SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant (X)
Filed by a Party other than the Registrant ( )
Check the appropriate box:
( ) Preliminary Proxy Statement ( ) Confidential, for Use of the
Commission Only (as permitted
by Rule 14a-6(e)(2))
(X) Definitive Proxy Statement
( ) Definitive Additional Materials
( ) Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
COCA-COLA BOTTLING CO. CONSOLIDATED
(Name of Registrant as Specified in its Charter)
(Name of Person(s) Filing Proxy Statement, if other than Registrant)
Payment of Filing Fee (Check the appropriate box):
(X) No fee required
( ) Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
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):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
( ) Fee paid previously with preliminary materials.
( ) Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule, or Registration Statement No.:
3) Filing Party:
4) Date Filed:
COCA-COLA BOTTLING CO. CONSOLIDATED
1900 REXFORD ROAD
CHARLOTTE, NORTH CAROLINA 28211
(704) 551-4400
------------------------------------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
to be held on
May 13, 1998
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TO THE SHAREHOLDERS OF
COCA-COLA BOTTLING CO. CONSOLIDATED:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of
Coca-Cola Bottling Co. Consolidated, a Delaware corporation (the "Company"),
will be held at the Snyder Production Center, 4901 Chesapeake Drive, Charlotte,
North Carolina 28216 on Wednesday, May 13, 1998, at 10:00 a.m., Eastern
Daylight Time, for the purpose of considering and acting upon the following:
1. Fixing the number of directors at eleven;
2. Electing four directors, each for a term of three years or until his
successor shall be elected and shall qualify;
3. Approving the Company's new Long Term Incentive Plan in order to permit
bonuses paid thereunder to qualify as "performance-based" compensation
within the meaning of Section 162(m) of the Internal Revenue Code of
1986, as amended; and
4. Such other business as may properly come before the Annual Meeting of
Shareholders, or any adjournment or adjournments thereof.
Only shareholders of record of the Company's common stock (including both
Common Stock and Class B Common Stock) at the close of business on March 27,
1998, are entitled to notice of, and to vote at, the meeting or any adjournment
thereof. A list of shareholders will be available for inspection at least ten
days prior to the meeting at the principal executive offices of the Company,
1900 Rexford Road, Charlotte, North Carolina 28211.
By Order of the Board of Directors.
John F. Henry, Jr.
Secretary
Date: April 7, 1998
Proxy Statement
ANNUAL MEETING OF SHAREHOLDERS OF
COCA-COLA BOTTLING CO. CONSOLIDATED
to be held on May 13, 1998
INTRODUCTION
This Proxy Statement is being furnished by the Board of Directors of
Coca-Cola Bottling Co. Consolidated, a Delaware corporation (the "Company"), in
connection with the solicitation of proxies by the Company for use at the
Annual Meeting of Shareholders to be held at the Snyder Production Center, 4901
Chesapeake Drive, Charlotte, North Carolina 28216 on Wednesday, May 13, 1998,
at 10:00 a.m., Eastern Daylight Time, and at any adjournment or adjournments
thereof (the "Annual Meeting"). It is contemplated that the Proxy Statement and
accompanying form of proxy will be mailed to shareholders of the Company on or
about April 7, 1998. The principal executive offices of the Company are located
at 1900 Rexford Road, Charlotte, North Carolina 28211, telephone (704)
551-4400.
At the Annual Meeting, holders of the Company's Common Stock, par value
$1.00 per share ("Common Stock"), and of the Company's Class B Common Stock,
par value $1.00 per share ("Class B Common Stock"), will be asked to fix the
number of directors at eleven, to elect four directors, each for a term of
three years, and to approve the Company's new Long Term Incentive Plan in order
to permit bonuses paid thereunder to qualify as "performance-based"
compensation within the meaning of Section 162(m) of the Internal Revenue Code
of 1986, as amended.
The Board of Directors recommends that the Company's shareholders vote FOR
fixing the number of directors at eleven, FOR electing the four nominees for
director and FOR approving the Company's new Long Term Incentive Plan.
RECORD DATE, VOTE REQUIRED, AND RELATED MATTERS
The Board of Directors has fixed the close of business on March 27, 1998,
as the record date for the determination of shareholders entitled to notice of
and to vote at the Annual Meeting. As of the close of business on March 27,
1998, the Company had issued and outstanding 7,045,047 shares of Common Stock
(which number excludes 3,062,374 shares held in the Company's treasury)
entitled to one vote per share on all matters brought before the Annual Meeting
and 1,319,800 shares of Class B Common Stock (which number excludes 628,114
shares held in the Company's treasury) entitled to twenty votes per share on
all matters brought before the Annual Meeting (7,045,047 votes for the Common
Stock and 26,396,000 votes for the Class B Common Stock, for an aggregate of
33,441,047 votes). Each shareholder may exercise his right to vote either in
person or by properly executed proxy. Cumulative voting is not permitted. The
Common Stock and Class B Common Stock will vote as a single class on each of
the specific matters to be presented at the Annual Meeting which are discussed
herein.
1
Shares represented at the Annual Meeting by properly executed proxies will
be voted in accordance with the instructions indicated in the proxies unless
such proxies have previously been revoked.
If no instructions are indicated, such shares will be voted: (i) FOR
fixing the number of directors at eleven and (ii) FOR electing the Board of
Directors' nominees for director and (iii) FOR approving the Company's Long
Term Incentive Plan.
Any proxy given pursuant to this solicitation may be revoked at any time
by the shareholder giving it, insofar as it has not been exercised, by
delivering to the Secretary of the Company a written notice of revocation
bearing a later date than the proxy or by submission of a later-dated, properly
executed proxy. Attendance at the Annual Meeting will not, in and of itself,
constitute a revocation of a proxy. Any written notice revoking a proxy should
be sent to Coca-Cola Bottling Co. Consolidated, Post Office Box 31487,
Charlotte, North Carolina 28231, Attention: John F. Henry, Jr., Secretary.
The persons designated as proxies in the accompanying form of proxy have
been selected by the Board of Directors and are H.W. McKay Belk, H. Reid Jones
and John W. Murrey, III, directors of the Company. The cost of solicitation of
proxies will be borne by the Company.
The presence, in person or by proxy, of the holders of a majority of the
votes eligible to be cast by the holders of the outstanding shares of Common
Stock and Class B Common Stock entitled to vote (16,720,524 votes) is necessary
to constitute a quorum at the Annual Meeting. The affirmative vote of a
majority of the total votes represented at the Annual Meeting, in person or by
proxy, by holders of outstanding shares of Common Stock and Class B Common
Stock is required to fix the number of directors at eleven and to approve the
Long Term Incentive Plan. A plurality of the vote is necessary to elect the
Board of Directors' nominees. Abstentions and broker non-votes shall not be
considered affirmative votes, and will have no effect upon the election of
directors by a plurality vote. With respect to fixing the number of directors
at eleven and approving the Long Term Incentive Plan, an abstention will have
the same effect as a "NO" vote and broker non-votes will have no effect.
The Board of Directors has been informed that J. Frank Harrison, Jr., J.
Frank Harrison, III and Reid M. Henson intend to vote an aggregate of 3,008,535
shares of the Company's Common Stock and 1,317,942 shares of the Company's
Class B Common Stock (representing an aggregate of 29,367,375 votes) FOR fixing
the number of directors at eleven, FOR electing the Board of Directors'
nominees for director and FOR approving the Company's Long Term Incentive Plan.
Such number of shares includes the 2,213,007 shares of Common Stock and the
269,158 shares of Class B Common Stock owned by The Coca-Cola Company, which
are voted by J. Frank Harrison, III pursuant to the terms of a Voting Agreement
between The Coca-Cola Company and Messrs. Harrison, Jr., Harrison, III and
Henson (in Mr. Henson's capacity as co-trustee of certain trusts holding shares
of Class B Common Stock). See "Principal Shareholders" and "Certain
Transactions." Accordingly, it is anticipated that the number of directors will
be fixed at eleven, the Board of Directors' nominees for director will be
elected and the Company's new Long Term Incentive Plan will be approved.
The Board of Directors of the Company is not aware of any other matter to
be brought before the Annual Meeting. If, however, other matters are properly
presented, proxies received in response to this solicitation representing
shares of Common Stock and Class B Common Stock will be cast in accordance with
the best judgment of the proxyholders on such other matters.
2
A copy of the Company's Annual Report for the fiscal year ended December
28, 1997, is enclosed herewith.
PRINCIPAL SHAREHOLDERS
The following table sets forth information as to the shares of Common
Stock and Class B Common Stock, the only classes of voting securities of the
Company with shares outstanding, beneficially owned as of March 10, 1998
(except as otherwise noted), by each person known to the Company to be the
beneficial owner of more than 5% of the outstanding Common Stock or Class B
Common Stock. As of such date, the Company had issued and outstanding 7,045,047
shares of Common Stock and 1,319,800 shares of Class B Common Stock.
Amount and
Nature of Percent Percent
Title Beneficial of Aggregate of Total
Name of Class Ownership(1) Class(2) Vote Vote(2)
- ---------------------------- ---------------------- ------------------------------ ---------- ------------ ---------
J. Frank Harrison, Jr., Common Stock 4,804,763(3)(4) 55.8
J. Frank Harrison, III Class B Common Stock 1,317,942(3)(4)(5) 99.9 29,603,161 88.5
and Reid M. Henson,
as a Group
2 Union Square
Chattanooga, TN 37402
The Coca-Cola Company Common Stock 2,213,007(6) 31.4
One Coca-Cola Plaza Class B Common Stock 269,158(6) 20.4 7,596,167 22.7
Atlanta, GA 30313
Tweedy, Browne Common Stock 525,680(7) 7.5 525,680 1.6
Company, L.P.
TBK Partners, L.P.
Vanderbilt Partners, L.P.
52 Vanderbilt Avenue
New York, NY 10017
- ------
(1) In general, a person is deemed to be a beneficial owner of a security
if that person has or shares voting power, which includes the power to
vote or direct the voting of such security, or investment power, which
includes the power to dispose of, or to direct the disposition of, such
security; or if a person has the right to acquire either voting power
or investment power over such security through the exercise of an
option or conversion of another security within 60 days. More than one
person may be a beneficial owner of the same securities, and a person
may be deemed to be a beneficial owner of securities as to which he has
no personal economic interest or which he may not vote.
(2) The percentages shown are based upon the number of shares outstanding
(net of shares held in treasury). In the case of J. Frank Harrison,
Jr., J. Frank Harrison, III and Reid M. Henson, in which beneficial
ownership includes (i) shares of Common Stock that would result from a
conversion of Class B Common Stock into such shares or (ii) shares of
Common Stock
3
which Messrs. Harrison, Jr. and Harrison, III presently have the right
to acquire through exercise of options, the percentages of class shown
give effect to such conversion and to the exercise of such options. In
calculating the aggregate vote and percent of total vote, however, no
effect is given to conversion of Class B Common Stock into Common Stock
or to the exercise of such unexercised options. In the case of The
Coca-Cola Company, beneficial ownership shown in the table does not
include shares of Common Stock that would result from a conversion of
Class B Common Stock into such shares.
(3) The amounts shown include (a) as to Common Stock: (i) 792,796 shares
owned outright by J. Frank Harrison, Jr. as to which he has sole voting
and investment power; (ii) 235,786 shares held by a trust for the
benefit of certain relatives of Mr. Harrison, Jr. as to which he has
sole voting power and no investment power; (iii) 2,213,007 shares held
by The Coca-Cola Company subject to the terms of the Voting Agreement
and Irrevocable Proxy (described elsewhere) as to which J. Frank
Harrison, III has shared voting and no investment power; (iv) 732
shares held by Mr. Harrison, III as custodian for certain of his
children under the North Carolina Uniform Gifts to Minors Act, as to
which Mr. Harrison, III possesses sole voting and investment power; (v)
2,000 shares owned outright by Reid M. Henson; (vi) 1,317,942 shares of
Class B Common Stock, convertible into Common Stock on a one for one
basis at the option of the holder of such shares, and which are
beneficially owned by Messrs. Harrison, Jr., Harrison, III and Henson
as described in subsection (b) of this Note (3); and (vii) 100,000
shares of Common Stock which Mr. Harrison, Jr. presently has the right
to acquire through exercise of options and 142,500 shares of Common
Stock which Mr. Harrison, III presently has the right to acquire
through exercise of options; and (b) as to Class B Common Stock: (i)
712,796 shares owned outright by Mr. Harrison, Jr. as to which he has
sole voting and investment power; (ii) 235,786 shares held by a trust
for the benefit of Mr. Harrison, Jr. and certain of his relatives as to
which Mr. Harrison, III and Mr. Henson share investment power as
co-trustees and as to which Mr. Harrison, Jr. possesses sole voting
power; (iii) 260 shares held by Mr. Harrison, III as custodian for
certain of his children under the North Carolina Uniform Gifts to
Minors Act, as to which Mr. Harrison, III possesses sole voting and
investment power; (iv) 99,942 shares held by certain trusts as to which
Mr. Harrison, III and Mr. Henson share investment power as co-trustees
and as to which Mr. Harrison, Jr. possesses sole voting power; and (v)
269,158 shares held by The Coca-Cola Company subject to the terms of
the Voting Agreement and Irrevocable Proxy (described elsewhere) as to
which Mr. Harrison, III has shared voting and no investment power.
(4) J. Frank Harrison, Jr., J. Frank Harrison, III and Reid M. Henson (as
trustee of certain trusts holding shares of Class B Common Stock) are
parties to a Voting Agreement and a Shareholder's Agreement entered
into with The Coca-Cola Company. Pursuant to the Voting Agreement, Mr.
Harrison, III has been granted an Irrevocable Proxy for life and,
thereafter, to Mr. Harrison, Jr., covering the shares of Common Stock
and Class B Common Stock held by The Coca-Cola Company. Accordingly,
Messrs. Harrison, Jr., Harrison, III and Henson may be deemed to be a
group as such term is defined in certain regulations of the Securities
and Exchange Commission. Information concerning the Voting Agreement,
Shareholder's Agreement and Irrevocable Proxy is disclosed hereinafter
under the heading "Certain Transactions."
4
(5) A trust of which J. Frank Harrison, Jr. is a beneficiary and J. Frank
Harrison, III and Reid M. Henson are co-trustees has the right to
acquire 292,396 shares of Class B Common Stock from the Company in
exchange for an equal number of shares of Common Stock. Mr. Harrison,
Jr. would have sole voting power, and Messrs. Harrison, III and Henson
would have shared investment power upon such acquisition. The trust
does not own any shares of Common Stock with which to make such
exchange and, accordingly, the number of shares shown does not include
such shares.
