SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [x]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[x] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S)240.14a-11(c) or (S)240.14a-12
MORRISON HEALTH CARE, INC.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[x] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
[_] $500 per each party to the controversy pursuant to Exchange Act Rule 14a-
6(i)(3).
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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Notes:
[LOGO OF MORRISON HEALTH CARE APPEARS HERE]
August 23, 1996
Dear Shareholders:
We are holding your 1996 Annual Meeting on Thursday, September 26, 1996 at
1:00 p.m., local time, at the Renaissance Atlanta Hotel-Concourse, One
Hartsfield Centre Parkway, Atlanta, Georgia 30354. We sincerely hope that you
will be able to attend the meeting, and we look forward to seeing you. Matters
on which action will be taken at the meeting are explained in detail in the
Notice and Proxy Statement following this letter.
This will be the first Annual Meeting of the Company since the distribution
by Morrison Restaurants Inc. to its shareholders of the shares of Common Stock
of the Company and of Morrison Fresh Cooking, Inc. As separate companies, both
Morrison Fresh Cooking, Inc. and Morrison Restaurants Inc. (now known as Ruby
Tuesday, Inc.) will have their own annual meetings and, if you are a
shareholder in one or both of those companies, you will receive proxy
materials directly from them.
We hope that you will be able to attend the meeting in person. Whether or
not you expect to be present, please complete, date, sign and mail the
enclosed proxy in the envelope provided. If you attend the meeting, you may
withdraw your proxy and vote your own shares.
Sincerely,
MORRISON HEALTH CARE, INC.
/s/ Glenn A. Davenport
Glenn A. Davenport
President and
Chief Executive Officer
MORRISON HEALTH CARE, INC.
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1955 Lake Park Drive . Suite 400 . Smyrna, Georgia 30080-8855 . (770) 437-3300
. Telefax: (770) 437-3343
MORRISON HEALTH CARE, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD
SEPTEMBER 26, 1996
The Annual Meeting of Shareholders of Morrison Health Care, Inc. will be
held at the Renaissance Atlanta Hotel-Concourse, One Hartsfield Centre
Parkway, Atlanta, Georgia 30354 on Thursday, September 26, 1996, at 1:00 p.m.,
local time, for the following purposes:
1. To elect three Class I directors to the Board of Directors for a term
of three years.
2. To approve amendments to the Company's 1996 Stock Incentive Plan to
increase the number of shares available for issuance thereunder by 350,000
shares and to increase the limit on the number of shares that may be
subject to awards granted to certain employees during any fiscal year.
3. To transact such other business as may properly come before the
meeting or any adjournment or adjournments thereof.
Only shareholders of record at the close of business on August 9, 1996 are
entitled to vote at the meeting.
The mailing address of the Company's principal executive office is 1955 Lake
Park Drive, S.E., Suite 400, Smyrna, Georgia 30080-8855.
We hope you will be able to attend the meeting in person. Whether or not you
expect to be present, please complete, date, sign, and mail the enclosed proxy
in the envelope provided. If you attend the meeting, you may withdraw your
proxy and vote your own shares.
By Order of the Board of Directors,
/s/ JOHN E. FOUNTAIN
-----------------------------------
John E. Fountain
Vice President, General Counsel
and Secretary
August 23, 1996
Atlanta, Georgia
MORRISON HEALTH CARE, INC.
1955 LAKE PARK DRIVE, S.E.
SUITE 400
SMYRNA, GEORGIA 30080-8855
PROXY STATEMENT FOR 1996 ANNUAL MEETING OF SHAREHOLDERS
INTRODUCTION
Morrison Health Care, Inc., a Georgia corporation (the "Company"), became an
independent publicly-owned company as a result of the distribution (the
"Distribution") by Morrison Restaurants Inc., a Delaware corporation ("MRI"),
to its shareholders of all the issued and outstanding shares of common stock
of the Company. In the Distribution, MRI also distributed to its shareholders
all of the issued and outstanding shares of common stock of Morrison Fresh
Cooking, Inc., a Georgia corporation ("MFCI"), which held the family dining
assets and business of MRI. Simultaneously with the Distribution MRI
reincorporated as a Georgia corporation (the "Reincorporation"), effected a
one-for-two reverse stock split and changed its name to Ruby Tuesday, Inc. As
a result of the Distribution and the Reincorporation, MRI's shareholders
received one share of MFCI common stock for every four shares of MRI common
stock held, one share of Company common stock for every three shares of MRI
held, and one share of common stock of Ruby Tuesday, Inc., successor to the
MRI's casual dining business, for every two shares of MRI held. Certain of the
historical information presented in this Proxy Statement concerns Morrison
Restaurants Inc. which will be referred to herein as "MRI."
GENERAL INFORMATION
The following Proxy Statement and the accompanying proxy card, first mailed
to shareholders on or about August 23, 1996, are furnished in connection with
the solicitation by the Board of Directors of the Company of proxies to be
used in voting at the Annual Meeting of Shareholders of the Company to be held
on Thursday, September 26, 1996, at the Renaissance Atlanta Hotel--Concourse,
One Hartsfield Centre Parkway, Atlanta, Georgia 30354 and at any
adjournment(s) thereof (the "Annual Meeting").
Any shareholder returning a proxy has the power to revoke it prior to the
Annual Meeting by giving the Secretary of the Company written notice of
revocation, by returning a later dated proxy or by expressing a desire to vote
in person at the Annual Meeting. All shares of the Company's common stock,
$.01 par value ("Common Stock"), represented by valid proxies received
pursuant to this solicitation and not revoked before they are exercised will
be voted in the manner specified therein. If no specification is made, the
proxy will be voted (i) in favor of the election of the three nominees for
directors named in this Proxy Statement, (ii) in favor of the proposed
amendments to the Company's 1996 Stock Incentive Plan (the "Stock Incentive
Plan") to increase the number of shares available for issuance thereunder by
350,000 shares and to increase the limit on the number of shares that may be
subject to awards granted to certain employees during any fiscal year, and
(iii) in accordance with the best judgment of the proxy holders on any other
matter that may properly come before the Annual Meeting.
The entire cost of soliciting these proxies will be borne by the Company. In
following up the original solicitation of the proxies by mail, the Company
will request brokers and others to send proxy forms and other proxy material
to the beneficial owners of the Common Stock and will reimburse them for
expenses incurred in so doing. If necessary, the Company also may use some of
its employees to solicit proxies from the shareholders personally or by
telephone.
August 9, 1996 has been fixed as the record date for determination of
shareholders entitled to notice of, and to vote at, the Annual Meeting and,
accordingly, only holders of Common Stock of record at the close of business
on that date will be entitled to notice of, and to vote at, the Annual
Meeting. The presence in person or by proxy of shareholders holding of record
a majority of shares of Common Stock outstanding and entitled to vote at the
Annual Meeting will constitute a quorum for the transaction of business at the
Annual Meeting. The number of shares of outstanding Common Stock on August 9,
1996 was 11,852,694, each of which is entitled to one vote.
1
Election of each of the Director Nominees named in Proposal 1 requires the
approval of a plurality of the votes cast in the election. Approval of the
amendments to the Stock Incentive Plan described in Proposal 2 requires the
affirmative vote of the holders of a majority of the shares of Common Stock of
the Company present or represented and entitled to vote at the Annual Meeting.
Abstentions and broker non-votes are counted as shares present for
determination of a quorum. For purposes of determining whether Proposals 1 and
2 are approved by the shareholders, (i) abstentions will have no effect on the
outcome of the voting on Proposal 1, and broker non-votes do not occur in the
election of directors, and (ii) abstentions will have the same effect as votes
against Proposal 2, but broker non-votes will have no effect on the voting on
such proposal.
PROPOSAL 1
ELECTION OF DIRECTORS
The Company's Articles of Incorporation provide for three classes of
directors with staggered, three-year terms of office and provide that upon the
expiration of the term of office for a class of directors, the nominees for
that class will be elected for a term of three years to serve until the
election and qualification of their successors or until their earlier
resignation, death or removal from office. At the Meeting, the three nominees
are for the Class I directors. The Class II and Class III directors have one
year and two years, respectively, remaining on their terms of office. The
Company's Articles of Incorporation and its Bylaws provide that the Board of
Directors shall consist of not less than three nor more than 12 directors and
authorize the exact number to be fixed from time to time by resolution of a
majority of the Board of Directors or by the affirmative vote of the holders
of at least 80% of all outstanding shares entitled to be voted in the election
of directors voting together as a single class. The Board of Directors has
fixed the exact number of members of the Board of Directors at seven and has
nominated E. Eugene Bishop, Arthur R. Outlaw, Jr. and Fred L. Brown to serve
in Class I of the Board of Directors for a term of three years. Messrs. Bishop
and Outlaw are currently serving as directors of the Company. Mr. Outlaw has
been nominated for election to the Board of Directors pursuant to an
understanding with the Company reached prior to the Distribution.
It is intended that persons named in the accompanying form of proxy will
vote for the three nominees listed below unless authority to so vote is
withheld. Although the Board of Directors does not expect that any of the
nominees identified herein will be unavailable for election, in the event a
vacancy in the slate of nominees occurs, the shares represented by proxies in
the accompanying form may be voted for the election of a substitute nominee
selected by the persons named in the proxy.
DIRECTOR AND DIRECTOR NOMINEE INFORMATION
NOMINEES FOR DIRECTORS
CLASS I -- TERM EXPIRING 1999
E. EUGENE BISHOP
Director of the Company since 1996
Age: 66
Mr. Bishop was Chairman of the Board of MRI from June 1992 until his
retirement in May 1995. From June 1986 to June 1992, he was Chairman of the
Board and Chief Executive Officer of MRI. Mr. Bishop was a director of MRI
from 1963 until the Distribution in March 1996. Mr. Bishop also is a director
of Delchamps, Inc. and Morrison Fresh Cooking, Inc.
ARTHUR R. OUTLAW, JR.
Director of the Company since 1996
Age: 42
Mr. Outlaw is Chairman of the Board and Chief Executive Officer of Marshall
Biscuit Company, which he founded in 1985. Prior thereto, Mr. Outlaw was
employed in cafeteria management and finance for MRI from 1978 through 1985.
2
FRED L. BROWN
Age: 55
Mr. Brown is President and Chief Executive Officer of St. Louis-based BJC
Health System. Prior thereto he served as President and CEO of Christian
Health Services, one of BJC's founding member organizations. BJC is an
integrated healthcare provider serving Missouri and southern Illinois through
more than 100 inpatient and outpatient academic and community based service
sites. He is a member of the board of trustees of the American Hospital
Association, the Voluntary Hospital Association of America and the Healthcare
Research and Development Institute. He also serves as a Governor of the
American College of Healthcare Executives. He currently serves as a director
of Citation Computers, Inc. and Commerce Bancshares, Inc.
DIRECTORS CONTINUING IN OFFICE
CLASS II -- TERM EXPIRING 1997
CLAIRE L. ARNOLD
Director of the Company since 1996
Age: 49
Ms. Arnold is currently a private investor. Ms. Arnold served as President
and Chief Executive Officer of Nicotiana Enterprises, Inc., a family holding
company holding stock in NCC L.P., from August 1979 to February 1995 and was
Chief Executive Officer of NCC L.P., a major distributor of grocery, tobacco,
candy, health and beauty, and allied products to retail stores, from November
1992 to April 1994. Prior thereto, Ms. Arnold was Chairman and Chief Executive
Officer of NCC L.P. from August 1979 to November 1992. Ms. Arnold was a
director of MRI from 1994 until the Distribution in March 1996. Ms. Arnold
also is a director of Schweitzer-Mauduit International, Inc. and Ruby Tuesday,
Inc.
GLENN A. DAVENPORT
Director of the Company since 1996
Age: 42
Mr. Davenport has served as President, Chief Executive Officer and Director
of the Company since the Distribution in March 1996. Mr. Davenport was
President of the Health Care Division of the MRI's Morrison Group from
November 1993 through March 1996. Prior thereto, he served as Senior Vice
President Hospitality Group from February 1990 through November 1993 and in
various other capacities since he first joined MRI in November 1973.
CLASS III -- TERM EXPIRING 1998
JOHN B. MCKINNON
Director of the Company since 1996
Age: 61
Mr. McKinnon has served as Chairman of the Board of Directors of the Company
since the Distribution in March 1996. Prior to his retirement in May 1995, Mr.
McKinnon was Dean of Babcock Graduate School of Management at Wake Forest
University. Prior thereto, he was President, Sara Lee Food Service from July
1988 through June 1989, and President, Sara Lee Corporation from July 1986
through June 1988. Mr. McKinnon served as a director of MRI from 1989 until
the Distribution in March 1996. Mr. McKinnon also is a director of Premark
International, Inc., Integon Corporation, MedCath, Inc. and Ruby Tuesday, Inc.
DR. BENJAMIN F. PAYTON
Director of the Company since 1996
Age: 63
Dr. Payton has been the President of Tuskegee University since 1981. Dr.
Payton was a director of MRI from 1993 until the Distribution in March 1996.
Dr. Payton also is a director of AmSouth Bancorporation, The ITT Corporation,
The Liberty Corporation, Sonat, Inc., Praxair, Inc. and Ruby Tuesday, Inc.
