<PAGE> 1
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. 1)
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.
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(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement, if Other Than the
Registrant)
Payment of filing fee (Check the appropriate box):
[ ] No fee required.
[X] Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
(1) Title of each class of securities to which transactions
applies:
Membership Common Stock and Store Common Stock
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(2) Aggregate number of securities to which transaction applies:
5744
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(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth the
amount on which the filing fee is calculated and state how it
was determined):
$3,107.06 (based on the Registrant's members equity per share
as of June 30, 2000)
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(4) Proposed maximum aggregate value of transaction:
$17,846,954
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(5) Total fee paid:
$3,569
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[X] Fee paid previously with preliminary materials.
<PAGE> 2
[ ] Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which
the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the form or
schedule and the date of its filing.
(1) Amount previously paid:
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(2) Form, Schedule or Registration Statement no.:
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(3) Filing Party:
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(4) Date Filed:
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[KFC NATIONAL PURCHASING COOPERATIVE LETTERHEAD]
REORGANIZATION PROPOSAL -- YOUR VOTE IS VERY IMPORTANT
The Board of Directors of KFC National Purchasing Cooperative, Inc.
(the "KFC Co-op") is seeking your approval to reorganize the KFC Co-op. We
propose that the KFC Co-op merge into a newly created, wholly owned subsidiary
(the "New KFC Co-op"). In the proposed merger, our current stockholder members
will exchange their shares of Membership Common Stock and Store Common Stock for
an equal number of shares of Membership Common Stock and Store Common Stock in
the New KFC Co-op. Unlike the shares of the KFC Co-op our members currently own,
the New KFC Co-op's shares of stock will not be registered with the Securities
and Exchange Commission under the Securities Exchange Act.
The Board of Directors of the KFC Co-op believes the proposed merger is
in the best interests of our members. The proposed merger would conform our
capital structure to other cooperative purchasing associations and reduce
recurring operating expenses associated with securities filings. Because our
members have not purchased stock of the KFC Co-op for investment purposes, but
rather for the purpose of obtaining the lowest possible prices for goods and
equipment used in the operation of our members' Kentucky Fried Chicken retail
food stores, we believe the proposed merger would not adversely affect our
members.
To accomplish the proposed merger, the KFC Co-op will form a new,
wholly owned subsidiary. After approval by our members, each share of Membership
Common Stock and Store Common Stock of the KFC Co-op will be exchanged in the
proposed merger for one share of corresponding Membership Common Stock or Store
Common Stock of the New KFC Co-op. At the same time, all of the assets,
operations, rights, obligations and liabilities of the KFC Co-op will be
transferred to, and assumed by, the New KFC Co-op. After the effective date of
the merger, our members no longer will have an ownership interest in the current
KFC Co-op, which will cease to exist after the effective date of the merger. The
New KFC Co-op will continue to operate on behalf of its members as the KFC Co-op
has in the past.
If our members approve the proposed merger, the New KFC Co-op's
Certificate of Incorporation and Bylaws will differ in three ways from the
current KFC Co-op's Certificate and Bylaws:
1. Our members will not have the right to receive dividends
other than patronage dividends in connection with ownership of the New
KFC Co-op stock;
2. Our members will not have the right to transfer stock of
the New KFC Co-op to any party other than the New KFC Co-op for the
same price the member paid to acquire the stock; and
3. The Bylaws of the New KFC Co-op will require that the New
KFC Co-op always do more than 90% of its business with stockholder
members.
The Board of Directors believes that these changes should not have a
substantive effect on our members' ownership of stock in the KFC Co-op. First,
the KFC Co-op has not declared a dividend, other than patronage dividends, for
over twenty years. Second, no market has ever developed for our Membership
Common Stock or Store Common Stock, and no member has transferred KFC Co-op
stock to a third party unassociated with the KFC Co-op. Finally, the KFC Co-op
currently has no restriction on the amount of business it is required do with
our members. Requiring the New KFC Co-op to do more
<PAGE> 4
than 90% of its business with our members will help assure that the KFC Co-op
remains focused on KFC member service.
To implement the proposed merger, the KFC Co-op Board seeks approval
for (i) its officers to execute the Plan and Agreement of Merger, as more fully
described in the attached Proxy Statement and (ii) the authorization of such
other action as may be necessary to carry out the purposes of the proposed
corporate reorganization.
Upon completion of the corporate reorganization, the New KFC Co-op will
continue to operate and will concentrate on the purchasing cooperative business.
The New KFC Co-op Board will continue to exercise policy-making decisions and
administer the Patronage Dividend Program in accordance with past practices.
Your vote is very important. You can vote by attending the Special
Meeting or by completing and returning the enclosed proxy card. The attached
Proxy Statement provides you with detailed information about the proposed
corporate reorganization. We encourage you to read this document.
We strongly support the proposed merger and enthusiastically recommend
that you vote in favor of the corporate reorganization.
Daniel E. Woodside David G. Neal
President, KFC Co-op Chairman, KFC Co-op
<PAGE> 5
KFC NATIONAL PURCHASING COOPERATIVE, INC.
950 BRECKENRIDGE LANE
LOUISVILLE, KENTUCKY 40207
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
November 28, 2000
To the Stockholders of KFC National Purchasing Cooperative, Inc.:
NOTICE IS HEREBY GIVEN that a Special Meeting of Stockholders of KFC
National Purchasing Cooperative, Inc. (the "KFC Co-op") will be held on
December 28, 2000, 10:00 a.m. local time, at the corporate headquarters of the
KFC Co-op at 950 Breckenridge Lane, Louisville, Kentucky 40207, for the purpose
of considering and voting upon the following matters, all as set forth in the
accompanying Proxy Statement:
(i) PLAN AND AGREEMENT OF MERGER. A proposal to approve the Merger of the
KFC Co-op, as approved by the KFC Co-op Board, into KFC National
Purchasing Co-op, Inc. (the "Merger"). Approval of the Merger involves:
(i) authorization of and execution of a Plan and Agreement of Merger,
in substantially the form attached to the Proxy Statement as Appendix
A, and the consummation of the transactions contemplated therein, as
more fully described in the Proxy Statement; and (ii) the authorization
of such other action by the KFC Co-op Board and any of its officers as
may be necessary or appropriate to carry out the objects, intents, and
purposes of the Merger.
(ii) OTHER BUSINESS. Such other business related to the Merger as may
properly come before the meeting or any adjournment thereof. The KFC
Co-op Board currently knows of no other business to be brought before
the Special Meeting.
The close of business on November 21, 2000 has been fixed as the date
of record for those stockholders entitled to vote at the Special Meeting and any
adjournments or postponements thereof. Accordingly, only stockholders of record
on such date are entitled to notice of, and to vote at, the Special Meeting and
any adjournments or postponements thereof. The stock transfer books of the KFC
Co-op will not be closed.
By Order of the Board of Directors
Robert C. Carle, Secretary
WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING IN PERSON, PLEASE
COMPLETE, DATE, SIGN AND RETURN THE ENCLOSED PROXY CARD IN THE ENCLOSED ENVELOPE
WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES. IF YOU ATTEND THE
SPECIAL MEETING, YOU MAY VOTE IN PERSON IF YOU WISH, EVEN IF YOU HAVE PREVIOUSLY
RETURNED YOUR PROXY CARD.
<PAGE> 6
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
SUMMARY .......................................................................4
The Company...........................................................4
The Special Meeting...................................................4
Purpose of the Merger.................................................4
General Terms and Effects of the Merger...............................4
Record Date and Outstanding Shares....................................5
Vote Required.........................................................5
Recommendations.......................................................5
Reasons for the Merger................................................5
Fairness of the Merger................................................6
Terms of the Merger Agreement.........................................6
Effects of the Merger Agreement.......................................6
THE SPECIAL MEETING............................................................8
General ..............................................................8
Matters to be Considered..............................................8
Recommendation of the KFC Co-op Board.................................8
Proxies ..............................................................8
Voting Rights.........................................................9
Voting Groups.........................................................9
No Appraisal Rights...................................................9
THE PROPOSED MERGER...........................................................10
History of the KFC Co-op.............................................10
Reasons for the Proposed Merger......................................11
Fairness of the Proposed Merger......................................13
Differences Between the KFC Co-op and the New KFC Co-op..............13
The Proposed Merger..................................................15
Stockholder Information after the Merger.............................16
Federal Income Tax Consequences......................................16
Accounting Treatment of the Proposed Merger..........................17
Regulatory Approvals.................................................17
Failure of the Merger Proposal.......................................17
MARKET AND PRICE FOR THE KFC CO-OP STOCK......................................17
COMPARISON OF KFC CO-OP CAPITAL STOCK AND NEW KFC CO-OP CAPITAL STOCK.........17
Introduction.........................................................18
KFC Co-op Membership Stock...........................................19
Issuance in Series..........................................19
KFC Operators...............................................19
Voting Rights...............................................20
Dividend Rights.............................................20
Limitations on Ownership and Transfer; Redemption...........20
Liquidation Rights..........................................21
General.....................................................21
KFC Co-op Store Stock................................................21
Voting Rights...............................................21
Dividend Rights.............................................21
Limitations on Ownership and Transfer; Redemption...........22
</TABLE>
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<TABLE>
<S> <C>
Liquidation Rights..........................................22
General.....................................................23
DIVIDEND POLICY...............................................................23
Introduction.........................................................23
Patronage Dividend Program...........................................23
Differences in the New KFC Co-op's Bylaws............................25
MANAGEMENT OF THE KFC CO-OP...................................................25
TRANSACTIONS WITH STOCKHOLDERS, DIRECTORS AND AFFILIATES......................29
LEGAL MATTERS.................................................................30
INDEPENDENT PUBLIC ACCOUNTANTS................................................30
STOCKHOLDER PROPOSALS.........................................................30
TRADEMARKS....................................................................30
WHERE YOU CAN FIND MORE INFORMATION...........................................30
INCORPORATION OF INFORMATION BY REFERENCE.....................................31
APPENDICES
PLAN AND AGREEMENT OF MERGER..........................................APPENDIX A
CERTIFICATE OF INCORPORATION OF
KFC NATIONAL PURCHASING COOPERATIVE, INC.,
AS CURRENTLY AMENDED..................................................APPENDIX B
BYLAWS OF KFC NATIONAL PURCHASING COOPERATIVE, INC....................APPENDIX C
CERTIFICATE OF INCORPORATION OF NEW KFC CO-OP.........................APPENDIX D
BYLAWS OF NEW KFC CO-OP...............................................APPENDIX E
</TABLE>
5
<PAGE> 8
SUMMARY
This summary highlights selected information from this document and may
not contain all of the information that is important to you. For a more complete
understanding of the proposed merger and for a more complete description of the
legal terms of the proposed merger, you should read this entire document
carefully, as well as the additional documents to which we refer you, including
the merger agreement. For your reference, we have included page references to
direct you to more complete descriptions of the topics presented in this
Summary.
THE COMPANY
KFC NATIONAL PURCHASING COOPERATIVE, INC.
950 Breckenridge Lane
Louisville, Kentucky 40207
(502) 896-5900
We are a purchasing cooperative that operates a purchasing program
through Unified Foodservice Purchasing Co-op, LLC in order to provide our
members with the lowest possible store delivered costs for goods and equipment
used in their outlets. Our stockholder members are operators of KFC outlets,
including Tricon Global Restaurants, Inc., and the National Council and
Advertising Cooperative, Inc. Until March 1, 1999, we administered purchasing
programs for multiple restaurant concepts, but now we only operate and only plan
to operate purchasing programs for KFC operators.
THE SPECIAL MEETING
The KFC Co-op will hold a special stockholders meeting at its corporate
headquarters at 950 Breckenridge Lane, Louisville, Kentucky 40207 on December
28, 2000, 10:00 a.m. local time. At the special stockholders meeting, you will
be asked to consider and vote on a proposal to approve and adopt the merger
agreement.
PURPOSE OF THE MERGER
The purpose of the proposed merger is to conform our organizational
structure to that of the Taco Bell National Purchasing Coop, Inc. and the Pizza
Hut National Purchasing Coop, Inc., the other two members of Unified Foodservice
Purchasing Co-op, LLC. As a result of the merger, we will no longer have to make
securities filings with the SEC, which will reduce our recurring operating
expenses.
GENERAL TERMS AND EFFECTS OF THE MERGER
In the proposed merger, the KFC Co-op will merge into the new KFC
National Purchasing Co-op, a corporation recently formed by the KFC Co-op, with
the New KFC Co-op being the surviving corporation. You will exchange your shares
in the KFC Co-op for an equal number of shares in the New KFC Co-op. The diagram
on page 15 shows the steps by which we will accomplish the merger.
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The stock in the New KFC Co-op will not be registered under federal
securities laws. As a result, the New KFC Co-op will not file periodic reports
with the Securities and Exchange Commission. Our board of directors has adopted
a policy to continue to provide stockholders with copies of our audited
financial statements and other information about the business, financial
condition and results of operations of the KFC Co-op. For a description of the
policy, see "The Proposed Merger - Stockholder Information After the Merger" on
page 16.
RECORD DATE AND OUTSTANDING SHARES
If you held KFC Co-op membership shares at the close of business on
November 21, 2000, you are entitled to vote on the merger proposal. As of that
date, 531 KFC Co-op membership shares were outstanding and entitled to vote at
the special meeting.
VOTE REQUIRED
Approval of the proposed merger requires the affirmative vote of (a) a
majority of all outstanding shares of KFC Co-op membership stock entitled to
vote at the Special Meeting and (b) two-thirds (2/3) of the members present,
either in person or by properly executed proxy, at the Special Meeting.
RECOMMENDATIONS
Our board of directors believes that the proposed merger is in the best
interest of the KFC Co-op and our members, and unanimously recommends that you
vote "FOR" the merger proposal. Our directors, who beneficially own 12 shares,
or 2%, of the membership stock entitled to vote at the Special Meeting, have
indicated they plan to vote their shares "FOR" the merger proposal.
REASONS FOR THE MERGER
Our board of directors based its recommendation that you approve the
merger on the following considerations, which are described in greater detail on
page 11 under "Reasons for the Proposed Merger":
- Members receive no financial benefit from the
features of our certificate of incorporation and
bylaws that require us to register our stock under
the federal securities laws.
- We believe that it is appropriate for us to pay no
dividends other than patronage dividends, which are
based on the volume of business a member does with
the KFC Co-op.
- Paying dividends based on stock ownership would have
disadvantageous federal income tax consequences for
us and our members. Patronage dividends are subject
only to a single level of tax at the stockholder
level, unlike per share dividends which are subject
to tax at both the corporate and stockholder levels.
Furthermore, paying per share dividends could
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cause us to lose our cooperative status and ability
to pay patronage dividends under the Internal Revenue
Code.
- Terminating the registration of the our stock under
federal securities laws will reduce recurring
operating costs associated with securities filings.
FAIRNESS OF THE MERGER
The KFC Co-op and the New KFC Co-op believe the merger is fair to all
stockholders because:
- The merger will not change the economic position of
our stockholders.
- Stockholders will continue to receive information
about our business, financial condition and results
of operations.
TERMS OF THE MERGER AGREEMENT
The merger agreement is attached to this proxy statement as Appendix A.
You should read the merger agreement in its entirety. It is the legal document
that governs the merger.
This is how we will accomplish the merger:
- We will form a new, wholly owned subsidiary, the New
KFC Co-op.
- The current KFC Co-op will then merge into the New
KFC Co-op, with the New KFC Co-op continuing
cooperative business operations as the surviving
entity of the merger.
- In the proposed merger, our members will exchange
their current shares of store common stock and
membership common stock for an equal number of shares
of corresponding store common stock and membership
common stock in the New KFC Co-op.
See "The Proposed Merger" on page 10 for a more complete discussion of this
process.
EFFECTS OF THE MERGER AGREEMENT
The New KFC Co-op's certificate of incorporation and bylaws will differ
in three significant ways from the current certificate of incorporation and
bylaws. We do not believe these differences will have an adverse effect on our
members.
- The New KFC Co-op will not have the capacity to pay
dividends, other than patronage dividends based on
the volume of business each member does with us
during the prior year.
Even though we have not paid dividends other than
patronage dividends for over 20 years and have no
intention to ever do so, our certificate of
incorporation does not prohibit us from paying
dividends based on stock ownership. We believe that
it is appropriate for us to maintain the smallest
margin over the costs of goods and services that is
sufficient to cover our cost of operation and need
for working capital and reserves. We also believe
that it is appropriate for us to distribute patronage
dividends rather than per share dividends because,
under the cooperative
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tax principles of the Internal Revenue Code,
patronage dividends are taxed only once, unlike per
share dividends that are taxed at both the corporate
and stockholder levels.
- Members will not have the right to transfer store
common stock other than to sell it to the New KFC
Co-op at the price at which the New KFC Co-op sells
shares of store common stock to members.
Although there has never been a market for our
capital stock, our certificate of incorporation does
not expressly prohibit our members from selling stock
to another KFC operator at a profit. In practice, a
member cannot sell store common stock for more than
the member paid for it, and therefore a market can
never develop for KFC store common stock, because the
only potential buyers are KFC retail operators who
can always purchase shares directly from the KFC
Co-op for $400 per share.
- The New KFC Co-op will always be required to do more
than 90% of its business with our members.
Although there currently is no restriction on our
ability to do business with non-members, neither we
nor our members have an interest in doing significant
amounts of business with non-members. The new
requirement will ensure that we remain focused on KFC
member services.
We anticipate that, as a result of these changes, the New KFC Co-op
will not be required to register its capital stock under federal securities
laws. The New KFC Co-op will continue to operate as the KFC Co-op has in the
past and will concentrate on its KFC purchasing cooperative business. The New
KFC Co-op Board will continue to exercise policy-making decisions and administer
the patronage dividend program in accordance with past practices.
THE SPECIAL MEETING
GENERAL
We are sending you this proxy statement because the board of directors
of the KFC Co-op is soliciting your proxy to vote at the KFC Co-op's special
stockholders meeting to be held on December 28, 2000, at 10:00 a.m. (local time)
at the KFC Co-op's headquarters at 950 Breckenridge Lane, Louisville, Kentucky.
We will be sending this proxy statement and the attached notice to the KFC
Co-op's members on or about November 28, 2000.
MATTERS TO BE CONSIDERED
At the Special Meeting, members owning shares of KFC Co-op membership
common stock will be asked to consider and vote upon a proposal to approve the
merger of the KFC Co-op into the New KFC Co-op, with the New KFC Co-op being the
surviving corporation. In the proposed merger, the KFC Co-op's members will
exchange their membership and store shares for an equal number of membership and
store shares in the New KFC Co-op. The diagram on
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page 15 shows the steps by which the KFC Co-op will accomplish the proposed
merger. In addition to approving the proposed merger, members will be asked to
authorize such other action by the KFC Co-op Board and its officers as is
necessary to carry out the proposed merger.
RECOMMENDATION OF THE KFC CO-OP BOARD
The KFC Co-op Board has approved the formation of the New KFC Co-op, a
wholly owned subsidiary of the KFC Co-op, the Plan and Agreement of Merger, and
the proposed merger, including the proposed Certificate and Bylaws of the New
KFC Co-op. The KFC Co-op Board recommends that members vote "FOR" approval of
the proposed merger. The reasons for the Board's recommendation are described on
page 11, "The Proposed Merger - Reasons for the Proposed Merger".
Our directors, who beneficially own 12 shares, or 2%, of the membership
common stock entitled to vote at the Special Meeting, have indicated they plan
to vote their shares "FOR" approval of the proposed merger.
PROXIES
The accompanying proxy form is for use at the Special Meeting if a
member does not attend in person. The proxy may be revoked by the holder of KFC
Co-op membership stock at any time before it is exercised by submitting to the
KFC Co-op written notice of revocation, a properly executed proxy of a later
date or by attending the Special Meeting and electing to vote in person. Written
notices of revocation and other communications with respect to the revocation of
the proxies should be addressed to the KFC Co-op, 950 Breckenridge Lane,
Louisville, Kentucky 40207, Attention: Robert C. Carle, Secretary. All shares
represented by a valid proxy received pursuant to this solicitation, and not
revoked before it is exercised, will be voted as directed in the proxy. If no
directions are given, the shares represented by the proxy will be voted in favor
of approval of the merger and the transactions contemplated thereby. The KFC
Co-op Board is unaware of any other matters that may be presented for action at
the Special Meeting. If, however, other matters properly come before the Special
Meeting, the shares represented by proxies in the accompanying form will be
voted or not voted by the named proxy holders in their discretion, provided that
no proxy that is voted against approval of the merger will be voted in favor of
any adjournment or postponement of the Special Meeting for the purpose of
soliciting additional proxies.
FAILURE TO RETURN AN EXECUTED PROXY CARD OR TO VOTE IN PERSON AT THE
SPECIAL MEETING OR VOTING TO ABSTAIN WILL CONSTITUTE, IN EFFECT, A VOTE AGAINST
APPROVAL OF THE MERGER.
The KFC Co-op will bear the cost of the solicitation. Certain
directors, officers and other employees of the KFC Co-op, not specially employed
for this purpose, may solicit proxies, without additional remuneration by
personal interview, mail, telephone, facsimile or other electronic means.
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VOTING RIGHTS
Only holders of record of shares of KFC Co-op membership stock as of
the close of business on the Special Meeting Record Date ("Holders of Record")
will be entitled to receive notice of and to vote at the Special Meeting or any
adjournment or postponement thereof. Holders of Record are entitled to one vote
per share on any matter that may properly come before the Special Meeting which
they are entitled to vote upon. The presence, either in person or by properly
executed proxy, of members representing a majority of those entitled to vote at
the Special Meeting will constitute a quorum at the Special Meeting.
VOTING GROUPS
Since the merger will affect all Holders of Record in the same manner,
the KFC Co-op Board of Directors has determined that all Holders of Record will
vote as a single voting group on the merger proposal.
Approval of the merger requires the affirmative vote of (a) a majority
of all outstanding shares of KFC Co-op membership stock entitled to vote at the
Special Meeting, and (b) two-thirds (2/3) of the members present, either in
person or by properly executed proxy, at the Special Meeting.
As of June 30, 2000, there were 567 shares of KFC Co-op membership
stock outstanding and entitled to vote at the Special Meeting. As of the Special
Meeting Record Date, the KFC Co-op knows of no person who beneficially owns more
than five percent of the issued and outstanding shares of KFC Co-op membership
stock.
NO APPRAISAL RIGHTS
Members of the KFC Co-op will not be entitled to appraisal rights under
the Delaware General Corporation Law (the "Delaware Law") in connection with the
merger.
THE PROPOSED MERGER
HISTORY OF THE KFC CO-OP
The KFC Co-op was organized in 1978 to serve as a national purchasing
cooperative on behalf, and for the benefit of KFC Operators, including KFC
National Management Company, a subsidiary of KFC Corporation. The KFC Co-op was
organized by KFC Corporation and the KFC franchisees' National Franchisee
Advisory Council (a predecessor of the National Council and Advertising
Cooperative, Inc. (the "NCAC")) with the objectives of: (i) obtaining goods and
equipment at the lowest prices and (ii) having the procurement function on
behalf of operators of KFC retail outlets handled on an arm's-length basis
rather than through KFC Corporation.
In 1989, the KFC Co-op began selling directly and through distributors,
goods and equipment to other restaurant systems, including Taco Bell. In
November 1992, operators of Taco Bell retail outlets became eligible as members
(the "Taco Bell Members") of the KFC Co-
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op through amendments to the KFC Co-op's Certificate of Incorporation and
Bylaws. In addition, during fiscal 1992, through a newly formed subsidiary, the
KFC Co-op commenced purchasing and distribution for operators of KFC franchised
retail outlets in Canada. In fiscal 1997, the KFC Co-op established a new
subsidiary to develop the KFC Co-op's sales of goods and equipment to quick
service restaurant operators located outside of the United States and Canada.
In 1999, the KFC Co-op completed a substantial corporate
reorganization, in which the KFC Co-op, the Taco Bell National Purchasing Coop,
Inc. (the "Taco Bell Co-op") and the Pizza Hut National Purchasing Coop, Inc.
