UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended July 3, 1994
Commission File Number 0-9286
COCA-COLA BOTTLING CO. CONSOLIDATED
(Exact name of registrant as specified in its charter)
Delaware 56-0950585
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
1900 Rexford Road, Charlotte, North Carolina 282ll
(Address of principal executive offices) (Zip Code)
(704) 551-4400
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1)
has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to
file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
Indicate the number of shares outstanding of each
of the issuer's classes of common stock, as of the
latest practicable date.
Class Outstanding at August 5, 1994
Common Stock, $1 Par Value 7,958,059
Class B Common Stock, $1 Par Value 1,336,362
<PAGE>
PART I - FINANCIAL INFORMATION
Item l. Financial Statements.
Coca-Cola Bottling Co. Consolidated
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
In Thousands of Dollars
<TABLE>
<CAPTION>
July 3, Jan. 2, July 4,
1994 1994 1993
<S> <C> <C> <C>
ASSETS
Current Assets:
Cash $ 2,098 $ 1,262 $ 1,932
Accounts receivable, trade, less
allowance for doubtful accounts
of $436, $425 and $601 16,380 4,960 13,113
Accounts receivable from
The Coca-Cola Company 4,614 6,698 3,103
Due from Piedmont Coca-Cola
Bottling Partnership 3,225 2,454
Accounts receivable, other 8,204 10,758 12,725
Notes receivable from Piedmont
Coca-Cola Bottling Partnership 106,974
Inventories 34,686 27,533 29,878
Prepaid expenses and other
current assets 6,639 4,734 5,309
Total current assets 75,846 58,399 173,034
Property, plant and equipment,
at cost 312,122 297,561 288,067
Less - accumulated depreciation
and amortization 135,367 134,546 127,526
Property, plant and equipment,
net 176,755 163,015 160,541
Investment in Piedmont Coca-Cola
Bottling Partnership 67,995 68,400 70,000
Other assets 19,302 18,700 19,758
Identifiable intangible assets,
less accumulated amortization of
$70,733, $65,803 and $61,512 262,785 267,715 292,071
Excess of cost over fair value
of net assets of businesses
acquired, less accumulated
amortization of $20,544, $19,399
and $18,253 71,075 72,220 73,365
Total $673,758 $648,449 $788,769
</TABLE>
See Accompanying Notes to Consolidated Financial Statements
LIABILITIES AND SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
July 3, Jan. 2, July 4,
1994 1994 1993
<S> <C> <C> <C>
Current Liabilities:
Portion of long-term debt payable
within one year $ 861 $ 711 $ 1,239
Note payable to Piedmont Coca-Cola
Bottling Partnership 21,746
Accounts payable and accrued
liabilities 63,005 69,232 53,281
Accounts payable to The Coca-Cola
Company 7,727 1,876 5,977
Accrued interest payable 10,340 10,108 12,224
Total current liabilities 81,933 81,927 94,467
Deferred income taxes 84,566 80,065 86,467
Other liabilities 22,166 22,470 20,893
Senior long-term debt 454,112 434,358 555,299
Total liabilities 642,777 618,820 757,126
Shareholders' Equity:
Convertible Preferred Stock, $100 par
value: Authorized-50,000 shares;
Issued-None
Nonconvertible Preferred Stock, $100
par value: Authorized-50,000 shares;
Issued-None
Preferred Stock, $.01 par value:
Authorized-20,000,000 shares;
Issued-None
Common Stock, $1 par value:
Authorized-30,000,000 shares;
Issued-10,090,859 shares 10,090 10,090 10,090
Class B Common Stock, $1 par value:
Authorized-10,000,000 shares;
Issued-1,964,476 shares 1,965 1,965 1,965
Class C Common Stock, $1 par value:
Authorized-20,000,000 shares;
Issued-None
Capital in excess of par value 134,675 139,322 143,171
Accumulated deficit (92,489) (98,488) (105,937)
Minimum pension liability adjustment (5,614) (5,614)
48,627 47,275 49,289
Less-Treasury stock, at cost:
Common-2,132,800 shares 17,237 17,237 17,237
Class B Common-628,114 shares 409 409 409
Total shareholders' equity 30,981 29,629 31,643
Total $673,758 $648,449 $788,769
</TABLE>
See Accompanying Notes to Consolidated Financial Statements
<PAGE>
Coca-Cola Bottling Co. Consolidated
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
In Thousands (Except Per Share Data)
<TABLE>
<CAPTION>
Second Quarter First Half
1994 1993 1994 1993
<S> <C> <C> <C> <C>
Net sales (includes sales to
Piedmont of $24,247 and
$44,811 in 1994) $ 200,692 $ 194,506 $ 364,509 $ 348,773
Cost of products sold,
excluding depreciation shown
below (includes $21,201 and
$40,106 related to sales to
Piedmont in 1994) 118,941 108,871 216,425 193,296
Gross margin 81,751 85,635 148,084 155,477
Selling expenses 39,310 41,379 73,949 77,361
General and administrative
expenses 13,508 13,949 26,167 26,428
Depreciation expense 5,991 6,008 11,764 11,648
Amortization of goodwill
and intangibles 3,081 4,322 6,154 8,622
Income from operations 19,861 19,977 30,050 31,418
Interest expense 7,833 8,235 15,359 16,503
Other expense, net 273 1,095 287 1,700
Income before income taxes and
effect of accounting change 11,755 10,647 14,404 13,215
Federal and state income taxes 5,055 4,612 6,194 5,831
Income before effect of
accounting change 6,700 6,035 8,210 7,384
Effect of accounting change (2,211)
Net income $ 6,700 $ 6,035 $ 5,999 $ 7,384
Income per share:
Income before effect of
accounting change $ .72 $ .65 $ .88 $ .80
Effect of accounting change (.24)
Net income $ .72 $ .65 $ .64 $ .80
Cash dividends per share:
Common Stock $ .25 $ .22 $ .50 $ .44
Class B Common Stock .25 .13 .50 .26
Weighted average number of
Common and Class B Common
shares outstanding 9,294 9,261 9,294 9,221
</TABLE>
See Accompanying Notes to Consolidated Financial Statements
<PAGE>
Coca-Cola Bottling Co. Consolidated
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (UNAUDITED)
In Thousands of Dollars
<TABLE>
<CAPTION>
Capital Minimum
Class B in Pension
Common Common Excess of Accumulated Liability Treasury
Stock Stock Par Value Deficit Adjustment Stock
<S> <C> <C> <C> <C> <C> <C>
Balance on
January 3,
1993 $ 9,977 $ 1,965 $ 144,831 $ (113,321) $ 17,646
Net income 7,384
Cash dividends
declared:
Common (3,816)
Issuance of
Common Stock 113 2,156
Balance on
July 4, 1993 $10,090 $ 1,965 $ 143,171 $ (105,937) $ 17,646
Balance on
January 2,
1994 $10,090 $ 1,965 $ l39,322 $ (98,488) $ (5,614) $ 17,646
Net income 5,999
Cash dividends
declared:
Common (4,647)
Balance on
July 3, 1994 $10,090 $ 1,965 $ 134,675 $ (92,489) $ (5,614) $ 17,646
</TABLE>
See Accompanying Notes to Consolidated Financial Statements
<PAGE>
Coca-Cola Bottling Co. Consolidated
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
In Thousands of Dollars
First Half
1994 1993
Cash Flows from Operating Activities
Net income $ 5,999 $ 7,384
Adjustments to reconcile net income to net
cash provided by operating activities:
Effect of accounting change 2,211
Depreciation expense 11,764 11,648
Amortization of goodwill and intangibles 6,154 8,622
Deferred income taxes 6,170 5,815
(Gains) losses on sale of property, plant
and equipment (367) 876
Amortization of debt costs 228 267
Undistributed loss of Piedmont Coca-Cola
Bottling Partnership 405
Increase in current assets less current
liabilities (20,085) (16,704)
Decrease (increase) in other noncurrent
assets (870) 520
Decrease in other noncurrent liabilities (189) (549)
Other 420 (190)
Total adjustments 5,841 10,305
Net cash provided by operating
activities 11,840 17,689
Cash Flows from Financing Activities
Proceeds from the issuance of long-term debt 19,810 3,743
Repayments of long-term debt (56) (3,570)
Issuance of Common Stock 2,269
Cash dividends paid (4,647) (3,816)
Other (556) (2,509)
Net cash provided by (used in) financing
activities 14,551 (3,883)
Cash Flows from Investing Activities
Additions to property, plant and equipment (27,831) (12,264)
Proceeds from the sale of property, plant
and equipment 2,276 550
Acquisition of companies, net of cash
acquired (1,574)
Net cash used in investing activities (25,555) (13,288)
Net increase in cash 836 518
Cash at beginning of period 1,262 1,414
Cash at end of period $ 2,098 $ 1,932
See Accompanying Notes to Consolidated Financial Statements
<PAGE>
Coca-Cola Bottling Co. Consolidated
Notes to Consolidated Financial Statements (Unaudited)
1. Accounting Policies
The consolidated financial statements include the accounts of
Coca-Cola Bottling Co. Consolidated and its wholly owned
subsidiaries ("the Company"). All significant intercompany
accounts and transactions have been eliminated.
The information contained in the financial statements is
unaudited. The statements reflect all adjustments which, in
the opinion of management, are necessary for a fair statement
of the results for the interim periods presented. Except for
the accounting change discussed in Note 2, all such adjustments
are of a normal, recurring nature.
The accounting policies followed in the presentation of interim
financial results are the same as those followed on an annual
basis. These policies are presented in Note 1 to the
consolidated financial statements included in the Company's
Annual Report on Form 10-K for the year ended January 2, 1994
filed with the Securities and Exchange Commission.
Certain prior year amounts have been reclassified to conform to
current year classifications.
2. Accounting Change
In November 1992, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards No. 112,
"Employers' Accounting for Postemployment Benefits" ("SFAS
112"). SFAS 112 requires the accrual, during the years that
employees render service, of the expected cost of providing
postemployment benefits if certain criteria are met. The
Company adopted the provisions of SFAS 112 in the first quarter
of 1994, effective January 3, 1994. As a result, the Company
recorded a one-time, after-tax charge of $2.2 million. This
charge appears within the caption "Effect of accounting
change."
<PAGE>
Coca-Cola Bottling Co. Consolidated
Notes to Consolidated Financial Statements (Unaudited)
3. Summarized Income Statement Data of Piedmont Coca-Cola
Bottling Partnership
On July 2, 1993, the Company and The Coca-Cola Company formed
Piedmont Coca-Cola Bottling Partnership ("Piedmont") to
distribute and market soft drink products primarily in portions
of North Carolina and South Carolina. The Company and The
Coca-Cola Company, through their respective subsidiaries, each
beneficially own a 50% interest in Piedmont. The Company
provides substantially all of the soft drink products for
Piedmont and manages the operations of Piedmont pursuant to a
management agreement. Summarized income statement data for
Piedmont is as follows:
Second Quarter First Half
In Thousands 1994 1994
Net sales $ 53,672 $ 97,633
Gross margin 22,605 41,779
Income from operations 2,806 3,821
Net income (loss) 482 (810)
4. Inventories
Inventories are summarized as follows:
July 3, Jan. 2, July 4,
In Thousands 1994 1994 1993
Finished products $20,687 $16,622 $19,478
Manufacturing materials 11,978 9,498 9,542
Used bottles and cases 2,021 1,413 858
Total inventories $34,686 $27,533 $29,878
<PAGE>
Coca-Cola Bottling Co. Consolidated
Notes to Consolidated Financial Statements (Unaudited)
5. Long-Term Debt
Long-term debt is summarized as follows:
<TABLE>
<CAPTION>
Fixed(F) or
Interest Variable Interest July 3, Jan. 2, July 4,
In Thousands Maturity Rate (V) Rate Paid 1994 1994 1993
<S> <C> <C> <C> <C> <C> <C> <C>
Lines of Credit 1997 4.46% - V Varies $108,170 $ 18,335 $ 93,615
4.58%
Commercial Paper 1997 4.47% V Varies 4,999 4,987
Revolving Credit 40,000
Term Loan Agreement 75,000 75,000
Term Loan Agreement 2000 4.00% V Semi- 60,000 60,000 60,000
annually
Term Loan Agreement 2001 3.94% V Semi- 60,000 60,000 60,000
annually
Medium-Term Notes 1998 5.11% V Quarterly 10,000 10,000 10,000
Medium-Term Notes 1999 7.99% F Semi- 66,500 66,500 66,500
annually
Medium-Term Notes 2000 10.05% F Semi- 57,000 57,000 57,000
annually
Medium-Term Notes 2002 8.56% F Semi- 66,500 66,500 66,500
annually
Notes acquired in
Sunbelt acquisition 2001 8.00% F Quarterly 5,417 5,442 5,441
Capital leases and
other notes payable 1994 - 6.85% - F Varies 16,387 16,292 17,495
2001 12.00%
454,973 435,069 556,538
Less: Portion of
long-term debt
payable within
one year 861 711 1,239
Senior long-term debt $454,112 $434,358 $555,299
</TABLE>
<PAGE>
Coca-Cola Bottling Co. Consolidated
Notes to Consolidated Financial Statements (Unaudited)
5. Long-Term Debt (cont.)
As of July 3, 1994, the Company was in compliance with all of the covenants of
its various borrowing agreements.
It is the Company's intent to renew its lines of credit, commercial
paper borrowings and borrowings under the revolving credit facility as they
mature and, to the extent that these borrowings do not exceed the amount
available under the Company's $170 million revolving credit facility,
they are classified as noncurrent liabilities.
A $100 million commercial paper program was established in January 1990 with
funds to be used for general corporate purposes. On July 3, 1994,
approximately $5 million was outstanding under this program.
In June 1992, the Company entered into a three-year arrangement under which it
has the right to sell an undivided interest in a designated pool of trade
accounts receivable for up to a maximum of $40 million. The Company
had sold trade receivables of $37 million, $33 million and $36.5 million
as of July 3, 1994, January 2, 1994 and July 4, 1993, respectively.
6. Financial Instruments with Off-Balance-Sheet Risk
The Company actively manages its interest rate risk using a variety of
rate hedging mechanisms to minimize exposure to and reduce risk from
interest rate fluctuations in the ordinary course of the Company's business.
The Company does not attempt to protect itself completely from all
interest rate movements but attempts to offset large interest rate
movements and reduce their impact within the most reasonable risk and cost
profile. The Company has entered into interest rate hedging transactions that
resulted in weighted average interest rates for the debt portfolio of
approximately 6.6%, 6.7% and 5.5% as of July 3, 1994, January 2, 1994 and
July 4, 1993, respectively. Including the effect of hedging activities,
approximately 45%, 43% and 40% of the total debt portfolio was
subject to changes in short-term interest rates as of July 3, 1994,
January 2, 1994 and July 4, 1993, respectively.
