SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934 (Amendment No. )
Filed by the registrant [ X ]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary proxy statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
KFC NATIONAL PURCHASING COOPERATIVE, INC.
__________________________________________________________________
(Name of Registrant as Specified in Its Charter)
KFC NATIONAL PURCHASING COOPERATIVE, INC.
_________________________________________________________________
(Name of Person(s) Filing Proxy Statement)
Payment of filing fee (Check the appropriate box):
[X] No fee required.
(1) Title of each class of securities to which transactions
applies:
__________________________________________________________________
(2) Aggregate number of securities to which transaction
applies:
_________________________________________________________________
(3) Per unit price of other underlying value of transaction
computer pursuant to Exchange Act Rule 0-11 (Set forth the amount
on which the filing fee is calculated and state how it was
determined):
__________________________________________________________________
(4) Proposed maximum aggregate value of transaction:
__________________________________________________________________
(5) Total fee paid:
___________________________________________________________________
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which the
offsetting fee was paid previously. Identify the previous filing
by registration statement number, or the form or schedule and the
date of its filing.
(1) Amount previously paid:
____________________________________________________________________
(2) Form, schedule or registration statement no.:
____________________________________________________________________
(3) Filing party:
____________________________________________________________________
(4) Date filed:
____________________________________________________________________
KFC National Purchasing Cooperative, Inc.
NOTICE OF EIGHTEENTH ANNUAL MEETING
OF STOCKHOLDERS
To Be Held March 21, 1997
To the Stockholder Members:
The Eighteenth Annual Meeting (the "Annual Meeting") of the stockholders
of KFC National Purchasing Cooperative, Inc. (the "Cooperative") will be held
on Friday, March 21, 1997 at 10:00 a.m. at the Cooperative's offices at 950
Breckenridge Lane, Louisville, Kentucky, for the purpose of considering and
acting upon:
1. Election of Directors. Election of one director by the holders of
each of the Series A, E, F, H, I, L, and M Membership Common Stock.
2. Other Business. Such other matters and business as may properly
be brought before the meeting or any adjournment thereof.
Information regarding the matters to be acted upon at the Annual Meeting
is contained in the Proxy Statement accompanying this Notice. Stockholders
of record at the close of business on February 10, 1997 are entitled to notice
of and to vote at the Annual Meeting, and any adjournments thereof.
HOLDERS OF SERIES A, E, F, H, I, L, and M MEMBERSHIP COMMON STOCK ARE ENTITLED
TO VOTE IN THE ELECTION OF THE DIRECTOR NOMINATED BY THE HOLDERS OF THEIR
RESPECTIVE SERIES OF MEMBERSHIP COMMON STOCK.
THE PRESENCE IN PERSON OR BY PROXY OF STOCKHOLDER MEMBERS REPRESENTING A
MAJORITY OF THE STOCKHOLDER MEMBERS ENTITLED TO VOTE AT THE ANNUAL MEETING
SHALL CONSTITUTE A QUORUM AT THE ANNUAL MEETING. THEREFORE, EVEN IF YOU ARE
NOT ELIGIBLE TO VOTE IN ANY OF THE DIRECTOR ELECTIONS, YOU ARE URGED TO SIGN,
DATE AND RETURN THE ENCLOSED FORM OF PROXY.
A PROMPT RESPONSE WILL BE APPRECIATED.
By Order of the Board of Directors.
Thomas D. Henrion
President and Chief Executive Officer
Louisville, Kentucky
February 11, 1997
KFC NATIONAL PURCHASING COOPERATIVE, INC.
PROXY STATEMENT
For the Eighteenth Annual Meeting of Stockholders
To Be Held on March 21, 1997
Proxies are being solicited on behalf of the Board of Directors of KFC
National Purchasing Cooperative, Inc. (the "Cooperative"), in connection with
the Eighteenth Annual Meeting of Stockholders (the "Annual Meeting") to be
held at the Cooperative's offices at 950 Breckenridge Lane, Louisville,
Kentucky, on Friday, March 21, 1997, at 10:00 a.m., and at any adjournments
thereof. As set forth in the accompanying Notice, the purpose of the Annual
Meeting is to consider the election of certain directors and such other
matters and business as may properly be brought before the meeting.
All properly executed proxies delivered pursuant to this solicitation
and not revoked will be voted at the Annual Meeting in accordance with the
directions given. Except in the election of Series A, E, F, H, I, L, and M
Directors, as discussed below, each stockholder member has one vote per share
of Membership Common Stock on all matters coming before the meeting. With
regard to the election of directors, only stockholders of each of Series A, E,
F, H, I, L, and M Membership Common Stock are entitled to cast one vote each
to elect one member to the Board of Directors to represent the Series.