(the "Pizza Hut Co-op") formed the Unified Foodservice Purchasing Co-op, LLC, a
Kentucky limited liability company ("UFPC"), for the purpose of combining
certain administrative and purchasing functions for the benefit of each Co-op's
members. As part of the reorganization, the KFC Co-op formed the Taco Bell
Co-op, transferred certain assets and liabilities specifically related to its
Taco Bell operations to the Taco Bell Co-op, and Taco Bell Members exchanged
their shares in the KFC Co-op for an equal number of shares of Taco Bell common
stock. In addition, the KFC Co-op transferred certain assets and liabilities to
UFPC, in exchange for its membership interest therein. After the reorganization,
the KFC Co-op continued to operate its purchasing cooperative business on behalf
of our members, but outsourced the administration of this business to UFPC. The
business and affairs of UFPC are managed by UFPC's eight member board of
directors. The KFC Co-op, Taco Bell Co-op, and Pizza Hut Co-op, each elect two
of the eight directors, and Tricon Global Restaurants, Inc. ("Tricon"), which is
a member of each concept co-op, elects two of the eight directors.
UFPC now provides the support and operational services for the KFC
Co-op, the Taco Bell Co-op and the Pizza Hut Co-op through combined
administrative and purchasing functions. As a member of UFPC, the KFC Co-op
currently provides advice and counsel to UFPC as to its operations. The KFC
Co-op Board exercises policy-making decisions and administers the KFC Co-op
patronage dividend program for our members.
REASONS FOR THE PROPOSED MERGER
Since 1978, the KFC Co-op's shares have been registered with the
Securities and Exchange Commission (the "SEC") under federal securities laws,
even though the KFC Co-op's shares are not listed on an exchange or traded in
any other public trading market. Since its inception in 1978, membership in the
KFC Co-op has been limited to operators of KFC and Taco Bell retail outlets.
Upon completion of the 1999 formation of the UFPC and the related
reorganization involving the KFC Co-op, the Taco Bell Co-op, and the Pizza Hut
Co-op, the KFC Co-op concluded it would be beneficial to conform its
organizational structure to the structures of the other two members of the UFPC.
In reaching its decision to approve the merger, the KFC Co-op Board of
Directors, without assigning any relative or specific weights, considered the
following material factors.
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1. Members receive no financial benefit from the features of the KFC
Co-op's certificate of incorporation and bylaws that require the KFC Co-op to
register its stock under federal securities laws.
The KFC Co-op's capital stock is a security and so must be registered
with the SEC because its Certificate of Incorporation and Bylaws do not
expressly prohibit a member from earning a financial return on investment in the
following ways:
(a) a member can sell KFC Co-op capital stock for more
than the member paid for it;
(b) a member can receive a per share dividend; and
(c) the KFC Co-op can do significant amounts of business
with non-members which, at least in theory, could
result in an economic benefit to members.
Because of the way the KFC Co-op actually operates, our members do not
earn a financial return on their investment. Therefore, they receive no benefit
from the Certificate and Bylaw provisions which, in theory, would allow the KFC
Co-op's capital stock to appreciate in value and allow members to earn an
economic return on their investment in KFC Co-op stock. Our members do not earn
a financial return on their investment for the following reasons:
(a) The KFC Co-op has not paid a per share dividend for
more than 20 years and has no intention to ever do
so.
(b) In practice, a member cannot sell or otherwise
transfer its KFC Co-op store common stock for more
than the member paid for it, and a market can never
develop for KFC Co-op store common stock, because the
only potential buyers are currently KFC retail
operators who can always purchase shares directly
from the KFC Co-op for $400 per share. Therefore, KFC
Co-op stock will never appreciate in value.
(c) The KFC Co-op purposefully limits business with
non-members to ensure that the KFC Co-op remains
focused on KFC member services.
2. We believe that it is appropriate for the KFC Co-op to pay no
dividends other than patronage dividends, which are based on the volume of
business a member does with the KFC Co-op.
The board of directors believes that it is appropriate for the KFC
Co-op to maintain the smallest margin over the costs of goods and services that
is sufficient to cover the KFC Co-op's cost of operation and need for working
capital and reserves. To the extent the KFC Co-op generates revenues in excess
of its operating costs and reasonable working capital needs and reserves, the
board believes that it is appropriate to return any excess to members based on
the volume of business they do with the KFC Co-op.
3. Paying dividends based on stock ownership would have adverse federal
income tax consequences for the KFC Co-op and its members.
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The board of directors believes that it is appropriate to distribute
patronage dividends rather than ordinary dividends because, under the
cooperative tax principles of Sections 1381 through 1388 of the Internal Revenue
Code, patronage dividends are taxed only at the stockholder level. Dividends
paid on a per share basis would be taxed twice, at both the corporate and
stockholder levels. Furthermore, paying per share dividends could cause the KFC
Co-op to lose its cooperative status under the Internal Revenue Code. Failing to
operate on a cooperative basis would cause the KFC Co-op and its members to lose
the more favorable tax status afforded by patronage dividend treatment.
4. Terminating the registration of the KFC Co-op's stock under federal
securities laws will reduce recurring costs associated with securities filings.
The KFC Co-op incurs significant operating costs every year,
including both direct expenses and employee time, to prepare and file periodic
reports with the SEC. However, members do not gain any economic benefit from the
features of its certificate of incorporation and bylaws that require ongoing
securities compliance. A reduction in operating costs following deregistration
will allow the KFC Co-op to lower the margins for our members. The economic
relationship between the KFC Co-op and our members is a commercial relationship,
not an investment relationship.
Based on these factors, and such other factors as the members of the
Board deemed relevant, including those set forth below under the heading
"Fairness of the Proposed Merger," the KFC Co-op Board has unanimously approved
the merger as being in the best interests of the KFC Co-op and our members.
FAIRNESS OF THE PROPOSED MERGER
1. The KFC Co-op and the New KFC Co-op believe that the merger is fair
to all stockholders because the merger will not change the economic position of
stockholders.
The merger will not change the economic position of the stockholders
because all of the assets, liabilities, and equity of the KFC Co-op will be
transferred to the New KFC Co-op and because the stock of the KFC Co-op will be
converted to stock of the New KFC Co-op on a one-to-one basis.
2. Stockholders will continue to receive information about the
business, financial condition, and results of operations of the KFC Co-op.
Because the New KFC Co-op will not file periodic reports with the
SEC, and will not be required by the requirements of federal securities laws to
provide information to its stockholders, the Board of Directors adopted a policy
to continue to provide stockholders with audited financial statements and other
material information about the New KFC Co-op, its business, financial condition
and results of operations. See "The Proposed Merger - Stockholder Information
After the Merger."
DIFFERENCES BETWEEN THE KFC CO-OP AND THE NEW KFC CO-OP
The following highlights the three substantive differences between the
Certificate of Incorporation and Bylaws of the KFC Co-op and the Certificate and
Bylaws of the New KFC Co-op:
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<PAGE> 17
- The New KFC Co-op will be prohibited from paying
dividends, other than patronage dividends. Although
the KFC Co-op has not paid dividends other than
patronage dividends on its capital stock for over 20
years, the current Certificate of Incorporation of
the KFC Co-op does not expressly prohibit payment of
such dividends.
- Members of the New KFC Co-op will not have the right
to transfer store common stock to any party, other
than repurchases by the new KFC Co-op at the same
price the stockholder member paid to acquire the
shares of store common stock. No market has ever
developed for KFC Co-op capital stock, nor could such
a market ever develop, as a practical matter, because
membership is limited to KFC operators who can always
buy store common stock directly from the KFC Co-op
for $400 per share. Nevertheless, the current
Certificate of Incorporation of the KFC Co-op does
not contain an express prohibition on our members
ability to transfer such stock, which in theory could
be sold at a profit to restaurant operators otherwise
eligible to participate in the KFC Co-op's programs.
- The new KFC Co-op will be required to always do more
than 90% of its business with our members. The KFC
Co-op currently has no restriction on its ability to
do business with non-members.
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THE PROPOSED MERGER
The following diagrams highlight the structure of the proposed merger,
as discussed herein:
1. Current Structure
--------------------------------------------
Stockholder Members
--------------------------------------------
|
|
|
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KFC National Purchasing Cooperative, Inc.
--------------------------------------------
2. Step One - Organize Wholly Owned Subsidiary
--------------------------------------------
Stockholder Members
--------------------------------------------
|
|
|
--------------------------------------------
KFC National Purchasing Cooperative, Inc.
--------------------------------------------
|
|
|
--------------------------------------------
New KFC Co-op
--------------------------------------------
3. Step Two - Merge Existing KFC Co-op into New KFC Co-op
--------------------------------------------
Stockholder Members
--------------------------------------------
|
|
|
--------------------------------------------
KFC National Purchasing Cooperative, Inc.
--------------------------------------------
|
|
|
--------------------------------------------
New KFC Co-op
--------------------------------------------
4. Resulting Structure
--------------------------------------------
Stockholder Members
--------------------------------------------
|
|
|
--------------------------------------------
New KFC Co-op
--------------------------------------------
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Following the merger, the New KFC Co-op's organization and its
relationship with its members will remain the same. The current Board of
Directors and officers of the KFC Co-op will also be the Board of Directors and
officers of the New KFC Co-op. Pursuant to the New KFC Co-op's Certificate and
Bylaws, it is expected that the patronage dividend program will continue to be
administered in accordance with past practices. Additionally, our members will
continue to elect the directors of the New KFC Co-op Board by series of KFC
Co-op membership stock held. The New KFC Co-op Board will continue to manage the
KFC Co-op's business affairs, as well as provide significant control, advice and
counsel to UFPC regarding operations of the KFC purchasing program.
STOCKHOLDER INFORMATION AFTER THE MERGER
The stock in the New KFC Co-op will not be registered under federal
securities laws. As a result, the New KFC Co-op will not file periodic reports
with the SEC and will not be required by federal securities laws to provide
information to its stockholders.
The Board of Directors has adopted a policy to continue, after the
merger, to provide stockholders with information about the business, financial
condition and results of operations of the KFC Co-op, including, without
limitation, the following:
- Audited financial statements for the KFC Co-op's two most recently
completed fiscal years;
- A discussion of the KFC Co-op's financial condition and results of
operations for its two most recently completed fiscal years;
- A notice of any annual and special meeting of the KFC Co-op's
stockholders accompanied by information about nominees for election to
the board of directors and other matters submitted for action by the
KFC Co-op's stockholders;
- Information concerning developments that materially affect the KFC
Co-op's business, financial condition and results of operations; and
- Other information that the Board of Directors believes, in good faith,
to be appropriate to keep stockholders informed about the KFC Co-op's
business, financial condition and results of operations.
FEDERAL INCOME TAX CONSEQUENCES
The transactions contemplated by the Plan and Agreement of Merger will
be tax-free to the KFC Co-op and its stockholders under Section 368(a)(1) of
the Internal Revenue Code. Specifically, (1) no gain or loss will be recognized
by a holder of KFC Co-op stock upon the receipt of New KFC Co-op stock; and (2)
no gain or loss will be recognized by the KFC Co-op or the New KFC Co-op upon
the transfer of assets and liabilities from the KFC Co-op to the New KFC Co-op.
Neither the KFC Co-op nor the New KFC Co-op, however, intends to apply for a
ruling from the Internal Revenue Service with respect to the tax treatment of
the transactions contemplated by the Plan and Agreement of Merger.
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<PAGE> 20
ACCOUNTING TREATMENT OF THE PROPOSED MERGER
The proposed merger will be accounted for as a change in reporting
entity and treated similar to a pooling of interests.
REGULATORY APPROVALS
In connection with the proposed merger, the KFC Co-op knows of no
federal or state regulatory requirements that must be complied with nor any
approval which must be obtained.
FAILURE OF THE MERGER PROPOSAL
If the merger proposal fails to receive the required affirmative votes
of holders of record, the KFC Co-op will not complete the proposed merger, but
will continue to operate in a manner and structure consistent with its
operations as of the date of this proxy statement.
MARKET AND PRICE FOR THE KFC CO-OP STOCK
As of June 30, 2000, the KFC Co-op had 567 shares of membership stock
and 5,166 shares of store stock outstanding. No class of the KFC Co-op's capital
stock is listed on an exchange or traded in any other public trading market. All
KFC Co-op stock is and will be issued only to KFC operators. The KFC Co-op
members purchase KFC Co-op membership stock and KFC Co-op store stock to
participate in the KFC Co-op's programs for its members, including the patronage
dividend program and the KFC Co-op purchasing programs, and to participate in
the KFC Co-op's management through the election of directors. The KFC Co-op
members do not purchase KFC Co-op stock with any expectation of return on their
investment through stock appreciation or per share dividends.
Since July 1, 1983, the KFC Co-op has offered shares of KFC Co-op
membership stock at $10 per share and shares of KFC Co-op store stock at $400
per share. Since January 1, 1998, the KFC Co-op has purchased 981 shares of
store stock for $400 per share and issued approximately 970 shares of store
common stock for $400 per share. The KFC Co-op has not paid dividends on its
common stock for more than twenty years.
COMPARISON OF KFC CO-OP CAPITAL STOCK
AND NEW KFC CO-OP CAPITAL STOCK
If our members approve the proposed merger and the Plan and Agreement
of Merger subsequently is consummated, each of our members will become a member
of the New KFC Co-op. The New KFC Co-op, like the current KFC Co-op, will be
incorporated under the General Corporation Law of Delaware. The capital stock of
the New KFC Co-op, however, will not be registered with the SEC under federal
securities laws. Therefore, the New KFC Co-op will not be required to comply
with federal securities laws filing requirements.
The New KFC Co-op membership and store stock, as well as the
Certificate of Incorporation and Bylaws, will be identical to the KFC Co-op
membership and store stock described below, with three significant exceptions.
First, New KFC Co-op store stock will not have the right to receive dividends,
except the New KFC Co-op members may receive patronage
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dividends. The current Certificate of Incorporation of the KFC Co-op does not
expressly prohibit payment of dividends although the KFC Co-op has not paid
dividends other than patronage dividends on its capital stock in 20 years and
has no intention to pay such dividends in the future. Second, members will not
have the right to transfer store stock to any party except the New KFC Co-op at
the same price the stockholder member paid to acquire the shares of store stock.
Although there has never been a market for KFC Co-op capital stock, the current
Certificate of Incorporation of the KFC Co-op does not contain an express
prohibition on our members' ability to transfer such stock, other than limiting
ownership of the stock only to restaurant operators otherwise eligible to
participate in the KFC Co-op's programs. Third, the New KFC Co-op will always be
required to do more than 90% of its business with our members. The KFC Co-op
currently has no restriction on its ability to do business with non-members.
In addition, the section of the Certificate of Incorporation regarding the
amendment of the Certificate of Incorporation by a vote of the stockholder
members will be revised in the New KFC Co-op's Certificate of Incorporation to
eliminate ambiguity and track the language of the applicable Delaware statutory
provision.
The following paragraphs of this section describe the rights,
privileges and preferences of the KFC Co-op's membership stock and store stock
and highlight the differences between owning shares of stock in the KFC Co-op
and owning shares of stock in the New KFC Co-op. The description is qualified in
all respects by the KFC Co-op Certificate of Incorporation and Bylaws, attached
as Appendices B and C to this Proxy Statement, and by the New KFC Co-op
Certificate and Bylaws, attached as Appendices D and E to this Proxy Statement.
Unless otherwise noted, the New KFC Co-op membership and store stock will be
identical to the KFC Co-op membership and store stock described below.
INTRODUCTION
Membership in the New KFC Co-op will have the same characteristics as
those outlined in this paragraph. Membership in the New KFC Co-op will be
limited to operators of KFC retail outlets, as membership in the KFC Co-op has
been limited since its inception. Each operator desiring membership in the KFC
Co-op is required to purchase one share of KFC Co-op membership stock regardless
of the number of retail outlets operated and to purchase a number of shares of
KFC Co-op store stock which equals either (i) the total number of KFC retail
outlets located in the United States owned and operated by that operator or (ii)
the total number of retail outlets located in a foreign territory owned and
operated by that operator. If a member at any time becomes an operator of
additional KFC retail outlets within the United States, or within a foreign
territory, the operator must purchase one additional share of KFC Co-op store
stock for each such additional traditional retail outlet and one additional
share of KFC Co-op store stock for every two additional non-traditional retail
outlets. To assist the KFC Co-op in negotiating purchase contracts, members are
asked from time to time for a good faith best estimate of purchasing intentions,
but responses are not required as a condition of membership. No purchase
commitment is required as a condition of membership or, except with respect to
advance purchase commitments for certain commodities, as a condition to
purchasing from or through the KFC Co-op.
KFC CO-OP MEMBERSHIP STOCK
As of June 30, 2000, the KFC Co-op was authorized to issue 2,000 shares
of KFC Co-op membership stock, of which 567 shares were issued and outstanding.
Upon completion of the proposed merger, the New KFC Co-op will have the same
number of authorized, issued, and outstanding shares of membership stock as the
KFC Co-op did on the date of the merger.
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Following the completion of the proposed merger, each member of the New KFC
Co-op will hold the same proportionate interest in the New KFC Co-op that he or
she previously held in the KFC Co-op.
Issuance in Series. Membership stock is offered and issued in series,
as discussed below. The KFC Co-op has provided for Series A-H, J, K, and L. No
person, firm, or entity may purchase or own any of the Series I or Series M-Z
shares of membership stock without further amendment of the Bylaws. The KFC
Co-op Board has no current intention to issue any shares of the Series I or M-Z.
KFC Operators. Operators of KFC Retail Outlets, except for KFC
Management, the NCAC, and Harman Management Corporation as defined in the KFC
Co-op Bylaws, are entitled to purchase one share of membership stock in Series
A-G, inclusive, depending upon their being deemed to operate a KFC retail outlet
in one or more of the geographic areas designated below:
Series Area
A - Indiana, Michigan, Ohio and West Virginia
B - Arkansas, Colorado, Kansas, Missouri, New Mexico, Oklahoma
and Texas
C - Connecticut, Delaware, District of Columbia, Maine,
Maryland, Massachusetts, New Hampshire, New Jersey, New
York, Pennsylvania, Rhode Island and Vermont
D - Alaska, Hawaii, Idaho, Montana, Oregon, Washington and
Wyoming
E - Alabama, Florida, Georgia, Kentucky, Louisiana, Mississippi,
North Carolina, South Carolina, Tennessee and Virginia
F - Illinois, Iowa, Minnesota, Nebraska, North Dakota, South
Dakota and Wisconsin
G - Arizona, California, Nevada and Utah
Harman has purchased one share of Series H membership stock. Operators
of KFC retail outlets in foreign territories are entitled to purchase one share
of Series J membership stock. KFC Management has purchased one share of Series K
membership stock, and the NCAC has purchased one share of Series L membership
stock.
The Series H share of membership stock held by Harman provides for the
election of one director, and the series of membership stock held by KFC
Management and the NCAC provide for the election of two directors. The KFC Co-op
Bylaws provide that if Harman at any time owns or operates fewer than 100 KFC
retail outlets, or if KFC Management owns or operates fewer than 200 KFC retail
outlets, then the share of membership stock owned by said operators
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must be exchanged for one share of membership stock of such other series as such
operator is otherwise eligible to purchase.
Voting Rights. Each class of Series A-H and J membership stock is
entitled to elect one member of the KFC Co-op Board. Series K and L holders are
entitled to elect two members of the KFC Co-op Board. However, until and unless
the holders of Series J membership stock hold 100 or more shares of KFC Co-op
store stock purchased or held with respect to retail outlets located in foreign
territories, the Series J member of the KFC Co-op Board shall be nominated by a
holder of Series J membership stock, but will be elected by a plurality vote of
all the shares of membership stock entitled to vote at the Annual Meeting. Each
member is entitled to cast one vote to elect a member of the KFC Co-op Board to
represent its series except for the members of Series K and L, which are
entitled to cast one vote to elect each of two members of the KFC Co-op Board
from their respective series.
On all matters except the election of the KFC Co-op Board, each holder
of membership stock is entitled to cast one vote on each matter on which members
are entitled to vote. The KFC Co-op Bylaws provide that directors may be elected
by a plurality of the series entitled to elect such director. Unless otherwise
provided by the KFC Co-op Bylaws or required by law, the affirmative vote of
two-thirds (2/3) of the members in attendance at a meeting at which a quorum is
present is necessary to decide in favor of any matter.
Dividend Rights. Dividends may not be declared or paid with respect to
membership stock.
Limitations on Ownership and Transfer; Redemption. Membership stock may
be issued only to persons who satisfy the membership requirements, and no more
than one share of such stock will be issued to any one operator, except for the
limited circumstances described below. The KFC Co-op Bylaws reflect the
principle of one franchisee, one vote. When a corporation, partnership or other
entity is an operator, the owner of more than 50% of the corporation,
partnership or other entity is deemed to be the owner of the share of membership
stock issued by the KFC Co-op. Where no person, corporation, partnership or
other entity owns more than 50% of the outstanding ownership interest of a
franchisee operator, the owners of the corporation, partnership or other entity
must designate among themselves who will be deemed to own the share of
membership stock.
The KFC Co-op Bylaws establish who is entitled to vote certain shares
of membership stock in situations involving individuals who, through different
corporations, partnerships or other affiliations, may have an interest in more
than one share of membership stock. The KFC Co-op Bylaws provide that no person,
firm or entity is entitled to own or have an interest in, directly or
indirectly, more than one share of membership stock (the "Base Share"), except
for (a) any interest a franchisee may have in the share of membership stock held
by the NCAC, (b) if a franchisee's Base Share is not a share of the KFC Co-op's
Series J membership stock, any interest a franchisee may have in one (but only
one) share of the Series J membership stock, (c) any interest a franchisee may
have in a share of membership stock held by a person, firm, or entity in which
the franchisee owns fifty percent or less in the aggregate of the outstanding
ownership interests, and with respect to which the franchisee refrains from
voting or
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participating in the voting of the share of membership stock. For these
purposes, a franchisee includes a licensee.
If any holder of membership stock has ceased to be a member because it
is no longer an operator or owns less than the required amount of store stock,
such stock will be called for redemption at $10.00 per share. Under Delaware
Law, the KFC Co-op may not repurchase any shares of its stock when the capital
of the KFC Co-op is impaired or when such repurchase would cause any impairment
of the capital of the KFC Co-op. Membership stock may not be transferred to any
person or entity other than the KFC Co-op.
Liquidation Rights. In the event of any liquidation of the KFC Co-op,
or other disposition of its assets, the holders of membership stock are entitled
to receive $10.00 per share before any distributions are made to the holders of
store stock. Any net assets remaining after the payment of the $10.00 per share
to the holders of membership stock will be distributed to holders of the store
stock in the manner described below.
General. Membership stock has no preemptive rights. The shares of
membership stock are, when issued, duly authorized, validly issued, fully paid
and non-assessable and the holders thereof will not be liable for any payment of
the KFC Co-op's debts.
KFC CO-OP STORE STOCK
The KFC Co-op is authorized to issue 10,000 shares of KFC Co-op store
stock, no par value, of which 5,166 shares were issued and outstanding as of
June 30, 2000. Upon completion of the proposed merger, the New KFC Co-op will
have the same number of authorized, issued, and outstanding shares of store
stock as the KFC Co-op did on the date of the merger. Following the completion
of the proposed merger, each member of the New KFC Co-op will hold the same
proportionate interest in the New KFC Co-op that he or she previously held in
the KFC Co-op.
Voting Rights. Store stock has no voting rights.
Dividend Rights. The holders of store stock are entitled to receive
dividends if declared by the KFC Co-op Board. There is no current intention to
pay any dividends on store stock.
THE HOLDERS OF NEW KFC CO-OP STORE STOCK WILL NOT BE ENTITLED TO
RECEIVE DIVIDENDS ON NEW KFC CO-OP STORE STOCK. UPON COMPLETION OF THE PROPOSED
MERGER, IT IS ANTICIPATED THAT THE NEW KFC CO-OP BOARD WILL CONTINUE THE
PATRONAGE DIVIDEND PROGRAM IN ACCORDANCE WITH PAST PRACTICES.
