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SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
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<S> <C>
Filed by the Registrant / /
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 Section240.14a-11(c) or
Section240.14a-12
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TRICON GLOBAL RESTAURANTS, 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)
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Payment of Filing Fee (Check the appropriate box):
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<S> <C> <C>
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
(1) Title of each class of securities to which transaction
applies:
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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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[LOGO]
TRICON GLOBAL RESTAURANTS, INC.
1441 GARDINER LANE
LOUISVILLE, KENTUCKY 40213
March 25, 2000
Dear Fellow Shareholders:
On behalf of your Board of Directors, we are pleased to invite you to attend
the 2000 Annual Meeting of Shareholders of TRICON Global Restaurants, Inc. The
meeting will be held on Thursday, May 18, 2000, at 9:00 a.m., local time, in the
Yum Center at 1900 Colonel Sanders Lane in Louisville, Kentucky.
At this meeting, you will be asked to elect four directors and to ratify the
Board's selection of independent auditors to audit the Company's financial
statements for 2000. The enclosed notice and proxy statement contain details
about the business to be conducted at the meeting.
To assure that your shares are represented at the meeting, we urge you to
mark your choices on the enclosed proxy card, sign and date the card and return
it promptly in the envelope provided. For the first time we are also offering
shareholders the opportunity to vote their shares electronically through the
internet or by telephone. Please see the proxy statement and the enclosed proxy
card for details about electronic voting options. If you are able to attend the
meeting and wish to vote your shares personally, you may do so at any time
before the proxy is voted at the meeting.
An admission ticket is attached to the accompanying proxy card. Please
retain it and bring it with you if you plan to attend the meeting.
Sincerely,
[SIG]
ANDRALL E. PEARSON
CHAIRMAN OF THE BOARD
[SIG]
DAVID C. NOVAK
CHIEF EXECUTIVE OFFICER
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[LOGO]
TRICON GLOBAL RESTAURANTS, INC.
1441 GARDINER LANE
LOUISVILLE, KENTUCKY 40213
------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
---------------------
To Our Shareholders:
The Annual Meeting of Shareholders of TRICON Global Restaurants, Inc. will
be held in the Yum Center at 1900 Colonel Sanders Lane, Louisville, Kentucky, on
Thursday, May 18, 2000 at 9:00 a.m., local time, for the following purposes:
(1) To elect four directors to serve until the 2003 annual meeting and until
their successors are elected and qualified;
(2) To ratify the selection of KPMG LLP as the Company's independent
auditors for the fiscal year ending December 30, 2000; and
(3) To transact such other business as may properly come before the meeting.
Only shareholders of record at the close of business on March 20, 2000 are
entitled to notice of and to vote at the Annual Meeting.
By Order of the Board of Directors
[SIGNATURE]
CHRISTIAN L. CAMPBELL
SECRETARY
March 25, 2000
YOUR VOTE IS IMPORTANT
It is important that your shares are represented and voted at the Annual
Meeting. Whether or not you plan to attend the meeting, please provide your
proxy by marking, dating and signing the enclosed proxy card and returning it
promptly in the enclosed envelope. Shareholders also have the option of voting
electronically through the internet or by telephone. Please read the
accompanying proxy statement and the voting instructions printed on your proxy
card for details about electronic voting procedures. If you are able to attend
the meeting and wish to vote your shares personally, you may do so at any time
before the proxy is exercised.
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TABLE OF CONTENTS
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GENERAL INFORMATION ABOUT THE MEETING....................... 1
Quorum and Voting Requirements............................ 1
Proxies and Voting Procedures............................. 2
Electronic Delivery of Proxy Materials.................... 2
Solicitation Expenses..................................... 3
Admission to Annual Meeting............................... 3
ELECTION OF DIRECTORS....................................... 3
Board of Directors........................................ 3
Nominees for Class III Directors--Terms Expiring in
2003.................................................... 4
Class I Directors--Terms Expiring in 2001................. 5
Class II Directors--Terms Expiring in 2002................ 5
Meetings of the Board of Directors........................ 6
Committees of the Board of Directors...................... 6
Compensation of Directors................................. 7
Compensation Committee Interlocks and Insider
Participation........................................... 7
Section 16 Beneficial Ownership Reporting Compliance...... 7
Stock Ownership of Certain Beneficial Owners.............. 8
Stock Ownership of Management............................. 8
EXECUTIVE COMPENSATION...................................... 10
Summary of Cash and Certain Other Compensation............ 10
Stock Option Grants....................................... 12
Stock Option Exercises and Holdings....................... 13
Pension Plans............................................. 13
Employment Agreements and Change in Control Agreements.... 14
Certain Transactions...................................... 15
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION..... 15
PERFORMANCE GRAPH........................................... 19
RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS........... 19
SHAREHOLDER PROPOSALS/DIRECTOR NOMINATIONS.................. 20
OTHER MATTERS............................................... 20
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TRICON GLOBAL RESTAURANTS, INC.
1441 GARDINER LANE
LOUISVILLE, KENTUCKY 40213
------------------------
PROXY STATEMENT
FOR ANNUAL MEETING TO BE HELD ON
MAY 18, 2000
---------------------
This Proxy Statement is furnished in connection with the solicitation of
proxies on behalf of the Board of Directors of TRICON Global Restaurants, Inc.,
a North Carolina corporation ("Tricon" or the "Company"), to be used at the
Annual Meeting of Shareholders of the Company to be held at 9:00 a.m. (Eastern
Daylight Savings Time), on Thursday, May 18, 2000, in the Yum Center, at 1900
Colonel Sanders Lane, Louisville, Kentucky, for the purposes set forth in the
accompanying Notice of the meeting. This Proxy Statement and the accompanying
form of proxy are being mailed to shareholders commencing on or about March 25,
2000.
GENERAL INFORMATION ABOUT THE MEETING
QUORUM AND VOTING REQUIREMENTS
The presence in person or by proxy of shareholders holding a majority of the
outstanding shares of the Company's Common Stock will constitute a quorum for
the transaction of all business at the Annual Meeting. A shareholder voting for
the election of directors may withhold authority to vote for all or certain
nominees for directors. A shareholder may also abstain from voting on the other
matters presented for shareholder vote. Votes withheld from the election of any
nominee for director and abstentions from any other proposal will be treated as
shares that are present and entitled to vote for purposes of determining the
presence of a quorum, but will not be counted in the number of votes cast on any
matter. If a broker does not receive voting instructions from the beneficial
owner of shares on a particular matter and indicates on the proxy that it does
not have discretionary authority to vote on that matter ("broker non-votes"),
those shares will be considered as present and entitled to vote with respect to
that matter, but will not be counted in the number of votes cast "for" or
"against" the matter.
Only shareholders of record at the close of business on March 20, 2000 are
entitled to vote at the Annual Meeting. As of March 20, 2000, there were
148,254,779 shares of the Company's Common Stock outstanding and entitled to
vote. Each share of Common Stock entitles the holder to one vote on all matters
presented at the Annual Meeting.
Shares represented by duly executed proxies in the accompanying form
received prior to the meeting and not revoked will be voted at the meeting or at
any adjournments in accordance with the choices specified on the proxy. If no
choices are specified, the shares represented by that proxy will be voted as
recommended by the Board of Directors. A proxy may be revoked by the person
executing it at any time before the authority thereby granted is exercised by
giving written notice to the Secretary of the Company, by delivery of a duly
executed proxy bearing a later date or by voting in person at the meeting.
Attendance at the meeting will not have the effect of revoking a proxy unless
the shareholder so attending so notifies the inspectors of election in writing
prior to voting of the proxy. Beneficial owners who intend to vote shares at the
meeting should obtain a legal proxy or power of attorney from their broker and
present it at the meeting to establish their right to vote such shares.
If you are a participant in the Capital Stock Purchase Program, shares of
Common Stock held in your account may be voted through the proxy card
accompanying this mailing. The administrator of this
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program, as the shareholder of record, may only vote the shares for which it has
received directions to vote from participants.
If you are a participant in the Tricon Long Term Savings Program ("Plan"),
you may use the accompanying proxy card to direct the trustee of the Plan to
vote shares of Common Stock you beneficially own under the Plan. In accordance
with the Plan terms, if your proxy card for Plan shares is not returned, those
shares will not be voted.
PROXIES AND VOTING PROCEDURES
All shareholders may vote their shares by completing, signing and returning
the enclosed proxy card in the postage-paid envelope provided with this proxy
statement. Instead of submitting your proxy through the mail, you may choose to
vote your shares electronically by accessing the internet site or by using the
toll-free telephone numbers identified below. Please note that there are
separate arrangements for using the internet and telephone to vote your shares
depending on whether shares are registered in the Company's stock records in
your name or in the name of a brokerage firm or bank. Submitting your proxy via
the internet or by telephone will not affect your right to vote in person should
you decide to attend the Annual Meeting. If you elect to vote either by
accessing the internet or by using the toll-free telephone numbers, please do
not mail back your proxy card.