(6) The information presented is derived from a report on Schedule 13D
dated May 18, 1987, as amended through Amendment Number 17 thereto
dated December 22, 1997, filed by The Coca-Cola Company as to its
beneficial ownership (through subsidiaries) of Common Stock and Class B
Common Stock of the Company. The Coca-Cola Company has granted the
power to vote all 2,213,007 shares of Common Stock and 269,158 shares
of Class B Common Stock it beneficially owns to J. Frank Harrison, III
for life and, thereafter, to J. Frank Harrison, Jr., pursuant to a
Voting Agreement and Irrevocable Proxy described elsewhere herein under
the heading "Certain Transactions."
(7) The information presented is derived from a report on Schedule 13D
dated March 31, 1995, as amended through Amendment Number 5 thereto
dated January 6, 1998, filed by Tweedy, Browne Company, LLC ("TBC"),
TBK Partners, L.P. ("TBK") and Vanderbilt Partners, L.P. ("Vanderbilt")
with respect to their aggregate beneficial ownership of shares of
Common Stock of the Company. TBC is a registered broker-dealer and
investment adviser and each of TBK and Vanderbilt is a private
investment partnership. Certain of the general partners of TBK and
Vanderbilt are also members of TBC. They report beneficial ownership as
follows: (i) TBC has shared investment power with respect to 505,380
shares of Common Stock held in discretionary accounts of various TBC
customers and has sole voting power with respect to 449,073 of such
shares and (ii) TBK has sole voting and investment power with respect
to 20,300 shares of Common Stock. Amendment Number 5 to the Schedule
13D reports that Vanderbilt no longer holds any shares of the Company's
Common Stock.
PROPOSALS 1 AND 2
ELECTION OF DIRECTORS
General
The Certificate of Incorporation of the Company provides that the Board of
Directors shall consist of not less than nine nor more than twelve members as
fixed from time to time by the shareholders of the Company or the Board of
Directors. It also provides that the Board of Directors shall be divided into
three classes, as nearly equal in number as possible, with staggered three-year
terms. The Board of Directors is permitted to appoint individuals as directors
to fill the unexpired terms of directors who resign.
The Board of Directors has recommended to the shareholders fixing the
number of directors at eleven and electing the four nominees listed below to
serve for three-year terms. The directors to be elected at this year's Annual
Meeting will hold office until the 2001 Annual Meeting of Shareholders, or
until their successors are elected and qualified.
5
It is intended that the persons named as proxies in the accompanying form
of proxy will vote for the three nominees listed below, unless the authority to
vote is withheld. Each nominee is at present a member of the Board of
Directors. Although the Company's management expects that each of the nominees
will be available for election, in the event a vacancy in the slate of nominees
should occur, it is intended that shares represented by proxies in the
accompanying form will be voted for the election of a substitute nominee
selected by the Board of Directors.
The names and terms of office of the nominees and directors of the
Company, their ages, their principal occupations or employments (which have
continued for at least the past five years unless otherwise noted),
directorships held by them in certain other publicly held corporations or
investment companies, the dates they first became directors of the Company and
certain other information with respect to such nominees and directors are as
follows:
NOMINEES FOR ELECTION OF DIRECTORS IN 1998
(Terms Expiring in 2001)
J. FRANK HARRISON, JR., age 67, is Chairman Emeritus of the Board of
Directors of the Company. Mr. Harrison, Jr. served the Company as Chairman of
the Board of Directors from 1977 through December 1996, and served as Chief
Executive Officer of the Company from August 1980 until April 1983. He had
previously served the Company as Vice Chairman of the Board of Directors. He
has been a director of the Company since 1973. Mr. Harrison, Jr. is Chairman of
the Executive Committee and the Finance Committee of the Company's Board of
Directors.
J. FRANK HARRISON, III, age 43, is Chairman of the Board of Directors and
Chief Executive Officer of the Company. Mr. Harrison, III served in the
capacity of Vice Chairman of the Board of Directors from his election in
November 1987 through his election as Chairman in December 1996 and was
appointed as the Company's Chief Executive Officer in May 1994. He was first
employed by the Company in 1977, and has served as a Division Sales Manager and
as a Vice President of the Company. Mr. Harrison, III is a director of Wachovia
Bank & Trust Co., N.A., Southern Region Board. He is a member of the Executive
Committee, the Audit Committee and the Finance Committee.
JAMES L. MOORE, JR., age 55, is President and Chief Operating Officer of
the Company. Prior to his election as President in March 1987, he served as
President and Chief Executive Officer of Atlantic Soft Drink Co., a soft drink
bottling subsidiary of Grand Metropolitan USA. Mr. Moore has been a director of
the Company since March 1987. Mr. Moore is a director of Brothers Gourmet
Coffees, Inc. He is a member of the Executive Committee and is Chairman of the
Retirement Benefits Committee.
NED R. McWHERTER, age 67, is Chairman of the Board of Directors of
Volunteer Distributing Company, Inc. and Eagle Distributors, Inc. of Dresden,
Tennessee. Mr. McWherter served as Governor of the State of Tennessee from
January 1987 to January 1995. He has been a director of the Company since 1995
and is a member of the Compensation Committee and the Finance Committee.
6
DIRECTORS WHOSE TERMS DO NOT EXPIRE THIS YEAR
(Terms Expiring in 1999)
JOHN M. BELK, age 78, is Chairman of the Board of Directors of Belk Stores
Services Inc., operators of retail department stores, and of Belk Brothers
Company, Charlotte, North Carolina. He serves as an officer or director, or
both, of approximately 110 retail corporations in the Belk organization. Mr.
Belk presently is a director of Lowe's Companies, Inc. and Chaparral Steel
Company. Mr. Belk has been a director of the Company since 1972 and is a member
of the Audit Committee.
CHARLES L. WALLACE, age 56, is Vice President and Executive Assistant to
the Chairman of The Coca-Cola Company, in which capacity he has served since
December 1997. Mr. Wallace previously served as Executive Assistant, Office of
the President of The Coca-Cola Company from July 1994 through December 1997.
From 1982 through July 1994, Mr. Wallace served as Vice President,
Contractual/Bottler Relations of Coca-Cola USA. Mr. Wallace has been a director
of the Company since February 23, 1998, when he was appointed by the Board to
fill the position vacated upon the resignation of David L. Kennedy, Jr., who
had served as a director of the Company since 1990. He is a member of the
Finance Committee and the Compensation Committee.
REID M. HENSON, age 58, has served as a Vice Chairman of the Board of
Directors of the Company since 1983. Prior to that time, Mr. Henson served as a
consultant to JTL Corporation, a management company, and later as President of
JTL Corporation. He has been a director of the Company since 1979, is Chairman
of the Audit Committee and is a member of the Executive Committee, the
Retirement Benefits Committee and the Finance Committee.
EVANDER HOLYFIELD, age 35, is a professional athlete who is the three-time
and current heavyweight boxing champion of the world. Mr. Holyfield is Chairman
of Holyfield Management, Inc., Fairburn, Georgia. Mr. Holyfield has been a
director of the Company since March 11, 1998, when he was appointed by the
Board to fill a new position created by the expansion of the Company's Board of
Directors from ten to eleven members.
(Terms Expiring in 2000)
H. W. MCKAY BELK, age 41, is President, Chief Merchandise Officer of Belk
Stores Services Inc., operators of retail department stores, a position which
he has held since March 1997. Mr. Belk served as President, Merchandise and
Sales Promotion of Belk Stores Services, Inc. from April 1995 through March
1997, and he had previously served as Senior Vice President, Merchandising from
April 1992 through April 1995. Prior to April 1992, Mr. Belk had served as Vice
President, General Merchandise Manager of Belk Brothers Company, Charlotte,
North Carolina, since 1988. He has been a director of the Company since May 18,
1994 and is Chairman of the Compensation Committee.
H. REID JONES, age 63, is retired. Prior to his retirement in 1982, he was
a Commercial Account Representative of Bagwell & Bagwell, Inc., an independent
insurance agency in Raleigh, North Carolina. He has been a director of the
Company since 1970 and is a member of the Audit Committee.
7
JOHN W. MURREY, III, age 55, is a member of the law firm of Witt, Gaither
& Whitaker, P.C., general counsel to the Company, in Chattanooga, Tennessee
with which he has been associated since 1970. He served as Secretary of the
Company from 1985 to 1993. He has been a director of the Company since March
17, 1993. Mr. Murrey is a director of The Dixie Group, Inc. He is a member of
the Audit Committee and the Retirement Benefits Committee.
No director, nominee or executive officer of the Company has any family
relationship, not more remote than first cousin, to any other director, nominee
or executive officer, except that J. Frank Harrison, III is J. Frank Harrison,
Jr.'s son and H. W. McKay Belk is John M. Belk's nephew.
Beneficial Ownership of Management
The following table presents certain information regarding the amount and
nature of beneficial ownership of the Company's equity securities by its
directors and nominees, by the Company's executive officers named in the
Summary Compensation Table (see "Executive Compensation") and by all directors
and executive officers, as a group, as of March 10, 1998. Information
concerning beneficial ownership of the Company's equity securities by Messrs.
Harrison, Jr., Harrison, III and Henson is presented above under the caption
"Principal Shareholders" and is not set forth below.
Beneficial Percent of
Name Class Ownership(1) Class(2)
- ------------------------------- -------------- -------------- -----------
John M. Belk Common Stock 10,475(3) *
H.W. McKay Belk Common Stock 520(4) *
Evander Holyfield Common Stock -- --
H. Reid Jones Common Stock 79,715 1.1
Charles L. Wallace Common Stock -- --
Ned R. McWherter Common Stock 1,000 *
James L. Moore, Jr. Common Stock -- --
John W. Murrey, III Common Stcok 1,000 *
David V. Singer Common Stock 2,000 *
James B. Stuart Common Stock 1,000 *
Directors and executive Common Stock 95,710(5) 1.4
officers as a group
(excluding Messrs.
Harrison, Jr., Harrison, III
and Henson) (19 persons)
- ------
* Indicates the number of shares owned is less than 1% of the total shares
of that class outstanding.
(1) See note 1 to table of Principal Shareholders.
(2) The percentages shown are based upon the number of shares outstanding
and do not include shares held in treasury.
(3) The amount shown includes (i) 8,975 shares held by a trust as to which
John M. Belk and his spouse serve as co-trustees and with respect to
which he shares voting and investment
8
power and (ii) 1,500 shares held by a trust for the benefit of John M.
Belk's daughter, as to which his spouse serves as trustee with sole
voting and investment power.
(4) The amount shown includes 300 shares held by H.W. McKay Belk as
custodian for certain of his children under the North Carolina Uniform
Transfers to Minors Act.
(5) Of the number of shares indicated: (i) 85,235 shares of Common Stock
are owned with sole voting and sole investment power; (ii) 8,975 shares
are owned by a director and his spouse in a joint fiduciary capacity
and (iii) 1,500 shares of Common Stock are owned by directors' spouses,
either directly or in a fiduciary capacity.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, and regulations of
the Securities and Exchange Commission ("SEC") thereunder, require the
Company's executive officers and directors and persons who beneficially own
more than 10% of the Company's Common Stock, as well as certain affiliates of
such persons, to file initial reports of ownership and monthly transactions
reports covering any changes in ownership with the SEC and the National
Association of Securities Dealers. Executive officers, directors and persons
owning more than 10% of the Company's Common Stock are required by SEC
regulations to furnish the Company with all such reports they file. Based
solely on its review of the copies of such reports received by it and written
representations that no other reports were required for such persons, the
Company believes that, during fiscal year 1997, all filing requirements
applicable to its executive officers, directors and owners of more than 10% of
the Company's Common Stock were complied with, except for one report which was
filed late by Mr. Kenny.
Directors' Fees and Attendance
Directors who are not employees of the Company are paid a retainer of
$18,800 per year, $1,100 for each Board meeting attended and $880 for each
committee meeting attended. During 1997, the Board of Directors held four
meetings. No director attended fewer than 75% of the total number of meetings
of the Board of Directors and any committees of the Board of Directors on which
he served.
The Board of Directors has an Executive Committee whose current members
are Messrs. Harrison, Jr., Harrison, III, Henson and Moore. Except as otherwise
limited by law or by resolution of the Board of Directors, the Committee has
and may exercise all of the powers and authority of the Board of Directors for
the management of the business and affairs of the Company, which power the
Committee exercises between the meetings of the full Board of Directors. The
Executive Committee met one time in 1997.
The Board of Directors has a standing Audit Committee whose current
members are Messrs. Harrison, III, John M. Belk, Jones, Henson and Murrey. The
Audit Committee evaluates audit performance, handles relations with the
Company's independent accountants and evaluates policies and procedures
relating to internal accounting functions and controls. The Committee
recommends to the Board of Directors the appointment of the independent
accountants for the Company. The Audit Committee met four times in 1997.
9
The Board of Directors has a Compensation Committee whose current members
are Messrs. H. W. McKay Belk, Wallace and McWherter. The Compensation Committee
administers the Company's compensation plans, reviews and may establish the
compensation of the Company's officers and makes recommendations to the Board
of Directors concerning such compensation and related matters. The Compensation
Committee met two times in 1997.
The Board of Directors has a Finance Committee whose current members are
Messrs. Harrison, Jr., Harrison, III, Henson, Wallace and McWherter. The
Finance Committee reviews, formulates and recommends to the Board of Directors
financial policies of the Company. The Finance Committee met four times in
1997.
The Board of Directors has a Retirement Benefits Committee whose current
members are Messrs. Henson, Moore and Murrey. The Retirement Benefits Committee
oversees various benefits for retired employees, including those of the
Company's employee retirement plans that are intended to meet the requirements
of the Internal Revenue Code as being qualified for favorable tax treatment.
The Retirement Benefits Committee met two times in 1997.
The Board of Directors does not have a standing nominating committee or
committee performing similar functions.
EXECUTIVE COMPENSATION
Set forth below is information concerning the annual and long-term
compensation for all services rendered in all capacities to the Company for
each of the last three (3) fiscal years for those persons who were at December
28, 1997 (i) the chief executive officer and (ii) the other four most highly
compensated executive officers of the Company (the "Named Officers").