Limitations on Ownership and Transfer; Redemption. Store stock may be
issued only to persons who satisfy the membership requirements discussed above.
Generally, each member must purchase that number of shares of store stock equal
to the total number of KFC retail outlets owned and operated by the member and
one share of store stock for each two non-traditional outlets owned and operated
by the member. Store stock may only be transferred to persons, firms or entities
who qualify for membership in the KFC Co-op, and only if the KFC Co-op does not
exercise its right of first refusal to purchase such shares. A member desiring
to transfer one or more shares of store stock must first offer such shares to
the KFC Co-op on the
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same terms and conditions to which the member has agreed with such other person,
firm or entity making an offer to purchase their stock. If the KFC Co-op
declines its right of first refusal or does not respond to the offer within 90
days, the member, within 60 days thereafter, may sell, assign or otherwise
transfer the shares to the person, firm or entity making the offer to purchase
the shares, provided such person, firm or entity qualifies for membership in the
KFC Co-op. If the shares are not sold or otherwise transferred within the 60 day
period referred to above, the shares may not be sold or transferred without the
member again offering the shares to the KFC Co-op.
THE HOLDERS OF NEW KFC STORE STOCK WILL NOT BE ABLE TO TRANSFER THE
STOCK TO ANY PARTY EXCEPT THE NEW KFC CO-OP. THE NEW KFC CO-OP WILL REDEEM THE
SHARES OF NEW KFC CO-OP STORE STOCK AT THE SAME PRICE THE STOCKHOLDER MEMBER
PAID TO ACQUIRE THEM. HOWEVER, UNDER DELAWARE LAW, THE NEW KFC CO-OP MAY NOT
REPURCHASE ANY SHARES OF ITS STOCK WHEN THE CAPITAL OF THE NEW KFC CO-OP IS
IMPAIRED OR WHEN SUCH REPURCHASE WOULD CAUSE ANY IMPAIRMENT OF THE CAPITAL OF
THE NEW KFC CO-OP.
Pursuant to a policy adopted by the KFC Co-op Board, the KFC Co-op is
authorized to purchase, a certain number of shares of store stock in each of the
KFC Co-op's fiscal quarters, for $400 per share. The KFC Co-op therefore may,
but generally has no obligation to, repurchase shares of store stock from a
member who owns shares in excess of the number required for membership. In any
event, the KFC Co-op has no intention of repurchasing substantial numbers of
shares of store stock. It is expected that such policy will be continued by the
New KFC Co-op Board of Directors.
Liquidation Rights. In the event of any liquidation of the KFC Co-op,
or other disposition of its assets, the holders of store stock will be entitled
to receive the net assets of the KFC Co-op remaining after the payment of all of
its debts and liabilities and the payment of $10.00 per share to the holders of
membership stock. Liquidating distributions will be made on the basis of past
patronage with the KFC Co-op rather than the number of shares of store stock
owned.
General. Store stock has no preemptive or conversion rights. The shares
of store stock are, when issued, duly authorized, validly issued, fully paid and
nonassessable, and the holders thereof will not be liable for any payment of the
KFC Co-op's debts.
DIVIDEND POLICY
INTRODUCTION
Although the KFC Co-op does not engage in business to generate profits,
it may nonetheless, in any fiscal year, generate revenues in excess of amounts
needed to cover expenses, amortize indebtedness, and provide for reasonable
reserves. Thus, even though the KFC Co-op endeavors to minimize purchasing fees
and mark-ups on goods and equipment to the least amount required to cover its
anticipated cost of operations, the KFC Co-op may have funds available for
distribution to members as patronage dividends.
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Dividends may not be declared or paid with respect to membership common
stock. There is no current intention to pay any dividends in the future on store
common stock on a per share basis.
PATRONAGE DIVIDEND PROGRAM
When, in the judgment of the KFC Co-op Board of Directors, the KFC
Co-op should distribute patronage dividends to our members, it will be done in
accordance with Article 9 of the Bylaws. Following, is a brief description of
some of the features of the patronage dividend program:
- Only stockholder members of the KFC Co-op are eligible to receive
patronage dividends.
- Patronage dividends are distributed to members on the basis of the
value of business done by the KFC Co-op or through UFPC with each
member, respectively.
- Members who are United States residents must consent to report any
patronage dividends received as gross income for federal income tax
purposes. The KFC Co-op will file a report with the IRS currently on
Form 1099-PATR, of the amount of patronage dividends paid to each
member.
- Members resident of countries other than the United States generally
are subject to a flat United States tax of 30% on the amount of
patronage dividends paid by the KFC Co-op. The KFC Co-op is required to
withhold the 30% tax from the patronage dividend payment, unless the
treaty between the United States and a particular country provides for
a lower withholding rate.
- Solely for the purpose of determining the amount of patronage dividends
distributable to a particular member, our board of directors may, by
resolution, segregate the KFC Co-op's business with members into two
distinct pools: (i) the "Title Pool," under which will be our net
earnings from business with our members in which we take title to
goods; and (ii) the "Non-Title Pool," under which will be our net
earnings from business with our members in which do not take title to
goods. By resolution, the Board of Directors may also further segregate
the KFC Co-op's business with its stockholder members, into other
distinct pools such as an equipment pool, a food and packaging pool, or
an international business pool.
- For fiscal 2000, the KFC Co-op Board has determined that, for purposes
of calculating each stockholder member's patronage dividend, the KFC
Co-op's net earnings from business done by the KFC Co-op with
stockholder members will be segregated in six distinct pools: (1) the
"Food and Packaging Title Pool;" (2) the "Food and Packaging Non-Title
Pool;" (3) the "Poultry Program Pool;" (4) The "Equipment Title Pool;"
(5) the "Equipment Non-Title Pool;" and (6) the "International Pool;"
and otherwise will not be segregated into a distinct "Title Pool" and a
distinct "Non-Title Pool."
- For fiscal 2000, the KFC Co-op Board has determined that, for each of
the Food and
24
<PAGE> 27
Packaging Title Pool, Food and Packaging Non-Title Pool, Poultry
Program Pool, Equipment Title Pool, and Equipment Non-Title Pool, the
KFC Co-op shall pay to each of its stockholder members patronage
dividends in an aggregate amount equal to the lesser of (a) 90% of the
amount of the KFC Co-op's "pre-tax income" as defined in the KFC
Co-op's 2000 fiscal year budget, or (b) the amount of the KFC Co-op's
"pre-tax income" for fiscal 2000 reasonably allocable to sales with
respect to which a patronage dividend is payable.
- For fiscal 2000, the KFC Co-op Board has determined that, for the
International Business Pool, the KFC Co-op shall pay to each of its
stockholder members patronage dividends in an aggregate amount equal to
the lesser of (a) zero percent of the amount of the KFC Co-op's
"pre-tax income" for fiscal 2000, or (b) the amount of the KFC Co-op's
"pre-tax income" for fiscal 2000 reasonably allocable to sales with
respect to which a patronage dividend is payable.
- Revenues generated from our purchasing programs administered by UFPC
will be the primary source of funds for any patronage dividends
distributed. After UFPC makes tax distributions to the concept co-ops,
UFPC may distribute additional net cash flow, whether resulting from
patronage or non-patronage sources, to the concept co-ops in accordance
with their relative annual patronage for such year. No concept co-op is
itself entitled to patronage, but rather may pass such distributions on
to its members in accordance with the provisions of its respective
patronage dividend program.
- The KFC Co-op is authorized to make patronage dividend distributions,
in part, in a form other than cash. Subject only to the payment of at
least 20% of each member's patronage dividend payment, if any, in cash,
the KFC Co-op may pay each stockholder member all or any portion of any
annual patronage dividend in promissory notes. These notes may be
subordinated to any liabilities or obligations of a member to the KFC
Co-op. Additionally, the portion of any patronage dividends which would
otherwise be payable in cash to a member may be applied to the payment
of any indebtedness, the repayment of which is in default, owed to us
by any such member to the extent of such indebtedness; provided,
however, that an amount equal to 20% (or, in some cases, 30%) of the
total annual patronage dividends distributable for the applicable year
to any such member must nevertheless be paid in cash if any such member
so requests in writing.
DIFFERENCES IN THE NEW KFC CO-OP'S BYLAWS
The patronage section of the New KFC Co-op's Bylaws will be identical
to the patronage section of the Bylaws of the KFC Co-op, with one exception.
SECTION 9.2 OF THE NEW KFC CO-OP'S BYLAWS WILL REQUIRE THE NEW KFC CO-OP TO
ALWAYS DO MORE THAN NINETY PERCENT (90%) OF ITS BUSINESS IN VALUE WITH OUR
STOCKHOLDER MEMBERS. The current KFC Co-op's Bylaws currently require the KFC
Co-op only to do more than fifty percent (50%) of its business with our
stockholder members. The difference in the New KFC Co-op's Bylaws will not have
a substantive effect on your ownership of shares of KFC membership stock and KFC
store stock.
25
<PAGE> 28
MANAGEMENT OF THE KFC CO-OP
The following table lists, in addition to other information, the
directors and executive officers of the KFC Co-op as of July 31, 2000, their
ages, their position with the KFC Co-op, their present principal occupations,
and the number and percentages of shares of store common stock beneficially
owned, directly or indirectly, by each. Except as noted, each of the listed
directors and executive officers has served in his or her present principal
occupation for the past five years. The information provided with respect to the
ages and number of shares beneficially owned is as of July 31, 2000. Upon
completion of the proposed merger, the directors and executive officers of the
KFC Co-op listed in the following table will serve in the same capacity for the
New KFC Co-op.
26
<PAGE> 29
<TABLE>
<CAPTION>
POSITIONS YEAR
AND OFFICES FIRST
CURRENTLY BECAME STORE
HELD WITH DIRECTOR TERM AS SERIES OR PRESENT COMMON PERCENT OF
THE OR DIRECTOR ORGANIZATION PRINCIPAL STOCK STORE STOCK
NAME AND ADDRESS AGE KFC CO-OP OFFICER EXPIRES REPRESENTED OCCUPATION OWNERSHIP OUTSTANDING
---------------- --- --------- ------- ------- ----------- ---------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
William E. Allen 60 Director 1988 2003 F Operator 6 **
1624 Lloyd Lane
Cedar Falls, Iowa 50613
Kathy Corsi Director 2000 2001 K Chief 1,468 ---
Tricon Global Restaurants, Inc. Financial (by KFC
P.O. Box 32070 Officer, KFC U.S.A.)
Louisville, Kentucky 40207 U.S.A.
William R. Carden 63 Director 1999 2003 Independent President, --- ---
4800 Lakewood, Suite 2 The Carden
Waco, TX 76702-3222 Group
Robert C. Carle 43 Director, 1998 2002 D Operator 7 **
6921 Brayton Drive, Suite 105 Secretary
Anchorage, Alaska 99507
James G. Cocolin 50 Director, 1996 2002 C Operator 10 **
17 James Street Treasurer
Kingston, Pennsylvania 18704
Ben E. Edwards 57 Director 1998++ 2002 B Operator 10 **
West Texas Foods, Inc.
P.O. Box 64490
Lubbock, Texas 79464
Lois G. Foust 55 Director 1997 2001 L Operator 2 **
4000 Chestnut Avenue
Long Beach, California 90807
Keith Chambers 41 Director 2000 2001 L Operator 2 **
P.O. Box 826
Hillsboro, Ohio 45133
Edward J. Henriquez, Jr. 62 Director 1994 2002 J Operator 12 **
610 Valencia Avenue #503
Coral Gables, Florida 33134
David G. Neal 53 Director, 1991+ 2003 E Operator 94 1.8
JRN, Inc. Chairman of
P.O. Box 1257 the Board
Columbia, Tennessee 38402
James D. Olson 49 Director 1997 2003 H President, 266 5.1
Harman Management Corp. Harman
199 First Street, Suite 212 Management
Los Altos, California 94022 Corporation
</TABLE>
27
<PAGE> 30
<TABLE>
<CAPTION>
POSITIONS YEAR
AND OFFICES FIRST
CURRENTLY BECAME STORE
HELD WITH DIRECTOR TERM AS SERIES OR PRESENT COMMON PERCENT OF
THE OR DIRECTOR ORGANIZATION PRINCIPAL STOCK STORE STOCK
NAME AND ADDRESS AGE KFC CO-OP OFFICER EXPIRES REPRESENTED OCCUPATION OWNERSHIP OUTSTANDING
---------------- --- --------- ------- ------- ----------- ---------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Ronald Young 42 Non-Voting
El Rancho Food Services Director 2000 --- --- --- ---
2929 Melville Street UPGC, Inc.
Saskatoon, Saskatchewan
Canada S7J5A6
Darlene Pfeiffer 62 Non-voting 1997 --- AKFCF Operator 4 **
P.O. Box 1185 Director
Port Ewen, New York 12466 AKFCF
Charles E. Rawley, III 49 Director 1999 2001 K President and 1,468 ---
Tricon Global Restaurants, Inc. Chief (by KFC
P.O. Box 32070 Operating U.S.A.)
Louisville, Kentucky 40207 Officer, KFC
U.S.A.
James B. Royster 61 Director, 1998++ 2003 A Operator 4 **
1110 West Michigan Avenue Vice Chairman
Jackson, Michigan 49202
Dean M. Sorgdrager 37 Director 1996 2002 G Operator 1 **
6851 Beach Boulevard
Buena Park, California 90620
Daniel E. Woodside 53 Non voting 1999 --- N/A President and --- ---
Unified Foodservice Purchasing Director, Chief
Co-op, LLC ("UFPC") President, Executive
950 Breckenridge Lane Chief Officer, UFPC
Louisville, Kentucky 40207 Executive
Officer
William L. Bickley 47 Chief 1999 --- N/A Chief --- ---
UFPC Financial Financial
950 Breckenridge Lane Officer, Officer, UFPC
Louisville, Kentucky 40207 Vice
President,
Assistant
Treasurer
Alice LeBlanc 42 Vice 1998 --- --- Vice --- ---
UFPC President, President,
950 Breckenridge Lane General UFPC
Louisville, Kentucky 40207 Manager
418 8.1%
(not
All directors and officers as a group (19 persons) +++ including
KFC U.S.A.)
</TABLE>
** Less than one-half of one percent.
28
<PAGE> 31
+ 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 voting director, other than Mr. Carden, 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
(19 persons) own 12 shares of membership common stock, 2%
percent of the total number of shares of membership common
stock outstanding. The store common stock ownership reflects
the number of shares which each voting director, other than
Mr. Carden, beneficially owns. Except as required by law,
store common stock has no voting rights. Mr. Carden is neither
the owner, nor an affiliate of the owner, of any membership or
store common stock.
29
<PAGE> 32
TRANSACTIONS WITH STOCKHOLDERS, DIRECTORS AND AFFILIATES
All present voting members of the Board of Directors, except William R.
Carden, are operators or represent operators and have purchased or may purchase
equipment and supplies from the KFC Co-op or UFPC or from distributors who
purchase from the KFC Co-op or UFPC. All purchases by directors and nominees or
their affiliates from the KFC Co-op or UFPC 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 Co-op or
UFPC.
UFPC and the KFC Co-op entered into a Purchasing Program Management
Agreement on March 1, 1999, which sets forth the terms pursuant to which UFPC
administers the KFC Co-op's purchasing programs. The initial term of this
Management Agreement extends through December 31, 2003 and may be terminated
then or on any December 31 thereafter upon one year's notice of termination. In
general, the management services provided by UFPC include: (i) negotiating the
lowest possible sustainable prices for goods and equipment from suppliers
approved by Tricon for sale through UFPC or directly by the supplier to
Tricon-approved distributors selected by the KFC Co-op and the outlet operators;
(ii) assisting the KFC Co-op and outlet operators in negotiating and monitoring
freight and distribution arrangements; (iii) administering related insurance and
other service programs; and (iv) negotiating arrangements such as master
beverage agreements and regional poultry contracts.
In exchange for administering these services, UFPC may retain 10% of
the net income generated by the KFC Co-op purchasing program. UFPC distributes
the remaining net income to the KFC Co-op on a quarterly and annual basis.
However, the KFC Co-op is required to reimburse UFPC for any net losses. In
determining the net income attributable to the KFC Co-op, UFPC allocates a
portion of the compensation expenses of its officers, including Messrs. Woodside
and Bickley, to each of the UFPC's member cooperatives.
30
<PAGE> 33
LEGAL MATTERS
Frost Brown Todd LLC, Louisville, Kentucky, has passed upon
certain matters on behalf of the KFC Co-op in connection with the proposed
merger.
INDEPENDENT ACCOUNTANTS
The KFC Co-op has engaged PricewaterhouseCoopers LLP as its independent
accountants to audit the KFC Co-op's financial statements. Representatives of
PricewaterhouseCoopers LLP will not be present at the Special Meeting.
STOCKHOLDER PROPOSALS
Proposals of stockholders intended to be presented at the 2001 Annual
Meeting of Stockholders were required to be received by the KFC Co-op on or
before November 2, 2000 to be eligible for inclusion in the KFC Co-op's proxy
statement and proxy relating to that meeting. Such stockholder proposals will be
considered untimely if not received by the KFC Co-op by December 14, 2000.
TRADEMARKS
"Taco Bell," "Pizza Hut," and "KFC" are registered trademarks of Taco
Bell Corp., Pizza Hut, Inc., and KFC Corporation, respectively, and are used in
these materials for identification purposes only. The KFC Co-op is an
independent provider of products and is not affiliated with Taco Bell Corp,
Pizza Hut, Inc., or KFC Corporation, except that KFC Corporation is a member of
the KFC Co-op.
WHERE YOU CAN FIND MORE INFORMATION
The KFC Co-op files reports, proxy statements and other information
with the Securities and Exchange Commission under the Securities and Exchange
Act of 1934, as amended. You may read and copy this information at the following
locations of the SEC:
Public Reference Room New York Regional Office Chicago Regional Office
450 Fifth Street, N.W. 7 World Trade Center 500 West Madison Street
Room 1024 Suite 1300 Suite 1400
Washington, D.C. 20549 New York, New York 10048 Chicago, Illinois 60661-2511
You may also obtain copies of this information by mail from the Public
Reference Section of the SEC, 450 Fifth Street, N.W., Room 1024, Washington,
D.C. 20549, at prescribed rates.
31
<PAGE> 34
The SEC also maintains an Internet world wide web site that contains
reports, proxy statements and other information about issuers, like the KFC
Co-op, who file electronically with the SEC. The address of that site is
http://www.sec.gov.
INCORPORATION OF INFORMATION BY REFERENCE
The SEC allows the KFC Co-op to "incorporate by reference" information
into this Proxy Statement. This means that we can disclose important information
to you by referring you to another document filed separately with the SEC. The
information incorporated by reference is considered to be a part of this Proxy
Statement, except for any information that is superseded by the information that
is included directly in this document.
This Proxy Statement incorporates by reference the documents listed
below that the KFC Co-op has previously filed with the SEC. They contain
important information about our company and its financial condition.
<TABLE>
<CAPTION>
KFC Sec Filing Period or Date
-------------- --------------
<S> <C>
Annual Report on Form 10-K Year ended October 31, 1999
Transition Report on Form 10-Q Two months ended December 31, 1999
Quarterly Reports on Form 10-Q Quarters ended March 31, 2000, June 30, 2000,
and September 30, 2000
Current Report on Form 8-K December 21, 1999
</TABLE>
This Proxy Statement is accompanied by a copy of the KFC Co-op's 1999
Annual Report to Members, the Transition Report on Form 10-Q for the two months
ended December 31, 1999, and its Quarterly Report on Form 10-Q for the quarter
ended September 30, 2000.
The KFC Co-op also incorporates by reference additional documents it
may file with the Commission between the date of this Proxy Statement and the
date of the Special Meeting. These documents include periodic reports, such as
Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports
on Form 8-K, as well as proxy statements.
You can obtain any of the documents incorporated by reference in this
document through the KFC Co-op, or from the Commission through the Commission's
web site at the address listed above. Documents incorporated by reference are
available from the KFC Co-op without charge, excluding any exhibits to those
documents unless the exhibit is specifically incorporated by reference as an
exhibit in this Proxy Statement. You can obtain documents incorporated by
reference in this Proxy Statement by requesting them in writing or by telephone
from the KFC Co-op at the following address:
32
<PAGE> 35
KFC National Purchasing Cooperative, Inc.
Attention: Chief Financial Officer
950 Breckenridge Lane, Suite 300
P. O. Box 32033
Louisville, Kentucky 40232
If you request any incorporated documents from us, we will mail them to
you by first class mail, or another equally prompt means, within one business
day after we receive your request.
33
<PAGE> 36
APPENDIX A
PLAN AND AGREEMENT OF MERGER
OF
KFC NATIONAL PURCHASING COOPERATIVE, INC.
A DELAWARE CORPORATION
WITH AND INTO
KFC NATIONAL PURCHASING CO-OP, INC.,
A DELAWARE CORPORATION
THIS PLAN AND AGREEMENT OF MERGER ("Agreement") is made as of the 16th
day of November 2000, by and among KFC National Purchasing Cooperative, Inc., a
Delaware corporation (the "KFC Co-op") and KFC National Purchasing Co-op, Inc.,
a Delaware corporation (the "New KFC Co-op"). The KFC Co-op and the New KFC
Co-op are referred to herein as the "Parties".
RECITALS
WHEREAS, the KFC Co-op is the sole stockholder of the New KFC Co-op;
WHEREAS, the Board of Directors of the KFC Co-op and the New KFC Co-op
respectively deem it advisable and generally to the advantage of the companies
and their respective stockholders that the KFC Co-op merge with and into the New
KFC Co-op under the Delaware General Corporation Law (the "DGCL"), with the New
KFC Co-op as the Surviving Corporation of the Merger;
WHEREAS, at the effective time of the Merger, each outstanding share of
Membership Common Stock and Store Common Stock of the KFC Co-op shall be
converted into one share of corresponding Membership Common Stock and Store
Common Stock of the New KFC Co-op;
WHEREAS, it is the intention of the Parties to this Agreement that the
shares in the New KFC Co-op shall not be "securities" within the meaning of
Section 2(a)(1) of the Securities Act of 1933 or Section 3(a)(10) of the
Securities Exchange Act of 1934; and
WHEREAS, it is the intention of the Parties to this Agreement that, for
federal income tax purposes, the Merger shall qualify as a "reorganization"
within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as
amended.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements herein contained and of the mutual benefits hereby provided, it is
agreed by and between the Parties hereto as follows:
A-1
<PAGE> 37
SECTION 1
MERGER
1.1. Merger. In accordance with the provisions of this Agreement and
the DGCL, the KFC Co-op shall be merged with and into the New KFC Co-op (the
"Merger"), the separate existence of the KFC Co-op shall cease, and the New KFC
Co-op shall be, and is sometimes referred to below as, the "Surviving
Corporation". The name of the Surviving Corporation shall be
"KFC National Purchasing Co-op, Inc."
1.2. Filing and Effectiveness. The Merger shall become effective only
upon completion of each and all of the following actions:
(a) Adoption and approval of this Agreement and the Merger by the
Board of Directors and stockholders respectively of the KFC Co-op and the New
KFC Co-op in accordance with the applicable requirements of the DGCL and their
respective Certificates of Incorporation and Bylaws; and
(b) The filing with the Secretary of State of the State of
Delaware of an executed Certificate of Ownership and Merger meeting the
requirements of the DGCL.
The date and time when the Merger becomes effective is referred to
in this Agreement as the "Effective Date."
1.3. Capital Stock on the Effective Date. Upon the Effective Date, each
outstanding share of Membership Common Stock and Store Common Stock of the KFC
Co-op will be converted into one share of corresponding Membership Common Stock
and Store Common Stock of the New KFC Co-op.