3
BENEFICIAL OWNERSHIP OF COMMON STOCK
The following table sets forth certain information as of August 9, 1996
(except as otherwise noted) regarding the amount of Common Stock beneficially
owned by all persons known to the Company who beneficially own more than five
percent of the outstanding Common Stock, each director and director nominee of
the Company, each Named Executive (as defined below), and all directors and
executive officers of the Company as a group. An asterisk indicates beneficial
ownership of less than one percent of the outstanding Common Stock.
NUMBER OF SHARES
BENEFICIALLY PERCENT OF
NAME OR GROUP OWNED(1) CLASS(2)
------------- ---------------- ----------
5% STOCKHOLDERS:
Heine Securities Corporation(3).................. 1,375,951 11.7
GeoCapital Corp.(4).............................. 1,198,264 10.2
DIRECTORS, DIRECTOR NOMINEES AND EXECUTIVE
OFFICERS:
C. L. Arnold..................................... 3,606 *
E. E. Bishop..................................... 387,464(5) 3.3
F. L. Brown...................................... -0- --
G. A. Davenport.................................. 56,159(6) *
J. B. McKinnon................................... 6,509 *
A. R. Outlaw, Jr. ............................... 209,794 1.2
B. F. Payton..................................... 3,683 *
G. L. Anderson................................... 661 *
K. W. Engwall.................................... 10,231 *
C. L. Kolesar.................................... 1,107 *
J. D. Underhill.................................. 12,012 *
All directors and executive officers as a group
(12 persons).................................... 700,636 5.9
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(1) Includes (i) shares subject to options exercisable within 60 days after
August 9, 1996 held by the named persons and groups as follows: Ms. Arnold
1,313; Mr. Bishop, 229,929; Mr. Davenport, 14,728; Mr. McKinnon, 3,003;
Mr. Payton, 1,313; Mr. Engwall, 7,452; Mr. Brown, -0-; Mr. Underhill,
9,423; and all directors and executive officers as a group, 272,279.
(2) "Percent of Class" has been calculated by taking into account all shares
as to which the indicated person has sole or shared voting or investment
power (including shares subject to currently exercisable options and
options exercisable within 60 days after August 9, 1996), without regard
to any disclaimers of beneficial ownership by the person indicated.
(3) Heine Securities Corporation's address is 51 John F. Kennedy Parkway,
Short Hills, New Jersey 07078-2789. The information presented is based on
the holder's Schedule 13G which reports beneficial ownership as of April
9, 1996.
(4) GeoCapital Corp.'s address is 45th Floor, 767 Fifth Avenue, New York, NY
10153-0001.
(5) Includes 2,053 shares owned by Mr. Bishop's spouse.
(6) Includes 29 shares held by Mr. Davenport's spouse in an Individual
Retirement Account.
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 1996 have been
complied with on a timely basis.
4
DIRECTORS' FEES AND ATTENDANCE
The Board of Directors of the Company held one meeting during the period
between the Distribution and the end of fiscal year 1996. Each director
attended this meeting and the meeting of any committee of which he or she was
a member which was held during the period between the Distribution and the end
of 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 (the
"Retainer") and $1,000 per Board meeting attended. Non-employee directors
serving on the Audit Committee or the Compensation and Stock Option Committee
(other than the Chairmen of such committees) receive a fee of $1,000 for each
committee meeting attended. 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. McKinnon, Chairman of the Company's Board of Directors, provides
strategic planning, investor relations and management consulting services to
the Company on a regular basis. Mr. McKinnon is generally compensated at a
rate of $2,000 per day for such services. For fiscal year 1996, Mr. McKinnon
was paid an aggregate of $6,000 for such services. Mr. McKinnon is also
eligible to participate in a program under the Company's 1996 Stock Incentive
Plan that permits him to elect to direct that up to 60 percent of his
consulting fees for each fiscal quarter be allocated to the purchase of
Company Common Stock on his behalf. Under this program, Mr. McKinnon is
awarded bonus shares and stock options based on formulas and subject to terms
and conditions substantially similar to awards that would be made under the
Company's Directors' Plan, as described below, to a participant who elects to
allocate a portion of his or her retainer for the purchase of Company Common
Stock.
The Morrison Health Care, Inc. Stock Incentive and Deferred Compensation
Plan for Directors (the "Directors' Plan") permits non-employee directors to
defer all or a portion (in 25 percent increments) of their retainer (other
than any portion of the retainer allocated to Stock Awards, as described
below) and/or any additional meeting and committee fees to a deferred
compensation account. Deferred compensation accounts are credited as of the
last day of each fiscal quarter with an assumed rate of income equal to 90-day
U.S. Treasury Bills, based on the weighted average balance of that account
during that fiscal quarter. Amounts credited to a director's deferred
compensation account will be distributed not sooner than the earlier of the
first January 15 or July 15 following (a) the date of the director's
seventieth birthday, or (b) the date the director ceases to be a member of the
Board of Directors.
The Directors' Plan provides that each non-employee director who has not
attained the Target Ownership Level, as defined below, will be deemed to have
elected to direct that 60 percent of his or her retainer payable for each
fiscal quarter be allocated to the purchase of Common Stock on his or her
behalf. Each non-employee director who has attained the Target Ownership Level
may elect to direct, in 10 percent increments and subject to such other
conditions prescribed by the Directors' Plan, that up to 60 percent of his or
her retainer for each fiscal quarter be allocated to the purchase of Common
Stock on his or her behalf (collectively, the "Stock Awards"). A deemed
election will continue in effect until that director, after attaining the
Target Ownership Level, modifies or revokes the election in the manner allowed
for discretionary elections.
A director will be treated as having attained the "Target Ownership Level"
for a fiscal quarter if he or she owns, on the first day of that fiscal
quarter, at least a number of shares of Common Stock with a fair market value,
as determined by the closing price on the last trading date 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.
5
The Directors' Plan provides that each non-employee director who receives
Stock Awards, whether through a deemed election or a discretionary election,
will be awarded an option to purchase shares of Common Stock (the "Options")
equal to three times the number of shares issued pursuant to the discretionary
election or deemed election, as the case may be.
Options issued under the Directors' Plan will be granted on the first day of
each fiscal quarter for which an election for a Stock Award is in effect; will
become fully exercisable six months following the date of grant; and will be
exercisable at the Fair Market Value of the Common Stock as of the date of the
option grant. Each Option shall expire generally upon the fifth anniversary of
the date on which it was granted.
Under the Directors' Plan, each non-employee director shall receive a one-
time restricted stock award of 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 two committees. Information
concerning these committees follows.
Audit Committee. The Audit Committee is comprised solely of non-management
directors. The Audit Committee maintains communications with the Company's
independent auditors as to the nature of the auditors' services, fees and such
other matters as the auditors believe may require the attention of the Board.
The Audit Committee reviews the Company's internal control procedures and
makes recommendations to the Board with respect thereto. The Audit Committee
did not hold any meetings during the period between the Distribution and the
end of fiscal year 1996. The current members of the Audit Committee are E.
Eugene Bishop (Chairman), Claire L. Arnold, Arthur R. Outlaw, Jr. and Dr.
Benjamin F. Payton.
Compensation and Stock Option Committee. The Compensation and Stock Option
Committee (the "Compensation Committee") is comprised solely of non-management
directors. The Compensation Committee makes recommendations to the Board of
Directors with respect to compensation of officers and with respect to the
granting of stock options. The Compensation Committee met one time during the
period between the Distribution and the end of fiscal year 1996. The current
members of the Compensation Committee are Claire L. Arnold (Chairman), E.
Eugene Bishop, Arthur R. Outlaw, Jr. and Dr. Benjamin F. Payton.
EXECUTIVE COMPENSATION
This section of the proxy statement discloses compensation awarded, paid to,
or earned by the Company's Chief Executive Officer and each of the four other
executive officers of the Company who were most highly compensated in fiscal
year 1996 for services rendered to MRI prior to the Distribution and the
Company thereafter during each of the three fiscal years in the period ended
June 1, 1996 (together, these persons are sometimes referred to as the "Named
Executives").
6
SUMMARY COMPENSATION TABLE
ANNUAL LONG TERM ALL OTHER
COMPENSATION COMPENSATION COMPENSATION
--------------------------------------- ------------------- ------------
AWARDS PAYOUTS
OTHER ANNUAL OPTIONS/ LTIP
NAME AND POSITION YEAR SALARY($) BONUS($) COMPENSATION($) SARS(#) PAYOUTS($) ($)(1)
----------------- ---- --------- -------- --------------- -------- ---------- ------------
G. A. Davenport(2) ..... 1996 234,134 32,850 5,929(4) 266,776 -0- 6,032
President and 1995 181,432 229,040 N/A 11,292 -0- 6,140
Chief Executive Officer 1994 143,000 182,800 N/A 26,220 -0- 6,559
K.W. Engwall(3) ........ 1996 108,421 18,200 33,588(5) 55,583 -0- 3,262
Senior Vice President, 1995 97,335 36,987 N/A -0- -0- 1,729
Finance 1994 N/A N/A N/A N/A N/A N/A
and Assistant Secretary
J.D. Underhill(3) ...... 1996 144,362 16,240 5,383(4) 56,731 -0- -0-
Senior Vice President, 1995 138,810 72,593 N/A 1,605 -0- -0-
Retail Development 1994 N/A N/A N/A N/A N/A N/A
G.L. Anderson(3) ....... 1996 121,108 24,196 841(4) 51,182 -0- -0-
Senior Vice President 1995 117,846 77,600 N/A 5,771 -0- -0-
1994 N/A N/A N/A N/A N/A N/A
C.L. Kolesar(3) ........ 1996 116,112 26,307 1,346(4) 51,881 -0- 4,496
Senior Vice President 1995 115,181 57,500 17,535(6) 5,771 -0- 3,026
1994 N/A N/A N/A N/A N/A N/A
- --------
(1) The amounts in this column include the following: (a) Company
contributions to the Deferred Compensation Plan for fiscal years 1996,
1995 and 1994, respectively: G. A. Davenport, $4,705, $4,947 and $3,189;
K. W. Engwall, $3,262, $1,729 and N/A; C. L. Kolesar, $2,847, $1,944 and
N/A; and (b) executive group life and accidental death and dismemberment
insurance plan premiums paid for fiscal years 1996, 1995 and 1994,
respectively: G. A. Davenport $557, $660 and $3,161; C. L. Kolesar, $712,
$505 and N/A; and (c) employee portion of split-dollar life insurance
premiums paid by the Company for fiscal years 1996 and 1995, respectively:
G. A. Davenport, $750, $533, and $209; and C. L. Kolesar, $937, $577 and
N/A.
(2) Mr. Davenport was elected as an executive officer of MRI effective
November 1, 1993.
(3) In accordance with the executive compensation disclosure rules adopted by
the SEC, the compensation of Mr. Engwall, Mr. Underhill, Mr. Anderson and
Ms. Kolesar for fiscal 1994 is not disclosed as the Company was not a
reporting company under the Securities and Exchange Act of 1934 for such
year and such compensation information has not been provided by MRI or the
Company in prior SEC filings.
(4) Represents the value of bonus shares issued in connection with the
purchase of Common Stock under the MRI Management Stock Option Program.
(5) Represents relocation related expenses of $30,000 and the value of bonus
shares issued in connection with the purchase of Common Stock under the
MRI Management Stock Option Program.
(6) Represents relocation and related expenses.
7
OPTION GRANTS IN FISCAL 1996
The following table presents information regarding fiscal year 1996 grants
of options to purchase shares of Common Stock to the Named Executives. The
Company has no outstanding SARs and granted no SARs during fiscal year 1996.
POTENTIAL REALIZABLE VALUE(6)
AT ASSUMED ANNUAL RATES OF
STOCK PRICE APPRECIATION FOR OPTION TERM
----------------------------------------
INDIVIDUAL GRANTS 5% 10%
------------------------------------------------ ------------------- --------------------
MARKET MARKET
PRICE PRICE
% OF TOTAL REQUIRED REQUIRED
OPTIONS/ OPTIONS/SARS EXERCISE TO REALIZE TO REALIZE
SARS GRANTED TO OR BASE DOLLAR DOLLAR
GRANTED EMPLOYEES IN PRICE EXPIRATION DOLLAR GAINS DOLLAR GAINS
NAME (#) FISCAL YEAR ($/SHARE) DATE GAINS($) ($/SHARE) GAINS($) ($/SHARE)
---- ---------- ------------ --------- ----------- -------- ---------- --------- ----------
G.A. Davenport.......... 775(1)(3) 4.17%(4) 24.4467 03-Jun-2000 5,231 31.20 11,563 39.37
867(1)(3) 4.66%(4) 21.8372 03-Sep-2000 5,228 27.87 11,557 35.17
90,909(1) 9.59%(5) 16.5000 03-Apr-2001 414,545 21.06 915,454 26.57
175,000(2) 8.47%(5) 16.5000 03-Apr-2001 798,000 21.06 1,762,250 26.57
K.W. Engwall............ 5,016(1) 0.53%(5) 16.5000 03-Apr-2001 22,873 21.06 50,511 26.57
567(2)(3) 3.05%(4) 14.5581 15-Jan-2001 2,279 18.58 5,041 23.45
50,000(2) 5.28%(5) 16.5000 03-Apr-2001 228,000 21.06 503,500 26.57
J.D. Underhill.......... 890(1)(3) 4.78%(4) 17.0303 02-Dec-2000 4,192 21.74 9,256 27.43
5,016(1) 0.53%(5) 16.5000 03-Apr-2001 22,873 21.06 50,511 26.57
825(2)(3) 4.44%(4) 17.5796 14-Feb-2001 4,010 22.44 8,852 28.31
50,000(2) 5.28%(5) 16.5000 03-Apr-2001 228,000 21.06 503,500 26.57
G.L. Anderson........... 1,182(1) 0.12%(5) 16.5000 03-Apr-2001 5,390 21.06 11,903 26.57
50,000(2) 5.28%(5) 16.5000 03-Apr-2001 228,000 21.06 503,500 26.57
C.L. Kolesar............ 1,881(1) 0.20%(5) 16.5000 03-Apr-2001 8,577 21.06 18,942 26.57
50,000(2) 5.28%(5) 16.5000 03-Apr-2001 228,000 21.06 503,500 26.57
- --------
(1) The indicated options have a term of five years and were granted pursuant
to the Company's Stock Incentive Plan and generally become exercisable two
years after date of grant. In the event of a change of control of the
Company, the Committee administering the plan may accelerate vesting,
otherwise adjust the options or terminate the options. Option holders also
have certain rights with respect to these options pursuant to their Change
of Control Agreements. See "Contracts with Executives."
