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 ANNUAL MEETING
OF STOCKHOLDERS
To Be Held June 7, 1999
To the Stockholder Members:
The Annual Meeting (the "Annual Meeting") of the
stockholders of KFC National Purchasing Cooperative, Inc. (the
"KFC Coop") will be held on Monday, June 7, 1999 at 10:00 a.m. at
the KFC Coop'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, B, C, D, and G
Membership Common Stock; the election of two directors
by the holder of Series K Membership Common Stock; the
election of one director nominated by holders of Series
J Membership Common Stock and elected by the holders of
all shares of Membership Common Stock; and the election
of the Independent Director nominated by the KFC Coop's
Board of Directors and elected by the holders of all
shares of 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
April 28, 1999 are entitled to notice of and to vote at the
Annual Meeting, and any adjournments thereof.
All stockholder members are entitled to vote in the election of
the Independent Director and the director nominated by the
holders of Series J Membership Common Stock. In addition,
holders of Series A, B, C, D, G, and K 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, 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.
Daniel E. Woodside
President and Chief Executive Officer
Louisville, Kentucky
April 29, 1999
KFC NATIONAL PURCHASING COOPERATIVE, INC.
PROXY STATEMENT
For the Annual Meeting of Stockholders
To Be Held on June 7, 1999
Proxies are being solicited on behalf of the Board of
Directors of KFC National Purchasing Cooperative, Inc. (the "KFC
Coop"), in connection with the Annual Meeting of Stockholders
(the "Annual Meeting") to be held at the KFC Coop's offices at
950 Breckenridge Lane, Louisville, Kentucky, on Friday, June 7,
1999, 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 A, B, C, D, G , and K 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, (a) each stockholder member
is entitled to cast one vote each to elect the Series J Director
and the Independent Director, and (b) only stockholders of each
of Series A, B, C, D, G, and K Membership Common Stock are
entitled to cast one vote each to elect one member to the Board
of Directors to represent the Series and the holder of Series K
Membership Common Stock is entitled to cast one vote to elect two
members of the Board to represent that Series. Proxies may be
revoked at any time in writing or in person at the Annual Meeting
or at any adjournment thereof.
The persons named in the enclosed form of proxy or their
substitutes will not vote a proxy for any director nominee 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 KFC Coop 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
April 29, 1999. Only those holders of Membership Common Stock of
record at the close of business on April 28, 1999, are entitled
to notice of and to vote at the Annual Meeting and any
adjournment thereof. On April 28, 1999, there were 688 holders
of Membership Common Stock.
ELECTION OF DIRECTORS
At the Annual Meeting, the Independent Director and
directors representing the Series A, B, C, D, G, J, and K
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 Series O and Taco Bell at large
director positions, but no persons have been nominated to fill
these positions at the Annual Meeting; these positions will be
eliminated at the time the KFC Coop no longer has any Series O
Membership Common Stock shares outstanding.
Expired Directorships
Name Series Class Area or Holder
James B. Royster A III Indiana, Michigan,
Ohio and West
Virginia
Ben E. Edwards B II Arkansas, Colorado,
Kansas, Missouri, New
Mexico, Oklahoma and
Texas
James G. Cocolin C II Connecticut, Delaware,
District of Columbia,
Maine, Maryland,
Massachusetts, New
Hampshire, New Jersey,
New York, Pennsylvania,
Rhode Island and Vermont
Robert C. Carle D II Alaska, Hawaii, Idaho,
Montana, Oregon,
Washington and Wyoming.
Dean M. Sorgdrager G II Arizona, California,
Nevada and Utah
Edward J. Henriquez, Jr. J II Foreign Territories
other than Canada
Christian L. Campbell K I KFC National Management
Company ("KFC")
Charles Rawley K I KFC
Edward W. Rhawn Independent III Independent
Nominees
KFC, the sole holder of Series K Membership Common Stock, is
entitled to nominate and elect as a Series two members of the
Board of Directors to serve the remaining two years of a three-
year term. KFC has nominated Christian L. Campbell and Charles
Rawley to continue serving as directors representing Series K
Membership Common Stock. Certain information with respect to
Messrs. Campbell and Rawley is provided below at "Management."
