<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] 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 Rule 14a-11(c) or Rule 14a-12
</TABLE>
CorporateFamily Solutions, 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)(1) 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:
(4) Date Filed:
<PAGE> 2
CORPORATEFAMILY SOLUTIONS, INC.
209 TENTH AVENUE SOUTH, SUITE 300
NASHVILLE, TENNESSEE 37203-4173
(615) 256-9915
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 21, 1998
The Annual Meeting of Shareholders (the "Annual Meeting") of
CorporateFamily Solutions, Inc. (the "Company") will be held at 9:00 a.m. (CDT)
on Thursday, May 21, 1998, at the Company's corporate offices, 209 Tenth Avenue
South, Suite 300, Nashville, Tennessee for the following purposes:
1. To elect three (3) Class III directors to hold office for a
term of three (3) years or until their successors are duly
elected and qualified;
2. To ratify the appointment of Arthur Andersen LLP as the
independent accountants of the Company; and
3. To transact such other business as may properly come before
the Annual Meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on March 30,
1998 as the record date for the determination of shareholders entitled to notice
of and to vote at the Annual Meeting. Your attention is directed to the Proxy
Statement accompanying this notice for a more complete statement regarding
matters to be acted upon at the Annual Meeting.
By Order of the Board of Directors,
/s/ Michael E. Hogrefe
Michael E. Hogrefe
Executive Vice President,
Chief Financial Officer, and
Secretary
Nashville, Tennessee
April 15, 1998
YOUR REPRESENTATION AT THE ANNUAL MEETING IS IMPORTANT. TO ENSURE YOUR
REPRESENTATION, WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, PLEASE
COMPLETE, DATE, SIGN AND RETURN THE ENCLOSED PROXY. SHOULD YOU DESIRE TO REVOKE
YOUR PROXY, YOU MAY DO SO AS PROVIDED IN THE ACCOMPANYING PROXY STATEMENT AT ANY
TIME BEFORE IT IS VOTED.
<PAGE> 3
CORPORATEFAMILY SOLUTIONS, INC.
209 TENTH AVENUE SOUTH, SUITE 300
NASHVILLE, TENNESSEE 37203-4173
--------------------
PROXY STATEMENT
--------------------
The accompanying Proxy is solicited by the Board of Directors of
CorporateFamily Solutions, Inc. (the "Company"), for use at the Annual Meeting
of Shareholders (the "Annual Meeting") to be held at 9:00 a.m. (CDT) on
Thursday, May 21, 1998, at the Company's corporate offices, 209 Tenth Avenue
South, Suite 300, Nashville, Tennessee and any adjournments thereof, notice of
which is attached hereto.
A shareholder who signs and returns a Proxy may revoke the same at any
time before the authority granted thereby is exercised by attending the Annual
Meeting and electing to vote in person, by filing with the Secretary of the
Company a written revocation or by duly executing a Proxy bearing a later date.
Unless so revoked, the shares represented by the Proxy will be voted at the
Annual Meeting. Where a choice is specified in the Proxy, the shares represented
thereby will be voted in accordance with such specifications. If no
specification is made, such shares will be voted FOR the election of the three
(3) director nominees and FOR the ratification of the appointment of Arthur
Andersen LLP as the independent accountants of the Company.
The Board of Directors knows of no other matters which are to be
brought to a vote at the Annual Meeting. If any other matter does come before
the Annual Meeting, however, the persons appointed in the Proxy or their
substitutes will vote in accordance with their best judgment on such matters.
The Board of Directors has fixed the close of business on March 30,
1998, as the record date for the Annual Meeting. Only record holders of the
Company's common stock, no par value (the "Common Stock"), at the close of
business on that date will be entitled to vote at the Annual Meeting. On the
record date, the Company had outstanding 4,607,565 shares of Common Stock, which
will be entitled to one (1) vote for each share of Common Stock so held.
Shareholders' votes may be given in person or by proxy duly authorized in
writing.
The representation in person or by proxy of at least a majority of the
outstanding shares entitled to vote is necessary to provide a quorum at the
meeting. Any matters as may properly come before the meeting or any adjournment
thereof shall be approved by the affirmative vote of a majority of the votes
cast by the holders of Common Stock represented and entitled to vote at the
Annual Meeting, except with regard to the election of directors, who shall be
elected by a plurality of the votes cast in the election by the holders of the
capital stock present and entitled to vote at the Annual Meeting. "Abstentions"
and broker "non-votes" are counted as present in determining whether a quorum is
present but are not voted for or against any proposal. Shareholders have no
right to vote cumulatively on any matter.
The cost of solicitation of proxies will be borne by the Company,
including expenses in connection with preparing, assembling and mailing this
Proxy Statement. Such solicitation will be made by mail, and may also be made by
the Company's regular officers or employees personally or by telephone or
telegram.
This Proxy Statement has been mailed on or about April 15, 1998, to all
shareholders of record on March 30, 1998.
<PAGE> 4
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information with respect to the
beneficial ownership of the Common Stock as of March 30, 1998 by: (i) each
director and nominee of the Company; (ii) each Executive Officer listed in the
Summary Compensation table; (iii) each person known by the Company to own
beneficially more than 5% of any class of voting securities of the Company; and
(iv) all directors and executive officers of the Company as a group.
<TABLE>
<CAPTION>
NAME SHARES BENEFICIALLY OWNED (1)
----------------------------------------------------- -----------------------------------
PERCENT
NUMBER (%)
----------- -------
<S> <C> <C>
Essex Investment Management Company.................. 546,750(2) 11.9
Robert D. Lurie...................................... 489,281(3)(4) 10.2
Marriott Management Services Corp.................... 468,302(5) 10.2
Janus Capital Corporation............................ 463,025(6) 10.0
Marguerite W. Sallee................................. 301,119(4)(7) 6.2
David J. Gleason..................................... 247,650(8) 5.2
Lamar Alexander...................................... 187,212(9) 4.0
E. Townes Duncan..................................... 93,334(10) 2.0
Michael E. Hogrefe................................... 37,700(11) *
Thomas G. Cigarran................................... 32,246(12) *
JoAnne Brandes....................................... 1,170(13) *
Joseph J. Guzzo...................................... --- *
Jerry L. Calhoun..................................... --- *
All directors and executive officers
as a group (9 persons)............................. 1,142,062(14) 22.4
</TABLE>
- ----------
* Represents less than 1% of the Common Stock outstanding.
(1) Shares subject to options held by the persons shown in the table which
are exercisable within 60 days of March 30, 1998 are deemed outstanding
for the purpose of computing the percentage ownership of such person
and the percentage ownership of all executive officers and directors as
a group but are not deemed outstanding for the purpose of computing the
percentage ownership of the other persons shown in the table.
(2) This information is based upon a Schedule 13G filed on March 12, 1998.
Essex Investment Management Company is an investment advisor registered
under Section 203 of the Investment Advisors Act of 1940 and reports
sole voting power as to 385,450 shares of Common Stock and sole
dispositive power as to 546,750 shares of Common Stock. Its principal
address is 125 High Street, Boston, MA 02110.
(3) Includes (a) 195,000 shares and 130 shares of Common Stock issuable
upon the exercise of outstanding options held by Mr. Lurie and Mr.
Lurie's wife, Jane Kyle-Lurie, respectively, and (b) 1,651 shares owned
by Jane Kyle-Lurie. Mr. Lurie disclaims beneficial ownership of the
options and shares held by his wife.
(4) The principal address of such person is c/o CorporateFamily Solutions,
Inc., 209 10th Avenue South, Suite 300, Nashville, Tennessee 37203.