The telephone and internet voting procedures are designed to authenticate
shareholders' identities, to allow shareholders to give their voting
instructions and to confirm that shareholders' instructions have been properly
recorded. Shareholders voting via the internet should understand that there may
be costs associated with electronic access, such as usage charges from internet
access providers and telephone companies, that must be borne by the shareholder.
FOR SHARES REGISTERED DIRECTLY IN THE NAME OF THE SHAREHOLDER. Shareholders
with shares registered directly in their name in the Company's stock records
maintained by our transfer agent, Boston EquiServe, may vote their shares
(1) by submitting their proxy through the internet at the following address on
the World Wide Web: http://www.eproxyvote.com/yum, (2) by making a toll-free
telephone call from the U.S. and Canada to Boston EquiServe at 1-877-779-8683 or
outside the U.S. and Canada collect at 1-201-536-8073 or (3) by mailing their
signed proxy card. Specific instructions to be followed by registered
shareholders are set forth on the enclosed proxy card. Proxies submitted through
the internet or by telephone through Boston EquiServe as described above must be
received by 5:00 p.m., Eastern Daylight Savings Time, on May 17, 2000.
FOR SHARES REGISTERED IN THE NAME OF A BROKERAGE FIRM OR BANK. A number of
brokerage firms and banks are participating in a program provided through ADP
Investor Communication Services that offers telephone and internet voting
options (as well as the option to receive future shareholder communications
including proxy materials through the internet and not through the mail). This
program is different from the program provided by Boston EquiServe for shares
registered directly in the name of the shareholder. If your shares are held in
an account with a brokerage firm or bank participating in the ADP Investor
Communication Services program, you may vote those shares telephonically by
calling the telephone number shown on the voting form received from your
brokerage firm or bank, or via the internet at ADP Investor Communication
Services' voting Web site (www.proxyvote.com). Votes submitted via the internet
or by telephone through the ADP program must be received by 11:59 p.m., Eastern
Daylight Savings Time, on May 17, 2000.
ELECTRONIC DELIVERY OF PROXY MATERIALS
Tricon shareholders with shares registered directly in their name may elect
to receive the Company's future annual reports, proxy statements and to vote
their shares through the internet instead of receiving copies through the mail.
Tricon is offering this service to provide added convenience to its shareholders
and to reduce annual report printing and mailing costs.
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To take advantage of this option, shareholders must subscribe to one of the
various commercial services that offer access to the internet. Costs normally
associated with electronic access, such as usage and telephone charges, will be
borne by the shareholder.
To elect this option, go to website http://www.econsent.com/yum.
Shareholders who elect this option will be notified each year by e-mail how to
access the proxy materials and how to vote their shares on the internet.
If you consent to receive the Company's future proxy materials
electronically, your consent will remain in effect unless it is withdrawn by
writing, or e-mailing our Transfer Agent, BankBoston (Boston EquiServe), at:
P.O. Box 8038, Boston, MA 02266-8038; http://www.equiserve.com. Also, if while
this consent is in effect you decide you would like to receive a hard copy of
the proxy materials, you may call, write or e-mail our Transfer Agent.
SOLICITATION EXPENSES
The expenses of soliciting proxies for the Annual Meeting, including the
cost of preparing, assembling and mailing this proxy statement and the
accompanying form of proxy, will be borne by the Company. The Company has
retained MacKenzie Partners, Inc. to assist in the solicitation of proxies for a
fee of $12,500 plus expenses for these services. In addition to the solicitation
of proxies by mail, certain directors, officers and regular employees of the
Company, without additional compensation, may use their personal efforts, by
telephone or otherwise, to obtain proxies. The Company will also request
persons, firms and corporations holding shares in their names, or in the names
of their nominees, which shares are beneficially owned by others, to send this
proxy material to and obtain proxies from such beneficial owners, and will
reimburse such holders for their reasonable expenses in so doing.
ADMISSION TO ANNUAL MEETING
If you are a registered owner and plan to attend the meeting in person,
please detach and retain the admission ticket which is attached to your proxy
card and return the proxy card with the "Annual Meeting" box marked. A
beneficial owner who plans to attend the meeting may obtain an admission ticket
in advance by sending a written request, with proof of ownership, such as a bank
or brokerage firm account statement, to the Company's transfer agent,
BankBoston, N.A., P.O. Box 8038, Boston, Massachusetts 02266-8038. Admittance to
the annual meeting will be based upon availability of seating. Shareholders who
do not present admission tickets at the meeting will be admitted upon
verification of ownership at the admissions desk.
ELECTION OF DIRECTORS
(ITEM 1 ON PROXY CARD)
BOARD OF DIRECTORS
The Board of Directors is presently divided into three classes consisting of
four directors each. Each class is elected for a three-year term expiring in
successive years. The Board of Directors has nominated each of the following
individuals for reelection at the annual meeting:
D. RONALD DANIEL
KENNETH G. LANGONE
ANDRALL E. PEARSON
JOHN L. WEINBERG
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ALL OF THE ABOVE-NAMED NOMINEES
FOR ELECTION AS DIRECTORS.
If elected, the Company expects that Messrs. Daniel, Langone, Pearson and
Weinberg will hold office until the annual meeting of shareholders in 2003 and
until their respective successors have been elected and qualified.
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Shareholders voting at the Annual Meeting may not vote for more than the
number of nominees listed in this Proxy Statement. Directors will be elected by
a plurality of the total votes cast at the Annual Meeting. That is, the four
nominees receiving the greatest number of votes for Class III directors will be
deemed elected directors. Unless a shareholder specifies otherwise, the proxies
received in response to this solicitation will be voted in favor of the election
of the four nominees for Class III directors. Abstentions and broker non-votes
will not be taken into account in determining the outcome of the election of
directors. In the event that any of the nominees becomes unavailable (which is
not now anticipated by the Company), the persons named as proxies have
discretionary authority to vote for a substitute nominee designated by the
present Board of Directors. The Board of Directors has no reason to believe that
any of said nominees will be unwilling or unable to serve if elected.
The following pages contain certain information regarding each of the
nominees for election as directors at this year's annual meeting and each
continuing director. Stock ownership information for each nominee and continuing
director is presented beginning on page 8.
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NOMINEES FOR CLASS III DIRECTORS--TERMS EXPIRING IN 2003
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D. RONALD DANIEL is an employee of McKinsey & Company. He served as a
director of McKinsey & Company from 1968 to 1999. He joined McKinsey & Company
in 1957 and held various positions with the firm, including Managing Director
from 1976 to 1988. Mr. Daniel is a member of the Harvard Corporation, the
Harvard Board of Overseers, and is the Treasurer of Harvard University.
Mr. Daniel is also a member of the boards of WNET/Thirteen, New York's public
television station, the Brookings Institution, Rockefeller University and the
Markle Foundation. He was elected a Director of Tricon effective October 7,
1997, and is a member of the Executive/Finance Committee, Nominating Committee
and the Compensation Committee. Age 70.
KENNETH G. LANGONE is the founder, and since 1974, has been Chairman of the
Board, Chief Executive Officer and President, of Invemed Associates, Inc., a New
York Stock Exchange firm engaged in investment banking and brokerage. He is a
founder of Home Depot, Inc. and has been a director since 1978. He is also a
director of DBT Online, Inc., General Electric Co., Interworld Corp. and Unifi,
Inc. He was elected a Director of Tricon effective October 7, 1997, and is a
member of the Compensation Committee. Age 64.
ANDRALL E. PEARSON became Chairman of the Board of Tricon effective
August 15, 1997, and he previously served as Chief Executive Officer of the
Company from October 21, 1997 to January 1, 2000. Mr. Pearson previously served
as an operating partner of Clayton, Dubilier & Rice, a leveraged buy-out firm,
from 1993 to 1997. He was President and Chief Operating Officer of
PepsiCo, Inc. from 1971 through 1984 and served on PepsiCo's Board of Directors
for 26 years, retiring in April 1996. From 1985 to 1993 he was a tenured
professor at Harvard Business School. Mr. Pearson is also a director of DBT
Online, Inc. and Citigroup Inc. He is also a trustee of the New York University
Medical Center and Good Samaritan Medical Center in Palm Beach, Florida. He is a
member and Chairperson of both the Tricon Executive/ Finance Committee and
Nominating Committee. Age 74.
JOHN L. WEINBERG is a member of the Board of Directors of the Goldman Sachs
Group, Inc., a position he has held since May 1999. He was Senior Chairman of
Goldman, Sachs & Co. from 1990 to 1999. Mr. Weinberg has served as an investment
banker with Goldman, Sachs & Co. since 1950. He became a Partner in 1956, Senior
Partner and Co-Chairman of the Management Committee in 1976, and was Senior
Partner and Chairman of the Management Committee from 1984 until 1990. He is
also a director of Knight-Ridder, Inc. and Providian Financial Corporation. He
became a Director of Tricon effective October 7, 1997, and is a member of the
Executive/Finance Committee, Nominating Committee and the Compensation
Committee, of which he is Chairperson. Age 75.