(2) The indicated options have a term of five years and were granted pursuant
to the Company's Stock Incentive Plan and generally become exercisable
three years after date of grant. In the event of a change of control of
the Company, the Committee administering the plan may accelerate vesting,
otherwise adjust the options or terminate the options. Option holders also
have certain rights with respect to these options pursuant to their Change
of Control Agreements. See "Contracts with Executives."
(3) Represents options to purchase shares of Common Stock of the Company
issued upon conversion of options granted by MRI during fiscal 1996 prior
to the Distribution. MRI options were converted in the Distribution into
options to purchase shares of Common Stock of each of the Company,
Morrison Fresh Cooking, Inc. and Ruby Tuesday, Inc. 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. The exercise price per share of the MRI options has been
allocated among the options to purchase Common Stock of the Company,
Morrison Fresh Cooking, Inc. and Ruby Tuesday, Inc. 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 trading days following the Distribution. Such per share exercise
price was allocated as follows: 32.62% to the Company option; 10.22% to
the Morrison Fresh Cooking, Inc. option; and 53.16% to the Ruby Tuesday,
Inc. 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.
(4) Based on an aggregate of 18,601 options issued upon conversion of options
granted by MRI during fiscal year 1996 prior to the Distribution.
8
(5) Based on an aggregate of 947,522 options granted by the Company in fiscal
1996 after the Distribution.
(6) The Potential Realizable Values are calculated as follows: Market Price at
Grant x (1 + Stock Price Appreciation Rate)]--Exercise Price x Number of
Underlying Shares. The Potential Realizable Values are based on annualized
compound rates of increase over a five-year term, with annual appreciation
rates of 5% and 10%, respectively.
AGGREGATED OPTION EXERCISES IN
FISCAL 1996 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 1996 by the Named
Executives and the value of unexercised options to purchase Company Common
Stock held at June 1, 1996. There were no Company or MRI SARs outstanding
during fiscal 1996.
VALUE OF
NUMBER OF UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
FY-END(#) FY-END($)(2)
SHARES VALUE -------------- -------------
ACQUIRED ON REALIZED EXERCISABLE/ EXERCISABLE/
NAME EXERCISE(#) ($)(1) UNEXERCISABLE UNEXERCISABLE
---- ----------- -------- -------------- -------------
G. A. Davenport....................... 30,303 0 12,116/280,642 4,470/6,485
K. W. Engwall......................... 1,672 0 6,482/58,005 2,838/2,812
J. D. Underhill....................... 1,672 0 8,063/62,891 0/0
G. L. Anderson........................ 394 0 0/53,939 0/0
C. L. Kolesar......................... 627 0 0/54,668 0/0
- --------
(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 June 1, 1996 is calculated
as follows: [(Per Share Closing Sale Price on May 31, 1996) - (Per Share
Exercise Price)] x Number of Shares Subject to Unexercised Options. The
per share closing sale price on May 31, 1996, the last trading day of
fiscal 1996, was $14.38.
RETIREMENT PLAN
Following the Distribution and in conjunction therewith, the Company became
a co-sponsor of the Morrison Restaurants Inc. Retirement Plan (the "Retirement
Plan"). Under the Retirement Plan, participants are entitled to receive
benefits based upon salary and length of service. The Retirement Plan was
frozen as of December 31, 1987, so that no additional benefits have accrued,
and no new participants have been permitted since that date. The Retirement
Plan is a tax-qualified, funded, defined benefit plan, which covers employees
of the Company who had attained age 21 and had completed at least one year of
full-time service with MRI by July 1, 1987. A participant's accrued annual
benefit is determined generally by adding A and B below, as applicable:
(A) 1/4 percent of pay up to that year's Social Security Wage Base, plus
1-1/4 percent of pay over the Social Security Wage Base for each credited
year of service (as defined in the Retirement Plan) commencing on or
after January 1, 1986; and
(B) 1/4 percent of average pay for the highest consecutive five years from
1976 through 1985 up to $14,400, plus 1-1/4 percent of such pay in
excess of $14,400, both multiplied by the number of credited years of
service with MRI up to January 1, 1986.
Normal retirement for purposes of the Retirement Plan is age 65, although a
participant with at least five years of service may retire with a reduced
benefit as early as age 55. Generally, benefits are paid in the form of a
single life annuity if the participant is unmarried or a joint and survivor
annuity if the participant is married, unless an alternative form of benefit
payment is selected by the participant from among a range of options made
available under the Retirement Plan. A participant's accrued benefit becomes
vested upon completion of five years of service after age 18.
9
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., the successor to MRI, from liability for benefits
accrued prior to the Distribution under the MRI Executive Supplemental Pension
Plan. (However, both Ruby Tuesday, Inc. and MFCI have agreed to be secondarily
liable for certain benefits accrued under the ESPP to the extent of the
amounts these employees had earned under the MRI Executive Supplemental
Pension Plan as of the Distribution.) As a condition of entry to the ESPP,
future participants must complete five years of consecutive service in one or
more qualifying job positions and must have achieved a minimum salary
threshold, as described in the ESPP.
A participant's accrued benefit in the ESPP equals 2.5 percent of the
participant's highest five-year average base salary multiplied by the
participant's years and fractional years of continuous service (as defined in
the ESPP) not in excess of 20 years; plus 1 percent of the participant's
highest five-year average base salary multiplied by the participant's years
and fractional years of continuous service in excess of 20 years, but not in
excess of 30 years of such service; less the retirement benefit payable at the
age of 65 in the form of a single life annuity payable to the participant
under the Retirement Plan; and less the participant's primary Social Security
benefits. Base salary includes commissions but excludes bonuses and other
forms of remuneration other than salary. Benefits are paid to a participant in
the same manner as benefits are paid to the participant under the Retirement
Plan and become vested if the participant has completed ten years of service.
Normal retirement for purposes of the ESPP is age 65, although a participant
with at least five years of service may retire with a reduced benefit as early
as age 55. Early retirement provisions allow designated participants to
receive unreduced benefits as early as age 55 depending upon criteria
specified in the ESPP. A participant's receipt of unreduced early retirement
benefits is conditioned upon not competing with the Company for a period of
two years following retirement.
Estimated annual benefits payable upon retirement to persons in specified
remuneration and years of continuous service classifications are shown in the
following table. All amounts shown are for a single life annuity and assume
that active participation in the ESPP continues until age 65. In accordance
with the ESPP, the amounts shown are subject to reduction for Social Security
benefits and benefits received under the Retirement Plan.
EXECUTIVE SUPPLEMENTAL PENSION PLAN
ESTIMATED ANNUAL BENEFITS FOR REPRESENTATIVE YEARS OF SERVICE TO AGE 65
30 OR
ANNUAL AVERAGE BASE SALARY 10 15 20 25 MORE
- -------------------------- ------- -------- -------- -------- --------
$ 75,000.......................... $18,750 $ 28,125 $ 37,500 $ 41,250 $ 45,000
100,000.......................... 25,000 37,500 50,000 55,000 60,000
125,000.......................... 31,250 46,875 62,500 68,750 75,000
150,000.......................... 37,500 56,250 75,000 82,500 90,000
175,000.......................... 43,750 65,625 87,500 96,250 105,000
200,000.......................... 50,000 75,000 100,000 110,000 120,000
225,000.......................... 56,250 84,375 112,500 123,750 135,000
250,000.......................... 62,500 93,750 125,000 137,500 150,000
275,000.......................... 68,750 103,125 137,500 151,250 165,000
300,000.......................... 75,000 112,500 150,000 165,000 180,000
10
Years of continuing service, to the nearest year, and current remuneration
covered by the ESPP (base salary) for the eligible Named Executives are: Mr.
Davenport, 22 years, $234,134; Ms. Kolesar, 17 years, $116,112; and Mr.
Engwall, 13 years, $108,421.
MANAGEMENT RETIREMENT PLAN
Effective as of March 7, 1996, the Company adopted the Morrison Health Care,
Inc. Management Retirement Plan ("MRP") to provide for a select group of
management or highly compensated employees the security of receiving a defined
level of retirement benefits. The MRP is a nonqualified, unfunded, defined
benefit retirement plan for employees with 15 or more years of credited
service (as defined in the MRP) and whose average annual compensation over a
consecutive three calendar-year period equals or exceeds $40,000, which amount
may be adjusted by the Company from time to time. Company employees who
participated in the MRI Management Retirement Plan prior to the Distribution
are eligible to participate and receive full credit for benefit accrual
purposes for their service with MRI prior to the Distribution, provided such
employees have released Ruby Tuesday, Inc., successor to MRI, from liability
for benefits accrued prior to the Distribution under the MRI Management
Retirement Plan. (However, both Ruby Tuesday, Inc. and MFCI have both agreed
to be secondarily liable for certain benefits accrued under the MRP to the
extent of the amounts these employees had earned under the MRI Management
Retirement Plan (as of the Distribution.)
A participant's single-life annuity accrued benefit in the MRP equals 1.5
percent of the participant's average compensation determined over the five-
year period immediately preceding termination of employment multiplied by the
participant's years of credited service not in excess of 20 years; plus 2
percent of the participant's average compensation determined over the five-
year period immediately preceding termination of employment multiplied by the
participant's years of credited service in excess of 20 years, but not in
excess of 30 years; minus the sum of (a) the participant's Retirement Plan
benefits, (b) the participant's Social Security benefits, and (c) the
participant's ESPP Benefit (as defined in the MRP). For purposes of
determining a participant's accrued benefit, a year's compensation includes
commissions and bonuses, but generally no form of remuneration is counted in
excess of $100,000, which amount may be adjusted by the Company from time to
time.
Normal retirement for purposes of the MRP is age 65, although a participant
may retire with a benefit as early as age 55. Generally, benefits are paid in
the form of a single life annuity if the participant is unmarried or a joint
and survivor annuity if the participant is married. If the participant is also
entitled to benefits under the Retirement Plan, benefits payable under the MRP
must be in the same form as those payable under the Retirement Plan. The MRP
allows payment of a participant's accrued benefit, commencing as early as age
55, even if the participant terminated employment prior to attainment of age
55.
Estimated annual benefits payable upon retirement to persons in specified
remuneration and years of credited service classifications are shown in the
following table. All amounts shown are for a single life annuity and assume
that active participation continues in the MRP until age 65. In accordance
with the MRP, the amounts shown are subject to reduction for Social Security
benefits, benefits received under the Retirement Plan and benefits payable
under the ESPP. A participant is ineligible for benefits under the MRP while
receiving any long-term disability benefits.
MANAGEMENT RETIREMENT PLAN
ESTIMATED ANNUAL BENEFITS FOR REPRESENTATIVE YEARS OF SERVICE TO AGE 65
30 OR
FINAL AVERAGE SALARY 15 20 25 MORE
-------------------- ------- ------- ------- -------
$ 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
Years of credited service and salary covered by the MRP for the eligible
Named Executives are: Mr. Davenport, 22 years, $100,000; and Ms. Kolesar, 17
years, $100,000.
11
CONTRACTS WITH EXECUTIVES
The Company entered into a Change of Control Agreement (the "Change of
Control Agreement") with each of the Named Executives. The Change of Control
Agreement is designed to diminish the distraction of executives by virtue of
the personal uncertainties and risks created by a threatened or pending Change
of Control (as defined in the Change of Control Agreement and set forth below)
and to encourage their full attention and dedication to the Company currently
and in the event of any pending or threatened Change of Control.
Under the Change of Control Agreement, a "Change of Control" is defined as
either (a) certain changes in the composition of more than 20 percent of the
Board of Directors, or (b) with certain exceptions, any "Business Combination"
(as defined in the Change of Control Agreement) that has not been approved by
the holders of 80 percent or more of the Company's outstanding voting stock.
Events that do not constitute a Change of Control include (a) any Business
Combination approved by at least 80 percent of the Continuing Directors (as
defined in the Change of Control Agreement), (b) any Business Combination
transaction that satisfies certain price and procedural requirements specified
in the Company's Articles of Incorporation, and (c) any acquisition by the
Company, any of its subsidiaries, or any employee benefit plan of the Company
or any of its subsidiaries.