Proxies may be revoked at any time in writing or in person at the Annual
Meeting or at any adjournment thereof. All proxies are automatically revoked
one year from their date.
The persons named in the enclosed form of proxy, who are the members of
the Executive Committee of the Board of Directors, or their substitutes, will
not vote a proxy for any nominee to represent a Series of Membership Common
Stock unless the stockholder member appointing the proxy is eligible to vote
for the nominee and designates the stockholder's preference by checking one
of the appropriate boxes on the form of proxy.
The presence in person or by proxy of stockholders representing a
majority of the stockholder members entitled to vote at the Annual Meeting
shall constitute a quorum at the Annual Meeting. The affirmative vote of
two-thirds of the shares of Membership Common Stock present in person or by
proxy at the meeting is required to take any action at the Annual Meeting,
other than the election of directors. Abstentions are counted for purposes
of determining the presence or absence of a quorum for the transaction of
business and in tabulations of the votes cast on proposals presented to
stockholders.
The mailing address of the principal executive offices of the Cooperative
is 950 Breckenridge Lane, Louisville, Kentucky 40207. The approximate date
on which this Proxy Statement and form of proxy are first being sent or given
to stockholders is February 11, 1997. Only those holders of Membership Common
Stock of record at the close of business on February 10, 1997, are entitled to
notice of and to vote at the Annual Meeting and any adjournment thereof. On
February 10, 1997, there were 605 holders of Membership Common Stock.
ELECTION OF DIRECTORS
At the Annual Meeting, the directors representing the Series A, E, F, H,
I, L, and M Membership Common Stockholders will be elected. The terms of the
directors set forth below will expire at the meeting. Vacancies also exist
with respect to the two director positions eligible to be filled by KFC
National Management Company ("KFC Management"), the sole holder of Series K
Membership Common Stock, but no persons have been nominated to fill these
positions at the Annual Meeting.
Expired Directorships
Name Series Class Area or Holder
Jack M. Richards A III Indiana, Michigan, Ohio and
West Virginia
David G. Neal E III Alabama, Florida, Georgia, Kentucky
Louisiana, Mississippi, North Carolina,
South Carolina, Tennessee and Virginia
William E. Allen F III Illinois, Iowa, Minnesota, Nebraska,
North Dakota, South Dakota, and
Wisconsin
Leon W. Harman H III Harman Management Corporation
("Harman")
Paul A. Houston I III Scott's Restaurants, Inc.
("Scott's")
Benny E. Edwards L I National Franchisee Advisory Council
("NFAC")
Ronald J. Young M III Canada
Nominees
Harman, the sole holder of Series H Membership Common Stock, is entitled
to nominate and elect as a Series one member of the Board of Directors to
serve a three-year term. Harman has nominated Leon W. Harman to continue
serving as a director representing Series H Membership Common Stock. Scott's,
the sole holder of Series I Membership Common Stock, is entitled to nominate
and elect as a Series one member of the Board of Directors to serve a three-
year term. Scott's has nominated Paul A. Houston to continue serving as
director representing Series I Membership Common Stock. At this Annual
Meeting, NFAC, the sole holder of Series L Membership Common Stock, is
entitled to nominate and elect as a Series one member of the Board of
Directors to serve the remaining one year of a three-year term. NFAC has
nominated Benny E. Edwards to continue serving as director representing the
Series L Membership Common Stock. Certain information with respect to
Messrs. Harman, Houston and Edwards is provided below at "Management of the
Cooperative."
Each of Series A, E, F, and M Membership Common Stock is entitled to
nominate and elect as a Series one member of the Board of Directors. Each
of the following two stockholder members has been nominated to serve as
Series A Director: Thomas A. Arnold and Jack M. Richards. Mr. Arnold is 54
years of age, has worked with KFC stores since 1979, and currently serves as
Executive Vice President and joint owner of Premier Restaurant Management
Company, the owner and operator of 43 KFC stores. Mr. Richards is 68 years of
age, has owned KFC stores for 29 years, and currently owns and operates three
KFC stores. He has served as a director of the Cooperative since 1991.
Each of the following three stockholder members has been nominated to
serve as Series E Director: Brady Keys, Jr., Jerry L. Jones, and David G.
Neal. Mr. Keys is 59 years of age, has worked with KFC stores since 1969,
and currently owns and operates 11 KFC stores. Mr. Jones is 53 years of age,
has worked with KFC stores since 1978, and currently owns and operates 4 KFC
stores. Mr. Neal is 50 years of age, has worked with KFC stores for over 20
years, and currently serves as Vice President of Operations for JRN, Inc.,
the owner and operator of 89 KFC stores. Mr. Neal has served as a director
of the Cooperative representing Series E Membership Common Stock since 1991,
and previously served on the Board of Directors as one of the two directors
representing NFAC, the holder of the Series L share of Membership Common Stock.