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CLASS I DIRECTORS--TERMS EXPIRING IN 2001
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ROBERT HOLLAND, JR. is the owner and Chief Executive Officer of WorkPlace
Integrators, Michigan's largest Steelcase office furniture dealer. Prior to his
current position, he was President and Chief Executive Officer of Ben & Jerry's
Homemade, Inc. from 1995 through 1996. From 1981 to 1984 and from 1991 to 1995,
Mr. Holland served as Chairman and Chief Executive Officer of Rokher-J, Inc.,
which participates in business development projects and provides strategy
development assistance to senior management of major corporations. From 1984 to
1987, he was Chairman and Chief Executive Officer of City Marketing, a beverage
distribution company in Detroit, Michigan. From 1987 to 1990, he was Vice
President, and from 1990 to 1991, he was Chairman of Gilreath Manufacturing,
Inc., a full-service custom plastic injection molding company. Mr. Holland is
also a director of MONY Group Inc., TruMark Inc., Mazaruni Granite Products, A C
Nielsen Corporation, Olin Corporation and Lexmark International, Inc. He was
elected a Director of Tricon effective October 7, 1997, and is a member of the
Audit Committee. Age 58.
SIDNEY KOHL, along with other family members, developed Kohl's Food Stores,
Wisconsin's largest supermarket chain, and Kohl's Department Stores, now a
national (New York Stock Exchange) department store chain. He served as
President and then Chairman when the two entities were sold in 1972. Since 1980,
Mr. Kohl has been the president of the Sidney Kohl Company which develops, owns
and manages substantial commercial and residential property. Mr. Kohl also
serves on the Board of Kinko's, Inc. and Alliant FoodService, Inc. He was
elected a Director of Tricon effective October 7, 1997, and is a member and
Chairperson of the Audit Committee. Age 69.
DAVID C. NOVAK became Chief Executive Officer of Tricon on January 1, 2000.
He also serves as Vice Chairman of the Board and President of Tricon, positions
he has held since October 21, 1997. He was elected a Director of Tricon
effective October 7, 1997. Mr. Novak previously served as Group President and
Chief Executive Officer, KFC and Pizza Hut from August 1996 to July 1997, at
which time he became acting Vice Chairman of Tricon. Mr. Novak joined Pizza Hut
in 1986 as Senior Vice President, Marketing. In 1990, he became Executive Vice
President, Marketing and National Sales, for Pepsi-Cola Company. In 1992 he
became Chief Operating Officer, Pepsi-Cola North America, and in 1994 he became
President and Chief Executive Officer of KFC North America. Mr. Novak is a
member of the Tricon Executive/Finance Committee and Nominating Committee. Age
47.
JACKIE TRUJILLO has been Chairman of the Board of Harman Management
Corporation, one of KFC's largest franchisees, since 1995. She joined the Harman
organization in 1953 and held various positions, becoming Executive Vice
President of Operations in 1983, with responsibility for operations of its
restaurants in Utah, Colorado, Washington and Northern California. From 1987 to
1995, she served as Executive Vice Chairman of Harman Management Corporation.
She was elected a Director of Tricon effective October 7, 1997, and is a member
of the Audit Committee. Age 64.
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CLASS II DIRECTORS--TERMS EXPIRING IN 2002
- --------------------------------------------------------------------------------
JAMES DIMON is a private investor and the former President of Citigroup
Inc., having held that position during October and November 1998 following the
merger of Travelers Group Inc. and Citicorp. From September 1991 until
October 1998, he was a director of Travelers Group Inc. From June 1995 to
November 1998, he was President and Chief Operating Officer of Travelers Group
Inc. He was the Co-Chairman of the Board and Co-Chief Executive Officer of
Salomon Smith Barney Holdings Inc. ("Salomon Smith Barney"), the immediate
parent company of Smith Barney Inc. and Salomon Brothers Inc. Mr. Dimon was a
director of Travelers Property Casualty Corp. from 1996 to 1998. From May 1988
to
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June 1995 he was Chief Financial Officer of Travelers Group Inc. From March 1994
to January 1996 he was Chief Operating Officer of the predecessor to Salomon
Smith Barney. Mr. Dimon is a trustee of New York University Medical Center and a
director of the Center on Addiction and Substance Abuse. He was elected a
Director of Tricon effective October 7, 1997, and is a member of the
Executive/Finance Committee, Nominating Committee and Audit Committee. Age 44.
MASSIMO FERRAGAMO is President and Vice Chairman of Ferragamo USA, Inc., a
subsidiary of Salvatore Ferragamo Italia, which controls sales and distribution
of Ferragamo products in North America. Mr. Ferragamo has held this position
since 1985. He was elected a Director of Tricon effective October 7, 1997, and
is a member of the Audit Committee. Age 42.
ROBERT J. ULRICH is Chairman and Chief Executive Officer of Target
Corporation (formerly Dayton Hudson Corporation) and Target Stores. He became
President of Dayton Hudson Department Store Company and President of Target
Stores in 1984. He became Chairman and Chief Executive Officer of Target Stores
in 1987 and assumed his additional present position with Target Corporation in
1994. Mr. Ulrich is also a director of Target Corporation. He was elected a
Director of Tricon effective October 7, 1997, and is a member of the
Compensation Committee. Age 56.
JEANETTE S. WAGNER is Vice Chairman of the Estee Lauder Companies, Inc. and
has held this position since July 1, 1998. From 1986 until 1998, she was
President of Estee Lauder International, Inc., the largest subsidiary of The
Estee Lauder Companies, Inc. Ms. Wagner's career at Estee Lauder has included
marketing and general management assignments domestically and internationally.
She was elected a Director of Tricon effective October 7, 1997, and is a member
of the Compensation Committee. Age 70.
MEETINGS OF THE BOARD OF DIRECTORS
During fiscal 1999, the Board of Directors met seven times, the Audit
Committee met six times, and the Compensation Committee met four times. All
directors attended at least 75% of all of the meetings of the Board and the
committees of which they were members during fiscal 1999.
COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors has standing Audit, Compensation, Executive/Finance
and Nominating Committees. All members of the Audit and Compensation Committees
are non-employee directors.
AUDIT COMMITTEE. The Audit Committee consists of James Dimon, Massimo
Ferragamo, Robert Holland, Jr., Jackie Trujillo and Sidney Kohl, who serves as
Chairperson. The Audit Committee's responsibilities include: (i) recommending to
the Board the selection, retention or termination of the Company's independent
auditors; (ii) reviewing the fees for non-audit services provided by the
Company's independent auditors; (iii) reviewing the scope and results of the
work of the Company's internal auditors; (iv) reviewing the scope and approving
the estimated cost of the annual audit; (v) reviewing the annual financial
statements and the results of the audit with management and the independent
auditors; (vi) reviewing with management, the Company's internal auditors and
the independent auditors the adequacy of the Company's system of internal
accounting controls; (vii) reviewing with management and the independent
auditors any significant recommendations made by the auditors with respect to
changes in accounting procedures and internal accounting controls; (viii)
reviewing the procedures that ensure that the Company has the appropriate
systems and processes in place to be sure that the Company is in compliance with
all applicable laws and regulations; and (ix) reporting to the Board on the
results of its review and making recommendations as it may deem appropriate. The
Audit Committee met six times during fiscal 1999.
COMPENSATION COMMITTEE. The Compensation Committee consists of D. Ronald
Daniel, Kenneth G. Langone, Robert J. Ulrich, Jeanette S. Wagner and John L.
Weinberg, who serves as Chairperson. The Compensation Committee's
responsibilities include: (i) reviewing and submitting to the Board of Directors
recommendations concerning the Company's compensation philosophy;
(ii) oversight of Tricon's Long
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Term Incentive Plans, Executive Incentive Compensation Plan and other executive
plans; (iii) approving, or referring to the Board of Directors for approval,
changes in such plans and the compensation programs to which they relate;
(iv) reviewing and approving the compensation of senior executives of the
Company; (v) appraising the performance of the chief executive officer and other
senior executives; (vi) reviewing management succession planning; and
(vii) reviewing periodically directors' compensation. The Compensation Committee
met four times in fiscal 1999.
EXECUTIVE/FINANCE COMMITTEE. The Executive/Finance Committee consists of D.
Ronald Daniel, James Dimon, David C. Novak, John L. Weinberg and Andrall E.
Pearson, who serves as Chairperson. The Executive/Finance Committee exercises
all of the powers of the Board of Directors in the management of the business
and affairs of the Company consistent with applicable law while the Board of
Directors is not in session. The Executive/Finance Committee did not meet during
fiscal 1999.