Each of Series A, B, C, D, and G 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: James
B. Royster and Thomas R. Arnold. Mr. Royster, 60 years of age,
currently owns and operates five KFC stores. He has served as
the Series A director of the KFC Coop since 1998, and previously
served as the director appointed by the National Franchisee
Advisory Council. Mr. Arnold, 57 years of age, is Executive Vice
President and co-owner of Premier Restaurant Management Company
where he has served since 1979. Premier currently operates 46
KFC Stores.
Ben E. Edwards is the sole nominee to serve as the Series B
Director. Certain information with respect to Mr. Edwards is
provided below at "Management."
Each of the following two stockholder members has been
nominated to serve as Series C Director: James G. Cocolin and
Darlene L. Pfeiffer. Mr. Cocolin, 49 years of age, currently
owns and operates ten KFC stores. Mr. Cocolin has served as the
Series C director of the KFC Coop since 1996. Ms. Pfeiffer, 61
years of age, currently owns and operates four KFC stores. Ms.
Pfeiffer has served as the Series L director of the KFC Coop
since 1997.
Robert C. Carle is the sole nominee to serve as the Series D
Director. Dean M. Sorgdrager is the sole nominee to serve as the
Series G Director. Certain information with respect to Messrs.
Carle and Sorgdrager is provided below at "Management."
Edward J. Henriquez, Jr. is the sole nominee to serve as the
Series J Director. Certain information will respect to Mr.
Henriquez is provided below at "Management."
William R. Carden is the nominee of the Board of Directors
to serve as the Independent Director. Mr. Carden, 62 years of
age, is the owner and President of The Carden Group, management
and financial consultants.
Each of the A, B, C, D, G, and K 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 104 holders of Series A Membership Common Stock, 85
holders of Series B Membership Common Stock, 72 holders of Series
C Membership Common Stock, 19 holders of Series D Membership
Common Stock, 61 holders of Series G Membership Common Stock and
one holder of Series K Membership Common Stock. Each of the
Independent Director and the Series J Director is elected by a
plurality vote of all shares of Membership Common Stock entitled
to vote at the Annual Meeting; as of the Record Date there were
688 holders of all Series of 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 KFC Coop's Annual Meeting for
2001, the terms of the Class II Directors will expire at the KFC
Coop's Annual Meeting for 2002, and the terms of the Class III
Directors will expire at the KFC Coop's Annual Meeting for 2000.
MANAGEMENT OF THE KFC COOP
Who are the members of the KFC Coop board of directors?
The KFC Coop's Bylaws provide for a board of directors
consisting of up to 20 members, plus the Chief Executive Officer
of the KFC Coop who is a non-voting ex-officio member of the
board. The directors representing each series are nominated by
the stockholder members of each series. Each of Series A - J and
M is entitled to elect, as a series, one member of the Board of
Directors, and each of Series K and L is entitled to elect, as a
series, two members of the Board of Directors.
In addition, the Board of Directors nominates an independent
director, who is elected by a plurality vote of the outstanding
shares of Membership Common Stock at the annual meeting of
members.
The affirmative vote of three-fifths of all voting members
of the Board of Directors is, except as otherwise specifically
provided for in the Bylaws, the act of the Board of Directors on
any matter properly submitted to the Board of Directors. The
Chairman of the Board is elected at each annual meeting by the
affirmative vote of three-fifths of the entire board of
directors.
The following table lists, in addition to other information, the
current directors and executive officers of the KFC Coop as of the date
of this proxy statement, their position with the KFC Coop, and their
present principal occupations.