Summary Compensation Table
Annual Compensation
------------------------------------------------
Other Annual All Other
Name and Principal Position Year Salary(1) Bonus(1),(2) Compensation(3) Compensation(4)
- ----------------------------- ------ ----------- -------------- ----------------- ----------------
J. Frank Harrison, III 1997 $424,229 $436,881 $163,691 $249,224
Chairman of the Board and 1996 337,325 384,087 132,192 241,915
Chief Executive Officer 1995 308,250 352,000 84,205 246,116
Reid M. Henson 1997 384,584 382,930 28,863 56,256
Vice Chairman of 1996 366,251 415,512 26,924 55,748
the Board of Directors 1995 349,350 399,000 19,464 54,443
James L. Moore, Jr. 1997 497,670 493,158 41,523 103,005
President and 1996 473,972 537,722 33,851 101,449
Chief Operating Officer 1995 452,100 517,000 28,934 99,633
David V. Singer 1997 273,945 129,316 34,984 31,601
Vice President and 1996 259,663 147,350 21,272 31,128
Chief Financial Officer 1995 246,600 141,000 16,053 30,391
James B. Stuart 1997 280,717 132,361 17,711 58,883
Vice President, 1996 269,816 152,995 11,143 59,276
Marketing 1995 258,499 148,000 9,690 59,582
10
- ------
(1) The amounts shown for Salary and Bonus include any amounts elected by
any Named Officer to be deferred under either the Company's
Supplemental Savings Incentive Plan (as discussed herein) or, pursuant
to Section 401(k) of the Internal Revenue Code, under the terms of the
Coca-Cola Bottling Co. Consolidated Savings Plan. Company contributions
on behalf of the Named Officers under each of these plans are included
in the "All Other Compensation" column of this table.
(2) The Company's Bonus Plan is administered by the Compensation Committee
of the Board. Any officer of the Company or any of its subsidiaries
holding a key position with the Company (or a subsidiary) is eligible
to participate, and participants are selected annually based on
management recommendations approved by the Compensation Committee.
Annual Bonus Plan awards are determined by the Compensation Committee
based on corporate or divisional goals for selected performance
indicators which it establishes annually. Awards are generally made on
the basis of a graduated scale ranging from a "goal achievement"
exceeding 89% of the target to a maximum achievement of 110% of the
target. See "Report of the Compensation Committee on Annual
Compensation of Executive Officers."
(3) In the case of Mr. Harrison, III, the 1997 figures include an amount
($121,955), representing the value of Mr. Harrison, III's personal use
of Company aircraft.
(4) Detail of amounts reported in the "All Other Compensation" column for
1997 is provided in the table below. Split-dollar insurance represents
the premiums paid by the Company for the benefit of each Named Officer.
Item Mr. Harrison, III Mr. Henson Mr. Moore Mr. Singer Mr. Stuart
- --------------------------------------- ------------------- ------------ ----------- ------------ -----------
o Company contributions to the
Company Savings Plan $ 3,175 $ 3,175 $ 3,175 $ 3,175 $ 3,125
o Company contributions to the
Supplemental Savings Incentive
Plan 13,686 16,281 17,776 9,587 14,184
o Split-Dollar Insurance Premium
Value 232,363 36,800 82,054 18,839 41,574
-------- -------- -------- -------- -------
Total All Other Compensation $249,224 $ 56,256 $103,005 $ 31,601 $58,883
======== ======== ======== ======== =======
Aggregated Option/SAR Exercises in Last Fiscal Year and FY-End Option/SAR
Values
Following is information with respect to unexercised options to purchase
the Company's Common Stock held by Named Officers as of December 28, 1997. None
of the Named Officers exercised any stock options during fiscal year 1997.
Based on the closing price of $66.875 for shares of the Company's Common Stock
on NASDAQ/NMS on December 26, 1997, the last trading day prior to the end of
the Company's 1997 fiscal year, the value of the unexercised options as of the
end of the Company's fiscal year was as disclosed in the table below. The
Company has no outstanding SARs.
11
Number of Securities Value of
Underlying Unexercised
Unexercised Options/ In-the-Money Options/
SARs Held at SARs Held at
December 28, 1997 December 28, 1997
(#) ($)
------------------------------- ------------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
- --------------------------------- ------------- --------------- ------------- --------------
J. Frank Harrison, III (1) 142,500 7,500 $5,290,313 $278,438
- ------
(1) All options set forth above were granted to Mr. Harrison, III pursuant
to a Stock Option Agreement effective August 9, 1989 and are
exercisable at the price of $29.75 per share. The unexercisable options
will become exercisable on December 31, 1998. Subject to the
foregoing, the option may be exercised in whole or in part at any time
during a 15 year period commencing on the date of grant.
Retirement Plan
The Company has in effect a unit benefit retirement plan for the majority
of its non-union employees (the "Retirement Plan"), with payments thereunder
computed on an actuarial basis. The following table shows the estimated annual
benefits payable upon retirement at age 65 to persons born in 1947 for various
classifications of compensation and years of service.
ANNUAL BENEFIT UNDER RETIREMENT PLAN
For Plan Participants Born in 1947
Years of Service
Five-Year -------------------------------------------------------------------
Average
Compensation 15 Years 20 Years 25 Years 30 Years 35 Years
- ---------------- ---------- ---------- ---------- ---------- ---------------
$ 125,000 $24,948 $33,264 $41,580 $49,896 $ 49,896
160,000(1) 33,348 44,464 55,580 66,696 66,696(2)
- ------
(1) Prior to January 1, 1989, the formula for determining benefits did not
limit the amount of compensation (generally compensation as reported on
Form W-2 for income tax withholding purposes) which could be
considered. Benefits which accrue after December 31, 1988 are limited
as to the amount of compensation which may be considered. Beginning in
1989, this amount was limited to $200,000 to be adjusted for cost of
living increases beginning in 1990. In 1994 the amount was further
reduced to $150,000, which amount is to be adjusted for cost of living
increases beginning in 1995, but only to the extent that such increases
exceed increments of $10,000. The limit did not increase for 1995 or
1996; however, the amount increased to $160,000 for benefits earned in
1997 and 1998. No retroactive adjustments are permitted. Since the
allowable annual benefit amount is the same for all compensation levels
in excess of the current limit of $160,000, the table does not
separately list the annual benefit for such additional levels of
compensation.
(2) The annual benefit from the Retirement Plan may not exceed $90,000 as
adjusted for cost of living increases beginning in 1988. In 1997 the
amount, as adjusted, is $125,000; it will be $130,000 in 1998. This
benefit is reduced by 1/15 for each of the first three years that
actual retirement precedes a participant's Social Security Retirement
Age. For someone born in
12
1947, the Social Security Retirement Age is 66. In 1997 the maximum
benefit was $116,667 for a person who retires at age 65, the earliest
Normal Retirement Age specified by the Retirement Plan; the maximum
benefit amount is $121,333 for 1998.
The benefits listed in the table, which are based on straight life annuity
amounts, are not subject to any deduction for Social Security or other offset
amounts, except to the extent that the benefits formula includes average
compensation in excess of Covered Compensation (as defined below). As of
December 28, 1997, the Named Officers have the following full years of service
as defined in the Retirement Plan: Mr. Harrison III, 21 years; Mr. Henson, 15
years; Mr. Moore, 11 years; Mr. Singer, 12 years; and Mr. Stuart, 9 years.
Generally, compensation is remuneration paid to Retirement Plan
participants by the Company for services rendered as reported or reportable for
federal income tax withholding purposes. During a period of disability, a
participant is deemed to have earned compensation at the same rate he was paid
during the last full year prior to the disability. In general, Covered
Compensation is the average of the Social Security taxable wage base during the
35 year period ending in the year that the participant reaches full Social
Security Retirement Age. At any point in time, this taxable wage base is
assumed to continue without increasing for all years after the year in which it
is calculated. Pursuant to these assumptions, Covered Compensation for 1997 for
the Named Officers is as follows: Mr. Moore, $47,616; Mr. Stuart, $47,616; Mr.
Henson, $42,792; Mr. Singer, $62,724; Mr. Harrison, III, $61,440. No benefits
are payable to a participant whose employment terminates before he has been
credited with five years of service or has both reached age 65 and begun to
participate in the Retirement Plan at least five years before his employment
terminated.
Officer Retention Plan
Under the Company's Officer Retention Plan ("ORP"), a participant receives
a 20-year annuity payable in equal monthly installments commencing at
retirement or, in certain instances, upon termination of employment. The
retirement benefits under the ORP increase with each year of the participant's
participation in the ORP based on the product of an assumed rate of increase in
a participant's beginning salary (as determined by the Compensation Committee)
and factors prescribed by the ORP. The retirement benefits under the ORP are
not payable to the participants unless they remain in the employment of the
Company until they attain age 60, except in the event of total disability (at
which time they would be paid on a present value basis).
The ORP contains a death benefit which must be paid in a lump sum. If the
participant dies before annuity payments begin, then the death benefit equals
the retirement benefit accrued as of the date of death, except that there is a
further reduction of 50% of the amount otherwise payable for deceased
participants whose employment with the Company terminated prior to age 60. If
the participant dies after annuity payments have begun, the monthly
installments remaining are paid to the participant's beneficiary in a lump sum
after applying a discount rate of 8% per annum.
The ORP provides that in the event of a Change in Control in the ownership
of the common stock of the Company (as more specifically described in
connection with the Supplemental Savings Incentive Plan below), if in
connection therewith (i) the ORP is terminated by the Company or amended so
13
as to materially reduce the rights and benefits of an ORP participant, (ii) the
participant is terminated by the Company without cause, (iii) the participant
is demoted or has his salary and/or benefits materially reduced, or (iv) the
Company takes other action which denies the participant the position and
economic entitlements which he had under the ORP prior to the Change in
Control, then the participant may elect to have paid to him 100% of the
retirement benefits to which he was entitled at the time of the Change in
Control, plus 50% of any increase in his retirement benefits which accrued
between the date of the Change in Control through the date of his election.
The 1997 annual compensation used for determining benefits under the ORP
for the Named Officers is as follows: Mr. Harrison, III, $578,198; Mr. Henson,
$386,098; Mr. Moore, $499,653; Mr. Singer, $275,140; and Mr. Stuart, $304,872.
Each of those individuals presently is credited with six years of participation
in the ORP.
Supplemental Savings Incentive Plan
Pursuant to the Company's Supplemental Savings Incentive Plan ("SSIP"),
the Company and the participant agree to defer a portion of salary and bonuses.
The Company matches 30% of the first 6% of salary (excluding bonuses) deferred
by the participant. The Company may also make discretionary contributions to
any one or more participants which contributions are to be both based on merit
and intended to offset the impact of the reduced compensation limit for
qualified plans (see "Retirement Plan,"above). A participant is fully vested in
the salary and bonuses he defers and becomes fully vested in Company
contributions upon death, disability, retirement on or after age 55, the
completion of at least five years of service (vesting occurring at a 20% rate
for each year of service) or a Change in Control. "Change in Control" for these
purposes includes the acquisition by any person or group of more than 50% of
the total vote of all shares of common stock of the Company for the election of
the Board of Directors and is presumed to occur in the event that J. Frank
Harrison, Jr. and his issue (or persons acting on their behalf) should be
entitled to vote less than 50% of the total votes of all shares of common stock
of the Company for the election of directors. Deferrals and Company
contributions may be placed in either a Fixed Benefit Option or designated
among investment funds specified by the Company. Such investment funds are only
used to measure the value of benefits, which benefits comprise the Supplemental
Account of a participant. There is no requirement that any money held in the
SSIP actually be invested in any such fund.
The schedule of benefits for a Fixed Benefit Option provides for earnings
up to 13% (depending on the participant's age and years of service at
retirement or termination due to total disability, as applicable). Benefits
which start after age 60 are increased at the rate of 6% compounded annually,
while benefits paid on account of severance are deemed to earn 8% compounded
annually.
Amounts held in a Supplemental Account may be transferred to a Fixed
Benefit Option. No investment in a Fixed Benefit Option may be transferred to a
Supplemental Account.
Benefits paid on account of a Change in Control are made within 30 days
following a Change in Control; all other payments are made (or begin) in the
first January after a payment has been requested and satisfactory evidence has
been furnished that the participant has become entitled to receive such
14
benefit. All benefits for severance, benefits arising from a Change in Control,
death benefits for participants who are not insurable, and benefits payable out
of Supplemental Accounts are made in a lump sum. Other payments made from the
Fixed Benefit Option are normally paid on a monthly basis for 180 months,
although the Compensation Committee may approve a lump sum payment or an
annuity for a period of less than 180 months. No executive officer received a
distribution during 1997. The amount of Company contributions allocated to each
of the Named Officers during 1997 is reflected in the Summary Compensation
Table under the heading, "All Other Compensation."
Officers' Split-Dollar Life Insurance Plan
The Company has established an Officers' Split-Dollar Life Insurance Plan
for all officers, including the Named Officers. Special arrangements have been
provided for J. Frank Harrison, III and Reid M. Henson, as described below.
Insurance policies purchased under the plan are whole life policies having a
face amount, in most instances, equal to approximately three times each
officer's salary (approximately six times in the case of the Named Officers).
The Company pays all premiums on each officer's policy. Policy dividends are
used to purchase paid up additions. Upon the death of any participant, the
participant's beneficiary would receive a stated death benefit, with the
balance of the proceeds from the participant's policy being paid to the
Company.
The dollar amount representing the insurance premiums paid by the Company
for the benefit of each of the Named Officers under the Officers' Split-Dollar
Life Insurance Plan is included in the Summary Compensation Table under the
heading "All Other Compensation."
A separate split-dollar insurance policy has been obtained covering Mr.
Henson. In the event of his death, the Company would receive an amount equal to
all premiums paid on the policy, subject to the death benefit payable to Mr.
Henson's beneficiary being not less than $1,000,000.
The split-dollar life insurance arrangement for J. Frank Harrison, III
varies from the standard split-dollar plan. A trust established by Mr.
Harrison, III pays the PS-58 cost and the Company pays the remaining portion of
the premium. This arrangement allows Mr. Harrison, III to obtain additional
insurance coverage with no increase in the net present value of the projected
costs of this arrangement for the Company. Under this revised arrangement, at
the death of the insured the Company receives a return of the aggregate
premiums it has paid.
Employment Agreements
James L. Moore, Jr., is employed as President and Chief Operating Officer
pursuant to an employment agreement dated March 16, 1987, as amended on May 18,
1994, at an annual salary of not less than $275,000. Mr. Moore is also entitled
under the agreement to other fringe benefits generally available from time to
time to the Company's executive officers. The agreement provides that it may be
terminated by either party at any time, with or without cause. In the event Mr.
Moore's employment is terminated by the Company for cause (as defined in the
agreement), or if Mr. Moore voluntarily terminates his employment with the
Company, Mr. Moore will receive only benefits accrued through the date his
employment is terminated. If the Company terminates Mr. Moore's employment
without cause, Mr. Moore shall receive his salary (i) at the annual rate of
$275,000 for the period through
15
May 18, 1999 or (ii) for a period of two years from the date of termination at
the specified annual rate of $440,000, whichever is greater.
Effective January 1, 1997, the Company entered into an Agreement for
Consultation and Services with J. Frank Harrison, Jr., who previously served as
Chairman of the Board of Directors. Pursuant to the agreement, Mr. Harrison,
Jr. has agreed to continue to serve as a director of the Company and as
Chairman of the Board of Directors' Executive Committee and Finance Committee.