(5) Includes 1,170 shares of Common Stock issuable upon the exercise of
outstanding options. The principal address for Marriott Management
Services Corp. is One Marriott Drive, Washington, D.C. 20058.
(6) This information is based upon a Schedule 13G filed by Janus Capital
Corporation, Thomas H. Bailey, and Janus Olympus Fund on February 9,
1998. Janus Olympus Fund is an investment company holding 395,425
shares of Common Stock. Janus Capital Corporation may be deemed to be a
beneficial owner as to 463,025 shares of Common Stock because it
furnishes investment advice to several individual and institutional
clients holding shares of Common Stock, including Janus Olympus Fund.
Mr. Bailey may be deemed to be a beneficial owner as to 463,025 shares
of Common Stock due to his position as President and Chairman of the
Board of and stock ownership in Janus Capital Corporation. Janus
Capital Corporation and Mr. Bailey disclaim beneficial ownership of
such shares of Common Stock. The principal address of each of the above
is: 100 Fillmore Street, Denver, Colorado 80206-4923.
(7) Includes 211,971 shares of Common Stock issuable upon the exercise of
outstanding options and 3,998 shares owned by Ms. Sallee's husband,
Arthur Knox Patterson, as custodian for Mr. Patterson's children. Ms.
Sallee disclaims beneficial ownership of the shares held as custodian
by Mr. Patterson.
(8) Includes 183,579 shares of Common Stock issuable upon the exercise of
outstanding options. Mr. Gleason's address is 238 St. Andrews Drive,
Franklin, TN 37069.
(9) Includes (a) 26,780 shares and 260 shares of Common Stock issuable upon
the exercise of outstanding options held by Mr. Alexander and Mr.
Alexander's wife, Leslee B. Alexander, respectively, and (b) 85,638
shares owned by Mr. Alexander's wife, Leslee B. Alexander, individually
and as trustee for Mr. Alexander's children. Mr. Alexander disclaims
beneficial ownership of the options and shares held of record and as
trustee by Mrs. Alexander.
(10) Includes 12,480 shares of Common Stock issuable upon the exercise of
outstanding options and 75,794 shares of Common Stock owned by Solidus,
LLC of which Mr. Duncan is the president and a significant shareholder.
Mr. Duncan disclaims beneficial ownership of the shares held by
Solidus, LLC, except to the extent of his pecuniary interest in
Solidus, LLC.
(11) Includes 5,200 shares of Common Stock issuable upon the exercise of
outstanding options.
(12) Includes 31,980 shares of Common Stock issuable upon the exercise of
outstanding options.
(13) Includes 1,170 shares of Common Stock issuable upon the exercise of
outstanding options.
(14) Includes 484,971 shares of Common Stock issuable upon the exercise of
outstanding options.
2
<PAGE> 5
PROPOSAL NO. 1:
ELECTION OF CLASS III DIRECTORS
Under the terms of the Company's Amended and Restated Charter, the
members of the Board of Directors are divided into three classes. Each director
is selected to serve a three-year term and shall hold office until the annual
meeting for the year in which such term expires and until the incumbent
director's successor is duly elected and qualified, subject, however, to prior
death, resignation, retirement, disqualification or removal from office. Each
class is to consist, as nearly as possible, of one-third (1/3) of the total
number of directors constituting the entire Board of Directors. The three
directors to be elected at the 1998 Annual Meeting will serve until the Annual
Meeting of Shareholder in 2001 (the "Class III" directors), three directors
currently serving on the Board will continue to serve until the Annual Meeting
of Shareholders in 1999 (the "Class II" directors), and two directors currently
serving on the Board will continue to serve until the Annual Meeting of
Shareholders in 2000 (the "Class I" directors).
Unless contrary instructions are received, the enclosed Proxy will be
voted in favor of the election as directors of the nominees listed below. Each
nominee has consented to be a candidate and to serve, if elected. While the
Board has no reason to believe that any nominee will be unable to accept
nomination or election as a director, if such an event should occur, the Proxy
will be voted with discretionary authority for a substitute or substitutes as
shall be designated by the current Board of Directors.
THE FOLLOWING THREE PEOPLE ARE THE NOMINEES FOR ELECTION TO SERVE AS
CLASS III DIRECTORS. ALL NOMINEES ARE PRESENTLY DIRECTORS OF THE COMPANY.
CERTAIN INFORMATION RELATING TO THE NOMINEES, WHICH HAS BEEN FURNISHED TO THE
COMPANY BY THE INDIVIDUALS NAMED, IS SET FORTH BELOW.
CLASS III DIRECTORS
(TERMS EXPIRE IN 2001)
- --------------------------------------------------------------------------------
Robert D. Lurie Director since 1995 Age 52
Robert D. Lurie has served as Chairman of the Company since December 1995 and as
Director of Research and Development since January 1998. He was President of The
Resource Group, a division of the Company focused on providing consulting and
resource support to work/life center operations, from October 1995 to December
1997. From 1984 to 1995, Mr. Lurie served as President and Chief Executive
Officer of Resources for Child Care Management, Inc. ("RCCM"), which was
acquired by the Company in October 1995. Mr. Lurie received his Bachelor of Arts
degree from the University of Florida and his Master of Arts in American
Civilization from the University of Texas at Austin. He completed his graduate
studies in Administration and Social Policy at the Harvard University Graduate
School of Education.
- --------------------------------------------------------------------------------
Jerry L. Calhoun Director since 1997 Age 47
Jerry L. Calhoun was elected as a director in April 1997. Mr. Calhoun currently
serves as Vice President of Employee and Union Relations for The Boeing Company,
an aeronautics design and manufacturing company, and has served in such capacity
since January 1997. Prior to that time, Mr. Calhoun served in various capacities
at The Boeing Company, including Vice President of Human Resources from November
1994 to January 1997, Director of Business Resources from June 1994 to November
1994 and Director of Human Resources from October 1991 to June 1994.
- --------------------------------------------------------------------------------
Thomas G. Cigarran Director since 1987 Age 56
Thomas G. Cigarran has served as a director of the Company since November 1987
and currently serves as the Chairman of the Audit Committee of the Board of
Directors. Mr. Cigarran has been Chairman, President and Chief
3
<PAGE> 6
Executive Officer of American Healthcorp, Inc., an operator of comprehensive
hospital-based diabetes treatment centers and a provider of diabetes disease
management services for third-party payors, since September 1988 and was
President and Chief Operating Officer from its founding in September 1981 until
September 1988. In addition, Mr. Cigarran has served as Chairman of the Board
since 1992 and Chief Executive Officer from 1992 to December 1997 of AmSurg
Corp., a developer, acquirer and manager of practice-based ambulatory surgery
centers. Mr. Cigarran is a director of ClinTrials Research, Inc., a contract
research organization providing services to pharmaceutical, biotechnology and
medical device industries.
- --------------------------------------------------------------------------------
THE FOLLOWING PERSONS CURRENTLY ARE MEMBERS OF THE BOARD OF DIRECTORS
AND WILL CONTINUE IN THEIR PRESENT POSITIONS AFTER THE ANNUAL MEETING. THE
FOLLOWING PERSONS ARE NOT NOMINEES, AND SHAREHOLDERS ARE NOT BEING ASKED TO VOTE
FOR THEM. CERTAIN INFORMATION RELATING TO THE FOLLOWING PERSONS HAS BEEN
FURNISHED TO THE COMPANY BY THE INDIVIDUALS NAMED.