William E. Allen is the sole nominee to serve as the Series F Director.
Certain information with respect to Mr. Allen is provided below at "Management
of the Cooperative."
Ronald J. Young is the sole nominee to serve as the Series M Director.
Certain information will respect to Mr. Young is provided below at "Management
of the Cooperative."
Each of the A, E, F, H, I, L, and M Series Directors are elected by the
affirmative vote of a plurality of the shares of the respective Series entitled
to vote for the director voting in person or by proxy at the Annual Meeting.
As of the Record Date, there were 103 holders of Series A Membership Common
Stock, 113 holders of Series E Membership Common Stock, 58 holders of Series
F Membership Common Stock, one holder each of Series H, I and L Membership
Common Stock, and 26 holders of Series M Membership Common Stock.
Each of the nominees described herein has agreed to serve if elected.
The terms of the Class I Directors elected at the Annual Meeting will expire
at the Cooperative's Annual Meeting for 1998 and the terms of the Class III
Directors will expire at the Cooperative's Annual Meeting for 2000.
MANAGEMENT OF THE COOPERATIVE
Directors and Executive Officers
<TABLE>
The following table lists, in addition to other information, the directors and executive officers of the
Cooperative at December 31, 1996, their ages, their position with the Cooperative, their present principal
occupations, and the number and percentages of shares of Store Common Stock beneficially owned, directly
or indirectly, by each. The information provided with respect to the ages and number of shares
beneficially owned is as of December 31, 1996.
<CAPTION>
Positions Year First
and Offices Became
Currently Director or Term as Present Store Percent
held with Executive Director Series Principal Common Stock of Store
Name Age Cooperative Officer Expires Represented(*) Occupation Ownership Outstanding
<S> <C> <C> <C> <C> <C> <C> <C> <C>
William E. 57 Director, 1988 1997 F Operator 10 **
Allen Secretary
James G. Cocolin 47 Director 1996 1999 C Operator 13 **
Darrell M. Dunafon 51 Director 1995 1998 N Operator 9 **
Ben E. Edwards 54 Director 1996 1997 L Operator 10 **
Leon W. 77 Director, 1978 1997 H Founder 266 4.5
Harman Vice Chairman of Harman
of the Board Management
Corporation
Edward J. 59 Director 1994 1999 J Operator 12 **
Henriquez, Jr.
Paul A. Houston 47 Director 1995 1997 I President of 408 6.8
Scott's Restaurants, Inc.
Grover G. Moss 52 Director 1994 1998 O Operator 10 **
David G. Neal 50 Director, 1991+ 1997 E Operator 89 1.5
Treasurer
Robert P. 62 Director, 1990 1999 B Operator 3 **
Peck Chairman of
the Board
Edward W. Rhawn 58 Director 1992 1999 Independent Chairman -- --
of Rhawn
Enterprises, Inc.
Jack M. Richards 68 Director 1991 1997 A Operator 3 **
James B. Royster 58 Director 1990 1998 L Operator 2 **
Dean M. Sorgdrager 34 Director 1996 1999 G Operator 1 **
Calvin G. White 42 Director 1992 1999 D Operator 12 **
Ronald J. Young 38 Director 1993 1997 M Operator 12 **
Thomas D. 54 Director, 1980 -- -- President & Chief -- --
Henrion President, Executive Officer,
Chief Executive Cooperative
Officer
William V. 47 Vice President, 1985 -- -- Vice President, -- --
Holden Chief Financial Chief Financial
Officer Officer, Cooperative
Judith L. 48 Vice President, 1991 -- -- Vice President, -- --
Hollis General Manager Cooperative
KFC Sales
W. Thomas 50 Vice President, 1982 -- -- Vice President -- --
Hutcherson Purchasing Cooperative
Kenneth L. Hartung 49 Vice President 1993 -- -- Vice President, -- --
Cooperative
John W. Inwright 40 Vice President, 1991 -- -- Vice President, -- --
Operations Cooperative
_______________________
All directors and executive officers as a group (22 persons)++ 860 14.4
* KFC Management has purchased one share of Series K Membership Common Stock. On November 16,
1989, both directors representing KFC Management resigned as members of the Board of Directors. KFC
Management has not taken any action to fill the two vacancies and has not indicated whether it will take
any action in the future to fill the vacancies. The total number of shares of Store Common Stock listed as
owned by directors and officers does not include the 2,028 shares of Store Common Stock believed by the
Cooperative to be owned by KFC Management or affiliates, representing approximately 34.0% of the Store
Common Stock outstanding.