Prior to the first date on which a Change of Control occurs (the "Effective
Date"), each covered executive remains an at-will employee, except as may be
provided in any other agreement, and any termination of his employment will
terminate his rights under the Change of Control Agreement. If and when the
Effective Date occurs, the Company has agreed to continue the employment of
the executive, and the executive has agreed to remain in the employ of the
Company, for a three-year period (the "Employment Period") commencing on the
Effective Date. During the Employment Period, the executive (a) shall receive
an annual base salary no less than that received prior to the Effective Date
and an annual bonus no less than the average of the last three annual bonuses
received prior to the Effective Date, and (b) generally shall be entitled to
continuation of retirement, savings and welfare benefit plan participation and
practices, expense reimbursements and other fringe benefits on a basis at
least comparable to that obtaining prior to the Effective Date.
If during the Employment Period the Company terminates the executive's
employment other than for cause, death or disability, or if the executive
terminates his employment for "good reason" (as defined in the Change of
Control Agreement), or if the executive terminates his employment for any
reason during the 30-day period immediately following the first anniversary of
the Effective Date, the executive becomes entitled to receive (a) any unpaid
portion of his accrued annual base salary plus a pro rata portion of his
highest annual bonus paid or payable for the three fiscal years immediately
preceding his date of termination, (b) an amount equal to either three, two or
one times the sum of his annual base salary and his highest annual bonus,
depending upon the particular multiplier stipulated in his Change of Control
Agreement, (c) any other accrued obligations, (d) rights with respect to any
outstanding stock options granted to him prior to his date of termination or a
cash amount equal to the difference between the option price and the then
value of Company stock for which any such option was granted, and (e) certain
employee benefits consisting of retirement, savings and various health and
welfare insurance benefits. The multiplier referred to in clause (b) of the
preceding sentence is three for each of the persons named in the Summary
Compensation Table. If this package of compensation and benefits constitutes
"excess parachute payments" as defined under the Internal Revenue Code, the
Company will pay an additional amount sufficient to reimburse the executive
for all taxes payable by the executive with respect to the parachute payments.
The Company estimates that the obligations to the Named Executives as of the
date of this Proxy Statement if a Change of Control had occurred and the
employment termination provisions of the Change of Control Agreement were to
take effect immediately would be approximately as follows: Mr. Davenport,
$3,837,000; Mr. Underhill, $1,515,000; Mr. Engwall, $1,468,000; Mr. Anderson;
$1,315,000 and Mrs. Kolesar, $1,523,000. Other executives may be made subject
to a Change of Control Agreement by the Board of Directors.
12
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.
INTRODUCTION
The Company became an independent publicly held corporation in March 1996 as
a result of the distribution of its Common Stock by Morrison Restaurants Inc.
("MRI") to the MRI shareholders. For the period between the Distribution and
the end of fiscal 1996, the Company generally followed the executive
compensation policies and procedures established by the Compensation Committee
of the Board of Director of MRI. Therefore, the following focuses on the
Compensation Committee's philosophy and compensation policies as applied to
current executives compensation but does not discuss in detail the basis for
past executive compensation.
OVERALL COMPENSATION PHILOSOPHY
The Company executive compensation policies and programs emphasize
performance-based elements of executive compensation. The Company's executive
compensation programs closely align performance measures with current business
strategy and are designed to motivate executive behavior. In general, the
Company controls base salaries and compensates outstanding performance through
more highly leveraged annual and longer-term incentive programs. As a result,
the following principles apply to executive compensation:
. Base salaries are competitive with the Company's peer group of public
companies in the health care food and nutrition services industry;
. A very significant portion of executive compensation is tied to the
Company's success in meeting predetermined annual and long-term
performance goals, including the Company's profitability and
appreciation in the Company's stock price; and
. Executives are required to own specified amounts of stock in the
Company, resulting in direct linkage between executive and shareholder
interests.
The overall objectives of this strategy are to attract and retain the best
possible executive talent and to motivate the Company's executives to achieve
the goals inherent in the Company's business strategy.
The key components of the Company's executive compensation packages are base
salary, annual incentive opportunities, and equity devices. The Compensation
Committee's policies with respect to each of these elements, including the
basis for the compensation awarded to Mr. Glenn A. Davenport, the Company's
President and Chief Executive Officer, are discussed below.
BASE SALARIES
The Company's general approach for base compensation is to establish salary
ranges with midpoints which are at the 50th percentile of the competitive
market in the contract food services industry. Each salary range provides a
lower and upper limit on the value of jobs assigned to that range. However,
for its executive officers, including the President and Chief Executive
Officer and the other executives named in the Summary Compensation Table, the
Company has capped base salaries at the midpoint of the salary range. This
reflects the previously mentioned objective of controlling base salary costs
and emphasizing incentive compensation. Future adjustments to base salaries
and salary ranges will reflect average movement in the competitive market.
ANNUAL INCENTIVE COMPENSATION
The Company's annual incentive plan directly links annual incentive payments
to the accomplishment of predetermined and Board-approved financial and
operating goals. Corporate and individual performance objectives are
established at the beginning of each fiscal year.
13
Each executive's potential incentive is tied to growth in net income and/or
growth in earnings before interest and taxes, as well as certain qualitative
measures. Depending upon an executive's organizational level and
responsibilities, as well as competitive market practices, annual incentive
compensation targets range from 30 percent to 50 percent of base salary if 100
percent of predetermined corporate goals are achieved and maximums range from
60 percent to 125 percent of base salary. Performance with respect to the
measures named in the annual incentive plan for fiscal 1996 resulted in
average annual incentive compensation of 15.2 percent of base salaries for the
five executive officers named in the Summary Compensation Table. Such awards
represented approximately 12.4 percent of the total incentive awards that
could have been earned by the five executive officers. Occasionally the
Company may establish a special incentive award for an individual officer or
other employee aimed at achieving a specified performance goal.
EXECUTIVE STOCK OWNERSHIP
Believing that equity ownership plays a key role in aligning the interests
of Company personnel with Company shareholders, the Company encourages all
employees to make a personal investment in Company stock. In addition,
ownership requirements have been developed for the Company's top management
group. These objectives will be phased in over a period of five years that
commenced with Fiscal 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 100 to 175,000 shares to 325 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. During fiscal 1996, option grants ranging from
100 to 175,000 shares, for a total of 806,000 shares, were made under this
program.
Management Stock Option Program
The Company has a Management Stock Option Program for all employees. Based
on organization level, eligible employees may purchase shares of Company stock
up to established annual limits. For each share purchased, 1.15 shares will be
issued and the participant will receive a five-year option to purchase three
times the number of shares of Company stock obtained at a per share exercise
price equal to the fair market value of a share on the date of grant. The
right to purchase Common Stock under this program is conditioned on the
achievement of Corporate, Region, or Account goals, as the case may be. There
is a two-year restriction on the sale of shares acquired through this program
other than through the exercise of stock options. The Company granted options
to purchase an aggregate of 127,000 shares to employees under this program
during fiscal 1996.
The Company may occasionally grant restricted stock or other stock rights to
ensure retention of key executives or as a part of the compensation provided
to a new executive hired from outside the Company.
CHIEF EXECUTIVE OFFICER COMPENSATION
The base salary for Mr. Davenport, the Company's Chief Executive Officer,
for fiscal year 1996 was determined by the Compensation Committee of MRI in
accordance with compensation practices and policies in
14
effect at MRI. The Compensation Committee reviewed Mr. Davenport's annual base
salary and recommended, and the Board of Directors subsequently approved, an
annual base salary of $262,800 for fiscal year 1997. Mr. Davenport's annual
base salary was determined in the same manner described previously for other
executives.
Mr. Davenport is eligible to participate in the Company's annual incentive
plan under which he may earn a cash bonus determined as a percentage of his
salary if predetermined levels of net income growth are achieved by the
Company. For fiscal year 1997, the Chief Executive Officer's bonus opportunity
is 12.5 percent, 50 percent, 100 percent and 125 percent of his salary if the
Company achieves or exceeds "threshold," "target," "maximum" and "maximum
plus" net income growth, respectively, with a proportional increase in the
bonus between such performance levels.
During fiscal year 1996, pursuant to the terms of the Stock Incentive Plan,
the Compensation Committee approved a special incentive to Mr. Davenport in
the form of an opportunity to purchase Company Common Stock which, in the
aggregate, had a dollar value not in excess of two times his salary mid-point.
Mr. Davenport elected to purchase 30,303 shares of Common Stock pursuant to
this offer. As part of this opportunity, Mr. Davenport was granted option
rights to acquire three times the number of shares so purchased. This option
has a five-year term, has an exercise price of $16.50 per share and becomes
exercisable in two years (subject to acceleration for reasons specified in the
option agreement or contemplated under the terms of the Stock Incentive Plan).
Mr. Davenport is eligible to participate in the Executive Stock Option
Program described above. The Compensation Committee approved a grant of
options to purchase 175,000 shares of Common Stock to Mr. Davenport during
fiscal year 1996.
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 one time during the fiscal year. The Board of Directors approved
all decisions of the Compensation Committee during fiscal year 1996. The
members of the Compensation Committee are as follows:
Claire L. Arnold (Chairman) Dr. Benjamin F. Payton
E. Eugene Bishop Arthur R. Outlaw, Jr.
15
PERFORMANCE GRAPH
The following chart and table compare the cumulative total return of the
Company's Common Stock with the cumulative total return of the NYSE Stock
Market Index and the Index of NYSE Eating and Drinking Places Index.
COMPARISON OF RETURNS*
FOR
MORRISON HEALTH CARE, INC.
[PERFORMANCE GRAPH--TO BE INSERTED HERE]
3/11/96 4/01/96 5/01/96 5/31/96
------- ------- ------- -------
Morrison Health Care, Inc....................... $100.0 $ 90.4 $ 88.1 $ 79.8
NYSE Stock Market Index......................... $100.0 $102.4 $102.6 $104.9
NYSE Eating and Drinking Places Index........... $100.0 $ 99.2 $ 99.6 $ 97.9
- --------
* Assumes $100 invested in the common stock of the Company and comparison
groups on March 11, 1996 and reinvestment of dividends.
16
PROPOSAL 2
APPROVAL OF AMENDMENTS
TO THE 1996 STOCK INCENTIVE PLAN
The Company currently has 500,000 shares of stock reserved exclusively for
issuance pursuant to awards that may be made under the Company's 1996 Stock
Incentive Plan (the "Stock Incentive Plan"), subject to adjustment in the
event of certain changes in the Company's capitalization, mergers,
consolidations and similar events.
The Board of Directors of the Company has approved, and recommends the
shareholders of the Company approve, amendments to the Stock Incentive Plan to
(i) increase the number of shares authorized for issuance under the Stock
Incentive Plan from 500,000 to 850,000 and (ii) increase from 100,000 to
300,000 the number of shares that may be granted in the form of option or
stock appreciation rights awards during a fiscal year to any employee who is
covered by the deductibility restrictions of Section 162(m) of the Internal
Revenue Code. Shareholder approval is being sought to preserve the Company's
ability to deduct, for Federal income tax purposes, compensation expense
attributable to stock options and stock awards. Under Section 162(m) of the
Internal Revenue Code, Shareholder approval of performance-based compensation
plans (including material amendments thereto) is necessary to qualify for the
performance-based compensation exception to the limitation on a company's
ability to deduct compensation paid to certain specified individuals in excess
of $1 million. Approval of the proposed amendments to the Stock Incentive Plan
requires the affirmative vote of the holders of at least a majority of the
outstanding shares of Common Stock of the Company represented and entitled to
vote at the Annual Meeting.
The following is a description of the Stock Incentive Plan, if amended as
proposed hereby.
Reserved Shares. The shares of Common Stock reserved for issuance pursuant
to awards made or that may be made under the Stock Incentive Plan will be
850,000, of which approximately 36,000 shares were previously issued and
approximately 607,000 are subject to stock options which are outstanding. The
maximum number of shares of Common Stock with respect to which options or
stock appreciation rights may be granted during any fiscal year to any
eligible recipient who is a "covered employee," within the meaning of Section
162(m) of the Internal Revenue Code, will not exceed 300,000. The Stock
Incentive Plan provides for further adjustments to the number of shares
reserved for issuance in the event of certain recapitalizations.
Disinterested Administration. Awards under the Stock Incentive Plan are
determined by the Compensation Committee of the Board of Directors (the
"Committee"), the members of which are selected by the Board of Directors.
Only persons who satisfy the criteria of "disinterested persons" set forth in
Rule 16b-3(c) under the Exchange Act may be members of the Committee. The
Committee shall have at least two members.
Awards. The Stock Incentive Plan permits the Committee to make awards of
shares of Common Stock, awards of derivative securities related to the value
of the Common Stock and certain cash awards to directors, officers and
employees of the Company or its affiliates ("Eligible Persons"). These
discretionary awards may be made on an individual basis, or pursuant to a
program approved by the Committee for the benefit of a group of Eligible
Persons. The Stock Incentive Plan permits the Committee to make awards of a
variety of Stock Incentives (as defined below), including, but not limited to,
stock awards, options to purchase shares of Common Stock, stock appreciation
rights, so-called "cashout" or "limited stock appreciation rights" (which the
Committee may make exercisable in the event) of a Change in Control of the
Company (as defined therein) or other event), phantom shares, performance
incentive rights, dividend equivalent rights and similar rights (together,
"Stock Incentives"). Outstanding Stock Incentives may be adjusted by the
Committee to reflect certain corporate events such as corporate
reorganizations.