CLASS II DIRECTORS
(TERMS EXPIRE IN 1999)
- --------------------------------------------------------------------------------
Lamar Alexander Director since 1996 Age 57
Lamar Alexander is a founder of the Company and has served as Vice Chairman of
the Board of Directors since May 1996. He also serves the Company as Chairman of
the Nominating Committee of the Board of Directors. Mr. Alexander served as a
director of the Company from September 1987 to April 1991. Mr. Alexander
currently serves as Co-Director of Empower America, a conservative public policy
advocacy organization, and was Chairman of the National Commission of
Philanthropy and Civic Renewal. From 1991 to 1993 he served as Secretary of the
United States Department of Education, from 1987 to 1990 he served as President
of the University of Tennessee, and from 1979 to 1987 he served as Governor of
Tennessee. Mr. Alexander also currently serves as a member of the Board Advisory
Committee of InterMedia Partners, a national cable television partnership; as a
director of The Learning Company, Inc. an international educational software
company; and as a director and Vice Chairman of Processed Foods, Inc., a food
manufacturing company.
- --------------------------------------------------------------------------------
JoAnne Brandes Director since 1995 Age 44
JoAnne Brandes has served as a director of the Company since December 1995. Ms.
Brandes has served as Senior Vice President, General Counsel and Secretary for
S.C. Johnson Commercial Markets, Inc., a manufacturer and marketer of cleaning
and sanitation products and services since October 1997. From October 1996 to
October 1997, Ms. Brandes served as Vice President and General Counsel for S. C.
Johnson Commercial Marketing Inc. Prior to that time, Ms. Brandes served as Vice
President of Corporate Communication Worldwide for S.C. Johnson & Son, Inc., a
manufacturer of cleaning and personal care products, from May 1992 to October
1996. Prior thereto, Ms. Brandes served as Senior Legal Counsel to S.C. Johnson
& Son, Inc. from 1981 to 1992. Ms. Brandes serves as a director of Alternative
Resources Corporation, a temporary technical staffing company; a Regent in the
University of Wisconsin System Board of Regents; Director of Child Care Action
Campaign, a not-for-profit child advocacy group; and serves on the State of
Wisconsin's Governor's Child Care Council.
- --------------------------------------------------------------------------------
Joseph L. Guzzo Director since 1991 Age 58
Joseph J. Guzzo has served as a director of the Company since November 1991. Mr.
Guzzo was the President of International Operations for Marriott Management
Services Corp. at the time of his retirement in March 1998. Since joining
Marriott Corporation in 1962, Mr. Guzzo served in a variety of management
positions, including Vice President of Finance & Administration for the Theme
Park Group and Vice President and Controller for Marriott Restaurant Operations.
Mr. Guzzo was also Chairman of the Board and a director of the Marriott Credit
Union until March 1998.
4
<PAGE> 7
- --------------------------------------------------------------------------------
CLASS I DIRECTORS
(TERMS EXPIRE IN 2000)
- --------------------------------------------------------------------------------
Marguerite W. Sallee Director since 1987 Age 52
Marguerite W. Sallee is a founder of the Company and has served as President,
Chief Executive Officer and a director since February 1987. Prior thereto, Ms.
Sallee served as Commissioner of Human Services in former Governor Lamar
Alexander's cabinet. Ms. Sallee received a Bachelor of Arts from Duke University
and a Master of Arts in Psychology from Austin Peay University. She is a
director of Proffitt's, Inc., an owner and operator of department stores;
MagneTek, Inc., a manufacturer of integrated electrical products; and Phoenix
Healthcare Corporation, a managed healthcare company; and is a former Chairman
of the Nashville Area Chamber of Commerce. In addition, Ms. Sallee is a delegate
to the Presidential Summit for Children.
- --------------------------------------------------------------------------------
E. Townes Duncan Director since 1988 Age 44
E. Townes Duncan has been a director of the Company since April 1988 and
currently serves as the Chairman of the Compensation Committee of the Board of
Directors. Mr. Duncan has served as the President of Solidus, LLC, a private
investment firm, since January 1997. Mr. Duncan was a director of Comptronix
Corporation, a provider of electronics contract manufacturing services and
served as Chairman of the Board and Chief Executive Officer from November 1993
to May 1997. Comptronix Corporation filed a petition for Chapter 11 protection
on August 9, 1996. From 1985 to November 1993, Mr. Duncan was a Vice President
and principal of Massey Burch Investment Group, Inc., a venture capital
corporation. Mr. Duncan is a director of J. Alexander's Corporation, an owner
and operator of restaurants; Sirrom Capital Corporation, a specialty finance
company; and Continental Circuits Corp., a manufacturer of circuit boards used
in sophisticated electronic equipment.
- --------------------------------------------------------------------------------
The Board of Directors holds regular quarterly meetings and meets on
other occasions when required by special circumstances. Certain directors also
devote their time and attention to the Board's three principal standing
committees. The committees, their primary functions, and memberships are as
follows:
Audit Committee -- The Audit Committee makes recommendations to the
Board of Directors concerning the Company's financial statements and the
appointment of independent accountants, reviews significant audit and
accounting policies and practices, meets with the Company's independent
accountants concerning, among other things, the scope of audits and
reports, and reviews the performance of the overall accounting and
financial controls of the Company. Members of the Audit Committee are
JoAnn Brandes, Thomas G. Cigarran, and Joseph L. Guzzo.
Compensation Committee -- The Compensation Committee has the
responsibility for reviewing and approving salaries, bonuses, and other
compensation and benefits of executive officers, advising management
regarding benefits and other terms and conditions of compensation, and
administering the Company's employee stock incentive plan. No executive
officer of the Company served during 1997 as a member of the
Compensation Committee. Members of the Compensation Committee are JoAnne
Brandes, Jerry L. Calhoun, and E. Townes Duncan.
Nominating Committee -- The Nominating Committee develops general
criteria concerning the qualifications and selection of Board members
and recommends candidates for such positions to the Board of Directors.
The Nominating Committee will consider nominees recommended by the
Company's shareholders only if proper written notice of such nomination
has been given, either by personal delivery or the United States mail,
postage prepaid, to the Secretary of the Company not later than (a) with
respect to an election to be held at an annual meeting of shareholders,
one hundred twenty
5
<PAGE> 8
days (120) in advance of the anniversary date of the proxy statement for
the previous year's annual meeting, and (b) with respect to an election
to be held at a special meeting of shareholders for the election of
directors called other than by written request of a shareholder, the
close of business on the tenth day following the date on which notice of
such meeting is first given to shareholders, and (c) in the case of a
special meeting of shareholders duly called upon the written request of
a shareholder to fill a vacancy or vacancies (then existing or proposed
to be created by removal at such meeting), within ten business days of
such written request.
In the case of any nomination by a shareholder, each such
notice shall set forth: (a) as to each person whom the shareholder
proposes to nominate for election or re-election as a director, (i) the
name, age, business address, and residence address of such person, (ii)
the principal occupation or employment of such person, (iii) the class
and number of shares of the Company which are beneficially owned by such
person, and (iv) any other information relating to such person that is
required to be disclosed in solicitations of proxies with respect to
nominees for election as directors pursuant to Regulation 14A under the
Securities Exchange Act of 1934, as amended (including without
limitation such person's written consent to being named in the proxy
statement as a nominee and to serving as a director, if elected); and
(b) as to the shareholder giving the notice (i) the name and address, as
they appear on the Company's books, of such shareholder, and (ii) the
class and number of shares of the Company which are beneficially owned
by such shareholder; and (c) a description of all arrangements or
understandings between the shareholder and each nominee and any other
person or persons (naming such person or persons) pursuant to which the
nomination or nominations are to be made by the shareholder. The
presiding officer of the meeting may refuse to acknowledge the
nomination of any person not made in compliance with the foregoing
procedure. Members of the Nominating Committee are Lamar Alexander,
Jerry L. Calhoun, and Marguerite W. Sallee.