NOMINATING COMMITTEE. The Nominating Committee consists of D. Ronald
Daniel, James Dimon, David C. Novak, John L. Weinberg and Andrall E. Pearson,
who serves as Chairperson. The Nominating Committee: (i) identifies suitable
candidates for Board members; (ii) proposes to the Board a slate of directors
for election by the shareholders; and (iii) proposes candidates to fill
vacancies on the Board based on qualifications it determines to be appropriate.
The committee will consider those recommendations by shareholders which are
submitted, along with biographical and business experience information, to the
Chief Executive Officer. The Nominating Committee did not meet during fiscal
1999.
COMPENSATION OF DIRECTORS
Employee Directors do not receive additional compensation for serving on the
Board of Directors. Non-employee Directors receive an annual stock grant
retainer with a fair market value of $50,000 and an annual grant of vested
options to buy $50,000 worth of Tricon's Common Stock at a price equal to the
fair market value of Tricon Common Stock on the date of grant. Non-employee
Directors also receive a one-time stock grant with a fair market value of
$25,000 on the date of grant upon joining the Board, payment of which will be
deferred until termination from the Board. Directors may also defer payment of
their retainers pursuant to the Directors Deferred Compensation Plan. Deferrals
may not be made for less than one year. The Company also pays the premiums on
directors' and officers' liability and business travel accident insurance
policies covering the Directors.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During fiscal 1999, members of the Compensation Committee were John L.
Weinberg, D. Ronald Daniel, Kenneth G. Langone, Jeanette S. Wagner and Robert J.
Ulrich. Mr. Weinberg is a director of Goldman Sachs Group, Inc. During fiscal
1999, Goldman Sachs Group, Inc. provided investment banking and financial
advisory services to the Company.
SECTION 16 BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors, certain officers and persons who own more than ten percent of the
outstanding Common Stock of the Company, to file with the Securities and
Exchange Commission reports of changes in ownership of the Common Stock of the
Company held by such persons. Officers, directors and greater-than-ten percent
shareholders are also required to furnish the Company with copies of all forms
they file under this regulation. To the Company's knowledge, based solely on a
review of the copies of such reports furnished to the Company and
representations that no other reports were required, all Section 16(a) filing
requirements applicable to all of its officers and directors were complied with
during fiscal 1999.
7
<PAGE>
STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
Based on Schedule 13G filings, stockholders holding 5% or more of Tricon
Common Stock as of December 31, 1999, were:
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENT OF
NAME AND ADDRESS OF BENEFICIAL OWNER TITLE OF CLASS BENEFICIALLY OWNED CLASS
- ------------------------------------ --------------- ------------------ ----------
<S> <C> <C> <C>
FMR Corp. ..................................... Common 8,274,094(1) 5.39%
82 Devonshire Street
Boston, Massachusetts 02109
Southeastern Asset Management, Inc. ........... Common 12,864,100(2) 8.3%
6075 Poplar Avenue, Suite 900
Memphis, Tennessee 38119
</TABLE>
- ------------------------
(1) The filing indicates sole voting power for 122,008 shares, shared voting
power for zero shares, sole dispositive power for 8,274,094 shares and
shared dispositive power for zero shares.
(2) The filing indicates sole voting power for 7,148,000 shares, shared or no
voting power for 5,716,100, sole dispositive power for 8,380,100 shares and
shared dispositive power for 4,484,000 shares.
STOCK OWNERSHIP OF MANAGEMENT
The following table shows the beneficial ownership of Tricon's Common Stock
as of February 29, 2000 by (i) each of the Company's continuing directors and
nominees for election as directors, (ii) each of the executive officers of the
Company named in the summary compensation table, and (iii) all directors and
executive officers as a group. Except as otherwise noted, each of the following
persons and their family members has sole voting and investment power with
respect to the shares of Common Stock beneficially owned by him or her. None of
the following persons or group hold in excess of one percent of Tricon's Common
Stock. Tricon's internal stock ownership guidelines call for the Chairman to own
Tricon Common Stock (or deferral plan units) with a value equal to 7.5 times
current salary within five years and for other executive officers to own from 3
to 5 times current salary within five years.
<TABLE>
<CAPTION>
NAME SHARES BENEFICIALLY OWNED DEFERRAL PLANS(1) TOTAL
- ---- ------------------------- ----------------- ---------
<S> <C> <C> <C>
Andrall E. Pearson............................ 715,402(2) 238,901 954,303
David C. Novak................................ 348,041(2)(3)(4) 240,283 588,324
D. Ronald Daniel.............................. 8,949(5) 4,564 13,513
James Dimon................................... 303,949(5)(6) 4,564 308,514
Massimo Ferragamo............................. 20,949(5) 4,564 25,513
Robert Holland, Jr............................ 3,949(5) 4,564 8,513
Sidney Kohl................................... 65,949(5)(7) 4,564 70,513
Kenneth G. Langone............................ 180,181(5) 790 180,971
Jackie Trujillo............................... 12,273(5)(8) 4,564 16,837
Robert J. Ulrich.............................. 3,949(5) 4,564 8,513
Jeanette S. Wagner............................ 3,949(5) 4,564 8,513
John L. Weinberg.............................. 80,629(5)(9) 4,564 85,193
Peter A. Bassi................................ 142,198(2)(3) 52,055 194,253
Christian L. Campbell......................... 3,321(10) 36,337 39,658
Michael S. Rawlings........................... 99,163(2) 7,017 106,180
All Directors and Executive Officers as a
Group (26 persons).......................... 2,776,988(2)(3) 893,131 3,670,119
</TABLE>
(FOOTNOTES ON FOLLOWING PAGE)
8
<PAGE>
(FOOTNOTES FOR PRECEDING PAGE)
- --------------------------
(1) Units denominated as Common Stock equivalents held in deferred compensation
accounts under the Director Deferred Compensation Plan or the Executive
Incentive Deferral Plan. Amounts payable under these plans will be paid in
Common Stock of the Company. Also included with respect to each non-employee
director is 790 shares representing the $25,000 initial stock grant payable
to non-employee directors after they leave the Board.
(2) As set forth in the following table, for Messrs. Pearson, Novak, Bassi,
Rawlings and all directors and executive officers as a group, the share
amounts include beneficial ownership of the following shares which may be
acquired within 60 days pursuant to stock options awarded under
employee/director incentive compensation plan.
<TABLE>
<CAPTION>
ALL DIRECTORS
AND
EXECUTIVE
ANDRALL E. DAVID C. PETER A. MICHAEL S. OFFICERS AS A
PEARSON NOVAK BASSI RAWLINGS GROUP
---------- -------- -------- ---------- -------------
<S> <C> <C> <C> <C> <C>
Shares which may be acquired within
60 days pursuant to stock options... 700,000 337,995 141,144 68,032 2,016,600
</TABLE>
(3) Share amounts include any shares held pursuant to the Tricon Long Term
Savings Program which will be subject to the voting direction of such
persons at the Annual Meeting: Mr. Novak, 6,820 shares; Mr. Bassi, 3 shares;
and all directors and executive officers as a group, 14,109 shares.
(4) Includes 110 shares held by Mr. Novak's spouse as custodian for their
daughter.
(5) Includes beneficial ownership of 3,949 shares which may be acquired within
60 days pursuant to stock options awarded under employee/director incentive
compensation plans.
(6) Includes 6,000 shares held by Mr. Dimon's spouse as custodian for their
minor children, and 2,000 shares owned by Mr. Dimon's spouse.
(7) Includes 21,000 shares held in a trust of which Mr. Kohl is trustee.
(8) Includes 3,000 shares held by the Harman Cafes Employee Profit Sharing Trust
and 4,000 shares owned by Harman Management Corp. of which Ms. Trujillo is a
trustee and of which Ms. Trujillo disclaims beneficial ownership.
(9) Includes 2,080 shares held by trusts of which Mr. Weinberg is trustee, and
8,800 shares held by Mr. Weinberg's spouse.
(10) Includes 20 shares held by Mr. Campbell's spouse.