17
The Company anticipates that most stock awards will be restricted for some
period of time, although the Committee does have the discretion to make such
awards freely transferable at the time of grant. Stock Incentives may be made
exercisable or settled at such prices and will terminate under such terms as
will be established by the Committee. For example, options may be made
exercisable at a price equal to, less than or more than, the fair market value
of the Common Stock on the date that the option is awarded, or based upon an
average fair market value of the Common Stock at the time the option is
awarded or at the time the option is exercised. The Committee may permit an
option exercise price to be paid in cash or by the delivery of previously-
owned shares of Common Stock, or to be satisfied through a cashless exercise
executed through a broker or by having a number of shares of Common Stock
otherwise issuable at the time of exercise withheld. The Stock Incentive Plan
permits the grant of both incentive and nonqualified stock options.
Stock appreciation rights may be granted separately or in connection with
another Stock Incentive, and the Committee may provide that they are
exercisable at the discretion of the holder or that they will be paid at a
time or times certain or upon the occurrence or non-occurrence of certain
events. Stock appreciation rights may be settled in shares of Common Stock or
in cash, according to terms established by the Committee with respect to any
particular award. The Committee may make cash awards designed to cover tax
obligations of employees that result from the receipt or exercise of a Stock
Incentive.
The terms of particular Stock Incentives may provide that they terminate or
expire upon the occurrence of one or more events, including, but not limited
to, the holder's termination of employment or other status with respect to the
Company, passage of a specified period of time, the holder's death or
disability, or the occurrence of a Change in Control of the Company. Stock
Incentives may include exercise, conversion or settlement rights to a holder's
estate or legal representative in the event of the holder's death or
disability. At the Committee's discretion, Stock Incentives that are held by
an employee who suffers a termination of employment may be cancelled,
accelerated, paid or continued. The Board of Directors at any time may
terminate the Stock Incentive Plan or amend it in any respect without
shareholder approval. Amendments that may be adopted without shareholder
approval include amendments that increase the cost of the Stock Incentive Plan
to the Company or alter the allocation of benefits thereunder among executive
officers, directors and other employees. No such termination or amendment
without the consent of the holder of a Stock Incentive shall adversely affect
the rights of the holder under such Stock Incentive. The Board also may
condition any such amendment upon shareholder approval if shareholder approval
is deemed necessary or appropriate in consideration of tax, securities or
other laws.
Tax Consequences. A participant will not recognize income upon the grant of
an option or at any time prior to the exercise of the option or a portion
thereof. At the time the participant exercises a nonqualified option or
portion thereof, he or she will recognize compensation taxable as ordinary
income in an amount equal to the excess of the fair market value of the Common
Stock on the date the option is exercised over the price paid for the Common
Stock, and the Company will then be entitled to a corresponding deduction.
A participant who exercises an incentive stock option will not be taxed at
the time he or she exercises his or her option or a portion thereof. Instead,
he or she will be taxed at the time he or she sells the Common Stock purchased
pursuant to the option. The participant will be taxed on the difference
between the price he or she paid for the stock and the amount for which he or
she sells the stock. If the participant does not sell the stock prior to two
years from the date of grant of the option and one year from the date the
stock is transferred to him or her, the gain will be capital gain and the
Company will not be entitled to a corresponding deduction. If the participant
sells the stock at a gain prior to that time, the difference between the
amount the participant paid for the stock and the lesser of the fair market
value on the date of exercise or the amount for which the stock is sold will
be taxed as ordinary income and the Company will be entitled to a
corresponding deduction. If the stock is sold for an amount in excess of the
fair market value on the date of exercise, the excess amount is taxed as
capital gain. If the participant sells the stock for less than the amount he
or she paid for the stock prior to the one or two year periods indicated, no
amount will be taxed as ordinary income and the loss will be taxed as a
capital loss. Exercise of an incentive option may subject a participant to, or
increase a participant's liability for, the alternative minimum tax.
18
A participant generally will not recognize income upon the grant of a stock
appreciation right, dividend equivalent right, performance unit award or
phantom share (the "Equity Incentives"). At the time a participant receives
payment under any Equity Incentive, he or she generally will recognize
compensation taxable as ordinary income in an amount equal to the cash or the
fair market value of the Common Stock received, and the Company then will be
entitled to a corresponding deduction.
A participant will not be taxed upon the grant of a stock award if such
award is not transferable by the participant or is subject to a "substantial
risk of forfeiture," as defined in the Internal Revenue Code. However, when
the shares of Common Stock that are subject to the stock award are
transferable by the participant and are no longer subject to a substantial
risk of forfeiture, the participant will recognize compensation taxable as
ordinary income in an amount equal to the fair market value of the stock
subject to the stock award, less any amount paid for such stock, and the
Company then will be entitled to a corresponding deduction. However, if a
participant so elects at the time of receipt of a stock award, he or she may
include the fair market value of the stock subject to the stock award, less
any amount paid for such stock, in income at that time and the Company also
will be entitled to a corresponding deduction at that time.
The Stock Incentive Plan is not qualified under Section 401(a) of the
Internal Revenue Code.
The following table sets forth information regarding stock options granted
under the Stock Incentive Plan during fiscal year 1996 to each of the Named
Executives, all persons who serve as executive officers of the Company as a
group, and all persons who are employees of the Company as a group.
OPTIONS TO
PURCHASE
COMPANY
COMMON
NAME AND POSITION WITH THE COMPANY OR GROUP STOCK (#)
------------------------------------------- ----------
G.A. Davenport ........................................................... 267,551
President and Chief Executive Officer
J.D. Underhill ........................................................... 56,731
Senior Vice President, Retail Development
G.L. Anderson ............................................................ 51,182
Senior Vice President
C.L. Kolesar ............................................................. 51,881
Senior Vice President
K.W. Engwall ............................................................. 55,583
Senior Vice President, Finance and Assistant Secretary
All executive officers of the Company as a group.......................... 556,833
All directors who are not executive officers of the Company as a group.... 480
All other employees of the Company as a group............................. 409,290
19
INDEPENDENT AUDITORS
The firm of Ernst & Young LLP served as the Company's independent auditors
for fiscal year 1996. Representatives of Ernst & Young LLP will be present at
the Annual Meeting to respond to appropriate questions and will have an
opportunity to make a statement if they so desire.
The appointment of auditors is a matter for determination by the Board of
Directors for which no shareholder approval or ratification is necessary. The
Board of Directors has selected the firm of Ernst & Young LLP to audit the
books of the Company for fiscal year 1997.
SHAREHOLDER PROPOSALS
Any shareholder of the Company wishing to submit a proposal for action at
the Company's 1997 Annual Meeting of Shareholders and desiring the proposal to
be considered for inclusion in the Company's proxy materials must provide a
written copy of the proposal to the management of the Company at its principal
executive office not later than April 25, 1997, and must otherwise comply with
rules of the Securities and Exchange Commission relating to shareholder
proposals.
GENERAL
Management does not know of any other business to come before the Annual
Meeting. If, however, other matters do properly come before the Annual
Meeting, it is the intention of the persons named in the accompanying proxy to
vote on such matters in accordance with their best judgment.
A list of shareholders entitled to be present and vote at the Annual Meeting
will be available for inspection by the shareholders at the time and place of
the Annual Meeting.
The Annual Report of the Company for fiscal year 1996 (which is not part of
the proxy soliciting material) is being mailed with this proxy statement to
all shareholders of record as of the record date for the Annual Meeting.
THE COMPANY WILL, UPON THE WRITTEN REQUEST OF ANY SHAREHOLDER, FURNISH
WITHOUT CHARGE A COPY OF ITS ANNUAL REPORT ON FORM 10-K WITHOUT EXHIBITS FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION FOR THE YEAR ENDED JUNE 1, 1996.
REQUESTS FOR COPIES SHOULD BE DIRECTED TO THE SHAREHOLDERS' RELATION
DEPARTMENT, MORRISON HEALTH CARE, INC., 1955 LAKE PARK DRIVE, S.E., SUITE 400,
SMYRNA, GEORGIA 30080-8855.
By Order of the Board of Directors,
/s/ JOHN E. FOUNTAIN
-----------------------------------
John E. Fountain
Vice President, General Counsel
and Secretary
August 23, 1996
Atlanta, Georgia
20
MORRISON HEALTH CARE, INC.
1996 STOCK INCENTIVE PLAN
TABLE OF CONTENTS
Page
----
SECTION 1 DEFINITIONS............................................... 1
1.1 Definitions........................................... 1
SECTION 2 THE STOCK INCENTIVE PLAN.................................. 4
2.1 Purpose of the Plan................................... 4
2.2 Stock Subject to the Plan............................. 4
2.3 Administration of the Plan............................ 4
2.4 Eligibility and Limits................................ 5
SECTION 3 TERMS OF STOCK INCENTIVES................................. 5
3.1 Terms and Conditions of All Stock Incentives.......... 5
3.2 Terms and Conditions of Options....................... 7
(a) Option Price...................................... 7
(b) Option Term....................................... 7
(c) Payment........................................... 7
(d) Conditions to the Exercise of an Option........... 8
(e) Termination of Incentive Stock Option............. 8
(f) Special Provisions for Certain Substitute Options. 8
3.3 Terms and Conditions of Stock Appreciation Rights..... 8
(a) Payment........................................... 9
(b) Conditions to Exercise............................ 9
3.4 Terms and Conditions of Stock Awards.................. 9
3.5 Terms and Conditions of Dividend Equivalent Rights.... 9
(a) Payment........................................... 9
(b) Conditions to Payment............................. 9
3.6 Terms and Conditions of Performance Unit Awards....... 10
(a) Payment........................................... 10
(b) Conditions to Payment............................. 10
3.7 Terms and Conditions of Phantom Shares................ 10
(a) Payment........................................... 10
(b) Conditions to Payment............................. 10
3.8 Treatment of Awards Upon Termination of Service....... 10
SECTION 4 RESTRICTIONS ON STOCK..................................... 11
4.1 Escrow of Shares...................................... 11
4.2 Forfeiture of Shares.................................. 11
4.3 Restrictions on Transfer.............................. 11
SECTION 5 GENERAL PROVISIONS........................................ 11
5.1 Withholding.......................................... 11
5.2 Changes in Capitalization; Merger; Liquidation....... 12
5.3 Cash Awards.......................................... 13
5.4 Compliance with Code................................. 13
5.5 Right to Terminate Service........................... 13
5.6 Restrictions on Delivery and Sale of Shares; Legends. 13
5.7 Non-alienation of Benefits........................... 13
5.8 Termination and Amendment of the Plan................ 14
5.9 Stockholder Approval................................. 14
5.10 Choice of Law........................................ 14
5.11 Effective Date of Plan............................... 14
MORRISON HEALTH CARE, INC.
1996 STOCK INCENTIVE PLAN
SECTION 1 DEFINITIONS
1.1 Definitions. Whenever used herein, the masculine pronoun shall be
deemed to include the feminine, and the singular to include the plural, unless
the context clearly indicates otherwise, and the following capitalized words and
phrases are used herein with the meaning thereafter ascribed:
(a) "Board of Directors" means the board of directors of the Company.
(b) "Cause" has the same meaning as provided in the employment
agreement between the Participant and the Company or, if applicable, any
affiliate of the Company on the date of Termination of Service, or if no such
definition or employment agreement exists, "Cause" means conduct amounting to
(1) fraud or dishonesty against the Company or its affiliates, (2) Participant's
willful misconduct, repeated refusal to follow the reasonable directions of the
board of directors of the Company or its affiliates, or knowing violation of law
in the course of performance of the duties of Participant's service with the
Company or its affiliates, (3) repeated absences from work without a reasonable
excuse, (4) repeated intoxication with alcohol or drugs while on the Company or
affiliates' premises during regular business hours, (5) a conviction or plea of
guilty or nolo contendere to a felony or a crime involving dishonesty, or (6) a
breach or violation of the terms of any agreement to which Participant and the
Company or its affiliates are party.
(c) "Change in Control" means any event that pursuant to the Company's
Certificate of Incorporation, as amended from time to time, requires the
affirmative vote of the holders of not less than eighty percent (80%) of the
Voting Stock (as defined therein); provided, however, that no event shall
constitute a Change in Control if approved by the Board of Directors a majority
of whom are present directors and new directors. For purposes of the preceding
sentence, the term "present directors" means individuals who as of the date this
Plan is adopted were members of the Board of Directors and the term "new
directors" means any director whose election by the Board of Directors in the
event of vacancy or whose nomination for election was approved by a vote of at
least three-fourths of the directors then still in office who are present
directors and new directors; provided that any director elected to the Board of
Directors solely to avoid or settle a threatened or actual proxy contest shall
in no event be deemed to be a new director.
(d) "Code" means the Internal Revenue Code of 1986, as amended.
(e) "Committee" means the committee appointed by the Board of
Directors to administer the Plan pursuant to Plan Section 2.3.
(f) "Company" means Morrison Health Care, Inc., a Georgia corporation.