1.4. Effect of the Merger. Upon the Effective Date, the separate
existence of the KFC Co-op shall cease and the New KFC Co-op, as the Surviving
Corporation, shall (a) continue to possess all of its assets, rights, powers and
property as constituted immediately prior to the Effective Date and shall retain
its limited liability, (b) be subject to all actions previously taken by its
board of directors or authorized officers and the KFC Co-op's board of directors
or authorized officers, (c) succeed, without other transfer, to all of the
assets, rights, powers and property of the KFC Co-op in the manner more fully
set forth in the DGCL, (d) continue to be subject to all of the debts,
liabilities and obligations of the New KFC Co-op as constituted immediately
prior to the Effective Date of the Merger, and (e) succeed, without other
transfer, to all of the debts, liabilities and obligations of the KFC Co-op in
the same manner as if the New KFC Co-op had itself incurred them, all as more
fully provided under the applicable provisions of the DGCL.
A-2
<PAGE> 38
SECTION 2
CHARTER DOCUMENTS, DIRECTORS AND OFFICERS
2.1. Certificate of Incorporation and Bylaws. The Certificate of
Incorporation and Bylaws of the New KFC Co-op as in effect immediately prior to
the Effective Date shall continue in full force and effect immediately after the
Effective Date of the Merger as the Certificate of Incorporation and Bylaws of
the Surviving Corporation until duly amended in accordance with the provisions
thereof and applicable law.
2.2. Directors and Officers. The directors and officers of the KFC
Co-op immediately prior to the Effective Date of the Merger shall be the
directors and officers of the Surviving Corporation until their successors shall
have been duly elected and qualified or as otherwise provided by law, or the
Certificate of Incorporation of the Surviving Corporation.
SECTION 3
CANCELLATION OF COMMON SHARES
3.1 Cancellation of the KFC Co-op's Common Shares. Upon the Effective
Date of the Merger, each share of Membership Common Stock and Store Common Stock
owned by each stockholder of the KFC Co-op, shall, by virtue of the Merger and
without any action by the Parties, be cancelled. Upon the Effective Date of the
Merger, the sole outstanding share of Membership Common Stock of the New KFC
Co-op owned by the KFC Co-op shall, by virtue of the Merger and without any
action by the parties, be cancelled.
3.2 New KFC Co-op's Common Shares. Upon the Effective Date of the
Merger, each outstanding share of Membership Common Stock and Store Common Stock
of the KFC Co-op shall be converted into one share of corresponding Membership
Common Stock and Store Common Stock of the New KFC Co-op.
3.3 Stock Certificates. Upon the Effective Date of the Merger, each
certificate which represented shares of Membership Common Stock or Store Common
Stock of the KFC Co-op, as the case may be, shall represent instead
corresponding shares of Membership Common Stock or Store Common Stock of the New
KFC Co-op.
SECTION 4
GENERAL
4.1. Further Assurances. From time to time, as and when required by the
New KFC Co-op or by its successors or assigns, there shall be executed and
delivered on behalf of the KFC Co-op such deeds and other instruments, and there
shall be taken or caused to be taken by it such further and other actions, as
shall be appropriate or necessary in order to vest or perfect in or conform of
record or otherwise by the New KFC Co-op the title to and possession of all the
property, interests, assets, rights, privileges, immunities, powers, franchises
and authority of the KFC Co-op and otherwise to carry out the purposes of this
Agreement, and the officers and directors of the New KFC Co-op are fully
authorized in the name and on behalf of the KFC Co-op or otherwise to take any
and all such action and to execute and deliver any and all such deeds and other
instruments.
A-3
<PAGE> 39
4.2. Registered Office. The registered office of the Surviving
Corporation in the State of Delaware is located at Corporation Trust Center,
1209 Orange Street, City of Wilmington, County of New Castle, Delaware 19801.
Corporation Trust Company is the registered agent of the Surviving Corporation
at such address.
4.3. Agreement. Executed copies of this Agreement will be on file at
the principal place of business of the Surviving Corporation, 950 Breckenridge
Lane, Louisville, Kentucky 40207, and copies thereof will be furnished to any
stockholder of any party, upon request and without cost.
SECTION 5
AMENDMENT; TERMINATION
Prior to the effective time of the filing of an executed Certificate of
Ownership and Merger with the Secretary of State of the State of Delaware, this
Agreement may be terminated at any time by the written consent of the Board of
Directors of the KFC Co-op, whether before or after approval by the stockholders
of the KFC Co-op.
IN WITNESS WHEREOF each of the parties hereto has caused this Plan and
Agreement of Merger to be executed by an authorized individual.
KFC NATIONAL PURCHASING
COOPERATIVE, INC.
a Delaware corporation
By: /s/ Daniel E. Woodside
----------------------------------------
Daniel E. Woodside, President
KFC NATIONAL PURCHASING
CO-OP, INC.
a Delaware corporation
By: /s/ Daniel E. Woodside
----------------------------------------
Daniel E. Woodside, President
A-4
<PAGE> 40
APPENDIX B
CERTIFICATE OF INCORPORATION
OF
KFC NATIONAL PURCHASING COOPERATIVE, INC.
Article I
The name of the corporation is "KFC National Purchasing Cooperative,
Inc."
Article II
The address of the corporation's registered office in the State of
Delaware is 1209 Orange Street, in the City of Wilmington, County of New Castle.
The name of its registered agent at such address is The Corporation Trust
Company.
Article III
(Amended 5/18/90)
The nature of the business or purposes to be conducted by the
corporation is as follows:
(a) To operate a purchasing cooperative on behalf of and
for the benefit of Kentucky Fried Chicken retail
operators with the corporation purchasing from
manufacturers and vendors for various food,
packaging, equipment, materials, supplies and
services for resale to Kentucky Fried Chicken retail
operators and others and to distributors who supply
and serve Kentucky Fried Chicken and other retail
outlets;
(b) To sponsor, create, assist and support programs,
services and entities for the benefit of Kentucky
Fried Chicken retail operators and outlets and
others;
(c) To carry on such other business as may be necessary,
convenient or desirable to accomplish the above
stated purposes, and to do all things incidental
thereto; and
(d) Except for acts and activities which the
corporation's board of directors shall specifically
determine are not consistent with the best interests
of Kentucky Fried Chicken retail operators and
outlets, to engage in any lawful act or activity for
which corporations may be organized under the General
Corporation Law of Delaware.
B-1
<PAGE> 41
Article IV
(Amended 11/19/92, 3/22/91, 4/22/82)
The authorized capital stock of the corporation shall be 12,000 shares
of capital stock consisting of 2,000 shares of Membership Common Stock, no par
value and 10,000 shares of Store Common Stock, no par value.
(a) Membership Common Stock shall be subject to the
following preferences, privileges and restrictions:
(i) Membership Common Stock shall be divided
into twenty-six series, designated A through
Z. Except for Series H, I, K and L, which
shall consist of one (1) share each, the
Board of Directors of the Corporation shall
have the right, power and authority to
establish and to increase or decrease the
number of shares of each series of
Membership Common Stock consistent with and
in order to effectuate the terms of the
Bylaws of the corporation, except that in no
event shall the aggregate number of
authorized shares of Series A through G,
inclusive, J, and Series M through Z,
inclusive, of Membership Common Stock exceed
1,996 shares. Each stockholder member of
each of Series A through J, and of Series M
through Z, shall be entitled to cast one (1)
vote to elect one (1) member of the Board of
Directors to represent its Series. Each
stockholder member shall also be entitled to
cast one (1) vote to elect the member of the
Board of Directors representing Series J or
Series M through Z, inclusive, to the extent
and in the manner provided in the Bylaws of
the corporation. Each stockholder member of
each of Series K and Series L shall be
entitled to cast one (1) vote to elect each
of the two (2) members of the Board of
Directors to represent its Series.
(ii) As to all matters on which each stockholder
is entitled to vote, except the election of
the Board of Directors, each share of
Membership Common Stock shall be entitled to
one (1) vote on each matter.
(iii) Membership Common Stock shall not be
entitled to receive dividends.
(iv) In the event of any liquidation of the
corporation, or other disposition of its
assets, after payment of all debts and
liabilities of the corporation, the holders
of the Membership Common Stock shall be
entitled only to receive Ten Dollars
($10.00) per share for each share of
Membership Common Stock held, prior to any
distribution being made to holders of the
Store Common Stock.
B-2
<PAGE> 42
(v) Membership Common Stock may only be issued
to persons, firms or entities who qualify
for membership as provided in the Bylaws.
Membership Common Stock is not transferable
and shall be redeemed by the corporation in
the manner provided in the Bylaws at Ten
Dollars ($10.00) per share if a stockholder
ceases to qualify as a member.
(vi) The Board of Directors is authorized,
subject to limitations prescribed by law and
the provisions of this Article IV, by filing
a certificate pursuant to the applicable
laws of the State of Delaware, to fix
whether the shares of each series shall have
conversion privileges, and, if so, the terms
and conditions of each conversion, including
provision for adjustment of the conversion
rate in such events as the Board of
Directors shall determine.
(b) Store Common Stock shall be subject to the following
preferences, privileges and restrictions:
(i) Store Common Stock shall have no voting
rights except as otherwise required by
Delaware law.
(ii) Except as provided in paragraph (a)(iv) of
this Article, Store Common Stock shall be
the only class of capital stock entitled to
receive dividends or other distributions on
capital stock.
(iii) In the event of any liquidation of the
corporation, or other disposition of its
assets, after payment of all debts and
liabilities of the corporation and payment
of Ten Dollars ($10.00) per share to holders
of Membership Common Stock, the remaining
assets of the corporation shall be
distributed to the holders of Store Common
Stock on a cooperative basis, that is, the
corporation shall return to such
stockholders the face amount of outstanding
patronage equities and distribute the
remaining assets to such stockholders on the
basis of their past patronage insofar as
such distribution is practicable.
(iv) Store Common Stock may be issued only to
persons, firms or entities who qualify for
membership in the corporation as provided in
the Bylaws. Shares of Store Common Stock may
be transferred to persons, firms or entities
who qualify for membership in the
corporation if the corporation does not
exercise its right of first refusal to
purchase such shares under the terms and
conditions provided in the Bylaws.
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Article V
The names and mailing addresses of the incorporators are as follows:
M. A. Ferrucci, P. O. Box 631, Wilmington, Delaware 19899
F. J. Obara, Jr., P. O. Box 631, Wilmington, Delaware 19899
R. F. Andrews, P. O. Box 631, Wilmington, Delaware 19899
The incorporators shall have the power to designate the members of the
corporation's initiated Board of Directors.
Article VI
Subject to the provisions of Article IV hereof, the property and
affairs of the corporation shall be managed by a governing body to be known as
the Board of Directors whose number shall be set in the Bylaws and who shall be
nominated and elected as set forth in the Bylaws.
Article VII
Except as otherwise required by law, this Certificate of Incorporation
may be altered, amended, or repealed by a two-thirds (2/3) vote of stockholder
members, at any regular or special meeting of the stockholder members if notice
of such alteration, amendment, or repeal of this Certificate of Incorporation is
contained in the notice of such meeting.
Article VIII
(Added 6/5/87)
A director of the corporation shall not be personally liable to the
corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except for liability (i) for any breach of the director's
duty of loyalty to the corporation or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of the law, (iii) under Section 174 of the Delaware General
Corporation Law, or (iv) for any transaction from which the director derived an
improper personal benefit. Any repeal or modification of this paragraph by the
stockholders of the corporation shall be prospective only, and shall not
adversely affect any limitation on the personal liability of a director of the
corporation existing at the time of such repeal or modification.
Article IX
(Added 11/19/92)
The Board of Directors shall have the power to make, adopt, amend or
repeal from time to time Bylaws of the corporation, subject to the right of the
Stockholder Members to adopt, amend or repeal the Bylaws.
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APPENDIX C
BYLAWS
OF
KFC NATIONAL PURCHASING COOPERATIVE, INC.
ARTICLE I
Offices
1.1 Registered Office. The address of the registered office of KFC
National Purchasing Cooperative, Inc. (the "Cooperative") shall be No. 100 West
Tenth Street, Wilmington, Delaware, until altered as provided by law.
1.2 Principal Office. The principal office of the Cooperative shall be
in Louisville, Kentucky until altered by the Board of Directors.
1.3 Other Offices. The Cooperative may maintain other offices within or
without the state where its registered and principal offices are located, as the
Board of Directors may from time to time establish.
ARTICLE II
Stockholder Members
2.1 Stockholder Eligibility. The following persons, firms or entities
shall be eligible to be stockholders in the Cooperative:
(a) Each sole proprietor, partnership, corporation or other entity
who is or becomes a direct or indirect Kentucky Fried Chicken franchisee or
licensee of KFC Corporation, a Delaware corporation, or its successors, assigns,
affiliates, or related companies.
(b) KFC National Management Company, a Delaware Corporation ("KFC
Management"), or its respective successor as an operator of KFC outlets.
(c) The KFC National Council and Advertising Cooperative, Inc., a
Delaware non-stock corporation ("NCAC").
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(d) Each sole proprietor, partnership, corporation or other entity
who is or becomes a direct or indirect Kentucky Fried Chicken franchisee or
licensee of Kentucky Fried Chicken International Holdings, Inc., a Delaware
corporation, or its successors, assigns, affiliates, or related companies.
Only persons, firms or entities which own of record a share of the
Cooperative's Membership Common Stock shall be eligible to purchase shares of
the Cooperative's Store Common Stock. As used in these Bylaws, the term
"franchise" includes licenses where appropriate in the context.
2.2 Stockholder Membership Requirements. Each person, firm or entity
which is eligible to be a stockholder member in the Cooperative shall be a
stockholder member in the Cooperative when and if that person, firm or entity
(a) purchases one share of the Cooperative's Membership Common Stock and (b)
purchases that number of shares of the Cooperative's Store Common Stock which
equals (i) the total number of Kentucky Fried Chicken retail outlets located in
all states of the United States and the District of Columbia (collectively, the
"United States") owned and operated by such person, firm or entity, and (ii) the
total number of Kentucky Fried Chicken retail outlets located in any one country
other than the United States in any one international territory (a "Foreign
Territory") owned and operated by such person, firm or entity. For purposes of
this Section 2.2, (a) the term "total number...of retail outlets" means the
total number of traditional retail outlets, plus one-half rounded up to the
nearest even number of the total number of non-traditional outlets, and (b) the
term "non-traditional retail outlet" means an outlet with more than one of the
following characteristics: (i) a ten-year or shorter license, (ii) a limited
menu, (iii) sales from a kiosk or other transportable unit, (iv) sales from a
segregated food service area at a location in a facility (such as an airport,
athletic stadium, university or school) established for a primary purpose other
than selling food for reasonably immediate consumption, (v) anticipated sales
volume less than anticipated sales volume for a traditional unit, (vi) sales in
conjunction with sales of another food concept, or (vii) such other
characteristics as the Board of Directors may determine are indicative of a
non-traditional retail outlet. If a stockholder member at any time becomes an
owner and operator of additional Kentucky Fried Chicken retail outlets within
the United States or within a Foreign Territory, as the case may be, he shall
purchase one additional share of Store Common Stock for each such additional
traditional retail outlet or for each additional two non-traditional retail
outlets as the case may be.
2.3 Multiple Franchises. No person, firm or entity shall be entitled to
own, directly or indirectly, beneficially or of record, an interest in more than
one (1) share of the Cooperative's Membership Common Stock (the "Base Share")
regardless of the number of Kentucky Fried Chicken retail outlets owned and
operated by such person, firm or entity, excluding (a) any interest which any
franchisee may have in the share of the Cooperative's Series L Membership Common
Stock held by the NCAC, (b) if a franchisee's Base Share is not a share of the
Cooperative's Series J Membership Common Stock, any interest which any
franchisee may have in one (but only one) share of the Cooperative's Series J
Membership Common Stock, and (c) any interest which any franchisee may have in a
share of the Cooperative's Membership Common Stock (i) held by a person, firm or
entity in which the franchisee owns 50% or less in
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the aggregate of the outstanding ownership interests, and (ii) with respect to
which the franchisee refrains from voting or participating in the voting of the
share of Membership Common Stock. Where more than one (1) person, firm or entity
are designated as franchisees of one (1) or more retail outlets, such persons,
firms or entities shall be considered as a single person, firm or entity for
stockholder purposes. The person, firm or entity who owns more than 50% in the
aggregate of the outstanding ownership interest of the person, firm or entities
owning and operating a Kentucky Fried Chicken retail outlet shall be, unless
such person designates otherwise, the person, firm or entity entitled to own the
share of Membership Common Stock representing such franchise operation. Where no
person, firm or entity owns more than 50% in the aggregate of the outstanding
ownership interests of the person, firm or entity owning and operating a
Kentucky Fried Chicken retail outlet and none of such persons, firms or entities
own, directly or indirectly, an interest in a share of Membership Common Stock
of the Cooperative, such persons, firms or entities shall be entitled to
designate the person, firm or entity from among themselves who shall be entitled
to own the share of Membership Common Stock.
2.4 Divisions of Membership Common Stock into Series. (a) Each Kentucky
Fried Chicken stockholder member other than KFC National Management Company,
Harman Management Corporation ("Harman"), and NCAC shall be entitled to purchase
one share of Membership Common Stock of one of the following series set forth in
Column 1 below, but only if such stockholder member owns or operates, or
pursuant to Section 2.3 hereof, is deemed to own or operate, a Kentucky Fried
Chicken retail outlet in one or more of the areas set forth in the corresponding
line(s) of Column 2 below:
COLUMN 1 COLUMN 2
-------- --------
SERIES AREA
A Indiana, Michigan, Ohio and West Virginia.
B Arkansas, Colorado, Kansas, Missouri, New Mexico, Oklahoma
and Texas.
C Connecticut, Delaware, District of Columbia, Maine,
Maryland, Massachusetts, New Hampshire, New Jersey, New
York, Pennsylvania, Rhode Island and Vermont.
D Alaska, Hawaii, Idaho, Montana, Oregon, Washington and
Wyoming.
E Alabama, Florida, Georgia, Kentucky, Louisiana,
Mississippi, North Carolina, South Carolina, Tennessee and
Virginia.
F Illinois, Iowa, Minnesota, Nebraska, North Dakota, South
Dakota and Wisconsin.
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G Arizona, California, Nevada and Utah.
J Foreign Territories.
The Series of Membership Common Stock to be issued shall be designated
by the stockholder member, or in the absence of such designation, by the
Cooperative.
(b) Harman, KFC National Management Company, and the NCAC shall be
entitled to purchase one (1) share of one of the Series of Membership Common
Stock set forth below opposite its name:
<TABLE>
<CAPTION>
STOCKHOLDER MEMBER SERIES
------------------ ------
<S> <C>
Harman H
KFC National Management Company K
NCAC L
</TABLE>
(c) If Harman shall at any time own or operate less than 100
Kentucky Fried Chicken outlets in the United States or if KFC National
Management Company shall own or operate less than 200 Kentucky Fried Chicken
outlets in the United States, then the share of the Membership Common Stock
owned by Harman or KFC National Management Company, as the case may be, shall be
exchanged for one share of Membership Common Stock of such other Series as such
person is eligible to purchase as provided in Section 2.4 hereof. The Series of
Membership Common Stock to be issued in such exchange shall be designated by
such person, or in the absence of such designation, by the Cooperative.
(d) No person, firm or entity shall be entitled to purchase or own
any of the Series I or Series M through Series Z shares of Membership Common
Stock.
2.5 Mandatory Redemptions; Restrictions on Transfers.
(a) Unless otherwise prohibited by law, the Cooperative shall
promptly redeem shares of Membership Common Stock held by persons, firms or
entities who no longer qualify as members. The redemption price for each share
of Membership Stock shall be Ten Dollars ($10.00), which shall be payable in
cash, except that, if the Cooperative shall be prohibited by law from redeeming
such share in cash because such payment would impair the capital of the
Cooperative or otherwise, the Cooperative shall in lieu thereof issue to the
holder of such share a non-interest bearing promissory note payable whenever the
Cooperative shall no longer be prohibited by law from making such payment.
(b) In the event the holder of any one or more shares of Store
Common Stock receives a bona fide offer ("Bona Fide Offer") to purchase such
share(s) of Store Common Stock
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and such holder shall desire to sell, assign, transfer or otherwise convey such
share(s) in accordance with the terms of such Bona Fide Offer, such holder shall
first offer in writing to sell such share(s) to the Cooperative upon the terms
set forth in the Bona Fide Offer. The Cooperative shall have ninety (90) days
from its receipt of such offer in which it may either accept or reject such
offer. The Cooperative may accept such offer by tendering to the holder of such
share(s) the purchase price therefor, subject to the tender by such holder of
the certificates to be purchased by the Cooperative duly endorsed for transfer
to the Cooperative. If the Cooperative fails to respond to such offer within
said ninety (90) day period, such offer shall be deemed to have been rejected.
Within sixty (60) days after such offer is rejected or deemed rejected, the
holder of such share(s) may sell, assign, or otherwise transfer such share(s) to
the person named in the Bona Fide Offer upon terms no less favorable than those
set forth therein; provided that no such transfer shall be made to any person,
firm or entity which does not at the time of such transfer qualify as a
stockholder member. If such share(s) are not sold, assigned, transferred or
otherwise conveyed within said sixty (60) day period, then they may not be sold,
assigned or transferred without the holder thereof again offering such share(s)
to the Cooperative in accordance with the provisions of this Section 2.5. Each
purchaser, assignee or transferee of Store Common Stock shall be bound by the
terms of these Bylaws. The Cooperative may from time to time purchase shares of
its Store Common Stock at the request of holders who do not or no longer own or
operate KFC retail outlets with respect to the offered share, all in accordance
with such specific policies and guidelines and upon such specific terms and
conditions as the Board of Directors may from time to time adopt and from time
to time deem advisable.
2.6 Sourcing Fees. By virtue of membership in the Cooperative, each
stockholder member (a) agrees that the Cooperative and the Unified Foodservice
Purchasing Co-op, LLC (the "Unified Co-op") may from time to time collect from
the stockholder member a fee (a "Sourcing Fee") in consideration of and to fund
the Cooperative and the Unified Co-op's purchasing programs and services, and
(b) authorizes the Cooperative and the Unified Co-op from time to time to cause
suppliers and distributors of goods and equipment to collect Sourcing Fees from
the stockholder member for the account of the Cooperative or Unified Co-op.
ARTICLE III
Meetings of Stockholder Members of the Cooperative
3.1 Annual Meeting of Stockholder Members. An annual meeting of
stockholder members of the Cooperative shall be held each year at a time and
place selected by the Board of Directors.
3.2 Notice of Annual Meeting. Written notice of the time and place of
the annual meeting shall be mailed to stockholder members entitled to vote as
shown by the records of the Cooperative not less than twenty (20) nor more than
sixty (60) days prior to the meeting which notice shall state the place, date
and hour of the meeting.
3.3 Delayed Annual Meeting. If, for any reason, the annual meeting of
the stockholder members shall not be held on the day designated, such meeting
may be called and
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held as a special meeting, and the same proceedings may be had at such meeting
as at an annual meeting and the notice of such meeting shall be the same as
required for the annual meeting.
3.4 Special Meetings of Stockholder Members. Special meetings of the
stockholder members may be called at any time by the Chairman of the Board of
Directors, President or by one-third (1/3) of the voting members of the Board of
Directors, upon not less than twenty (20) nor more than sixty (60) days written
notice which shall state the place, date, hour and purpose or purposes of the
meeting.
3.5 Waiver of Notice by Attendance. Attendance at a meeting, whether
annual or special, shall be a waiver of notice, unless attendance is expressly
for the purpose of objecting, at the beginning of the meeting, to the
transaction of any business because the meeting is not lawfully called or
convened.
3.6 Quorum. Presence in person or by proxy of stockholder members
representing a majority of the stockholder members entitled to vote at such
meeting shall constitute a quorum at such meeting. A quorum shall not be lost by
the departure of stockholder members before adjournment.