** Less than one-half of one percent.
+ Mr. Neal has previously served on the Board of Directors of the Cooperative as one of the two
directors representing NFAC, the holder of the Series L share of Membership Common Stock. He first began
serving on the Board of Directors as a representative of Series E in February 1991.
++ Each director and nominee for director, other than Messrs. Henrion and Rhawn, is, or is
affiliated with a member which is, the owner of one share of Membership Common Stock. All directors and
executive officers as a group (22 persons) own 15 shares of Membership Common Stock, 2.4 percent of the
total number of Shares of Membership Common Stock outstanding. The Store Common Stock ownership reflects
the number of shares which each director, other than Messrs. Henrion and Rhawn, owns or which is owned by
the member with which the director is affiliated. Except as required by law, Store Common Stock has no
voting rights. Messrs. Henrion and Rhawn are neither the owners, nor affiliates of owners, of any
Membership or Store Common Stock.
</TABLE
The Cooperative's Bylaws provide for a Board of Directors consisting of
up to twenty voting members (with sixteen voting members currently serving)
plus the Cooperative's President, who is a non-voting member. Up to nineteen
directors will be elected by the holders of various series of Membership
Common Stock. Each series of Membership Common Stock is generally entitled
to elect one director, except that the NFAC and KFC Management are each enti-
tled to elect two directors. One director (the "Independent Director") is
nominated by the Board of Directors and elected by a plurality vote of the
shares of all series of Membership Common Stock entitled to vote. The
Independent Director must not be affiliated in any way with any owner or
operator of a KFC or Taco Bell retail outlet ("Operator"). With the exception
of the President and the Independent Director, each director of the
Cooperative must be a member of the Cooperative or a shareholder, officer,
employee or partner of the entity which is a member of the Cooperative.
Additionally, each director (other than the President and the Independent
Director) must be a member or an officer, director, shareholder, employee or
partner of the organization which is entitled to vote for such director. All
voting members of the Board of Directors serve three-year staggered terms. In
addition to the twenty voting members and the President described above, the
Cooperative's Bylaws provide that the Board of Directors may from time to
time appoint one or more non-voting members of the Board of Directors to
serve at the pleasure and upon such terms and conditions as the Board of
Directors may provide. Only the Series A, E, F, H, I, L, and M directors will
be elected at the Annual Meeting.
During the last five years, Messrs. Allen, Cocolin, Dunafon, Edwards,
Harman, Henriquez, Houston, Moss, Neal, Peck, Richards, Royster, Sorgdrager,
White, and Young have been principally engaged in business as Operators, and
Mr. Rhawn has been Chairman and owner of Rhawn Enterprises, Inc., a Louisville
financial services holding company.
Thomas D. Henrion joined the staff of the Cooperative in March 1980 as
its President and in 1993 also became Chief Executive Officer. In 1991, Mr.
Henrion was elected to serve as a director of the National Cooperative Bank.
Mr. Henrion also serves as a director of Wholesome and Hearty Foods, Inc.
and Span-America Medical Systems, Inc.
Except for Mr. Henrion, all officers of the Cooperative who are also
directors serve in such offices on a limited, part-time basis without
remuneration.
Standing Committees
The Board of Directors of the Cooperative had four regular meetings in
fiscal 1996 and no special meetings. The Board of Directors has five
standing committees: Executive, Personnel, Audit and Budget, Insurance, and
Nominating.
The Executive Committee is comprised of Messrs. Allen, Harman, Neal,
Peck and Royster and met five times during fiscal 1996. The Executive
Committee, between the meetings of the Board and while the Board is not in
session, has all the powers and may exercise all the duties of the Board of
Directors in the management of the business of the Cooperative which may
lawfully be delegated to it by the Board.
The Audit and Budget Committee is comprised of Messrs. Cocolin, Edwards,
Henriquez, Moss, Neal and Young and met three times during fiscal 1996. The
Audit and Budget Committee meets periodically with management and
representatives of the Cooperative's independent accountants. The
independent accountants have free access to the Committee and the Board of
Directors. The Committee considers the scope, timing and fees for the
annual audit and the results of audit examinations performed by the
independent public accountants, including certain recommendations to improve
the Cooperative's systems of accounting and internal controls, and the
follow-up reports prepared by management of the Cooperative pursuant to such
recommendations. The Committee reviews the Cooperative's annual budget
before its consideration by the Board of Directors.
The Insurance Committee is comprised of Messrs. Allen, Dunafon, Richards,
Sorgdrager and White and met four times during fiscal 1996. The Insurance
Committee monitors the KFC Franchisee Insurance Program and, in conjunction
with the Executive Committee, makes recommendations to the Board of Directors
concerning the program.
