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:
____________________________________________________________________
FoodService Purchasing Cooperative, Inc.
__________________________________________________
NOTICE OF ANNUAL MEETING
OF STOCKHOLDERS
__________________________________________________
To Be Held April 3, 1998
To the Stockholder Members:
The Annual Meeting (the "Annual Meeting") of the stockholders of
KFC National Purchasing Cooperative, Inc. (d/b/a FoodService
Purchasing Cooperative, Inc.) (the "Cooperative") will be held on
Friday, April 3, 1998 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 H and O Membership Common
Stock, election of two directors by the holder of Series L
Membership Common Stock, and the election of the Taco Bell
at large director by the holders of Series O 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 16, 1998
are entitled to notice of and to vote at the Annual Meeting, and any
adjournments thereof.
HOLDERS OF SERIES H, L, and O MEMBERSHIP COMMON STOCK ARE ENTITLED TO
VOTE IN THE ELECTION OF THE DIRECTORS.
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 17, 1998
FOODSERVICE PURCHASING COOPERATIVE, INC.
PROXY STATEMENT
For the Annual Meeting of Stockholders
To Be Held on April 3, 1998
Proxies are being solicited on behalf of the Board of Directors
of KFC National Purchasing Cooperative, Inc. (d/b/a FoodService
Purchasing Cooperative, Inc.) (the "Cooperative"), in connection with
the Annual Meeting of Stockholders (the "Annual Meeting") to be held
at the Cooperative's offices at 950 Breckenridge Lane, Louisville,
Kentucky, on Friday, April 3, 1998, 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. The Board of Directors does not know of
any such other matters to be brought before the meeting as of the date
of this proxy statement.
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 H, L, O, and Taco Bell at large 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 H and O
Membership Common Stock are entitled to cast one vote each to elect
one member to the Board of Directors to represent the Series, the
holder of Series L Membership Common Stock is entitled to elect two
directors, and the holders of Series O are entitled to cast one vote
each to elect the Taco Bell at large director. 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 or the Taco Bell at large director
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 17, 1998.
Only those holders of Membership Common Stock of record at the close
of business on February 16, 1998, are entitled to notice of and to
vote at the Annual Meeting and any adjournment thereof. On February
16, 1998, there were 666 holders of Membership Common Stock.
ELECTION OF DIRECTORS
At the Annual Meeting, the directors representing the Series H,
L, and O Membership Common Stockholders and the Taco Bell at large
director 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
James D. Olson H III Harman Management Corporation ("Harman")
Lois G. Foust L I KFC National Council and Advertising
Cooperative, Inc. ("NCAC")
Darlene L.
Pfeiffer L I NCAC
Grover G. Moss O I Taco Bell Operators
Anthony Basile Taco Bell
at Large I Taco Bell Operators
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. Harman has nominated James D. Olson to continue serving as
a director representing Series H Membership Common Stock. At this
Annual Meeting, NCAC, the sole holder of Series L Membership Common
Stock, is entitled to nominate and elect as a Series two members of
the Board of Directors. NCAC has nominated Lois G. Foust and Darlene
L. Pfeiffer to continue serving as directors representing the Series L
Membership Common Stock. Certain information with respect to Mr.
Olson, Ms. Foust, and Ms. Pfeiffer is provided below at "Management of
the Cooperative."
Under the Certificate of Incorporation and Bylaws of the
Cooperative, all shares of Membership Common Stock held by Taco Bell
franchisees are currently Series O shares. The holders of Series O
shares are currently entitled to nominate and elect, as a series, one
member of the Board of Directors as the Series O Director and one
member of the Board of Directors as the Taco Bell at Large Director.
Each of the following two stockholder members has been nominated
to serve as Series O Director: Allan J. "Jody" Luihn and Grover G.
Moss. Mr. Luihn is 37 years of age, has worked with KFC and Taco Bell
stores since 1983, and currently serves as President Luihn Food
Systems, Inc., the owner and operator of 31 Taco Bell stores and 20
KFC stores. Mr. Moss is 52 years of age and has been a Taco Bell
franchisee for 28 years. He has served as a director of the
Cooperative since 1994 and currently owns and operates 10 Taco Bell
stores.