3.7 Who Entitled to Vote; Proxies. Each stockholder member owning a
share of the Cooperative's Membership Common Stock shall be entitled to one (1)
vote in person or by proxy upon each matter on which such stockholder member is
entitled to vote. Proxies shall be valid only if signed by the stockholder
member, dated and filed with the Secretary of the Cooperative prior to or at the
meeting in which it is given. No proxy shall be irrevocable and any proxy may be
revoked at any time in writing or in person at the meeting for which it was
given. No Proxy shall be voted or acted upon after one (1) year from its date.
3.8 Necessity of Two-Thirds Vote. Except as otherwise provided in these
Bylaws or required by law, the affirmative vote of two-thirds (2/3) of the
stockholder members present in person or by proxy at a meeting at which a quorum
is in attendance shall be necessary to decide in favor of any matter properly
submitted to the meeting.
3.9 Disputes. Any dispute as to the voting rights of stockholder
members shall be submitted to the Secretary of the Cooperative to be decided
upon by the Chairman of the Board of Directors, or, in his absence, the
Vice-Chairman with the stockholder member whose voting rights are in issue
having the right to appeal this decision to the Board of Directors.
3.10 Organization of Meetings. The Chairman of the Board of Directors,
or the Vice-Chairman, if the Chairman is not present, and the Secretary of the
Cooperative shall act as chairman and secretary, respectively, at all meetings
of stockholder members of the Cooperative.
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ARTICLE IV
Board of Directors
4.1 General.
(a) The property and affairs of the Cooperative shall be managed by
a governing body to be known as the Board of Directors. The Board of Directors
shall be composed of up to twenty-one (21) persons who shall be nominated and
elected and shall serve for terms as hereinafter provided.
(b) The Secretary of the Cooperative shall notify stockholder
members in writing no later than seventy-five (75) days prior to the annual
meeting of stockholder members of the date of such meeting. Such notice shall
advise them that nominations for members of the Board of Directors whose terms
will expire at such meeting must be submitted to the Secretary in writing not
later than sixty (60) days prior to the meeting date. Such notice shall also
specify the names of directors whose terms are expiring and the names of
directors who have resigned, died, or otherwise been removed from office since
the last annual meeting of stockholder members, and shall identify the Series of
Membership Common Stock entitled to elect successors to such directors. Each
nomination submitted to the Secretary shall be accompanied by a written
statement signed by the nominee, including nominees to represent the Series H, K
and L Membership Common Stock, that he or she (i) will serve and is eligible to
serve in such capacity if elected, (ii) will participate in a director
orientation program in accordance with the Board's current orientation policies,
and (iii) will enter into a director confidentiality agreement in such form as
the Board may adopt from time to time. Each stockholder member (other than the
NCAC and KFC National Management Company) may nominate not more than one person
to serve as the director who may be elected by the Series of Membership Common
Stock held by such stockholder member. NCAC and KFC National Management Company
may each nominate two persons to serve as the directors who may be elected by
the series of Membership Common Stock held by them.
(c) Each of Series A through Series H and Series J, shall be
entitled to elect, as a series, one member of the Board of Directors, and of
Series K and Series L shall be entitled to elect, as a series, two members of
the Board of Directors; provided, however, that until and unless the holders of
Series J Membership Common Stock hold one hundred (100) or more shares of Store
Common Stock purchased or held with respect to Kentucky Fried Chicken outlets
located in Foreign Territories, the Series J member of the Board of Directors
shall be nominated by a holder of Series J Membership Common Stock, but shall be
elected by a plurality vote of all the shares of Membership Common Stock
entitled to vote at the annual meeting of the stockholder members.
(d) In addition to the members of the Board of Directors elected by
the holders of Membership Common Stock, there shall be one (1) independent
member of the Board of Directors (the "Independent Director") who shall not in
any way be associated or affiliated with KFC Corporation, KFC National
Management Company, Kentucky Fried Chicken
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International Holdings, Inc., or any franchisee of KFC Corporation. The
Independent Director shall be nominated by the Board of Directors and elected by
a plurality vote of the shares of Membership Common Stock entitled to vote at
the annual meeting of the stockholder members.
(e) The President of the Cooperative shall serve as a non-voting
ex-officio member of the Board of Directors.
(f) With the exception of the Independent Director and the
President, all directors of the Cooperative must be stockholder members of the
Cooperative or an officer, stockholder, employee or partner of an entity which
is a stockholder member of the Cooperative. Each director must be a member or an
officer, director, stockholder, employee or partner of the organization which is
entitled to vote for (or in certain circumstances concerning Series J, nominate)
such director.
(g) All voting directors of the Cooperative shall be divided into
three classes, designated Class I, Class II and Class III. Such classes shall be
as nearly equal in number as the then total number of voting directors permits,
with the term of office of one class expiring each year. Should the number of
voting directors not be equally divisible by three, the excess of directors over
a number divisible by three shall be classified in Class III if there is an
excess of one and in Class II and III if there is an excess of two. The Board of
Directors shall by majority vote designate which series of membership shall
elect directors within Class I, II and III, respectively, but by such
designations may not shorten the term of any director.
(h) No person shall hold more than one (1) seat on the Board of
Directors at any one time. Except for the holders of the Series K and Series L
Membership Common Stock who are entitled, as a Series, to elect two (2) members
of the Board of Directors, not more than one (1) person affiliated with any
stockholder member may hold a seat on the Board of Directors.
(i) The initial Class I directors shall hold office for a term
commencing with the adoption of these Bylaws and expiring at the annual meeting
next ensuing and until their successors are elected and take office. The initial
Class II directors shall hold office for a term commencing with the adoption of
these Bylaws and expiring at the second annual meeting thereafter and until
their successors are elected and take office. The initial Class III directors
shall hold office for a term commencing with the adoption of these Bylaws and
expiring at the third annual meeting thereafter and until their successors are
elected and take office. The successors to the initial Class I, Class II and
Class III directors shall each be elected for terms commencing as of the date of
their election and continuing until the third annual meeting of stockholder
members thereafter and until their respective successors are duly elected and
qualified.
(j) Whenever any member of the Board of Directors ceases to fulfill
the eligibility requirements of this Section 4.1, his membership on the Board of
Directors shall automatically terminate and the vacancy so created shall be
filled in the manner prescribed in Section 4.2.
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(k) Notwithstanding any limitation on the number of persons who may
serve as members of the Board of Directors provided for in Section 4.1(a)
hereof, the Board of Directors may, from time to time, by resolution provide for
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 by
resolution provide.
(l) No voting director of the Cooperative, except for directors
elected by the Series H or K Membership Common Stock, may serve more than two
consecutive three years terms (whether representing the same or a different
Series) without having not served as a voting director for an entire period
between two consecutive annual meetings of the stockholder members (a "meeting
period") before reelection. For purposes of this Section 4.1(l), (i) service for
a term which equals or exceeds two meeting periods shall be deemed to be a three
year term and a term which does not exceed two meeting periods shall not be
deemed to be a three year term, and (ii) no term which commenced prior to the
annual meeting of the stockholder members held in 1999 shall count as a
consecutive term or otherwise shorten the eligibility of any director.
4.2 Vacancies. Except as herein provided, all vacancies on the Board of
Directors shall be filled by the Board of Directors. In filling any vacancy, the
Board of Directors shall seek the advice and counsel of the holder or holders of
the Series of stock who are entitled, as a Series, to elect the director whose
position became vacant. All vacancies shall be filled as soon as practicable;
however, the Board need not fill a vacancy if the holder or holders of the
Series of Membership Common Stock who are entitled, as a Series, to elect the
director whose position became vacant decline (a) to provide the Board with
advice and counsel concerning the filling of the vacancy, or (b) to nominate a
person to fill a vacancy, however created, at any annual or special meeting of
the stockholders at which an election of directors occurs. For purposes of this
Article IV, the number of voting members of the Board shall not include from
time to time the number of vacancies on the Board.
Directors elected as hereinabove provided in this Section 4.2 shall
serve until the next annual meeting of stockholder members, at which time the
holders of the Series of Membership Common Stock who elected the director whose
position became vacant shall be entitled to elect a successor who shall serve
for the remainder, if any, of the term of the director who shall have resigned,
died or otherwise been removed from office.
The person elected to fill a vacancy must fulfill the eligibility
requirements for the position of the director whose position became vacant.
4.3 Quorum. Two-thirds (2/3) of the voting members of the Board of
Directors shall constitute a quorum.
4.4 Annual Meeting. The Board of Directors shall hold its annual
meeting in each calendar year at such time and place as the Board shall
designate to elect its Chairman and Vice-Chairman, to elect the officers of the
Cooperative for the ensuing year and to transact any other business.
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4.5 Other Meetings. Other meetings of the Board of Directors may be
called by the Chairman, President or one-third (1/3) of the voting members of
the Board of Directors at any time by means of written notice by mail of the
time, place and purpose thereof to each member of the Board of Directors, as the
Chairman, the President or one-third (1/3) of the voting members of the Board of
Directors shall deem sufficient, but action taken at any such meeting shall not
be invalidated for want of notice if such notice shall be waived as hereinafter
provided.
4.6 Waiver of Notice. Notice of the time, place and purpose of any
meeting of the Board of Directors may be waived by telegram, radiogram,
cablegram, or other writing either before or after such meeting has been held.
Attendance at a meeting shall constitute a waiver of notice, unless attendance
is expressly for the purpose of objecting, at the beginning of the meeting, to
the transaction of any business because the meeting is not lawfully called or
convened.
4.7 Removal of Members of the Board of Directors. The Board of
Directors may, upon the affirmative vote of at least two-thirds (2/3) of all
stockholder members at any time determine that any member of the Board of
Directors shall be removed from the Board of Directors for cause. Upon such a
vote of stockholder members, the Board of Directors shall give such director
written notice of removal for cause.
4.8 Voting. The affirmative vote of three-fifths (3/5) of all voting
members of the Board of Directors shall, except as otherwise specifically
provided in these Bylaws, be the act of the Board of Directors on any matter
properly submitted to the Board of Directors. Members of the Board of Directors
may participate in a meeting of the Board of Directors by means of conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other and such participation in a
meeting shall constitute presence in person at such meeting. Upon the demand of
a majority of the voting members of the Board of Directors participating in a
meeting, the voting upon any question before the meeting shall be by secret
ballot. The President shall not be entitled to vote on matters brought before
the Board of Directors.
4.9 Chairman and Vice-Chairman.
(a) The Board of Directors shall at each annual meeting elect by
the affirmative vote of three-fifths (3/5) of the entire Board of Directors a
Chairman and a Vice-Chairman, each of whom shall serve until the next annual
meeting of the Board of Directors and until his successor is duly elected and
qualified.
(b) The duties of the Chairman shall be to preside at all meetings
of the Board of Directors and stockholder members. The Chairman shall oversee
the President in his assigned duties as established and authorized by the Board
of Directors. The Chairman shall have the power to execute in the name of the
Cooperative any authorized corporate obligation or other instrument and shall
perform all acts incident to the Office of Chairman or Directors. In the absence
of the Chairman or his inability to perform, the Vice-Chairman shall assume his
duties.
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(c) No Chairman may serve more than two consecutive full one year
terms as Chairman without having not served as Chairman for an entire one year
term before reelection as Chairman. For purposes of this Section 4.9 (c), no
term as Chairman which commenced prior to 1999 shall count as a consecutive term
or otherwise shorten the eligibility of a chairman.
4.10 Meetings: Chairman and Secretary. At all meetings of the Board of
Directors, the Chairman, or in his absence, the Vice-Chairman, shall act as
chairman of the meeting and the Secretary of the Cooperative shall act as
secretary, except that if any one of them shall be absent, a chairman or
secretary, or both, may be chosen at the meeting.
4.11 Compensation and Expenses. The Independent Director shall be
entitled to such compensation as may be determined by the Board of Directors.
Except for the Independent Director, all members of the Board of Directors shall
serve without compensation. Reasonable expenses of members of the Board of
Directors attending regular and called meetings shall be reimbursed by the
Cooperative, provided, that such expenses are not in excess of the actual cost
of traveling from and returning to the member's home city, lodging, meals and
other reasonable and necessary expenses. The Board of Directors shall also
reimburse members of the Board of Directors and others for their reasonable
expenses of attending seminars or other events at the direction of the Board of
Directors.
ARTICLE V
Officers
5.1 Executive Officers. The Board of Directors shall elect a President,
a Secretary and a Treasurer, and may elect one or more Vice-Presidents and such
other officers and assistant officers, as the Board of Directors may, from time
to time, determine are necessary to manage the affairs of the Cooperative. Any
one person, except as forbidden by law, may be elected to more than one office.
Any person elected to office shall hold his office as such for a one (1) year
period and until his successor shall have been elected and shall have accepted
office, unless prior thereto such person resigns or is removed from office. The
President shall at all times be subject to dismissal by the Board of Directors
by the affirmative vote of two-thirds (2/3) of all voting members of the Board
of Directors. Any meeting of the Board of Directors for the purpose of
considering the dismissal of the President may be called upon not less than
twenty (20) days nor more than sixty (60) days prior written notice which notice
shall state the place, date, hour and purpose of the meeting. The other officers
shall at all times be subject to dismissal by the President or the Board of
Directors.
5.2 Vacancies. Any vacancy in any office shall be filled by the Board
of Directors.
5.3 Powers and Duties of the President. The President shall be the
President and Chief Executive Officer of the Cooperative and, subject to the
control of the Board of Directors, shall have general charge of its business and
supervision of its affairs. He shall keep the Board of Directors fully informed
and freely consult with it in regard to the business of the
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Cooperative, and make due reports to it and to the stockholder members. The
President shall have the power to execute in the name of the Cooperative any
authorized corporate obligation or other instruments. The President shall also
have such other powers and duties as are incident to his office and not
inconsistent with these Bylaws, or as may at any time be assigned to him by the
Board of Directors.
5.4 Powers and Duties of Vice-Presidents. The Board of Directors may
elect one (1) or more Vice-Presidents who shall have the powers and duties
incident to their office and shall perform such duties as may at any time be
assigned to them by the Board of Directors or the President.
5.5 Powers and Duties of the Treasurer. The Treasurer, subject to the
control of the Board of Directors and together with the President, shall have
general supervision of the finances of the Cooperative. He shall have the care
of, and be responsible for, all monies, securities, evidences of value and
corporate instruments of the Cooperative, and shall supervise the officers and
other persons authorized to bank, handle and disburse its funds, informing
himself as to whether all deposits are or have been duly made and all
expenditures duly authorized and evidenced by proper receipts and vouchers. He
shall cause full and accurate books to be kept, showing the transactions of the
Cooperative, its accounts, assets, liabilities and financial condition, which
shall at all reasonable times be open to the inspection of any member of the
Board of Directors, and he shall make due reports to the Board of Directors and
the stockholder members, and such statements and reports as are required of him
by law. The Treasurer shall have such other powers and duties incident to his
office and not inconsistent with these Bylaws, or as may at any time be assigned
to him by the Board of Directors.
5.6 Powers and Duties of the Secretary. The Secretary shall cause to be
entered in the minute books the minutes of all meetings of the Board of
Directors and annual and other meetings of the stockholder members; shall have
charge of the seal of the Cooperative and all other books and papers pertaining
to his office, and shall be responsible for giving of all notices, and the
making of all statements and reports required of the Cooperative or of the
Secretary by law. The Secretary shall affix the corporate seal, attested by his
signature, to all instruments duly authorized and requiring the same. The
Secretary shall have such other powers and duties incident to his office and not
inconsistent with these Bylaws, or as may at any time be assigned to him by the
Board of Directors.
5.7 Assistant Treasurers and Assistant Secretaries. Any Assistant
Treasurers and Assistant Secretaries elected shall perform such duties as may
properly be assigned to them by the executive officers of the Cooperative, and
shall have such powers and duties, including all the powers and duties of their
principals in the event of the absence of such principals from any place in
which the business in hand is to be done, and as may at any time be assigned to
them by the Board of Directors.
5.8 Other Officers. The Board of Directors shall prescribe the powers
and duties of any other officer or officers of the Cooperative.
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5.9 Salaries. The salary of the President of the Cooperative shall be
fixed by the Board of Directors. Subject to such limitations as may be fixed by
the Board of Directors from time to time, the salaries of all other employees
and officers of the Cooperative shall be fixed by the President who shall report
annually to the Board of Directors on all salary changes.
ARTICLE VI
Finance, Audit and Fiscal Year
6.1 Banking. All funds and money of the Cooperative shall be banked,
handled and disbursed, and all bills, notes, checks and like obligations, and
endorsements (for deposit or collection) shall be signed by such officers and
other persons as the Board of Directors shall from time to time designate, who
shall account therefor to the Treasurer as and when he may require. All money,
funds, bills, notes, checks and other negotiable instruments coming to the
Cooperative shall be collected and promptly deposited in the name of the
Cooperative in such depositories as the Board of Directors shall select.
6.2 Annual Audit. An audit by certified public accountants of the books
and records of the Cooperative shall be conducted annually by a firm engaged by
the Board of Directors.
6.3 Fiscal Year. The fiscal year of the Cooperative shall be set from
time to time by the Board of Directors.
ARTICLE VII
Indemnification
7.1 Indemnification of Officers and Directors.
(a) The Cooperative shall indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the Cooperative) by
reason of the fact that he is or was a director, officer, employee or agent of
the Cooperative, or is or was serving at the request of the Cooperative as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the Cooperative, and, with respect to any criminal action
or proceeding, had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent, shall not, of
itself, create a presumption that the person did not act in good faith and in a
manner which he reasonable believed to be in or not opposed to the best
interests of the Cooperative, and, with respect to any criminal action or
proceeding, had reasonable cause to believe that his conduct was unlawful.
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(b) The Cooperative shall indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the Cooperative to procure a
judgment in its favor by reason of the fact that he is or was a director,
officer, employee or agent of the Cooperative, or is or was serving at the
request of the Cooperative as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise against
expenses (including attorneys' fees) actually and reasonably incurred by him in
connection with the defense or settlement of such action or suit if he acted in
good faith and in a manner he reasonably believed to be in or not opposed to the
best interests of the Cooperative and except that no indemnification shall be
made in respect of any claim, issue or matters as to which such person shall
have been adjudged to be liable to the Cooperative unless and only to the extent
that the Court of Chancery or the court in which such action or suit was brought
shall determine upon application that, despite the adjudication of liability but
in view of all the circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such expenses which the Court of Chancery
or such other court shall deem proper.
(c) To the extent that a present and former director or officer of
the Cooperative has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in subsections (a) and (b) of this
Section 7.1, or in defense of any claim, issue, or matter therein, he shall be
indemnified against expenses (including attorneys' fees) actually and reasonably
incurred by him in connection therewith.
(d) Any indemnification under subsections (a) and (b) of this
Section 7.1 (unless ordered by a court) shall be made by the Cooperative only as
authorized in the specific case upon a determination that indemnification of the
present or former director, officer, employee or agent is proper in the
circumstances because he has met the applicable standard of conduct set forth in
subsections (a) and (b). Such determination shall be made, with respect to a
person who is a director or officer at the time of such determination, (1) by a
majority vote of the directors who are not parties to such action, suit or
proceeding, even though less than a quorum, or (2) by a committee of such
directors designated by majority vote of such directors, even though less than a
quorum, or (3) if there are no such directors, or if such directors so direct,
by independent legal counsel in written opinion, or (4) by the stockholder
members.
(e) Expenses (including attorneys' fees) incurred by an officer or
director in defending any civil, criminal, administrative or investigative
action, suit or proceeding may be paid by the Cooperative in advance of the
final disposition of such action, suit or proceeding upon receipt of an
undertaking by or on behalf of such director or officer to repay such amount it
shall ultimately be determined that he is not entitled to be indemnified by the
Cooperative as authorized in this Section 7.1. Such expenses (including
attorneys' fees) incurred by former directors and officers or other employees
and agents may be so paid upon such terms and conditions, if any, as the
corporation deems appropriate.
(f) The indemnification and advancement of expenses provided by, or
granted pursuant to this Section 7.1 shall not be deemed exclusive of any other
rights to which those
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seeking indemnification or advancement of expenses may be entitled under any
Bylaw, agreement, vote of stockholders or disinterested directors or otherwise,
both as to action in his official capacity and as to action in another capacity
while holding such office.
(g) The Cooperative shall have power to purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee or
agent of the Cooperative, or is or was serving at the request of the Cooperative
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprises against any liability asserted against
him and incurred by him in any such capacity, or arising out of his status as
such, whether or not the Cooperative would have the power to indemnify him
against such liability under the provisions of this Section 7.1.
(h) For purposes of this Section 7.1, references to the Cooperative
shall include, in addition to the resulting corporation, any constituent
corporation (including any constituent of a constituent) absorbed in a
consolidation or merger which, if its separate existence had continued, would
have had power and authority to indemnify its directors, officers, and employees
or agents, so that any person who is or was a director, officer, employee or
agent of such constituent corporation, or is or was serving at the request of
such constituent corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
shall stand in the same position under the provisions of this Section 7.1 with
respect to the resulting or surviving corporation as he would have with respect
to such constituent corporation if its separate existence had continued.
(i) For purposes of this Section 7.1, references to "other
enterprises" shall include employee benefit plans, references to "fines" shall
include any excise taxes assessed on a person with respect to an employee
benefit plan, and references to "serving at the request of the Cooperative"
shall include any service as a director, officer, employee or agent of the
Cooperative which imposes duties on, or involves services by, such director,
officer, employee, or agent with respect to an employee benefit plan, its
participants, or beneficiaries; and a person who acted in good faith and in a
manner he reasonably believed to be in the interest of the participants and
beneficiaries of an employee benefit plan shall be deemed to have acted in a
manner "not opposed to the best interests of the Cooperative" as referred to in
this Section 7.1.
(j) The indemnification and advancement of expenses provided by, or
granted pursuant to, this Section 7.1 shall, unless otherwise provided when
authorized or ratified, continue as to a person who has ceased to be a director,
officer, employee or agent and shall inure to the benefit of the heirs,
executors and administrators of such a person.
(k) The Court of Chancery of the State of Delaware is hereby vested
with exclusive jurisdiction to hear and determine all actions for advancement of
expenses or indemnification brought under this Section 7.1 or under any bylaw,
agreement, vote of stockholder members or disinterested directors, or otherwise.
The Court of Chancery may summarily determine the Cooperative's obligation to
advance expenses (including attorneys' fees).
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(l) If so provided in the Cooperative's Certificate of
Incorporation, a director of the Cooperative shall not be personally liable to
the Cooperative or its stockholders for monetary damages for breach of fiduciary
duty as a director, except for liability (i) for any breach of the director's
duty of loyalty to the Cooperative or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) under Section 174 of the Delaware General Corporation
Law, or (iv) for any transaction from which the director derived an improper
personal benefit.
The foregoing Article 7 is derived from Sections 145 and 102 of the
General Corporation Law of the State of Delaware.
The Cooperative has obtained a policy of insurance under which the
Cooperative and its directors and officers are insured subject to specific
exclusions and deductible and maximum amounts against loss deriving from any
claim which may be made against the Cooperative or any director or officer of
the Cooperative by reason of any act done or alleged to have been done while
acting in their respective capacities.
ARTICLE VIII
Capital Stock
8.1 Certificate of Stock. Every holder of capital stock in the
Cooperative shall be entitled to have a certificate, signed by, or in the name
of the Cooperative by, the President or a Vice-President and the Treasurer or an
Assistant Treasurer, or the Secretary or an Assistant Secretary of the
Cooperative, certifying the number of shares owned by him in the Cooperative.
The certificates of stock of the Cooperative shall be numbered and shall be
entered in the books of the Cooperative as they are issued.
8.2 Lost Certificates. The Board of Directors may direct a new
certificate or certificates to be issued in place of any certificate or
certificates theretofore issued by the Cooperative alleged to have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the person
claiming the certificate of stock to be lost, stolen or destroyed. When
authorizing such issue of a new certificate or certificates, the Board of
Directors may, in its discretion and as a condition precedent to the issuance
thereof, require the owner of such lost, stolen or destroyed certificate or
certificates, or his legal representative, to advertise the same in such manner
as it shall require and/or to give the Cooperative a bond in such sum as it may
direct as indemnity against any claim that may be made against the Cooperative
with respect to the certificate alleged to have been lost, stolen or destroyed.