<PAGE>
Coca-Cola Bottling Co. Consolidated
Notes to Consolidated Financial Statements (Unaudited)
6. Financial Instruments with Off-Balance-Sheet Risk (cont.)
Off-balance-sheet financial instruments were as follows:
<TABLE>
<CAPTION>
July 3, 1994 January 2, 1994 July 4, 1993
Remaining Remaining Remaining
In Thousands Amount Term Amount Term Amount Term
<S> <C> <C> <C> <C> <C> <C>
Interest swaps-
floating $221,600 6-9 years $221,600 7-10 years $161,600 7-10 years
Interest swaps-
fixed 265,000 2-9 years 368,000 1-10 years 268,000 1-4 years
Interest caps 110,000 1 year 110,000 1.5 years 110,000 2 years
Financial
guarantee 20,000 7 years 13,094 7 years 16,961 8 years
</TABLE>
The Company routinely monitors both interest rate and counterparty
credit risk. Mark-to-market valuations of positions and underlying debt
are performed on an ongoing basis. Sensitivity analyses are performed to
review the impact on the Company's financial position and coverages of various
likely increases in interest rates as well as the impact of unlikely rate
movements.
7. Income Taxes
Reported income tax expense differs from the amount computed at the statutory
rate due to amortization of nondeductible goodwill, state income taxes,
nondeductible premiums on officers' life insurance and other nondeductible
expenses.
<PAGE>
Coca-Cola Bottling Co. Consolidated
Notes to Consolidated Financial Statements (Unaudited)
8. Supplemental Disclosures of Cash Flow Information
Changes in current assets and current liabilities affecting cash, net of
effects from acquisitions and divestitures and effect of accounting
change, are as follows:
First Half
In Thousands 1994 1993
Accounts receivable, trade, net $(11,420) $(17,039)
Due from Piedmont (771)
Accounts receivable, other 4,638 (1,896)
Inventories (7,153) (5,436)
Prepaid expenses and other current assets (1,905) (2,250)
Portion of long-term debt payable within
one year 150 (264)
Accounts payable and accrued liabilities (3,856) 8,999
Accrued interest payable 232 1,182
Increase $(20,085) $(16,704)
Cash payments during the period were as follows:
First Half
In Thousands 1994 1993
Interest $ 15,127 $ 15,054
Income taxes 53 1,067
Noncash items related to the formation of Piedmont on
July 2, 1993 were as follows:
In Thousands
Notes receivable for assets sold to Piedmont $106,974
Assets contributed to Piedmont 48,254
Capital contribution - note payable to Piedmont 21,746
Assumption of Company liabilities by Piedmont 4,800
The $107.0 million notes receivable and the $21.7 million note payable were
funded when Piedmont secured its bank financing on August 31, 1993.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Introduction:
The following discussion presents management's analysis of the results of
operations for the first six months of 1994 compared to the first six months
of 1993 and changes in financial condition from July 4, 1993 and January 2,
1994 to July 3, 1994.
On July 2, 1993, the Company and The Coca-Cola Company formed Piedmont
Coca-Cola Bottling Partnership ("Piedmont") to distribute and market soft
drink products primarily in certain portions of North Carolina and South
Carolina. The Company provides substantially all of the soft drink products to
Piedmont and manages the business of Piedmont pursuant to a management
agreement. The Company and The Coca-Cola Company, through their respective
subsidiaries, each beneficially own a 50% interest in Piedmont. Subsidiaries of
the Company made an initial capital contribution to Piedmont of $70 million in
the aggregate. The Company's capital contribution was composed of approximately
$21.7 million in cash and of bottling operations and certain assets used in
connection with the Company's Wilson, North Carolina and Greenville and
Beaufort, South Carolina territories. The Company sold other territories to
Piedmont for an aggregate purchase price of approximately $118 million. Assets
were sold or contributed at their approximate carrying values. Proceeds from
the sale of territories to Piedmont, net of the Company's cash contribution,
totaled approximately $96 million and were used to reduce the Company's
long-term debt. The Company is accounting for its investment in Piedmont using
the equity method of accounting.
The Company reported net income of $6.7 million or $.72 per share for the
second quarter of 1994 compared with $6.0 million or $.65 per share for the
same period in 1993. For the first six months of 1994, the Company reported
income before the effect of an accounting change of $8.2 million or $.88 per
share as compared to net income of $7.4 million or $.80 per share in the first
six months of 1993. These earnings for the second quarter and first half of
1994 represent improvements of 11% and 11.2%, respectively, over the same
periods of 1993.
A one-time, after-tax noncash charge of $2.2 million or $.24 per share was
recorded in the first quarter of 1994 due to the adoption of Statement of
F i n a n cial Accounting Standards No. 112, "Employers' Accounting for
Postemployment Benefits" ("SFAS 112"). The Company does not expect any
significant impact on the results of future operations due to the adoption of
this accounting standard.
On June 1, 1994, the Company executed an agreement with South Atlantic
Canners, Inc. ("SAC"), a cooperative located in Bishopville, South Carolina.
SAC will significantly expand its
<PAGE>
operations by adding two PET bottling lines.
The Company will oversee the installation of the new lines and will manage
day-to-day operations pursuant to a 10-year management agreement. These new
bottling lines will supply a portion of the Company's volume requirements for
PET product. On July 22, 1994, the Company guaranteed expansion financing for
SAC of up to $15 million.
The results for interim periods are not necessarily indicative of the results
to be expected for the year due to seasonal factors.
Result of Operations:
Due to the formation of Piedmont on July 2, 1993, results of operations for
the second quarter and first half of 1994 are not directly comparable to the
1993 periods.
Excluding the results of the branches sold or contributed to Piedmont from
1993 results, franchise net sales increased by slightly more than 6% and 6.5%
for the second quarter and first half of 1994, respectively. The increase in
franchise net sales was primarily due to increases in volume. The
introduction of certain New Age beverages, such as Nestea and PowerAde,
contributed approximately 1.8% of the first half 1994 franchise sales
increase. Average net selling prices were slightly higher than those of the
1993 periods, sustaining the increases realized in 1993 versus 1992. Sales to
other bottlers increased over the same periods in 1993 primarily due to the
sale of finished products to Piedmont. Soft drink products are sold to
Piedmont at cost.
In the second quarter and first half of 1994, total gross margin decreased by
4.5% and 4.8%, respectively. When the results are adjusted to reflect
comparable territories, gross margin on a per-unit basis was essentially
unchanged. Cost of goods sold as a percentage of net sales was slightly
higher as increases in the costs of ingredients were partially offset by lower
packaging costs.
Excluding the results of the branches sold or contributed to Piedmont from
1993 results, selling expenses increased approximately 14% and 13% in the
second quarter and first half of 1994, respectively. Higher employment costs
resulted from normal wage rate adjustments, the volume increases discussed
previously and planned increases in certain sales and operations functions to
improve customer service and reduce turnover. Expenses associated with the
introduction of New Age beverages also increased 1994 expenses. General and
administrative expenses for the comparable franchise territories were slightly
lower on a per-unit basis than for the 1993 periods.
Amortization of goodwill and intangibles declined 29% for both the second
quarter and first half of 1994, reflecting the sale and contribution of
franchise territories to Piedmont.
<PAGE>
Interest expense declined approximately 5% from the second quarter of 1993 to
the second quarter of 1994 and approximately 7% between the first-half
periods. This decline was due primarily to the decrease of more than $100
million in outstanding debt between the end of the second quarter of 1993 and
the end of the same period in 1994, offset by increases in short-term rates on
the Company's floating rate debt. Proceeds from the sale of territories to
Piedmont, net of the Company's cash contribution, were used to reduce the
Company's long-term debt.
The decline in "other expense, net" was due primarily to a first quarter 1994
gain on the sale of an idle production facility. This facility was acquired
in the 1991 Sunbelt acquisition and was closed in April 1992. For the first
half of 1994, gains of approximately $.4 million on sales of property, plant
and equipment were included in "other expense, net." Losses of approximately
$.9 million on sales of property, plant and equipment were included in "other
expense, net" for the first half of 1993.
The estimated annual effective tax rate for federal and state income taxes was
43% for both the second quarter and the first half of 1994. The difference
between the effective rate and the statutory rate was due to amortization of
n o ndeductible goodwill, state income taxes, nondeductible premiums on
officers' life insurance and other nondeductible expenses. The estimated
annual effective tax rate for the first half of 1993 was 44%.
Changes in Financial Condition:
Working capital increased $17.4 million from January 2, 1994 and decreased
$84.7 million from July 4, 1993 to July 3, 1994. On July 4, 1993, the Company
had notes receivable from Piedmont of $107.0 million and a note payable to
Piedmont of $21.7 million. These notes were settled when Piedmont secured
its bank financing on August 31, 1993. Excluding the effect of these notes
receivable from and payable to Piedmont, working capital increased $.6 million
from July 4, 1993. The increase from January 2, 1994 was primarily due to
seasonality and resulted principally from increases in trade accounts
receivable and inventories. Inventory balances of raw materials and finished
products increased in order to support Piedmont's inventory requirements. The
increase in trade accounts receivable resulted primarily from increases in net
sales.
Capital expenditures in 1994 will be higher than in 1993. The Company is
p u r c hasing rather than leasing new vehicles and is making certain
manufacturing improvements needed to produce new packages. Equipment
additions to serve the Cold Drink market have also increased the 1994
expenditures over the 1993 levels.
The Company actively manages its interest rate risk using a variety of rate
hedging mechanisms. As of July 3, 1994, the debt portfolio had a weighted
average interest rate of approximately 6.6% and
<PAGE>
approximately 45% of the total portfolio was subject to changes in short-term
interest rates. The Company routinely monitors both interest rate and
counterparty credit risk. Mark-to-market valuations of positions and
underlying debt are performed on an ongoing basis. Sensitivity analyses are
performed to review the impact on the Company's financial position and
coverages of various likely increases in interest rates as well as the impact
of unlikely rate movements. As a result of increases in short-term interest
rates, the Company expects that interest expense in the second half of 1994
will increase versus interest expense in the first half of 1994.
Long-term debt increased $19.8 million from January 2, 1994 due primarily to a
seasonal increase in working capital. As of July 3, 1994, the Company was in
compliance with all of the covenants of its various borrowing agreements.
It is the Company's intent to renew any borrowings under its $170 million
revolving credit facility and the informal lines of credit as they mature and,
to the extent that any borrowings under the revolving credit facility, the
informal lines of credit and commercial paper program do not exceed the amount
available under the Company's $170 million revolving credit facility, they are
classified as noncurrent liabilities. As of July 3, 1994, the Company had no
balances outstanding under the revolving credit facility, $108.2 million
outstanding under the informal lines of credit and $5.0 million outstanding
under the commercial paper program. The Company had sold trade accounts
receivable of $37 million as of July 3, 1994 compared to $33 million and $36.5
million on January 2, 1994 and July 4, 1993, respectively.
In February 1994, the Board of Directors approved an increase in the dividend
for the first quarter of 1994. Quarterly dividends were increased to $.25 per
share on both the Common and Class B Common shares outstanding. This dividend
rate was maintained in the second quarter of 1994. If the Company continues
to pay quarterly dividends of $.25 per share on both classes of common stock,
annual dividend payments will total approximately $9.3 million in 1994.
Management believes that the Company, through the generation of cash flow from
operations and the utilization of unused borrowing capacity, has sufficient
financial resources available to maintain its current operations and provide
for its current capital expenditure requirements. The Company considers the
acquisition of additional franchise territories on an ongoing basis.
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
On February 11, 1991, a Complaint was filed against the Company and two
Company employees in the matter of Jeff Hallums v. Coca-Cola Bottling Co.
Consolidated, et al., File No. 8108 in the Chancery Court for Wilson County,
Tennessee as previously reported in the Company's Annual Report on Form 10-K
for the fiscal year ended January 2, 1994. This suit by a visually
handicapped former truck driver for Coca-Cola Bottling Company of Nashville,
Inc., a wholly owned subsidiary of the Company, alleged liability under
various Tennessee common law misrepresentation principles and under the
employee discrimination provision of the Tennessee Human Rights Act.
Plaintiff was terminated because he did not meet federal standards for
commercial truck drivers. Plaintiff sought damages in the amount of $750,000.
As previously reported, the Tennessee Court of Appeals, on an interlocutory
appeal, reversed the trial court's denial of the Company's motion for summary
judgment with respect to plaintiff's handicap discrimination claim on October
13, 1993 and remanded the case for trial of plaintiff's common law tort
claims. The plaintiff's application for permission to appeal the appellate
court's ruling was denied by the Tennessee Supreme Court on February 28, 1994.
The Company subsequently settled this suit on the basis of the Company's
agreement to pay only the outstanding court costs in the matter. The suit was
dismissed, with prejudice, under an Order entered June 10, 1994 by the
Chancery Court for Wilson County, Tennessee.
<PAGE>
Item 4. Submission of Matters to a Vote of Security Holders
(a) The Annual Meeting of the Company's shareholders was held on May 18, 1994.
(c) The meeting was held to consider and vote upon (i) fixing the number of the
Company's directors at ten and (ii) electing three directors, each for a
term of three years or until his successor shall be elected and shall
qualify. The votes cast on the question of fixing the number of directors
at ten are summarized as follows:
FOR AGAINST ABSTAIN TOTAL VOTES
33,450,903 16,872 29,720 33,497,495
The votes cast with respect to each director are summarized as follows:
DIRECTOR NAME FOR ABSTAIN TOTAL VOTES
John W. Murrey, III 33,388,294 109,201 33,497,495
H. W. McKay Belk 33,385,599 111,896 33,497,495
H. Reid Jones 33,388,378 109,117 33,497,495
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit
Number Description
10.1 Lease Funding No. 94002, dated as of April 25, 1994, of a
Master Equipment Lease between the Company and Coca-Cola
Financial Corporation covering various vending machines.
10.2 Lease Funding No. 94003, dated as of May 12, 1994, of a
Master Equipment Lease between the Company and Coca-Cola
Financial Corporation covering various vending machines.
10.3 Lease Funding No. 94004, dated as of June 3, 1994, of a
Master Equipment Lease between the Company and Coca-Cola
Financial Corporation covering various vending machines.
10.4 Lease Funding No. 94005, dated as of June 22, 1994, of a
Master Equipment Lease between the Company and Coca-Cola
Financial Corporation covering various vending machines.
10.5 Lease Funding No. 94006, dated as of July 8, 1994, of a
Master Equipment Lease between the Company and Coca-Cola
Financial Corporation covering various vending machines.
10.6 Management Agreement, dated as of June 1, 1994, by and among
Coca-Cola Bottling Co. Consolidated and South Atlantic
Canners, Inc.
10.7 Guaranty Agreement, dated as of July 22, 1994, between
Coca-Cola Bottling Co. Consolidated and Wachovia Bank of
North Carolina, N.A.