He will provide consultation and assistance to management of the Company with
respect to major strategic decisions and special projects, as well as
concerning general oversight and guidance of the Company. The agreement also
provides that Mr. Harrison, Jr. will continue to personally assist the Company
in maintaining a good relationship with The Coca-Cola Company to promote the
best interests of the Company and its shareholders. Mr. Harrison, Jr. has
agreed to devote his full time business resources, as required by Company
management, to carrying out these duties. Under the terms of the agreement, Mr.
Harrison, Jr. will be paid a consulting fee of $200,000 per year and will also
receive a retirement benefit of $500,000 per year on account of his past
service as an officer of the Company, both payable in equal monthly
installments commencing January 1, 1997. He will also be provided with
insurance and other fringe benefits comparable with the past practice of the
Company. The agreement contains confidentiality and non-competition provisions
and provides that, in the event of a change in control of the Company, he will
continue to receive the retirement benefit provided under the agreement for the
remainder of his lifetime. The agreement is for a term of one year, and is
self-renewing for successive terms of one year each unless terminated by either
Mr. Harrison, Jr. or by the Board of Directors upon notice given at least 60
days in advance of the expiration of the prior one year term.
REPORT OF THE COMPENSATION COMMITTEE ON ANNUAL
COMPENSATION OF EXECUTIVE OFFICERS
The Board's Compensation Committee, composed of Messrs. H.W. McKay Belk,
Charles L. Wallace, and Ned R. McWherter, administers the Company's
compensation plans, reviews and may establish executive compensation and makes
recommendations to the Board concerning such compensation and related matters.
The following is a report submitted by the Compensation Committee members
addressing the Company's compensation policy as it relates to the Company's
executive officers, including the Named Officers, for 1997.
Compensation Policy and Fiscal 1997 Compensation
The Company's executive compensation policy is designed to establish an
appropriate relationship between executive pay and the creation of long term
shareholder value, while motivating and retaining key employees. To achieve
these goals, the Company's executive compensation policy supplements annual
base compensation with an opportunity to earn bonuses based upon corporate
performance as well as factors related to each individual's performance.
Accordingly, a significant portion of any executive's compensation may consist
of performance-based bonuses. Measurement of corporate performance is primarily
based on Company objectives which are set based on industry conditions and
industry-wide performance levels and approved by the Board of Directors. The
performance
16
of individual executives is evaluated on the basis of both pre-determined
performance goals for the Company and factors related to the contributions of
each individual.
Base salaries, including the base salary of J. Frank Harrison, III, the
Company's Chairman and Chief Executive Officer, were adjusted from the prior
year. The Company periodically reviews base salary levels for its executives in
comparison with those of other companies in the soft drink bottling industry,
as well as other industries. For 1997, the Company utilized a study published
by Wyatt Executive Compensation Services which surveyed over 1,200 public
corporations, including many "Fortune 500" companies. The survey provided
compensation information by separate categories of employers. Employer
categorization factors included, but were not limited to, those defined by
industry, size and geographic location. The Company strives to maintain base
executive salaries at a level that will permit it to compete with other major
companies for managers with comparable qualifications and abilities. Based on
information contained in the Wyatt survey, the Compensation Committee believes
that the overall compensation of the Company's executive officers, taken in the
aggregate, places them below the median compensation of similarly situated
executives in all industries covered by the survey. The Compensation Committee
believes that Mr. Harrison, III's overall compensation places him below the
median for similarly situated executives.
Other factors considered by the Company in its periodic review of
executive salary levels include (i) the Company's total operating budget for
each fiscal year; (ii) the impact of annual changes in the consumer price
index; and (iii) a comparison of the Company's executive compensation program
to available information concerning those of other companies in the soft drink
bottling industry, focusing specifically on the three publicly traded soft
drink bottlers included in the old peer group index utilized in the stock price
performance graph included elsewhere in this Proxy Statement. Due to wide
disparities in levels of executive compensation revealed in the published
information regarding the other companies included in the Company's peer group
index, the Compensation Committee does not believe that such information
provides a meaningful basis for evaluating the overall compensation of the
Company's executive officers for the current fiscal year, and therefore relied
principally upon the information contained in the Wyatt survey for purposes of
such evaluation.
The Company's Bonus Plan is administered by the Compensation Committee,
which annually selects participants (based on management recommendations) who
hold key positions with the Company or one of its subsidiaries. The total cash
bonus awardable to a participant is determined by multiplying such
participant's base salary by three factors: (i) the participant's approved
bonus percentage factor; (ii) the individual's indexed performance factor; and
(iii) the overall goal achievement factor. The participant's approved bonus
percentage factor is based on the relative responsibility and contribution to
the Company's performance attributed to the participant's position with the
Company, while the individual's indexed performance factor is determined by
such individual's actual performance during the fiscal year. The overall goal
achievement factor is determined by the Company's performance in relation to
pre-set goals, as discussed below.
Annual goals for selected performance indicators are set in the fourth
quarter for the succeeding year. These goals are reviewed by the Compensation
Committee and approved by the Board of Directors. The selected performance
indicators for 1997 were operating cash flow, free cash flow, net income,
equivalent case volume, market share and a value measure. The Compensation
Committee
17
also assigns different weights to each of the performance indicators based on
the perceived need to focus more or less on any particular objective in a given
year. The corporate performance indicators and related weights are established
after evaluating the industry conditions, available information on performance
of other companies in the soft drink bottling industry, prior year performance
and the Company's specific needs for the current year. For fiscal 1997, the
following weights were assigned to the performance indicators: operating cash
flow -- 25%; free cash flow -- 25%; net income -- 10%; equivalent case volume
- -- 20%; market share -- 10%; and value measure -- 10%. The performance
indicators, as weighted, make up the Company's overall goal achievement factor,
which is calculated on the basis of a graduated scale ranging from a goal
achievement exceeding 89% of the target to a maximum achievement of 110% of the
target for performance indicator. Target goals were met or exceeded for three
performance indicators. They were partially met for two performance indicators
and not met for one of the performance indicators.
Although the Company's Bonus Plan enables the Compensation Committee to
calculate bonuses derived from the factors described above, the Compensation
Committee has absolute discretion to decrease, eliminate or otherwise amend
awards under the Company's Bonus Plan. The Compensation Committee elected to
award bonuses to executive officers in an amount equal to 94% of 1997 base
salary multiplied by each officer's approved bonus percentage factor. The
amount of annual bonus payments for each of the Named Officers for the years
1995, 1996 and 1997 is shown in the Summary Compensation Table under the
heading "Bonuses."
In addition to the annual base salary and performance-based bonus
components, the Company's total annual compensation package for its executives
includes the opportunity: (i) to participate, on the same basis as other
non-union employees, in the Coca-Cola Bottling Co. Consolidated Savings Plan
(Company contributions for each of the Named Officers are included under "All
Other Compensation" in the Summary Compensation Table); (ii) to participate in
the Officers' Split-Dollar Life Insurance Plan; (iii) to participate in the
Company's Retirement Plan which is available to all eligible employees; (iv) to
elect to defer a certain portion of each executive's compensation and receive
limited matching contributions from the Company under the Supplemental Savings
Incentive Plan (Company contributions for each of the Named Officers are
included under "All Other Compensation" in the Summary Compensation Table); and
(v) for certain key executives selected by the Compensation Committee, to
receive additional retirement and survivor benefits pursuant to the Officer
Retention Plan. (The Retirement Plan, the Officers' Split-Dollar Life Insurance
Plan, the Supplemental Savings Incentive Plan and the Officer Retention Plan
are each discussed in greater detail in the preceding section of this Proxy
Statement.) This overall package is designed to attract and retain qualified
executives and to ensure that such executives have a continuing stake in the
long-term success of the Company.
The Company believes that all compensation paid or payable to its
executive officers covered under Section 162(m) of the Internal Revenue Code
will qualify for deductibility under such section.
The Company's compensation policies apply equally to all of its executive
officers, including each of those named in the compensation table.
18
Submitted by the Compensation Committee of the Board of Directors.
H. W. McKay Belk Charles L. Wallace
Ned R. McWherter
COMMON STOCK PERFORMANCE
As part of the executive compensation information presented in this Proxy
Statement, the Securities and Exchange Commission requires a five-year
comparison of stock performance with a broad market equity index and with a
peer group of similar companies. The Company's Common Stock is traded on the
Nasdaq National Market System and the Company has selected the S&P 500 for use
as a broad equity market index for the purpose of this comparison. Beginning
with the fiscal year ended December 28, 1997, the Company has elected to change
the composition of the peer group index used for purposes of this comparison.
Since 1993, the Company has compared itself to a peer group consisting of three
publicly traded soft drink bottlers: Coca-Cola Enterprises Inc., Coca-Cola
Beverages Ltd. and National Beverage Corp. (the "Old 3-Stock Custom Composite
Index"). During 1997, the Company reevaluated its continued use of the Old
3-Stock Custom Composite Index based on significant growth in the Company's
sales, earnings and market capitalization since 1993, and in light of the
acquisition of Coca-Cola Beverages Ltd. by Coca-Cola Enterprises, Inc. during
fiscal 1997. Beginning with fiscal 1997, the Company has elected to utilize a
new peer group comprised of eleven publicly traded companies in the food and
beverage industry (the "New 11-Stock Custom Composite Index"), which the
Company feels provides a more appropriate basis for comparison in light of the
scope of its current business. The New 11-Stock Custom Composite Index is
comprised of Anheuser-Busch Companies, Inc.; Cadbury Schweppes plc; Coca-Cola
Enterprises, Inc.; The Coca-Cola Company; Cott Corporation; National Beverage
Corp.; PepsiCo, Inc.; The Quaker Oats Company; Triarc Companies, Inc.; Whitman
Corporation; and The Seagram Company Ltd. In accordance with the Company's
decision to change its peer group, the graph presented below includes
comparisons with both the Old 3-Stock Custom Composite Index and the New
11-Stock Custom Composite Index.
19
CUMULATIVE TOTAL RETURN (1)
Based on reinvestment of $100 beginning December 31, 1992
(The Performance Graph appears here. See the table below for plot points.)
SOURCE: GEORGESON & COMPANY INC.
Dec-92 Dec-93 Dec-94 Dec-95 Dec-96 Dec-97
Coca-Cola Bottling Co.
Consolidated $100 $207 $156 $213 $304 $440
- ---------------------------------------------------------------------------------------
S&P 500(R) $100 $110 $112 $153 $189 $252
- ---------------------------------------------------------------------------------------
New Custom Composite Index
(11 Stocks) $100 $104 $111 $158 $204 $261
- ---------------------------------------------------------------------------------------
Old Custom Composite Index
(3 Stocks) $100 $126 $142 $215 $393 $841
- ---------------------------------------------------------------------------------------
The New 11-Stock Custom Composite Index includes Anheuser-Busch Cos., Cadbury
Schweppes ADS, The Coca-Cola Company, Coca-Cola Enterprises, Cott Corp.,
National Beverage Corp., PepsiCo Inc., Quaker Oats, Triarc Cos. Inc., Whitman
Corp. and Seagram Co.
The Old 3-Stock Custom Composite Index includes Coca-Cola Beverages Ltd. (thru
2Q97), Coca-Cola Enterprises Inc., and National Beverage Corp.
- ------
(1) Assumes that the value of the investment in Company Common Stock and in
each index was $100 on December 31, 1992 and that all dividends were
reinvested on a quarterly basis. Returns for the companies included in the
Old 3-Stock Custom Composite Index and in the New 11-Stock Custom
Composite Index have been weighted on the basis of total market
capitalization for each company.
20
PROPOSAL 3
APPROVAL OF THE COMPANY'S LONG TERM INCENTIVE PLAN
(Effective January 1, 1998)
The Board of Directors of the Company has adopted the Company's Long Term
Incentive Plan, effective January 1, 1998 (the "Long Term Incentive Plan"), and
directed that the Long Term Incentive Plan be submitted to the Company's
shareholders for approval at the Annual Meeting. The Long Term Incentive Plan
will become effective upon the approval by the holders of a majority of the
shares of Company Stock represented and entitled to vote at the Annual Meeting.
The purpose of the Long Term Incentive Plan is to enhance the earnings and
growth of the Company by providing selected key employees with the opportunity
to receive increased compensation based upon the Company's achievement of
certain factors designed to enhance profitability, while also allowing them the
option of postponing such payments for future income and survivor benefits. The
following summary description of the Long Term Incentive Plan is qualified in
its entirety by reference to the full text of the Long Term Incentive Plan
attached hereto as ANNEX A.
The Company intends that the compensation paid pursuant to the Long Term
Incentive Plan be "performance-based" within the meaning of Section 162(m) of
the Internal Revenue Code of 1986, as amended ("Section 162(m)"). The payment
of such compensation thereby will be exempt from the provisions of Section
162(m) that would otherwise deny the Company a federal income tax deduction for
compensation expense to the extent that aggregate compensation payments to the
Company's Chief Executive Officer or to any other officer whose compensation is
required to be disclosed in the Summary Compensation Table in the Company's
Proxy Statement (e.g., any Named Officer) might exceed $1 million in any future
period. Accordingly, the Long Term Incentive Plan is being submitted to the
Company's shareholders for approval pursuant to the requirements of Section
162(m).
The Long Term Incentive Plan will be administered by the Compensation
Committee of the Company's Board of Directors, provided that the Compensation
Committee must be comprised of no fewer than two members who are "outside
directors" within the meaning of Section 162(m) and the regulations thereunder.
The Compensation Committee may interpret provisions of the Long Term Incentive
Plan.
Cash incentive payments may be made under the Long Term Incentive Plan to
any employee who is a member of the Company's "select group of management or
highly compensated employees" (as defined by applicable provisions of ERISA)
and who is selected for participation by the Compensation Committee, subject to
approval by the Board of Directors. Approximately 35 employees are currently
members of the class of employees eligible to participate in the Long Term
Incentive Plan. For the initial three-year Incentive Period under the Long Term
Incentive Plan, the Compensation Committee has selected 34 eligible employees
as participants, including all of the Named Officers.
Incentive payments made under the Long Term Incentive Plan will be paid
solely on account of the Company's performance in meeting specified objectives
with respect to both a Value Growth Factor and a Volume Growth Factor, as
measured on a Company-wide basis, over any period of three calendar years (the
"Incentive Period") beginning January 1 of any year the Compensation Committee
designates as the beginning of an Incentive Period. The Value Growth Factor
will be measured by the
21
weighted average growth in value over a three year Incentive Period based on
three factors (and adjusted to eliminate the effects of cash dividend payments
on the Company's Common Stock and Class B Common Stock): (i) Operating Cash
Flow Per Share, weighted at 55%; (ii) sales volume expressed on the basis of
Equivalent Cases (defined as an eight ounce equivalent case containing 192
ounces in total of carbonated or non-carbonated Coca-Cola USA beverage products
in bottles, cans or pre-mix), weighted at 35%; and (iii) Earnings Per Share,
weighted at 10%. The Volume Growth Factor will be measured by a formula which
calculates the extent to which growth in per capita consumption of Coca-Cola
USA products in the Company's franchise territories during the three year
Incentive Period exceeds the growth in per capita consumption of Coca-Cola USA
products in the remainder of the United States (excluding the Company's
franchise territories) during the three year Incentive Period.