The Board of Directors held four (4) meetings during 1997. The Audit
Committee held two (2) meetings, the Compensation Committee held three (3)
meetings, and the Nominating Committee held no meetings during 1997. Each of the
directors attended at least 75% of the meetings of the Board of Directors and
the committees on which he or she served, except JoAnne Brandes.
6
<PAGE> 9
EXECUTIVE COMPENSATION
The following table sets forth the total compensation paid or accrued by
the Company on behalf of the Chief Executive Officer and each of the other
executive officers of the Company whose aggregate salary and bonus exceeded
$100,000 (collectively, the "Named Executive Officers") for services rendered in
all capacities to the Company for the year ended January 2, 1998.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION ALL OTHER
ANNUAL COMPENSATION AWARDS (1) COMPENSATION
--------------------------------------- ----------------------------- ------------
NUMBER OF
RESTRICTED SECURITIES
NAME AND PRINCIPAL FISCAL STOCK UNDERLYING
POSITION YEAR SALARY ($) (2) BONUS ($) AWARD(S)($) OPTIONS ($) (3)
- -------------------------- ------- ------------- --------- ----------- ------------ --------
<S> <C> <C> <C> <C> <C> <C>
Marguerite W. Sallee................... 1997 150,563 45,000 -- -- 2,166
President and Chief Executive 1996 126,855 10,000 -- 188,500
Officer
Robert D. Lurie........................ 1997 139,405 13,500 -- -- 1,668
Chairman of the Board and 1996 124,679 -- -- --
Director of Research and
Development
David J. Gleason....................... 1997 144,894 14,000 -- -- 2,167
Executive Vice President and 1996 124,752 5,000 -- 165,100
Chief Operating Officer(4)
Michael E. Hogrefe..................... 1997 134,356 38,729 -- 26,000 2,009
Executive Vice President, 1996 124,808 25,000 325,000(5) 6,500
Chief Financial Officer and
Secretary
</TABLE>
(1) The Company did not grant any stock appreciation rights or make any
long-term incentive plan payouts during 1996 or 1997.
(2) Includes amounts deferred by the employee under the Company's 401(k)
plan.
(3) Consists of Company matching contributions to the employee's 401(k)
plan account.
(4) Mr. Gleason retired from the Company effective January 2, 1998. As a
result, the Compensation Committee, pursuant to its authority as
administrator of the Company's stock incentive plans, accelerated the
vesting of all Mr. Gleason's unvested options and provided for
expiration of such options at December 31, 2000.
(5) Mr. Hogrefe received a restricted stock grant for 32,500 shares of
Common Stock under the Company's 1996 Stock Incentive Plan, subject to
the terms of the Restricted Stock Award Agreement, including (i) a
permanent restriction on transfer in the form of a permanent right of
first refusal in favor of the Company to repurchase the shares at the
then book value and (ii) forfeiture in the event of Mr. Hogrefe's
breach of confidentiality and non-competition covenants or termination
of Mr. Hogrefe's employment for cause as defined in the agreement,
which provisions were terminated by the Company's Board of Directors
upon the closing of the Company's initial public offering on August 12,
1997. Because there was no trading market for the Common Stock on the
date of grant (April 18, 1996), the value of the shares has been
presented as the value of the shares at the initial public offering
price ($10.00) per share.
7
<PAGE> 10
The following table sets forth certain information concerning stock options
granted during fiscal year 1997 to each of the Named Executive Officers.
<TABLE>
<CAPTION>
OPTION GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
--------------------------------------------------------------
PERCENT OF
NUMBER OF TOTAL POTENTIAL REALIZABLE
SECURITIES OPTIONS VALUE AT ASSUMED
UNDERLYING GRANTED TO EXERCISE ANNUAL RATES OF STOCK
OPTIONS EMPLOYEES PRICE EXPIRATION APPRECIATION FOR
NAME GRANTED (#)(1) IN 1997 (%) ($/SHARE) DATE OPTION TERMS
- ------------------------------ -------------- ----------- --------- ------------- ------------------------
5% ($) 10% ($)
------ --------
<S> <C> <C> <C> <C> <C> <C>
Marguerite W. Sallee......... -- -- -- -- -- --
Robert D. Lurie............... -- -- -- -- -- --
David J. Gleason(2)........... -- -- -- -- -- --
Michael E. Hogrefe............ 13,000 8.34 7.69 01/01/07 62,871 159,326
13,000 8.34 10.00 08/12/07 81,756 207,187
</TABLE>
(1) Options will vest annually over five years in one-fifth increments.
(2) Mr. Gleason retired from the Company effective January 2, 1998. As a
result, the Compensation Committee, pursuant to its authority as
administrator of the Company's stock incentive plans, accelerated the
vesting of all Mr. Gleason's unvested options and provided for
expiration of such options at December 31, 2000.
The following table sets forth certain information with respect to
stock options granted to the Named Executive Officers pursuant to the Company's
stock option plans. No Named Executive Officer exercised any options for the
purchase of Common Stock in 1997.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND 1997 FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
JANUARY 2, 1998 (#) JANUARY 2, 1998 ($) (1)
---------------------------------------- -------------------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ----------------------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Marguerite W. Sallee......... 206,511 126,360 $2,663,676 $1,497,007
Robert D. Lurie.............. 195,000 130,000 2,302,950 1,535,300
David J. Gleason............. 184,080 112,320 2,368,690 1,331,195
Michael E. Hogrefe........... 5,200 27,300 61,412 292,383
</TABLE>
- ---------------------
(1) The aggregate dollar value of the options held at year-end are
calculated as the difference between the fair market value of the Common
Stock ($19.50 as reported on the Nasdaq National Market on January 2,
1998) and the respective exercise prices of the stock options.
8
<PAGE> 11
COMPENSATION PURSUANT TO PLANS
1997 Stock Incentive Plan
The Company has historically granted options for the purchase of Common
Stock pursuant to the 1987 Stock Option Plan, the 1996 Stock Incentive Plan and
other contractual grants. The Company does not intend to make further grants
pursuant to those plans. Instead, the Company plans to make grants pursuant to
the 1997 Stock Incentive Plan. As of January 2, 1998, options for the purchase
of 1,529,596 shares of Common Stock were outstanding at a weighted average
exercise price per share of $7.30.
Under the 1997 Stock Incentive Plan, the Compensation Committee has the
authority to grant to officers, key employees and consultants of the Company the
following types of awards: (1) stock options; (2) stock appreciation rights; (3)
restricted stock; and/or (4) other stock-based awards. Pursuant to the 1997
Stock Incentive Plan, 450,000 shares of Common Stock have been reserved and will
be available for distribution, which may include authorized and unissued shares
or treasury shares. Any shares as to which an option or other award expires,
lapses unexpired, or is forfeited, terminated or canceled may become subject to
a new option or other award. The 1997 Stock Incentive Plan will terminate on,
and no award may be granted later than, the tenth anniversary of the Company's
initial public offering, August 12, 1997, but the exercise date of awards
granted prior to such tenth anniversary may extend beyond that date.