8.3 Transfers of Capital Stock. Subject to the provisions of Article II
hereof, upon surrender to the Cooperative of a certificate for shares duly
endorsed or accompanied by proper evidence of succession, assignment or
authority to transfer, it shall be the duty of the Cooperative to issue a new
certificate to the person entitled thereto, cancel the old certificates and
record the transaction upon its books.
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8.4 Fixing Record Date. In order that the Cooperative may determine the
stockholder members entitled to notice of or to vote at any meeting of
stockholder members or any adjournment thereof, or entitled to receive payment
of any dividend or other distribution or allotment of any rights, or entitled to
exercise any rights in respect of any change, conversion or exchange of stock or
for the purpose of any other lawful action, the Board of Directors may fix, in
advance, a record date, which shall not be more than sixty (60) nor less than
twenty (20) days prior to any other action. A determination of stockholder
members of record entitled to notice of or to vote at a meeting of stockholder
members shall apply to any adjournment of the meeting; provided, however, that
the Board of Directors may fix a new record date for the adjourned meeting.
8.5 Registered Stockholders. The Cooperative shall be entitled to
recognize the exclusive right of a person registered on its books as the owner
of shares to receive dividends and to vote, and to hold liable for calls and
assessments a person registered on its books as the owner of shares, and shall
not be bound to recognize any equitable or other claim to or interest in such
share of shares on the part of any other person, whether or not it shall have
express or other notice thereof, except as otherwise provided by the laws of
Delaware.
ARTICLE IX
Patronage Dividends
9.1 Patronage. The term "patronage" shall refer to the value of the
Cooperative's business with its stockholder members. Business with the
Cooperative's stockholder members shall include the following: (1) the
Cooperative's direct business with its stockholder members; (2) the
Cooperative's business with its stockholder members through distributors
("participating distributors") which shall have agreed to participate in the
Cooperative's patronage dividend program for its stockholder members by entering
into distributor participation agreements with the Cooperative or the Unified
Co-op in such form as the President shall prescribe or approve from time to
time; (3) the Cooperative's business with its stockholder members through
suppliers ("participating suppliers") which shall have agreed to participate in
the Cooperative's patronage dividend program by entering into supplier
participation agreements with the Cooperative or the Unified Co-op in such form
as the President shall prescribe or approve from time to time; and (4) the
Cooperative's business with its stockholder members pursuant to arrangements set
forth in a management agreement approved by the Board of Directors with the
Unified Co-op, whereby the stockholder members purchase goods directly from the
Unified Co-op or through participating distributors and participating suppliers.
The term "patronage" includes the Cooperative's business with its stockholder
members both when the Cooperative or the Unified Co-op purchases (takes "Title")
and resells goods to the Cooperative's stockholder members and participating
distributors, and when participating suppliers sell goods directly to
stockholder members and participating distributors.
9.2 Cooperative Basis. The Cooperative shall at all times be operated
on a cooperative basis for the benefit of its stockholder members. The
Cooperative shall always do more than fifty percent (50%) in value of its
business with its stockholder members.
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9.3 Patronage Dividend Distributions.
(a) The Board of Directors shall, after considering the
Cooperative's anticipated expenses and need for capital and reserves, (i)
obligate the Cooperative to distribute patronage dividends as provided in
section 1388(a)(2) of the Internal Revenue Code of 1986, as amended (hereinafter
referred to as the "IRC"), and (ii) distribute as patronage dividends, directly
to the stockholder members of the Cooperative, the net income of the Cooperative
from patronage done with or for stockholder members computed in accordance with
sections 1381-1388 of the IRC and in accordance with the principles applied in
preparation of the Cooperative's federal income tax return. Specifically, the
Cooperative shall distribute patronage dividends to stockholder members annually
on the basis of each stockholder member's patronage. In determining the portion
of the Cooperative's patronage dividend obligations to be paid in cash, the
Board of Directors shall consider: (1) Expenses directly or indirectly related
to the Cooperative's business; (2) Such reasonable reserves for necessary
corporate purposes as may from time to time be provided by the Board of
Directors for depreciation and obsolescence, state and federal taxes, bad debts,
casualty losses, insurance and other corporate and operating charges and
expenses, all established and computed in accordance with generally accepted
accounting principles; (3) Such reasonable reserves for working capital
necessary for the operation of the Cooperative and for deficits arising from
such operation, (including deficits from business other than business done with
or for stockholder members).
The amounts set aside for reserves in any year from gross margins
of the Cooperative from business other than with or for the stockholder members
shall be allocated to the extent possible, to stockholder members, on the books
of the Cooperative on a patronage basis for that year, or, in lieu thereof, the
books or records of the Cooperative shall afford a means of doing so, so that in
the event of a distribution of amounts formerly carried in reserves, each
stockholder member may receive to the extent possible, that stockholder member's
pro rata share thereof.
(b) Solely for the purpose of determining the amount of patronage
dividends distributable to a particular stockholder member of the Cooperative,
the Board of Directors may, by resolution, segregate the Cooperative's business
with its stockholder members into two distinct pools: (i) the "Title Pool,"
under which shall be determined the net earnings of the Cooperative from
business with the Cooperative's stockholder members in which the Cooperative
takes Title to goods; and (ii) the "Non-Title Pool," under which shall be
determined the net earnings of the Cooperative from business with the
Cooperative's stockholder members in which the Cooperative does not take Title
to goods.
The amount distributable by the Cooperative as patronage dividends
directly to each stockholder member of the Cooperative shall be based on
(A) the ratio of
(i) the value of business done by the Cooperative with each
stockholder member in which the Cooperative takes Title to goods, to
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(ii) the net earnings of the Cooperative in the Title Pool
attributable to business done with or for its stockholder members, plus
(B) the ratio of
(i) the value of business done by the Cooperative with each
stockholder member in which the Cooperative does not take Title to goods, to
(ii) the net earnings of the Cooperative in the Non-Title Pool
attributable to business done with or for its stockholder members.
(c) Solely for the purpose of determining the amount of patronage
dividends distributable to a particular member of the Cooperative, the Board of
Directors may from time to time, when appropriate, by resolution, segregate the
Cooperative's business with its stockholders members into other distinct pools,
such as by way of example, an equipment business pool, a food and packaging
business pool, or an international business pool. The net earnings of the
Cooperative from business with the Cooperative's stockholder members related to
any such pool shall be attributable to a stockholder member patron of the pool
in proportion to the quantity or value of business done by the stockholder
member with the pool. The resolution establishing such distinct business pools
shall also specify the basis for determining the amount distributable by the
Cooperative as patronage dividends to each stockholder member.
(d) The patronage dividend distributions shall be paid to each
stockholder member on the basis of the quantity or value of business done with
or for each stockholder member, and the patronage dividend distributions shall
be determined by reference to the net earnings of the Cooperative from business
done with or for its stockholder members. The patronage dividend distributions
shall be among all stockholder members, shall be directly proportional for each
taxable year of the Cooperative to the purchases by each stockholder member, and
so shall be based upon each stockholder member's patronage.
9.4 Timing of Payment of Patronage Dividends. Each distribution of
patronage dividends shall be made within the payment period beginning with the
first day of a taxable year for which the Cooperative claims a deduction for
patronage dividends paid in the form of such distributions and ending with the
15th day of the 9th month following the close of such taxable year.
9.5 Method and Character of Payment. The Board of Directors may, in its
discretion, determine to pay patronage dividends either all in a form that will
be treated as a deductible qualified written notice of allocation within the
meaning of section 1388(c) of the IRC, all in a form that will be treated as a
nonqualified written notice of allocation within the meaning of section 1388(d)
of the IRC, or part in qualified form and part in nonqualified form. At least
twenty percent (20%) of any qualified payment of patronage dividends shall be
paid in cash or by a "qualified check" as defined in Section 1388(c)(4) of the
IRC. Subject to this limitation with respect to qualified distributions, the
Board of Directors may decide that the balance of any
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patronage dividend be paid, in whole or in part, in cash, property, promissory
notes or other evidence of indebtedness, or in any other form of written notice
of allocation (within the meaning of section 1388(b) of the IRC).
9.6 Consent to Stockholder Members. Membership in the Cooperative by
stockholder members shall constitute a consent of each such member to include in
its gross income the amount of any patronage dividend which is paid with respect
to direct sales from the Cooperative, and indirect sales through participating
distributors in money, "qualified checks," "qualified written notices of
allocation" or other property (except "nonqualified written notices of
allocation" as defined in Section 1388(d) of the Internal Revenue Code of 1986,
as amended) and which is received by it during the taxable year from the
Cooperative. Each stockholder member of the Cooperative, through initiating or
retaining its membership after adoption of this Article IX of these Bylaws, as
amended from time to time, consents to be bound hereby. The provisions of this
Article IX, as amended from time to time, shall be a contract between the
Cooperative and each stockholder member as fully as though each stockholder
member had signed a specific separate instrument in which the stockholder member
agreed to be bound by all of the terms and provisions of this Article IX, as
amended from time to time.
This consent, however, shall not extend to written notices of
allocation received by the stockholder member as part of a nonqualified payment
of patronage which clearly indicate on their face that they are nonqualified. By
way of illustration, the term "written notice of allocation" shall include such
items as the promissory notes, a notice or statement that such securities have
been deposited with a bank or other qualified agent on behalf of the stockholder
member, a notice of credit to the account of the stockholder member on the books
of the Cooperative (against stock subscription or any other indebtedness as the
Cooperative may elect) and such other forms of notice as the Board of Directors
may determine, distributed by the Cooperative in payment, or part payment of the
patronage dividends. The stated dollar amount of the promissory notes is the
principal amount thereof.
9.7 Promissory Notes. Subject only to the payment of at least twenty
percent (20%) of each stockholder member's annual patronage dividend in cash,
the Cooperative may pay each stockholder member all or any portion of the annual
patronage dividend in promissory notes which shall bear interest at the rate
from time to time fixed by the Board of Directors and shall mature at the time
fixed by the Board of Directors not later than five (5) years from the date of
issuance, and may be subordinated to any liabilities or obligations of the
Cooperative, existing, contingent or created after the date of issuance. The
Cooperative shall have a lien upon and a right of set off against any said
promissory notes issued to a stockholder member to secure payment of any
indebtedness due the Cooperative or any of its subsidiaries by the stockholder
member.
9.8 Application of Patronage Dividends to Amounts Due the Cooperative.
Notwithstanding any of the foregoing provisions of this Article IX, the portion
of any patronage dividends which would otherwise be payable in cash under any
provision of this Article IX to a stockholder member may be applied by the
Cooperative to the payment of any indebtedness, the repayment of which is in
default, owed to the Cooperative by any such stockholder member to
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the extent of such indebtedness instead of being distributed in cash, provided,
however, that an amount equal to twenty percent (20%) (or, in the case of a
stockholder member located in a jurisdiction to which the special withholding
requirements of Sections 1441 or 1442 of the Internal Revenue Code of 1986, as
amended, apply, thirty percent (30%)) of the total annual patronage dividends
distributable for the applicable year to any such stockholder member shall
nevertheless be paid in cash within the period set forth in Section 9.4 if any
such stockholder member so requests in a writing received by the Cooperative
within thirty (30) days of the first day of the Cooperative's fiscal year as
established under Section 6.3.
ARTICLE X
Amendments
10.1 Amendments to Bylaws. The voting members of the Board of Directors
shall have the power to adopt, amend or repeal from time to time the Bylaws of
the Cooperative at any regular meeting of the Board of Directors or at any
special meeting of the Board of Directors if notice of such adoption, amendment
or repeal of the Bylaws be contained in the notice of such special meeting,
subject to the right of the stockholder members to adopt, amend or repeal the
Bylaws, at any regular meeting of the stockholder members or at any special
meeting of the stockholder members if notice of such adoption, amendment or
repeal of the Bylaws be contained in the notice of such special meeting.
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APPENDIX D
CERTIFICATE OF INCORPORATION
OF
KFC NATIONAL PURCHASING CO-OP, INC.
ARTICLE I
The name of the Corporation is KFC National Purchasing Co-op, Inc.
ARTICLE II
The address of the Corporation's registered office in the State of
Delaware is 1209 Orange Street, in the City of Wilmington, County of New Castle.
The name of the Corporation's registered agent at such address is The
Corporation Trust Company.
ARTICLE III
The nature of the business or purposes to be conducted by the
Corporation is as follows:
(a) To operate a purchasing cooperative on behalf of and for the
benefit of KFC retail operators, with the Corporation, either
directly or through Unified Foodservice Purchasing Co-op, LLC,
a Kentucky limited liability company, purchasing from or
arranging for the purchase from manufacturers and vendors for
various food, packaging, equipment, materials, supplies and
services for resale to KFC retail operators and to
distributors who supply and serve KFC retail outlets;
(b) To sponsor, create, assist and support programs, services and
entities for the benefit of KFC retail operators and outlets;
(c) To carry on such other business as may be necessary,
convenient or desirable to accomplish the above stated
purposes, and to do all things incidental thereto; and
(d) Except for acts and activities which the Corporation's Board
of Directors shall specifically determine are not consistent
with the best interests of KFC retail operators and outlets,
to engage in any lawful act or activity for which corporations
may be organized under the Delaware General Corporation Law.
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ARTICLE IV
The authorized capital stock of the Corporation shall be 12,000 shares
of capital stock consisting of 2,000 shares of Membership Common Stock, $.01 par
value per share, and 10,000 shares of Store Common Stock, $.01 par value per
share.
(1) Membership Common Stock shall be subject to the following
preferences, privileges and restrictions:
(i) Membership Common Stock shall be divided into twenty-six
series, designated A through Z. Except for Series H, K
and L, which shall consist of one (1) share each, the
Board of Directors of the Corporation shall have the
right, power and authority to establish and to increase
or decrease the number of shares of each series of
Membership Common Stock consistent with and in order to
effectuate the terms of the Bylaws of the Corporation,
except that in no event shall the aggregate number of
authorized shares of Series A through G, inclusive, I
and J, and M through Z, inclusive, of Membership Common
Stock exceed 1,997 shares. Each stockholder member of
each of Series A through J and Series M through Z,
inclusive, shall be entitled to cast one (1) vote to
elect one (1) member of the Board of Directors to
represent its Series. The stockholder member of Series K
and L shall each be entitled to cast one (1) vote to
elect two (2) members of the Board of Directors to
represent its Series.
(ii) As to all matters on which each stockholder is entitled
to vote, except the election of the Board of Directors,
each share of Membership Common Stock shall be entitled
to one (1) vote on each matter.
(iii) Membership Common Stock shall not be entitled to receive
dividends.
(iv) In the event of any liquidation of the Corporation, or
other disposition of its assets, after payment of all
debts and liabilities of the Corporation, the holders of
the Membership Common Stock shall be entitled only to
receive Ten Dollars ($10.00) per share for each share of
Membership Common Stock held, prior to any distribution
being made to holders of the Store Common Stock.
(v) Membership Common Stock may only be issued to persons,
firms or entities who qualify for membership as provided
in the Bylaws.
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Membership Common Stock is not transferable and shall be
redeemed by the Corporation in the manner provided in
the Bylaws at Ten Dollars ($10.00) per share if a
stockholder ceases to qualify as a member.
(b) Store Common Stock shall be subject to the following
preferences, privileges and restrictions:
(i) Store Common Stock shall have no voting rights except as
otherwise required by Delaware law.
(ii) Except as provided in paragraph (a)(iv) of this Article,
Store Common Stock shall be the only class of capital
stock entitled to receive distributions on capital
stock.
(iii) The Store Common Stock may not be sold, transferred,
pledged, mortgaged, gifted, or hypothecated to any third
party, either voluntarily or by operation of law, and
such restrictions will be noted on all Store Common
Stock certificates. If a stockholder member desires to
dispose of its Store Common Stock, the stockholder
member must transfer its Store Common Stock to the
Corporation at the same price the stockholder member
paid to acquire the Store Common Stock.
(iv) Store Common Stock shall not be entitled to receive
dividends, other than patronage dividends as provided in
the Bylaws.
(v) In the event of any distributions by the Corporation to
its stockholder members, liquidation of the Corporation,
or other disposition of its assets, after payment of all
debts and liabilities of the Corporation and payment of
Ten Dollars ($10.00) per share to holders of Membership
Common Stock, the remaining assets of the Corporation
shall be distributed to the holders of Store Common
Stock on a cooperative basis, that is, the Corporation
shall return to such stockholders the face amount of
outstanding patronage equities and distribute the
remaining assets to such stockholders on the basis of
their past patronage with the Corporation and its
predecessor, the KFC National Purchasing Cooperative,
Inc., insofar as such distribution is practicable.
(vi) Store Common Stock may be issued only to persons, firms
or entities who qualify for membership in the
Corporation as provided in the Bylaws.
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ARTICLE V
Subject to the provisions of Article IV hereof, the property and
affairs of the Corporation shall be managed by a governing body to be known as
the Board of Directors whose number shall be set in the Bylaws and who shall be
nominated and elected as set forth in the Bylaws.
ARTICLE VI
No election of members of the Board of Directors of the Corporation
(the "Directors") need be by written ballot, except and to the extent provided
in the Bylaws of the Corporation.
ARTICLE VII
The Board of Directors may adopt, amend or repeal bylaws of the
Corporation, but the stockholders may adopt additional bylaws and may amend or
repeal any bylaw, whether adopted by the stockholders or otherwise.
ARTICLE VIII
Any action required or permitted to be taken at any meeting of the
Directors may be taken without a meeting, if all of the Directors consent
thereto in writing and if the writing or writings are filed with the minutes of
proceedings of the Directors.
ARTICLE IX
Any action required or permitted to be taken at any meeting of the
stockholders may be taken without a meeting, without prior notice and without a
vote, if a consent or consents in writing, setting forth the action so taken,
shall be signed by the holders of outstanding stock having not less than the
minimum number of votes that would be necessary to authorize or take such action
at a meeting at which all shares entitled to vote thereon were present and
voted, and shall be delivered to the Corporation.
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ARTICLE X
A Director of the Corporation shall not be personally liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a Director, except for liability (i) for any breach of the Director's
duty of loyalty to the Corporation or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) under Section 174 of the Delaware General Corporation
Law, or (iv) for any transaction from which the Director derived an improper
personal benefit. Any repeal or modification of this paragraph by the
stockholders of the Corporation shall be prospective only, and shall not
adversely affect any limitation on the personal liability of a Director of the
Corporation existing at the time of such repeal or modification.
ARTICLE XI
The Corporation reserves the right at any time, and from time to time,
to amend, alter, change or repeal any provision contained in this Certificate of
Incorporation, and any other provision authorized by the laws of the State of
Delaware at the time in force may be added or inserted, in the manner now or
hereafter prescribed by law; and all rights, preferences and privileges of
whatsoever nature conferred upon the stockholders, Directors or other persons
whomsoever by and pursuant to this Certificate of Incorporation in its present
form or as hereafter amended are granted subject to the rights reserved in this
Article. Except as otherwise required by law, this Certificate of Incorporation
may be altered, amended, or repealed by the affirmative vote of two-thirds (2/3)
of the stockholder members, present in person or represented by proxy at any
regular or special meeting of the stockholder members and entitled to vote on
the alteration, amendment or repeal, if notice of such alteration, amendment, or
repeal of this Certificate of Incorporation is contained in the notice of such
meeting.
The name and mailing address of the incorporator are:
R. James Straus
400 West Market Street, 32nd Floor
Louisville, Kentucky 40202-3363.
The incorporator shall have the power to designate the members of the
Corporation's initial Board of Directors.
The undersigned incorporator hereby acknowledges that the foregoing
Certificate of Incorporation is his act and deed this 16th day of November 2000.
/s/ R. James Straus
---------------------------------
R. James Straus
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APPENDIX E
BYLAWS
OF
KFC NATIONAL PURCHASING CO-OP, INC.
ARTICLE I
Offices
1.1 Registered Office. The address of the registered office of KFC
National Purchasing Co-op, Inc. (the "Co-op") shall be No. 100 West Tenth
Street, Wilmington, Delaware, until altered as provided by law.
1.2 Principal Office. The principal office of the Co-op shall be in
Louisville, Kentucky until altered by the Board of Directors.
1.3 Other Offices. The Co-op may maintain other offices within or
without the state where its registered and principal offices are located, as the
Board of Directors may from time to time establish.
ARTICLE II
Stockholder Members
2.1 Stockholder Eligibility. The following persons, firms or entities
shall be eligible to be stockholders in the Co-op:
(a) Each sole proprietor, partnership, corporation or other entity
who is or becomes a direct or indirect Kentucky Fried Chicken franchisee or
licensee of KFC Corporation, a Delaware corporation, or its successors, assigns,
affiliates, or related companies.
(b) KFC National Management Company, a Delaware Corporation ("KFC
Management"), or its respective successor as an operator of KFC outlets.
(c) The KFC National Council and Advertising Co-op, Inc., a
Delaware non-stock corporation ("NCAC").
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(d) Each sole proprietor, partnership, corporation or other
entity who is or becomes a direct or indirect Kentucky Fried Chicken franchisee
or licensee of Kentucky Fried Chicken International Holdings, Inc., a Delaware
corporation, or its successors, assigns, affiliates, or related companies.
Only persons, firms or entities which own of record a share of the
Co-op's Membership Common Stock shall be eligible to purchase shares of the
Co-op's Store Common Stock. As used in these Bylaws, the term "franchise"
includes licenses where appropriate in the context.
2.2 Stockholder Membership Requirements. Each person, firm or entity
which is eligible to be a stockholder member in the Co-op shall be a stockholder
member in the Co-op when and if that person, firm or entity (a) purchases one
share of the Co-op's Membership Common Stock; (b) purchases that number of
shares of the Co-op's Store Common Stock which equals (i) the total number of
Kentucky Fried Chicken retail outlets located in all states of the United States
and the District of Columbia (collectively, the "United States") owned and
operated by such person, firm or entity, and (ii) the total number of Kentucky
Fried Chicken retail outlets located in any one country other than the United
States in any one international territory (a "Foreign Territory") owned and
operated by such person, firm or entity; and (c) agrees to abide by the terms
and commitments set forth in these Bylaws as amended from time to time. For
purposes of this Section 2.2, (a) the term "total number...of retail outlets"
means the total number of traditional retail outlets, plus one-half rounded up
to the nearest even number of the total number of non-traditional outlets, and
(b) the term "non-traditional retail outlet" means an outlet with more than one
of the following characteristics: (i) a ten-year or shorter license, (ii) a
limited menu, (iii) sales from a kiosk or other transportable unit, (iv) sales
from a segregated food service area at a location in a facility (such as an
airport, athletic stadium, university or school) established for a primary
purpose other than selling food for reasonably immediate consumption, (v)
anticipated sales volume less than anticipated sales volume for a traditional
unit, (vi) sales in conjunction with sales of another food concept, or (vii)
such other characteristics as the Board of Directors may determine are
indicative of a non-traditional retail outlet. If a stockholder member at any
time becomes an owner and operator of additional Kentucky Fried Chicken retail
outlets within the United States or within a Foreign Territory, as the case may
be, he shall purchase one additional share of Store Common Stock for each such
additional traditional retail outlet or for each additional two non-traditional
retail outlets as the case may be. If a stockholder member, who at any time
becomes an owner and operator of additional Kentucky Fried Chicken retail
outlets within the United States or within a Foreign Territory, does not (a)(i)
purchase one additional share of Store Common Stock for each such additional
traditional retail outlet or for each additional two non-traditional retail
outlets and (ii) pay any fees or assessments which are established from time to
time by the Board of Directors pursuant to Section 2.6 hereof, (b) then such
stockholder member shall not be entitled to vote on any matters submitted to
stockholder members or receive patronage dividends from the Co-op as provided in
Article IX.