1
(g) "Disability" has the same meaning as provided in the long-term
disability plan or policy maintained or, if applicable, most recently
maintained, by the Company or, if applicable, any affiliate of the Company for
the Participant. If no long-term disability plan or policy was ever maintained
on behalf of the Participant or, if the determination of Disability relates to
an Incentive Stock Option, Disability shall mean that condition described in
Code Section 22(e)(3), as amended from time to time. In the event of a dispute,
the determination of Disability shall be made by the Board of Directors and
shall be supported by advice of a physician competent in the area to which such
Disability relates.
(h) "Disposition" means any conveyance, sale, transfer, assignment,
pledge or hypothecation, whether outright or as security, inter vivos or
testamentary, with or without consideration, voluntary or involuntary.
(i) "Dividend Equivalent Rights" means certain rights to receive cash
payments as described in Plan Section 3.5.
(j) "Fair Market Value" with regard to a date means the closing price
at which Stock shall have been sold on the last trading date prior to that date
as reported by a national securities exchange selected by the Committee on which
the shares of Stock are then actively traded and published in The Wall Street
Journal; provided that, for purposes of granting awards other than Incentive
Stock Options, Fair Market Value of the shares of Stock may be determined by the
Committee by reference to the average market value determined over a period
certain or as of specified dates, to a tender offer price for the shares of
Stock (if settlement of an award is triggered by such an event) or to any other
reasonable measure of fair market value.
(k) "Incentive Stock Option" means an incentive stock option, as
defined in Code Section 422, described in Plan Section 3.2.
(l) "Non-Qualified Stock Option" means a stock option, other than an
option qualifying as an Incentive Stock Option, described in Plan Section 3.2.
(m) "Option" means a Non-Qualified Stock Option or an Incentive Stock
Option.
(n) "Over 10% Owner" means an individual who at the time an Incentive
Stock Option is granted owns Stock possessing more than 10% of the total
combined voting power of the Company or one of its Parents or Subsidiaries,
determined by applying the attribution rules of Code Section 424(d).
(o) "Parent" means any corporation (other than the Company) in an
unbroken chain of corporations ending with the Company if, with respect to
Incentive Stock Options, at the time of granting of the Option, each of the
corporations other than the Company owns stock possessing 50% or more of the
total combined voting power of all classes of stock in one of the other
corporations in the chain.
(p) "Participant" means an individual who receives a Stock Incentive
hereunder.
2
(q) "Performance Unit Award" refers to a performance unit award
described in Plan Section 3.6.
(r) "Phantom Shares" refers to the rights described
in Plan Section 3.7.
(s) "Plan" means the Morrison Health Care, Inc. 1996 Stock Incentive
Plan. If the Company's Certificate of Incorporation is amended to change the
name of the Company, the Plan shall thereafter be formally titled using the new
name of the Company followed by the phrase "1996 Stock Incentive Plan."
(t) "Stock" means the Company's common stock, $.01 par value.
(u) "Stock Appreciation Right" means a stock appreciation right
described in Plan Section 3.3.
(v) "Stock Award" means a stock award described in Plan Section 3.4.
(w) "Stock Incentive Agreement" means an agreement between the Company
and a Participant or other documentation evidencing an award of a Stock
Incentive.
(x) "Stock Incentive Program" means a written program established by
the Committee pursuant to which Stock Incentives, other than Options or Stock
Appreciation Rights, are awarded under the Plan under uniform terms, conditions
and restrictions set forth in such written program and distributed among
eligible officers, employees and directors.
(y) "Stock Incentives" means, collectively, Dividend Equivalent
Rights, Incentive Stock Options, Non-Qualified Stock Options, Performance Unit
Awards, Phantom Shares, Stock Appreciation Rights and Stock Awards.
(z) "Subsidiary" means any corporation (other than the Company) in an
unbroken chain of corporations beginning with the Company if, with respect to
Incentive Stock Options, at the time of the granting of the Option, each of the
corporations other than the last corporation in the unbroken chain owns stock
possessing 50% or more of the total combined voting power of all classes of
stock in one of the other corporations in the chain.
(aa)"Termination of Service" means the termination of either the
employee-employer or director relationship, as the case may be, between a
Participant and the Company and its affiliates, regardless of the fact that
severance or similar payments are made to the Participant, for any reason,
including, but not by way of limitation, a termination by resignation,
discharge, death, Disability or retirement. The Committee shall, in its
absolute discretion, determine the effect of all matters and questions relating
to Termination of Service, including, but not by way of limitation, the question
of whether a leave of absence constitutes a Termination of Service, or whether a
Termination of Service is for Cause.
3
SECTION 2 THE STOCK INCENTIVE PLAN
2.1 Purpose of the Plan. The Plan is intended to (a) provide
incentive to officers, employees and directors of the Company and its
affiliates to stimulate their efforts toward the continued success of the
Company and to operate and manage the business in a manner that will provide
for the long-term growth and profitability of the Company; (b) encourage stock
ownership by officers, employees and directors by providing them with a means
to acquire a proprietary interest in the Company by acquiring shares of Stock
or to receive compensation which is based upon appreciation in the value of
Stock; and (c) provide a means of obtaining and rewarding key personnel.
2.2 Stock Subject to the Plan. Subject to adjustment in accordance
with Section 5.2, 500,000 shares of Stock (the "Maximum Plan Shares") are
hereby reserved exclusively for issuance pursuant to Stock Incentives. At no
time shall the Company have outstanding Stock Incentives and shares of Stock
issued in respect of Stock Incentives in excess of the Maximum Plan Shares; for
this purpose, the outstanding Stock Incentives and shares of Stock issued in
respect of Stock Incentives shall be computed in accordance with Rule 16b-
3(a)(1) as promulgated under the Securities Exchange Act of 1934, as amended
from time to time. To the extent permitted by Rule 16b-3(a)(1) as promulgated
under the Securities Exchange Act of 1934, the shares of Stock attributable to
the nonvested, unpaid, unexercised, unconverted or otherwise unsettled portion
of any Stock Incentive that is forfeited or cancelled or expires or terminates
for any reason without becoming vested, paid, exercised, converted or otherwise
settled in full shall again be available for purposes of the Plan.
2.3 Administration of the Plan. The Plan shall be administered by
the Committee. The Committee shall have full authority in its discretion to
determine the officers, employees and directors of the Company or its affiliates
to whom Stock Incentives shall be granted and the terms and provisions of Stock
Incentives, subject to the Plan. Subject to the provisions of the Plan, the
Committee shall have full and conclusive authority to interpret the Plan; to
prescribe, amend and rescind rules and regulations relating to the Plan; to
determine the terms and provisions of the respective Stock Incentive Agreements
or Stock Incentive Programs and to make all other determinations necessary or
advisable for the proper administration of the Plan. The Committee's
determinations under the Plan need not be uniform and may be made by it
selectively among persons who receive, or are eligible to receive, awards under
the Plan (whether or not such persons are similarly situated). The Committee's
decisions shall be final and binding on all Participants.
As to any matter involving a Participant who is not a "reporting
person" for purposes of Section 16 of the Securities Exchange Act of 1934,
Committee may delegate to any member of the Board of Directors or officer of the
Company the administrative authority to (a) interpret the provisions of the
Participant's Stock Incentive Agreement and (b) determine the treatment of Stock
Incentives upon a Termination of Service, as contemplated by Plan Section 3.8.
Prior to the date the Stock of the Company is distributed to the
stockholders of Morrison Restaurants Inc., the Committee shall consist of the
then current members of the Board of Directors; thereafter, the Committee shall
consist of at least two members of the Board of Directors each of whom, during
those periods that the Company is subject to the provisions of Section 16 of the
4
Securities Exchange Act of 1934, shall qualify as a "disinterested person," as
defined in Rule 16b-3 as promulgated under the Securities Exchange Act of 1934
and as an "outside director," within the meaning of Code Section 162(m) and the
regulations promulgated thereunder. The Board of Directors may from time to
time remove members from or add members to the Committee. Vacancies on the
Committee shall be filled by the Board of Directors.
2.4 Eligibility and Limits. Stock Incentives may be granted only to
officers, employees and directors of the Company or an affiliate (including, but
not limited to, Morrison Restaurants Inc. and Morrison Fresh Cooking, Inc.;
provided, however, that directors who serve on the Committee shall not be
eligible to receive awards that are subject to Section 16 of the Securities
Exchange Act of 1934 while they are members of the Committee and that an
Incentive Stock Option may only be granted to an employee of the Company or any
Parent or Subsidiary. In the case of Incentive Stock Options, the aggregate
Fair Market Value (determined as at the date an Incentive Stock Option is
granted) of stock with respect to which stock options intended to meet the
requirements of Code Section 422 become exercisable for the first time by an
individual during any calendar year under all plans of the Company and its
Parents and Subsidiaries shall not exceed $100,000; provided further, that if
the limitation is exceeded, the Incentive Stock Option(s) which cause the
limitation to be exceeded shall be treated as Non-Qualified Stock Option(s). To
the extent required under Code Section 162(m) and regulations thereunder for
compensation to be treated as qualified performance-based compensation, the
maximum number of shares Stock with respect to which Options or Stock
Appreciation Rights may be granted during any single fiscal year of the Company
to any Participant who is a "covered employee," within the meaning of Code
Section 162(m) and the regulations promulgated thereunder (a "Covered
Employee"), shall not exceed 100,000.
SECTION 3 TERMS OF STOCK INCENTIVES
3.1 Terms and Conditions of All Stock Incentives.
(a) The number of shares of Stock as to which a Stock Incentive shall
be granted shall be determined by the Committee in its sole discretion, subject
to the provisions of Section 2.2 as to the total number of shares available for
grants under the Plan. If a Stock Incentive Agreement so provides, a
Participant may be granted a new Option to purchase a number of shares of Stock
equal to the number of previously owned shares of Stock tendered in payment of
the Exercise Price (as defined below) for each share of Stock purchased pursuant
to the terms of the Stock Incentive Agreement.
(b) Each Stock Incentive shall be evidenced either by a Stock
Incentive Agreement in such form and containing such terms, conditions and
restrictions as the Committee may determine is appropriate or be made subject to
the terms of a Stock Incentive Program, containing such terms, conditions and
restrictions as the Committee may determine is appropriate. Each Stock
Incentive Agreement or Stock Incentive Program shall be subject to the terms of
the Plan and any provision in a Stock Incentive Agreement or Stock Incentive
Program that is inconsistent with the Plan shall be null and void.
5
(c) The date a Stock Incentive is granted shall be the date on which
the Committee has approved the terms and conditions of the Stock Incentive
Agreement or Stock Incentive Program and has determined the recipient of the
Stock Incentive and the number of shares covered by the Stock Incentive and has
taken all such other action necessary to complete the grant of the Stock
Incentive.
(d) The Committee may provide in any Stock Incentive Agreement or
pursuant to any Stock Incentive Program (or subsequent to the award of a Stock
Incentive but prior to its expiration or cancellation, as the case may be) that,
in the event of a Change in Control, the Stock Incentive shall or may be cashed
out on the basis of any price not greater than the highest price paid for a
share of Stock in any transaction reported by any national securities exchange
selected by the Committee on which the shares of Stock are then actively traded
during a specified period immediately preceding or including the date of the
Change in Control or offered for a share of Stock in any tender offer occurring
during a specified period immediately preceding or including the date the tender
offer commences; provided that, in no case shall any such specified period
exceed one (1) year (the "Change in Control Price"). For purposes of this
Subsection, the cash-out of a Stock Incentive shall be determined as follows:
(i) Options shall be cashed out on the basis of the excess, if
any, of the Change in Control Price (but not more than the Fair Market Value of
the Stock on the date of the cash-out in the case of Incentive Stock Options)
over the Exercise Price with or without regard to whether the Option may
otherwise be exercisable only in part;
(ii) Stock Awards and Phantom Shares shall be cashed out in an
amount equal to the Change in Control Price with or without regard to any
conditions or restrictions otherwise applicable to any such Stock Incentive; and
(iii) Stock Appreciation Rights, Dividend Equivalent Rights and
Performance Unit Awards shall be cashed out with or without regard to any
conditions or restrictions otherwise applicable to any such Stock Incentive and
the amount of the cash out shall be determined by reference to the number of
shares of Stock that would be required to pay the Participant in kind for the
value of the Stock Incentive as of the date of the Change in Control multiplied
by the Change in Control Price.
(e) Any Stock Incentive may be granted in connection with all or any
portion of a previously or contemporaneously granted Stock Incentive. Exercise
or vesting of a Stock Incentive granted in connection with another Stock
Incentive may result in a pro rata surrender or cancellation of any related
Stock Incentive, as specified in the applicable Stock Incentive Agreement or
Stock Incentive Program.
(f) Stock Incentives shall not be transferable or assignable except
by will or by the laws of descent and distribution and shall be exercisable,
during the Participant's lifetime, only by the Participant; in the event of the
Disability of the Participant, by the legal representative of the Participant;
or in the event of the death of the participant, by the personal representative
of the
6
Participant's estate or if no personal representative has been appointed, by the
successor in interest determined under the Participant's will.
3.2 Terms and Conditions of Options. Each Option granted under the
Plan shall be evidenced by a Stock Incentive Agreement. At the time any Option
is granted, the Committee shall determine whether the Option is to be an
Incentive Stock Option or a Non-Qualified Stock Option, and the Option shall be
clearly identified as to its status as an Incentive Stock Option or a Non-
Qualified Stock Option. At the time any Incentive Stock Option is exercised,
the Company shall be entitled to place a legend on the certificates representing
the shares of Stock purchased pursuant to the Option to clearly identify them as
shares of Stock purchased upon exercise of an Incentive Stock Option. An
Incentive Stock Option may only be granted within ten (10) years from the
earlier of the date the Plan, as amended and restated, is adopted or approved by
the Company's stockholders.