Anthony Basile is the sole nominee to serve as the Taco Bell at
Large Director. Certain information with respect to Mr. Basile is
provided below at "Management of the Cooperative."
Each of the Series O and Taco Bell at Large Directors are elected
by the affirmative vote of a plurality of the shares of Series O
entitled to vote for the director voting in person or by proxy at the
Annual Meeting. As of the Record Date, there were one holder each of
Series H and L Membership Common Stock, and 82 holders of Series O
Membership Common Stock.
Each of the nominees described herein has agreed to serve if
elected. As members of Class I, each of the Series L and O and Taco
Bell at Large directors will be elected for a three-year term at the
Annual Meeting. As a member of Class III, the Series H Director will
be elected for a two-year term at the Annual Meeting.
MANAGEMENT OF THE COOPERATIVE
Directors and Executive Officers
The following table lists, in addition to other information, the
directors and certain executive officers of the Cooperative at December 31,
1997, 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, 1997.
<TABLE>
<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. Allen 58 Director, 1988 2000 F Operator 11 **
Secretary
Anthony Basile 56 Director 1997 1998 Taco Bell Operator 26 **
At Large
James G. Cocolin 48 Director 1996 1999 C Operator 13 **
Lois G. Foust 53 Director 1997 1998 L Operator 2 **
Edward J. Henriquez,
Jr. 60 Director 1994 1999 J Operator 12 **
Paul A. Houston 48 Director 1995 2000 I President of 367 6.0
Scott's
Restaurants,
Inc.
Grover G. Moss 53 Director 1994 1998 O Operator 10 **
David G. Neal 51 Director, 1991(1) 2000 E Operator 94 1.5
Vice
Chairman of
the Board,
Treasurer
James D. Olson 47 Director 1997 1998 H President of 266 4.3
Harman
Management
Corporation
Robert P. Peck 63 Director, 1990 1999 B Operator 10 **
Chairman of
the Board
Darlene L. Pfeiffer 60 Director 1997 1998 L Operator 4 **
Edward W. Rhawn 59 Director 1992 1999 Independent Chairman of -- --
Rhawn
Enterprises,
Inc.
Jack M. Richards 69 Director 1991 2000 A Operator 3 **
Dean M. Sorgdrager 35 Director 1996 1999 G Operator 1 **
Calvin G. White 43 Director 1992 1999 D Operator 12 **
Ronald J. Young 39 Director 1993 2000 M Operator 12 **
David Paradise 47 Non-Voting 1997 -- -- Operator 9 **
Director (2)
Thomas D. Henrion 55 Director, 1980 -- -- President & -- --
President, Chief
Chief Executive
Executive Officer,
Officer Cooperative
William V. Holden 48 Vice 1985 -- -- Vice -- --
President, President
Chief Chief
Financial Financial
Officer Officer
Cooperative
W. Thomas Hutcherson 51 Vice 1982 -- -- Vice -- --
President, President,
Purchasing Cooperative
Kenneth L. Hartung 50 Vice 1993 -- -- Vice -- --
President President
Cooperative
John W. Inwright 41 Vice 1991 -- -- Vice -- --
President, President,
Operations Cooperative
Carol L. Mudd 43 Vice 1997 -- -- Vice -- --
President, President,
Human Cooperative
Resources
All directors and officers as a group (23 persons)(3) 852 13.9
<FN>
* KFC Management has purchased one share of Series K Membership Common
Stock. In 1989, both directors representing KFC Management resigned as
members of the Board of Directors. KFC Management has not taken any action
to fill the vacancies and has not indicated whether it will take 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 33.0% of the Store
Common Stock outstanding.
** Less than one-half of one percent.
(1) Mr. Neal has previously served on the Board of Directors of the
Cooperative as one of the two directors representing the National
Franchise Advisory Council, the former 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.
(2) Mr. Paradise is a Taco Bell Operator chosen to serve at the
pleasure of the Board of Directors as a non-voting member of the Board
of Directors after consultation with the Taco Bell Operators serving
as directors and FRANMAC.
(3) 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; Mr. Peck is affiliated
with a member which is the owner of two shares of Membership Common
Stock. All directors and officers as a group (24 persons) own 17
shares of Membership Common Stock, 2.6 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.
