Filed pursuant to Rule 424(b)(3)
(Registration No. 333-75751)
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COCA-COLA BOTTLING CO. CONSOLIDATED CAROLINA COCA-COLA BOTTLING COMPANY, INC.
PROSPECTUS PROXY STATEMENT
COMMON STOCK FOR SPECIAL MEETING OF SHAREHOLDERS
INSTALLMENT NOTES DUE 2006 MAY 20, 1999
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This combined Proxy Statement/Prospectus is being furnished to the
shareholders of Carolina Coca-Cola Bottling Company, Inc. ("Coke-Carolina") in
connection with the solicitation of proxies by the board of directors of
Coke-Carolina for use at the special meeting of shareholders of Coke-Carolina to
be held on May 20, 1999 at 11:00 a.m., local time, at Coke-Carolina's corporate
offices located at 480 E. Liberty Street, Sumter, South Carolina 29151.
The purpose of the Coke-Carolina special meeting is for holders of
Coke-Carolina Common Stock to approve the Agreement and Plan of Merger, dated as
of March 26, 1999, among Coca-Cola Bottling Co. Consolidated ("Consolidated"),
Sumter Merger Corporation, Inc., a wholly owned subsidiary of Consolidated, and
Coke-Carolina.
Pursuant to the merger agreement, the issued and outstanding shares of
Coke-Carolina Common Stock will be converted into the right to receive a total
merger consideration of $36,600,000, subject to adjustment as described in the
Proxy Statement/Prospectus. Each Coke-Carolina shareholder may elect to receive
his or her share of the merger consideration in a combination of (a) shares of
Consolidated Common Stock, (b) 5.75% Installment Notes of Consolidated and (c)
cash. Notwithstanding each Coke-Carolina shareholder's right to elect the
composition of such shareholder's merger consideration, shares of Consolidated
Common Stock must compose at least 51% but not more than 60% of the total merger
consideration to be received by all Coke-Carolina shareholders. The total merger
consideration is subject to adjustment based upon the shareholders' equity of
Coke-Carolina at the time of the merger and reduction for any indemnification
claims Consolidated may have.
THE COKE-CAROLINA BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE MERGER
AND THE MERGER AGREEMENT, HAS UNANIMOUSLY DETERMINED THAT THE MERGER IS FAIR TO,
AND IN THE BEST INTERESTS OF, COKE-CAROLINA AND ITS SHAREHOLDERS, AND
UNANIMOUSLY RECOMMENDS THAT HOLDERS OF SHARES OF COKE-CAROLINA COMMON STOCK
APPROVE THE MERGER AGREEMENT.
This Proxy Statement/Prospectus also serves as a prospectus of
Consolidated under the Securities Act of 1933, as amended, relating to the
Consolidated Common Stock and the Installment Notes to be issued in the merger.
Consolidated Common Stock is traded on the Nasdaq National Market under the
symbol "COKE." There is no trading market for the Installment Notes.
This Proxy Statement/Prospectus and the accompanying form of proxy are
first being mailed to shareholders of Coke-Carolina on or about April 22, 1999.
PLEASE READ ALL OF THIS PROXY STATEMENT/PROSPECTUS CAREFULLY, INCLUDING
THE MATTERS REFERRED TO ON PAGE 12 UNDER THE CAPTION "RISK FACTORS," BEFORE
VOTING.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THE CONSOLIDATED COMMON STOCK OR THE
INSTALLMENT NOTES OR DETERMINED IF THIS PROXY STATEMENT/PROSPECTUS IS COMPLETE.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this Proxy Statement/Prospectus is April 22, 1999.