The Nominating Committee is comprised of Messrs. Allen, Harman, Neal and
Royster. The Nominating Committee makes recommendations to the Board of
Directors concerning officer positions for the Cooperative and met once
during fiscal 1996. The Board of Directors considers the nomination of the
Independent Director. Members of the Cooperative nominate their own
candidates for director to represent their respective Series of Membership
Common Stock.
Compensation Committee Interlocks and Insider Participation
The Personnel Committee is comprised of Messrs. Harman, Houston, Peck,
Rhawn and Royster and met four times during fiscal 1996. Pursuant to a
former provision of the Cooperative's Bylaws, Mr. Peck, as Chairman of the
Board, served as the Cooperative's Chief Executive Officer until May 1993;
he received no compensation from the Cooperative except for the reimbursement
for expenses as provided below under "Compensation of Directors." The
Personnel Committee considers personnel policy and practices of the
Cooperative and makes recommendations to the Board of Directors concerning
the compensation of all officers. See "Report of Personnel Committee on
Executive Compensation."
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as amended, (the
"1934 Act") requires the Cooperative's directors, executive officers and
certain persons to file initial reports of ownership and reports of changes
in ownership with the Securities and Exchange Commission (the "SEC"). Based
solely upon a review of forms filed by the appropriate persons and written
representations from such persons, the Cooperative believes that all such
filing requirements were complied with in fiscal 1996 except that two
directors filed untimely reports on transactions in the Company's stock as
follows: Robert P. Peck, one report regarding one transaction, and Calvin G.
White, one report regarding two transactions.
Executive Compensation
The following table shows all cash compensation paid by the Cooperative
for the years ended October 31, 1996, 1995 and 1994 to the most highly
compensated executive officers as to whom the total cash and cash-equivalent
remuneration exceeded $100,000 during fiscal 1996.
Summary Compensation Table
Annual Compensation
Name and Principal Fiscal All Other
Position Year Salary Bonus(1) Compensation(2)
Thomas 1996 $191,798 $58,466 $22,578
D. Henrion 1995 181,498 51,480 21,046
President 1994 175,116 51,383 19,440
and Chief
Executive
Officer
William 1996 101,379 16,000 13,279
T. Hutcherson 1995 102,034 15,815 11,631
Vice President 1994 101,538 10,713 11,834
William 1996 95,421 16,432 12,444
V. Holden 1995 92,067 14,406 10,531
Vice President 1994 85,381 10,522 10,024
and Chief
Financial
Officer
Kenneth 1996 93,896 15,288 12,662
L. Hartung 1995 87,099 17,861 10,457
Vice President 1994 82,813 16,538 9,881
Judith 1996 91,133 18,520 12,404
L. Hollis 1995 86,800 18,346 10,230
Vice President 1994 83,333 8,820 9,784
(1) The Cooperative has established bonus programs for
all officers under which, if they achieve certain
objectives, they may receive a bonus of not greater than
40% of their base salaries. In addition, the fiscal 1994
amount for Mr. Henrion includes a one-time payment of
$21,330 to Mr. Henrion pursuant to a letter agreement
dated May 22, 1991, providing for such payment if Mr.
Henrion remained employed by the Cooperative through
February 15, 1994.
(2) Includes employer contribution to the
Cooperative's Thrift Plan and Money Purchase Pension Plan
in fiscal 1996 as follows: Mr. Henrion $6,495 and
$11,083, respectively; Mr. Hutcherson $5,075 and $8,204,
respectively; Mr. Holden $4,756 and $7,688, respectively;
Mr. Hartung $4,839 and $7,823, respectively; and Ms.
Hollis $4,740 and $7,664, respectively. For Mr. Henrion,
the fiscal 1996 amount includes $5,000, representing
the value to Mr. Henrion of the Cooperative's payments
with respect to the insurance policy described below. See
"Report of Personnel Committee on Executive
Compensation."
Compensation of Directors
No director, other than the Independent Director, receives any
remuneration from the Cooperative other than reimbursement for long distance
travel, hotel accommodations, and $400 per board meeting for out-of-pocket
expenses. The Independent Director receives an annual fee of $10,000, plus
fees of $1,000 per board meeting attended.
Report of Personnel Committee on Executive Compensation
The Personnel Committee of the Board of Directors reviews and establishes
management compensation and compensation policies and procedures. Following
review and approval by the Personnel Committee, all issues pertaining to
executive compensation are submitted to the full Board of Directors for
approval. The Personnel Committee's policies and procedures for the year
ending October 31, 1996, are discussed below.