(a) Option Price. Subject to adjustment in accordance with
Section 5.2 and the other provisions of this Section 3.2, the exercise price
(the "Exercise Price") per share of Stock purchasable under any Option shall be
as set forth in the applicable Stock Incentive Agreement. With respect to each
grant of an Incentive Stock Option to a Participant who is not an Over 10% Owner
or to each grant of any Option to a Participant who is then a Covered Employee,
the Exercise Price per share shall not be less than the Fair Market Value on the
date the Option is granted. With respect to each grant of an Incentive Stock
Option to a Participant who is an Over 10% Owner, the Exercise Price shall not
be less than 110% of the Fair Market Value on the date the Option is granted.
(b) Option Term. The term of an Option shall be as specified in
the applicable Stock Incentive Agreement; provided, however that any Incentive
Stock Option granted to a Participant who is not an Over 10% Owner shall not be
exercisable after the expiration of ten (10) years after the date the Option is
granted and any Incentive Stock Option granted to an Over 10% Owner shall not be
exercisable after the expiration of five (5) years after the date the Option is
granted.
(c) Payment. Payment for all shares of Stock purchased pursuant
to exercise of an Option shall be made in any form or manner authorized by the
Committee in the Stock Incentive Agreement or by amendment thereto, including,
but not limited to, cash or, if the Stock Incentive Agreement provides, (i) by
delivery to the Company of a number of shares of Stock which have been owned by
the holder for at least six (6) months prior to the date of exercise having an
aggregate Fair Market Value of not less than the product of the Exercise Price
multiplied by the number of shares the Participant intends to purchase upon
exercise of the Option on the date of delivery; (ii) in a cashless exercise
through a broker; or (iii) by having a number of shares of Stock withheld, the
Fair Market Value of which as of the date of exercise is sufficient to satisfy
the Exercise Price. In its discretion, the Committee also may authorize (at the
time an Option is granted or thereafter) Company financing to assist the
Participant as to payment of the Exercise Price on such terms as may be offered
by the Committee in its discretion. Payment shall be made at the time that the
Option or any part thereof is exercised, and no shares shall be issued or
delivered upon exercise of
7
an option until full payment has been made by the Participant. The holder of an
Option, as such, shall have none of the rights of a stockholder.
(d) Conditions to the Exercise of an Option. Each Option granted
under the Plan shall be exercisable by whom, at such time or times, or upon the
occurrence of such event or events, and in such amounts, as the Committee shall
specify in the Stock Incentive Agreement; provided, however, that subsequent to
the grant of an Option, the Committee, at any time before complete termination
of such Option, may accelerate the time or times at which such Option may be
exercised in whole or in part, including, without limitation, upon a Change in
Control and may permit the Participant or any other designated person to
exercise the Option, or any portion thereof, for all or part of the remaining
Option term notwithstanding any provision of the Stock Incentive Agreement to
the contrary.
(e) Termination of Incentive Stock Option. With respect to an
Incentive Stock Option, in the event of the Termination of Service of a
Participant, the Option or portion thereof held by the Participant which is
unexercised shall expire, terminate, and become unexercisable no later than the
expiration of three (3) months after the date of Termination of Service;
provided, however, that in the case of a holder whose Termination of Service is
due to death or Disability, one (1) year shall be substituted for such three (3)
month period. For purposes of this Subsection (e), Termination of Service of
the Participant shall not be deemed to have occurred if the Participant is
employed by another corporation (or a parent or subsidiary corporation of such
other corporation) which has assumed the Incentive Stock Option of the
Participant in a transaction to which Code Section 424(a) is applicable.
(f) Special Provisions for Certain Substitute Options.
Notwithstanding anything to the contrary in this Section 3.2, any Option issued
in substitution for an option previously issued by another entity, which
substitution occurs in connection with a transaction to which Code Section
424(a) is applicable, may provide for an exercise price computed in accordance
with such Code Section and the regulations thereunder and may contain such other
terms and conditions as the Committee may prescribe to cause such substitute
Option to contain as nearly as possible the same terms and conditions (including
the applicable vesting and termination provisions) as those contained in the
previously issued option being replaced thereby.
3.3 Terms and Conditions of Stock Appreciation Rights. Each Stock
Appreciation Right granted under the Plan shall be evidenced by a Stock
Incentive Agreement. A Stock Appreciation Right may be granted in connection
with all or any portion of a previously or contemporaneously granted Stock
Incentive or not in connection with a Stock Incentive. A Stock Appreciation
Right shall entitle the Participant to receive the excess of (a) the Fair Market
Value of a specified or determinable number of shares of the Stock at the time
of payment or exercise over (b) a specified price (i) which, in the case of a
Stock Appreciation Right granted in connection with an Option, shall be not less
than the Exercise Price for that number of shares and (ii) which, in the case of
a Stock Appreciation Right that is granted to a Participant who is then a
Covered Employee, shall not be less than the Fair Market Value of the Stock at
the time of the award. A Stock Appreciation Right granted in connection with a
Stock Incentive may only be exercised to the extent that the related Stock
Incentive has not been exercised, paid or otherwise settled. The exercise of a
Stock
8
Appreciation Right granted in connection with a Stock Incentive shall result in
a pro rata surrender or cancellation of any related Stock Incentive to the
extent the Stock Appreciation Right has been exercised.
(a) Settlement. Upon settlement of a Stock Appreciation Right, the
Company shall pay to the Participant the appreciation in cash or shares of Stock
(valued at the aggregate Fair Market Value on the date of payment or exercise)
as provided in the Stock Incentive Agreement or, in the absence of such
provision, as the Committee may determine.
(b) Conditions to Exercise. Each Stock Appreciation Right granted
under the Plan shall be exercisable or payable at such time or times, or upon
the occurrence of such event or events, and in such amounts, as the Committee
shall specify in the Stock Incentive Agreement; provided, however, that
subsequent to the grant of a Stock Appreciation Right, the Committee, at any
time before complete termination of such Stock Appreciation Right, may
accelerate the time or times at which such Stock Appreciation Right may be
exercised or paid in whole or in part.
3.4 Terms and Conditions of Stock Awards. The number of shares of
Stock subject to a Stock Award and restrictions or conditions on such shares, if
any, shall be as the Committee determines, and the certificate for such shares
shall bear evidence of any restrictions or conditions. Subsequent to the date
of the grant of the Stock Award, the Committee shall have the power to permit,
in its discretion, an acceleration of the expiration of an applicable
restriction period with respect to any part or all of the shares awarded to a
Participant. The Committee may require a cash payment from the Participant in
an amount no greater than the aggregate Fair Market Value of the shares of Stock
awarded determined at the date of grant in exchange for the grant of a Stock
Award or may grant a Stock Award without the requirement of a cash payment.
3.5 Terms and Conditions of Dividend Equivalent Rights. A Dividend
Equivalent Right shall entitle the Participant to receive payments from the
Company in an amount determined by reference to any cash dividends paid on a
specified number of shares of Stock to Company stockholders of record during the
period such rights are effective. The Committee may impose such restrictions
and conditions on any Dividend Equivalent Right as the Committee in its
discretion shall determine, including the date any such right shall terminate
and may reserve the right to terminate, amend or suspend any such right at any
time.
(a) Payment. Payment in respect of a Dividend Equivalent Right may be
made by the Company in cash or shares of Stock (valued at Fair Market Value on
the date of payment) as provided in the Stock Incentive Agreement or, in the
absence of such provision, as the Committee may determine.
(b) Conditions to Payment. Each Dividend Equivalent Right granted
under the Plan shall be payable at such time or times, or upon the occurrence of
such event or events, and in such amounts, as the Committee shall specify in the
Stock Incentive Agreement or Stock Incentive Program; provided, however, that
subsequent to the grant of a Dividend Equivalent Right, the Committee, at any
time before complete termination of such Dividend Equivalent Right, may
accelerate the time or times at which such Dividend Equivalent Right may be paid
in whole or in part.
9
3.6 Terms and Conditions of Performance Unit Awards. A Performance
Unit Award shall entitle the Participant to receive, at a future date, payment
of an amount equal to all or a portion of the value of a number of units (stated
in terms of a designated dollar amount per unit) granted by the Committee, all
as the Committee shall specify in the Stock Incentive Agreement or Stock
Incentive Program. At the time of the grant, the Committee must determine the
base value of each unit, the number of units subject to a Performance Unit
Award, the performance factors applicable to the determination of the ultimate
payment value of the Performance Unit Award and the period over which Company
performance shall be measured. The Committee may provide for an alternate base
value for each unit under certain specified conditions.
(a) Payment. Payment in respect of Performance Unit Awards may be
made by the Company in cash or shares of Stock (valued at Fair Market Value on
the date of payment) as provided in the Stock Incentive Agreement or Stock
Incentive Program or, in the absence of such provision, as the Committee may
determine.
(b) Conditions to Payment. Each Performance Unit Award granted under
the Plan shall be payable at such time or times, or upon the occurrence of such
event or events, and in such amounts, as the Committee shall specify in the
Stock Incentive Agreement or Stock Incentive Program; provided, however, that
subsequent to the grant of a Performance Unit Award, the Committee, at any time
before complete termination of such Performance Unit Award, may accelerate the
time or times at which such Performance Unit Award may be paid in whole or in
part.
3.7 Terms and Conditions of Phantom Shares. Phantom Shares shall
entitle the Participant to receive, at a future date, payment of an amount equal
to all or a portion of the Fair Market Value of a number of shares of Stock at
the end of a certain period, all as the Committee shall specify in the Stock
Incentive Agreement or Stock Incentive Program. At the time of the grant, the
Committee shall determine the factors which will govern the portion of the
rights so payable, including, at the discretion of the Committee, any
performance criteria that must be satisfied as a condition to payment.
(a) Payment. Payment in respect of Phantom Shares may be made by the
Company in cash or shares of Stock (valued at Fair Market Value on the date of
payment) as provided in the Stock Incentive Agreement or Stock Incentive Program
or, in the absence of such provision, as the Committee may determine.
(b) Conditions to Payment. Each Phantom Share granted under the Plan
shall be payable at such time or times, or upon the occurrence of such event or
events, and in such amounts, as the Committee shall specify in the Stock
Incentive Agreement or Stock Incentive Program; provided, however, that
subsequent to the grant of a Phantom Share, the Committee, at any time before
complete termination of such Phantom Share, may accelerate the time or times at
which such Phantom Share may be paid in whole or in part.
3.8 Treatment of Awards Upon Termination of Service. Except as
otherwise provided by Plan Section 3.2(e), any award under this Plan to a
Participant who suffers a Termination of Service may be cancelled, accelerated,
paid or continued, as provided in the Stock Incentive Agreement or Stock
Incentive Program or, in the absence of such provision, as the Committee may
determine. The portion of any award exercisable in the event of continuation or
the amount of any
10
payment due under a continued award may be adjusted by the Committee to reflect
the Participant's period of service from the date of grant through the date of
the Participant's Termination of Service or such other factors as the Committee
determines are relevant to its decision to continue the award.
SECTION 4 RESTRICTIONS ON STOCK
4.1 Escrow of Shares. Any certificates representing the shares of
Stock issued under the Plan shall be issued in the Participant's name, but, if
the Stock Incentive Agreement or Stock Incentive Program so provides, the shares
of Stock shall be held by a custodian designated by the Committee (the
"Custodian"). Each applicable Stock Incentive Agreement or Stock Incentive
Program providing for transfer of shares of Stock to the Custodian shall appoint
the Custodian as the attorney-in-fact for the Participant for the term specified
in the applicable Stock Incentive Agreement or Stock Incentive Program, with
full power and authority in the Participant's name, place and stead to transfer,
assign and convey to the Company any shares of Stock held by the Custodian for
such Participant, if the Participant forfeits the shares under the terms of the
applicable Stock Incentive Agreement or Stock Incentive Program. During the
period that the Custodian holds the shares subject to this Section, the
Participant shall be entitled to all rights, except as provided in the
applicable Stock Incentive Agreement or Stock Incentive Program, applicable to
shares of Stock not so held. Any dividends declared on shares of Stock held by
the Custodian shall, as the Committee may provide in the applicable Stock
Incentive Agreement or Stock Incentive Program, be paid directly to the
Participant or, in the alternative, be retained by the Custodian until the
expiration of the term specified in the applicable Stock Incentive Agreement or
Stock Incentive Program and shall then be delivered, together with any proceeds,
with the shares of Stock to the Participant or to the Company, as applicable.
4.2 Forfeiture of Shares. Notwithstanding any vesting schedule set
forth in any Stock Incentive Agreement or Stock Incentive Program, in the event
that the Participant violates a noncompetition agreement as set forth in the
Stock Incentive Agreement or Stock Incentive Program, all Stock Incentives and
shares of Stock issued to the holder pursuant to the Plan shall be forfeited;
provided, however, that the Company shall return to the holder the lesser of any
consideration paid by the Participant in exchange for Stock issued to the
Participant pursuant to the Plan or the then Fair Market Value of the Stock
forfeited hereunder.
