott will receive
benefits under the other Company plans in accordance with their terms and
contains confidentiality and waiver and release provisions customary for such
agreements.
In connection with Mr. Lee's resignation effective April 4, 1997, he
entered into a severance agreement with the Company pursuant to which: (a) the
Company agreed to pay Mr. Lee an amount of $9,091.67 per month for 12 months
following his termination of employment and for an additional period of up to
three months in the event that he had not obtained other employment; (b) the
Company waived any restrictions on the sale of the 3,116 shares of Common Stock
acquired by Mr. Lee under the Company's Management Stock
B-13
<PAGE> 14
Option Program and agreed to pay him an amount equal to the difference between
$7.75 per share (the amount paid by Mr. Lee upon the purchase of such shares)
and the closing price per share of Common Stock on the date of any sale that
occurs prior to December 31, 1997; (c) each stock option held by Mr. Lee, other
than any stock option issued to him during the fourth quarter of fiscal 1996
under the Company's Executive Stock Option Program and the Management Stock
Option Program which would otherwise expire upon termination of employment
continued to remain outstanding for a period equal to the lesser of three years
from the date of termination of employment or the expiration of the original
option period and may be exercised by him when such option becomes exercisable
within such period in accordance with its terms; (d) the Company agreed to pay
Mr. Lee any bonus earned by him during fiscal 1997 on a pro rata basis through
the date of termination of employment; and (e) the Company agreed to reimburse
Mr. Lee for that portion of his COBRA cost equal to the amount the Company
contributes for the same type of employee coverage for a period equal to the
lesser of 12 months or the duration of COBRA contribution period. The severance
agreement also provides that Mr. Lee will receive benefits under other Company
plans in accordance with their terms and contains confidentiality and waiver and
release provisions customary for such agreements.
STAY BONUS AGREEMENTS
On March 6, 1998, the Company entered into stay bonus agreements
(collectively, the "Stay Bonus Agreements") with each of Messrs. Tatum, Nelson
and Block and Ms. Green to encourage such individuals to remain in the employ of
the Company during the process of its evaluation of strategic alternatives, as
well as through the consummation of a transaction and a winding up period
thereafter. The Stay Bonus Agreements provide for the payment of additional
compensation in an amount equal to nine (9) times the parties' then current
monthly base pay, less applicable withholding, in the event any one of the
following occurs: (i) employment is terminated by the Company for any reason
other than "Good Cause" (as defined in the Stay Bonus Agreement); (ii) the
Company experiences a "Change of Control" (as defined in the Stay Bonus
Agreement); or (iii) the party remains employed through December 31, 1999. As a
condition to an executive's eligibility to receive the stay bonus, the Company
may require such executive to continue as an employee for a period not to exceed
60 days following the Change of Control. Pursuant to the Merger Agreement,
Parent has agreed to cause Offeror to honor these Stay Bonus Agreements.
COMPENSATION COMMITTEE REPORT
The Compensation Committee of the Board of Directors of the Company, which
is composed solely of non-employee directors of the Company, has furnished the
following report on executive compensation.
OVERALL COMPENSATION PHILOSOPHY
The Company's executive compensation policies and programs emphasize
performance-based elements of executive compensation. The Company's executive
compensation programs closely align performance measures with current business
strategy and are designed to motivate executive behavior. In general, the
Company controls base salaries and compensates outstanding performance through
more highly leveraged annual and longer-term incentive programs. As a result,
the following principles apply to executive compensation:
- Base salaries are ten percent below the Company's peer group of public
companies in the family dining industry; and
- A very significant portion of executive compensation is tied to the
Company's success in meeting predetermined annual performance goals,
including the Company's profitability.
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
B-14
<PAGE> 15
these elements, including the basis for the compensation awarded to Mr. Ronnie
L. Tatum, the Company's 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 10 percent below the 50th percentile of the
competitive market in the family dining industry. The Company's general approach
is for total compensation to be at the 75th percentile of the competitive market
in the family dining industry. Each salary range provides a lower and upper
limit on the value of jobs assigned to that range. This reflects the previously
mentioned objective of controlling base salary costs and emphasizing incentive
compensation. Future adjustments to base salaries and salary ranges are intended
to 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 the objective of growth in
pre-tax income. Depending upon an executive's organizational level and
responsibilities, as well as competitive market practices, annual incentive
compensation ranges from 10 percent to 15 percent of base salary if minimum
corporate targets are achieved, from 25 percent to 55 percent of base salary if
100 percent of predetermined targeted corporate goals are achieved, and from 90
percent to 165 percent of base salary if maximum corporate goals are achieved.
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. The
following requirements apply to various organization levels: Chief Executive
Officer -- a minimum of four times base salary; Senior Vice Presidents and Vice
Presidents -- a minimum of two times base salary; and supervisory and store
managements -- minimum of one times base salary. 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 of 200 to 120,000 shares for key employees. The options are issued at
fair market value, have a five-year term and generally vest three years after
the date of the grant. In order for executives to receive option grants under
this program, they must meet certain minimum Common Stock ownership
requirements. During fiscal year 1997, one option grant for 4,000 shares was
made under this program.
B-15
<PAGE> 16
Management Stock Option Program
The Company has a Management Stock Option Program for all employees at the
General Manager level and higher. Based on organization level, eligible
employees may purchase shares of Company stock up to established annual limits.