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TABLE OF CONTENTS
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SUMMARY...............................................................................1
RISK FACTORS.........................................................................12
THE COKE-CAROLINA SPECIAL MEETING....................................................14
Special Meeting...................................................................14
Record Date; Shares Entitled to Vote; Vote Required...............................14
Proxies; Proxy Solicitation.......................................................15
THE MERGER...........................................................................16
General...........................................................................16
Effective Time....................................................................16
Merger Consideration..............................................................16
Non-Solicitation Agreement........................................................20
Shareholders'Representatives and Exchange Procedures..............................20
Background of the Merger..........................................................21
Coke-Carolina Reasons for the Merger; Recommendation of the Board of Directors of
Coke-Carolina ....................................................................22
Consolidated Reasons for the Merger...............................................23
Certain Federal Income Tax Consequences...........................................24
Regulatory Approvals Required.....................................................26
Interests of Certain Persons in the Merger........................................27
Dissenters'Rights.................................................................27
Accounting Treatment..............................................................27
Nasdaq National Market Listing for Consolidated Common Stock; No Secondary Market
for Installment Notes ............................................................27
Resale of Consolidated Common Stock and the Installment Notes.....................28
THE MERGER AGREEMENT.................................................................29
The Merger........................................................................29
Merger Consideration..............................................................29
Representations and Warranties....................................................29
Indemnification...................................................................32
Conduct of Business Pending Closing...............................................34
Additional Covenants..............................................................35
Conditions to the Consummation of the Merger......................................36
Termination, Amendment and Waiver.................................................37
DESCRIPTION OF INSTALLMENT NOTES.....................................................39
General...........................................................................39
Terms of the Installment Notes....................................................39
Redemption Offer..................................................................39
Ranking of the Installment Notes..................................................40
Set-Off Rights....................................................................40
Defaults..........................................................................40
Amendments and Waivers............................................................41
Concerning the Trustee............................................................41
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Governing Law.....................................................................42
INFORMATION ABOUT CONSOLIDATED.......................................................43
BUSINESS OF COKE-CAROLINA............................................................44
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS OF COKE-CAROLINA .........................................................48
Financial Review Overview -Fiscal 1998............................................48
Financial Review Overview -Fiscal 1997............................................49
Results of Operations: Fiscal 1998 Compared to Fiscal 1997.......................49
Results of Operations: Fiscal 1997 Compared to Fiscal 1996.......................50
Liquidity and Capital Resources...................................................51
Forward-looking Statements........................................................51
Year 2000.........................................................................52
COKE-CAROLINA COMMON STOCK PRICES AND DIVIDENDS......................................53
COKE-CAROLINA PRINCIPAL SHAREHOLDERS AND MANAGEMENT OWNERSHIP........................54
COMPARISON OF RIGHTS OF COMMON STOCKHOLDERS OF CONSOLIDATED AND COKE-CAROLINA........56
Voting Rights.....................................................................56
Action by Special Meetings; Written Consents......................................57
Board of Directors; Filling Vacancies; Removal....................................57
Liability of Directors............................................................58
Indemnification of Officers and Directors.........................................58
Dividends and Distributions.......................................................59
Shareholder Approval of Mergers...................................................59
Anti-Takeover Provisions..........................................................60
Amendment to Certificate of Incorporation, Articles of Incorporation and Bylaws...60
Shareholder Inspection Rights.....................................................61
Appraisal Rights..................................................................62
DISSENTERS'RIGHTS....................................................................63
OTHER MATTERS........................................................................65
LEGAL MATTERS........................................................................65
EXPERTS..............................................................................65
INDEX TO FINANCIAL STATEMENTS.........................................................1
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ANNEX A - AGREEMENT AND PLAN OF MERGER (INCLUDING ARTICLES OF MERGER IN THE FORM
ATTACHED THERETO AS EXHIBIT 1.1(a) AND A CERTIFICATE OF MERGER IN THE FORM
ATTACHED THERETO AS EXHIBIT 1.1(b), BUT EXCLUDING CERTAIN OTHER
EXHIBITS)..................................................................A-1
ANNEX B - FORM OF INSTALLMENT NOTE...........................................B-1
ANNEX C - FORM OF SHAREHOLDERS' EQUITY ESCROW AGREEMENT......................C-1
ANNEX D - FORM OF INDEMNIFICATION ESCROW AGREEMENT...........................D-1
ANNEX E - FORM OF NON-COMPETITION AND CONSULTING AGREEMENT...................E-1
ANNEX F - FORM OF AFFILIATE AGREEMENT........................................F-1
ANNEX G - PROVISIONS OF THE CODE OF LAWS OF THE STATE OF
SOUTH CAROLINA RELATING TO DISSENTERS' RIGHTS..............................G-1
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WHERE YOU CAN FIND MORE INFORMATION
Consolidated files annual, quarterly and current reports, proxy
statements and other information with the SEC. You may read and copy any
reports, statements or other information Consolidated has filed at the SEC's
public reference rooms in Washington, D.C., New York, New York and Chicago,
Illinois. Please call the SEC at 1-800-SEC-0330 for further information on the
public reference rooms. Consolidated's SEC filings are also available to the
public from commercial document retrieval services and at the Website maintained
by the SEC at www.sec.gov. Consolidated has filed a registration statement to
register with the SEC the Consolidated Common Stock and Installment Notes to be
issued to Coke-Carolina shareholders in the merger. This Proxy
Statement/Prospectus is part of that registration statement. As allowed by SEC
rules, this Proxy Statement/Prospectus does not contain all of the information
you can find in the registration statement or the exhibits to the registration
statement.