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2.3 Multiple Franchises. No person, firm or entity shall be entitled to
own, directly or indirectly, beneficially or of record, an interest in more than
one (1) share of the Co-op's Membership Common Stock (the "Base Share")
regardless of the number of Kentucky Fried Chicken retail outlets owned and
operated by such person, firm or entity, excluding (a) any interest which any
franchisee may have in the share of the Co-op's Series L Membership Common Stock
held by the NCAC, (b) if a franchisee's Base Share is not a share of the Co-op's
Series J Membership Common Stock, any interest which any franchisee may have in
one (but only one) share of the Co-op's Series J Membership Common Stock, and
(c) any interest which any franchisee may have in a share of the Co-op's
Membership Common Stock (i) held by a person, firm or entity in which the
franchisee owns 50% or less in the aggregate of the outstanding ownership
interests, and (ii) with respect to which the franchisee refrains from voting or
participating in the voting of the share of Membership Common Stock. Where more
than one (1) person, firm or entity are designated as franchisees of one (1) or
more retail outlets, such persons, firms or entities shall be considered as a
single person, firm or entity for stockholder purposes. The person, firm or
entity who owns more than 50% in the aggregate of the outstanding ownership
interest of the person, firm or entities owning and operating a Kentucky Fried
Chicken retail outlet shall be, unless such person designates otherwise, the
person, firm or entity entitled to own the share of Membership Common Stock
representing such franchise operation. Where no person, firm or entity owns more
than 50% in the aggregate of the outstanding ownership interests of the person,
firm or entity owning and operating a Kentucky Fried Chicken retail outlet and
none of such persons, firms or entities own, directly or indirectly, an interest
in a share of Membership Common Stock of the Co-op, such persons, firms or
entities shall be entitled to designate the person, firm or entity from among
themselves who shall be entitled to own the share of Membership Common Stock.
2.4 Divisions of Membership Common Stock into Series. (a) Each Kentucky
Fried Chicken stockholder member other than KFC National Management Company,
Harman Management Corporation ("Harman"), and NCAC shall be entitled to purchase
one share of Membership Common Stock of one of the following series set forth in
Column 1 below, but only if such stockholder member owns or operates, or
pursuant to Section 2.3 hereof, is deemed to own or operate, a Kentucky Fried
Chicken retail outlet in one or more of the areas set forth in the corresponding
line(s) of Column 2 below:
<TABLE>
<CAPTION>
COLUMN 1 COLUMN 2
-------- --------
SERIES AREA
<S> <C>
A Indiana, Michigan, Ohio and West Virginia.
B Arkansas, Colorado, Kansas, Missouri, New Mexico, Oklahoma
and Texas.
C Connecticut, Delaware, District of Columbia, Maine, Maryland,
Massachusetts, New Hampshire, New Jersey, New York,
Pennsylvania, Rhode Island and Vermont.
</TABLE>
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<TABLE>
<S> <C>
D Alaska, Hawaii, Idaho, Montana, Oregon, Washington and
Wyoming.
E Alabama, Florida, Georgia, Kentucky, Louisiana, Mississippi,
North Carolina, South Carolina, Tennessee and Virginia.
F Illinois, Iowa, Minnesota, Nebraska, North Dakota, South
Dakota and Wisconsin.
G Arizona, California, Nevada and Utah.
J Foreign Territories.
</TABLE>
The Series of Membership Common Stock to be issued shall be designated
by the stockholder member, or in the absence of such designation, by the Co-op.
(b) Harman, KFC National Management Company, and the NCAC
shall be entitled to purchase one (1) share of one of the Series of Membership
Common Stock set forth below opposite its name:
<TABLE>
<CAPTION>
STOCKHOLDER MEMBER SERIES
------------------ ------
<S> <C>
Harman H
KFC National Management Company K
NCAC L
</TABLE>
(c) If Harman shall at any time own or operate less than 100
Kentucky Fried Chicken outlets in the United States or if KFC National
Management Company shall own or operate less than 200 Kentucky Fried Chicken
outlets in the United States, then the share of the Membership Common Stock
owned by Harman or KFC National Management Company, as the case may be, shall be
exchanged for one share of Membership Common Stock of such other Series as such
person is eligible to purchase as provided in Section 2.4 hereof. The Series of
Membership Common Stock to be issued in such exchange shall be designated by
such person, or in the absence of such designation, by the Co-op.
(d) No person, firm or entity shall be entitled to purchase or
own any of the Series I or Series M through Series Z shares of Membership Common
Stock.
2.5 Mandatory Redemptions; Restrictions on Transfers; Prohibition
of Dividends.
(a) Unless otherwise prohibited by law, the Co-op shall promptly
redeem shares of Membership Common Stock held by persons, firms or entities who
no longer qualify as members. The redemption price for each share of Membership
Stock shall be Ten Dollars ($10.00), which shall be payable in cash, except
that, if the Co-op shall be prohibited by law
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from redeeming such share in cash because such payment would impair the capital
of the Co-op or otherwise, the Co-op shall in lieu thereof issue to the holder
of such share a non-interest bearing promissory note payable whenever the Co-op
shall no longer be prohibited by law from making such payment. The Membership
Common Stock may not be sold, transferred, pledged, mortgaged, gifted, or
hypothecated to any third party, either voluntarily or by operation of law, and
such restrictions shall be noted on all Membership Common Stock certificates.
(b) The Store Common Stock may not be sold, transferred, pledged,
mortgaged, gifted, or hypothecated to any third party, either voluntarily or by
operation of law, and such restrictions will be noted on all Store Common Stock
certificates. The Co-op may from time to time purchase shares of its Store
Common Stock at the request of holders who do not or no longer own or operate
KFC retail outlets with respect to the offered share, all in accordance with
such specific policies and guidelines and upon such specific terms and
conditions as the Board of Directors may from time to time adopt and from time
to time deem advisable. If the Co-op purchases shares of its Store Common Stock
as provided in this Section 2.5(b), the purchase price paid by the Co-op for a
share of Store Common Stock shall be the same as the price the stockholder
member paid to acquire the share of Store Common Stock.
(c) No dividends, other than "patronage dividends" as provided in
Section 9 of the Bylaws, shall be declared, accrued, or paid on any class of
stock of the Co-op.
2.6 Sourcing Fees. By virtue of membership in the Co-op, each
stockholder member (a) agrees that the Co-op and the Unified Foodservice
Purchasing Co-op, LLC ("UFPC") may from time to time collect from the
stockholder member a fee (a "Sourcing Fee") in consideration of and to fund the
Co-op and UFPC's purchasing programs and services, and (b) authorizes the Co-op
and UFPC from time to time to cause suppliers and distributors of goods and
equipment to collect Sourcing Fees from the stockholder member for the account
of the Co-op or UFPC.
2.7 Liquidation Rights. In the event of any dissolution or liquidation
of the Co-op or other disposition of its assets, after payment of all debts and
liabilities of the Co-op and payment of Ten Dollars ($10.00) per share to
holders of Membership Common Stock, the remaining assets of the Co-op shall be
distributed to the holders of Store Common Stock on a Co-operative basis, that
is, the Co-op shall return to such stockholder members the face amount of
outstanding patronage equities and distribute the remaining assets to such
stockholder members on the basis of their past Patronage insofar as such
distribution is practicable.
2.8 Notwithstanding any other provision of these Bylaws, KFC National
Purchasing Cooperative, Inc. shall be eligible to be a stockholder member of
the Co-op and be issued one share of Membership Common Stock, which share need
not be of a designated series. Upon the consummation of the transactions
contemplated in the Plan and Agreement of Merger of KFC National Purchasing
Cooperative, Inc. with and into the Co-op, the share of Membership Common Stock
issued to KFC National Purchasing Cooperative, Inc. shall be cancelled and this
Section 2.8 of the Bylaws shall be automatically deleted.
ARTICLE III
Meetings of Stockholder Members of the Co-op
3.1 Annual Meeting of Stockholder Members. An annual meeting of
stockholder members of the Co-op shall be held each year at a time and place
selected by the Board of Directors.
3.2 Notice of Annual Meeting. Written notice of the time and place of
the annual meeting shall be mailed to stockholder members entitled to vote as
shown by the records of the
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Co-op not less than twenty (20) nor more than sixty (60) days prior to the
meeting which notice shall state the place, date and hour of the meeting.
3.3 Delayed Annual Meeting. If, for any reason, the annual meeting of
the stockholder members shall not be held on the day designated, such meeting
may be called and held as a special meeting, and the same proceedings may be had
at such meeting as at an annual meeting and the notice of such meeting shall be
the same as required for the annual meeting.
3.4 Special Meetings of Stockholder Members. Special meetings of the
stockholder members may be called at any time by the Chairman of the Board of
Directors, President or by one-third (1/3) of the voting members of the Board of
Directors, upon not less than twenty (20) nor more than sixty (60) days written
notice which shall state the place, date, hour and purpose or purposes of the
meeting.
3.5 Waiver of Notice by Attendance. Attendance at a meeting, whether
annual or special, shall be a waiver of notice, unless attendance is expressly
for the purpose of objecting, at the beginning of the meeting, to the
transaction of any business because the meeting is not lawfully called or
convened.
3.6 Quorum. Presence in person or by proxy of stockholder members
representing a majority of the stockholder members entitled to vote at such
meeting shall constitute a quorum at such meeting. A quorum shall not be lost by
the departure of stockholder members before adjournment.
3.7 Who Entitled to Vote; Proxies. Each stockholder member owning a
share of the Co-op's Membership Common Stock shall be entitled to one (1) vote
in person or by proxy upon each matter on which such stockholder member is
entitled to vote. Proxies shall be valid only if signed by the stockholder
member, dated and filed with the Secretary of the Co-op prior to or at the
meeting in which it is given. No proxy shall be irrevocable and any proxy may be
revoked at any time in writing or in person at the meeting for which it was
given. No Proxy shall be voted or acted upon after one (1) year from its date.
3.8 Necessity of Two-Thirds Vote. Except as otherwise provided in these
Bylaws or required by law, the affirmative vote of two-thirds (2/3) of the
stockholder members present in person or by proxy at a meeting at which a quorum
is in attendance shall be necessary to decide in favor of any matter properly
submitted to the meeting.
3.9 Disputes. Any dispute as to the voting rights of stockholder
members shall be submitted to the Secretary of the Co-op to be decided upon by
the Chairman of the Board of Directors, or, in his absence, the Vice-Chairman
with the stockholder member whose voting rights are in issue having the right to
appeal this decision to the Board of Directors.
3.10 Organization of Meetings. The Chairman of the Board of Directors,
or the Vice-Chairman, if the Chairman is not present, and the Secretary of the
Co-op shall act as chairman and secretary, respectively, at all meetings of
stockholder members of the Co-op.
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ARTICLE IV
Board of Directors
4.1 General.
(a) The property and affairs of the Co-op shall be managed by a
governing body to be known as the Board of Directors. The Board of Directors
shall be composed of up to twenty-one (21) persons who shall be nominated and
elected and shall serve for terms as hereinafter provided.
(b) The Secretary of the Co-op shall notify stockholder members in
writing no later than seventy-five (75) days prior to the annual meeting of
stockholder members of the date of such meeting. Such notice shall advise them
that nominations for members of the Board of Directors whose terms will expire
at such meeting must be submitted to the Secretary in writing not later than
sixty (60) days prior to the meeting date. Such notice shall also specify the
names of directors whose terms are expiring and the names of directors who have
resigned, died, or otherwise been removed from office since the last annual
meeting of stockholder members, and shall identify the Series of Membership
Common Stock entitled to elect successors to such directors. Each nomination
submitted to the Secretary shall be accompanied by a written statement signed by
the nominee, including nominees to represent the Series H, K and L Membership
Common Stock, that he or she (i) will serve and is eligible to serve in such
capacity if elected, (ii) will participate in a director orientation program in
accordance with the Board's current orientation policies, and (iii) will enter
into a director confidentiality agreement in such form as the Board may adopt
from time to time. Each stockholder member (other than the NCAC and KFC National
Management Company) may nominate not more than one person to serve as the
director who may be elected by the Series of Membership Common Stock held by
such stockholder member. NCAC and KFC National Management Company may each
nominate two persons to serve as the directors who may be elected by the series
of Membership Common Stock held by them.
(c) Each of Series A through Series H and Series J, shall be
entitled to elect, as a series, one member of the Board of Directors, and of
Series K and Series L shall be entitled to elect, as a series, two members of
the Board of Directors; provided, however, that until and unless the holders of
Series J Membership Common Stock hold one hundred (100) or more shares of Store
Common Stock purchased or held with respect to Kentucky Fried Chicken outlets
located in Foreign Territories, the Series J member of the Board of Directors
shall be nominated by a holder of Series J Membership Common Stock, but shall be
elected by a plurality vote of all the shares of Membership Common Stock
entitled to vote at the annual meeting of the stockholder members.
(d) In addition to the members of the Board of Directors elected by
the holders of Membership Common Stock, there shall be one (1) independent
member of the Board of Directors (the "Independent Director") who shall not in
any way be associated or affiliated with KFC Corporation, KFC National
Management Company, Kentucky Fried Chicken International Holdings, Inc., or any
franchisee of KFC Corporation. The Independent Director
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shall be nominated by the Board of Directors and elected by a plurality vote of
the shares of Membership Common Stock entitled to vote at the annual meeting of
the stockholder members.
(e) The President of the Co-op and UFPC shall serve as a non-voting
ex-officio member of the Board of Directors.
(f) With the exception of the Independent Director and the
President of the Co-op and UFPC, all directors of the Co-op must be stockholder
members of the Co-op or an officer, shareholder, employee or partner of an
entity which is a stockholder member of the Co-op. Each director must be a
member or an officer, director, shareholder, employee or partner of the
organization which is entitled to vote for (or in certain circumstances
concerning Series J, nominate) such director.
(g) All voting directors of the Co-op shall be divided into three
classes, designated Class I, Class II and Class III. Such classes shall be as
nearly equal in number as the then total number of voting directors permits,
with the term of office of one class expiring each year. Should the number of
voting directors not be equally divisible by three, the excess of directors over
a number divisible by three shall be classified in Class III if there is an
excess of one and in Class II and III if there is an excess of two. The Board of
Directors shall by majority vote designate which series of membership shall
elect directors within Class I, II and III, respectively, but by such
designations may not shorten the term of any director.
(h) No person shall hold more than one (1) seat on the Board
of Directors at any one time. Except for the holders of the Series K and Series
L Membership Common Stock who are entitled, as a Series, to elect two (2)
members of the Board of Directors, not more than one (1) person affiliated with
any stockholder member may hold a seat on the Board of Directors.
(i) The initial Class I directors shall hold office for a term
commencing with the adoption of these Bylaws and expiring at the annual meeting
next ensuing and until their successors are elected and take office. The initial
Class II directors shall hold office for a term commencing with the adoption of
these Bylaws and expiring at the second annual meeting thereafter and until
their successors are elected and take office. The initial Class III directors
shall hold office for a term commencing with the adoption of these Bylaws and
expiring at the third annual meeting thereafter and until their successors are
elected and take office. The successors to the initial Class I, Class II and
Class III directors shall each be elected for terms commencing as of the date of
their election and continuing until the third annual meeting of stockholder
members thereafter and until their respective successors are duly elected and
qualified.
(j) Whenever any member of the Board of Directors ceases to fulfill
the eligibility requirements of this Section 4.1, his membership on the Board of
Directors shall automatically terminate and the vacancy so created shall be
filled in the manner prescribed in Section 4.2.
(k) Notwithstanding any limitation on the number of persons who may
serve as members of the Board of Directors provided for in Section 4.1(a)
hereof, the Board of
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Directors may, from time to time, by resolution provide for 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 by resolution provide.
(l) No voting director of the Co-op, except for directors
elected by the Series H or K Membership Common Stock, may serve more than two
consecutive three years terms (whether representing the same or a different
Series) without having not served as a voting director for an entire period
between two consecutive annual meetings of the stockholder members (a "meeting
period") before reelection. For purposes of this Section 4.1(l), (i) service for
a term which equals or exceeds two meeting periods shall be deemed to be a three
year term and a term which does not exceed two meeting periods shall not be
deemed to be a three year term, and (ii) no term which commenced prior to the
annual meeting of the stockholder members held in 1999 shall count as a
consecutive term or otherwise shorten the eligibility of any director.
4.2 Vacancies. Except as herein provided, all vacancies on the Board of
Directors shall be filled by the Board of Directors. In filling any vacancy, the
Board of Directors shall seek the advice and counsel of the holder or holders of
the Series of stock who are entitled, as a Series, to elect the director whose
position became vacant. All vacancies shall be filled as soon as practicable;
however, the Board need not fill a vacancy if the holder or holders of the
Series of Membership Common Stock who are entitled, as a Series, to elect the
director whose position became vacant decline (a) to provide the Board with
advice and counsel concerning the filling of the vacancy, or (b) to nominate a
person to fill a vacancy, however created, at any annual or special meeting of
the stockholders at which an election of directors occurs. For purposes of this
Article IV, the number of voting members of the Board shall not include from
time to time the number of vacancies on the Board. The Board of Directors shall
not fill a vacancy with respect to the Series H, K or L share of Membership
Common Stock without specific direction and the consent respectively of Harman,
Tricon Global Restaurants, Inc. ("Tricon"), or NCAC
Directors elected as hereinabove provided in this Section 4.2 shall
serve until the next annual meeting of stockholder members, at which time the
holders of the Series of Membership Common Stock who elected the director whose
position became vacant shall be entitled to elect a successor who shall serve
for the remainder, if any, of the term of the director who shall have resigned,
died or otherwise been removed from office.
The person elected to fill a vacancy must fulfill the eligibility
requirements for the position of the director whose position became vacant.
4.3 Quorum. Two-thirds (2/3) of the voting members of the Board of
Directors shall constitute a quorum.
4.4 Annual Meeting. The Board of Directors shall hold its annual
meeting in each calendar year at such time and place as the Board shall
designate to elect its Chairman and Vice-Chairman, to elect the officers of the
Co-op for the ensuing year and to transact any other business.
4.5 Other Meetings. Other meetings of the Board of Directors may be
called by the Chairman, President or one-third (1/3) of the voting members of
the Board of Directors at any
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time by means of written notice by mail of the time, place and purpose thereof
to each member of the Board of Directors, as the Chairman, the President or
one-third (1/3) of the voting members of the Board of Directors shall deem
sufficient, but action taken at any such meeting shall not be invalidated for
want of notice if such notice shall be waived as hereinafter provided.
4.6 Waiver of Notice. Notice of the time, place and purpose of any
meeting of the Board of Directors may be waived by telegram, radiogram,
cablegram, or other writing either before or after such meeting has been held.
Attendance at a meeting shall constitute a waiver of notice, unless attendance
is expressly for the purpose of objecting, at the beginning of the meeting, to
the transaction of any business because the meeting is not lawfully called or
convened.
4.7 Removal of Members of the Board of Directors. The Board of
Directors may, upon the affirmative vote of at least two-thirds (2/3) of all
stockholder members (including the vote of Tricon or NCAC with respect to the
director representing the Series K or L share of Membership Common Stock,
respectively) at any time determine that any member of the Board of Directors
shall be removed from the Board of Directors for cause. Upon such a vote of
stockholder members, the Board of Directors shall give such director written
notice of removal for cause.
4.8 Voting. The affirmative vote of three-fifths (3/5) of all voting
members of the Board of Directors shall, except as otherwise specifically
provided in these Bylaws, be the act of the Board of Directors on any matter
properly submitted to the Board of Directors. Members of the Board of Directors
may participate in a meeting of the Board of Directors by means of conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other and such participation in a
meeting shall constitute presence in person at such meeting. Upon the demand of
a majority of the voting members of the Board of Directors participating in a
meeting, the voting upon any question before the meeting shall be by secret
ballot. The President shall not be entitled to vote on matters brought before
the Board of Directors.
4.9 Chairman and Vice-Chairman.
(a) The Board of Directors shall at each annual meeting elect by
the affirmative vote of three-fifths (3/5) of the entire Board of Directors a
Chairman and a Vice-Chairman, each of whom shall serve until the next annual
meeting of the Board of Directors and until his successor is duly elected and
qualified.
(b) The duties of the Chairman shall be to preside at all meetings
of the Board of Directors and stockholder members. The Chairman shall oversee
the President in his assigned duties as established and authorized by the Board
of Directors. The Chairman shall have the power to execute in the name of the
Co-op any authorized corporate obligation or other instrument and shall perform
all acts incident to the Office of Chairman or Directors. In the absence of the
Chairman or his inability to perform, the Vice-Chairman shall assume his duties.
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(c) No Chairman may serve more than two consecutive full one
year terms as Chairman without having not served as Chairman for an entire one
year term before reelection as Chairman. For purposes of this Section 4.9 (c),
no term as Chairman which commenced prior to 1999 shall count as a consecutive
term or otherwise shorten the eligibility of a chairman.
4.10 Meetings: Chairman and Secretary. At all meetings of the Board of
Directors, the Chairman, or in his absence, the Vice-Chairman, shall act as
chairman of the meeting and the Secretary of the Co-op shall act as secretary,
except that if any one of them shall be absent, a chairman or secretary, or
both, may be chosen at the meeting.
4.11 Compensation and Expenses. The Independent Director shall be
entitled to such compensation as may be determined by the Board of Directors.
Except for the Independent Director, all members of the Board of Directors shall
serve without compensation. Reasonable expenses of members of the Board of
Directors attending regular and called meetings shall be reimbursed by the
Co-op, provided, that such expenses are not in excess of the actual cost of
traveling from and returning to the member's home city, lodging, meals and other
reasonable and necessary expenses. The Board of Directors shall also reimburse
members of the Board of Directors and others for their reasonable expenses of
attending seminars or other events at the direction of the Board of Directors.
ARTICLE V
Officers
5.1 Executive Officers. The Board of Directors shall elect a President,
a Secretary and a Treasurer, and may elect one or more Vice-Presidents and such
other officers and assistant officers, as the Board of Directors may, from time
to time, determine are necessary to manage the affairs of the Co-op. Any one
person, except as forbidden by law, may be elected to more than one office. Any
person elected to office shall hold his office as such for a one (1) year period
and until his successor shall have been elected and shall have accepted office,
unless prior thereto such person resigns or is removed from office. The
President shall at all times be subject to dismissal by the Board of Directors
by the affirmative vote of two-thirds (2/3) of all voting members of the Board
of Directors. Any meeting of the Board of Directors for the purpose of
considering the dismissal of the President may be called upon not less than
twenty (20) days nor more than sixty (60) days prior written notice which notice
shall state the place, date, hour and purpose of the meeting. The other officers
shall at all times be subject to dismissal by the President or the Board of
Directors.
5.2 Vacancies. Any vacancy in any office shall be filled by the Board
of Directors.
5.3 Powers and Duties of the President. The President shall be the
President and Chief Executive Officer of the Co-op and, subject to the control
of the Board of Directors, shall have general charge of its business and
supervision of its affairs. He shall keep the Board of Directors fully informed
and freely consult with it in regard to the business of the Co-op, and make due
reports to it and to the stockholder members. The President shall have the power
to execute in the name of the Co-op any authorized corporate obligation or other
instruments. The
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President shall also have such other powers and duties as are incident to his
office and not inconsistent with these Bylaws, or as may at any time be assigned
to him by the Board of Directors.
5.4 Powers and Duties of Vice-Presidents. The Board of Directors may
elect one (1) or more Vice-Presidents who shall have the powers and duties
incident to their office and shall perform such duties as may at any time be
assigned to them by the Board of Directors or the President.
5.5 Powers and Duties of the Treasurer. The Treasurer, subject to the
control of the Board of Directors and together with the President, shall have
general supervision of the finances of the Co-op. He shall have the care of, and
be responsible for, all monies, securities, evidences of value and corporate
instruments of the Co-op, and shall supervise the officers and other persons
authorized to bank, handle and disburse its funds, informing himself as to
whether all deposits are or have been duly made and all expenditures duly
authorized and evidenced by proper receipts and vouchers. He shall cause full
and accurate books to be kept, showing the transactions of the Co-op, its
accounts, assets, liabilities and financial condition, which shall at all
reasonable times be open to the inspection of any member of the Board of
Directors, and he shall make due reports to the Board of Directors and the
stockholder members, and such statements and reports as are required of him by
law. The Treasurer shall have such other powers and duties incident to his
office and not inconsistent with these Bylaws, or as may at any time be assigned
to him by the Board of Directors.