(b) Reports on Form 8-K
A report on Form 8-K, dated May 18, 1994, was filed on May 24, 1994,
under Item 5 of Form 8-K, providing press releases describing the
election of a new director to the Board of Directors and a change in the
titles of certain executive officers of the Company.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
COCA-COLA BOTTLING CO. CONSOLIDATED
(REGISTRANT)
Date: August 12, 1994 By: /s/ David V. Singer
David V. Singer
Principal Financial Officer
of the Registrant
and
Vice President - Chief Financial
Officer
TREASURY BOND: 7.04%
RENTAL FACTOR: 3.23188
LEASE FUNDING NO: 94002
LEASE SUPPLEMENT TO
MASTER EQUIPMENT LEASE (the "Master Lease")
BETWEEN
COCA-COLA FINANCIAL CORPORATION ("Lessor")
AND
COCA-COLA BOTTLING CO. CONSOLIDATED ("Lessee")
DATED: FEBRUARY 9, 1993
Lease Supplement Date: April 25,1994
1. Term
The "Initial Term" shall commence on the 25TH day of April, 1994
(the "Lease Commencement Date") and will continue for a term of one
hundred eight months (108) months ending on April 25TH, 2003.
2. Rent
(a) BASIC RENT: As Basic Rent hereunder, Lessee shall pay an
aggregate rental charge of $2,256,942.24 payable in thirty six (36)
quarterly installments of $62,692.84 each, beginning on July 25th, 1994
and continuing every third month thereafter during the Initial Term,
with the final such installment being due and payable on April 25th, 2003.
(b) INTERIM RENT: Lessee shall pay Lessor Interim Rent on all payments
made by Lessor for Equipment from the date of Lessor's payment, if paid
prior to the Lease Commencement Date, until the Lease Commencement Date.
Interim Rent shall be calculated from the date of such payment on the
basis of a rate which shall be the lesser of (i) a daily rate
of per dollar so paid by Lessor, (which rate is based on the
rate implied by the Basic Rent amount set forth above), or (ii) a per
annum rate applied to the amount so paid by Lessor equal to the
"Prime Rate" as published in The Wall Street Journal on the last
business day prior to the date of such payment by Lessor. Interim
Rent shall be payable in full on the Lease Commencement Date.
(c) SUPPLEMENTAL RENT: In addition to Basic Rent and Interim Rent,
Lessee shall pay Lessor all Supplemental Rent provided for in the
Master Lease including, without limitation, all applicable sales and
use taxes.
3. Location of the Equipment
The location(s) of the Equipment leased is (are) set forth
on Exhibit "A" attached hereto.
1
<PAGE>
4. Equipment Leased
The Equipment leased is described on each equipment invoice and installation
notification subject to this Lease Supplement. The supporting equipment
invoices, installation notifications and equipment serial numbers are
summarized on Exhibit "A" attached hereto.
5. Stipulated Loss Value
The "Stipulated Loss Value" of each item of Equipment, as of
any particular date of computation, shall be determined with reference
to Exhibit "B" attached hereto by multiplying the original cost of such
item of Equipment as stated on Exhibit "A" hereto by the percentage
set forth opposite the applicable month number on Exhibit "B" hereto.
For this purpose the applicable month number means the number of months
or partial months elapsed since the Lease Commencement Date. If only
a portion of an item of Equipment is affected by any event causing
calculation of "Stipulated Loss Value" as specified in the Master Lease,
and the cost of such portion of the Equipment cannot be readily determined
from the original cost of such item set forth on Exhibit A, then the
Stipulated Loss Value for such portion of the Equipment shall be as
reasonably calculated by Lessor, with written notice of such amount being
sent to Lessee by Lessor.
6. Lease
This Lease Supplement is executed and delivered under and pursuant
to the terms of the Master Lease, and this Lease Supplement shall be
deemed to be a part of, and shall be governed by the terms and conditions
of the Master Lease. For purposes of this Lease Supplement, capitalized
terms which are used herein but which are not otherwise defined herein
shall have the meanings ascribed to such terms in the Master Lease.
IN WITNESS WHEREOF, Lessee has caused this Lease Supplement to be
duly executed and delivered by its duly authorized officer,
this day of April 1994.
LESSEE: COCA-COLA BOTTLING CO. CONSOLIDATED
By: Brenda B. Jackson
Title: Vice President & Treasurer
[CORPORATE SEAL]
Accepted in Atlanta, Georgia, this 26th day of April, 1994.
LESSOR:
COCA-COLA FINANCIAL CORPORATION
By: Chris Tambeaux
Title: Vice President
2
TREASURY BOND: 7.594%
RENTAL FACTOR 3.31468%
LEASE FUNDING NO: 94003
LEASE SUPPLEMENT TO
MASTER EQUIPMENT LEASE (the "Master Lease")
BETWEEN
COCA-COLA FINANCIAL CORPORATION ("Lessor")
AND
COCA-COLA BOTTLING CO. CONSOLIDATED ("Lessee")
DATED FEBRUARY 9, 1993
Lease Supplement Date: May 12th, 1993.
1. Term
The "Initial Term" shall commence on the 12th day of May, 1994
(the "Lease Commencement Date") and will continue for a term of one
hundred eight (108) months ending on May 12th, 2003.
2. Rent
(a) BASIC RENT: As Basic Rent hereunder, Lessee shall pay an aggregate
rental charge of $1,002,866.76, payable in arrears in thirty-six (36)
quarterly installments of $27,857.41 each, beginning on August 12, 1994
and continuing on the same day of each calendar quarter thereafter during
the Initial Term, with the final such installment being due and payable
on May 12, 2003.
(b) INTERIM RENT: Lessee shall pay Lessor Interim Rent on all payments
made by Lessor for Equipment from the date of Lessor's payment, if paid
prior to the Lease Commencement Date, until the Lease Commencement Date.
Interim Rent shall be calculated from the date of such payment on the
basis of a rate which shall be the lesser of (i) a daily rate of
per dollar so paid by Lessor, (which rate is based on the rate implied by
the Basic Rent amount set forth above), or (ii) a per annum rate applied to
the amount so paid by Lessor equal to the "Prime Rate" as published in The
Wall Street Journal on the last business day prior to the date of such
payment by Lessor. Interim Rent shall be payable in full on the Lease
Commencement Date.
(c) SUPPLEMENTAL RENT: In addition to Basic Rent and Interim Rent,
Lessee shall pay Lessor all Supplemental Rent provided for in the Master
Lease including, without limitation, all applicable sales and use taxes.
3. Location of the Equipment
The location(s) of the Equipment leased is (are) set forth on
Exhibit "A" attached hereto.
4. Equipment Leased
The Equipment leased is described on each equipment invoice and
installation notification subject to this Lease Supplement. The supporting
equipment invoices, installation notifications and equipment serial numbers
are summarized on Exhibit "A" attached hereto.
1
<PAGE>
5. Stipulated Loss Value
The "Stipulated Loss Value" of each item of Equipment, as of any
particular date of computation, shall be determined with reference to
Exhibit "B" attached hereto by multiplying the original cost of such item
of Equipment as stated on Exhibit "A" hereto by the percentage set forth
opposite the applicable month number on Exhibit "B" hereto. For this
purpose the applicable month number means the number of months or partial
months elapsed since the Lease Commencement Date. If only a portion of an
item of Equipment is affected by any event causing calculation of "Stipulated
Loss Value" as specified in the Master Lease, and the cost of such portion of
the Equipment cannot be readily determined from the original cost of such
item set forth on Exhibit A, then the Stipulated Loss Value for such
portion of the Equipment shall be as reasonably calculated by Lessor, with
written notice of such amount being sent to Lessee by Lessor.
6. Lease
This Lease Supplement is executed and delivered under and pursuant to
the terms of the Master Lease, and this Lease Supplement shall be deemed to
be a part of, and shall be governed by the terms and conditions of the
Master Lease. For purposes of this Lease Supplement, capitalized terms which
are used herein but which are not otherwise defined herein shall have the
meanings ascribed to such terms in the Master Lease.
IN WITNESS WHEREOF, Lessee has caused this Lease Supplement to be duly
executed and delivered by its duly authorized officer, this 12th day of May,
1994.
LESSEE:
COCA-COLA BOTTLING CO. CONSOLIDATED
By: Brenda B. Jackson
Brenda B. Jackson
Title: Vice President & Treasurer
Accepted in Atlanta, Georgia, this day of , .
LESSOR:
COCA-COLA FINANCIAL CORPORATION
By:
Title:
2
TREASURY BOND 7.1367%
RENTAL FACTOR 3.24629%
LEASE FUNDING NO: 94004
LEASE SUPPLEMENT TO
MASTER EQUIPMENT LEASE (the "Master Lease")
BETWEEN
COCA-COLA FINANCIAL CORPORATION ("Lessor")
AND
COCA-COLA BOTTLING CO. CONSOLIDATED ("Lessee")
DATED: February 9, 1993
1. Term
The "Initial Term" shall commence on the 3rd day of June, 1994 ("Lease
Commencement Date"); and will continue for a term of one hundred eight (108)
months ending on 3rd day of June, 2003.
2. Rent
(a) BASIC RENT: As Basic Rent hereunder, Lessee shall pay an aggregate
rental charge of $1,544,340.96, payable in arrears in thirty-six (36)
quarter annual installments of $42,898.36 each, beginning on September 3,
1994 and continuing on the same day of each calendar quarter thereafter
during the Initial Term, with the final such installment being due and
payable on June 3, 2003.
(b) INTERIM RENT: Lessee shall pay Lessor Interim Rent on all payments
made by Lessor for Equipment from the date of Lessor's payment, if paid prior
to the Lease Commencement Date, until the Lease Commencement Date.
Interim Rent shall be calculated from the date of such payment on the
basis of a rate which shall be the lesser of (i) a daily rate of
per dollar so paid by Lessor, (which rate is based on the rate implied by
the Basic Rent amount set forth above), or (ii) a per annum rate applied
to the amount so paid by Lessor equal to the "Prime Rate" as published in
The Wall street Journal on the last business day prior to the date of
such payment by Lessor. Interim Rent shall be payable in full on the
Lease Commencement Date.
(c) SUPPLEMENTAL RENT: In addition to Basic Rent and Interim Rent, Lessee
shall pay Lessor all Supplemental Rent provided for in the Master Lease
including, without limitation, all applicable sales and use taxes.
<PAGE>
3. Location of the Equipment
The location(s) of the Equipment leased is (are) set forth on Exhibit "A"
attached hereto.
4. Equipment Leased
The Equipment leased is described on each equipment invoice and
installation notification subject to this Lease Supplement. The supporting
equipment invoices, installation notifications and equipment serial numbers are
summarized on Exhibit "A" attached hereto.
5. Stipulated Loss Value
The "Stipulated Loss Value" of each item of Equipment, as of any particular
date of computation, shall be determined with reference to Exhibit "B" attached
hereto by multiplying the original cost of such item of Equipment as stated on
Exhibit "A" hereto by the percentage of the cost of such item set forth
opposite the applicable month number on Exhibit "B" hereto. For this purpose
the applicable month number means the number of months or partial months
elapsed since the Lease Commencement Date. If only a portion of an item of
Equipment is affected by any event causing calculation of "Stipulated
Loss Value" as specified in the Master Lease, and the cost of such portion
of the Equipment cannot be readily determined from the original cost of
such item set forth on Exhibit A, then the Stipulated Loss Value for
such portion of the Equipment shall be as reasonably calculated by Lessor,
with written notice of such amount being sent to Lessee by Lessor.
6. Lease
This Lease Supplement is executed and delivered under and pursuant to the
terms of the Master Lease, and this Lease Supplement shall be deemed to be a
part of, and shall be governed by the terms and conditions of the Master Lease.
For purposes of this Lease Supplement, capitalized terms which are used herein
but which are not otherwise defined herein shall have the meanings ascribed to
such terms in the Master Lease.
<PAGE>
IN WITNESS WHEREOF, Lessee has caused this Lease Supplement to be duly
executed and delivered by its duly authorized officers, this 3rd day of
June, 1994.
LESSEE:
COCA-COLA BOTTLING CO. CONSOLIDATED
(CORPORATE SEAL) By: Brenda B. Jackson
Attest: Patricia A. Gill Title: Brenda B. Jackson
Vice President & Treasurer
Title: Assistant Secretary
Accepted in Atlanta, Georgia, this day of , 1994.
LESSOR:
COCA-COLA FINANCIAL CORPORATION
By:
Title:
TREASURY BOND: 7.07333%
RENTAL FACTOR 3.23684%
LEASE FUNDING NO: 94005
LEASE SUPPLEMENT TO
MASTER EQUIPMENT LEASE (the "Master Lease")
BETWEEN
COCA-COLA FINANCIAL CORPORATION ("Lessor")
AND
COCA-COLA BOTTLING CO. CONSOLIDATED ("Lessee")
DATED FEBRUARY 9, 1993
Lease Supplement Date: June 22, 1994.
1. Term
The "Initial Term" shall commence on the 22nd day of June, 1994
(the "Lease Commencement Date") and will continue for a term of one
hundred eight (108) months ending on June 22, 2003.
2. Rent
(a) BASIC RENT: As Basic Rent hereunder, Lessee shall pay an
aggregate rental charge of $1,930,073.04, payable in arrears in thirty-six
(36) quarterly installments of $53,613.14 each, beginning on September 22,
1994 and continuing on the same day of each calendar quarter
thereafter during the Initial Term, with the final such installment being
due and payable on June 22, 2003.
(b) INTERIM RENT: Lessee shall pay Lessor Interim Rent on all
payments made by Lessor for Equipment from the date of Lessor's payment,
if paid prior to the Lease Commencement Date, until the Lease
Commencement Date. Interim Rent shall be calculated from the date of such
payment on the basis of a rate which shall be the lesser of (i) a daily
rate of per dollar so paid by Lessor, (which rate is based
on the rate implied by the Basic Rent amount set forth above), or (ii) a
per annum rate applied to the amount so paid by Lessor equal to the
"Prime Rate" as published in The Wall Street Journal on the last business
day prior to the date of such payment by Lessor. Interim Rent shall be
payable in full on the Lease Commencement Date.
(c) SUPPLEMENTAL RENT: In addition to Basic Rent and Interim Rent,
Lessee shall pay Lessor all Supplemental Rent provided for in the Master
Lease including, without limitation, all applicable sales and use taxes.
3. Location of the Equipment
The location(s) of the Equipment leased is (are) set forth on
Exhibit "A" attached hereto.
4. Equipment Leased
<PAGE>
The Equipment leased is described on each equipment invoice
and installation notification subject to this Lease Supplement. The
supporting equipment invoices, installation notifications and
equipment serial numbers are summarized on Exhibit "A" attached hereto.