Some of the important business and financial information that you may
want to consider in deciding how to vote is not included in this Proxy
Statement/Prospectus, but rather is "incorporated by reference" to documents
that have been filed by Consolidated with the SEC. The "file number" used by the
SEC to identify documents filed by Consolidated is 0-9286. The information that
is incorporated by reference consists of:
o Consolidated's Annual Report on Form 10-K, for the fiscal year
ended January 3, 1999;
o All documents filed by Consolidated under the Securities Exchange
Act of 1934 (E.G., Forms 10-Q and 8-K) after the date of this
Proxy Statement/Prospectus and prior to the Coke-Carolina special
meeting; and
o The description of Consolidated's Common Stock in Consolidated's
Registration Statement on Form 8-A filed January 29, 1973, as
updated by Consolidated's subsequent filings with the SEC.
If there is any contrary information in a previously filed document that
is incorporated by reference, then you should rely on the information in this
Proxy Statement/Prospectus.
All information contained or incorporated by reference in this Proxy
Statement/Prospectus relating to Consolidated and its subsidiaries has been
supplied by Consolidated, and all information relating to Coke-Carolina and its
subsidiaries has been supplied by Coke-Carolina.
You can obtain any of the documents incorporated by reference through
Consolidated or the SEC. Documents incorporated by reference are available from
Consolidated without charge, excluding all exhibits. You may obtain documents
incorporated by reference in this Proxy Statement/Prospectus by requesting them
in writing to the following address or by telephone:
David V. Singer
Chief Financial Officer
Coca-Cola Bottling Co. Consolidated
1900 Rexford Road, Charlotte, NC 28211
(704) 551-4400
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IF YOU WOULD LIKE TO REQUEST DOCUMENTS FROM CONSOLIDATED, PLEASE DO SO
BY MAY 13, 1999 TO ENSURE THAT YOU RECEIVE THEM BEFORE THE COKE-CAROLINA SPECIAL
MEETING.
YOU SHOULD RELY ON THE INFORMATION CONTAINED OR INCORPORATED BY
REFERENCE IN THIS PROXY STATEMENT/PROSPECTUS TO VOTE ON THE MERGER AGREEMENT AND
THE MERGER. NEITHER CONSOLIDATED NOR COKE-CAROLINA HAS AUTHORIZED ANYONE TO
PROVIDE YOU WITH INFORMATION THAT IS DIFFERENT FROM THAT CONTAINED IN THIS PROXY
STATEMENT/PROSPECTUS. YOU SHOULD NOT ASSUME THAT THE INFORMATION CONTAINED IN
THIS PROXY STATEMENT/PROSPECTUS IS ACCURATE AS OF ANY DATE OTHER THAN THE DATE
HEREOF. THIS PROXY STATEMENT/PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR
A SOLICITATION OF AN OFFER TO BUY ANY SECURITIES, OR THE SOLICITATION OF A
PROXY, IN ANY JURISDICTION IN WHICH, OR TO ANY PERSON TO WHOM, IT IS UNLAWFUL TO
MAKE ANY SUCH OFFER OR SOLICITATION.
FORWARD-LOOKING STATEMENTS
This Proxy Statement/Prospectus, including the information incorporated
by reference herein, information included in, or incorporated by reference from,
future filings by Consolidated with the SEC, as well as information contained in
written material, press releases and oral statements issued by or on behalf of
Consolidated, contains, or may contain, certain statements that may be deemed to
be "forward-looking statements" within the meaning of Section 27A of the
Securities Act and Section 21E of the Exchange Act. Such "forward looking
statements" include information relating to, among other matters, Consolidated's
future prospects, developments and business strategies for its operations and
synergies that are possible from the merger. These forward-looking statements
are identified by their use of terms and phrases such as "expect", "estimate",
"project", "believe", and similar terms and phrases. Such forward-looking
statements are contained in various sections of this Proxy Statement/Prospectus
and in the documents incorporated herein by reference. These statements are
based on certain assumptions and analyses made by Consolidated in light of its
experience and perception of historical trends, current conditions, expected
future developments and other factors it believes are appropriate under the
circumstances, and involve risks and uncertainties that may cause actual future
activities and results of operations to be materially different from that
suggested or described in this Proxy Statement/Prospectus or in such other
documents. These risks include, but are not limited to, (A) risks associated
with any changes in the historical levels of marketing funding support that
Consolidated and Coke-Carolina receive from The Coca-Cola Company, (B) risks
associated with interruptions in Consolidated's business operations as a result
of any failure to adequately correct the Year 2000 computer problem in any
systems or equipment of Consolidated or any of its major suppliers or customers
and (C) other risks detailed from time to time in Consolidated's filings with
the SEC. Investors are cautioned that any such statements are not guarantees of
future performance. Should one or more of these risks or uncertainties
materialize, or should underlying assumptions prove incorrect, actual results
may vary from those expected, estimated or projected.