9
<PAGE>
EXECUTIVE COMPENSATION
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following tables provide information on compensation and stock-based
awards paid, earned or awarded for the years indicated by Tricon to its Chief
Executive Officer and its four other most highly compensated executive officers
as of the end of the Company's 1999 fiscal year in accordance with the rules of
the Securities and Exchange Commission. These five individuals are referred to
in this proxy statement as the named executive officers.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION AWARDS
ANNUAL COMPENSATION ---------------------
----------------------------------------- SECURITIES UNDERLYING
OTHER ANNUAL OPTIONS/SARS ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY(1) BONUS(1) COMPENSATION(2) (# SHARES)(3) COMPENSATION
- --------------------------- -------- --------- ---------- ---------------- --------------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Andrall E. Pearson ......... 1999 $900,000 $2,430,000 $ 15,614 0 $ 900,000(4)
Chairman of the Board 1998 900,000 2,700,000 90,320 0 150,000(4)
1997 446,538 1,300,000 134,135 1,050,000 1,283,333(5)
David C. Novak ............. 1999 792,308 2,160,000 80,979 255,489 700,000(4)
Vice Chairman, Chief 1998 700,000 2,100,000 69,669 0 582,887(4)
Executive Officer and 1997 619,231 1,748,660 8,167 805,542 0
President
Peter A. Bassi ............. 1999 427,693 903,000 70,948 57,485 50,963(4)
President, Tricon 1998 400,000 611,550 0 99,083 37,198(4)
Restaurants International 1997 316,227 646,370 4,108 0 0
Christian L. Campbell ...... 1999 418,462 819,000 8,542 42,582 196,000(4)
Senior Vice President, 1998 400,000 990,000 8,387 0 6,666(4)
General Counsel and 1997 257,692 350,000 121,217 110,645 0
Secretary
Michael S. Rawlings ........ 1999 372,116 843,800 96,472 57,485 0
President, Pizza Hut, Inc. 1998 350,000 621,075 60,270 99,083 47,807(4)
1997 192,500 143,420 41,791 0 0
</TABLE>
- ------------------------
(1) Amounts shown include compensation earned by the named executive officers
during 1999, including amounts deferred at the election of those officers.
Bonuses are generally paid in the year following the year in which they are
earned. The 1997 salary of Messrs. Pearson, Campbell and Rawlings only
reflect a partial year since each was first employed during the second half
of 1997. For 1997, the bonus shown for Mr. Pearson represents a guaranteed
bonus of $450,000 and a one-time hiring bonus of $850,000 awarded pursuant
to his employment agreement with the Company. For 1997, the bonus shown for
Mr. Campbell represents a guaranteed bonus of $200,000 and a hiring bonus of
$150,000 awarded pursuant to his employment agreement with the Company. For
1998, the bonus shown for Mr. Campbell includes a hiring bonus of $150,000.
All other bonuses were determined pursuant to the Company's Executive
Incentive Compensation Plan.
(2) This column includes the dollar value of perquisites and other personal
benefits for each named executive officer that is required to be reported
under the rules of the Securities and Exchange Commission ("SEC"). The table
below shows amounts from the column which are required to be
10
<PAGE>
reported. Amounts not shown in this column and the table below for such
executive officers are omitted as permitted by SEC rules.
<TABLE>
<CAPTION>
NAME 1999 1998 1997
- ---- -------- -------- --------
<S> <C> <C> <C> <C>
Andrall E. Pearson.................... Personal use of Company aircraft...... -- 38,487 --
One-time club initiation fee.......... -- -- 65,152
Company perquisite allowance.......... -- 37,918 --
Tax-related reimbursements............ 15,614 13,915 63,618
David C. Novak........................ Personal use of Company aircraft...... 26,644 41,532 --
Company car allowance................. 16,000 -- --
Company perquisite allowance.......... -- 19,750 --
Tax-related reimbursements............ 18,335 8,387 --
Peter A. Bassi........................ Personal use of Company aircraft...... 18,602 -- --
Company car allowance................. 16,000 -- --
Tax-related reimbursements............ 20,321 -- 4,108
Christian L. Campbell................. Moving expenses....................... -- -- 106,182
Tax-related reimbursements............ 8,542 8,387 2,258
Michael S. Rawlings................... Personal use of Company aircraft...... 43,947 30,530 19,650
Company car allowance................. 16,000 22,653 12,495
Tax-related reimbursements............ 21,993 -- 3,796
</TABLE>
(3) The stock options listed in this column were granted under Tricon's Long
Term Incentive Plan. No stock appreciation rights ("SARs") were granted in
1997 through 1999.
(4) Represents preferential earnings on deferred compensation under the
Executive Income Deferral Plan which is subject to forfeiture (as is the
underlying deferred compensation) if the participant voluntarily terminates
employment prior to the second anniversary of the deferral, except however
in the case of a participant's retirement in which case the preferential
earnings are earned on a pro rata basis if retirement occurs within one year
of the deferral. If retirement occurs more than one year after the deferral,
the participant receives the preferential earnings in accordance with the
election filed by the participant.
(5) Included in this column for Mr. Pearson is a $1,000,000 retirement payment
to be made to him following his retirement. Under the terms of his
employment agreement, Mr. Pearson will not be entitled to any retirement
benefits under Tricon's Salaried Employees Retirement Plan or Pension
Equalization Plan. Also included is $283,333 of preferential earnings on
deferred compensation which is subject to a risk of forfeiture as described
in footnote 4 above.
11
<PAGE>
STOCK OPTION GRANTS
The following table presents information with respect to stock option grants
that were made during the fiscal year ended December 25, 1999 to each of the
named executive officers. All options granted by the Company in 1999 were
non-qualified stock options, and no stock appreciation rights ("SARs") were
granted in 1999. Except for Mr. Pearson (whose 1997 grant was intended to cover
1998 and 1999), the named executive officers received stock option grants in
1999 as shown below.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
----------------------------
NUMBER OF
SECURITIES
UNDERLYING % OF TOTAL
OPTIONS OPTIONS EXERCISE GRANT DATE
GRANTED GRANTED TO PRICE EXPIRATION PRESENT
NAME (# SHARES)(1) EMPLOYEES ($/SHARE)(2) DATE VALUE(3)
- ---- -------------- ----------- ------------ ---------- ----------
<S> <C> <C> <C> <C> <C>
Andrall E. Pearson...................... 0 0 -- -- $ 0
David C. Novak.......................... 255,489 6.54 46.97 1/21/09 4,616,686
Peter A. Bassi.......................... 57,485 1.47 46.97 1/21/09 1,038,754
Christian L. Campbell................... 42,582 1.09 46.97 1/21/09 769,457
Michael S. Rawlings..................... 57,485 1.47 46.97 1/21/09 1,038,754
</TABLE>
- ------------------------
(1) 1999 option grants become exercisable on January 21, 2003. The terms of each
option grant provide that if specified corporate control changes occur, all
outstanding stock options become exercisable immediately.
(2) The exercise price shown is the average of the high and low sales price of
the Company's Common Stock on the date of grant.
(3) The grant date present values were determined using the Black-Scholes option
pricing model. The Black-Scholes present value per option was $18.07. The
assumptions used in calculating the Black-Scholes present value for the new
options were as follows: (a) options are assumed to be exercised at year
six; (b) volatility is 29.7% based on the daily closing stock prices from
October 7, 1997 to December 31, 1999 for Tricon, and the monthly closing
stock prices for the last five years for McDonald's Corporation and Wendy's
International, Inc.; (c) the risk-free rate of return is 4.6% based on the
five-year zero coupon treasury average yield for January 1999; and (d) the
dividend yield is 0%. No further discount to the option value calculated was
taken to give effect to the fact that the options are not freely
transferable or to the exercise or lapse of the options after the vesting
period, but prior to the end of the option term, or to the fact that the
Company has stock ownership guidelines.
12
<PAGE>
STOCK OPTION EXERCISES AND HOLDINGS
The following table presents information with respect to stock options
exercised during the last fiscal year by the named executive officers, as well
as the status and current value of unexercised stock options held as of
December 25, 1999.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED
OPTIONS AT VALUE OF UNEXERCISED
SHARES DECEMBER 25, 1999 IN-THE-MONEY OPTIONS AT
ACQUIRED ON (# SHARES) DECEMBER 25, 1999(1)
EXERCISE VALUE --------------------------- ----------------------------
NAME (# SHARES) REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- -------- ----------- ------------- ----------- --------------
<S> <C> <C> <C> <C> <C> <C>
Andrall E. Pearson.......... 0 0 700,000(2) 350,000 4,413,290 2,206,645
David C. Novak.............. 0 0 4,003 1,628,991(2) 81,968 12,520,172
Peter A. Bassi.............. 0 0 3,137 295,615 66,068 3,134,305
Christian L. Campbell....... 0 0 0 153,227 0 697,584
Michael S. Rawlings......... 0 0 0 224,600 0 1,639,868
</TABLE>
- ------------------------
(1) The value of in-the-money options is based on the $37.9375 per share closing
price of Tricon Common Stock on December 23, 1999 (the last trading day
prior to Tricon's fiscal year-end), less the exercise price of the options.
(2) The Compensation Committee of the Board of Directors amended these options
to permit their transfer to family members and family trusts. In
Mr. Novak's case, only 333,992 options may be transferred once they become
exercisable.
PENSION PLANS
The Company has adopted the Tricon Retirement Plan (formerly known as the
Tricon Salaried Employees Retirement Plan) and Tricon Pension Equalization Plan.