The Long Term Incentive Plan provides that calculations with respect to
both the Value Growth Factor and the Volume Growth Factor will be adjusted, in
the event that the Company acquires the remaining 50% interest in Piedmont
Coca-Cola Bottling Partnership ("Piedmont") which is presently owned by The
Coca-Cola Company) during any Incentive Period, to reflect such acquisition as
if it had occurred at the beginning of the Incentive Period. In the event that
the Company makes any other acquisition during any Incentive Period, the Long
Term Incentive Plan provides that the Compensation Committee shall be required
to either (i) disregard the effects of such acquisition in calculating the
Value Growth Factor and the Volume Growth Factor or (ii) treat the acquisition
as if it had occurred at the beginning of the Incentive Period, with the
Compensation Committee being required to choose the alternative that produces
the larger incentive payment for the Incentive Period (if either has the effect
of increasing the award amount). The Plan also provides, however, that the
Compensation Committee shall have discretion, in the case of any acquisition
other than Piedmont, to calculate the Value Growth Factor and the Volume Growth
Factor as if such acquisition had occurred either (i) as of the beginning of
the applicable Incentive Period or (ii) as of the actual date of such
acquisition, provided in either case that the effect of exercising such
discretion would be to decrease the amount of the awards otherwise payable for
such Incentive Period.
No incentive payments shall be made to participants for any Incentive
Period unless the Company attains specified minimum levels for both the Value
Growth Factor and the Volume Growth Factor for such Incentive Period. If the
Company's performance with respect to both factors exceeds the specified
threshold level, then the amount of each participant's incentive payment with
respect to the Incentive Period will be calculated as a percentage of the
participant's average annual base salary in effect on July 1 of each year
during the Incentive Period for which the award is made. The percentages that
may be used to calculate the value of incentive payments range from 25% to
175%, with the exact percentages applicable to specified increases in the Value
Growth Factor and the Volume Growth Factor being determined by the Compensation
Committee prior to the beginning of each three-year Incentive Period. Both the
Compensation Committee and the Board of Directors have discretion to amend,
modify or terminate or reduce the Company's obligations under the Long Term
Incentive Plan at any time; provided, however, that (i) such discretion may not
be exercised in a manner which would reduce any benefits otherwise payable
following a Change of Control (as defined below) and (ii) such discretion may
not be exercised in any manner which would cause any compensation payments made
under the Long Term Incentive Plan to cease to be deductible by the Company as
"performance based compensation" pursuant to Section 162(m).
22
The maximum amount of compensation potentially payable to any individual
with respect to a single Incentive Period under the Long Term Incentive Plan is
limited to the lesser of (i) $2,000,000 or (ii) four (4) times such
individual's annual base salary in effect on July 1 of the Fiscal Year that
precedes the start of such Incentive Period.
The Long Term Incentive Plan provides that incentive payments will be made
to participants in a lump sum in cash within 60 days of the Benefit
Determination Date, which is generally defined to be the March 31 following the
conclusion of any Incentive Period. The Long Term Incentive Plan gives
participants the option, however, to elect to defer incentive payments with
respect to any Incentive Period if such election is made in writing within 30
days of his or her being selected as a participant with respect to such
Incentive Period. Any such deferrals will be treated as contributions to the
Company's Supplemental Savings Incentive Plan (as described elsewhere in this
Proxy Statement) as of the date on which such payments otherwise would have
been made to the participant; provided, however, that the Fixed Benefit Option
under the Supplemental Savings Incentive Plan shall not be available for
amounts deferred with respect to the Long Term Incentive Plan.
The Long Term Incentive Plan provides that incentive payments may be
prorated when a participant dies, retires or becomes disabled prior to the end
of an Incentive Period. In the event of any Change of Control of the Company
during an Incentive Period, the Long Term Incentive Plan provides that
incentive payments for such Incentive Period shall be computed from the
beginning of such period to the date of the Change of Control (prorated to
reflect the portion of the Incentive Period then completed) and paid to
participants in a lump sum within 60 days of the Change of Control. A "Change
of Control" is defined as "the acquisition of over 50% of the total vote of all
shares of common stock of the Company for the election of the Board by an
individual or a group of individuals acting in concert, other than J. Frank
Harrison, Jr. and his issue or persons acting for and on their behalf." The
Long Term Incentive Plan further provides that a rebuttable presumption that a
Change in Control has occurred shall arise in the event the Harrison Family
should be entitled to vote less than 50% of the total votes of all shares of
common stock for the Company for the election of the Board of Directors.
The Board of Directors or the Compensation Committee may terminate or
suspend the Long Term Incentive Plan in whole or in part and may amend the Long
Term Incentive Plan from time to time to correct any defect or supply any
omission or reconcile any inconsistency in the Long Term Incentive Plan if such
amendment does not constitute the modification of a material term of the Long
Term Incentive Plan, without the approval of the shareholders of the Company.
No action shall be taken, however, without the approval of the shareholders
unless the Compensation Committee determines that the approval of shareholders
would not be necessary in order for the compensation paid pursuant to the Long
Term Incentive Plan to continue to be "performance-based" within the meaning of
Section 162(m).
The Long Term Incentive Plan became effective as of January 1, 1998,
subject to approval of such plan by the holders of a majority of the shares of
the Company's Common Stock represented and entitled to vote at the 1998 Annual
Meeting in accordance with Section 162(m). Initial awards under the Long Term
Incentive Plan will not be determinable until the end of the Company's fiscal
year 2000, when the results of the Company's performance with respect to the
Value Growth Factor and
23
the Volume Growth Factor for the initial three-year Incentive Period (1998
through 2000) are available. On a pro forma basis, if the terms of the Long
Term Incentive Plan were applied to the period 1995 through 1997, there would
have been no payouts to the Named Officers or to any other employee eligible to
participate. Directors who are not employed as executive officers of the
Company are not eligible for any awards as participants under the Long Term
Incentive Plan.
CERTAIN TRANSACTIONS
The Company's business consists primarily of the production, marketing and
distribution of soft drink products of The Coca-Cola Company, which is the sole
owner of the secret formulas under which the primary components (either
concentrates or syrups) of its soft drink products are manufactured.
Accordingly, the Company purchases substantially all of its requirements of
concentrates and syrups from The Coca-Cola Company in the ordinary course of
its business. During fiscal year 1997 the Company paid The Coca-Cola Company
approximately $198 million for sweetener, syrups and concentrate purchases.
Additionally, the Company engages in a variety of marketing programs, local
media advertising and similar arrangements to promote the sale of products of
The Coca-Cola Company in territories operated by the Company. During fiscal
year 1997, total direct marketing support provided to the Company by The
Coca-Cola Company was approximately $47 million. In addition, the Company paid
approximately $25 million for local media and marketing program expense
pur-suant to cooperative advertising and cooperative marketing arrangements
with The Coca-Cola Company.
On July 2, 1993, Piedmont Coca-Cola Bottling Partnership, a Delaware
general partnership (the "Partnership"), was formed by wholly owned
subsidiaries of the Company and The Coca-Cola Company (together, the
"Partners") to engage in the business of distributing and marketing finished
bottle/ can and fountain beverage products under trademarks of The Coca-Cola
Company and other third party licensors in portions of North Carolina, South
Carolina, Virginia and Georgia. A Company subsidiary ("CCBCC Sub") is a general
partner and owns a 50% interest in the Partnership. A subsidiary of The
Coca-Cola Company ("KO Sub") is the other general partner, and it owns the
remaining 50% interest in the Partnership. All distributions of cash flow and
profits and losses of the Partnership are allocated between KO Sub and CCBCC
Sub on a 50/50 basis. The Partnership has an initial term of 25 years subject
to early termination as a result of any Dissolving Event, as defined in the
Partnership Agreement. Each Partner's partnership Interest is subject to
certain limitations on transfers, rights of first refusal and other purchase
rights upon the occurrence of certain events. CCBCC Sub and KO Sub made equal
initial capital contributions with KO Sub's contribution being in the form of
cash and CCBCC Sub's contribution being comprised of the Wilson, North Carolina
and Greenville and Beaufort, South Carolina bottling territories and other
related assets and cash. Following the formation of the Partnership, the
Company and certain of its subsidiaries caused the sale to the Partnership of
the Charleston, Greenwood, Columbia, Anderson and Aiken, South Carolina and
Plymouth, North Carolina bottling territories and other related assets and The
Coca-Cola Company caused the sale to the Partnership of assets and capital
stock of subsidiaries having bottling territories located in and around
Kinston, Greenville, Goldsboro, Wilmington, Rocky Mount, Weldon and Kelford,
North Carolina; Marion, Conway and Florence, South Carolina; and Emporia,
Virginia.
24
The Company is providing the manufacture, production and packaging of the
products and the management of the Partnership pursuant to a Management
Agreement. In consideration for its services, the Company receives a management
fee based on total case sales, reimbursement for its out-of-pocket expenses and
reimbursement for sales branch, divisional and certain other expenses. The term
of the Management Agreement is 25 years, subject to early termination in the
event of a "Change in Control" as defined therein, a termination of the
Partnership or a material default by either party. For the fiscal year ending
December 28, 1997, the Partnership recorded management fees in the amount of
approximately $12.7 million to the Company pursuant to the Management
Agreement.
The Company previously leased vending equipment from Coca-Cola Financial
Corporation ("CCFC"), a subsidiary of The Coca-Cola Company. On January 14,
1997, the Company purchased all of the leases with CCFC for approximately $66.3
million.
Mr. Charles L. Wallace, a director of the Company, is Vice President and
Executive Assistant to the Chairman of The Coca-Cola Company. During the period
1987-1997, The Coca-Cola Company and the Company have engaged in various
transactions pursuant to which The Coca-Cola Company presently owns an
aggregate of 2,213,007 shares of Common Stock (31.4% of the outstanding shares
of such class as of March 10, 1998) and 269,158 shares of Class B Common Stock
(20.4% of the outstanding shares of such class as of March 10, 1998) from the
Company. These transactions occurred pursuant to: (i) a negotiated, direct
purchase of shares from the Company; (ii) an exchange of Common Stock for all
of the outstanding shares of The Coca-Cola Bottling Company of West Virginia,
Inc., which were owned by The Coca-Cola Company; (iii) the exercise by The
Coca-Cola Company of its preemptive right to purchase additional shares of
Common Stock pursuant to the Stock Rights and Restrictions Agreement (described
below) that was triggered by the Company's issuance of Common Stock to Mr.
Harrison, Jr. in connection with the Company's acquisition of Whirl-i-Bird,
Inc. in April 1993; and (iv) the Company's February 20, 1997 repurchase of
275,490 shares of Common Stock from The Coca-Cola Company pursuant to the Stock
Rights and Restrictions Agreement, as described below.
See "Principal Shareholders" and the notes to the tabular information
presented therein for additional information concerning The Coca-Cola Company's
beneficial ownership of Common Stock and Class B Common Stock.
Pursuant to a Stock Rights and Restrictions Agreement dated January 27,
1989, between the Company and The Coca-Cola Company, The Coca-Cola Company
agreed not to purchase or acquire additional shares of Common Stock or Class B
Common Stock except as contemplated or provided in the agreement; and not to
sell or otherwise dispose of shares of Class B Common Stock without converting
them into Common Stock. The Coca-Cola Company granted the Company a right of
first refusal with respect to any sale, assignment, transfer or other
disposition by The Coca-Cola Company of such shares, and the Company granted
The Coca-Cola Company certain registration rights with respect to such shares.
The Stock Rights and Restrictions Agreement contains provisions under which The
Coca-Cola Company has agreed that if its equity ownership or voting interest at
any time reaches 30.67% or more of the Company's outstanding common stock of
all classes, or 23.59% or more of the votes of all outstanding shares of all
classes (both as adjusted by the Company's right to call described below), then
it will negotiate in good faith with the Company to sell to the Company the
number of
25
shares of Common Stock or convert the number of shares of Class B Common Stock
necessary to reduce its equity ownership to 29.67% of the outstanding common
stock of all classes (including not less than 20% nor more than 21% of the
outstanding shares of Class B Common Stock) and to maintain its voting interest
at not less than 22.59% nor more than 23.59% of the votes of all outstanding
shares of all classes, as adjusted. Following the purchase by the Company of
(i) 508,690 shares of Common Stock pursuant to a Dutch auction self-tender
offer in December 1996 and (ii) 145,260 shares of Common Stock in a private
transaction with a single shareholder in January 1997, The Coca-Cola Company
owned shares of Common Stock and Class B Common Stock aggregating to 33.99% of
the outstanding common stock of all classes and approximately 20.39% of the
votes of all outstanding shares of all classes. In accordance with the
provisions of the Stock Rights and Restrictions Agreement, the Company
repurchased 275,490 shares of Common Stock from The Coca-Cola Company at a cash
price of $47.50 per share in a negotiated transaction effective February 20,
1997. This transaction reduced The Coca-Cola Company's ownership of Common
Stock and Class B Common Stock to the levels prescribed in the Stock Rights and
Restrictions Agreement.
Additionally, in the event that the Company issues new shares of Class B
Common Stock upon the conversion or exercise of any security, warrant or option
of the Company which results in The Coca-Cola Company owning less than 20% of
the outstanding shares of Class B Common Stock and less than 20% of the total
votes of all outstanding shares of all classes of the Company, The Coca-Cola
Company has the right, under the Stock Rights and Restrictions Agreement, to
convert shares of Common Stock to shares of Class B Common Stock in order to
maintain its ownership of 20% of the outstanding shares of Class B Common Stock
and 20% of the total votes of all outstanding shares of all classes of the
Company. Under the Stock Rights and Restrictions Agreement, The Coca-Cola
Company has a preemptive right to purchase a percentage of any newly issued
shares of any class as necessary to allow it to maintain ownership of both
29.67% of the outstanding shares of Common Stock of all classes and 22.59% of
the total votes of all outstanding shares of all classes. The number of shares
issuable to The Coca-Cola Company as a result of any exercise of its conversion
right or its preemptive right described herein is subject to adjustment by the
Company's right to call described below and by any voluntary disposition of the
shares held by The Coca-Cola Company.