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SUMMARY
THIS SUMMARY HIGHLIGHTS SELECTED INFORMATION FROM THIS PROXY
STATEMENT/PROSPECTUS. IT MAY NOT CONTAIN ALL OF THE INFORMATION THAT IS
IMPORTANT TO YOU. YOU SHOULD CAREFULLY READ THIS ENTIRE DOCUMENT (INCLUDING THE
ATTACHED ANNEXES) AND THE OTHER DOCUMENTS TO WHICH WE REFER (INCLUDING THOSE
INCORPORATED BY REFERENCE IN THIS DOCUMENT). THESE DOCUMENTS WILL GIVE YOU A
MORE COMPLETE DESCRIPTION OF THE MERGER. EACH ITEM IN THIS SUMMARY REFERS TO THE
PAGES WHERE THAT SUBJECT IS DISCUSSED MORE FULLY. ADDITIONALLY, ALL REFERENCES
TO "CONSOLIDATED" MEAN COCA-COLA BOTTLING CO. CONSOLIDATED AND, WHERE
APPROPRIATE, ITS SUBSIDIARIES AND ALL REFERENCES TO "COKE-CAROLINA" MEAN
CAROLINA COCA-COLA BOTTLING COMPANY, INC. AND, WHERE APPROPRIATE, ITS
SUBSIDIARY.
THE COMPANIES
COCA-COLA BOTTLING CO. CONSOLIDATED (PAGE 43)
1900 Rexford Road
Charlotte, North Carolina 28211
(704) 551-4400
Consolidated produces, markets and distributes carbonated and noncarbonated
beverages, primarily products of The Coca-Cola Company. Consolidated has been in
the soft drink manufacturing business since 1902. Consolidated has grown
significantly since 1984, making several acquisitions and becoming the
second-largest Coca-Cola bottler in the United States. Net sales for
Consolidated were approximately $928.5 million for the fiscal year ended January
3, 1999.
CAROLINA COCA-COLA BOTTLING COMPANY, INC. (PAGE 44)
480 E. Liberty Street
Sumter, South Carolina 29151
(803) 773-3336
Coke-Carolina is primarily engaged in the production of carbonated beverages and
the marketing and distribution of carbonated and noncarbonated beverages, mainly
products of The Coca-Cola Company. Coke-Carolina is also engaged in the sale of
snack foods through automated vending machines. Sales for Coke-Carolina were
approximately $21.9 million for the fiscal year ended January 31, 1999. Sales of
carbonated and noncarbonated beverages, and their related products, represented
approximately 97% of Coke-Carolina's total sales for the fiscal year ended
January 31, 1999.
CONSOLIDATED REASONS FOR THE MERGER (PAGE 23)
In assessing the merger, Consolidated considered a number of factors such as
Coke-Carolina's Coca-Cola bottling territory being contiguous to Consolidated's
territory. Consolidated believes this will provide it with the opportunity to
realize synergies and cost reductions by combining the two companies' production
and distribution operations as well as their marketing and administrative
systems and programs.
COKE-CAROLINA REASONS FOR THE MERGER (PAGE 22)
In determining whether to merge with Consolidated, Coke-Carolina's board of
directors considered a variety of factors, including the fixed value of
Consolidated common stock, the tax-free nature of the transaction, and, to the
extent of the Consolidated common stock received as consideration for the
merger, the ability of the Coke-Carolina shareholders to continue to participate
in the growth of the business after the merger.
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THE COKE-CAROLINA BOARD'S RECOMMENDATION TO COKE-CAROLINA SHAREHOLDERS (PAGE 22)
The Coke-Carolina board of directors has adopted and approved the merger
agreement and the merger and believes that the merger is fair to, and in the
best interests of, the Coke-Carolina shareholders. After careful consideration,
the Coke-Carolina board of directors unanimously recommends that you vote "FOR"
the proposal to approve the merger agreement.