Chief Executive Officer Compensation
Mr. Henrion serves as Chief Executive Officer at the pleasure of the
Board. In fiscal 1996, Mr. Henrion received a base salary of $191,798 and
an incentive bonus of $58,466. The increase in Mr. Henrion's base salary in
fiscal 1996 compared to his fiscal 1995 base salary was based on the
Personnel Committee's subjective determination, not based on specific
criteria, that Mr. Henrion continues to be a valuable employee and has met
or exceeded the Cooperative's expectations in the preceding fiscal year.
With respect to the level of Mr. Henrion's base salary, as discussed below,
a nationally recognized management consulting firm determined during 1994
that the Cooperative's executive officer compensation (salary plus bonus)
was generally in the low range of compensation for executives in comparable
job positions in Kentucky and throughout the United States.
The Personnel Committee has established an incentive bonus program
(the "Incentive Bonus Program") for each of its executive officers, including
Mr. Henrion, under which, if an officer achieves certain specified
objectives, the officer may receive a bonus of not greater than 40% of base
salary. The Personnel Committee determined the amount of Mr. Henrion's 1996
bonus based on its assessment of his performance in the following three
areas: (i) his contribution toward obtainment of Cooperative objectives,
including (A) overall level of sales, (B) operating expenses as a percent of
sales and (C) operating income after bad debt but before patronage dividend
and income taxes, (ii) his overall management leadership, and (iii) his
flexibility in dealing with issues confronted by the Cooperative during the
year. The Personnel Committee generally weighted each of the three areas as
follows: 60% weight to area (i) and 20% weight to areas (ii) and (iii).
Based on the Cooperative's performance results in area (i) and the Personnel
Committee's subjective determination of Mr. Henrion's performance in the
other areas, the Personnel Committee recommended, and the Board of Directors
awarded, Mr. Henrion a bonus of $58,466.
In addition, Mr. Henrion and the Cooperative have executed a
Supplemental Benefits/Consulting Agreement (the "Supplemental Agreement"),
effective January 1, 1994, whereby Mr. Henrion will receive deferred
compensation upon either his retirement or his voluntary or involuntary
termination not for cause, as defined. The Cooperative's determination to
enter into the Supplemental Agreement was primarily based on the Board of
Directors' subjective sense of the value of Mr. Henrion's continued loyalty
and service to the Cooperative, the Cooperative's desire to assist Mr.
Henrion in providing for his retirement, as well as the contingencies of
death and disability, and to provide Mr. Henrion with an incentive to provide
advisory services to the Cooperative in a consulting capacity upon his
eventual retirement.
Pursuant to the Supplemental Agreement, commencing upon his departure
from the Cooperative (so long as his departure is not the result of a
termination for cause) and for the duration of the "Period" as defined below,
Mr. Henrion will receive monthly compensation equivalent at least to
one-twelfth of 18% of his annual base compensation averaged over a three-
year period ("Averaged Annual Compensation"). The Period will be a number
of months equal to the number of months Mr. Henrion has worked for the
Cooperative after January 1, 1994. In addition, for one year following the
expiration of the Period, Mr. Henrion will receive, in equal monthly
installments, an amount equal to his Averaged Annual Compensation. As of
October 31, 1996, Mr. Henrion's Averaged Annual Compensation for purposes
of the Supplemental Agreement was $185,175, with one-twelfth of 18% of this
amount equal to $2,778.
If Mr. Henrion chooses to provide consulting services following his
departure from the Cooperative, in lieu of the monthly supplemental
retirement benefits at the annual rate of 18% of his Averaged Annual
Compensation, he will receive monthly compensation equivalent to one-twelfth
of 30% of his Averaged Annual Compensation for so long as he provides such
consulting services. In any event, Mr. Henrion may not provide consulting
services for longer than the Period or seven years, if the Period exceeds
seven years. Mr. Henrion may elect to receive the supplemental retirement
income described above in a lump sum payment of the present value of such
income, in lieu of the monthly payments.
The Supplemental Agreement also provides Mr. Henrion with an increasing
death benefit whole life split-dollar insurance policy in an initial face
amount of $147,384 (the "Policy"). The Cooperative will pay the $10,000
annual premium on the Policy unless and until Mr. Henrion's employment ceases
for any reason. The Cooperative has a 50% interest in the death benefits and
cash value under the Policy. Should Mr. Henrion's employment terminate for
any reason before his death, Mr. Henrion has the option of purchasing the
Cooperative's interest in the Policy for 50% of its then cash value. If Mr.
Henrion does not exercise his right to purchase the Cooperative's interest
in the Policy, the Cooperative may either purchase Mr. Henrion's interest in
the Policy for 50% of its then cash value or elect that the Policy be
surrendered, in which case the cash value will be paid one-half to Mr.
Henrion and one-half to the Cooperative.