Pursuant to the Stock Rights and Restrictions Agreement, The Coca-Cola
Company granted the Company the right, from and after the sixth anniversary of
the date of such agreement through the thirtieth anniversary, at the Company's
sole option and from time to time, to call for redemption that number of
Purchased Shares (as defined in such agreement) which would reduce The
Coca-Cola Company's ownership of the equity of the Company to 20% at a price
and on such terms as set forth in the agreement; provided, however, that in no
event shall the price be less than $42.50 per share (subject to appropriate
adjustment to reflect changes in the Company's capital structure and except for
shares issued to The Coca-Cola Company to maintain its proportionate ownership
of Common Stock).
The Coca-Cola Company was also given the right to have its designee
proposed by the Company for nomination to the Company's Board of Directors and
to have such person (or a successor) nominated at each subsequent election of
the Company's directors, subject to certain conditions. Mr. Wallace's
nomination for election as a director of the Company was made in accordance
with the terms of this agreement.
26
The Coca-Cola Company, J. Frank Harrison, Jr., J. Frank Harrison, III and
Reid M. Henson, in his capacity as co-trustee of certain trusts holding shares
of Class B Common Stock, also entered into a Voting Agreement dated January 27,
1989 (the "Voting Agreement"). Pursuant to the Voting Agreement, Mr. Harrison,
Jr., Mr. Harrison, III and Mr. Henson (as co-trustee), agreed to vote their
shares of Common Stock and Class B Common Stock for a nominee of The Coca-Cola
Company for election, as a director, to the Company's Board of Directors, and
The Coca-Cola Company granted an irrevocable proxy (the "Irrevocable Proxy")
with respect to all shares of Class B Common Stock and Common Stock owned by
The Coca-Cola Company (and any shares of Common Stock into which shares of
Class B Common Stock are converted or exchanged) to J. Frank Harrison, III for
life and thereafter to J. Frank Harrison, Jr. The Irrevocable Proxy covers any
matters on which holders of Class B Common Stock or Common Stock are entitled
to vote, other than certain mergers, consolidations, sales of assets and other
similar corporate reorganizations or corporate transactions.
Pursuant to the terms of the Voting Agreement, J. Frank Harrison, III (or,
in the event of his death, J. Frank Harrison, Jr.) was granted the option
(assignable to the Company or to J. Frank Harrison, Jr.) to purchase the shares
of Class B Common Stock held by The Coca-Cola Company at a price per share
determined in accordance with the Voting Agreement, exercisable on certain
conditions relating to termination of the disproportionate voting rights of the
Class B Common Stock.
The Voting Agreement and Irrevocable Proxy terminate upon the written
agreement of the parties, or at such time as The Coca-Cola Company is not the
beneficial owner of any shares of the Company's common stock. The Irrevocable
Proxy terminates at such time as: (i) J. Frank Harrison, Jr. or J. Frank
Harrison, III do not collectively own all 712,796 shares of Class B Common
Stock owned by J. Frank Harrison, Jr., or (ii) certain trusts holding shares of
Class B Common Stock subject to the Voting Agreement do not collectively own at
least 50% of the Class B Common Stock held by them at the date of the Voting
Agreement.
On December 17, 1988, J. Frank Harrison, Jr., J. Frank Harrison, III and
certain trusts holding shares of Class B Common Stock entered into a
Shareholder's Agreement with The Coca-Cola Company. Pursuant to the agreement,
which has a term of ten years, expiring in 1998: (i) the Harrisons expressed a
commitment to remain actively involved and interested in the management and
operations of the Company during the term of the agreement; (ii) the Harrisons
agreed not to dispose of their shares of Common Stock and Class B Common Stock
during the term of the agreement (other than to certain permitted transferees)
without first offering such shares to The Coca-Cola Company; (iii) the
Harrisons were granted the right (the exercise of which could result in a
change in control of the Company), exercisable for a period of five years
following the fifth anniversary of the agreement, to cause The Coca-Cola
Company to purchase all or a portion of their shares of Common Stock and Class
B Common Stock subject to the agreement at a price per share and on such terms
as determined by the agreement; and (iv) The Coca-Cola Company was granted the
right to acquire the Harrisons' shares of Common Stock and Class B Common Stock
at a price per share and on such terms as determined by the agreement upon the
circumstance of an offer having been made which, if consummated, would result
in a change in control of the Company or the sale of all or substantially all
of the assets of the Company, and provided that the Harrisons intend to vote in
favor of such transaction.
27
On November 30, 1992, the Company and the owner of the property on which
the Company operates its Snyder Production Center agreed to the early
termination of the Company's lease of this property. Harrison Limited
Partnership One ("HLP One"), a North Carolina limited partnership, purchased
the property contemporaneously with the termination of the lease, and the
Company and HLP One entered into an agreement pursuant to which the Company is
leasing the property for a ten-year term which commenced December 1, 1992. JFH
Management, Inc., a North Carolina corporation of which J. Frank Harrison, Jr.
is the sole shareholder, serves as sole general partner of the limited
partnership that purchased the production center property. The sole limited
partner of this limited partnership is a trust as to which J. Frank Harrison,
III and Reid M. Henson are co-trustees, share investment powers, and as to
which they share voting power for purposes of this partnership interest. The
beneficiaries of this trust are J. Frank Harrison, Jr. and his descendants.
On June 1, 1993, Beacon Investment Corporation, a North Carolina
corporation of which J. Frank Harrison, III is sole shareholder, purchased the
office building located on Rexford Road in Charlotte, North Carolina, in which
the Company leases its executive offices. Contemporaneously, the Company
entered into a ten year lease commencing June 1, 1993 with Beacon Investment
Corporation for office space within the building.
Under these agreements, the annual base rents which the Company is
obligated to pay for its lease of the Snyder Production Center and its
executive offices are subject to annual adjustments corresponding to the
Consumer Price Index. The base rent for the lease of the Snyder Production
Center is further subject to increases and decreases based on the London
Interbank Offered Rate of interest ("LIBOR"), and the base rent for the lease
of the executive offices is subject to increases and decreases, as the case may
be, in an Adjusted Eurodollar Rate determined by NationsBank of North Carolina,
N.A.. The current annual lease payments, as so adjusted, are $2.6 million for
the Snyder Production Center and $2.1 million for the Company's executive
offices.
The material terms of the Snyder Production Center and office building
lease agreements are substantially similar to the lease agreements between the
Company and the properties' prior owners. The Company believes that the terms
of the Snyder Production Center and office building lease agreements are
generally, in each instance, at least as favorable as the Company could have
obtained from the prior owners.
The Company purchases certain computerized data management products and
services from Data Ventures LLC, a Delaware limited liability company in which
the Company holds a 31.25% equity membership with a 47.7% voting interest. J.
Frank Harrison, III, Chairman of the Board of Directors and Chief Executive
Officer of the Company, also holds a 32.5% equity membership in Data Ventures,
LLC with a 49.6% voting interest. The remaining 39.25% equity membership and
2.8% voting interest in Data Ventures, LLC is held by third parties who have no
affiliation with the Company. During the Company's fiscal year ended December
28, 1997, the Company paid approximately $199,000 to Data Ventures, LLC in
connection with the purchase of such products and services. Additionally, as of
December 28, 1997, Data Ventures was indebted to the Company in the amount of
approximately $1.0 million pursuant to a promissory note. The promissory note
was issued in conjunction with a $1.9 million line of credit which terminates
in September 1999. The promissory note provides working capital financing and
bears interest at a rate per annum equal to the prime rate as published
28
by The Wall Street Journal, less one percent, adjusted on the first day of each
-----------------------
month. As of March 1, 1998, the promissory note balance totaled $1.27 million.
During the fiscal year ended December 28, 1997, the Company paid legal
fees of $543,000 to Witt, Gaither & Whitaker, P.C., a law firm in which John W.
Murrey, III, a director of the Company, and John F. Henry, Jr., Secretary of
the Company, are members.
RELATIONSHIP WITH INDEPENDENT ACCOUNTANTS
The Board of Directors of the Company has appointed the firm of Price
Waterhouse LLP to serve as the Company's independent accountants for the fiscal
year ending January 3, 1999. Price Waterhouse LLP has served in that capacity
since 1968.
A representative of Price Waterhouse LLP will be present at the Annual
Meeting and will have the opportunity to make a statement if he desires to do
so and is expected to be available to respond to appropriate questions.
RECOMMENDATIONS OF THE BOARD OF DIRECTORS
The Board of Directors recommends that the Company's shareholders vote FOR
fixing the number of directors at eleven, FOR electing the Board of Directors'
nominees for directors and FOR approving the Company's Long Term Incentive
Plan, as set forth in this Proxy Statement.
SHAREHOLDER PROPOSALS
In the event any shareholder wishes to present a proposal to the
shareholders of the Company at the 1999 Annual Meeting of Shareholders, such
proposal must be received by the Company for inclusion in the proxy statement
and form of proxy relating to such meeting on or before December 8, 1998.
ADDITIONAL INFORMATION
The entire cost of soliciting proxies will be borne by the Company. In
addition to this solicitation of proxies by mail, proxies may be solicited by
the Company's directors, officers and other employees by personal interview,
telephone and telegram. Such persons will receive no additional compensation
for such services. Furthermore, Georgeson & Co., Inc., Wall Street Plaza, New
York, New York 10005, has been retained to assist the Company in the
solicitation of brokers, banks and other similar entities holding shares for
other persons. Georgeson & Co., Inc. will receive a payment of $6,500 for these
services. All brokers, banks and other similar entities and other custodians,
nominees and fiduciaries will be requested to forward solicitation materials to
the beneficial owners of the shares of Common Stock and Class B Common Stock
held of record by such persons, and the Company will pay such brokers, banks
and other fiduciaries all of their reasonable out-of-pocket expenses incurred
in connection therewith.
29
OTHER MATTERS
As of the date of this Proxy Statement, the Board of Directors does not
intend to present, and has not been informed that any other person intends to
present, any matter to be acted upon at the Annual Meeting other than those
specifically referred to in this Proxy Statement. If other matters should
properly come before the Annual Meeting, it is intended that the holders of the
proxies will act in respect thereto in accordance with their best judgment.
John F. Henry, Jr.
Secretary
Date: April 7, 1998
30
ANNEX A
COCA-COLA BOTTLING CO. CONSOLIDATED
LONG TERM INCENTIVE PLAN
Preamble
This Plan is designed to enhance the earnings and growth of the Company.
The Plan rewards selected key Employees with the opportunity to receive
increased compensation and to postpone such increases for future income and
survivor benefits. By providing such benefits, the Plan enables the Company to
attract superior key Employees, to encourage them to make careers with the
Company, and to give them additional incentive to make the Company more
profitable. As specified herein, the Plan is operated and administered by the
Board of Directors and by its Compensation Committee, and whenever either may
take any action, make any determination or refrain from taking any action or
making a determination, such shall be made at the sole and absolute discretion
of the Board of Directors or the Compensation Committee, as the case may be.
ARTICLE 1. REFERENCES, CONSTRUCTION AND DEFINITIONS
Unless otherwise indicated, all references to articles, sections and
subsections shall be to the Plan as set forth in this document. The Plan and
all rights thereunder shall be construed and enforced in accordance with ERISA
and, to the extent that state law is applicable, the laws of the State of North
Carolina. The article titles and the captions preceding sections and
subsections have been inserted solely as a matter of convenience and in no way
define or limit the scope or intent of any provision. When the context so
requires, the singular includes the plural. Whenever used herein and
capitalized, the following terms shall have the respective meanings indicated
unless the context plainly requires otherwise.
1.1 Affiliate: Any corporation with respect to which the Company owns,
directly or indirectly, 100 percent of the corporation's outstanding capital
stock, and any other entity with respect to which the Company owns directly or
indirectly at least 50 percent or more of such entities' capital stock or
interest in earnings or any other entity for which the Company has a management
agreement.
1.2 Average Compensation: The average of the annual Compensation of a
Participant for each Fiscal Year during the Incentive Period.
1.3 Beneficiary: The beneficiary or beneficiaries designated by a
Participant pursuant to Article 8 to receive the benefits, if any, payable on
behalf of the Participant under the Plan after the death of such Participant,
or when there has been no such designation or an invalid designation, the
individual or entity, or the individuals or entities, who will receive such
amount.
1.4 Benefit Determination Date: March 31 that follows the last day of the
Incentive Period or, if earlier, i) the date when a Change of Control occurs;
or ii) as determined by the Compensation Committee.
1.5 Board: The Board of Directors of the Company.
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1.6 Change in Control: "A change in the ownership or control" or "a change
in the effective control" of the Company occurs upon the acquisition of over
50% of the total vote of all shares of common stock of the Company for the
election of the Board by an individual or a group of individuals acting in
concert, other than J. Frank Harrison, Jr. and his issue or persons acting for
and on their behalf (hereinafter "the Harrison Family"); and a rebuttable
presumption that a Change in Control has occurred shall arise in the event the
Harrison Family should be entitled to vote less than 50% of the total votes of
all shares of common stock for the Company for the election of the Board.
1.7 Code: The Internal Revenue Code of 1986, as now in effect or as
hereafter amended. All citations to sections of the Code are to such sections
as they may from time to time be amended or renumbered.
1.8 Committee: The Compensation Committee of the Board, provided that it
shall be comprised of not fewer than two members who are "outside directors"
within the meaning of Section 162(m) of the Code and the regulations
thereunder.
1.9 Company: Coca-Cola Bottling Co. Consolidated, a Delaware corporation,
and where appropriate any subsidiary thereof, or any entity which succeeds to
its rights and obligations with respect to the Plan.
1.10 Compensation: The amount of annual base salary for the Fiscal Year
determined as of July 1 during the Fiscal Year.
1.11 Debt Per Share: The amount of long-term debt plus the current portion
of long-term debt less the after-tax impact of the deferred Long Term Incentive
Plan balance on the Company's balance sheet prepared in accordance with GAAP,
plus the present value of the operating leases, divided by Outstanding Shares.
1.12 Earnings Per Share: Earnings per share on an undiluted basis as
reported by the Company in accordance with GAAP adjusted to eliminate the
impact of the Long Term Incentive Plan.
1.13 Effective Date: The Plan became effective on January 1, 1998.
1.14 Employee: A person who is a common law employee of a Participating
Company.
1.15 ERISA: The Employee Retirement Income Security Act of 1974, as now in
effect or as hereafter amended. All citations to sections of ERISA are to such
sections as they may from time to time be amended or renumbered.
1.16 Fiscal Year: The annual accounting period used by the Company for
shareholder reporting purposes. The Fiscal Year is the Plan Year.
1.17 Incentive Factor: The factor determined on Schedule A which requires
a specified level of achievement in both Volume Growth and Value Growth.
1.18 Incentive Payment: The payment made under this Plan.
1.19 Incentive Period: A period of three (3) consecutive Fiscal Years
determined by the Committee, provided, however, that if a Change of Control
occurs, all Incentive Periods that are not then
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completed shall end on the date of a Change of Control. A Fiscal Year may be
included in more than one Incentive Period.