THE MERGER (PAGE 16)
The merger agreement is the primary legal document that governs the merger of
Coke-Carolina with a subsidiary of Consolidated. We encourage you to read the
merger agreement, which is attached as Annex A. A number of other agreements and
documents are being prepared and will be entered into when the merger is
completed. These include the Installment Note (Annex B), Shareholders' Equity
Escrow Agreement (Annex C), Indemnification Escrow Agreement (Annex D), A.T.
Heath, III Non-Competition and Consulting Agreement (Annex E) and Affiliate
Agreement (Annex F).
RISKS OF THE MERGER (PAGE 12)
In considering the merger, you should consider all of the risks of the merger,
including risks relating to:
o the possibility that the price of Consolidated's Common Stock might fall;
o your possible future indemnification obligations;
o the possibility that Consolidated and Coke-Carolina's operations may not be
integrated successfully; and
o changes in the levels of marketing funding support that Consolidated and
Coke-Carolina receive from The Coca-Cola Company.
WE ENCOURAGE YOU TO REVIEW THE RISKS SET FORTH IN THIS PROXY
STATEMENT/PROSPECTUS BEGINNING ON PAGE 12.
WHAT COKE-CAROLINA SHAREHOLDERS WILL RECEIVE (PAGE 16)
In connection with the merger, Consolidated will pay an aggregate consideration
of $36,600,000 to Coke-Carolina shareholders. Such amount will be subject to
adjustment based upon the shareholders' equity of Coke-Carolina at the time of
the merger and reduction for any indemnification claims Consolidated may have.
The consideration will be paid in a combination of the following items:
o shares of Consolidated Common Stock, valued at $59.60 per share;
o Consolidated's 5.75% Installment Notes due 2006 on which interest will be
paid quarterly and on which principal will be paid in five equal installments
on December 31, 2001, 2002, 2003 and 2004 and seven years from the closing
date; and
o cash.
The aggregate consideration will be paid pro rata to each Coke-Carolina
shareholder based on the number of shares of Coke-Carolina Common Stock owned by
such shareholder. Each Coke-Carolina shareholder will have the option to elect
the relative amounts of shares of Consolidated Common Stock, Installment Notes
and cash he or she will receive in exchange for his or her Coke-Carolina Common
Stock, subject to the following limits:
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MINIMUM CONSOLIDATED COMMON STOCK PERCENTAGE
At least 51% of the merger consideration will be paid in the form of
Consolidated Common Stock valued at $59.60 per share, regardless of the actual
elections made by Coke-Carolina shareholders. If Coke-Carolina shareholders in
the aggregate do not initially elect to receive that minimum percentage of
Consolidated Common Stock, the elections will be automatically amended to
increase the amount of stock to be received. If possible, those amendments will
be made proportionately among only those Coke-Carolina shareholders who have
elected to receive any Consolidated Common Stock. However, if necessary, all
Coke-Carolina shareholders (even those who did not initially elect to receive
any Consolidated Common Stock) may have their elections amended as needed to
obtain the required minimum stock percentage. If the elections of the
Coke-Carolina shareholders are amended, then the elections as to cash and
Installment Notes will be decreased proportionately, provided that no
Coke-Carolina shareholder's cash election will be reduced below a minimum amount
of 3.5%.
MAXIMUM CONSOLIDATED COMMON STOCK PERCENTAGE
Not more than 60% of the merger consideration will be paid in the form of shares
of Consolidated Common Stock, regardless of the actual elections made by
Coke-Carolina shareholders. If Coke-Carolina shareholders in the aggregate
initially elect to receive more than the maximum percentage of Consolidated
Common Stock, Consolidated will issue only 60% of the merger consideration in
the form of Consolidated Common Stock. The election of each Coke-Carolina
shareholder who elected to receive more than 60% of his or her merger
consideration in the form of Consolidated Common Stock will be automatically
amended to proportionately reduce the stock to be received by such shareholder.
If the elections of such Coke-Carolina shareholders are so amended, then their
elections as to cash and Installment Notes will be increased proportionately.
MINIMUM CASH PAYMENT
At least 3.5% of the merger consideration will be paid in cash to each
Coke-Carolina shareholder. This portion of the cash will be used to pay certain
fees and expenses incurred in connection with the merger. The actual
consideration received by the Coke-Carolina shareholders will be reduced by the
amount of those fees and expenses.