For each share purchased, 1.15 shares will be issued and the participant will
receive a five-year option to purchase three times the number of shares of
Company stock obtained at a per share exercise price equal to the fair market
value of a share on the date of grant. The right to purchase Common Stock under
this program is conditioned on the achievement of Company, region or location
goals, as the case may be. There is a two-year restriction on the sale of shares
acquired through this program other than through the exercise of stock options.
The Company granted options to purchase an aggregate of 10,374 shares to
employees under this program during fiscal year 1997.
CHIEF EXECUTIVE OFFICER COMPENSATION
The base salary for Mr. Tatum, the Company's Chief Executive Officer, for
fiscal year 1997 was determined by the Compensation Committee in accordance with
compensation practices and policies in effect. The Compensation Committee
reviewed Mr. Tatum's annual base salary and recommended, and the Board of
Directors subsequently approved, an annual base salary of $257,000 for fiscal
year 1998. Mr. Tatum's annual base salary was determined taking into account his
performance and comprehensive market data.
Mr. Tatum is eligible to participate in the Company's annual incentive plan
under which he may earn a cash bonus determined as a percentage of his salary if
predetermined levels of pre-tax income growth are achieved by the Company. For
fiscal year 1998, the Chief Executive Officer's bonus opportunity is 15 percent,
55 percent, and 165 percent of his salary if the Company achieves or exceeds
"minimum," "target," and maximum" pre-tax income growth levels, respectively.
Mr. Tatum is eligible to participate in the Executive Stock Option Program
described above. In addition, the Compensation Committee has approved Mr.
Tatum's participation in the Management Stock Option Program (described above)
under which he may purchase Common Stock having a value of up to $50,000
annually, conditioned upon the Company's achievement of pre-established
financial goals.
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 three
times during the fiscal year. The Board of Directors approved all decisions of
the Compensation Committee during fiscal year 1997. The members of the
Compensation Committee are as follows:
Dr. Donald Ratajczak (Chairman)
J. Veronica Biggins
E. Eugene Bishop
Arthur R. Outlaw
B-16
<PAGE> 17
RELATED PARTY TRANSACTIONS
Mr. Byrd received an interest free loan from the Company in the amount of
$65,000 on August 7, 1996 in conjunction with Mr. Byrd's relocation of his home
from Norfolk, Virginia to Atlanta, Georgia. Mr. Byrd repaid such loan in full on
November 26, 1996.
PERFORMANCE GRAPH
The following chart and table compare the sixteen-month cumulative total
return of the Company's Common Stock with the cumulative total return of the
Index of NYSE Stock Market Index and the NYSE Eating and Drinking Places Index.
COMPARISON OF RETURNS(1)
FOR MORRISON FRESH COOKING, INC.,
EATING AND DRINKING PLACES INDICES
<TABLE>
<CAPTION>
MORRISON NYSE EATING
MEASUREMENT PERIOD FRESH NYSE STOCK AND DRINKING
(FISCAL YEAR COVERED) COOKING, INC. MARKET INDEX PLACES INDEX
<S> <C> <C> <C>
03/11/96 100.0 100.0 100.0
05/31/96 85.2 104.9 97.8
08/30/96 64.6 103.0 93.8
11/29/96 55.3 117.6 95.6
02/28/97 57.8 123.2 89.8
05/30/97 62.0 131.4 103.0
</TABLE>
- ---------------
(1) 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.
CHANGES IN CONTROL
The Offer, if consummated, will result in a change in control of the
Company for purposes of Section 14f of the Securities Exchange Act of 1934 and
Rule 14f-1 thereunder. See the Offer to Purchase for additional information
concerning the Offer, Parent and the Offeror.
B-17
<PAGE> 18
ATTACHMENT I
OFFEROR'S DIRECTOR DESIGNEES
The Offeror has provided the Company with the following information
regarding those persons who it intends to designate as directors of the Company
following consummation of the Offer. The Company assumes no responsibility for
the accuracy or completeness of such information.
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT AND
NAME FIVE-YEAR EMPLOYMENT HISTORY
- ---- ----------------------------------------------
<S> <C>
Ronald A. LaBorde Mr. LaBorde (age 41) is President and Chief Executive
Officer of the Parent and has held such positions since
June 1995. From January 1992 to May 1995 he was
Executive Vice President, Treasurer and Chief Financial
Officer of the Parent. He is also a director of
AMEDYSIS, Inc.
J. Fred Johnson Mr. Johnson (age 46) has served as Executive Vice
President, Treasurer and Chief Financial Officer of the
Parent since November 1995. From August 1985 through
October 1995 he was employed by Graphic Industries,
Inc., a printing company, in various positions including
Chief Financial Officer and Treasurer. The business
address of Graphic Industries, Inc. is 1720 Peachtree
Street, N.W., Suite 1048, Atlanta, Georgia 30309-2439.
Joseph S. Polito Mr. Polito (age 56) has served as Executive Vice President
and General Manager of the Parent since July 1995. From
October 1992 to July 1995, he served as the Parent's
Executive Vice President and Director of Training.
Paul W. Murrill Mr. Murrill (age 67) is Chairman of the Parent's Board of
Directors. He is retired. He has served as a director of
Gulf States Utilities Company and its successor company,
Entergy Corporation, since 1978. He was chairman and
chief executive officer of Gulf States Utilities Company
for five of those years. Mr. Murrill also served as
Chancellor of Louisiana State University for seven
years. He is a director of Tidewater, Inc., ChemFirst
Corporation, Howell Corporation and ZYGO, Inc.
</TABLE>
B-18