1.20 Operating Cash Flow Per Share: Income from operations plus
depreciation expense, amortization expense and lease expense plus any expense
related to the Long Term Incentive Plan on a per share basis at the Benefit
Determination Date.
1.21 Outstanding Shares: The total number of issued and outstanding shares
of Common and Class B shares of the Company plus any shares that may be issued.
1.22 Participant: As of any date, any individual who commenced
participation in the Plan as provided in Article 2 and who is either (a) an
Employee or, (b) a former Employee who is eligible for a benefit under the
Plan.
1.23 Participating Company: The Company and any Affiliate.
1.24 Equivalent Case: An Equivalent Case is defined as an eight (8) ounce
equivalent case containing 192 ounces in total of Coca-Cola USA products which
include carbonated and non-carbonated beverages in bottles, cans or pre-mix.
1.25 Plan: The Coca-Cola Bottling Co. Consolidated Long Term Incentive Plan
as contained herein and as it may be amended from time to time hereafter.
1.26 Plan Administrator: The Committee.
1.27 Retirement: Termination of employment, other than termination by the
Company with or without cause, after an Employee has reached age 55. "Retire" is
the act of Retirement.
1.28 Severance: Ceasing to be an Employee other than on account of death
or Total and Permanent Disability.
1.29 Surviving Spouse: The survivor of a deceased Participant to whom such
deceased Participant was legally married (as determined by the Committee)
immediately before the Participant's death.
1.30 Total and Permanent Disability: A Participant is Totally and
Permanently Disabled if he has a condition that qualifies him for long-term
disability benefits provided under a plan sponsored by the Company at the time
of determination or qualifies him for disability benefits under the Social
Security laws then in effect.
1.31 Value Growth: Value Growth is based on three factors for the
Incentive Period: Operating Cash Flow Per Share, Equivalent Cases, and Earnings
Per Share.
Value Computation at Beginning of Incentive Period
Value based on Operating Cash Flow Per Share shall be computed by
multiplying Operating Cash Flow Per Share for the last Fiscal Year prior to the
beginning of the Incentive Period by nine (9) and subtracting Debt Per Share at
the end of the Fiscal Year.
Value based on Equivalent Cases shall be computed by multiplying the
Equivalent Cases for the last Fiscal Year prior to the beginning of the
Incentive Period by Five Dollars and Eighty Nine and
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two tenths cents ($5.892) and dividing the product by the Outstanding Shares at
the end of the Fiscal Year prior to the beginning of the Incentive Period. Debt
Per Share at the end of the last Fiscal Year prior to the beginning of the
Incentive Period shall be subtracted from the aforementioned result to give the
value based on Equivalent Cases.
Value based on Earnings Per Share shall be computed by multiplying
Earnings Per Share for the last Fiscal Year prior to the beginning of the
Incentive Period, as determined in accordance with GAAP, by twenty (20).
The three values computed based on Operating Cash Flow Per Share,
Equivalent Cases and Earnings Per Share shall be weighted as follows: Operating
Cash Flow Per Share -- 55%; Equivalent Cases -- 35%; and Earnings Per Share --
10% to compute a weighted average value per share. The value per share so
computed shall be the value per share at the beginning of the Incentive Period.
Value Computation at End of Incentive Period
Value based on Operating Cash Flow Per Share shall be computed by
multiplying Operating Cash Flow Per Share for the last Fiscal Year of the
Incentive Period by nine (9) and subtracting Debt Per Share at the end of the
last Fiscal Year of the Incentive Period.
Value based on Equivalent Cases shall be computed by multiplying the
Equivalent Cases for the last Fiscal Year in the Incentive Period by Five
Dollars and Eighty Nine and two tenths cents ($5.892) and dividing the product
by the Outstanding Shares at the end of the last Fiscal Year of the Incentive
Period. Debt Per Share at the end of the last Fiscal Year of the Incentive
Period shall be subtracted from the aforementioned result to give the value
based on Equivalent Cases.
Value based on Earnings Per Share shall be computed by multiplying
Earnings Per Share for the last Fiscal Year of the Incentive Period, as
determined in accordance with GAAP, by twenty (20).
The three values computed based on Operating Cash Flow Per Share,
Equivalent Cases and Earnings Per Share shall be weighted as follows: Operating
Cash Flow Per Share -- 55%; Equivalent Cases -- 35%; and Earnings Per Share --
10% to compute a weighted average value per share. The value per share so
computed shall be the value per share at the end of the Incentive Period.
Value Growth Factor
The Value Growth factor of the Plan shall be the compound annual rate of
change between the Value Computation at the beginning of the Incentive Period
and the Value Computation at the end of the Incentive Period, adjusted for
dividends, expressed as a percentage.
Schedule B sets forth the method of determining the Value Growth Factor.
1.32 Volume Growth: Volume growth is the growth in per capita consumption
above the national average during the Incentive Period measured on an eight (8)
ounce equivalent basis.
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Volume Computation at Beginning of Incentive Period
The Volume computation shall be based on results for the last Fiscal Year
prior to the beginning of the Incentive Period. Volume for the Company shall be
the bottle, can and premix Coca-Cola USA volume on an eight (8) ounce
equivalent case basis, divided by the population for the Company's franchise
territory to yield the Company's per capita consumption. Volume for the
remainder of the United States shall be computed by dividing the total U.S.
equivalent case volume, as obtained from Coca-Cola-USA, less equivalent case
sales within the Company's territory, by the total United States population
less the population within the Company's franchise territory to yield a
non-Company per capita consumption.
Volume Computation at End of Incentive Period
The Volume computation shall be based on results for the last Fiscal Year
of the Incentive Period. Volume for the Company shall be the bottle, can and
premix Coca-Cola USA volume on an eight (8) ounce equivalent case basis,
divided by the population for the Company's franchise territory to yield the
Company's per capita consumption. Volume for the remainder of the United States
shall be computed by dividing the total U.S. equivalent case volume, as
obtained from Coca-Cola-USA, less equivalent case sales within the Company's
territory, by the total United States population less the population within the
Company's franchise territory to yield a non-Company per capita consumption.
Computation of Volume Growth Factor
The change in volume for the Company shall be computed as the Company
Volume at End of Incentive Period less the Company Volume at Beginning of
Incentive Period. The change in volume for the remainder of the United States
shall be the non-Company Volume at End of Incentive Period less the non-Company
Volume at Beginning of Incentive Period. The change in Company per capita
consumption less the change in non-Company per capita consumption shall be used
in determining the Volume Growth Factor.
Schedule C sets forth the method of determining the Volume Growth Factor.
ARTICLE 2. ELIGIBILITY AND PARTICIPATION
2.1 Eligibility. An Employee (a) who is a member of the Company's "select
group of management or highly compensated employees," as defined in Sections
201(2), 301(a)(3) and 401(a) of ERISA, as amended, and (b) whom the Committee
designates, subject to approval by the Board, shall be eligible to become a
Participant in the Plan.
2.2 Participation. An Employee who is eligible to become a Participant for
the Incentive Period must be designated by the Compensation Committee and
approved by the Board. Such designation must be made on or before the first day
of the Incentive Period or March 31 of the first Fiscal Year of the Incentive
Period. Participation shall begin on the first day of the Incentive Period
following designation. All Participants of the Plan and the effective date of
their participation shall be set forth in the form shown in Schedule D.
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2.3 Duration of Participation. A Participant shall continue to be a
Participant until the Participant's Severance, Total and Permanent Disability
or death or the last day of the last Incentive Period for which an Employee has
been designated as a Participant.
ARTICLE 3. COMPUTATION AND PAYMENT OF INCENTIVE PAYMENTS
3.1 General. For every Incentive Period, each Participant shall receive an
Incentive Payment as set forth in Section 3.2. Unless a Participant has died,
terminated employment on account of Total and Permanent Disability, Retired or
unless the Participant is an Employee on the Benefit Determination Date that
follows the last day of the Incentive Period for which such payment relates, no
payment will be made under this Plan. All incentive payments are to be made in
a lump sum within sixty (60) days following the Benefit Determination Date,
unless such benefits have been deferred as provided in Article 4.
3.2 Benefit Computation. The benefit for purposes of the Plan shall be
calculated based on the achievement of both the Value Growth Factor and Volume
Growth Factor. The Incentive Factor shall be based on achieving both the Value
Growth Factor and The Volume Growth Factor as defined and set forth in Schedule
A. The amount of the benefit, if any, to be paid to a participant shall be
computed as the Average Compensation multiplied by the Incentive Factor.
Notwithstanding the results of the computation, in no event will the benefit
for a participant exceed the lesser of the maximum amount approved by the
stockholders of the Company or four (4) times the base salary determined as of
July 1 of the Fiscal Year that precedes the Incentive Period.
3.3 Acquisitions: In the event the Company acquires the remaining interest
in Piedmont Coca-Cola Bottling Partnership, determination of the Value Growth
Factor and the Volume Growth Factor as of the beginning of the Incentive Period
will be adjusted to reflect such acquisition as if it had occurred as of the
beginning of the Incentive Period.
In the event the Company makes other acquisitions, with respect to such
acquisitions, the Committee shall be required either to: (i) disregard the
effect of such acquisitions in determining achievement of the Value Growth
Factor and the Volume Growth Factor or (ii) treat any such acquisition as if it
had occurred at the beginning of the Incentive Period. If the effect of either
disregarding such acquisition or treating such acquisition as if it had
occurred at the beginning of the Incentive Period would be to increase the
awards payable under the Plan; the Committee shall be required to make any such
determination so as to result in the highest award level determinable under the
circumstances. Notwithstanding the foregoing, the Committee shall have the
discretion to treat any such acquisition as if it had occurred as of the
beginning of the Incentive Period, or to determine the Value Growth Factor and
the Volume Growth Factor taking into consideration the effect of the
acquisition from the effective date thereof, if the effect of exercising such
discretion would be to decrease the awards otherwise payable under the Plan.
3.4 Certification. Other than Incentive Payments made on account of a
Change of Control, no Incentive Payments shall be made unless approved by the
Committee.
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ARTICLE 4. DEFERRAL BENEFITS
A Participant may elect to defer Incentive Payments for an Incentive
Period if such deferral is made in writing within thirty (30) days after having
been selected as a Participant for such Incentive Period. All such deferrals
will be considered contributions to the Company's Supplemental Savings
Incentive Plan. Deferred Incentive Payments, contributed to the Supplemental
Savings Incentive Plan may be allocated among the mutual fund and prime rate
investment options, however such deferrals may not be included in a
Participant's Fixed Benefit Option account of the Supplemental Savings
Incentive Plan. All rules and regulations of the Supplemental Savings Incentive
Plan apply to deferrals contributed to that plan. Deferrals to the Supplemental
Savings Incentive Plan from the Plan are not eligible for any Company matching
contributions.
ARTICLE 5. DISTRIBUTION EVENTS
Certain events may result in forfeiture or reduction of a Participant's
Incentive Payment as follows:
Severance -- A Participant who leaves the employment of the Company, other
than on account of death, Total and Permanent Disability or Retirement, or is
terminated with or without cause by the Company before the Benefit
Determination Date for an Incentive Period shall not be eligible for any
Incentive Payment.
Disability -- A Participant who becomes Totally and Permanently Disabled
and is unable to continue employment with the Company, will be eligible to
receive a pro-rated portion of the Incentive Payment for the Incentive Period.
The amount of the pro-rated Incentive Payment will be the portion of time
during the Incentive Period the Participant was an active Participant divided
by the total Incentive Period, multiplied by the amount of the Incentive
Payment as determined in accordance with the Plan for the Incentive Period.
Retirement -- As defined in the Plan, a Participant must have reached age
55 in order to be considered retired under the Plan. A Participant who Retires
during an Incentive Period will be eligible to receive a pro-rated portion of
the Incentive Payment for the Incentive Period. The amount of the pro-rated
Incentive Payment will be the portion of time during the Incentive Period the
Participant was an active Participant divided by the total Incentive Period,
multiplied by the amount of the Incentive Payment as determined in accordance
with the Plan for the Incentive Period.
Death -- Upon the death of a Participant prior to the end of an Incentive
Period, the Company shall pay the Participant's Beneficiary a pro-rated portion
of the Incentive Payment for the Incentive Period. The amount of the pro-rated
Incentive Payment will be the portion of time during the Incentive Period the
Participant was an active Participant divided by the total Incentive Period,
multiplied by the amount of the Incentive Payment as determined in accordance
with the Plan for the Incentive Period.
Except to the extent such payments are subject to the provisions of the
Supplemental Savings Incentive Plan, any payments due to Participants or their
beneficiaries related to the distribution events described above shall be made
in a lump sum within sixty (60) days following the Benefit Determination Date
which relates to such payments.
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ARTICLE 6. CHANGE IN CONTROL BENEFITS
In the event of a Change in Control, the Company shall pay the Participant
a single lump sum payment. Such payment shall be computed from the beginning of
the Incentive Period to the date of the Change in Control as provided for in
Sections 1.31, 1.32 and 3.2 of the Plan subject to the modifications in this
Section 6. For the purposes of this Section 6, the Volume Growth Scale as set
forth in Schedule A, shall be adjusted by multiplying the scale by a fraction,
the numerator of which shall be the number of days elapsed since the beginning
of the Incentive Period to the date of the Change in Control and the
denominator of which shall be the total number of days in the Incentive Period.
For purposes of this Section 6, the Value Growth Factor shall be computed using
the last full twelve (12) months prior to the Change In Control. The amount so
computed will be multiplied by a fraction, the numerator of which shall be the
number of days elapsed since the beginning of the Incentive Period to the date
of the Change in Control and the denominator of which shall be the total number
of days in the Incentive Period.
ARTICLE 7. ADMINISTRATION OF THE PLAN
7.1 Powers and Duties of the Committee. The Committee shall have general
responsibility for the administration of the Plan (including but not limited to
complying with reporting and disclosure requirements, and establishing and
maintaining Plan records). In the exercise of its sole and absolute discretion,
the Committee shall interpret the Plan's provisions (and all ambiguities) and
subject to the Board's approval, determine the eligibility of individuals for
benefits.
7.2 Agents. The Committee may engage such legal counsel, certified public
accountants and other advisers and service providers, who may be advisers or
service providers for the Company, and make use of such agents and clerical or
other personnel, as it shall require or may deem advisable for purposes of the
Plan. The Committee may rely upon the written opinion of any legal counsel or
accountants engaged by the Committee, and may delegate to any person or persons
its authority to perform any act hereunder, including, without limitation,
those matters involving the exercise of discretion, provided that such
delegation shall be subject to revocation at any time at the discretion of the
Committee.
7.3 Reports to Board. The Committee shall report to the Board or to the
Executive Committee of the Board of Directors, as frequently as the Board or
the Executive Committee shall specify, with regard to the matters for which the
Committee is responsible under the Plan.