5. Stipulated Loss Value
The "Stipulated Loss Value" of each item of Equipment, as of
any particular date of computation, shall be determined with reference
to Exhibit "B" attached hereto by multiplying the original cost of such
item of Equipment as stated on Exhibit "A" hereto by the percentage set forth
opposite the applicable month number on Exhibit "B" hereto. For this
purpose the applicable month number means the number of months or
partial months elapsed since the Lease Commencement Date. If only a portion
of an item of Equipment is affected by any event causing calculation of
"Stipulated Loss Value" as specified in the Master Lease, and the cost of
such portion of the Equipment cannot be readily determined from the
original cost of such item set forth on Exhibit A, then the Stipulated
Loss Value for such portion of the Equipment shall be as reasonably
calculated by Lessor, with written notice of such amount being sent to
Lessee by Lessor.
6. Lease
This Lease Supplement is executed and delivered under and pursuant to
the terms of the Master Lease, and this Lease Supplement shall be deemed
to be a part of, and shall be governed by the terms and conditions of
the Master Lease. For purposes of this Lease Supplement, capitalized terms
which are used herein but which are not otherwise defined herein shall have
the meanings ascribed to such terms in the Master Lease.
IN WITNESS WHEREOF, Lessee has caused this Lease Supplement to be
duly executed and delivered by its duly authorized officer, this day
of June, 1994.
LESSEE:
COCA-COLA BOTTLING CO. CONSOLIDATED
By: Brenda B. Jackson
Title:
Accepted in Atlanta, Georgia, this 22nd day of June, 1994.
LESSOR:
COCA-COLA FINANCIAL CORPORATION
By: Chris Tambeaux
Title: Vice President
TREASURY BOND 7.3066%
RENTAL FACTOR 3.25294%
LEASE FUNDING NO: 94006
LEASE SUPPLEMENT TO
MASTER EQUIPMENT LEASE (the "Master Lease")
BETWEEN
COCA-COLA FINANCIAL CORPORATION ("Lessor")
AND
COCA-COLA BOTTLING CO. CONSOLIDATED ("Lessee")
DATED: February 9, 1993
1. Term
The "Initial Term" shall commence on the 8th day of July, 1994
("Lease Commencement Date"); and will continue for a term of one hundred
eight (108) months ending on the 8th day of July, 2003.
2. Rent
(a) BASIC RENT: As Basic Rent hereunder, Lessee shall pay an aggregate
rental charge of $1,376,483.40, payable in arrears in thirty-six (36) quarterly
installments of $38,235.65 each, beginning on October 8,1994 and continuing
on the same day of each calendar quarter thereafter during the Initial Term,
with the final such installment being due and payable on July 8, 2003.
(b) INTERIM RENT: Lessee shall pay Lessor Interim Rent on all payments
made by Lessor for Equipment from the date of Lessor's payment, if paid prior
to the Lease Commencement Date, until the Lease Commencement Date.
Interim Rent shall be calculated from the date of such payment on the
basis of a rate which shall be the lesser of (i) a daily rate of
per dollar so paid by Lessor, (which rate is based on the rate implied by
the Basic Rent amount set forth above), or (ii) a per annum rate applied to
the amount so paid by Lessor equal to the "Prime Rate" as published in
The Wall Street Journal on the last business day prior to the date of
such payment by Lessor. Interim Rent shall be payable in full on the
Lease Commencement Date.
(c) SUPPLEMENTAL RENT: In addition to Basic Rent and Interim Rent, Lessee
shall pay Lessor all Supplemental Rent provided for in the Master Lease
including, without limitation, all applicable sales and use taxes.
<PAGE>
3. Location of the Equipment
The location(s) of the Equipment leased is (are) set forth on
Exhibit "A" attached hereto.
4. Equipment Leased
The Equipment leased is described on each equipment invoice and
installation notification subject to this Lease Supplement. The supporting
equipment invoices, installation notifications and equipment serial numbers are
summarized on Exhibit "A" attached hereto.
5. Stipulated Loss Value
The "Stipulated Loss Value" of each item of Equipment, as of any particular
date of computation, shall be determined with reference to Exhibit "B" attached
hereto by multiplying the original cost of such item of Equipment as stated on
Exhibit "A" hereto by the percentage of the cost of such item set forth
opposite the applicable month number on Exhibit "B" hereto. For this purpose the
applicable month number means the number of months or partial months
elapsed since the Lease Commencement Date. If only a portion of an item of
Equipment is affected by any event causing calculation of "Stipulated
Loss Value" as specified in the Master Lease, and the cost of such portion
of the Equipment cannot be readily determined from the original cost of such
item set forth on Exhibit A, then the Stipulated Loss Value for such portion
of the Equipment shall be as reasonably calculated by Lessor, with written
notice of such amount being sent to Lessee by Lessor.
6. Lease
This Lease Supplement is executed and delivered under and pursuant to the
terms of the Master Lease, and this Lease Supplement shall be deemed to be a
part of, and shall be governed by the terms and conditions of the Master Lease.
For purposes of this Lease Supplement, capitalized terms which are used herein
but which are not otherwise defined herein shall have the meanings ascribed to
such terms in the Master Lease.
<PAGE>
IN WITNESS WHEREOF, Lessee has caused this Lease Supplement to be duly
executed and delivered by its duly authorized officers, this 8th day of
July, 1994.
LESSEE:
COCA-COLA BOTTLING CO. CONSOLIDATED
(CORPORATE SEAL) By: Brenda B. Jackson
Attest: Patricia A. Gill Title: Vice President & Treasurer
Title: Assistant Secretary
Accepted in Atlanta, Georgia, this 12th day of July, 1994.
LESSOR:
COCA-COLA FINANCIAL CORPORATION
By: Chris Tambeaux
Title: Vice President
MANAGEMENT AGREEMENT
This Management Agreement ("Agreement") made and entered
into this day of May, 1994, by and among Coca-Cola Bottling
Co. Consolidated, a Delaware corporation ("Manager") and South
Atlantic Canners, Inc., a South Carolina corporation ("SAC").
W I T N E S S E T H:
By this Agreement, SAC intends to retain Manager for the
purpose of managing its day to day operations as is more fully
described in the Agreement. Manager has managerial expertise,
knowledge of the industry, access to certain raw materials, and
other capabilities which indicate that its services will be
beneficial to SAC and its membership. Under this Agreement, it
is anticipated that Manager will supervise day to day operations
without material interference from the SAC Board of Directors
("SAC Board") and that the SAC Board will generally perform the
typical board functions of supervising the performance of
management and establishing policy for SAC. The parties
recognize, however, that the SAC Board has a legal obligation to
SAC and its membership to oversee and direct the operations of
SAC and nothing contained in this Agreement shall remove from the
SAC Board its obligations or ability to direct the business and
affairs of SAC. It is anticipated that a smooth working
relationship will be established through the adoption each year
of an annual business plan ("Annual Business Plan"), under which
Manager can perform its responsibilities as described herein.
The parties believe that the efficiencies to be derived from
Manager's supervisory capabilities and the additional purchasing
volume Manager brings to SAC in its capacity as a member will
prove to be beneficial to Manager and to SAC's membership in
general.
NOW, THEREFORE, in consideration of the mutual promises,
obligations and agreements contained herein, the parties hereto,
intending to be legally bound, do hereby agree as follows:
Section 1. Definitions.
1.01 Defined Terms. The following terms shall have the
meanings set forth in the Section of this Agreement indicated
below:
Defined Term Section
Agreement Preamble
Annual Business Plan Preamble
Claimant Section 10.03(a)
Claim Section 10.02
CPI Section 6.01
<PAGE>
SAC Bank Account Section 6.03(d)
Disclosing Party Section 9.04
Effective Date Section 8.01
Environmental Manager Section 3.01(c)(4)
Environmental Laws Section 3.01(c)(4)(i)
Expansion Section 3.01(c)(3)
Facility Section 2.01
FICA Section 3.02
FUTA Section 3.02
Indemnitee Section 10.02
Losses Section 10.02
Manager Preamble
Manager's Corporate Offices Section 3.01
Manager Employee(s) Section 3.01(c)(2)
Management Fee Section 6.01
Notified Party Section 10.03(a)
Physical Case Section 6.01
Proposed Budget Section 3.01(a)(2)
Receiving Party Section 9.04
Reimbursable Expenses Section 6.02
Rules Section 10.02
SAC Preamble
SAC Board Preamble
SAC Business Section 2.01
SAC Employee(s) Section 3.01(c)(2)
SAC Executive Committee Section 3.01(a)(5)
Summary of Major Operational
and Business Items Section 3.01(a)(2)
Term Section 8.02
Section 2. Appointment of Manager.
2.01 Appointment of and Acceptance by Manager. SAC hereby
appoints and retains Manager for the purpose of managing SAC's
canning, bottling, and other soft drink packaging operations (the
"SAC Business"), effective as of the Effective Date, and
authorizes Manager to supervise, direct and control the day-to-
day operation of the SAC Business at 601 Cousar Street,
Bishopville, South Carolina (the "Facility") in accordance with
this Agreement. In the appointment of Manager to handle day to
day operations hereunder, both SAC and Manager understand and
agree that the business and affairs of SAC shall be under the
direction and control of the SAC Board, and Manager agrees to
carry out the policies and directives of the SAC Board. Manager
hereby accepts this appointment and agrees to perform its duties
in accordance with this Agreement.
2.02 Standards of Performance. In providing services under
this Agreement, Manager shall give the care and attention to its
responsibilities that a reasonable business manager in its
position would be expected to give. Manager agrees to provide
and employ a sufficient number of personnel with adequate
- 2 -
<PAGE>
training and experience to perform such duties competently and in
a businesslike manner in such a way as to cause the operations of
SAC to be carried on efficiently and in the best interests of
SAC. In its capacity as Manager under this Agreement, Manager
shall perform its duties in good faith and shall loyally seek to
promote the best interests of SAC. Manager shall perform in a
timely and cooperative manner.
2.03 Non-exclusive Service. It is understood and agreed
that nothing in this Agreement shall confer upon SAC an exclusive
right to Manager's service. Manager may contract with others for
the provision of expertise and services similar to those to be
provided to SAC as contemplated herein.
2.04 Services to be Performed by SAC's Officers and Others.
SAC will continue to have as corporate officers a President, a
Secretary and such other officers as may be determined by the SAC
Board, who shall perform such functions as the SAC Board may
assign to them. Nothing in this Agreement shall prevent SAC from
obtaining services from others which are not assigned to Manager
under Sections 3 and 4 of this Agreement.
Section 3. Services and Responsibilities of Manager.
3.01 Primary Services and Responsibilities. Within the
scope of the authority granted to it under this Agreement and
subject to any limitations provided herein, Manager will
undertake to manage SAC in a manner such that it may meet its
operating requirements. It is anticipated by the parties that,
during an interim transition period--from the Effective Date
until Manager determines that it is in a position to perform the
administrative functions itself (but not later than September 1,
1994), Manager will primarily supervise the administrative
services included herein and performed at the Facility and that,
following such transition period, Manager will perform such
functions primarily at Manager's Corporate Offices located at
Rexford Road, Charlotte, North Carolina ("Manager's Corporate
Offices"). Manager is hereby authorized to and shall provide the
following services or cause the following services to be
performed:
(a) Annual Business Plan. Manager will develop (from the
information provided by SAC members) an Annual Business Plan to
be adopted by the SAC Board prior to the beginning of each fiscal
year with such changes as the SAC Board deems necessary.
(1) Adoption. Manager will present the proposed plan
to the SAC Board no later than thirty (30) days prior to the
beginning of SAC's fiscal year that is the subject of such
projections. In the event information necessary to complete such
projections are not furnished to Manager, Manager will present
projections utilizing the provided information plus reasonable
estimates for the unprovided information, which will be based on
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the prior year's information plus 3%, as adjusted for changes
made during the year and other changes reasonably anticipated by
Manager. As soon as practicable after the Effective Date,
Manager will submit to the SAC Board for approval a business plan
for the interim period of SAC's 1994 fiscal year commencing the
effective date hereof and ending on August 31, 1994. It is
anticipated that this interim period business plan will
essentially be a continuance of SAC's current business plan for
its 1993-94 fiscal year. SAC shall deliver a copy of each Annual
Business Plan, and the interim period business plan for the 1993-
94 year, to Manager as soon as practicable following adoption
thereof by SAC Board.
(2) General Contents. Manager's proposed Annual
Business Plan will contain a proposed annual budget ("Proposed
Budget"), a summary of major operational and financial items
("Summary of Major Operational and Business Items") projected for
the year in sufficient detail for the SAC Board to determine the
nature and extent of proposed operations, an estimate of the
Management Fee and Reimbursable Expenses SAC will be asked to pay
to Manager for the year, and such other items as the SAC Board
may request.
(3) Projections, Developments, and Anticipated Events.
The Proposed Budget will contain annual projections of volume,
estimated operating revenues based upon pricing at the end of the
previous fiscal year, required capital expenditures, operating
expenses and cash flow, and the presentation of items will show a
breakdown of each item for each of SAC's operating allocation
units (cans, bottles, etc.). The Summary of Major Operational
and Business Items will include a description of proposed
activities in areas for which Manager has operational
responsibility under Section 3.01(c), a description of
significant developments relating to the business and financial
items for which Manager has responsibility under Section 3.01(b),
and a description of other major operational and business items,
if any, which Manager reasonably anticipates for the upcoming
year.
(4) Effect of Not Adopting Business Plan Prior to the
Commencement of the Fiscal Year. If the SAC Board has not
adopted an Annual Business Plan prior to the commencement of any
fiscal year, Manager shall continue to provide management
functions for SAC based upon the most recently adopted Annual
Business Plan (or interim period business plan for the 1993-94
fiscal year, if that is the most recently adopted business plan),
until such time as a new Annual Business Plan is adopted and
takes effect for such fiscal year; provided, however, that (i)
any CPI increases that will be due as part of the Management Fee
under Section 6.01 for the new fiscal year and (ii) any
previously approved increase in a normal, recurring operating
expense (such as, employee compensation) since the adoption of
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the most recent Annual Business Plan will take effect with the
beginning of such year.
(5) Performance of Services Under the Annual Business
Plan and Deviations Therefrom. In performing its services under
this Agreement, Manager shall follow the Annual Business Plan
adopted for the fiscal year, unless otherwise directed by the SAC
Board. If Manager encounters a business situation which will
require it to deviate from the Annual Business Plan or it
discovers that it or SAC has inadvertently deviated from the
plan, it shall immediately consult with the Executive Committee
of the SAC Board ("SAC Executive Committee") about the situation
and obtain approval for such deviation. If approval is given by
the SAC Executive Committee, Manager shall be allowed to continue
with such deviation until the next meeting of the SAC Board at
which time the SAC Board can consider the matter. If the SAC
Executive Committee does not approve of the deviation, the matter
will immediately be brought to the attention of the SAC Board.
(b) Business/Finance. Manager will be responsible for
accounting, tax, treasury and internal policy auditing services
in connection with the financial management of the SAC Business.