<TABLE>
<CAPTION>
Positions
and Year
Offices First
Currently Became Store
Held with Director Term as Present Common Percent of
the or Director Series Principal Stock Store Stock
Name and Address Age KFC Coop Officer Expires Represented Occupation Ownership Outstanding
<S> <C> <C> <C> <C> <C> <C> <C> <C>
William E. Allen 59 Director, 1988 2000 F Operator 6 **
1624 Lloyd Lane Secretary
Cedar Falls, Iowa
50613
Christian L. 48 Director 1999 1999 K Sr. Vice --- ---
Campbell President,
Tricon Global Tricon
Restaurants, Inc. Global
P.O. Box 32070 Restaurants,
Louisville, Inc.
Kentucky 40232
Bob Carle 42 Director 1998 1999 D Operator 7 **
6921 Brayton
Drive, Suite 105
Anchorage, Alaska
99507
James G. Cocolin 49 Director 1996 1999 C Operator 10 **
17 James Street
Kingston,
Pennsylvania 18704
Ben E. Edwards 56 Director 1998++ 1999 B Operator 10 **
West Texas Foods,
Inc.
P.O. Box 64490
Lubbock, Texas
79464
Lois G. Foust 54 Director 1997 2001 L Operator 2 **
4000 Chestnut
Avenue
Long Beach,
California 90807
Edward J. 61 Director 1994 1999 J Operator 12 **
Henriquez, Jr.
610 Valencia
Avenue #503
Coral Gables,
Florida 33134
Paul Houston 49 Director 1995 2000 I President, 353 5.3
Scott's Scott's
Restaurants, Inc. Restaurants
500 Hood Road
Markham, Ontario,
Canada L3R 0P6
David G. Neal 52 Director, 1991+ 2000 E Operator 94 1.4
JRN, Inc. Chairman
P.O. Box 1257 of the
Columbia, Board
Tennessee 38402
James D. Olson 48 Director 1997 2000 H President, 266 4.0
Harman Management Harman
Corp. Management
199 First Street, Corporation
Suite 212
Los Altos,
California 94022
Darlene Pfeiffer 61 Director 1997 2001 L Operator 4 **
P.O. Box 1185
Port Ewen, New
York 12466
Charles E. 48 Director 1999 1999 K President --- ---
Rawley, III and Chief
Tricon Global Operating
Restaurants, Inc. Officer,
P.O. Box 32070 KFC U.S.A.
Louisville,
Kentucky 40232
Edward W. Rhawn 60 Director 1992 1999 Independent Chairman, --- ---
Rhawn Enterprises, Rhawn
Inc. Enterprises
418 Knightsbridge
Road
Louisville,
Kentucky 40206
James B. Royster 60 Director, 1998++ 2000 A Operator 4 **
1110 West Michigan Vice
Avenue Chairman
Jackson, Michigan
49202
Dean M. Sorgdrager 36 Director 1996 1999 G Operator 1 **
6851 Beach
Boulevard
Buena Park,
California 90620
Ronald J. Young 40 Director 1993 2000 M Operator 14 **
El Rancho Food
Services
2929 Melville
Street
Saskatoon,
Saskatchewan
Canada S7J 5A6
Daniel E. Woodside 52 Director, 1999 -- -- President --- ---
Unified President, and Chief
FoodService Chief Executive
Purchasing Coop Executive Officer,
950 Breckinridge Officer Unified
Lane Coop
Louisville,
Kentucky 40207
William L. Bickley 46 Chief 1999 --- --- Chief --- ---
Unified Financial Financial
FoodService Officer Officer,
Purchasing Coop Unified
950 Breckinridge Coop
Lane
Louisville,
Kentucky 40207
John Inwright 42 --- 1991 --- --- Senior --- ---
Unified Vice
FoodService President,
Purchasing Coop Unified
950 Breckinridge Coop
Lane
Louisville,
Kentucky 40207
Alice LeBlanc 41 Vice 1998 --- --- Vice --- ---
Unified President President,
FoodService Unified
Purchasing Coop Coop
950 Breckinridge
Lane
Louisville,
Kentucky 40207
All directors and 783 13.1
officers as a
group (20 persons)
+++
** Less than one-half of one percent.
+ Mr. Neal has previously served on the Board as one of the two directors
representing the National Franchisee Advisory Council, the former holder
of the Series L share of Membership Common Stock. He first began serving
on the Board as a representative of Series E in February 1991.