</FN>
</TABLE>
The Cooperative's Bylaws provide for a Board of Directors
consisting of up to twenty voting members 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 NCAC and KFC Management are
each entitled to elect two directors. In addition, when and if shares
of Series O, P and/or Q are issued and outstanding, holders of those
series are also collectively entitled to elect the Taco Bell at large
director. 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 Inde-
pendent Director must not be affiliated in any way with any 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. Pursuant to this
provision, the Board of Directors has established a non-voting
membership for a Taco Bell stockholder member after consultation with
the Taco Bell Operators serving as directors and the Franchise
Management Advisory Council ("FRANMAC"); David Paradise currently
serves in this position. Only the Series H, L, O, and Taco Bell at
large directors will be elected at the Annual Meeting.
During the last five years, Messrs. Allen, Basile, Cocolin,
Foust, Henriquez, Houston, Moss, Neal, Olson, Paradise, Peck,
Pfeifer, Richards, 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.
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 1997 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. Peck, Neal,
Houston, and Allen. 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. Neal,
Young, Cocolin, Henriquez, Pfeiffer, Basile, and Foust and met 5 times
during fiscal 1997. 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 pre-
pared by management of the Cooperative pursuant to such recommenda-
tions. The Committee reviews the Cooperative's annual budget before
its consideration by the Board of Directors.
The Insurance Committee is comprised of Messrs. Allen, Richards,
Sorgdrager, White, and Moss. The Insurance Committee monitors the
operations of the Insurance Subsidiary and, in conjunction with the
Executive Committee, makes recommendations to the Board of Directors
concerning the insurance programs.
The Nominating Committee is comprised of Messrs. Rhawn, Houston,
Allen and Paradise. The Nominating Committee makes recommendations to
the Board of Directors concerning officer positions for the
Cooperative and met once during fiscal 1997. 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. Houston, Olson,
Paradise, Peck, and Rhawn and met four times during fiscal 1997.
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 set forth
below in "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 1997 except that one director filed untimely
reports on transactions in the Company's stock as follows: Paul
Houston, one report regarding the disposition of 38 shares of Store
Common Stock and one report regarding the disposition of 3 shares of
Store Common Stock.
Executive Compensation
The following table shows all cash compensation paid by the
Cooperative for the years ended October 31, 1997, 1996 and 1995 to the
most highly compensated executive officers as to whom the total cash
and cash-equivalent remuneration exceeded $100,000 during fiscal 1997.
Summary Compensation Table
Annual Compensation
Name and Principal Fiscal All Other
Position Year Salary Bonus(1) Compensation(2)
Thomas 1997 $208,460 $49,940 $20,583
D. Henrion 1996 191,798 58,466 22,578
President 1995 181,498 51,480 21,046
and Chief
Executive
Officer
William 1997 103,665 16,500 12,010
V. Holden 1996 95,421 16,432 12,444
Vice President 1995 92,067 14,406 10,531
and Chief
Financial
Officer
John W. Inwright 1997 103,178 18,150 12,317
Vice President 1996 88,656 20,000 11,929
1995 77,702 16,625 9,016
Kenneth 1997 102,733 16,838 11,802
L. Hartung 1996 93,896 15,288 12,662
Vice President 1995 87,099 17,861 10,457
Judith 1997 100,963 16,830 11,949
L. Hollis(3) 1996 91,133 18,520 12,404
Vice President 1995 86,800 18,346 10,230
(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.
(2) Includes employer contribution to the Cooperative's
Thrift Plan and Money Purchase Pension Plan in fiscal
1997 as follows: Mr. Henrion $4,500 and $11,083,
respectively; Mr. Holden $3,603 and $8,407, respectively;
Mr. Inwright $3,695 and $8,622, respectively; Mr. Hartung
$3,541 and $8,261, respectively; and Ms. Hollis $3,585
and $8,364, respectively. For Mr. Henrion, the fiscal
1997 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."
(3) Ms. Hollis resigned from all positions with the
Cooperative effective February 6, 1998.
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, 1997, are
discussed below.
Chief Executive Officer Compensation
Mr. Henrion serves as Chief Executive Officer at the pleasure of
the Board. In fiscal 1997, Mr. Henrion received a base salary of
$208,460 and an incentive bonus of $49,940. The increase in Mr.