4.3 Restrictions on Transfer. The Participant shall not have the
right to make or permit to exist any Disposition of the shares of Stock issued
pursuant to the Plan except as provided in the Plan or the applicable Stock
Incentive Agreement or Stock Incentive Program. Any Disposition of the shares
of Stock issued under the Plan by the Participant not made in accordance with
the Plan or the applicable Stock Incentive Agreement or Stock Incentive Program
shall be void. The Company shall not recognize, or have the duty to recognize,
any Disposition not made in accordance with the Plan and the applicable Stock
Incentive Agreement or Stock Incentive Program, and the shares so transferred
shall continue to be bound by the Plan and the applicable Stock Incentive
Agreement or Stock Incentive Program.
SECTION 5 GENERAL PROVISIONS
5.1 Withholding. The Company shall deduct from all cash
distributions under the Plan any taxes required to be withheld by federal, state
or local government. Whenever the Company
11
proposes or is required to issue or transfer shares of Stock under the Plan or
upon the vesting of any Stock Award, the Company shall have the right to require
the recipient to remit to the Company an amount sufficient to satisfy any
federal, state and local withholding tax requirements prior to the delivery of
any certificate or certificates for such shares or the vesting of such Stock
Award. A Participant may pay the withholding tax in cash, or, if the applicable
Stock Incentive Agreement or Stock Incentive Program provides, a Participant may
elect to have the number of shares of Stock he is to receive reduced by, or with
respect to a Stock Award, tender back to the Company, the smallest number of
whole shares of Stock which, when multiplied by the Fair Market Value of the
shares of Stock determined as of the Tax Date (defined below), is sufficient to
satisfy federal, state and local, if any, withholding taxes arising from
exercise or payment of a Stock Incentive (a "Withholding Election"). A
Participant may make a Withholding Election only if both of the following
conditions are met:
(a) The Withholding Election must be made on or prior to the date on
which the amount of tax required to be withheld is determined (the "Tax Date")
by executing and delivering to the Company a properly completed notice of
Withholding Election as prescribed by the Committee; and
(b) Any Withholding Election made will be irrevocable; however, the
Committee may in its sole discretion disapprove and give no effect to the
Withholding Election.
5.2 Changes in Capitalization; Merger; Liquidation.
(a) The number of shares of Stock reserved for the grant of Options,
Dividend Equivalent Rights, Performance Unit Awards, Phantom Shares, Stock
Appreciation Rights and Stock Awards; the number of shares of Stock reserved for
issuance upon the exercise or payment, as applicable, of each outstanding
Option, Dividend Equivalent Right, Performance Unit Award, Phantom Share and
Stock Appreciation Right and upon vesting or grant, as applicable, of each Stock
Award; the Exercise Price of each outstanding Option and the specified number of
shares of Stock to which each outstanding Dividend Equivalent Right, Phantom
Share and Stock Appreciation Right pertains shall be proportionately adjusted
for any increase or decrease in the number of issued shares of Stock resulting
from a subdivision or combination of shares or the payment of an ordinary stock
dividend in shares of Stock to holders of outstanding shares of Stock or any
other increase or decrease in the number of shares of Stock outstanding effected
without receipt of consideration by the Company.
(b) In the event of any merger, consolidation, extraordinary dividend
(including a spin-off), reorganization or other change in the corporate
structure of the Company or its Stock or tender offer for shares of Stock, the
Committee, in its sole discretion, may make such adjustments with respect to
awards and take such other action as it deems necessary or appropriate to
reflect or in anticipation of such merger, consolidation, extraordinary
dividend, reorganization, other change in corporate structure or tender offer,
including, without limitation, the substitution of new awards, the termination
or adjustment of outstanding awards, the acceleration of awards or the removal
of restrictions on outstanding awards. Any adjustment pursuant to this Section
5.2 may provide, in the Committee's discretion, for the elimination without
payment therefor of any fractional shares that might otherwise become subject to
any Stock Incentive.
12
(c) The existence of the Plan and the Stock Incentives granted
pursuant to the Plan shall not affect in any way the right or power of the
Company to make or authorize any adjustment, reclassification, reorganization or
other change in its capital or business structure, any merger or consolidation
of the Company, any issue of debt or equity securities having preferences or
priorities as to the Stock or the rights thereof, the dissolution or liquidation
of the Company, any sale or transfer of all or any part of its business or
assets, or any other corporate act or proceeding.
5.3 Cash Awards. The Committee may, at any time and in its discretion,
grant to any holder of a Stock Incentive the right to receive, at such times and
in such amounts as determined by the Committee in its discretion, a cash amount
which is intended to reimburse such person for all or a portion of the federal,
state and local income taxes imposed upon such person as a consequence of the
receipt of the Stock Incentive or the exercise of rights thereunder.
5.4 Compliance with Code. All Incentive Stock Options to be granted
hereunder are intended to comply with Code Section 422, and all provisions of
the Plan and all Incentive Stock Options granted hereunder shall be construed in
such manner as to effectuate that intent.
5.5 Right to Terminate Service. Nothing in the Plan or in any Stock
Incentive Agreement or Stock Incentive Program shall confer upon any Participant
the right to continue as an employee, officer or director of the Company or any
of its affiliates or affect the right of the Company or any of its affiliates to
terminate the Participant's service at any time.
5.6 Restrictions on Delivery and Sale of Shares; Legends. Each Stock
Incentive is subject to the condition that if at any time the Committee, in its
discretion, shall determine that the listing, registration or qualification of
the shares covered by such Stock Incentive upon any securities exchange or under
any state or federal law is necessary or desirable as a condition of or in
connection with the granting of such Stock Incentive or the purchase or delivery
of shares thereunder, the delivery of any or all shares pursuant to such Stock
Incentive may be withheld unless and until such listing, registration or
qualification shall have been effected. If a registration statement is not in
effect under the Securities Act of 1933 or any applicable state securities laws
with respect to the shares of Stock purchasable or otherwise deliverable under
Stock Incentives then outstanding, the Committee may require, as a condition of
exercise of any Option or as a condition to any other delivery of Stock pursuant
to a Stock Incentive, that the Participant or other recipient of a Stock
Incentive represent, in writing, that the shares received pursuant to the Stock
Incentive are being acquired for investment and not with a view to distribution
and agree that the shares will not be disposed of except pursuant to an
effective registration statement, unless the Company shall have received an
opinion of counsel that such disposition is exempt from such requirement under
the Securities Act of 1933 and any applicable state securities laws. The
Company may include on certificates representing shares delivered pursuant to a
Stock Incentive such legends referring to the foregoing representations or
restrictions or any other applicable restrictions on resale as the Company, in
its discretion, shall deem appropriate.
5.7 Non-alienation of Benefits. Other than as specifically provided
with regard to the death of a Participant, no benefit under the Plan shall be
subject in any manner to anticipation, alienation, sale, transfer, assignment,
pledge, encumbrance or charge; and any attempt to do so shall be void. No such
benefit shall, prior to receipt by the Participant, be in any manner liable for
or subject to the debts, contracts, liabilities, engagements or torts of the
Participant.
13
5.8 Termination and Amendment of the Plan. The Board of Directors at
any time may amend or terminate the Plan without stockholder approval; provided,
however, that the Board of Directors may condition any amendment on the approval
of stockholders of the Company if such approval is necessary or advisable with
respect to tax, securities or other applicable laws. No such termination or
amendment without the consent of the holder of a Stock Incentive shall adversely
affect the rights of the Participant under such Stock Incentive.
5.9 Stockholder Approval. The Plan shall be submitted to the stockholders
of both Morrison Restaurants Inc. and Morrison Health Care, Inc. for their
approval within twelve (12) months before or after its adoption by the Board of
Directors. If such approval is not obtained, any Stock Incentive granted under
the Plan shall be void.
5.10 Choice of Law. The laws of the State of Georgia shall govern the Plan,
to the extent not preempted by federal law.
5.11 Effective Date of Plan. The Plan shall become effective upon the date
the Plan is approved by the Board of Directors.
MORRISON HEALTH CARE, INC.
By: /s/ J. Russell Mothershed
__________________________________
Title: Vice President
Attest:
/s/ Pfilip G. Hunt
______________________________
Secretary
[CORPORATE SEAL]
14
FIRST AMENDMENT TO THE
MORRISON HEALTH CARE, INC. 1996 STOCK INCENTIVE PLAN
THIS FIRST AMENDMENT is made this 26th day of June, 1996, by Morrison
Health Care, Inc., a corporation duly organized and existing under the laws of
the State of Georgia (hereinafter called the "Company").
W I T N E S S E T H:
WHEREAS, the Company maintains the Morrison Health Care, Inc. 1996 Stock
Incentive Plan under an indenture which was adopted as of February 23, 1996 (the
"Plan"); and
WHEREAS, the Company desires to amend the Plan to reflect increases in the
number of shares authorized for issuance thereunder and to increase the limit on
the number of shares that may be the subject of awards granted to certain
executives during any single fiscal year of the Company; and
WHEREAS, the Board of Directors of the Company has duly approved and
authorized these amendments to the Plan;
NOW, THEREFORE, the Company does hereby amend the Plan as follows:
1. By deleting, effective March 26, 1996, the first sentence of Section 2.2 in
its entirety and by substituting therefor the following:
"Subject to adjustment in accordance with Section 5.2, 750,000 shares of
Stock (the `Maximum Plan Shares') are hereby reserved exclusively for
issuance pursuant to Stock Incentives."
2. By deleting, effective June 26, 1996, the first sentence of Section 2.2 in
its entirety and by substituting therefor the following:
"Subject to adjustment in accordance with Section 5.2, 850,000 shares of
Stock (the `Maximum Plan Shares') are hereby reserved exclusively for
issuance pursuant to Stock Incentives."
3. By deleting, effective March 26, 1996, the number "100,000" where it
appears in the last sentence of Section 2.4 and by substituting therefor the
number "300,000".
4. Except as specifically amended hereby, the Plan shall remain in full force
and effect as prior to the adoption of this First Amendment.
5. Notwithstanding the foregoing, the adoption of this First Amendment is
subject to the approval of the stockholders of the Company and in the event that
the stockholders of the Company fail to approve such adoption within twelve
months of March 26, 1996, the adoption of this First Amendment shall be null and
void.
IN WITNESS WHEREOF, the Company has caused this First Amendment to be
executed on the day and year first above written.
MORRISON HEALTH CARE, INC.
By: _________________________________
Title: _________________________________
ATTEST:
By: _________________________________
Title: _________________________________
(CORPORATE SEAL)
2
MORRISON HEALTH CARE, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby acknowledges receipt of the Notice of Annual Meeting of
Shareholders and Proxy Statement, each dated August 23, 1996, and does hereby
appoint Glenn A. Davenport, and K. Wyatt Engwall, and either of them, with full
power of substitution, as proxy or proxies of the undersigned to represent the
undersigned and to vote all shares of Morrison Health Care, Inc. Common Stock
which the undersigned would be entitled to vote if personally present at the
Annual Meeting of Shareholders of Morrison Health Care, Inc., to be held at the
Renaissance Atlanta Hotel--Concourse, One Hartsfield Centre Parkway, Atlanta,
Georgia 30354 at 1:00 p.m., local time, on September 26, 1996, at any
adjournment(s) thereof:
1. To elect three Class I Directors for a term of three years.
E. Eugene Bishop, Arthur R. Outlaw, Jr. and Fred L. Brown
[_] FOR all nominees above [_] WITHHOLD AUTHORITY
(except as marked to the to vote for ALL nominees listed above
contrary above)
INSTRUCTION: TO WITHHOLD AUTHORITY FOR ANY INDIVIDUAL NOMINEE, MARK THE FIRST
BOX ABOVE AND LINE THROUGH THAT NOMINEE'S NAME AS IT APPEARS ABOVE.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ALL DIRECTOR NOMINEES LISTED
ABOVE.
2. To approve amendments to the Company's 1996 Stock Incentive Plan to increase
the number of shares available for issuance thereunder by 350,000 shares and
to increase the limit on the number of shares that may be subject to awards
granted to certain employees during any fiscal year from 100,000 to 300,000.
[_] FOR the amendment [_] AGAINST the amendment [_] ABSTAIN
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE AMENDMENTS.
3. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before this meeting.
(CONTINUED ON OTHER SIDE)
PLEASE COMPLETE, DATE, SIGN AND RETURN THIS PROXY PROMPTLY.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN ACCORDANCE WITH THE
DIRECTIONS GIVEN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, IT
WILL BE VOTED FOR ALL DIRECTOR NOMINEES LISTED ABOVE AND FOR THE APPROVAL OF
THE AMENDMENTS TO THE 1996 STOCK INCENTIVE PLAN.
PROXY NUMBER NUMBER OF
------------ SHARES
---------
Dated: ---------------------, 1996.
-----------------------------------
Signature
-----------------------------------
Signature, if held jointly
Please sign exactly as your
name(s) appear hereon. If shares
are held jointly, each shareholder
named should sign. When signing as
attorney, executor, administrator,
trustee or guardian, give your
full title as such. If the
signatory is a corporation, sign
the full corporate name by a duly
authorized officer.
PLEASE COMPLETE, DATE, SIGN AND
RETURN THIS PROXY PROMPTLY USING
THE ENCLOSED ENVELOPE.