Compensation of Executive Officers Generally
As a general matter, the Personnel Committee in making recommendations
to the Board of Directors considers increases in the base salary compensation
of each of its officers annually between 0% and 8% depending on the Personnel
Committee's assessment of the value of the officer's position within the
Cooperative organization. It is the Personnel Committee's policy to analyze
jobs and job descriptions in addition to the individuals filling the job
positions. During 1994, the Cooperative also commissioned a report by a
nationally recognized management consulting firm, which analyzed the
Cooperative's management structure as well as salary information regarding
executive officers of the Cooperative. Among other things, the report
concluded that Cooperative executive salaries overall were in the low range
of competitive salaries for executives in comparable job positions in
Kentucky and throughout the country. The consulting firm considered
compensation data primarily from the wholesale trade and chain restaurant
industry sectors, with some business services and general industry data also
referenced. The Personnel Committee considered the consulting firm's report
in making the fiscal 1996 executive salary recommendations.
Individual performance-based bonuses for the Cooperative's other key
executive officers under the Incentive Bonus Program are distributed annually
at the discretion of the Board of Directors, upon recommendation by the
Personnel Committee, based on the achievement of certain specified objectives
by each officer. The individualized criteria may include such objective and
subjective factors as the officer's success in meeting the objectives of the
Cooperative (such as operating expenses as a percent of sales and income),
the officer's management and communication skills, or the officer's handling
of accounts receivable.
In addition to the individual performance-based bonuses described above,
executive officers participate in the Cooperative's Thrift and Money Purchase
Pension Plans (the "Plans"), which Plans are available to all active employees
of the Cooperative. These Plans (referred to herein, where appropriate, as
the "Thrift Plan" and the "Pension Plan") are structured to motivate the
officers and employees of the Cooperative to do an outstanding job of managing
and operating the Cooperative.
Under the Thrift Plan, money is contributed by an employee to an
employee's Plan account based on the employee's elective contributions (which
are subject to certain legal limitations). The Cooperative may also make
additional contributions under the Thrift Plan to the employee's plan account
based on a portion of the Cooperative's profits. The Cooperative is not
obligated to make any additional contributions under the Thrift Plan and
thus voluntary additional contributions may be less in some years than
in others. If the Cooperative determines to make an additional contribution
to the Thrift Plan, the amount is divided among all eligible employees on the
basis of their annual compensation. The Cooperative's voluntary contribution
to the Thrift Plan in fiscal 1996 was equivalent to 4.36% of each eligible
executive officer's annual base salary.
Under the Pension Plan, the Cooperative is obligated to make matching
contributions to the employee's account based on the amount of elective
contributions made by the employee to the Thrift Plan. The Cooperative will
match $2.00 for every $1.00 contributed by an employee to the Thrift Plan,
up to the first 1% of the employee's annual compensation; thereafter, the
Cooperative will match the elective contribution dollar-for-dollar from the
next 5% of the employee's annual compensation.
Personnel Committee Members
Leon W. Harman
Paul A. Houston
Robert P. Peck
Edward W. Rhawn
James B. Royster
Performance Graph
Under rules adopted by the Securities and Exchange Commission in 1992,
each corporation with securities registered under the Securities Exchange Act
of 1934 is required to provide in its proxy statement a line graph comparing,
for the previous five years, the cumulative total return on its common stock
with the cumulative total return of a broad equity market index and an
industry index or peer group. The Cooperative cannot provide this graph
because there is no meaningful information with respect to cumulative return
on any class of the Cooperative's capital stock. The Cooperative's
stockholder members purchase Membership Common Stock and Store Common Stock
to participate in the Cooperative's member programs, including the patronage
dividend program, and to participate in the Cooperative's management through
the election of directors. The stockholder members do not purchase the
Cooperative's capital stock with any expectation of return on their investment
through stock appreciation or per share dividends. The Cooperative's
Membership Common Stock and Store Common Stock are issued only to Operators.
No class of the Cooperative's capital stock is listed on an exchange or traded
in any other public trading market. Since July 1, 1983, the Cooperative from
time to time has offered shares of its Membership Common Stock at a per share
price of $10 and shares of its Store Common Stock at a per share price of $400.
Transactions With Stockholders, Directors and Officers
All present voting members of the Board of Directors and nominees for the
Board, except the Independent Director, are Operators or represent Operators
and have purchased or may purchase equipment and supplies from the Cooperative
or from distributors who purchase from the Cooperative. All purchases by
directors and nominees or their affiliates from the Cooperative are made on
the same terms and conditions as purchases by any other Operator. Several
Operators are also in the business of purchasing equipment and supplies for
sale and distribution to other Operators and may purchase such equipment and
supplies from the Cooperative.