Henrion's base salary in fiscal 1997 compared to his fiscal 1996 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. During fiscal 1997, the Cooperative engaged the
consulting firm to review the Cooperative's compensation policies to
provide fair and equitable compensation to the Cooperative's employees
in order to attract and maintain qualified and experienced employees.
Using the results of the consulting firm's studies, the Personnel
Committee determined to compensate the Cooperative's employees,
including the Chief Executive Officer, in the mid-range of
compensation for similarly experienced employees in local, regional,
and national markets, as deemed appropriate by the Personnel
Committee.
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 financial and personal 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 1997 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 $49,940.
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, 1997, Mr. Henrion's Averaged Annual Compensation for
purposes of the Supplemental Agreement was $195,107, with one-twelfth
of 18% of this amount equal to $2,927.
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. Again in 1997, the
Cooperative engaged the management consulting firm to review all
salaries for all positions as compared to the local, regional, and
national market for such positions, as appropriate. Among other
things, the reports 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
second survey also focused on salaries in the market of the
Cooperative's headquarters for positions that would normally be filled
through residents of the Cooperative's home community, while focusing
on regional and national compensation data for many other positions.
The Personnel Committee considered both reports in making the fiscal
1997 executive salary recommendations. Based on these studies, the
compensation packages of certain executive officers and other
employees were increased.
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 1997 was equivalent to 3.5%
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
Paul A. Houston
James D. Olson
David Paradise
Robert P. Peck
Edward W. Rhawn
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 1999
Annual Meeting of Stockholders must be received by the Cooperative on
or before October 20, 1998 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 17, 1998
FoodService Purchasing Cooperative, Inc.
PROXY FOR 1998 ANNUAL MEETING OF STOCKHOLDERS
PROXY MUST BE SIGNED AND DATED.
PLEASE SIGN BACK OF FORM AND RETURN PROMPTLY.
I, the undersigned Stockholder Member of KFC National Purchasing
Cooperative, Inc. (d/b/a FoodService Purchasing Cooperative, Inc.)
(the "Cooperative") do hereby appoint Robert P. Peck, William E.
Allen, Paul A. Houston, or David G. Neal 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 April 3, 1998, 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 and Taco Bell at Large Director.
Do not vote in Item 1 unless you hold Series H, L, or O
Membership Common Stock. If you hold Series O Membership Common Stock
(Taco Bell Holders), you may vote for the Taco Bell at Large nominee
and one of the Series O nominees. Only Harman's and the NCAC
Committee vote for the Series H and L nominees. Your Series is
indicated on the label on the back of this form. If you do not hold
Series H, L, or O Membership Common Stock, i.e., you are a KFC
Operator, please simply sign and date this form on the reverse side
and return it promptly to assure that a quorum is present at the
Annual Meeting.
To elect the following indicated nominees as members of the
Cooperative's Board of Directors to represent their respective Series
of Membership Common Stock or as the Taco Bell at Large Director, as
the case may be.
Series Name For
H (Harman's) James D. Olson [ ]
L (NCAC) Lois G. Foust [ ]
L (NCAC) Darlene L. Pfeiffer [ ]
Taco Bell At Large
(Taco Bell Holders) Anthony Basile [ ]
(Taco Bell Holders) Jody Luihn [ ]
(Taco Bell Holders) Grover G. Moss [ ]
Series O Holders vote for one of the two nominees.
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 ______________,
1998.
_________________________________ ___________________________________
(Series of Membership Common (Signature of Stockholder)
Stock held by 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 ALL STOCKHOLDER MEMBERS AS OF THE RECORD
DATE SHALL CONSTITUTE A QUORUM AT THE ANNUAL MEETING. THEREFORE, YOU
ARE URGED TO SIGN, DATE AND RETURN THE PROXY CARD.
PLEASE MAIL IN STAMPED ENVELOPE PROVIDED TO: JAMES A. GIESEL,
BROWN, TODD & HEYBURN PLLC, 400 WEST MARKET STREET, 32ND FLOOR,
LOUISVILLE, KENTUCKY 40202.
A PROMPT RESPONSE WILL BE APPRECIATED.