Incentive stock options ("ISOs") and non-qualified stock options may be
granted for such number of shares as the Committee may determine and may be
granted alone, in conjunction with, or in tandem with other awards under the
1997 Stock Incentive Plan or cash awards outside the 1997 Stock Incentive Plan.
A stock option will be exercisable at such times and subject to such terms and
conditions as the Committee will determine. However, in the case of an ISO, the
term will be no more than ten years after the date of grant (five years in the
case of ISOs for certain 10% shareholders). The option price for an ISO will not
be less than 100% (110% in the case of certain 10% shareholders) of the fair
market value of the Common Stock as of the date of grant and for any
non-qualified stock option will not be less than 50% of the fair market value as
of the date of grant. Stock options and stock appreciation rights granted under
the 1997 Stock Incentive Plan may not be assigned or transferred other than by
will or by the laws of descent and distribution.
Stock appreciation rights may be granted under the 1997 Stock Incentive
Plan in conjunction with all or part of a stock option and will be exercisable
only when the underlying stock option is exercisable. Once a stock appreciation
right has been exercised, the related portion of the stock option underlying the
stock appreciation right will terminate. Upon the exercise of a stock
appreciation right, the Committee will pay to the employee or consultant in
cash, Common Stock or a combination thereof (the method of payment to be at the
discretion of the Committee), an amount equal to the excess of the fair market
value of the Common Stock on the exercise date over the option price, multiplied
by the number of stock appreciation rights being exercised.
Restricted stock awards may be granted alone, in addition to, or in
tandem with, other awards under the 1997 Stock Incentive Plan or cash awards
made outside the 1997 Stock Incentive Plan. The provisions attendant to a grant
of restricted stock may vary from participant to participant. In making an award
of restricted stock, the Committee will determine the periods during which the
restricted stock is subject to forfeiture and may provide such other awards
designed to guarantee a minimum of value for such stock. During the restricted
period, the employee or consultant may not sell, transfer, pledge, or assign the
restricted stock but will be entitled to vote the restricted stock and to
receive, at the election of the Committee, cash or deferred dividends.
The Committee also may grant other types of awards such as performance
shares, convertible preferred stock, convertible debentures or other
exchangeable securities that are valued, as a whole or in part, by reference to
or otherwise based on the Common Stock. These awards may be granted alone, in
addition to, or in tandem with, stock options, stock appreciation rights,
restricted stock, or cash awards outside of the 1997 Stock Incentive Plan.
Awards will be made upon such terms and conditions as the Committee may
determine.
9
<PAGE> 12
If there is a change in control or a potential change in control of the
Company (as defined in the 1997 Stock Incentive Plan), stock appreciation rights
and limited stock appreciation rights outstanding for at least six months and
any stock options which are not then exercisable, in the discretion of the
Board, may become fully exercisable and vested. Notwithstanding the foregoing,
stock appreciation rights held by persons subject to Section 16(b) of the
Exchange Act, will be automatically exercised if the change in control or
potential change in control is not within the control of such person for
purposes of Rule 16b-3(e)(3) of the Exchange Act. Also, in the discretion of the
Board, the restrictions and deferral limitations applicable to restricted stock
and other stock-based awards may lapse, and such shares and awards will be
deemed fully vested. Stock options, stock appreciation rights, limited stock
appreciation rights, restricted stock and other stock-based awards, will, unless
otherwise determined by the Committee in its sole discretion, be cashed out on
the basis of the change in control price (as defined in the 1997 Stock Incentive
Plan and as described below). The change in control price will be the highest
price per share paid in any transaction reported on the Nasdaq National Market
or paid or offered to be paid in any bona fide transaction relating to a change
in control or potential change in control at any time during the immediately
preceding 60-day period. The Committee has the discretion to determine the
change in control price, based on the parameters described in the preceding
sentence.
Employee Stock Purchase Plan
The Company and its shareholders adopted the 1997 Employee Stock
Purchase Plan (the "1997 Stock Purchase Plan") that will become effective upon
implementation by the Board of Directors. An aggregate of 100,000 shares of
Common Stock has been reserved for issuance pursuant to the 1997 Stock Purchase
Plan. Under the 1997 Stock Purchase Plan, employees, including executive
officers, who have been employed by the Company continuously for at least one
year are eligible, as of the first day of any option period (January 1 through
June 30, or July 1 through December 31) (an "Option Period"), to contribute on
an after-tax basis up to 15% of their base pay per pay period through payroll
deductions to be used to purchase shares of Common Stock. Notwithstanding the
foregoing, no employee who is a 5% or greater shareholder of the Company's
voting stock is eligible to participate in the 1997 Stock Purchase Plan. On the
last trading day of each Option Period (the "Exercise Date"), the amount
contributed by each participant over the course of the Option Period will be
used to purchase shares of Common Stock at a purchase price per share equal to
the lesser of (a) 85% of the closing market price of the Common Stock on the
Exercise Date, or (b) 85% of the closing market price of the Common Stock on the
first trading date of such Option Period. The 1997 Stock Purchase Plan is
intended to qualify for favorable tax treatment under Section 423 of the
Internal Revenue Code of 1986, as amended (the "Code").
401(k) Retirement Savings Plan
Employees of the Company participate in a savings plan (the "401(k)
Plan") which is qualified under Sections 401(a) and 401(k) of the Code. To be
eligible, an employee must have been employed by the Company for at least twelve
months. The 401(k) Plan permits employees to make salary deferrals up to
specified limits. Additional contributions may be made by the Company at its
discretion, and the Company makes a matching contribution equal to at least 25%
of an employee's salary deferral, limited to 6% of an employee's wages, which
contributions vest ratably over a six-year period.
DIRECTOR COMPENSATION
The Company has adopted and the shareholders have approved the 1997
Outside Directors' Stock Incentive Plan ("1997 Outside Directors' Plan"), which
became effective on January 1, 1998. An aggregate of 25,000 shares have been
reserved for issuance pursuant to the 1997 Outside Directors' Plan. The 1997
Outside Directors' Plan provides that, on the date of each Annual Meeting of
Shareholders beginning in 1998, each Outside Director (continuing to serve as a
director) will receive a restricted stock award of that number of shares of
Common Stock with a fair market value (as defined in the 1997 Outside Directors'
Plan) of $10,000. The restricted stock shall vest in one-third increments with
one-third vesting on the date of grant and the remaining shares vesting equally
on the first and second anniversary dates of the initial grant, as long as the
Outside Director continues to serve as a director of the Company. No shares of
restricted stock granted pursuant to the 1997 Outside Directors' Plan shall be
sold, transferred, pledged, assigned, or otherwise alienated or hypothecated,
otherwise than by will or by the laws of descent and distribution until the
earlier of (i) five
10
<PAGE> 13
years from the date of grant or (ii) the date on which the Outside Director
ceases to serve as a director of the Company. Outside Directors awarded such
restricted stock may exercise full voting rights and shall be entitled to
receive all dividends and other distributions paid with respect to such shares
from the date of grant. Shares of restricted stock that have not vested at the
time of a grantee's resignation, removal, or failure to be elected as a member
of the Board of Directors shall be forfeited. In addition, Outside Directors
receive a $10,000 cash retainer annually and are entitled to reimbursement from
the Company for reasonable out-of-pocket expenses incurred in connection with
attending Board of Directors or committee meetings.
Pursuant to an agreement dated August 26, 1996, between the Company and
Lamar Alexander, Mr. Alexander agreed to serve as Vice Chairman. In his capacity
as Vice Chairman, Mr. Alexander works with the Company's Chief Executive Officer
regarding business development, strategic analysis and expanding the Company's
educational focus. Mr. Alexander's compensation under this agreement consists of
(i) $72,000 per annum commencing July 1, 1997 and (ii) the grant of an option
for the purchase of an aggregate of 32,500 shares of Common Stock at an exercise
price of $7.69 per share. Options for the purchase of 26,000 shares are fully
vested, and options for the purchase of the remaining 6,500 shares will vest on
January 1, 1999. He shall serve in such capacity during his current term, and,
if nominated and re-elected as a director, shall continue to serve in such
capacity until August 2000.