(1) Contracts. Manager shall have the right to enter
into contracts in the ordinary course of business in
accordance with the Annual Business Plan and thereby bind
SAC; provided, however, that the SAC Board may set size
limitations above which approval of the SAC Board is
required.
(2) Treasury Management. Manager will provide
necessary treasury management services for SAC including the
arrangement and administration of financings (subject to SAC
Board approval) and bank transactions and cash management
services including receipt of and responsibility for all
income realized by SAC and disbursement of funds for
satisfaction of the debts, obligations and expenses of SAC
and for distributions of patronage dividends as determined
by the SAC Board.
(3) Accounting. Manager will maintain accounting
systems and records for SAC which shall be sufficiently
separate from Manager's other accounts for the SAC Board to
have full access to its accounts without raising questions
about the confidentiality of Manager's files. Manager shall
provide the following functions or prepare the following
reports:
(i) Accounts receivable, credit and collections
including credit approval, billing, collection and cash
application, as necessary.
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(ii) Accounts payable functions including check
writing and accounting for paid expense and capital
items.
(iii) General accounting functions including
maintenance of general ledger and monthly financial
reporting to the SAC Board.
(iv) Fixed asset record maintenance and
accounting.
(v) Annual budgets.
(vi) Monthly reports to the SAC Board (i)
comparing actual operating and capital expenditures to
those budgeted and set forth in the Annual Business
Plan, (ii) detailing significant management actions
taken by Manager, and (iii) such other matters as the
SAC Board may request.
(4) Taxes. Manager shall handle the federal, state
and local tax reporting and filing as well as the
implementation of tax planning strategies relating to
federal, state and local taxes and user fees. Manager will
also handle any required tax audits and maintain all
Department of Transportation files and furnish copies of
federal income tax returns to the SAC Executive Committee
prior to the filing of such returns.
(5) Internal Policy Audit. Manager will provide
internal auditing services for monitoring compliance with
SAC policies and procedures as Manager deems necessary.
(c) Operations. The major operational responsibilities of
Manager shall be in the areas of Manufacturing and Purchasing;
Human Resources; Fleet, Transportation and Facility
Administration; Environmental Services; Data Processing and Risk
Management as follows:
(1) Manufacturing and Purchasing. Manager will
oversee the manufacturing of products which meet franchise
company specifications and will deliver all products within
reasonable age standards as established by the SAC Board.
The initial product age and quality standards to be met by
Manager are described in Exhibit A hereto. Manager will
select and negotiate with vendors and purchase or, if in the
best interest of SAC, lease on SAC's behalf all capital
equipment from such vendors. If Management selects itself
as a vendor or lessor to SAC under this paragraph, this
arrangement must be disclosed to and approved by the SAC
Board. Manager will, on behalf of SAC, procure all raw
materials, supplies, utilities and services which are
required for or incidental to, the operations of the SAC
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Business. Manager will use its best efforts to make such
procurement on a basis similar to that which is available to
Manager; provided, however, that both Manager and SAC hereby
acknowledge that differences may arise with respect to
prices of concentrates and syrup or as a result of different
specifications, sources of supply and freight costs.
(2) Human Resources.
(i) Manager shall have responsibility for
supervising employees of SAC ("SAC Employees") and any employees
of Manager providing services for SAC ("Manager Employees") under
this Agreement. All such management and supervision by Manager
for employees at the Facility shall be within the parameters
established in the Annual Business Plan. Manager shall provide
overall pay and benefit administration for SAC Employees (if any)
and Manager Employees in accordance with the Annual Business
Plan. Any necessary labor contract negotiations will be
performed by Manager, and Manager will handle the administration
of any labor contract (including grievance procedures and
arbitration) and any labor relations disputes or other labor
matters, and the SAC Board will be advised thereof. Manager will
have the authority and responsibility to enter into, amend or
terminate any employment agreements and consulting and agency
agreements relating to SAC; provided, however, that the SAC Board
shall determine who shall perform professional accounting and
legal services for SAC and set the terms for their employment.
To the extent permitted by the Annual Business Plan or otherwise
approved by the SAC Board, Manager may supplement SAC with
additional Manager Employees. For such purpose, Manager may
utilize its employees or employees of a wholly owned subsidiary
of Manager which have adequate training and experience to perform
their duties competently and in a businesslike manner. Manager
shall have the authority to select, employ and terminate all
employees performing services for SAC, whether they be SAC
Employees or Manager Employees. Manager shall also have the
right to substitute one of its employees for a Manager Employee
whenever Manager deems such substitution appropriate. Each
Manager Employee and SAC Employee shall be subject to all of
Manager's applicable employment policies and practices (unless
otherwise restricted by union contracts), and SAC shall not have
the right to subject any Manager Employees or SAC Employees to
any additional employment policies or practices or other work
related rules or regulations (except rules and regulations
reasonably related to the health and safety of such employees or
required under applicable law) absent Manager's express consent
to such action which shall not be unreasonably withheld. Manager
shall provide substantially the same job-related education and
training to Manager Employees and SAC Employees as Manager
provides to its other employees who perform the same or related
tasks, and SAC shall reimburse Manager for the cost of the job-
related education and training provided by third parties to SAC
Employees and Manager Employees. Manager shall compensate
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Manager Employees in accordance with Manager's standard
compensation policies and practices for employees who perform the
same or related tasks subject to regional pay differences.
Manager Employees shall be provided with employee benefits no
more favorable as a whole than those provided to Manager's other
employees performing the same or related tasks in addition to
workers' compensation, unemployment compensation and all other
benefits which an employer is required to provide for its
employees under applicable law. Manager will adopt and enforce
Manager's Code of Business Conduct at the Facility.
(ii) In the event this Agreement is terminated or
expires, all Manager Employees employed at the Facility at such
time shall have the opportunity to be considered for employment
by SAC as SAC Employees. SAC shall be entitled to approach all
such persons and discuss future employment with SAC, and Manager
shall not attempt to retain or continue such persons in its
employment until they have first rejected an offer of employment
with SAC or otherwise been informed by SAC that they will not be
offered employment.
(3) Fleet, Transportation and Facility Administration.
Manager will provide overall administration of fleet
activities including assessment of required fleet expansion
or replacement, acquisition of required equipment and
direction of preventative maintenance programs in accordance
with the Annual Business Plan. Manager will be responsible
for the administration of all transportation activities
including the receipt of raw materials by or on behalf of
SAC and the delivery of full goods to SAC members. Manager
will also provide for the administration of all facility
activities including preventive and corrective maintenance
and expansion. In particular, Manager will oversee the
anticipated acquisition and installation of two high speed
production lines at the Facility - one generally suited for
2-liter PET bottles and one generally suited for 20-ounce
PET bottles (the "Expansion"). In connection therewith,
Manager shall be responsible for the planning,
implementation and supervision of the design, construction
and start up of the Expansion including the selection of
equipment manufacturers, architects, engineers and
contractors and the procurement of all necessary permits.
(4) Environmental Services. Manager shall provide
environmental management services, assigning the
administration of those systems to an environmental
compliance manager ("Environmental Manager"). The
Environmental Manager will be provided by Manager, and the
costs for the Environmental Manager will be born by Manager
as part of the Management Fee. It is the responsibility of
Manager to determine if all SAC operations at the Facility
are in compliance with, or exceed, the requirements of all
applicable environmental laws, regulations, statutes,
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ordinances and permit conditions ("Environmental Laws").
Any known or suspected exceptions to environmental
compliance requirements discovered by the Environmental
Manager shall be reported immediately to Manager who, in
turn, shall notify the SAC Executive Committee of his
findings. SAC Executive Committee shall thereafter notify
Manager of actions to be taken and Manager shall, on behalf
of SAC, take or cause to be taken such lawful actions as are
requested of it by the SAC Executive Committee.
(5) Data Processing. Manager shall utilize its
computer systems to provide computer services required to
carry out its responsibilities under this Agreement.
(6) Risk Management. Manager shall contract for the
purchase of insurance policies on behalf of SAC at coverage
levels prescribed by the SAC Board. A list of the initial
policies and coverage levels thereunder are set forth in
Exhibit B hereof. Manager shall, on behalf of SAC, cause
such policies (or such other policies which are satisfactory
to or required by SAC) to be maintained during the term of
this Agreement; provided, however, that subject to
maintaining the coverage levels established by the SAC
Board, Manager shall, at its discretion, have the authority
to select or change insurance carriers, provided such
carrier(s) have at least an equivalent insurance company
rating.
3.02 Manager's Personnel. All of Manager's personnel
providing services hereunder shall be exclusively employed by
Manager or its affiliates, and Manager shall have the sole right
to determine their conditions of employment, working hours,
employment and vacation policies, seniority, promotions and
assignments. Manager shall have the exclusive right to hire and
fire any such personnel and shall comply with all the laws
applicable to the employment of such personnel. Subject to the
provisions of Section 6 below, Manager shall be solely
responsible for the compensation of the employees and for all
withholding taxes, Federal Insurance Contributions Act ("FICA")
and Federal Unemployment Tax Act ("FUTA") taxes, unemployment
insurance, workmen's compensation and any other insurance and
fringe benefits with respect to such employees.
3.03 Accounts, Books and Record.
(1) Manager shall maintain separate accounts, books,
and records for SAC with respect to services under Sections 3 and
4 of this Agreement, and these accounts, books and records shall
be the property of SAC. Manager shall be responsible for
maintaining SAC's accounts, books and records in good order and
shall maintain them in a way that is sufficiently separate from
Manager's own records so that SAC may have access to such
documents during regular business hours upon request without
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raising an issue of confidentiality with respect to Manager's
proprietary information. In the event this Agreement is
terminated for any reason or expires, Manager shall return all of
SAC's accounts, books and records in its possession to SAC as
provided in Section 8.05.
(2) Manager shall make such of Manager's books and
records that relate to the SAC Business, including the pricing of
raw materials to the extent such information relates to the SAC
Business, available to independent auditors selected by the SAC
Board, or such other person or persons who are mutually
acceptable to the parties, as is necessary to audit the
Management Fee and Expenses charged to SAC and Manager's
compliance with its obligations under this Agreement. Such
auditors or person(s) shall be bound by a confidentiality
agreement not to disclose such information to persons outside SAC
or its professional advisors. SAC shall bear the costs of any
independent accounting firm engaged by it for the purpose of
performing the review described in this paragraph.
3.04 Attendance at Meetings of SAC Board and SAC Executive
Committee.
(1) Manager will attend all regularly scheduled
meetings of the SAC Board and all special meetings of the SAC
Board at which its attendance is requested as long as Manager has
been given reasonable notice of the time and place of the special
meeting. At regularly scheduled meetings of the SAC Board,
Manager will present a detailed report on operations, including
any deviations from the Annual Business Plan, and Manager shall
advise the SAC Board of deviations from the Annual Business Plan
which it reasonably anticipates in the future. At special
meetings of the SAC Board, Manager shall provide such information
with respect to the management of SAC as may be reasonably
requested by the SAC Board.
(2) It is anticipated that the SAC Executive Committee
will meet on a monthly basis. If requested by the SAC Executive
Committee, Manager shall attend meetings of the SAC Executive
Committee, and provide a verbal report on operations and such
other information as may be requested by the SAC Executive
Committee. It is anticipated that the monthly meetings of the
SAC Executive Committee will provide an opportunity for the
parties to discuss SAC's performance on an ongoing basis. It
will give Manager a convenient mechanism through which deviations
from the Annual Business Plan can be reviewed and approved.
Section 4. Additional Services Provided by Manager.
Manager shall also perform other management functions
relating to the SAC Business as may be requested from time to
time by the SAC Board and agreed to by Manager, provided that the
parties can agree upon a price for such services. If additional
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services are requested under this Section, Manager agrees to
offer SAC a price or fees (excluding applicable taxes and
transportation costs, which shall be charged to SAC at cost) for
such services which is no less favorable than those charged by
Manager to other entities of a similar size and location;
provided, however, that under no circumstances shall Manager
charge SAC an amount which is less than Manager's actual cost.
If SAC and Manager cannot agree on a price for additional
services under this Section, SAC shall be free to obtain such
services from others.
Section 5. Board Functions. In addition to SAC Board's
general responsibilities of directing the business and affairs of
the organization and approving the Annual Business Plan, the
responsibilities of the SAC Board will include, but not be
limited to, supervising the performance of SAC in accordance with
the Annual Business Plan, establishing capital requirements for
its members, reviewing and approving long-term business plans,
approving major financial undertakings, and supervising the
performance of Manager under this Agreement. It will be the SAC
Board's responsibility to assure that all costs are fairly
allocated (as determined by the Board) to the various products
produced at SAC. Product pricing and rebates will be at the
discretion of the SAC Board.
Section 6. SAC Payments.
6.01 Management Fee. In consideration for the services to
be provided by Manager pursuant to this Agreement, SAC shall pay
to Manager a management services fee equal to 15(cent sign) per physical
case of bottles and cans, and 15(cent sign) per unit of post mix bag-in-a-
box as described in Exhibit C hereto (each such case or unit
quantity of bottles, cans, or post-mix as described in Exhibit C
being herein referred to for purposes hereof as "Physical
Case/Unit") manufactured by SAC from and after the earlier of
October 1, 1994 or the completion of the Expansion (the
"Management Fee"). No Management Fee shall be paid on shipments
of bulk syrup. Subject to the provisions of Section 8.02, the
Management Fee shall be increased effective as of the beginning
of each fiscal year (commencing September 1, 1995) in accordance
with the increase in the Urban Wage Earners and Clerical Workers-
South-ALL Items consumer price index published by the U.S.
Department of Labor ("CPI") for the most recent twelve (12) month
period for which statistics are available on January 1 of each
year; provided, however that the Management Fee shall not exceed
25(cent sign) per Physical Case/Unit during the Term of this Agreement.
6.02 Reimbursable Expenses. with respect to payments made
by Manager from Manager's separate funds, SAC shall reimburse
Manager for employees' costs incurred at the Facility and other
charges for specific materials or service at the Facility as well
as third party fees as long as such costs and charges are within
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the ranges established in the Annual Business Plan or otherwise
approved by the SAC Board ("Reimbursable Expenses").
(a) No Reimbursable Expense other than those described
in the Annual Business Plan shall be payable by SAC unless such
expense is (1) less than $25,000, or (2) otherwise approved by
the SAC Board or Executive Committee; provided, however, that the
parties hereto recognize that ordinary operating expenses of the
SAC Business paid by Manager on SAC's behalf that exceed amounts
budgeted in the Annual Business Plan as a result of an increase
in the sales volume shall be reimbursable to the extent such
amounts are reasonably incurred.
(b) Manager shall be responsible for administrative
costs it incurs to provide managerial services under this
Agreement to the extent such services are not performed at the
Facility. All functions that are currently being performed by
Manager's personnel based at Manager's Corporate Offices will not
be considered to be performed at the Facility and will be covered
by the Management Fee. These functions are listed in Exhibit E.