++ Previously served as a director appointed by the National Franchisee
Advisory Council.
+++ Each director, other than Messrs. Woodside and Rhawn, is, or is
affiliated with a member which is, the owner of one share of
Membership Common Stock. All directors and officers as a group (20
persons) own 13 shares of Membership Common Stock, 1.9 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. Woodside and Rhawn, beneficially owns.
Except as required by law, Store Common Stock has no voting rights.
Messrs. Woodside and Rhawn are neither the owners, nor affiliated of
the owners, of any Membership or Store Common Stock.
</TABLE>
History
During the last five years, Directors Allen, Carle, Cocolin,
Edwards, Foust, Henriquez, Houston, Neal, Olson, Pfeiffer,
Royster, Sorgdrager, 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. Charles E. Rawley, III is President and Chief
Operating Officer of KFC U.S.A. Mr. Rawley joined KFC in 1985 as
a Director of Operations. He served as Vice President of
Operations for the Southwest, West, Northeast, and Mid-Atlantic
Divisions from 1988 to 1994, when he became Senior Vice
President, Concept Development for KFC. Mr. Rawley assumed his
position of Chief Operating Officer in 1995 and President in
1998.
Christian L. Campbell is Senior Vice President, General
Counsel and Secretary of Tricon. He has served in this position
since September 1997. From 1995 to September 1997, Mr. Campbell
served as Senior Vice President, General Counsel and Secretary of
Owens Corning, a building products company. Before joining Owens
Corning, Mr. Campbell served as Vice President, General Counsel
and Secretary of Nalco Chemical Company in Naperville, Illinois,
from 1990 through 1994.
Since March 1, 1999, Daniel E. Woodside has served as the
President and Chief Executive Officer of the KFC Coop and the
Unified Coop. From September 1997 through February 1999, Mr.
Woodside served as Chief Operating Officer of UniPro Foodservice,
Inc. UniPro was formed by the merger of EMCO Food Service
Systems, Inc. and ComSource Independent Food Distribution in
September 1997. Mr. Woodside served as President of EMCO from
1991 to September 1997. Before his service with EMCO, Mr.
Woodside served in various positions with General Foods
Corporation for 21 years.
Except for Mr. Woodside, all officers of the KFC Coop who
are also directors serve in such offices on a limited, part-time
basis without remuneration.
Standing Committees
The Board of Directors of the KFC Coop had four regular
meetings in fiscal 1998 and seven special meetings. The Board of
Directors currently has three standing committees: Executive,
Audit and Budget, and Personnel.
The Executive Committee is currently comprised of Messrs.
Neal, Royster, Houston and Sorgdrager. 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
KFC Coop which may lawfully be delegated to it by the Board.
The Audit and Budget Committee is currently comprised of
Messrs. Young, Cocolin, Henriquez, and Royster and Ms. Foust and
met 4 times during fiscal 1998. The Audit and Budget Committee
meets periodically with management and representatives of the KFC
Coop'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 KFC Coop's systems of accounting and internal
controls, and the follow-up reports prepared by management of the
KFC Coop pursuant to such recommendations. The Committee reviews
the KFC Coop's annual budget before its consideration by the
Board of Directors.
The Board of Directors does not currently have a Nominating
Committee. The Board of Directors considers the nomination of
the Independent Director. Members of the KFC Coop 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, and Rhawn and Ms. Pfeiffer and met four times during
fiscal 1998. Before his resignation as a director, Robert P.
Peck served as a member of the Personnel Committee during fiscal
1998. Pursuant to a former provision of the KFC Coop's Bylaws,
Mr. Peck, as Chairman of the Board, served as the KFC Coop's
Chief Executive Officer until May 1993; he received no
compensation from the KFC Coop except for the reimbursement for
expenses as set forth below in "Compensation of Directors." The
Personnel Committee considers personnel policy and practices of
the KFC Coop 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 KFC Coop'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 KFC Coop believes that all
such filing requirements were complied with in fiscal 1998.