EMPLOYMENT, SEVERANCE, AND CHANGE IN CONTROL ARRANGEMENTS
Robert Lurie is employed by the Company under an Employment Agreement
dated August 27, 1995, amended effective as of January 3, 1998 (the "Employment
Agreement"). Under the Employment Agreement, Mr. Lurie is employed as Director
of Research and Development for a term ending August 27, 2000, and also serves
as Chairman of the Board of Directors. As compensation under the Employment
Agreement, Mr. Lurie is paid a base salary commensurate with his duties.
Effective January 3, 1998, Mr. Lurie will be paid a base salary equal to
one-half of his base salary at the end of fiscal 1997, and will devote one-half
of his working time and efforts to the Company (not fewer than 20 hours per week
on average). Pursuant to the Employment Agreement, Mr. Lurie received a grant of
an option to purchase 325,000 shares of Common Stock at $7.69 per share
effective August 27, 1995. Options for the purchase of 195,000 shares are fully
vested, and options for the purchase of the remaining 130,000 shares will vest
on August 27, 1998 and 1999. The Employment Agreement will terminate upon death
or permanent disability, may be terminated by the Company for cause and may be
terminated by Mr. Lurie for any reason upon 60 days' written notice to the
Company. In addition, pursuant to an Agreement Not To Compete dated August 27,
1995 (the "Non-Compete Agreement"), Mr. Lurie has agreed for a period of five
years, upon his termination from the Company for any reason, not to become
employed, directly or indirectly, by, or to have a significant financial
interest in any other enterprise engaged in, the family services business in
which the Company is engaged in the United States. For such Non-Compete
Agreement, Mr. Lurie shall be paid an aggregate of $500,000, in yearly
installments of $100,000 which began on the fourth business day following the
effective date of the Company's initial public offering, August 12, 1997.
The Company has entered into agreements with each of the Named Executive
Officers other than Mr. Lurie whereby, upon the termination of such person's
employment under specified conditions within one year following a change in
control of the Company (as defined in the agreements), such person would receive
a cash payment of two times such person's base salary at the time of the
termination. In consideration of such payment, the Named Executive Officer has
agreed not to compete with the Company's business during the term of employment
and for one year following the termination of such person's employment.
David J. Gleason retired from employment with the Company effective
January 2, 1998. The Company and Mr. Gleason entered into an agreement whereby
the Company paid Mr. Gleason ten weeks' base salary for the period immediately
following his retirement. In consideration of such payments, Mr. Gleason agreed
that neither he nor any entity controlled by him will directly or indirectly
compete with the Company's business in the United States for three years
following his retirement. In addition, in accordance with the provisions of the
Company's stock incentive plans, the Company accelerated the vesting of Mr.
Gleason's unvested options and provided for the expiration of all options at
December 31, 2000.
11
<PAGE> 14
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee of the Board of Directors consists of E.
Townes Duncan, Chairman, JoAnne Brandes and Jerry L. Calhoun.
JoAnne Brandes is Vice President of Corporate Communication Worldwide
for S.C. Johnson & Son, Inc. The Company has entered into agreements with S.C.
Johnson & Son, Inc. (i) to operate and manage a Family Center for its employees
and (ii) for consulting services provided on an ongoing basis. During 1997, the
Company received management fees from S.C. Johnson & Son, Inc. with respect to
operation of its Family Center totaling $50,000, and the Company received
consulting fees totaling $35,000.
Jerry L. Calhoun is employed as Vice President of Employee and Union
Relations at The Boeing Company. The Company has entered into agreements with
The Boeing Company (i) to operate and manage a Family Center for its employees
and (ii) to consult with the Company concerning work and family issues. The
Company received a management fee of $75,000 and a consulting fee of $33,000
pursuant to its contracts with Boeing in 1997.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Decisions concerning the compensation of the Company's executives are
made by the Compensation Committee of the Board of Directors. Each member of the
Compensation Committee is a non-employee director. The Compensation Committee
has the responsibility for reviewing and approving salaries, bonuses, and other
compensation and benefits of executive officers, advising management regarding
benefits and other terms and conditions of compensation, and administering the
Company's employee stock incentive plan.
Compensation Philosophy and Policies for All Executive Officers
The Compensation Committee believes that the primary objectives of the
Company's executive compensation policy should be:
- to attract and retain talented executives by providing a
compensation program that is competitive with the compensation
provided to executives at companies of comparable size and
position in service businesses, while maintaining compensation
within levels that are consistent with the Company's business
plan, financial objectives and operating performance;
- to provide appropriate incentives for executives to work
towards the achievement of the Company's annual performance
targets established in the Company's business plan; and
- to more closely align the interests of its executives with
those of shareholders by providing long-term incentive
compensation in the form of stock awards and service or other
equity-based, long-term incentive compensation.
The Compensation Committee believes that the Company's executive
compensation policies should be reviewed during the first half of the fiscal
year after the financial results of the prior fiscal year become available. The
policies should be reviewed in light of their consistency with the Company's
financial performance, its business plan and its position within the family
services industry, as well as the compensation policies of similar companies in
the family services business and other service businesses. The compensation of
individual executives should then be reviewed annually by the Compensation
Committee in light of its executive compensation policies for that year.
In setting and reviewing compensation for the executive officers, the
Compensation Committee considers a number of different factors designed to
assure that compensation levels are properly aligned with the Company's business
strategy, corporate culture and operating performance. Among the factors
considered are the following:
12
<PAGE> 15
- Comparability--The Compensation Committee considers the
compensation packages of similarly situated executives at
companies deemed to be most comparable to the Company. The
objective is to maintain competitiveness in the marketplace in
order to attract and retain the highest quality executives.
This is a principal factor in setting base levels of
compensation.
- Pay for Performance--The Compensation Committee believes that
compensation should be in part directly linked to operating
performance. To achieve this link with regard to short-term
performance, the Compensation Committee has relied on cash
bonuses which have been determined on the basis of certain
objective and subjective factors after receiving the
recommendations of senior management.
- Equity Ownership--The Compensation Committee believes that an
integral part of the executive compensation program at the
Company is equity-based compensation plans which encourage and
create ownership of the Company's stock by its executives,
thereby aligning executives' long-term interests with those of
the shareholders. These long-term incentive programs are
principally reflected in the Company's stock-based incentive
plans. The Compensation Committee believes that significant
stock ownership is a major incentive in building shareholder
value and reviews awards of equity-based incentives with that
goal in mind.
- Qualitative Factors--The Compensation Committee believes that
in addition to corporate performance and specific division
performance, it is appropriate to consider in setting and
reviewing executive compensation the personal contributions
that a particular individual may make to the success of the
corporate enterprise. Such qualitative factors as leadership
skills, planning initiatives development skills, public
affairs and civic involvement have been deemed to be important
qualitative factors to take into account in considering levels
of compensation.
In connection with the annual review of the Company's executive
compensation policies, the Compensation Committee deemed it appropriate to
engage a compensation consulting firm (the "Consultant") to assist the
Compensation Committee in its review and to make recommendations to address the
Company's compensation arrangements for the Company's senior executive officers
for 1996 and 1997. The peer group which the Compensation Committee utilized for
purposes of evaluating compensation for executive officers consists of companies
in service businesses that are similar in size to the Company by revenue.