7.4 Structure of Committee. No member of the Committee shall be entitled
to act on or decide any matter relating solely to his own or any other member's
rights or benefits under the Plan. In the event the Committee is unable to act
in any matter by reason of the foregoing restriction, the Board shall act on
such matter. The members of the Committee shall not receive any special
compensation for serving in the capacity as members of the Committee but shall
be reimbursed for any reasonable expenses incurred in connection therewith.
Except as otherwise required by ERISA, no bond or other security shall be
required of the Committee or any member thereof in any jurisdiction. Any member
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of the Committee, any subcommittee or agent to whom the Committee delegates any
authority, and any other person or group of persons, may serve in more than one
fiduciary capacity with respect to the Plan.
7.5 Adoption of Procedures of Committee. The Committee shall establish its
own procedures and the time and place for its meetings and provide for the
keeping of minutes of all meetings. A majority of the members of the Committee
shall constitute a quorum for the transaction of business at a meeting of the
Committee. Any action of the Committee may be taken upon the affirmative vote
of a majority of the members of the Committee present at a meeting. The
Committee may also act without meeting by unanimous written consent.
7.6 Instructions for Payments. All requests of or directions to the
Company for payment or disbursement shall be signed by a member of the
Committee or such other person or persons as the Committee may from time to
time designate in writing. This person shall cause to be kept full and accurate
accounts of payments and disbursements under the Plan.
7.7 Claims for Benefits. All claims for benefits under the Plan shall be
submitted in writing to the Committee. Within a reasonable period of time the
Committee shall decide the claim by majority vote. Written notice of the
decision on each such claim shall be furnished within 30 days after receipt of
the claim. If the claim is wholly or partially denied, such written notice
shall set forth an explanation of the specific findings and conclusions on
which such denial is based. A claimant may review all pertinent documents and
may request a review by the Committee of such a decision denying the claim.
Such a request shall be made in writing and filed with the Committee within 60
days after delivery to said claimant of written notice of said decision. Such
written request for review shall contain all additional information which the
claimant requests the Committee to consider. The Committee may hold any hearing
or conduct any independent investigation which it deems necessary to render its
decision, and the decision on review shall be made as soon as possible after
the Committee's receipt of the request for review. Written notice of the
decision on review shall be furnished to the claimant within 30 days after
receipt by the Committee of a request for review. Written notice of the
decision on review shall include specific reasons for such decision.
7.8 Hold Harmless. To the maximum extent permitted by law, no member of
the Committee shall be personally liable by reason of any contract or other
instrument executed by such member or on such member's behalf in such member's
capacity as a member of the Committee nor for any mistake of judgment made in
good faith; and the Company shall indemnify and hold harmless, directly from
its own assets (including the proceeds of any insurance policy the premiums of
which are paid from the Company's own assets), each member of the Committee and
each other officer, employee, or director of the Company to whom there was any
duty or power relating to the administration or interpretation of the Plan
against any cost or expense (including counsel fees) or liability (including
any sum paid in settlement of a claim with the approval of the Company) arising
out of any act or omission to act in connection with the Plan unless arising
out of such person's own fraud or bad faith or such indemnification is contrary
to law.
7.9 Service of Process. The Secretary of the Company or such other person
designated by the Board shall be the agent for service of process under the
Plan.
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ARTICLE 8. DESIGNATION OF BENEFICIARIES
8.1 Beneficiary Designation. Every Participant shall file with the
Committee a written designation (in substantially the form attached hereto as
Schedule E of one or more persons as the Beneficiary who shall be entitled to
receive the benefits, if any, payable under the Plan after the Participant's
death. A Participant may from time to time revoke or change such Beneficiary by
filing a new designation with the Committee. The last such designation received
by the Committee shall be controlling; provided, however, that no designation,
or change or revocation thereof, shall be effective unless received by the
Committee prior to the Participant's death, and in no event shall it be
effective as of any date prior to such receipt. All Beneficiary designations,
and the identity of any Beneficiary, shall be final. If a Beneficiary dies
after the death of the Participant and prior to receiving the payment(s) that
would have been made to such Beneficiary had such Beneficiary's death not
occurred, and no contingent Beneficiary has been designated, then for the
purposes of the Plan the payment(s) that would have been received by such
Beneficiary shall be made to the Beneficiary's estate.
8.2 Failure to Designate Beneficiary. If no Beneficiary designation is in
effect at the time of a Participant's death, the benefits, if any, payable
under the Plan after the Participant's death shall be made to the Participant's
Surviving Spouse, if any, or if the Participant has no Surviving Spouse, to the
Participant's estate. If the Committee is in doubt as to the right of any
person to receive such benefits, the Committee may direct the Company to
withhold payment, without liability for any interest thereon, until the rights
thereto are determined, or the Committee may direct the Company to pay any such
amount into any court of appropriate jurisdiction; and such payment shall be a
complete discharge of the liability of the Company.
ARTICLE 9. AMENDMENT OR TERMINATION OF THE PLAN
9.1 Right to Amend or Terminate Plan.
(a) The Board or the Committee reserves the right at any time in its sole
discretion to amend, specifically including but not limited to such amendments
that may be necessary or advisable so that all payments are deductible for
federal income tax purposes under Section 162 of the Code, or terminate the
Plan, in whole or in part, and for any reason and without the consent of any
Participant or Beneficiary.
(b) The Board or the Committee may adopt any ministerial and
nonsubstantive amendment which may be necessary or appropriate to facilitate
the administration, management and interpretation of the Plan, provided the
amendment does not materially affect the currently estimated cost to the
Company of maintaining the Plan.
(c) The Board or the Committee reserves the right to amend, terminate,
modify, reduce or otherwise affect the Company's obligations under the Plan
retroactively provided that after a Change in Control neither the Board or the
Committee may reduce any benefits which would otherwise be paid.
The Board and Committee shall at all times be required to exercise its
discretionary powers herein provided in such a manner, and subject to such
limitations as will permit all payments under the Plan to "covered employees",
as such term is defined in Section 162 (m) of the Code, to continue to qualify
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as "performance based compensation" for purposes of Section 162 (m) of the
Code, and any action taken by the Committee or by the Board shall automatically
be deemed null and void to the extent that it would have the effect of
destroying such qualification.
9.2 Notice. Notice of any amendment or termination of the Plan shall be
given by the Board or the Committee, whichever adopts the amendment to the
other.
ARTICLE 10. GENERAL PROVISIONS AND LIMITATIONS
10.1 No Right to Continued Employment. Nothing contained in the Plan shall
give any Employee the right to be retained in the employment of the Company or
affect the right of any such employer to dismiss any employee with or without
cause. The adoption and maintenance of the Plan shall not constitute a contract
between the Company and Employee or consideration for, or an inducement to or
condition of, the employment of any Employee. Unless otherwise expressly stated
in a written contract of employment and such has been executed by a duly
authorized representative of the Company, such Employee is an "employee at
will."
10.2 Payment on Behalf of Payee. If the Committee finds that any person to
whom any amount is payable under the Plan is unable to care for his own affairs
because of illness or accident, or is a minor, or has died, then any payment
due such person or such person's estate (unless a prior claim therefor has been
made by a duly appointed legal representative) may, if the Committee so elects,
be paid to such person's spouse, child (or children), relative, institution
maintaining or having custody of such person, or any other person deemed by the
Committee to be a proper recipient on behalf of such person otherwise entitled
to payment. Any such payment shall be a complete discharge of the liability of
the Plan and Company therefor.
10.3 Nonalienation. No interest, expectancy, benefit, payment, claim or
right of any Participant or Beneficiary under the Plan shall be (a) subject in
any manner to any claims of any creditor of the Participant or Beneficiary, (b)
subject to the debts, contracts, liabilities or torts of the Participant or
Beneficiary or (c) subject to alienation by anticipation, sale, transfer,
assignment, bankruptcy, pledge, attachment, charge or encumbrance of any kind.
If any person attempts to take any action contrary to this Section, such action
shall be null and void and of no effect; and the Committee and the Company
shall disregard such action and shall not in any manner be bound thereby and
shall suffer no liability on account of their disregard thereof. If the
Participant or Beneficiary hereunder becomes bankrupt or attempts to
anticipate, alienate, sell, assign, pledge, encumber, or change any right
hereunder, then such right or benefit shall, in the discretion of the
Committee, cease and terminate; and in such event the Committee may hold or
apply the same or any part thereof for the benefit of the Participant or
Beneficiary or the spouse, children, or other dependents of the Participant or
Beneficiary, or any of them, in such manner and in such amounts and proportions
as the Committee may deem proper.
10.4 Missing Payee. If the Committee cannot ascertain the whereabouts of
any person to whom a payment is due under the Plan, and if, after five years
from the date such payment is due, a notice of such payment due is mailed to
the last known address of such person, as shown on the records of the Committee
or the Company, and within three months after such mailing such person has not
made written claim therefor, the Committee, if it so elects, after receiving
advice from counsel to the Plan,
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may direct that such payment and all remaining payments otherwise due to such
person be canceled on the records of the Plan and the amount thereof forfeited;
and upon such cancellation, the Company shall have no further liability
therefor, except that, in the event such person later notifies the Committee of
such person's whereabouts and requests the payment or payments due to such
person under the Plan, the amounts otherwise due but unpaid shall be paid to
such person without interest for late payment.
10.5 Required Information. Each Participant shall file with the Committee
such pertinent information concerning himself or herself, such Participant's
Beneficiary, or such other person as the Committee may specify; and no
Participant, Beneficiary, or other person shall have any rights or be entitled
to any benefits under the Plan unless such information is filed by or with
respect to the Participant.
10.6 No Trust or Funding Created. The obligations of the Company to make
payments hereunder constitutes a liability of the Company to a Participant or
Beneficiary, as the case may be. Such payments shall be made from the general
funds of the Company; and the Company shall not be required to establish or
maintain any special or separate fund, or purchase or acquire life insurance on
a Participant's life, or otherwise to segregate assets to assure that such
payment shall be made; and neither a Participant nor a Beneficiary shall have
any interest in any particular asset of the Company by reason of its
obligations hereunder. Nothing contained in the Plan shall create or be
construed as creating a trust of any kind or any other fiduciary relationship
between the Company and a Participant or any other person, it being the
intention of the parties that the Plan be unfunded for tax purposes and for
title I of ERISA. The rights and claims of a Participant or a Beneficiary to a
benefit provided hereunder shall have no greater or higher status than the
rights and claims of any other general, unsecured creditor of the Company; and
the Plan constitutes a mere promise to make benefit payments in the future. If,
however, the Company should establish a trust, such trust and any asset held by
it to assist it in meeting its obligations under this Plan must conform to the
terms of the model trust as described in Rev. Proc. 92-64.
10.7 Binding Effect. Obligations incurred by the Company pursuant to this
Plan shall be binding upon and inure to the benefit of the Company, its
successors and assigns, and the Participant and the Participant's Beneficiary.
10.8 Merger or Consolidation. In the event of a merger or a consolidation
by the Company with another corporation or entity, or the acquisition of
substantially all of the assets or outstanding stock of the Company by another
corporation, then and in such event the obligations and responsibilities of the
Company under this Plan shall be assumed by any such successor or acquiring
corporation; and all of the rights, privileges and benefits of the Participants
and Beneficiaries hereunder shall continue.
10.9 Entire Plan. This document, any written amendments hereto and the
Schedules attached hereto contain all the terms and provisions of the Plan and
shall constitute the entire Plan, any other alleged terms or provisions being
of no effect.
10.10 Withholding. The Company shall withhold from benefit payments all
taxes required by law.
A-12
10.11 Counterparts. The Plan may be executed in multiple counterparts,
each of which is as effective as an original.
IN WITNESS WHEREOF, the Company has caused this Plan to be executed this
day of , 1998.
COCA-COLA BOTTLING CO. CONSOLIDATED
[Corporate Seal] By------------------------------------------
President and Chief Operating Officer
ATTEST: ------------------------------------------
Secretary
A-13
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APPENDIX
This Proxy is Solicited on Behalf of the Board of Directors
PROXY
COCA-COLA BOTTLING CO. CONSOLIDATED
Annual Meeting of Shareholders, May 13, 1998
The undersigned hereby appoints H.W. McKay Belk, H. Reid Jones and John W.
Murrey, III, and each of them proxies, with full power of substitution, to act
and to vote the shares of common stock which the undersigned is entitled to
vote at the Annual Meeting of Shareholders to be held at Snyder Production
Center, 4901 Chesapeake Drive, Charlotte, North Carolina 28216, at 10:00 a.m.,
E.D.T., on May 13, 1998, and any adjournment or adjournments thereof, as
follows:
1. FIXING THE NUMBER OF DIRECTORS AT ELEVEN: [ ] FOR [ ] AGAINST [ ] ABSTAIN
2. ELECTION OF DIRECTORS: [ ] FOR all nominees [ ] WITHHOLD AUTHORITY
listed below to vote for all
(Except as marked nominees listed below
to the contrary
below)
J. Frank Harrison, Jr.; J. Frank Harrison, III; James L. Moore, Jr.; and
Ned R. McWherter
(Instruction: To withhold authority to vote for any individual write that
nominee's name in the space provided below.)
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3. APPROVING THE COMPANY'S LONG TERM INCENTIVE
PLAN: [ ] FOR [ ] AGAINST [ ] ABSTAIN
(Continued on other side)
(Continued from other side)
4. Acting upon any other business which may be properly brought
before said meeting or any adjournment or adjournments thereof;
according to the number of votes and as fully as the undersigned
would be entitled to vote if personally present, hereby ratifying
and confirming all that said proxies or any of them lawfully do
or cause to be done by virtue hereof. A majority of said proxies
who shall be present and acting as such at the meeting or any
adjournment thereof, or if only one such proxy be present and
acting, then that one, shall have and may exercise all the powers
herein conferred.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED IN FAVOR OF PROPOSALS 1, 2 AND 3, AND WILL BE VOTED IN ACCORDANCE WITH
THE BEST JUDGMENT OF THE PROXYHOLDERS IN ACTING UPON ANY OTHER BUSINESS WHICH
MAY BE PROPERLY BROUGHT BEFORE SAID MEETING OR ANY ADJOURNMENT OR ADJOURNMENTS
THEREOF.
The undersigned hereby acknowledges receipt of the Notice of Annual Meeting of
Shareholders, dated April 7, 1998, and the Proxy Statement furnished therewith.
If you plan to attend the Annual Meeting of Shareholders on May 13, 1998, please
check the following box: [ ]
Dated this.............. day of............, 1998
_________________________________________ (Seal)
Note: Signature should agree with name on stock
certificate as printed thereon. Executors,
administrators, trustees and other fiduciaries
and persons signing on behalf of corporations or
partnerships, should so indicate when signing.
Please sign, date and return this Proxy in the accompanying prepaid
self-addressed envelope. Thank you.