STOCKHOLDER PROPOSALS FOR THE ANNUAL MEETING
Proposals of stockholders intended to be presented at the 1998 Annual
Meeting of Stockholders must be received by the Cooperative on or before
October 14, 1997 to be eligible for inclusion in the Cooperative's proxy
statement and proxy relating to that meeting.
OTHER INFORMATION
The officers and directors of the Cooperative do not know of any matters
to be presented at the meeting and submitted to a vote of the Stockholder
Members other than those specified above. If any other matter should come
before the meeting, it is intended that the persons named in the enclosed
form of proxy, who are members of the Executive Committee of the Board of
Directors, or their substitutes, will vote the proxy in accordance with their
discretion on such matters.
All expenses incurred in connection with the solicitation of proxies
will be borne by the Cooperative. Solicitation may be undertaken by mail,
telephone and personal contact by Directors, officers and employees of the
Cooperative without additional compensation.
The Cooperative has appointed the firm of KPMG Peat Marwick LLP to serve
as the Cooperative's independent certified public accountants. Representatives
of KPMG Peat Marwick LLP will not be present at the Annual Meeting.
"Taco Bell" and "KFC" are registered trademarks of Taco Bell Corporation
and KFC Corporation, respectively, and are used in these materials for
identification purposes only. The Cooperative is an independent provider of
products and is not affiliated with Taco Bell Corporation or KFC Corporation,
except that KFC Management is a stockholder member of the Cooperative.
Louisville, Kentucky
February 11, 1997
KFC NATIONAL PURCHASING COOPERATIVE, INC.
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS
To Be Held March 21, 1997
Please Mark, Sign, Date and Return Immediately
EVEN IF YOU ARE NOT A MEMBER OF A SERIES BEING ELECTED AT
THIS ANNUAL MEETING, YOU ARE URGED TO SIGN, DATE AND RETURN THIS
PROXY FORM
I, the undersigned Stockholder Member of KFC National Purchasing
Cooperative, Inc. (the "Cooperative"), do hereby nominate,
designate and appoint Robert P. Peck or William E. Allen or Leon W.
Harman or David G. Neal or James B. Royster or any one of them with
full power to act alone, my true and lawful attorney(s), with full
power of substitution, for me and in my name, place and stead to
vote all of the Membership Common Stock of the Cooperative standing
in my name on its books and which I am entitled to vote at the
annual meeting of its stockholder members to be held at 10:00 a.m.
on March 21, 1997, at the Cooperative's offices at 950 Breckenridge
Lane, Louisville, Kentucky, and at any adjournment thereof, with
all the powers the undersigned would possess if personally present,
as follows:
1. ELECTION OF SERIES DIRECTORS BY SERIES MEMBERS ONLY
To elect the following indicated nominees as members of the
Cooperative's Board of Directors to represent their respective
Series of Membership Common Stock.
VOTE ONLY FOR A NOMINEE OF YOUR SERIES. Note: Do not vote
unless you hold series A, E, F, H, I, L, or M stock.
YOUR SERIES IS _______
CHECK ONE BOX ONLY!
Series Name For
A Tom Arnold _
Jack Richards _
E Jerry L. Jones _
Brady Keys, Jr. _
David G. Neal _
F William E. Allen _
H Leon W. Harman _
I Paul A. Houston _
L Ben E. Edwards _
M Ronald J. Young _
2. OTHER BUSINESS
To transact all other matters and business which may properly come
before the meeting.
Information regarding the matters to be acted upon at the Annual
Meeting is contained in the Proxy Statement accompanying this
Proxy. This Proxy will be voted as specified. If no instruction
is indicated on a properly executed and dated proxy form, then the
above-named proxies, or any of them or their substitutes, will vote
the share represented IN ACCORDANCE WITH THEIR DISCRETION on any
matters or business, other than the election of directors, that may
properly come before the meeting. (The above-named proxies will not
vote for any director nominees named above to represent a Series
unless a nominee has been specified.) THIS PROXY IS SOLICITED BY
THE BOARD OF DIRECTORS.
IN WITNESS WHEREOF, I have signed my name on ________________,
1997.
__________________________________________
(Signature of Stockholder)
__________________________________________
(Printed Name)
Please sign exactly as name appears in address on this form of
proxy. When shares are held by joint tenants, both should sign.
If a corporation, please sign in full corporate name by President
or other authorized officer. If a partnership, please sign in
partnership name by authorized person.
THE PRESENCE IN PERSON OR BY PROXY OF STOCKHOLDER MEMBERS
REPRESENTING A MAJORITY OF THE STOCKHOLDER MEMBERS ENTITLED TO VOTE
AT THE ANNUAL MEETING SHALL CONSTITUTE A QUORUM AT THE ANNUAL
MEETING.
A PROMPT RESPONSE IS APPRECIATED!
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