Executive Compensation
The following table shows all cash compensation paid by the
KFC Coop for the years ended October 31, 1998, 1997 and 1996 to
the most highly compensated executive officers, whose total cash
and cash-equivalent remuneration exceeded $100,000 during fiscal
1998(1).
Summary of Annual Compensation
All Other
Name and Principal Fiscal Salary Bonus(2) Compen-
Position Year sation(3)
Thomas D. Henrion 1998 $212,127 $90,640 $16,200
President and 1997 208,460 49,940 20,583
Chief Executive 1996 191,798 58,466 22,578
Officer
William V. Holden 1998 111,011 27,126 8,926
Vice President 1997 103,665 16,500 12,010
and Chief 1996 95,421 16,432 12,444
Financial Officer
John W. Inwright 1998 108,937 27,192 8,896
Vice President 1997 103,178 18,150 12,317
1996 88,656 20,000 11,929
Kenneth L. Hartung 1998 108,233 26,512 8,755
Vice President 1997 102,733 16,838 11,802
1996 93,896 15,288 12,662
Alice LeBlanc 1998 87,216 24,720 72,922
Vice President
(1) As of March 1, 1999, the executive officers of the
KFC Coop are: Daniel E. Woodside, President and Chief
Executive Officer; William L. Bickley, Chief Financial
Officer; and Alice LeBlanc, Vice President. John W.
Inwright is Sr. Vice President of the Unified Coop.
(2) The KFC Coop had bonus programs for all officers
under which, if they achieved certain objectives, they
received a bonus of not greater than 40% of their base
salaries.
(3) Includes employer contribution to the KFC Coop's
Money Purchase Pension Plan in fiscal 1998 as follows:
Mr. Henrion $11,200; Mr. Holden $8,926; Mr. Inwright
$8,896; Mr. Hartung $8,755; and Ms. LeBlanc $6,105.
For Mr. Henrion, the fiscal 1998 amount includes
$5,000, representing the value to Mr. Henrion of the
KFC Coop's payments with respect to a whole life split-
dollar insurance policy with an initial face amount of
$147,384. For Ms. LeBlanc, the fiscal 1998 amount
includes $66,817 paid to Ms. LeBlanc in connection with
moving expenses and the sale of her home to relocate
from Toronto to the KFC Coop's headquarters in
Louisville.
In addition, as part of the KFC's Coop's corporate
reorganization in March 1999, Thomas D. Henrion, the KFC Coop,
and the Unified Coop executed a Separation and Consulting
Agreement. The Separation and Consulting Agreement provided for
Mr. Henrion to resign his employment on March 1, 1999 and,
thereafter, to provide consulting services to the Unified Coop
and KFC Coop for two years. Mr. Henrion also agreed to non-
compete provisions whereby, for two years following the date of
the Separation and Consulting Agreement, Mr. Henrion will not
work for companies that are specifically listed in the Separation
and Consulting Agreement. Under the Separation and Consulting
Agreement, Mr. Henrion was paid $500,000 on March 1, 1999 and
will be paid $456,300 on the first business day of January 2000
along with health insurance coverage for 10 years.
Compensation of Directors
No director, other than the Independent Director, receives
any remuneration from the KFC Coop 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, 1998, are discussed below.
Chief Executive Officer Compensation
Mr. Henrion served as Chief Executive Officer at the
pleasure of the Board. In fiscal 1998, Mr. Henrion received a
base salary of $212,127 and an incentive bonus of $90,640. The
increase in Mr. Henrion's base salary in fiscal 1998 compared to
his fiscal 1997 base salary was based on the Personnel
Committee's subjective determination, not based on specific
criteria, that Mr. Henrion continued to be a valuable employee
and had met or exceeded the KFC Coop'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 KFC
Coop'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 KFC Coop engaged the consulting
firm to review the KFC Coop's compensation policies to provide
fair and equitable compensation to the KFC Coop'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 KFC Coop'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.