ESCROW ARRANGEMENTS AND INDEMNIFICATION OBLIGATIONS OF COKE-CAROLINA
SHAREHOLDERS (PAGE 17)
At the closing of the merger, a portion of the merger consideration will be held
back from the Coke-Carolina shareholders (in the relative proportions that each
of them elects to receive merger consideration) and will instead be placed in
escrow in connection with the following arrangements.
SHAREHOLDERS' EQUITY ESCROW FUND
The total merger consideration is subject to adjustment, either up or down, to
account for any increase or decrease in the aggregate shareholders' equity of
Coke-Carolina as of the closing date from $6,651,881. Such shareholders' equity
will (a) exclude the shareholders' equity of Heath Oil Company, Inc., a
subsidiary of Coke-Carolina, (b) include Heath Oil's cash and cash equivalents,
payables for goods and/or services, and accrued but unpaid taxes, and (c) be
calculated in accordance with certain stipulated guidelines. To the extent that
it is estimated that this stipulated shareholders' equity will be greater than
$6,651,881 on the closing date, Newco will deposit the amount of such
difference, in cash, into the shareholders' equity escrow fund. If Coke-Carolina
estimates that this stipulated shareholders' equity will be less than $6,651,881
on the closing date, the merger
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consideration will be decreased by the amount of the difference and Newco will
deposit cash equal to such amount into the shareholders' equity escrow fund.
Within 120 days of closing, Consolidated's independent accountants will prepare
an unaudited balance sheet showing the actual amount of this stipulated
shareholders' equity at closing. To the extent that the actual shareholders'
equity is greater than $6,651,881, this amount will generally be paid in cash to
the Coke-Carolina shareholders. To the extent that the actual shareholders'
equity is less than $6,651,881, the escrow agent will deliver the difference to
Newco. If the amount deposited into this fund is insufficient to cover the
shortfall, Newco will be paid the remaining amount from the Indemnification
Escrow Fund described below.
INDEMNIFICATION AND INDEMNIFICATION ESCROW
The merger agreement provides that the Coke-Carolina shareholders will indemnify
Consolidated against any liability or damages arising out of any breach of any
representation or warranty of Coke-Carolina in the merger agreement and related
documents, as a result of any failure by Coke-Carolina to perform any agreement
contained in the merger agreement and for Coke-Carolina's failure to collect
within 180 days from the closing date any account receivable existing on the
closing date.
An aggregate of $3,660,000 of the merger consideration will be placed in escrow
to fund these indemnity obligations. Each Coke-Carolina shareholder will fund
his or her proportionate amount of the indemnification escrow by placing in
escrow shares of Consolidated Common Stock, Installment Notes and cash in the
same relative proportions that he or she is receiving the balance of his or her
merger consideration. Eighteen months after the closing of the merger, funds
will be released from the indemnification escrow fund so that $1,830,000 of the
merger consideration remains in escrow. Any remaining unused funds will be
released to the Coke-Carolina shareholders 42 months after the closing of the
merger.
RIGHTS OF DISSENTING SHAREHOLDERS (PAGE 63)
South Carolina law permits holders of Coke-Carolina Common Stock to dissent from
the merger and to have the fair value of their stock appraised and paid to them
in cash. To do this, any holder of Coke-Carolina Common Stock must, before the
Coke-Carolina shareholders meeting, give notice to Coke-Carolina that he or she
is exercising his or her dissenters' rights and must not personally vote his or
her shares of Coke-Carolina Common Stock in favor of the merger agreement and
the merger. If you hold shares of Coke-Carolina Common Stock and you dissent
from the merger and follow the required formalities, you will not be entitled to
receive the merger consideration described above. Instead, your only right will
be to receive the fair value of your shares in cash plus accrued interest.
MATERIAL FEDERAL INCOME TAX CONSEQUENCES (PAGE 24)
The merger has been structured to qualify as a reorganization under the Internal
Revenue Code of 1986 . Accordingly, Coke-Carolina shareholders will not
recognize gain on their receipt of shares of Consolidated Common Stock in
exchange for shares of Coke-Carolina Common Stock. However, Coke-Carolina
shareholders will recognize the gain realized in the exchange for federal income
tax purposes to the extent they receive Installment Notes or cash. Coke-Carolina
shareholders who receive Installment Notes may be entitled to report a portion
of the gain recognized in the exchange over time under the installment method.
Any gain recognized generally will be considered capital gain, subject to tax at
a reduced rate.
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Determining the actual tax consequences of the merger to you as an individual
taxpayer can be complicated. The tax treatment will depend on your specific
situation and many variables not within our control. You should consult your own
advisors for a full understanding of the merger's tax consequences.