Manager may not shift functions or personnel to the Facility
without approval of the SAC Board. Reimbursable Expenses will be
included in the Annual Business Plan and are subject to audit at
least annually at the request of SAC as provided in Section 3.03
hereof.
(c) The following expenses are examples of direct
expenses of SAC to be paid by SAC as provided in the Annual
Business Plan or otherwise approved by the Board of Directors.
In the event Manager pays direct expenses of this type on SAC's
behalf, such expenses shall be Reimbursable Expenses to Manager
if the expenses are within the Annual Business Plan or are
approved by the SAC Board or SAC Executive Committee:
(1) Entity and On Site Expenses. SAC will incur
direct expenses related to its form of entity or the SAC Business
in the form of fees or taxes to third parties such as state or
local governments. In addition, SAC (or Manager on behalf of
SAC) will incur certain expenses directly related to the routine
operation of the Facility including the cost of On Site Employees
of SAC or Manager. "On Site Employees" shall include all direct
and indirect labor as well as management and administrative
employees based at the Facility whether such employees are
Manager Employees or SAC Employees. Examples of such expenses
are set forth on Exhibit D.
(2) Miscellaneous Expense. Other reasonable and
necessary expenses directly related to SAC's business operations
or administration thereof which are set forth on Exhibit F.
6.03 Payments, Reconciliation and Reimbursement.
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(a) Estimated Management Fee Payments. Subject to the
provisions of Section 8.01 hereof, the estimated Management Fee
as determined from the Annual Business Plan shall be paid as
follows: SAC shall pay to Manager on or before the 15th of each
month a monthly disbursement equal to the estimated Management
Fee allocable for each month as determined from the Annual
Business Plan.
(b) Quarterly Reconciliation of Payments. On or before the
end of each fiscal quarter, beginning with the second fiscal
quarter following the Effective Date, Manager will furnish to SAC
a statement reconciling actual Physical Case/Unit sales for the
immediately preceding fiscal quarter against the estimated
amounts used in determining the amount of the monthly
disbursement. For each quarter, the parties shall make a true-up
adjustment in such amount as is necessary to ensure that the
aggregate estimated monthly payments paid to Manager for the
reconciled fiscal quarter are not more than or less than the
amounts that would have been paid had the actual Management Fee
been known to the parties at the time the monthly advances were
paid. Any refund due from Manager to SAC, and any additional
payment due from SAC to Manager, as a result of this
reconciliation shall upon determination thereof be paid or
credited to the appropriate party in connection with the next
ensuing payment of the estimated Management Fee.
(c) Reimbursement of Expenses. SAC shall reimburse the
Manager for all Reimbursable Expenses. The Manager will provide
SAC monthly with a detailed invoice for all expenses reimbursable
under this Section 6.03(c). All such invoices shall be due and
payable upon receipt thereof.
(d) SAC Bank Account/Check Signing Authority.
(1) The Manager will administer a separate bank
account on behalf of SAC ("SAC Bank Account") into which sales
revenue and all other monies of SAC shall be deposited and from
which expenses and fees of and distributions from SAC shall be
paid. The Manager shall be responsible for maintaining and
administering the SAC Bank Account in accordance with this
Agreement. With the consent of the SAC Board, Manager may
change the financial institution in which the SAC Back Account is
held or the branch location of the account.
(2) Within limitations established by the SAC Board,
the Manager shall be authorized to sign all checks and drafts and
execute all wire transfers for disbursements in satisfaction of
all debts, obligations and expenses of SAC and the
countersignature of another person shall not be required.
6.04 Management Fee Distinguished from Distributions. All
fees and other payments paid by SAC to Manager under this Section
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6 shall be treated as expenses of SAC and not part of a patronage
distribution paid to Manager by SAC.
Section 7. Obligations of SAC.
7.01 Duties of SAC. To facilitate the performance of
Manager's services, SAC agrees to provide the following:
(a) to the extent approved by the SAC Board in the Annual
Business Plan, provide or cause to be provided at no charge to
Manager sufficient secure building space, furniture, facilities
and office equipment to enable Manager's on site personnel to
carry out their obligations under this Agreement;
(b) assist Manager in obtaining, or cause to be obtained
any permits, applications, authorizations or forms required by or
from the federal, state or local governments for the specific
services areas;
(c) afford Manager's personnel unlimited and unrestricted
access to all areas of the Facility;
(d) cooperate with Manager and direct all SAC personnel (if
any) to extend maximum cooperation to Manager in accordance with
this Agreement;
(e) use its best efforts to support Manager's requests to
SAC members for their estimates of annual volume requirements by
brand and package for planning purposes each year and for use in
preparing annual budgets;
(f) use its best efforts to support Manager's request to
SAC members to provide product orders to Manager in a manner and
within time parameters reasonably requested by Manager;
(g) if approved by the SAC Board, maintain a revolving line
of credit or other financing sufficient in the reasonable
judgment of SAC to satisfy SAC's working capital needs; and
In addition, SAC agrees that it will cause the SAC Board or
its designee to consider approval of any capital expenditure
requiring approval, not otherwise set forth in the Annual
Business Plan, no later than fifteen (15) Business Days after
receipt of written request for approval from Manager.
Section 8. Term
8.01 Effective Date. This Agreement shall become effective
upon the approval by SAC's stockholders of an amendment to SAC's
Bylaws which will allow the SAC Board to assign some or all of
the management responsibilities for SAC to a person or
organization other than the officers of the corporation (the
"Effective Date").
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8.02 Duration. Unless terminated pursuant to Section 8.03
below, this Agreement shall continue in full force and effect for
a term of ten (10) years following the Effective Date (the
"Term"). The parties anticipate that they will negotiate an
extension of this Agreement during the tenth (10th) year of the
Term but acknowledge that neither party shall be bound by the
provisions of this Agreement beyond the Term.
8.03 Early Termination. This Agreement shall terminate
early as follows:
(a) Breach by Manager.
(1) If at any time Manager shall default in the
performance of any of its obligations under this Agreement or
otherwise fails to comply in all material respects with policies
and directives of the SAC Board, and such default or breach shall
continue for a period of ninety (90) days after SAC has given
notice to Manager specifying such default or breach and requiring
it to be remedied, then SAC shall have the right to terminate
this Agreement, provided that SAC has determined in its
reasonable business judgment that an alternative manager could
have met the performance requirements during the period of
Manager's noncompliance, and further provided that the SAC Board
requires similar performance requirements of the management it
selects to replace Manager.
(2) At the time this Agreement is executed, Manager
will become a member of SAC and execute a membership agreement
with SAC. At this time, Manager will also sign a purchase
agreement with SAC. This purchase requirement will be measured
based on an annual year of September 1 to August 31 each year,
starting on September 1, 1994. If Manager discontinues its
membership or fails to meet its membership requirements in SAC,
SAC may terminate this Agreement. If Manager fails to meet its
purchase requirements for any year, or it would be clear to a
reasonable business person that it cannot or will not meet these
requirements for a particular year, SAC may terminate this
Agreement.
(3) If the Agreement is terminated under Section
8.03(a), Manager agrees to continue to provide services pursuant
to the terms described herein for a reasonable transition period
following termination by SAC, if SAC so requests.
(b) Breach by SAC. If at any time SAC shall default in the
performance of any of its material obligations under this
Agreement and such default or breach shall continue for a period
of ninety (90) days after Manager has given notice to SAC
specifying such default or breach and requiring it to be
remedied, then Manager shall have the right to terminate this
Agreement. If the Agreement is terminated under this paragraph,
Manager agrees to continue to provide services pursuant to the
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terms described herein for a reasonable transition period
following termination by Manager, if SAC so requests.
(c) Failure of Expansion to be Completed. If the Expansion
shall not have been completed by December 31, 1994, Manager shall
have the right at any time thereafter to terminate this Agreement
prior to actual completion of the Expansion; provided, however,
that Manager's right to terminate under this Section 8.03(c)
shall not exist so long as SAC is using its best efforts to
complete the expansion by December 31, 1994. Manager shall
provide SAC with ninety (90) days notice of a termination under
this paragraph.
(d) Bankruptcy Decree. If a decree or order of a court
having jurisdiction has been entered adjudicating a party
bankrupt, insolvent, or approving a petition seeking
reorganization of such party under any bankruptcy act or any
similar applicable law, and such decree or order has continued
undischarged or unstayed for a period of sixty (60) days; or a
decree or order of court having jurisdiction for the appointment
of a receiver or liquidator or trustee or assignee in bankruptcy
or insolvency of such party or all or substantially all of its
property, or for the winding up or liquidation of its affiliates,
has been entered, and such decree or order has remained in force
undischarged or unstayed for a period of sixty (60) days, then
the other party shall have the right to terminate this Agreement
by giving the first mentioned party notice to that effect within
thirty (30) days after the expiration of such sixty-day period.
(e) Institution of Bankruptcy Proceedings. If a party
institutes proceedings to be adjudicated voluntarily bankrupt or
consents to the filing of bankruptcy proceedings against it, or
files a petition for answer or consent seeking reorganization
under any bankruptcy act or similar law or consents to the filing
of any petition or consents to the appointment of a receiver or
liquidator or trustee or assignee in bankruptcy or insolvency of
it, or all or substantially all of its property, or makes a
general assignment for the benefit of creditors or admits in
writing its inability to pay its debts generally as they become
due, then the other party shall have the right to terminate this
Agreement by giving the first mentioned party notice to that
effect within thirty (30) days after the occurrence of such
event.
8.04 Effect of Termination. Upon the termination of this
Agreement, this Agreement shall be of no further force and
effect, except that the provisions Section 8, 9, 10, and 11 shall
continue in full force and effect indefinitely. Upon the
termination of this Agreement, SAC shall immediately pay Manager
the balance of the Management Fee accrued hereunder to the date
of termination and all reimbursable expenses payable to Manager
hereunder. Upon termination or expiration of this Agreement,
Manager shall immediately return to SAC all of SAC's accounts,
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books and records in Manager's possession as well as any other
property belonging to SAC, and Manager shall remove all Manager
Employees from the Facility and leave the Facility in good order,
unless Manager has been requested by SAC to continue to provide
services during a reasonable transition period under Sections
8.03(a) or 8.03(b) of this Agreement, in which case Manager shall
return SAC's property and leave the premises in good order at the
end of the transition period.
Section 9. Confidentiality.
9.01 Confidential Information. The parties acknowledge
that each of them may be required to disclose Confidential
Information to government agencies or authorities by law, upon
the advice of counsel, and each shall endeavor to limit
disclosure to that purpose. Each Party will give the other prior
written notice of any disclosure pursuant to this paragraph,
which notice shall specify the substance of any such disclosure.
9.02 Identification. Each party hereto will take
appropriate steps to enable the other party hereto to identify
the information that should be protected as Confidential
Information. Accordingly, each party shall legend or otherwise
designate as proprietary any material furnished to the other
party which it believes to be Confidential Information. In
addition, any Confidential Information that is imparted orally
shall be identified as proprietary. Information that is not so
identified shall not be considered Confidential Information.
Also, information that is generally known or that has been
disclosed to a third party by the party claiming confidentiality
shall not be considered Confidential Information for purposes of
this Agreement.
9.03 Acknowledgment of Confidential Information. Each
party recognizes and acknowledges (a) that Confidential
Information of the other party may be commercially valuable
proprietary products of such party, the design and development of
which may have involved the expenditure of substantial amounts of
money and the use of skilled development experts over a long
period of time and which afford such party a commercial advantage
over its competitors; (b) that the loss of this competitive
advantage due to unauthorized disclosure or use of Confidential
Information of such party may cause great injury and harm to such
party; (c) that the restrictions imposed upon the parties under
this Agreement are necessary to protect the secrecy of
Confidential Information and to prevent the occurrence of such
injury and harm.
9.04 Nondisclosure. Each party who receives Confidential
Information hereunder (the "Receiving Party") agrees that it will
not, without the prior written consent of the party from whom
such Confidential Information was obtained (the "Disclosing
Party"), disclose, divulge or permit any unauthorized person to
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obtain any Confidential Information disclosed by the Disclosing
Party (whether or not such Confidential Information is in written
or tangible form) for as long as the pertinent information or
data remain Confidential Information. The Receiving Party hereby
agrees to indemnify and hold harmless the Disclosing Party from
and against any and all damage, loss, liability and expense
(including, without limitation, reasonable expenses of
investigation and reasonable attorneys' fees and expenses)
arising from any such unauthorized disclosure by the Receiving
Party or its personnel. The Receiving Party agrees that it will
use any Confidential Information disclosed by the Disclosing
Party hereunder (whether or not such Confidential Information is
in written or tangible form) only for purposes of the business of
SAC, for as long as the pertinent information or data remain
Confidential Information. The Receiving Party hereby agrees to
indemnify, defend and hold harmless the Disclosing Party from and
against any Loss arising from any such unauthorized disclosure by
the Receiving Party or its personnel.
9.05 Security. To protect the Confidential Information of
the parties, each party shall adopt basic security measures of
the kind commonly observed in industries in the United States of
America that rely extensively on proprietary information.
Security measures, to the extent appropriate, shall include
physical security measures, restrictions on access by
unauthorized personnel, use of confidentiality agreements with
personnel, legending, systematic segregation, and appropriate
record retention systems.
Section 10. Manager's Liability and Indemnification.
10.01 Limitation on Liability. Manager shall not be
responsible for any errors in judgment made in good faith in the
performance of its duties hereunder; provided, however, that
nothing contained herein shall release Manager of any
responsibility it may have for claims based on the gross
negligence or willful misconduct of Manager.
10.02 Indemnification. To the extent agents of SAC are
entitled to indemnification in SAC's Bylaws, SAC shall indemnify
and hold Manager and its affiliates, directors, officers,
employees and agents (each an "Indemnitee") harmless from any and
all liabilities, losses, damages, suits, judgments, fines,
demands and expenses ("Losses") arising in connection with the
SAC Business (a "Claim"); provided, however, that any such Losses
arising out of Manager's material breach of this Agreement, gross
negligence, fraud or willful misconduct shall be the
responsibility of Manager and Manager shall be liable to and
indemnify SAC from and against any Losses incurred by SAC as a
result thereof.
10.03 Indemnity Procedure for Third Party Claims. The
obligations and liabilities of SAC to indemnify an Indemnitee or
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Manager to indemnify SAC, as applicable, for third party claims
(including those by Manager Employees) under this Section 10
shall be subject to the following terms and conditions:
(a) The person or entity (i.e., SAC, Manager or Indemnitee)
making a claim ("Claimant") will give the party from whom
indemnity is sought ("Notified Party") prompt notice of such
Claim. The failure to promptly notify a party of any such Claim
shall not relieve the party of its obligation hereunder, unless
the failure to so notify such party materially prejudices such
party's ability to defend such Claim.