For fiscal 1998, the Personnel Committee had established an
incentive bonus program (the "Incentive Bonus Program") for each
of its executive officers, including Mr. Henrion, under which, if
an officer achieved certain specified financial and personal
objectives, the officer may receive a bonus of not greater than
40% of base salary. During fiscal 1998, however, the Personnel
Committee determined that the KFC Coop's corporate
reorganization, subsequently consummated on March 1, 1999, caused
the KFC Coop to pursue alternative goals that were not accurately
reflected in the incentive criteria established at the beginning
of the fiscal period. In light of the Personnel Committee's
subjective determination concerning the performance and loyalty
of the KFC Coop's executive officers during this transition
period, the Personnel Committee recommended, and the Board of
Directors awarded, the maximum bonus for fiscal 1998 to each of
the executive officers participating in the Incentive Bonus
Program. Mr. Henrion received a bonus of $90,640.
In addition, Mr. Henrion and the KFC Coop had previously
executed a Supplemental Benefits/Consulting Agreement (the
"Supplemental Agreement"), effective January 1, 1994, whereby Mr.
Henrion would receive deferred compensation upon either his
retirement or his voluntary or involuntary termination not for
cause, as defined. The KFC Coop'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 KFC Coop, the KFC Coop'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
KFC Coop in a consulting capacity upon his eventual retirement.
As set forth above under "Executive Compensation," the
Supplemental Agreement was superceded by a Separation and
Consulting Agreement executed in connection with the KFC Coop's
corporate reorganization in March 1999.
Compensation of Executive Officers Generally
As a general matter, the Personnel Committee in making
recommendations to the Board of Directors considered 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 KFC
Coop 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 KFC Coop also
commissioned a report by a nationally recognized management
consulting firm, which analyzed the KFC Coop's management
structure as well as salary information regarding executive
officers of the KFC Coop. Again in 1997, the KFC Coop 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 KFC Coop 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
KFC Coop's headquarters for positions that would normally be
filled through residents of the KFC Coop'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 1998 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 KFC Coop's
other key executive officers under the Incentive Bonus Program
were previously 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 included
such objective and subjective factors as the officer's success in
meeting the objectives of the KFC Coop (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. As discussed more fully above, in light of
the Personnel Committee's subjective determination concerning the
performance and loyalty of the KFC Coop's executive officers
during fiscal 1998, the Personnel Committee recommended, and the
Board of Directors awarded, the maximum bonus for fiscal 1998 to
each of the executive officers participating in the Incentive
Bonus Program.
In addition to the individual performance-based bonuses
described above, executive officers participated in the KFC
Coop's Thrift and Money Purchase Pension Plans (the "Plans"),
which Plans were available to all active employees of the KFC
Coop. These Plans (referred to herein, where appropriate, as the
"Thrift Plan" and the "Pension Plan") were structured to motivate
the officers and employees of the KFC Coop to do an outstanding
job of managing and operating the KFC Coop.
Under the Thrift Plan, money was 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 KFC Coop could also make additional contributions under the
Thrift Plan to the employee's plan account based on a portion of
the KFC Coop's profits. The KFC Coop was not obligated to make
any additional contributions under the Thrift Plan and thus
voluntary additional contributions could be less in some years
than in others. If the KFC Coop determined to make an additional
contribution to the Thrift Plan, the amount was divided among all
eligible employees on the basis of their annual compensation.
The KFC Coop did not make a voluntary contribution to the Thrift
Plan in fiscal 1998.
Under the Pension Plan, the KFC Coop was 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 KFC Coop would 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 KFC Coop
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
Darlene L. Pfeiffer
Edward W. Rhawn
Performance Graph
Under rules adopted by the Securities and Exchange
Commission, 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 KFC Coop cannot provide this
graph because there is no meaningful information with respect to
cumulative return on any class of the KFC Coop's capital stock.