OTHER INTERESTS OF OFFICERS AND DIRECTORS IN THE MERGER (PAGE 27)
On or before the closing date, Coke-Carolina will enter into a nine-year
consulting and non-competition agreement with A.T. Heath, III.
EFFECT OF THE MERGER ON COKE-CAROLINA (PAGE 16)
Upon completion of the merger, Coke-Carolina will become a subsidiary of
Consolidated. Individuals who owned stock in Coke-Carolina before the merger
will be entitled to receive shares of Consolidated Common Stock, Installment
Notes and cash in the merger. Former Coke-Carolina shareholders will hold
between approximately 4.9% and 5.8% of Consolidated's Common Stock after the
merger, depending on the amount of Consolidated Common Stock that Coke-Carolina
shareholders elect to receive.
VOTE REQUIRED; VOTING AGREEMENT (PAGE 14)
In order to approve the merger, Coke-Carolina shareholders holding two-thirds
(66-2/3%) of the outstanding shares of Coke-Carolina Common Stock must vote for
the merger agreement and the merger. As of March 31, 1999, directors and
executive officers of Coke-Carolina (and their affiliates) owned 3,212.50 shares
of Coke-Carolina Common Stock, or approximately 75.0% of all outstanding
Coke-Carolina Common Stock.
It is not necessary for Consolidated stockholders to vote on the merger
agreement or the merger.
THE COKE-CAROLINA SHAREHOLDERS' MEETING (PAGE 14)
Coke-Carolina will hold its special shareholders' meeting at its corporate
offices located at 480 E. Liberty Street, Sumter, South Carolina 29151, on May
20, 1999 at 11:00 a.m. At this meeting, Coke-Carolina will ask its shareholders:
o to approve the merger agreement; and
o to act on any other matters that may be put to a vote at the Coke-Carolina
special meeting.
RECORD DATE; VOTING POWER (PAGE 14)
You may vote at the Coke-Carolina special meeting if you owned Coke-Carolina
shares as of the close of business on April 20, 1999. You will have one vote for
each share of Coke-Carolina Common Stock you owned on April 20, 1999.
CONDITIONS TO THE MERGER (PAGE 36)
The completion of the merger depends on satisfaction of a number of conditions,
including the following:
o Coke-Carolina's shareholders must approve the merger agreement;
o Consolidated's board of directors must not have withdrawn its approval of the
merger agreement;
o The Coca-Cola Company must approve the merger and the transfer of
Coke-Carolina's franchises to Consolidated;
o there must be no governmental order blocking completion of the merger, and no
proceedings by a government body or administrative agency seeking to block
the merger;
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o a court order must authorize the trusts established under the wills of A.T.
Heath and Ann H. Heath to vote in favor of the merger and the merger
agreement;
o Consolidated and Coke-Carolina must have performed in all material respects
their respective obligations under the merger agreement;
o the representations and warranties made by Coke-Carolina and Consolidated and
Newco in the merger agreement must continue to be true in all material
respects at the time the merger is to be effective;
o in the reasonable opinion of Consolidated, no event shall have occurred which
would have a material adverse effect upon Coke-Carolina; and
o the delivery of certain legal opinions.
Unless prohibited by law, either Consolidated or Coke-Carolina could elect to
waive a condition that has not been satisfied and complete the merger. We cannot
be certain whether or when any of these conditions will be satisfied, or waived
where permissible, or that we will complete the merger.
TERMINATION OF THE MERGER AGREEMENT (PAGE 37)
Consolidated and Coke-Carolina can agree at any time to terminate the merger
agreement before completing the merger, even if the Coke-Carolina shareholders
have already voted to approve it. In addition, Consolidated and Newco can
terminate the merger agreement if the board of directors of Coke-Carolina
withdraws or modifies in a manner adverse to Consolidated or Newco its approval
or recommendation of the merger agreement.
Coke-Carolina or Consolidated can also terminate the merger agreement:
o if the merger is not consummated within five business days after the
Coke-Carolina special shareholders' meeting;
o if any federal or state court enters a final, nonappealable order, judgment
or decree restraining, enjoining or otherwise prohibiting the merger; or
o if the other party violates, in a material way, any of its representations,
warranties or obligations under the merger agreement.