The annual benefits payable under these two pension plans to employees with five
or more years of service at age 65 are equal to 3% of the employee's highest
consecutive five-year average annual earnings multiplied by years of credited
service up to ten years of credited service plus an additional 1% of the
employee's highest consecutive five-year average annual earnings for each
additional year of credited service over ten years, less .43% of final average
earnings not to exceed Social Security covered compensation multiplied by years
of service (not to exceed 35 years).
Under the Tricon plans, when an executive retires at the normal retirement
age (65), the approximate annual benefits payable after January 1, 2000 for the
following pay classifications and years of service are expected to be:
<TABLE>
<CAPTION>
YEARS OF SERVICE
------------------------------------------------------
REMUNERATION 15 20 25 30 35
- ------------ -------- -------- -------- -------- ----------
<S> <C> <C> <C> <C> <C>
$ 250,000............................ $ 85,372 $ 97,162 $108,953 $120,743 $ 132,534
$ 500,000............................ 172,872 197,162 221,453 245,743 270,034
$ 750,000............................ 260,372 297,162 333,953 370,743 407,534
$1,000,000........................... 347,872 397,162 446,453 495,743 545,034
$1,250,000........................... 435,372 497,162 558,953 620,743 682,534
$1,500,000........................... 522,872 597,162 671,453 745,743 820,034
$1,750,000........................... 610,372 697,162 783,953 870,744 957,534
$2,000,000........................... 697,872 797,162 896,453 995,743 1,095,034
</TABLE>
13
<PAGE>
The years of credited service and covered compensation under the Tricon
Retirement Plan and Tricon Pension Equalization Plan for the covered executive
officers named in the Summary Compensation Table are as follows:
<TABLE>
<CAPTION>
ANDRALL E. DAVID C. PETER A. CHRISTIAN L. MICHAEL S.
PEARSON NOVAK BASSI CAMPBELL RAWLINGS
---------- ---------- -------- ------------ ----------
<S> <C> <C> <C> <C> <C>
Years of Credited Service.......... (1) 13 27 2 2
Covered Compensation............... (1) $1,569,349 $636,132 $744,238 $721,594
</TABLE>
- ------------------------
(1) Under the terms of Mr. Pearson's employment agreement, he will not
participate in the Tricon pension plans.
EMPLOYMENT AGREEMENTS AND CHANGE IN CONTROL AGREEMENTS
EMPLOYMENT AGREEMENTS. In 1997, the Company entered into an employment
agreement with Andrall E. Pearson under which he will serve as Tricon's Chairman
of the Board and Chief Executive Officer until July 1, 2000. (The Board of
Directors appointed David C. Novak Tricon's Chief Executive Officer effective
January 1, 2000.) The agreement provides for an annual salary of $900,000 and
annual incentive compensation awards to be determined by the Company's Board of
Directors. However, Mr. Pearson received a guaranteed bonus for 1997 (payable in
1998) of $450,000. The Company also awarded Mr. Pearson a one-time hiring bonus
of $850,000 in 1997 which under the terms of the agreement was deferred until
the end of his employment and treated as if invested in Tricon Common Stock at a
discount under the Tricon Executive Income Deferral Plan. In addition, the
Company will make a $1,000,000 retirement payment to Mr. Pearson at the end of
his employment term. Mr. Pearson was granted options to purchase 1,050,000
shares of the Company's Common Stock in 1997. The exercise price of these
options is $31.6328 per share, which was the average of the closing prices of
Tricon stock for the fifth through the twentieth trading days following October
6, 1997, but not less than the average of the high and low sales price for
Tricon's Common Stock on the grant date. One third of the options vested on each
of July 1, 1998 and July 1, 1999 and one-third will vest on July 1, 2000. They
will be exercisable for a period of ten years from the grant date.
The Company entered into an employment agreement with Christian L. Campbell
in September 1997, under which he will serve as Tricon's Senior Vice President,
General Counsel and Secretary. The agreement provided for a starting salary of
$400,000 per year and participation in Tricon's annual incentive plan with a
target annual incentive compensation award of 65% (subsequently changed to 75%)
of annual salary. The Company also agreed to pay Mr. Campbell a $300,000 hiring
bonus, 50% of which was payable upon starting with Tricon and the remainder
payable on his first anniversary. In addition, the Company agreed to pay Mr.
Campbell a guaranteed 1997 bonus, payable in 1998, of $200,000. Upon achieving
normal retirement age status (age 55 and at least 10 years of credited service
with Tricon), the Company will add five years of credited service to Mr.
Campbell's benefit under the Tricon Retirement Plan and Tricon Pension
Equalization Plan. Mr. Campbell was granted options to purchase 110,645 shares
of Tricon Common Stock at an exercise price of $31.6328, which represents the
average closing prices for Tricon stock for the fifth through twentieth day
period following Tricon's October 6, 1997 spin-off from PepsiCo, but not less
than the average of the high and low sales price for Tricon's Common Stock on
the grant date. They will become exercisable five years from the grant date
(provided Mr. Campbell remains employed by Tricon) and must be exercised within
ten years from the grant date or, if earlier, termination of employment.
CHANGE IN CONTROL AGREEMENTS. Change in control severance agreements are in
effect between the Company and certain key executives (including Messrs.
Pearson, Novak, Bassi, Campbell and Rawlings). These executive change in control
agreements (the "Agreements") were effective as of July 21, 1998, and have been
general obligations of the Company since that date, and provide, generally, that
if, within two years subsequent to a change in control of the Company (a "Change
in Control"), the employment of
14
<PAGE>
the executive ("Covered Executive") is terminated (other than for cause, or for
other limited reasons specified in the Agreements), or if the Covered Executive
terminates employment for Good Reason (defined in the Agreements to include a
diminution of duties and responsibilities or benefits), the Covered Executive
will be entitled to receive a severance payment consisting of (a) the Covered
Executive's base salary through the date of termination, (b) a proportionate
bonus assuming achievement of target performance goals under the bonus plan or,
if higher, assuming continued achievement of such performance goals until date
of termination, (c) two times the sum of the Covered Executive's base salary and
the target bonus or, if higher, the actual bonus for the year preceding the
Change in Control, and (d) any unpaid compensation. If payments had been made at
December 25, 1999, the total of such severance payments under (c) above to each
of Messrs. Pearson, Novak, Bassi, Campbell and Rawlings would have been
$7,200,000, $5,800,000, $2,083,100, $2,820,000 and $1,992,150, respectively. A
Covered Executive whose employment is not terminated in a manner described in
this paragraph will not be entitled to receive any severance payments under the
Agreements. In addition to such severance payments, the Company will also
provide the Covered Executive with outplacement services for one year following
such termination. In addition, the Agreements provide that in the event a
Covered Executive becomes entitled to receive a severance payment and other
severance benefits and such severance payment and benefits are subject to an
excise tax, the Covered Executive will become entitled to receive an additional
payment in an amount such that after the payment of all income and excise taxes,
the Covered Executive will be in the same after-tax position as if no excise tax
had been imposed. If a Change in Control does not occur before December 31,
2000, the Agreements terminate.
CERTAIN TRANSACTIONS
During fiscal 1999, affiliates of Harman Management Company ("Harman") paid
royalties of approximately $9,750,000 to KFC Corporation, a subsidiary of
Tricon. Jackie Trujillo, Chairman of the Board of Harman, is a Director of
Tricon.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee (the "Committee") is responsible for assisting
the Board of Directors in monitoring the Company's compensation arrangements
with a view to ensuring that the Company continues to attract and retain highly
qualified management through competitive compensation programs, and encouraging
extraordinary results through incentive awards. The Committee establishes basic
principles related to the compensation programs of the Company and provides
oversight for compensation programs for senior executive officers. The
principles include building a strong relationship between shareholder return and
executive compensation. Particular emphasis is placed on share ownership for
senior executives and middle management. In addition, the Committee places a
high emphasis on incentive compensation, in particular long-term incentives, and
providing an overall level of remuneration which is competitive and reflective
of performance.
COMPENSATION PHILOSOPHY AND PROGRAMS
In administering senior executive officer compensation, the Committee has
established a compensation program tailored for the restaurant industry that is
designed to reward superior performance. The committee's objective is to
establish a program which aligns the interests of shareholders and executives.
As such, the Committee has established stock ownership guidelines for the 500
most senior executives and managers. The guidelines vary from 7.5 times salary
to 0.25 times salary and assume that affected employees will meet or exceed the
guidelines within five years. The Company's long-term stock option program is
focused on attracting, retaining and motivating the best restaurant executives
in the industry.