The KFC Coop's stockholder members purchase Membership Common
Stock and Store Common Stock to participate in the KFC Coop's
member programs, including the patronage dividend program, and to
participate in the KFC Coop's management through the election of
directors. The stockholder members do not purchase the KFC
Coop's capital stock with any expectation of return on their
investment through stock appreciation or per share dividends.
The KFC Coop's Membership Common Stock and Store Common Stock are
issued only to Operators. No class of the KFC Coop's capital
stock is listed on an exchange or traded in any other public
trading market. Since July 1, 1983, the KFC Coop 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 KFC Coop or from
distributors who purchase from the KFC Coop. All purchases by
directors and nominees or their affiliates from the KFC Coop 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 KFC Coop.
STOCKHOLDER PROPOSALS FOR THE ANNUAL MEETING
Proposals of stockholders intended to be presented at the
2000 Annual Meeting of Stockholders must be received by the KFC
Coop on or before February 7, 2000 to be eligible for inclusion
in the KFC Coop's proxy statement and proxy relating to that
meeting.
OTHER INFORMATION
The officers and directors of the KFC Coop 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, 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 KFC Coop.
Solicitation may be undertaken by mail, telephone and personal
contact by Directors, officers and employees of the KFC Coop
without additional compensation.
Upon recommendation of the KFC Coop's Audit Committee, the
Board dismissed KPMG Peat Marwick LLP, now KPMG LLP ("KPMG") as
its principal accountants on May 18, 1998. KPMG's report on the
KFC Coop's financial statements for the past two fiscal years did
not contain any adverse opinion or disclaimer of opinion, and was
not qualified or modified as to uncertainty, audit scope, or
accounting principles. Furthermore, during the KFC Coop's two
most recent fiscal years and through the date of dismissal, there
were no disagreements with KPMG on any matter of accounting
principles or practices, financial statement disclosure, or
auditing scope or procedure.
Upon recommendation of the KFC Coop's Audit Committee, on
May 18, 1998, the Board engaged PricewaterhouseCoopers LLP as its
principal accountants to audit the KFC Coop's financial
statements. A representative of neither KPMG nor
PricewaterhouseCoopers LLP will be present at the Annual Meeting.
"KFC" is a registered trademark of KFC Corporation and is
used in these materials for identification purposes only. The
KFC Coop is an independent provider of products and is not
affiliated with KFC Corporation, except that KFC Management is a
stockholder member of the KFC Coop.
Louisville, Kentucky
April 29, 1999
KFC National Purchasing Cooperative, Inc.
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS
To Be Held June 7, 1999
Please Mark, Sign, Date and Return Immediately
I, the undersigned Stockholder Member of KFC National
Purchasing Cooperative, Inc. (the "Cooperative") do hereby
nominate, designate and appoint David G. Neal or Daniel E.
Woodside 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 June 7, 1999, 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 Directors by All Members.
All holders of Membership Common Stock may vote in Item 1.
You may vote for either or both of the nominees listed above
because each nominee has been nominated for a separate position
on the Board of Directors. To elect the following indicated
nominees as members of the Cooperative's Board of Directors to
serve as the Independent Director and to represent the Series J
Membership Common Stock, respectively.
Series Name For
Independent William R. Carden [ ]
Series Name For
J Edward J. Henriquez [ ]
2. Election of Series Directors by Series Members Only.
Do not vote in Item 2 unless you hold Series A, B, C, D, G,
or K Membership Common Stock. Check one box only--Vote only for
a nominee of your Series in Item 2. Your series is indicated on
the label on the back of this form. To elect the following
indicated nominees as members of the Cooperative's Board of
Directors to represent their respective Series of Membership
Common Stock.
Series Name For Series Name For
A Thomas R. Arnold [ ] D Robert C. Carle [ ]
A James B. Royster [ ] G Dean M. Sorgdrager [ ]
B Ben E. Edwards [ ] K Christian L. Campbell[ ]
C James G. Cocolin [ ] K Charles Rawley [ ]
C Darlene L. Pfeiffer[ ]
3. 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 ______________,
1999.
___________________________ ________________________________
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.