(b) Following notice by the Claimant to the Notified Party
of a Claim, the Notified Party shall be entitled at its cost and
expense to contest and defend such Claim by all appropriate legal
proceedings; provided, however, that notice of the intention so
to contest shall be delivered by the Notified Party to the
Claimant within thirty (30) days from the date of receipt by the
Notified Party of notice from the Claimant of the assertion of
such Claim. Any such contest may be conducted in the name and on
behalf of the Notified Party or the Claimant, as may be
appropriate. Such contest shall be conducted diligently by
reputable counsel employed by the Notified Party, but the
Notified Party shall keep the Claimant fully informed with
respect to such Claim and the contest thereof and the Claimant
shall have the right to engage its own counsel at its own
expense. If the Claimant joins in any such contest, the Notified
Party shall have full authority, in consultation with the
Claimant, to determine all action to be taken with respect
thereto provided, however, that in no event shall the Notified
Party have authority to agree to any relief other than the
payment of money damages by the Claimant unless agreed to by the
Claimant. Each party shall bear its own expense of such
representation. If any Claim is asserted and the Notified Party
fails to contest and defend such Claim within a reasonable period
of time, the Claimant may take such action in connection
therewith as the Claimant deems necessary or desirable, including
retention of counsel, and the Claimant shall be entitled to
indemnification of the costs incurred in connection with such
defense.
(c) If requested by the Notified Party, the Claimant shall
cooperate with the Notified Party and its counsel, including
permitting reasonable access to books and records, in contesting
any Claim which the Notified Party elects to contest or, if
appropriate, in making any counterclaim against the person
asserting the Claim on behalf of Claimant or Notified Party, or
any cross-complaint against any person, and the Notified Party
will reimburse the Claimant for reasonable out-of-pocket costs
(but not the cost of employee time expended) incurred by the
Claimant in so cooperating.
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(d) The Claimant agrees to afford the Notified Party and
its counsel the opportunity to be present at, and to participate
in, conferences with all persons, including governmental
authorities, asserting any Claim against the Claimant or
conferences with representatives or counsel for such persons.
Unless the Notified Party approves in writing the settlement of a
Claim, no right to indemnification under Section 9.02 shall be
established by such settlement.
10.04 Force Majeure. Delay in performance or non-
performance by Manager or SAC shall be excused to the extent such
performance is prevented by an Act of God or other event beyond
the reasonable control of the nonperforming party.
Section 11. Dispute Resolution.
11.01 Attempts to Resolve. All disputes and differences
raised by any party to this Agreement which may arise out of or
in connection with or with respect to this Agreement (including
but not limited to any rights of indemnification under Section 10
hereof) will be settled as far as possible by means of
negotiations between Manager and the SAC Executive Committee. If
any such dispute is not resolved by Manager and the SAC Executive
Committee within five (5) business days of commencement of
negotiations, then either party may submit the dispute to
arbitration in accordance with Section 11.02 of this Agreement
for a binding resolution thereof.
11.02 Arbitration. Except as provided in Section 11.05
hereof, any dispute, controversy or claim arising out of or
relating to this Agreement or the breach, termination or validity
thereof which cannot be resolved by the paries pursuant to
Section 11.01 hereof shall be settled by arbitration in
accordance with the Arbitration Rules of the American Arbitration
Association in effect on the date of this Agreement (the "Rules")
as modified in this Article. The arbitration shall be held at a
site mutually agreeable to the parties.
There shall be three arbitrators of whom each party shall
select one within 15 days following respondent's receipt of
claimant's notice of arbitration and statement of claim. The two
party-appointed arbitrators shall select a third arbitrator to
serve as presiding arbitrator within 15 days of the appointment
of the second arbitrator. In the event one party fails to
appoint an arbitrator within said 15 day period, then the
arbitrator that has been selected by the other party shall select
a second arbitrator and such arbitrators shall select a third
arbitrator to be the presiding arbitrator.
11.03 Claims and Judgments. Within twenty (20) days of the
respondent's receipt of the claimant's notice of arbitration and
statement of claim, the respondent shall serve the claimant with
its statement of defense and any counterclaims. Within twenty
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(20) days of claimant's receipt of the respondent's statement of
defense and counterclaims, the claimant shall serve its statement
of defense to any counterclaims or set-offs asserted by the
respondent. The tribunal shall permit and facilitate such
prehearing discovery and exchange of documents and information to
which the parties in writing agree or which it determines is
relevant to the dispute between the parties as is appropriate
taking into account the needs of the parties and the desirability
of making discovery expeditious and cost-effective. All
discovery shall be completed within forty-five (45) days from the
date on which the respondent communicates its statement of
defense and counterclaims, if any, to the claimant. The hearing
shall be held no later than ninety (90) days following the
selection of the presiding arbitrator. Any arbitration award
shall be rendered in U.S. dollars, with appropriate interest as
determined by the tribunal. Judgment on any award shall be
entered in any court having jurisdiction thereof.
11.04 Submission to Jurisdiction. For purposes of disputes
arising under this Agreement, the parties hereto submit
themselves to the jurisdiction of the state and federal courts
located in North and South Carolina with respect to the
enforcement of any arbitration award. Each of the parties hereby
consents to the service of process by registered mail at its
address set forth below and agrees that its submission to
jurisdiction and its consent to service of process by mail is
made for the express benefit of the other party. The arbitration
shall be governed by the Federal Arbitration Act, 9. U.S.C.
(section mark)(section mark) 1-16, 201-208.
11.05 Right to Additional Remedies. Notwithstanding
anything to the contrary in this Article, in the event any
intellectual property (including Confidential Information) is
used in violation of the terms of this Agreement, each party
shall be entitled, in addition to the remedy of arbitration set
forth herein, to apply immediately to any court of competent
jurisdiction for immediate injunctive relief. Each party hereby
submits itself to the jurisdiction of the state and federal
courts located in North and South Carolina for any such relief or
for the enforcement of any arbitration award against such party.
Section 12. Press Release.
The parties hereto shall attempt to consult with each other,
when possible, before issuing any press release or otherwise
making any public statements with respect to this Agreement and
the transactions contemplated hereby and shall not issue any such
press release or make any public statement prior to such
consultation, except as may be required by law.
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Section 13. Independent Status of Parties.
Except as specifically provided herein, nothing contained in
this Agreement shall be construed to constitute a party as agent
for the other party. Except as specifically provided herein,
neither party shall have the right to bind the other party,
transact any business in the other party's name or on its behalf
in any manner or form, or to make any promises or representations
on behalf of the other party.
Section 14. Assignment.
Neither SAC nor Manager shall assign or transfer any right
or obligation hereunder whether by operation of law, merger
(which, for purposes hereof, shall constitute an assignment) or
otherwise without the prior written consent of the other. Any
such attempted assignment or transfer in violation of this
Section 14 shall be void and without legal effect.
Notwithstanding the foregoing, Manager may assign all or any of
its rights and obligations hereunder to any wholly owned
subsidiary (direct or indirect) of Manager, provided, however,
that (a) (i) Manager shall give SAC written notice of such
assignment, (ii) any such assignee shall execute an agreement
assuming such duties and obligations and deliver the same to SAC,
and (iii) Manager shall deliver to SAC a written unconditional
guaranty of the performance of the duties and obligations so
assigned and assumed and (b) such rights and obligations shall
revert back to Manager at such time as the assignee ceases to be
a wholly owned subsidiary of Manager. Subject to the foregoing,
this Agreement shall inure to the benefit of, and be binding
upon, the successors and assigns of the parties hereto.
Section 15. Governing Law.
This agreement shall be governed by and construed in
accordance with the laws of the State of North Carolina,
regardless of any conflicts of laws or rules which would require
the application of the laws of another jurisdiction.
Section 16. Miscellaneous.
16.01 Notices. Any notice, request, instruction or other
document to be given hereunder by any party hereto to any other
Person shall be in writing and delivered personally or by mail or
any express mail service to the addresses set forth below.
(a) If to Manager:
Coca-Cola Bottling Co. Consolidated
1900 Rexford Road
Charlotte, NC 28211
Attention: Chief Financial Officer
Telecopy Number: (704) 551-4451
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With a copy to:
Witt, Gaither & Whitaker
1100 American National Bank Building
Chattanooga, TN 37401
Attention: Ralph M. Killebrew, Jr.
Telecopy Number: (615) 266-4138
(b) If to SAC:
South Atlantic Canners, Inc.
601 Cousar Street
Bishopville, South Carolina 29010
Attention: Chairman, Board of Directors
Telecopy Number: (803) 484-5841
With a copy to:
McDermott, Will & Emery
1200 18th Street, N.W.
Washington, D.C. 20036-2506
Attention: J. Gary McDavid
Telecopy Number: (202) 778-8335
16.02 Nonwaiver of Default. Any failure by either party at
any time or from time to time to enforce and require the strict
keeping and performance of any of the terms and conditions of
this Agreement shall not constitute a waiver of any such terms
and conditions at any future time and shall not permit such party
from insisting on the strict keeping and performance of such
terms and conditions at any later time.
16.03 Interpretation. Should the provisions of this
Agreement require judicial or arbitral interpretation, it is
agreed that the judicial or arbitral body interpreting or
construing the same shall not apply the assumption that the terms
hereof shall be more strictly construed against one party by
reason of the rule of construction that an instrument is to be
construed more strictly against the party which itself or through
its agents prepared the same, it being agreed that the agents of
both parties have participated in the preparation herein equally.
16.04 Partial Invalidity. If any portion of this Agreement
is held invalid, illegal or unenforceable and such invalidity,
illegality, or unenforceability shall not have a material adverse
effect with respect to the transactions contemplated herein taken
as a whole, such determination shall not impair the
enforceability of the remaining terms and provisions contained
herein. In such event, this Agreement shall be construed and
interpreted as if such invalid, illegal or unenforceable terms
were limited to the extent whereby such terms would be valid,
legal and enforceable. If such limitation is not possible, this
Agreement shall be construed and interpreted as if such invalid,
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<PAGE>
illegal or unenforceable terms were severed and not included
herein.
16.05 Amendment or Rescission. This Agreement shall not be
modified or rescinded except by a written instrument setting
forth such modification or rescission and signed by the parties
hereto.
16.06 Duplicate Originals. For the convenience of the
parties hereto, this Agreement may be executed in two
counterparts, and each such counterpart shall be deemed to be an
original instrument and together constitute one and the same
Agreement.
16.07 Captions. The captions or headings of the Sections
and other subdivisions hereof are inserted only as a matter of
convenience or for reference and shall have no effect on the
meaning of the provisions hereof.
16.08 Entirety of Agreement. This Agreement constitute the
entire agreement between the parties hereto with respect to the
subject matter hereof, and there are no agreements,
understandings, covenants, conditions or undertaking, oral or
written, expressed or implied, concerning such subject matter
that are not merged herein.
16.09 Plurals, Etc. As used herein or in any document
which incorporates the terms hereof:
(a) the plural form of the noun shall include the singular
and the singular shall include the plural, unless the context
requires otherwise;
(b) each of the masculine, neuter and feminine forms of any
pronoun shall include all forms unless the context otherwise
requires; and
(c) words of inclusion shall not be construed as terms of
limitation, so that references to included matters shall be
regarded as non-exclusive, non-characterizing illustrations.
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IN WITNESS WHEREOF, each of the parties has caused this
Agreement to be executed on its behalf by its duly authorized
representative as the date first written above.
MANAGER:
Coca-Cola Bottling Co. Consolidated
By: David V. Singer
Its: Vice President & Chief Financial Officer
SAC:
South Atlantic Canners, Inc.
By: A. T. Heath, Jr.
Its: Chairman of the Board
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<PAGE>
Guaranty Agreement
WHEREAS, the undersigned has requested WACHOVIA BANK OF NORTH CAROLINA, N.A.
(herein called "Bank") to extend credit or make certain financial
accommodations to SOUTH ATLANTIC CANNERS, INC., a South Carolina
corporation (herein called "Borrower") or to renew or extend, in whole
or in part, existing indebtedness or financial accommodations of the
Borrower to the Bank, and the Bank has extended credit or extended
or renewed existing indebtedness or made financial accommodations and/or
may in the future extend credit or extend or renew existing indebtedness
or make certain financial accommodations by reason of such request and in
reliance upon this guaranty:
NOW, THEREFORE, in consideration of such credit extended or renewed and/or
to be extended or renewed or such financial accommodations made or to be
made in its discretion by the Bank to the Borrower (whether to the same,
greater or lesser extent than any limit, if applicable, of this guaranty),
in consideration of $5.00 and other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the undersigned
hereby unconditionally guarantees to the Bank and any of "Bank's Affiliates",
as herein defined (the Bank and the Bank's Affiliates being hereinafter
collectively and/or individually, as the context shall require, referred
to as "Lender"), and their successors, endorsees, transferees and
assigns, the punctual payment when due, whether by acceleration or otherwise,
and at all times thereafter of (a) all debts, liabilities and obligations
whatsoever of the Borrower to the Lender, now existing or hereafter coming
into existence, whether joint or several, whether created directly or acquired
by endorsement, assignment or otherwise, whether absolute or contingent,
secured or unsecured, due or not due, including but not being limited to notes,
checks, drafts, credits, advances and obligations to reimburse draws against
letters of credit; (b) accrued but unpaid interest on such debts, liabilities
and obligations, whether accruing before or after any maturity(ies) thereof;
and (c) reasonable attorneys' fees (not to exceed 15% of the then outstanding
principal and interest of the indebtedness, to the extent not prohibited
by law) if any such debts, liabilities or obligations of the Borrower are
collected, or the liability of the undersigned hereunder enforced, by or
through any attorney at law (all of (a), (b) and (c) being hereinafter referred
to as the "Obligations"). As used herein, "Bank's Affiliates" means any entity
or entities now or hereafter directly or indirectly controlled by Wachovia
Corporation or any successor thereto. References herein to Borrower shall
be deemed to include any successor corporations to Borrower, if Borrower
is a corporation, or any reconstituted partnerships of Borrower,
if Borrower is a partnership.
The undersigned consents that, at any time, and from time to time, either
with or without consideration, the whole or any part of any security
now or hereafter held for any Obligations may be substituted, exchanged,
compromised, impaired, released, or surrendered with or without consideration;
the time or place of payment of any Obligations or of any security thereof
may be changed or extended, in whole or in part, to a time certain or
otherwise, and may be renewed or accelerated, in whole or in part; the
Borrower may be granted indulgences generally; any of the provisions
of any note or other instrument evidencing any Obligations or any security
therefor may be modified or waived; any party liable for the payment thereof
(including but not being limited to any co-guarantor) may be granted
indulgences or released; neither the death, termination of existence,
bankruptcy, incapacity, lack of authority nor disability of the Borrower
or any one or more of the guarantors, including any of the undersigned, shall
affect the continuing obligation of any other guarantor, including any of the
undersigned, and that no claim need be asserted against the personal
representative, guardian, custodian, trustee or debtor in bankruptcy
or receiver of any deceased, incompetent, bankrupt or insolvent
guarantor; any deposit balance to the credit of the Borrower or any other
party liable for the payment of the Obligations or liable upon any security
therefor may be released, in whole or in part, at, before and/or after the
stated, extended or accelerated maturity of any Obligations; and the Lender
may release, discharge, compromise or enter into any accord and satisfaction
with respect to any collateral for the Obligations, or the liability of the
Borrower or any of the undersigned, or any liability of any other person
primarily or secondarily liable on any of the Obligations, all without
notice to or further assent by the undersigned, who shall remain bound
hereon, notwithstanding any such exchange, compromise, surrender, extension,
renewal, acceleration, modification, indulgence, release, discharge or
accord and satisfaction.