Compensation of Executive Officers
The Compensation Committee believes that the compensation for each of
its executive officers should consist of a base salary, the potential for an
annual cash bonus and long-term equity-based incentive compensation. The
Compensation Committee has applied the policies described herein to fiscal 1997
compensation for executive officers and key employees, including the Named
Executive Officers.
Base Compensation. In determining whether an increase in base
compensation for its executive officers was appropriate for fiscal 1997, the
Compensation Committee reviewed salary ranges recommended by the Consultant and
sought the advice of the Chief Executive Officer. The Compensation Committee
subjectively determined base compensation on the basis of discussions with the
Chief Executive Officer, a review of the base compensation of executive officers
of comparable companies, the advice of the Consultant, its experience with the
Company and in business generally, and what it viewed to be appropriate levels
of base compensation after taking into consideration the contributions of each
executive officer. Therefore, the Compensation Committee determined that
previous base compensation levels were lower than average base compensation
levels of executives with similar responsibilities at comparable companies. As a
result of this review, increases averaging approximately 17% in the base
salaries for the Executive Officers were made in the third quarter of 1996 and
remained effective for 1997, with specific increases varying from 0% to
approximately 27%, reflecting the Compensation Committee's subjective judgment
as to the competitive level of the compensation being paid to each executive,
the executive's contribution to the Company's performance and the increased
responsibilities undertaken by the executive officer. As a result of these
increases, base salaries for the Named Executive Officers were set for 1997 at
levels which were still lower than the median of the base
13
<PAGE> 16
compensation of executives with similar responsibilities at comparable
companies. In addition, the Compensation Committee implemented an increase of 4%
in the base salary of one executive as a cost of living increase for fiscal
1997. The Compensation Committee did not assign any relative weight to the
quantitative and qualitative factors which were applied subjectively in reaching
its base compensation decisions.
Annual Incentive and Bonus Compensation. For fiscal 1997, the
Compensation Committee established performance goals for awarding cash incentive
payments, including targeted pre-tax profits for the Company, and for certain
Named Executive Officers, pre-determined operating contributions for specific
divisions of the Company. The amount of any potential award varied with each
executive officer. Based on satisfying certain of these performance goals, the
Named Executive Officers earned annual incentive payments aggregating $111,229
for 1997.
Long-Term Incentive Compensation. The Compensation Committee believes
the Company should make it a part of its regular executive compensation policies
to grant awards of long-term, equity-based incentives to executive officers and
other key employees as part of the compensation package that is reviewed
annually for each executive officer. In making these awards, the Compensation
Committee establishes guidelines at the time of the annual review and takes into
account the recommendations of the Chief Executive Officer prior to approving
awards of long-term, equity-based incentive compensation to the other executive
officers.
As part of the Compensation Committee's annual review of the Company's
executive compensation policies for fiscal 1997 and based upon the
recommendations of the Consultant, the Compensation Committee determined to
grant stock options with an exercise price based on the fair market value of the
Common Stock on the date of grant as long-term, equity-based incentive
compensation to certain members of the Company's management team. Accordingly,
during fiscal 1997, the Compensation Committee considered, with the assistance
of the Consultant, the amount of stock option holdings by its senior executives
in relation to the holdings by senior executives of comparable companies. As a
result of this analysis the Compensation Committee determined that each of the
Named Executive Officers other than the Chief Financial Officer had adequate
stock option holdings to provide appropriate incentives for performance. The
Compensation Committee granted to Michael Hogrefe, the Executive Vice President
and Chief Financial Officer, stock option awards to purchase an aggregate of
26,000 shares of Common Stock, which are non-qualified options and were granted
under the 1996 Stock Incentive Plan. See "--Option/SAR Grants in Last Fiscal
Year." The size of the option grant to Mr. Hogrefe was determined by the
Compensation Committee based upon an analysis of comparable companies, a
subjective assessment of performance and his respective level in the
organization and lower level of equity-based incentives relative to other
executives of the Company.
In addition, in order to reward Mr. Hogrefe for his performance in the
Company's initial public offering of its Common Stock and to further align his
interests with those of the Company's shareholders, the Board of Directors
removed the restrictions on 32,500 shares of Common Stock held pursuant to a
Restricted Stock Agreement by Mr. Hogrefe upon completion of the initial public
offering.
Chief Executive Officer Compensation. The Compensation Committee had
previously set the base compensation for Marguerite W. Sallee as its Chief
Executive Officer and President in the third quarter of 1996 at $150,000, based
on a review of the Company's performance in terms of its profitability, growth,
client development, return on capital, and Ms. Sallee's leadership in building
the management team, among other factors. The Compensation Committee also took
into account the Company's financial performance (as compared to companies of
comparable size by revenue), the base compensation of Ms. Sallee relative to
chief executive officers of comparable companies, the advice of the Consultant
and the longevity of Ms. Sallee's service to the Company. The Compensation
Committee made no change in Ms. Sallee's base salary for 1997, but established
an incentive compensation goal for 1997. In 1997, Ms. Sallee was eligible to
receive a cash incentive payment if the Company achieved certain targeted
pre-tax profits as set by the Compensation Committee. Based on such criteria,
Ms. Sallee received a cash incentive payment for 1997 in the amount of $45,000.
The Committee will address Ms. Sallee's base compensation in 1998 and
will consider factors similar to the above, as well as the Company's favorable
financial performance in 1997 and the successful completion of the Company's
initial public offering.
14
<PAGE> 17
Federal Income Tax Deductibility Limitations. Section 162(m) of the
Internal Revenue Code of 1986, enacted as part of the Omnibus Budget
Reconciliation Act in 1993 ("OBRA"), generally disallows a tax deduction to
public companies for compensation over $1,000,000 paid to the Company's Chief
Executive Officer and four other most highly compensated executive officers.
Compensation paid to these officers in excess of $1,000,000 that is not
performance-based cannot be claimed by the Company as a tax deduction. The
Compensation Committee believes it is appropriate to take into account the
$1,000,000 limit on the deductibility of executive compensation and to seek to
qualify executive compensation awards as performance-based compensation excluded
from the $1,000,000 limit. Stock options and other equity-based incentives
granted under the Company's stock incentive plans qualify as performance-based
compensation. None of the executive officers received compensation in 1997 that
would exceed the $1,000,000 limit on deductibility. The Committee has not
determined whether it will approve any compensation arrangements that will cause
the $1,000,000 limit to be exceeded in the future.
E. Townes Duncan, Chairman
JoAnne Brandes
Jerry L. Calhoun
PERFORMANCE GRAPH
The following Performance Graph compares the Company's cumulative total
stockholder return on its Common Stock from August 13, 1997 (the date the
Company's Common Stock began trading on the Nasdaq National Market) through
December 31, 1997 with the cumulative total return of (a) the University of
Chicago Graduate School of Business Center for Research in Security Prices
("CRSP") Index for Nasdaq Stock Market (U.S. Companies) ("Nasdaq-U.S.") and (b)
the CRSP Total Return Index for Standard Industrial Classification ("SIC") Codes
8290 to 8359 ("Nasdaq SIC 8290-8359"), which includes Child Daycare Services
(8350 and 8351) and Schools and Educational Services (8290 and 8299). The graph
assumes the value of the investment in the Company's Common Stock and each index
was $100 at August 13, 1997 and that all dividends, if any, were reinvested.
<TABLE>
<CAPTION>
8/13/97 12/31/97
------- --------
<S> <C> <C>
CorporateFamily Solutions, Inc. $100 $158
Nasdaq -- U.S. $100 $100
Nasdaq SIC 8290-8359 $100 $108
</TABLE>
15
<PAGE> 18
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company purchases food from Marriott International, Inc.