Senior People Resources management of the Company presents proposals and
recommendations on senior executive officer compensation to the Committee for
their review and evaluation. To establish compensation targets, the Committee
uses data provided by the Company which is obtained from
15
<PAGE>
independent consultants. The data reflect compensation practices of 22 companies
from the restaurant, service, consumer goods and retail industries (the
"comparator group") who participate in widely distributed surveys. The Committee
believes that targeting compensation at a level comparable to other large
companies appropriately reflects the labor market for Company executives. Base
pay is established at the median level for the comparator group. Annual
incentive compensation targets are set at the 75th percentile for the comparator
group. Long-term incentive targets are set at the 75th percentile for executives
and managers who are achieving their ownership guideline. Companies in the
comparator group may be included in the S&P Restaurants Index used in the
performance graph included in this Proxy Statement; however, the comparator
group is not made up exclusively of companies used in that index. As the Company
recruits senior executives from outside the restaurant industry and retains
these executives against offers from outside the restaurant industry, the
Committee believes that the broad-based comparator group is a more appropriate
basis for comparison.
BASE SALARIES
The Committee approved the Company's executive compensation salary structure
for 1999. Base salaries were established around a targeted pay level for each
position within each career band. Each position's career band is established
based on the median level of base compensation for similar positions in the
survey data. The 1999 increases to base salaries were set within the prescribed
career band based on an assessment of factors including individual performance,
experience and responsibilities. This assessment is not subject to weightings or
formulas. Future individual salary increases are expected to reflect the
position against a targeted salary within the career band, the merit increase
budget established by the Company, and individual performance over the prior
performance period.
ANNUAL CASH INCENTIVES
The Company established the Executive Incentive Compensation Plan ("EICP")
to motivate the attainment of annual performance objectives. The performance
requirement under the EICP is based upon attainment of a pre-established
earnings per share ("EPS") target (adjusted for nonrecurring events). No payment
is made if a minimum EPS target is not met. Once the EPS target is achieved, the
participant is eligible to receive an overall maximum incentive award
attributable to the level of EPS attained. The Committee has discretion to
decrease (but not increase) the amount payable. Pursuant to the terms of the
EICP, the Committee certified results against performance objectives and
approved annual incentive awards.
In exercising its discretion to determine the annual incentives of executive
officers (subject to the overall maximums), the Committee reviews actual
performance against consolidated or relevant operating company and individual
goals and objectives. These goals and objectives are used to establish a minimum
level, a target level, and a maximum level of performance. The restaurant
company goals and objectives for executive officers in 1999 included cash flow,
profit objectives, same store sales and return on net assets. For each
objective, no payment is made if performance fails to meet the minimum level for
that objective. Actual performance is measured relative to these levels for each
objective in order to determine a percentage. This percentage is applied to each
participant's predetermined target incentive amount in determining a
participant's actual incentive award which may not exceed the overall maximum.
Depending on actual performance, the percentage can range from 0 to 300% of the
target incentive amount. This same formula is applied to determine incentive
awards of eligible nonexecutive officers; however, each operating company also
has financial targets based on one or more of the following measures: sales,
profit, cash flow, same store sales and return on net assets.
In keeping with the emphasis on stock ownership, executives have the
opportunity to defer all or a portion of their annual incentives into phantom
shares of Tricon Common Stock at a discount; however, to receive payment of
these shares, participating executives must continue employment with the Company
for two years following the deferral or meet certain retirement or disability
criteria.
16
<PAGE>
LONG-TERM INCENTIVES
The Company provides long-term incentives through the Company's Long Term
Incentive Plans ("LTIP"). The Committee believes that stock ownership by
executive and middle management is essential for aligning management's interest
with that of shareholders.
Under the LTIP, the Committee provides long-term incentive awards in the
form of stock options and, from time to time, restricted shares. Stock options
are the primary long-term incentive of the Company. The number of options
granted to each executive officer is related to the market data for that job and
the performance of the executive. For executive officers these grants were based
on the individual's anticipated achievement of their stock ownership guidelines,
responsibilities, performance, and future potential. Each option was granted at
not less than the fair market value of the underlying Common Stock on the date
of grant. Each regular grant of an option becomes vested after four years and is
for a term of ten years.
1999 COMPENSATION OF ANDRALL E. PEARSON
In 1997, Mr. Pearson entered into a three-year employment agreement with the
Company which was approved by PepsiCo, Inc. (prior to spin-off of the Company by
PepsiCo), the major terms of which were ratified by the Board's non-employee
Directors. Under the Agreement, Mr. Pearson's annual salary was set at $900,000.
The amount was determined based on a comparison with other firms in the
comparator group. This salary is at the median for the survey group.
The Committee did not change Mr. Pearson's salary in 1999 since it was set
as a fixed amount for his three year employment period. Mr. Pearson did not
receive a 1999 stock option grant. His 1997 grant was designed to cover his
responsibilities as Chairman and Chief Executive Officer for 1998, 1999 and
2000.
Mr. Pearson was awarded an annual incentive of $2,430,000 for 1999. The
Committee certified Tricon's attainment of the Committee's pre-established EPS
target for 1999. Based on Tricon's 1999 EPS, the Committee could have awarded
Mr. Pearson an annual incentive of $3,000,000 under the EICP. The Committee,
however, exercised its discretion to award Mr. Pearson a lower incentive. The
determination of this amount was based on Mr. Pearson's target incentive (100%
of his salary) multiplied by two factors: Tricon's performance and
Mr. Pearson's individual performance. In exercising its discretion, the
Committee reviewed Tricon's attainment of pre-established cash flow and EPS
objectives. Attainment of these objectives resulted in a 200% factor for Tricon
performance. In reviewing Mr. Pearson's individual performance, the Committee
considered several criteria on a subjective basis including Tricon's above
target 1999 EPS and cash flow, improved store level margins, improved same store
sales and increased return on assets. The Committee determined that
Mr. Pearson's personal performance was at a level producing a 135% factor.
Combining the Tricon and personal performance factors resulted in a bonus equal
to 270% of Mr. Pearson's target incentive.
IMPACT OF INTERNAL REVENUE CODE SECTION 162(M)
Under the Omnibus Budget Reconciliation Act of 1993, provisions were added
to the Internal Revenue Code under Section 162(m) that limit the tax deduction
for compensation in excess of one million dollars paid to certain executive
officers. However, performance-based compensation can be excluded from the limit
so long as it meets certain requirements. The Committee believes the EICP and
LTIP satisfy the requirements for exemption under the Internal Revenue Code
Section 162(m). Payments made under these plans qualify as performance-based
compensation and constitute the majority of aggregate annual incentive payments
for the named executive officers.
For 1999, the annual salary paid to Mr. Pearson and the other named
executive officers were in each case less than one million dollars. The 1999
annual incentives were all paid pursuant to the EICP and will, therefore, be
deductible when paid. To the extent any of the named executive officers defer
their annual incentives into phantom shares of Tricon Common Stock at a
discount, the annual incentives are no longer
17
<PAGE>
qualified under Section 162(m); however, it is expected that they will be
deductible when paid, since they will be paid after each executive's retirement
or termination of employment or when the executive is no longer a named
executive officer. The stock option awards made under the terms of the LTIP are
exempt as performance-based compensation for purposes of calculating the
one million dollar limit. Due to the Company's focus on performance-based
compensation plans and continued deferral of compensation by certain executive
officers, the Committee expects to continue to qualify most compensation paid to
the group as tax deductible.
SUMMARY
The Compensation Committee believes that the compensation programs of the
Company are well structured to encourage attainment of objectives and foster a
shareholder perspective in management, in particular through employee share
ownership. The Committee feels that the awards made in 1999 were competitive and
appropriate, and serve shareholders' long-term interests.
Respectfully submitted,
The Compensation Committee
<TABLE>
<S> <C>
D. Ronald Daniel Kenneth G. Langone
Robert J. Ulrich Jeanette S. Wagner
John L. Weinberg
</TABLE>
18
<PAGE>
PERFORMANCE GRAPH
The following performance graph compares the cumulative total return of the
Company's Common Stock to the S&P 500 Stock Index and to the S&P Restaurants
Index for the period from September 17, 1997, the day shares of Tricon's Common
Stock began trading on the New York Stock Exchange, to December 23, 1999, the
last trading day of the Company's fiscal year. The returns of each member of the
peer group are weighted according to each member's stock market capitalization
as of the beginning of the period measured. The graph assumes that the value of
the investment in the Company's Common Stock and each index was $100 at
September 17, 1997 and that all dividends were reinvested. The companies
included in the S&P Restaurants Index in addition to Tricon were as follows:
McDonald's Corporation, Wendy's International, Inc. and Darden
Restaurants, Inc.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
TRICON S&P 500 S&P RESTAURANTS
<S> <C> <C> <C>
September 17, 1997 100 100 100
December 26, 1997 97 100 97
December 24, 1998 164 133 158
December 23, 1999 130 160 163
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 17, DECEMBER 26, DECEMBER 24, DECEMBER 23,
1997 1997 1998 1999
-------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Tricon...................................... 100 97 164 130
S & P 500................................... 100 100 133 160
S & P Restaurants........................... 100 97 158 163
</TABLE>
RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
(ITEM 2 ON PROXY CARD)
The Board of Directors, upon recommendation of the Audit Committee, has
selected KPMG LLP to audit the Company's financial statements for the fiscal
year ending December 30, 2000. This selection will be presented to shareholders
for ratification at the Annual Meeting. If the shareholders fail to ratify this
selection, the matter of the selection of independent auditors will be
reconsidered by the Board of Directors. Representatives of KPMG LLP will be
present at the Annual Meeting and will have the opportunity to make a statement
if they so desire and will be available to respond to appropriate questions.