Without limiting any of the foregoing, in the event of death, incompetency,
or dissolution of the Borrower, or should the Borrower become insolvent
(as defined by the North Carolina Uniform Commercial Code as in effect
at the time), or if a petition in bankruptcy be filed by or against the
Borrower, or if a receiver be appointed for any part of the property or assets
of the Borrower, of if any final judgment for money damages be entered against
the Borrower in a court of competent jurisdiction and remain unsatisfied for
a period of sixty (60) days or more in the amount of $250,000 or more.
The undersigned expressly waives: (a) notice of acceptance of this guaranty
and of all extensions or renewals of credit or other financial
accommodations to the Borrower; (b) presentment and demand for payment
of any of the Obligations; (c) protest and notice of dishonor or of
default to the undersigned or to any other party with respect to any
of the Obligations or with respect to any security therefor; (d) any
invalidity or disability in whole or in part at the time of the
acceptance of, or at any time with respect to, any security for the
Obligations or with respect to any party primarily or secondarily
liable for the payment of the Obligations to the Lender; (e) the fact
that any security for the Obligations may at any time or from time to time
be in default or be inaccurately estimated or may deteriorate in value
for any cause whatsoever; (f) any diligence in the creation or perfection
of a security interest or collection or protection of or realization upon
the Obligations or any security therefor, any liability hereunder, or any
party primarily or secondarily liable for the Obligations or any lack of
commercial reasonableness in dealing with any security for the Obligations;
(g) any duty or obligation on the part of the Lender to ascertain the extent
or nature of any security for the Obligations, or any insurance or other
rights respecting such security, or the liability of any party primarily
or secondarily liable for the Obligations, or to take any steps or action
to safeguard, protect, handle, obtain or convey information respecting,
or otherwise follow in any manner, any such security, insurance or other
rights; (h) any duty or obligation on the Lender to proceed to collect
the Obligations from, or to commence an action against, the Borrower,
any other guarantor, or any other person, or to resort to any security
or to any balance of any deposit account or credit on the books of the
Lender in favor of the Borrower or any other person, despite any notice
or request of the undersigned to do so; (i) any rights of the undersigned
pursuant to North Carolina General Statute Section 26-7 or any similar
or subsequent law; (j) to the extent not prohibited by law, the right
to assert any of the benefits under any statute providing appraisal
or other rights which may reduce or prohibit any deficiency judgments
in any foreclosure or other action; (k) all other notices to which
the undersigned might otherwise be entitled; and (l) demand for payment
under this guaranty.
This is a guaranty of payment and not of collection. The liability of the
undersigned on this guaranty shall be continuing, direct and immediate
and not conditional or contingent upon either the pursuit of any remedies
against the Borrower or any other person or foreclosure of any security
interests or liens available to the Lender, its successors, endorsees or
assigns. The Lender may accept any payment(s), plan for adjustment or debts,
plan for reorganization or liquidation, or plan of composition or
extension proposed by, or on behalf of, the Borrower or any other guarantor
without in any way affecting or discharging the liability of the undersigned
hereunder. If the Obligations are partially paid, the undersigned shall
remain liable for any balance of such Obligations. This guaranty shall be
revived and reinstated in the event that any payment received by Lender
on any Obligation is required to be repaid or rescinded under present or
future federal or state law or regulation relating to bankruptcy, insolvency
or other relief of debtors. The undersigned agrees to furnish promptly to the
Bank annual financial statements and such other current financial information
as the Bank may reasonably request from time to time.
The undersigned expressly represents and acknowledges that loans
and other financial accommodations by the Lender to the Borrower are
and will be to the direct interest and advantage of the undersigned.
The Lender may, without notice of any kind, sell, assign or transfer all or
any of the Obligations, and in such event each and every immediate and
successive assignee, transferee, or holder of all or any of the Obligations
shall have the right to enforce this guaranty, by suit or otherwise, for the
benefit of such assignee, transferee or holder, as fully as if such assignee,
transferee or holder were herein by name specifically given such rights,
powers and benefits, but the Lender shall have an
<PAGE>
unimpaired right, prior and superior to that of any such assignee, transferee
or holder, to enforce this guaranty for the benefit of the Lender, as to
so much of the Obligations as it has not sold, assigned or transferred.
No delay or failure on the part of the Lender in the exercise of any right
or remedy shall operate as a waiver thereof, and no single or partial exercise
by the Lender of any right or remedy shall preclude other or further exercise
thereof or the exercise of any other right or remedy.
For the purpose of this guaranty, the Obligations shall include all debts,
liabilities and obligations of the Borrower to the Lender, notwithstanding any
right or power of the Borrower or anyone else to assert any claim or defense
as to the invalidity or unenforceability thereof, and no such claim or defense
shall impair or affect the obligations and liabilities of the undersigned
hereunder. Without limiting the generality of the foregoing, if the Borrower
is a corporation, partnership, joint venture, trust or other form of business
organization, this guaranty covers all Obligations purporting to be made in
behalf of such organization by any officer or agent of the same, without
regard to the actual authority of such officer or agent. The term
"corporation" shall include associations of all kinds and all purported
corporations, whether or not correctly and legally chartered and organized.
To the extent not prohibited by law, the undersigned hereby grants to the
Lender a security interest in and security title and hereby assigns, pledges,
transfers and conveys to Lender (i) all property of the undersigned of every
kind or description now or hereafter in the possession or control of the
Lender, exclusive of any such property in the possession or control of the
Lender as a fiduciary other than as agent, for any reason including, without
limitation, all cash, stock or other dividends and all proceeds thereof, and
all rights to subscribe for securities incident thereto and any substitutions
or replacements therefor and (ii) any balance or deposit accounts of the
undersigned, whether such accounts be general or special, or individual or
multiple party, and upon all drafts, notes, or other items deposited for
collection or presented for payment by the undersigned with the Lender,
exclusive of any such property in the possession or control of the Lender as
a fiduciary other than as agent, and the Lender may at any time, without
demand or notice, appropriate and apply any of such to the payment of any of
the Obligations, whether or not due, except for other indebtedness,
obligations and liabilities owing to Lender or any of Lender's Affiliates
that constitute open-end credit under, or are subject to, the requirements
of the Truth-in-Lending Act and Federal Reserve Board Regulation Z and any
applicable state consumer laws.
Any amount received by the Lender from whatever source and applied by it
toward the payment of the Obligations shall be applied in such order of
application as the Lender may from time to time elect.
This guaranty shall bind and inure to the benefit of the Lender, its
successors and assigns, and likewise shall bind and inure to the benefit
of the undersigned, their heirs, executors, administrators, successors and
assigns. If more than one person shall execute this guaranty or a similar,
contemporaneous guaranty, the term "undersigned," shall mean, as used herein,
all parties executing this guaranty and such similar guaranties and all such
parties shall be liable, jointly and severally, one with the other and with
the Borrower, for each of the undertakings, agreements, obligations, covenants
and liabilities provided for herein with respect to the undersigned. This
guaranty contains the entire agreement and there is no understanding that any
other person shall execute this or a similar guaranty. Furthermore, no course
of dealing between the parties, no usage of trade, and no parol or extrinsic
evidence shall be used to supplement or modify any terms of this guaranty;
nor are there any conditions to the complete effectiveness of this guaranty.
This guaranty shall be deemed accepted by Lender in the State of North
Carolina. The parties agree that this guaranty shall be deemed, made,
delivered, performed and accepted by Lender in the State of North Carolina
and shall be governed by the laws of the State of North Carolina. Wherever
possible each provision of this guaranty shall be interpreted in such manner
as to be effective and valid under applicable law, but if any provision of
this guaranty shall be prohibited by or invalid under such law, such provision
shall be ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of
this guaranty.
The undersigned (a) submits to personal jurisdiction in the State of North
Carolina, the courts thereof and any United States District Court sitting
therein, for the enforcement of this guaranty, (b) waives any and all personal
rights under the law of any jurisdiction to object on any basis (including,
without limitation, inconvenience of forum) to jurisdiction or venue within
the State of North Carolina for the purpose of litigation to enforce this
guaranty, and (c) agrees that service of process may be made upon the
undersigned by first class postage prepaid mail, addressed to the undersigned
at the latest address of the undersigned known to the Bank (or at such other
address as the undersigned may specify for the purpose by notice to the Bank).
Nothing herein contained, however, shall prevent the Lender from bringing
any action or exercising any rights against any security and against the
Borrower personally, and against any assets of the Borrower, within any other
state or jurisdiction.
This guaranty shall remain in full force and effect as to each of the
undersigned unless and until terminated as to one or more of the undersigned
by notice to that effect actually received by the Bank, by registered mail,
addressed to Bank at 301 N. Main St., Suite 32092, Winston-Salem, NC 27101,
but no such notice shall affect or impair the liabilities hereunder of such
of the undersigned who gives or on whose behalf is given any such notice for the
Obligations existing at the date of receipt by the Bank of such notice, any
renewals, modifications, or extensions thereof (whether made before or after
such notice is received), any interest thereon, or any costs or expenses,
including without limitation, reasonable attorneys fees incurred in the
collection thereof or any future advances made by Lender to Borrower as
required or permitted pursuant to the terms of the instruments, documents
or agreements evidencing or providing for the Obligations. Any such notice
of termination by or on behalf of any of the undersigned shall affect only
that person and shall not affect or impair the liabilities and obligations
hereunder of any other person.
The terms and provisions of any addendum attached hereto are incorporated
herein by reference and made a part hereof.
IN WITNESS WHEREOF, each of the undersigned has executed this guaranty
under seal, this 22nd day of July, 1994
Witness: ________________________________(Seal)
(Individual Guarantor)
_________________________________ ________________________________(Seal)
(Individual Guarantor)
_________________________________
COCA-COLA BOTTLING CO. CONSOLIDATED
Attest: --------------------------------------
(Signature of Patricia A. Gill By (Signature of Brenda B. Jackson
appears here) appears here)
- - --------------------------------- ---------------------------------(Seal)
Title Assistant Secretary Title Vice President and Treasurer
--------------------------- ---------------------------------
[Corporate Seal]
<PAGE>
- - ----------------------------------------------------------WACHOVIA---------
Addendum to Guaranty Agreement
This document, upon its acceptance below by WACHOVIA BANK OF NORTH CAROLINA,
N.A. (hereinafter referred to as the "Bank"), shall constitute an addendum to
the Guaranty Agreement, dated July 22, 1994 (herein referred to as the
"Guaranty Agreement") from COCA-COLA BOTTLING CO. CONSOLIDATED, a Delaware
corporation (herein referred to as the "Guarantor(s)") which provides for the
guaranty by Guarantor(s) of the Obligations of SOUTH ATLANTIC CANNERS, INC., a
South Carolina/corporation (herein referred to as "Borrower") to Lender, and
shall be incorporated in the Guaranty Agreement by reference and made a part
thereof. All capitalized terms used in this Addendum which are defined in the
Guaranty Agreement shall have the meanings given such terms in the Guaranty
Agreement. Only those sections below which have been checked and completed are
included in the Addendum.
( ) Notwithstanding any contrary provision of the Guaranty Agreement,
the liability of the Guarantor(s) under the Guaranty Agreement for the
Obligations of the Borrower shall not exceed at any one time an aggregate of
$__________________________; provided, however, that this limitation shall
not apply (a) to that portion of the Obligations of the Borrower which consists
of accrued but unpaid interest and attorneys' fees incurred in the collection
of the Obligations or the enforcement of liability of the Guarantor(s) under
the Guaranty Agreement and (b) to the liabilities of the Guarantor(s) under any
other guaranties executed by the Guarantor(s) for the benefit of the Lender,
the guaranty of the Guarantor(s) under the Guaranty Agreement being cumulative
with all such other guaranties.
(X) Notwithstanding any contrary provision of the Guaranty Agreement, the
liability of the Guarantor(s) under the Guaranty Agreement for the Obligations
of the Borrower shall be limited to the principal and interest of that certain
promissory note dated July 22, 1994, payable to the Bank, in the original
principal amount of $15,000,000.00, and any modifications, renewals or
extensions thereof, plus (a) reasonable attorneys' fees if such note is
collected, or the liability of the Guarantor(s) under the Guaranty Agreement
is enforced, by or through any attorney-at-law and (b) the Obligations of the
Borrower under any collateral documents securing such promissory note.
( ) To secure the liabilities of the Guarantor(s) to the Lender under the
Guaranty Agreement, together with any other indebtedness, liabilities and
obligations of Guarantor(s), or any of them, to the Lender, now existing
or hereafter incurred or arising, except for other indebtedness, obligations
and liabilities owing to Lender or any of Lender's Affiliates that constitute
open-end credit under, or are subject to, the disclosure requirements of the
Truth-in-Lending Act and the Federal Reserve Board Regulation Z or any
applicable state consumer protection laws, the Guarantor(s) each hereby
grant to the Lender a security interest in and security title to, and
does hereby assign, pledge, transfer and convey to Lender a continuing
general primary lien upon, the following described property in addition to
that granted in the Guaranty;
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
Each Guarantor agrees that the security interest and security title granted
hereby shall remain in full force and effect and shall not be released until
all Obligations of the Borrower and all indebtedness, liabilities and
obligations of the Guarantor(s) secured hereby have been indefeasibly paid
in full and such payments are no longer subject to rescission, recovery or
repayment upon the bankruptcy, insolvency, reorganization, moratorium,
receivership or similar proceeding affecting the Borrower, the Guarantor(s)
or any other person.
Witness: ________________________________(Seal)
(Individual Guarantor)
_________________________________ ________________________________(Seal)
(Individual Guarantor)
_________________________________
Attest: COCA-COLA BOTTLING CO. CONSOLIDATED
--------------------------------------
(Name of Corporation or Partnership)
(Signature of Patricia A. Gill By (Signature of Brenda B. Jackson
appears here) appears here)
- - --------------------------------- --------------------------------(Seal)
Title Assistant Secretary Title Vice President and Treasurer
--------------------------- --------------------------------
[Corporate Seal] Accepted
WACHOVIA BANK OF NORTH CAROLINA, N.A.
By (Signature of Kenneth R. Smith, Jr.
appears here)
--------------------------------------
Title Senior Vice President
--------------------------------