("Marriott") for use in several Family Centers managed by the Company. Marriott
Management Services Corp., an indirect subsidiary of Marriott, is the record
owner of 467,132 shares of the Company's Common Stock and holds options for the
purchase of 1,170 shares of Common Stock. In 1997, the Company made food
purchases from Marriott totaling approximately $532,000. The Company also has an
agreement with Marriott to operate and manage a Family Center for its employees.
During 1997, the Company received management fees from Marriott totaling
$56,000.
The Company has also entered into agreements with S.C. Johnson & Son,
Inc. (i) to operate and manage a Family Center for its employees and (ii) for
consulting services provided on an ongoing basis. During 1997, the Company
received management fees from S.C. Johnson & Son, Inc. with respect to operation
of its Family Center totaling $50,000, and the Company received consulting fees
totaling $35,000. JoAnne Brandes, a member of the Board of Directors of the
Company, is Vice President of Corporate Communication Worldwide for S.C. Johnson
& Son, Inc.
The Company has entered into agreements with The Boeing Company (i) to
operate and manage a Family Center for its employees and (ii) to consult with
the Company concerning work and family issues. The Company received a management
fee of $75,000 and a consulting fee of $33,000 pursuant to its contracts with
Boeing in 1997. Jerry L. Calhoun, a member of the Board of Directors of the
Company, is employed as Vice President of Employee and Union Relations at The
Boeing Company.
The Company believes that the above-mentioned transactions between the
Company and its directors, officers, or other affiliates were, and that future
transactions will be, on terms no less favorable to the Company than can be
obtained from unaffiliated third parties.
COMPLIANCE WITH SECTION 16(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's officers and directors, and persons who
beneficially own more than ten percent of a registered class of the Company's
equity securities, to file reports of ownership and changes in ownership with
the SEC and the Nasdaq National Market. Officers, directors, and greater than
ten percent shareholders are required by federal securities regulations to
furnish the Company with copies of all Section 16(a) forms they file.
Based solely on the Company's review of the copies of such forms, or
written representations from certain reporting persons furnished to the Company,
the Company believes that its officers, directors and greater than ten percent
beneficial owners were in compliance with all applicable filing requirements,
with the exception of Mr. Alexander, who had one transaction in September 1997,
which was reported in January 1998.
PROPOSAL NO. 2:
RATIFICATION OF APPOINTMENT OF ACCOUNTANTS
Upon recommendation of the Audit Committee, the Board of Directors has
appointed Arthur Andersen LLP, independent public accountants, to audit the
accounts of the Company for 1998. Arthur Andersen LLP audited the accounts of
the Company for 1997 and has served as independent public accountants to the
Company since 1994. While ratification by shareholders of this appointment is
not required by law or the Company's Amended and Restated Charter or Bylaws,
management of the Company believes that such ratification is desirable. In the
event this appointment is not ratified by the shareholders, the Board of
Directors will consider such fact as it deems appropriate. A representative of
Arthur Andersen LLP is expected to be present at the Annual Meeting, will have
an opportunity to make a statement if he or she so desires, and is expected to
be available to respond to appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR PROPOSAL NO. 2.
16
<PAGE> 19
METHOD OF COUNTING VOTES
Unless a contrary choice is indicated, all duly executed proxies will
be voted in accordance with the instructions set forth on the proxy card.
Abstentions will be counted as present for purposes of determining a quorum.
Proposals submitted for shareholder approval, other than the election of
directors, will be approved if the votes for exceed the votes against each
proposal; therefore, abstentions will have no effect on such proposals. Because
directors are elected by a plurality of the votes cast, abstentions also are not
considered in the election of directors.
PROPOSALS OF SHAREHOLDERS
A proper proposal submitted by a shareholder in accordance with
applicable rules and regulations for presentation at the Company's Annual
Meeting of Shareholders in 1999 and received at the Company's executive offices
no later than December 11, 1998, will be included in the Company's Proxy
Statement and form of proxy relating to such annual meeting.
OTHER MATTERS
The Board of Directors is not aware of any matter to be presented for
action at the meeting other than the matters set forth herein. Should any other
matter requiring a vote of shareholders arise, the proxies in the enclosed form
confer upon the person or persons entitled to vote the shares represented by
such proxies discretionary authority to vote the same in accordance with their
best judgment in the interest of the Company.
FINANCIAL STATEMENTS AVAILABLE
A copy of the Company's 1997 Annual Report to Shareholders containing
audited financial statements accompanies this Proxy Statement. The 1997 Annual
Report does not constitute a part of the proxy solicitation material.
UPON WRITTEN REQUEST TO MICHAEL E. HOGREFE, EXECUTIVE VICE PRESIDENT,
CHIEF FINANCIAL OFFICER AND SECRETARY, CORPORATEFAMILY SOLUTIONS, INC., 209
TENTH AVENUE SOUTH, SUITE 300, NASHVILLE, TENNESSEE 37203-4173, THE COMPANY WILL
PROVIDE, WITHOUT CHARGE, COPIES OF THE COMPANY'S ANNUAL REPORT TO THE SECURITIES
AND EXCHANGE COMMISSION ON FORM 10-K.
April 15, 1998
17
<PAGE> 20
APPENDIX A
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
CORPORATEFAMILY SOLUTIONS, INC.
Annual Meeting of Shareholders
To be held on
May 21, 1998
The undersigned hereby appoints Marguerite W. Sallee and Michael E. Hogrefe,
or either of them, with full power of substitution, as proxies, and hereby
authorizes them to represent and to vote, as designated, all of the shares of
voting stock of CorporateFamily Solutions, Inc. held by the undersigned on March
30, 1998, at the Annual Meeting of Shareholders to be held at the Company's
corporate headquarters, 209 Tenth Avenue South, Suite 300, Nashville, Tennessee,
on Thursday, May 21, 1998 at 9:00 a.m. (CDT) and any adjournment(s) thereof.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
1. ELECTION OF DIRECTORS: [ ] FOR all nominees listed below [ ] WITHHOLD AUTHORITY
(except as marked to the to vote for all nominees.
contrary below).
</TABLE>
Class III (2001) -- Robert D. Lurie; Jerry L. Calhoun; Thomas G. Cigarran
To withhold authority to vote for any individual nominee, write that nominee's
name in the space below:
- --------------------------------------------------------------------------------
(Continued on reverse side)
2. RATIFICATION OF THE APPOINTMENT OF ARTHUR ANDERSEN LLP AS THE INDEPENDENT
ACCOUNTANTS OF THE COMPANY:
<TABLE>
<S> <C> <C> <C>
[ ] FOR [ ] AGAINST [ ] ABSTAIN
</TABLE>
In their discretion, the proxies are authorized to vote upon such business
as may properly come before this meeting.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL
BE VOTED FOR PROPOSALS 1 AND 2.
DATED: , 1998
--------------------------
----------------------------------
SIGNATURE
----------------------------------
SIGNATURE IF HELD JOINTLY
PLEASE SIGN EXACTLY AS NAME
APPEARS ON YOUR SHARE
CERTIFICATES. EACH JOINT OWNER
MUST SIGN. WHEN SIGNING AS
ATTORNEY, EXECUTOR, ADMINISTRATOR,
TRUSTEE OR GUARDIAN, PLEASE GIVE
FULL TITLE AS SUCH. IF A
CORPORATION, PLEASE SIGN IN FULL
CORPORATE NAME AS AUTHORIZED. IF A
PARTNERSHIP, PLEASE SIGN IN
PARTNERSHIP NAME BY AUTHORIZED
PERSON.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY PROMPTLY.