5.6 Powers and Duties of the Secretary. The Secretary shall cause to be
entered in the minute books the minutes of all meetings of the Board of
Directors and annual and other meetings of the stockholder members; shall have
charge of the seal of the Co-op and all other books and papers pertaining to his
office, and shall be responsible for giving of all notices, and the making of
all statements and reports required of the Co-op or of the Secretary by law. The
Secretary shall affix the corporate seal, attested by his signature, to all
instruments duly authorized and requiring the same. The Secretary shall have
such other powers and duties incident to his office and not inconsistent with
these Bylaws, or as may at any time be assigned to him by the Board of
Directors.
5.7 Assistant Treasurers and Assistant Secretaries. Any Assistant
Treasurers and Assistant Secretaries elected shall perform such duties as may
properly be assigned to them by the executive officers of the Co-op, and shall
have such powers and duties, including all the powers and duties of their
principals in the event of the absence of such principals from any place in
which the business in hand is to be done, and as may at any time be assigned to
them by the Board of Directors.
5.8 Other Officers. The Board of Directors shall prescribe the powers
and duties of any other officer or officers of the Co-op.
5.9 Salaries. The salary, if any, of the President of the Co-op shall
be fixed by the Board of Directors. Subject to such limitations as may be fixed
by the Board of Directors from time to time, the salaries, if any, of all other
employees and officers of the Co-op shall be fixed by the President who shall
report annually to the Board of Directors on all salary changes.
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ARTICLE VI
Finance, Audit and Fiscal Year
6.1 Banking. All funds and money of the Co-op shall be banked, handled
and disbursed, and all bills, notes, checks and like obligations, and
endorsements (for deposit or collection) shall be signed by such officers and
other persons as the Board of Directors shall from time to time designate, who
shall account therefor to the Treasurer as and when he may require. All money,
funds, bills, notes, checks and other negotiable instruments coming to the Co-op
shall be collected and promptly deposited in the name of the Co-op in such
depositories as the Board of Directors shall select.
6.2 Annual Audit. An audit by certified public accountants of the books
and records of the Co-op shall be conducted annually by a firm engaged by the
Board of Directors.
6.3 Fiscal Year. The fiscal year of the Co-op shall be set from time to
time by the Board of Directors.
ARTICLE VII
Indemnification
7.1 Indemnification of Officers and Directors.
(a) The Co-op shall indemnify any person who was or is a party
or is threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the Co-op) by reason
of the fact that he is or was a director, officer, employee or agent of the
Co-op, or is or was serving at the request of the Co-op as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise, against expenses (including attorneys' fees), judgments, fines
and amounts paid in settlement actually and reasonably incurred by him in
connection with such action, suit or proceeding if he acted in good faith and in
a manner he reasonably believed to be in or not opposed to the best interests of
the Co-op, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination of any
action, suit or proceeding by judgment, order, settlement, conviction, or upon a
plea of nolo contendere or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a manner which he
reasonable believed to be in or not opposed to the best interests of the Co-op,
and, with respect to any criminal action or proceeding, had reasonable cause to
believe that his conduct was unlawful.
(b) The Co-op shall indemnify any person who was or is a party
or is threatened to be made a party to any threatened, pending or completed
action or suit by or in the right of the Co-op to procure a judgment in its
favor by reason of the fact that he is or was a director, officer, employee or
agent of the Co-op, or is or was serving at the request of the Co-op as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust
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or other enterprise against expenses (including attorneys' fees) actually and
reasonably incurred by him in connection with the defense or settlement of such
action or suit if he acted in good faith and in a manner he reasonably believed
to be in or not opposed to the best interests of the Co-op and except that no
indemnification shall be made in respect of any claim, issue or matters as to
which such person shall have been adjudged to be liable to the Co-op unless and
only to the extent that the Court of Chancery or the court in which such action
or suit was brought shall determine upon application that, despite the
adjudication of liability but in view of all the circumstances of the case, such
person is fairly and reasonably entitled to indemnity for such expenses which
the Court of Chancery or such other court shall deem proper.
(c) To the extent that a present and former director or officer of
the Co-op has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in subsections (a) and (b) of this
Section 7.1, or in defense of any claim, issue, or matter therein, he shall be
indemnified against expenses (including attorneys' fees) actually and reasonably
incurred by him in connection therewith.
(d) Any indemnification under subsections (a) and (b) of this
Section 7.1 (unless ordered by a court) shall be made by the Co-op only as
authorized in the specific case upon a determination that indemnification of the
present or former director, officer, employee or agent is proper in the
circumstances because he has met the applicable standard of conduct set forth in
subsections (a) and (b). Such determination shall be made, with respect to a
person who is a director or officer at the time of such determination, (1) by a
majority vote of the directors who are not parties to such action, suit or
proceeding, even though less than a quorum, or (2) by a committee of such
directors designated by majority vote of such directors, even though less than a
quorum, or (3) if there are no such directors, or if such directors so direct,
by independent legal counsel in written opinion, or (4) by the stockholder
members.
(e) Expenses (including attorneys' fees) incurred by an officer or
director in defending any civil, criminal, administrative or investigative
action, suit or proceeding may be paid by the Co-op in advance of the final
disposition of such action, suit or proceeding upon receipt of an undertaking by
or on behalf of such director or officer to repay such amount it shall
ultimately be determined that he is not entitled to be indemnified by the Co-op
as authorized in this Section 7.1. Such expenses (including attorneys' fees)
incurred by former directors and officers or other employees and agents may be
so paid upon such terms and conditions, if any, as the corporation deems
appropriate.
(f) The indemnification and advancement of expenses provided by, or
granted pursuant to this Section 7.1 shall not be deemed exclusive of any other
rights to which those seeking indemnification or advancement of expenses may be
entitled under any Bylaw, agreement, vote of stockholders or disinterested
directors or otherwise, both as to action in his official capacity and as to
action in another capacity while holding such office.
(g) The Co-op shall have power to purchase and maintain insurance
on behalf of any person who is or was a director, officer, employee or agent of
the Co-op, or is or was serving at the request of the Co-op as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprises against any liability asserted against him and
incurred by him in any such capacity, or arising out of his status as such,
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whether or not the Co-op would have the power to indemnify him against such
liability under the provisions of this Section 7.1.
(h) For purposes of this Section 7.1, references to the Co-op shall
include, in addition to the resulting corporation, any constituent corporation
(including any constituent of a constituent) absorbed in a consolidation or
merger which, if its separate existence had continued, would have had power and
authority to indemnify its directors, officers, and employees or agents, so that
any person who is or was a director, officer, employee or agent of such
constituent corporation, or is or was serving at the request of such constituent
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, shall stand in the same
position under the provisions of this Section 7.1 with respect to the resulting
or surviving corporation as he would have with respect to such constituent
corporation if its separate existence had continued.
(i) For purposes of this Section 7.1, references to "other
enterprises" shall include employee benefit plans, references to "fines" shall
include any excise taxes assessed on a person with respect to an employee
benefit plan, and references to "serving at the request of the Co-op" shall
include any service as a director, officer, employee or agent of the Co-op which
imposes duties on, or involves services by, such director, officer, employee, or
agent with respect to an employee benefit plan, its participants, or
beneficiaries; and a person who acted in good faith and in a manner he
reasonably believed to be in the interest of the participants and beneficiaries
of an employee benefit plan shall be deemed to have acted in a manner "not
opposed to the best interests of the Co-op" as referred to in this Section 7.1.
(j) The indemnification and advancement of expenses provided by, or
granted pursuant to, this Section 7.1 shall, unless otherwise provided when
authorized or ratified, continue as to a person who has ceased to be a director,
officer, employee or agent and shall inure to the benefit of the heirs,
executors and administrators of such a person.
(k) The Court of Chancery of the State of Delaware is hereby vested
with exclusive jurisdiction to hear and determine all actions for advancement of
expenses or indemnification brought under this Section 7.1 or under any bylaw,
agreement, vote of stockholder members or disinterested directors, or otherwise.
The Court of Chancery may summarily determine the Co-op's obligation to advance
expenses (including attorneys' fees).
(l) If so provided in the Co-op's Certificate of Incorporation, a
director of the Co-op shall not be personally liable to the Co-op or its
stockholders for monetary damages for breach of fiduciary duty as a director,
except for liability (i) for any breach of the director's duty of loyalty to the
Co-op or its stockholders, (ii) for acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of law, (iii) under
Section 174 of the Delaware General Corporation Law, or (iv) for any transaction
from which the director derived an improper personal benefit.
The foregoing Article 7 is derived from Sections 145 and 102 of the
General Corporation Law of the State of Delaware.
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The Co-op has obtained a policy of insurance under which the Co-op and
its directors and officers are insured subject to specific exclusions and
deductible and maximum amounts against loss deriving from any claim which may be
made against the Co-op or any director or officer of the Co-op by reason of any
act done or alleged to have been done while acting in their respective
capacities.
ARTICLE VIII
Capital Stock
8.1 Certificate of Stock. Every holder of capital stock in the Co-op
shall be entitled to have a certificate, signed by, or in the name of the Co-op
by, the President or a Vice-President and the Treasurer or an Assistant
Treasurer, or the Secretary or an Assistant Secretary of the Co-op, certifying
the number of shares owned by him in the Co-op. The certificates of stock of the
Co-op shall be numbered and shall be entered in the books of the Co-op as they
are issued.
8.2 Lost Certificates. The Board of Directors may direct a new
certificate or certificates to be issued in place of any certificate or
certificates theretofore issued by the Co-op alleged to have been lost, stolen
or destroyed, upon the making of an affidavit of that fact by the person
claiming the certificate of stock to be lost, stolen or destroyed. When
authorizing such issue of a new certificate or certificates, the Board of
Directors may, in its discretion and as a condition precedent to the issuance
thereof, require the owner of such lost, stolen or destroyed certificate or
certificates, or his legal representative, to advertise the same in such manner
as it shall require and/or to give the Co-op a bond in such sum as it may direct
as indemnity against any claim that may be made against the Co-op with respect
to the certificate alleged to have been lost, stolen or destroyed.
8.3 Transfers of Capital Stock. Any attempted transfer, sale, pledge,
mortgage, gift, or hypothecation of shares of Membership Common Stock or Store
Common Stock other than a transfer of the shares to the Co-op shall be null,
void, and without effect, and the Co-op shall not make or recognize any such
transfer, sale, pledge, mortgage, gift, or hypothecation upon its books.
8.4 Fixing Record Date. In order that the Co-op may determine the
stockholder members entitled to notice of or to vote at any meeting of
stockholder members or any adjournment thereof, or entitled to receive payment
of any dividend or other distribution or allotment of any rights, or entitled to
exercise any rights in respect of any change, conversion or exchange of stock or
for the purpose of any other lawful action, the Board of Directors may fix, in
advance, a record date, which shall not be more than sixty (60) nor less than
twenty (20) days prior to any other action. A determination of stockholder
members of record entitled to notice of or to vote at a meeting of stockholder
members shall apply to any adjournment of the meeting; provided, however, that
the Board of Directors may fix a new record date for the adjourned meeting.
8.5 Registered Stockholders. The Co-op shall be entitled to recognize
the exclusive right of a person registered on its books as the owner of shares
to receive dividends and to vote, and to hold liable for calls and assessments a
person registered on its books as the owner of
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shares, and shall not be bound to recognize any equitable or other claim to or
interest in such share of shares on the part of any other person, whether or not
it shall have express or other notice thereof, except as otherwise provided by
the laws of Delaware.
ARTICLE IX
Patronage Dividends
9.1 Patronage. The term "patronage" shall refer to the value of the
Co-op's business with its stockholder members. Business with the Co-op's
stockholder members shall include the following: (1) the Co-op's direct business
with its stockholder members; (2) the Co-op's business with its stockholder
members through distributors ("participating distributors") which shall have
agreed to participate in the Co-op's patronage dividend program for its
stockholder members by entering into distributor participation agreements with
the Co-op or UFPC in such form as the President shall prescribe or approve from
time to time; (3) the Co-op's business with its stockholder members through
suppliers ("participating suppliers") which shall have agreed to participate in
the Co-op's patronage dividend program by entering into supplier participation
agreements with the Co-op or UFPC in such form as the President shall prescribe
or approve from time to time; and (4) the Co-op's business with its stockholder
members pursuant to arrangements set forth in a management agreement approved by
the Board of Directors with UFPC, whereby the stockholder members purchase goods
directly from UFPC or through participating distributors and participating
suppliers. The term "patronage" includes the Co-op's business with its
stockholder members both when the Co-op or UFPC purchases (takes "Title") and
resells goods to the Co-op's stockholder members and participating distributors,
and when participating suppliers sell goods directly to stockholder members and
participating distributors.
9.2 Cooperative Basis. The Co-op shall at all times be operated on a
cooperative basis for the benefit of its stockholder members. The Co-op shall
always do more than ninety percent (90%) in value of its business with its
stockholder members.
9.3 Patronage Dividend Distributions.
(a) The Board of Directors shall, after considering the Co-op's
anticipated expenses and need for capital and reserves, (i) obligate the Co-op
to distribute patronage dividends as provided in section 1388(a)(2) of the
Internal Revenue Code of 1986, as amended (hereinafter referred to as the
"IRC"), and (ii) distribute as patronage dividends, directly to the stockholder
members of the Co-op, the net income of the Co-op from patronage done with or
for stockholder members computed in accordance with sections 1381-1388 of the
IRC and in accordance with the principles applied in preparation of the Co-op's
federal income tax return. Specifically, the Co-op shall distribute patronage
dividends to stockholder members annually on the basis of each stockholder
member's patronage. In determining the portion of the Co-op's patronage dividend
obligations to be paid in cash, the Board of Directors shall consider: (1)
Expenses directly or indirectly related to the Co-op's business; (2) Such
reasonable reserves for necessary corporate purposes as may from time to time be
provided by the Board of Directors for depreciation and obsolescence, state and
federal taxes, bad debts, casualty losses, insurance and other corporate and
operating charges and expenses, all established and computed in accordance with
generally accepted accounting principles; (3) Such reasonable reserves for
working capital
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necessary for the operation of the Co-op and for deficits arising from such
operation, (including deficits from business other than business done with or
for stockholder members).
The amounts set aside for reserves in any year from gross margins of
the Co-op from business other than with or for the stockholder members shall be
allocated to the extent possible, to stockholder members, on the books of the
Co-op on a patronage basis for that year, or, in lieu thereof, the books or
records of the Co-op shall afford a means of doing so, so that in the event of a
distribution of amounts formerly carried in reserves, each stockholder member
may receive to the extent possible, that stockholder member's pro rata share
thereof.
(b) Solely for the purpose of determining the amount of patronage
dividends distributable to a particular stockholder member of the Co-op, the
Board of Directors may, by resolution, segregate the Co-op's business with its
stockholder members into two distinct pools: (i) the "Title Pool," under which
shall be determined the net earnings of the Co-op from business with the Co-op's
stockholder members in which the Co-op takes Title to goods; and (ii) the
"Non-Title Pool," under which shall be determined the net earnings of the Co-op
from business with the Co-op's stockholder members in which the Co-op does not
take Title to goods.
The amount distributable by the Co-op as patronage dividends
directly to each stockholder member of the Co-op shall be based on
(A) the ratio of
(i) the value of business done by the Co-op with each
stockholder member in which the Co-op takes Title to goods, to
(ii) the net earnings of the Co-op in the Title Pool
attributable to business done with or for its stockholder members, plus
(B) the ratio of
(i) the value of business done by the Co-op with each
stockholder member in which the Co-op does not take Title to goods, to
(ii) the net earnings of the Co-op in the Non-Title Pool
attributable to business done with or for its stockholder members.
(c) Solely for the purpose of determining the amount of patronage
dividends distributable to a particular member of the Co-op, the Board of
Directors may from time to time, when appropriate, by resolution, segregate the
Co-op's business with its stockholders members into other distinct pools, such
as by way of example, an equipment business pool, a food and packaging business
pool, or an international business pool. The net earnings of the Co-op from
business with the Co-op's stockholder members related to any such pool shall be
attributable to a stockholder member patron of the pool in proportion to the
quantity or value of business done by the stockholder member with the pool. The
resolution establishing such distinct business pools shall also specify the
basis for determining the amount distributable by the Co-op as patronage
dividends to each shareholder member.
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(d) The patronage dividend distributions shall be paid to each
stockholder member on the basis of the quantity or value of business done with
or for each stockholder member, and the patronage dividend distributions shall
be determined by reference to the net earnings of the Co-op from business done
with or for its stockholder members. The patronage dividend distributions shall
be among all stockholder members, shall be directly proportional for each
taxable year of the Co-op to the purchases by each stockholder member, and so
shall be based upon each stockholder member's patronage.
9.4 Timing of Payment of Patronage Dividends. Each distribution of
patronage dividends shall be made within the payment period beginning with the
first day of a taxable year for which the Co-op claims a deduction for patronage
dividends paid in the form of such distributions and ending with the 15th day of
the 9th month following the close of such taxable year.
9.5 Method and Character of Payment. The Board of Directors may, in its
discretion, determine to pay patronage dividends either all in a form that will
be treated as a deductible qualified written notice of allocation within the
meaning of section 1388(c) of the IRC, all in a form that will be treated as a
nonqualified written notice of allocation within the meaning of section 1388(d)
of the IRC, or part in qualified form and part in nonqualified form. At least
twenty percent (20%) of any qualified payment of patronage dividends shall be
paid in cash or by a "qualified check" as defined in Section 1388(c)(4) of the
IRC. Subject to this limitation with respect to qualified distributions, the
Board of Directors may decide that the balance of any patronage dividend be
paid, in whole or in part, in cash, property, promissory notes or other evidence
of indebtedness, or in any other form of written notice of allocation (within
the meaning of section 1388(b) of the IRC).
9.6 Consent to Stockholder Members. Membership in the Co-op by
stockholder members shall constitute a consent of each such member to include in
its gross income the amount of any patronage dividend which is paid with respect
to direct sales from the Co-op, and indirect sales through participating
distributors in money, "qualified checks," "qualified written notices of
allocation" or other property (except "nonqualified written notices of
allocation" as defined in Section 1388(d) of the Internal Revenue Code of 1986,
as amended) and which is received by it during the taxable year from the Co-op.
Each stockholder member of the Co-op, through initiating or retaining its
membership after adoption of this Article IX of these Bylaws, as amended from
time to time, consents to be bound hereby. The provisions of this Article IX, as
amended from time to time, shall be a contract between the Co-op and each
stockholder member as fully as though each stockholder member had signed a
specific separate instrument in which the stockholder member agreed to be bound
by all of the terms and provisions of this Article IX, as amended from time to
time.
This consent, however, shall not extend to written notices of
allocation received by the stockholder member as part of a nonqualified payment
of patronage which clearly indicate on their face that they are nonqualified. By
way of illustration, the term "written notice of allocation" shall include such
items as the promissory notes, a notice or statement that such securities have
been deposited with a bank or other qualified agent on behalf of the stockholder
member, a notice of credit to the account of the stockholder member on the books
of the Co-op
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(against stock subscription or any other indebtedness as the Co-op may elect)
and such other forms of notice as the Board of Directors may determine,
distributed by the Co-op in payment, or part payment of the patronage dividends.
The stated dollar amount of the promissory notes is the principal amount
thereof.
9.7 Promissory Notes. Subject only to the payment of at least twenty
percent (20%) of each stockholder member's annual patronage dividend in cash,
the Co-op may pay each stockholder member all or any portion of the annual
patronage dividend in promissory notes which shall bear interest at the rate
from time to time fixed by the Board of Directors and shall mature at the time
fixed by the Board of Directors not later than five (5) years from the date of
issuance, and may be subordinated to any liabilities or obligations of the
Co-op, existing, contingent or created after the date of issuance. The Co-op
shall have a lien upon and a right of set off against any said promissory notes
issued to a stockholder member to secure payment of any indebtedness due the
Co-op or any of its subsidiaries by the stockholder member.
9.8 Application of Patronage Dividends to Amounts Due the Co-op.
Notwithstanding any of the foregoing provisions of this Article IX, the portion
of any patronage dividends which would otherwise be payable in cash under any
provision of this Article IX to a stockholder member may be applied by the Co-op
to the payment of any indebtedness, the repayment of which is in default, owed
to the Co-op by any such stockholder member to the extent of such indebtedness
instead of being distributed in cash, provided, however, that an amount equal to
twenty percent (20%) (or, in the case of a stockholder member located in a
jurisdiction to which the special withholding requirements of Sections 1441 or
1442 of the Internal Revenue Code of 1986, as amended, apply, thirty percent
(30%)) of the total annual patronage dividends distributable for the applicable
year to any such stockholder member shall nevertheless be paid in cash within
the period set forth in Section 9.4 if any such stockholder member so requests
in a writing received by the Co-op within thirty (30) days of the first day of
the Co-op's fiscal year as established under Section 6.3.
ARTICLE X
Amendments
10.1 Amendments to Bylaws. The Board of Directors shall have the power
to adopt, amend or repeal from time to time the Bylaws of the Co-op at any
regular meeting of the Board of Directors or at any special meeting of the Board
of Directors if notice of such adoption, amendment or repeal of the Bylaws be
contained in the notice of such special meeting, subject to the right of the
stockholder members to adopt, amend or repeal the Bylaws, at any regular meeting
of the stockholder members or at any special meeting of the stockholder members
if notice of such adoption, amendment or repeal of the Bylaws be contained in
the notice of such special meeting.
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KFC NATIONAL PURCHASING COOPERATIVE, INC.
PROXY FOR SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD DECEMBER 28, 2000
PLEASE MARK, SIGN, DATE AND RETURN IMMEDIATELY,
ALL HOLDERS OF MEMBERSHIP COMMON STOCK MAY VOTE.
The undersigned Stockholder Member of KFC National Purchasing
Cooperative, Inc. (the "Cooperative") hereby appoints David G. Neal, Daniel
E. Woodside or Alice LeBlanc, 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 special meeting of its stockholder members to be held at 10:00 a.m. on
December 28, 2000, 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. PLAN AND AGREEMENT OF MERGER.
To authorize and execute the Plan and Agreement of Merger, in
substantially the form attached to the Proxy Statement as Appendix A, and the
consummation of all the transactions contemplated therein, as more fully
described in the Proxy Statement.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
2. OTHER BUSINESS.
To transact all other matters and business related to the merger which
may properly come before the meeting.
Information regarding the matters to be acted upon at the Special
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 proxy or any substitutes,
will vote the share represented IN ACCORDANCE WITH THEIR DISCRETION on any
matters or business that may properly come before the meeting. THIS PROXY IS
SOLICITED BY THE BOARD OF DIRECTORS.
<PAGE> 91
Dated: ______________, 2000.
--------------------------------------------
(SIGNATURE OF STOCKHOLDER)
--------------------------------------------
(PRINTED NAME)
Please sign exactly as your name appears in the 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.
TO CONDUCT THE SPECIAL MEETING, WE MUST HAVE THE PRESENCE IN PERSON OR
BY PROXY OF STOCKHOLDER MEMBERS REPRESENTING A MAJORITY OF ALL STOCKHOLDER
MEMBERS AS OF THE RECORD DATE. THEREFORE, YOU ARE URGED TO SIGN, DATE AND RETURN
THE PROXY CARD.
PLEASE MAIL IN STAMPED ENVELOPE PROVIDED TO: JAMES A. GIESEL, FROST
BROWN TODD LLC, 400 WEST MARKET STREET, 32ND FLOOR, LOUISVILLE, KENTUCKY 40202.
A PROMPT RESPONSE WILL BE APPRECIATED.