19
<PAGE>
The selection of KPMG LLP will be deemed ratified if the votes cast in favor
of the proposal exceed the votes cast against the proposal. Abstentions and
broker non-votes will not be counted as votes cast either for or against the
proposal.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR RATIFICATION OF THE SELECTION
OF KPMG LLP.
SHAREHOLDER PROPOSALS/DIRECTOR NOMINATIONS
Shareholders who intend to present proposals for consideration at the 2001
Annual Meeting of Shareholders, and who wish to have their proposals included in
the Company's proxy statement and proxy card for that meeting, must be certain
that their proposals are received by the Company at its principal executive
offices in Louisville, Kentucky on or before November 30, 2000. Proposals should
be sent to Secretary, Tricon Global Restaurants, Inc., 1441 Gardiner Lane,
Louisville, Kentucky 40213. All proposals must also comply with the applicable
requirements of the federal securities laws and the Company's Bylaws in order to
be included in the Company's proxy statement and proxy card for the 2001 Annual
Meeting. Similarly, in order for a shareholder proposal to be raised from the
floor during next year's annual meeting, written notice must be received by the
Company no later than February 19, 2001, and shall contain such information as
required under Tricon's Bylaws. Shareholders may propose director candidates for
consideration by Tricon's Nominating Committee. In addition, Company Bylaws
permit shareholders to nominate directors at a shareholder meeting. To make a
director nomination at the 2001 Annual Meeting, a shareholder must notify
Tricon's Secretary no later than February 19, 2001. The notice must meet all
other requirements contained in the Company's Bylaws. You may contact Tricon's
Secretary at the address mentioned above for a copy of the relevant Bylaw
provisions regarding the requirements for making shareholder proposals and
nominating director candidates.
OTHER MATTERS
As of the mailing date for this Proxy Statement, the Board of Directors
knows of no other business which will be presented for consideration at the
Annual Meeting. However, if any such other business should properly come before
the Annual Meeting, it is the intention of the persons named in the accompanying
form of proxy to vote the proxies in respect of any such business in accordance
with their best judgment.
March 25, 2000
20
<PAGE>
_______________________________________________________________________________
TRICON GLOBAL RESTAURANTS, INC.
[TRICON LOGO] ANNUAL MEETING
May 18, 2000
9:00 AM
Tricon Global Restaurants, Inc.
YUM Center
1900 Colonel Sanders Lane
Louisville, Kentucky 40213
A D M I S S I O N T I C K E T
- -------------------------------------------------------------------------------
TRICON'S 2000 ANNUAL SHAREHOLDERS' MEETING WILL BE HELD AT 9:00 A.M.
(EASTERN DAYLIGHT SAVINGS TIME) ON THURSDAY, MAY 18, 2000 AT THE YUM
CENTER AT 1900 COLONEL SANDERS LANE IN LOUISVILLE, KENTUCKY. If you plan
to attend the Annual Shareholders' Meeting, please tear off and keep the
upper portion of this form as your ticket for admission to the meeting.
YOUR VOTE IS IMPORTANT. The proxy voting instruction card below covers
the voting of all shares of Common Stock of Tricon Global Restaurants,
Inc. which you are entitled to vote or to direct the voting of, including
those shares in Tricon's Capital Stock Purchase Program and Long Term
Savings Program.
Please date and sign the proxy card and return it promptly in the
enclosed business reply envelope. If you do not sign and return a proxy
or attend the meeting and vote by ballot, your shares cannot be voted.
(Please detach proxy card at perforation)
- -------------------------------------------------------------------------------
TRICON GLOBAL RESTAURANTS, INC.
[TRICON LOGO] This Proxy is solicited on behalf of the Board of Directors
_________________________________________________________________________
The undersigned hereby appoints Christian L. Campbell, John P. Daly and
Matthew P. Preston, and each of them, as Proxies with full power of
substitution, to vote, as designated on the reverse side, for director
substitutes if any nominee becomes unavailable, and in their discretion, on
matters properly brought before the Meeting and on matters incident to the
conduct of the Meeting, all of the shares of common stock of Tricon Global
Restaurants, Inc. which the undersigned has power to vote at the Annual
Meeting of Shareholders to be held on May 18, 2000 or any adjournment thereof.
NOMINEES FOR DIRECTOR:
Class III: D. Ronald Daniel, Kenneth G. Langone, Andrall E. Pearson,
John L. Weinberg.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ALL NOMINEES FOR DIRECTOR
AND FOR THE RATIFICATION OF ELECTION OF KPMG LLP AS INDEPENDENT
ACCOUNTANTS.
This Proxy when properly executed will be voted as directed; if no
discretion is indicated, it will be voted as follows:
FOR the election of all nominees for director:
FOR the ratification of the election of independent accountants.
This card also provides voting instructions to the Administrator or
Trustee for shares beneficially owned under Tricon Global Restaurants,
Inc. Capital Stock Purchase Program and the Tricon Global Restaurants,
Inc. Long Term Savings Program.
(CONTINUED, and To Be Signed and Dated on the REVERSE SIDE) / SEE /
/REVERSE SIDE /
_______________________________________________________________________________
<PAGE>
_______________________________________________________________________________
[TRICON LOGO]
Tricon Global Restaurants, Inc.
c/o Proxy Services
P.O. Box 9380
Boston, MA 02205-9955
A D M I S S I O N T I C K E T
- -------------------------------------------------------------------------------
You may vote your proxy 24 hours a day, 7 days a week, using either the
Internet or a touch-tone telephone. Your Internet or telephone vote
authorizes the named proxies to vote your shares in the same manner as if
you marked, signed and returned your proxy card.
TO VOTE BY INTERNET: GO TO THE WEB ADDRESS: http://www.eproxyvote.com/yum.
You will be asked to enter the 14-digit VOTE CONTROL
NUMBER located above your name and address in the
lower left of the proxy card. Then follow the
instructions. Be sure to vote at least 36 hours
prior to the Meeting.
TO VOTE BY TELEPHONE: CALL TOLL-FREE ON A TOUCH-TONE TELEPHONE
1-877-PRX-VOTE (1-877-779-8683). THERE IS NO CHARGE
TO YOU FOR THIS CALL. OUTSIDE THE U.S. CALL COLLECT
AT 1-201-536-8073. You will be asked to enter the
14-digit VOTER CONTROL NUMBER located above your
name and address in the lower left of the proxy
card. Then follow the instructions. Be sure to vote
at least 36 hours prior to the Meeting.
TO VOTE BY MAIL: Mark, sign and date your proxy card and return it in
the postage-paid envelope.
RECEIVE FUTURE MATERIALS VIA THE INTERNET
You may elect to receive future proxy and other materials over the Internet
if you have an e-mail account and Internet access. To take advantage of this
offer, please access http://www.consent.com/yum and then simply follow the
instructions.
IF YOU ARE VOTING BY INTERNET OR TELEPHONE, DO NOT MAIL YOUR PROXY CARD.
(Please detach proxy card at perforation)
- -------------------------------------------------------------------------------
/X/ PLEASE MARK
VOTES AS IN
THIS EXAMPLE.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEMS 1 AND 2
_______________________________________________________________________________
1. Election of Directors
(01) D. Ronald Daniel WITHHOLD
(02) Kenneth C. Langone FOR AUTHORITY
(03) Andrall E. Pearson
(04) John L. Weinberg / / / /
2. Ratification of Election FOR AGAINST ABSTAIN
of Independent
Accountants / / / / / /
-----------------------------------
To withhold authority to vote
for any particular nominee(s) write
the name(s) above.
_______________________________________________________________________________
If you receive more than one Annual Report at
the address set forth on this proxy card and have
no need for the extra copy, please check the box at
the right. This will not affect the distribution of
dividends or proxy statements. / /
_____________________________________________________
I plan to attend the Annual Meeting. / /
I plan to bring a guest. / /
_____________________________________________________
When executed, promptly forward this card to: Proxy Services
Boston EquiServe
P.O. Box 9380
Boston, MA
02205-9955
Signature(s) Date
----------------------------------------------- --------------
NOTE: Please sign exactly as the name appears hereon. Joint owners
should each sign. When signing as attorney, executor,
administrator, trustee or guardian, please give full title as such
_______________________________________________________________________________
note corner cut