GOVERNMENTAL AND REGULATORY MATTERS (PAGE 26)
The Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, prohibits
us from completing the merger until after we have furnished certain information
and materials to the Antitrust Division of the Department of Justice and the
Federal Trade Commission and a required waiting period has ended. The required
information was furnished and the parties were granted early termination of the
waiting period on December 1, 1998. However, the Department of Justice and the
Federal Trade Commission continue to have the authority to challenge the merger
on antitrust grounds before or after the merger is completed.
ACCOUNTING TREATMENT (PAGE 27)
Consolidated intends to treat the merger as a purchase for accounting and
financial reporting purposes, which means that Consolidated will treat
Coke-Carolina as a separate entity for periods prior to the closing and,
thereafter, as a wholly-owned subsidiary of Consolidated.
MARKET PRICE INFORMATION
Shares of Consolidated Common Stock are traded on the Nasdaq National Market. On
October 21, 1998, the last trading day before public announcement of the
proposed merger, Consolidated's Common Stock
6
<PAGE>
closed at $59.63 per share. The merger agreement values shares of Consolidated
Common Stock at $59.60 per share. On April 20, 1999, Consolidated's Common Stock
closed at $ 53.75 per share. Neither the Installment Notes nor the Coke-Carolina
Common Stock is publicly traded.
APPOINTMENT OF SHAREHOLDERS' REPRESENTATIVES (PAGE 20)
In connection with the merger, W.S. Heath, A.T. Heath III and R. Bland Roper are
being appointed as shareholders' representatives. The shareholders'
representatives, acting jointly, have the authority to receive the merger
consideration on behalf of each Coke-Carolina shareholder as well as to act for
and bind each Coke-Carolina shareholder in connection with a wide range of
matters occurring at or after the closing. By appointing the shareholders'
representatives, each Coke-Carolina shareholder waives the right to act on
matters within the scope of the shareholders' representatives' authority.
MERGER CONSIDERATION ELECTION FORM; TRANSMITTAL LETTER
To elect the method of payment of merger consideration for your shares of
Coke-Carolina Common Stock, you must follow the procedures in the Election Form
enclosed with this Proxy Statement/Prospectus. IF YOU HAVE NOT COMPLETED AND
RETURNED THE ELECTION FORM TO COKE-CAROLINA IN THE CARE OF THOMAS B. HYMAN, JR.,
SUTHERLAND ASBILL & BRENNAN, L.L.P., 999 PEACHTREE STREET, N.E., ATLANTA,
GEORGIA 30309-3996 AT LEAST FIVE CALENDAR DAYS PRIOR TO THE CLOSING DATE, YOU
WILL BE DEEMED TO HAVE ELECTED TO RECEIVE ALL OF YOUR MERGER CONSIDERATION IN
CASH.
Additionally each Coke-Carolina shareholder will be required to deliver a
completed and signed transmittal letter in which he or she tenders his or her
shares of Coke-Carolina Common Stock to Thomas B. Hyman, Jr., of Sutherland
Asbill & Brennan, L.L.P., 999 Peachtree Street, N.E., Atlanta, Georgia
30309-3996, Coke-Carolina's legal counsel, who will deliver the transmittal
letters and shares of Coke-Carolina Common Stock to the shareholders'
representatives at the closing. In connection with the transmittal letters,
Coke-Carolina shareholders will make certain representations to Consolidated,
including representations as to ownership of their shares of Coke-Carolina
Common Stock. YOU SHOULD COMPLETE AND RETURN THE TRANSMITTAL LETTER AND YOUR
CERTIFICATES FOR SHARES OF COKE-CAROLINA COMMON STOCK IN THE MANNER DESCRIBED
ABOVE AS SOON AS POSSIBLE. YOU WILL NOT BE ENTITLED TO RECEIVE YOUR PORTION OF
THE MERGER CONSIDERATION UNTIL YOU DO SO.
7
<PAGE>
SELECTED FINANCIAL DATA AND UNAUDITED COMPARATIVE PER SHARE INFORMATION
CONSOLIDATED
The following selected consolidated financial data of Consolidated has
been derived from its historical financial statements, which have been audited
by PricewaterhouseCoopers LLP, independent accountants, and should be read in
conjunction with such financial statements. This selected consolidated financial
data should be read in conjunction with "Management's Discussion and Analysis of
Financial Condition and Results of Operations," the historical financial
statements of Consolidated, and all other information related to Consolidated
included or incorporated by reference in this Proxy Statement/Prospectus.
<TABLE>
<CAPTION>
FISCAL YEAR*
--------------------------------------------------------------
1998 1997 1996 1995 1994
---- ---- ---- ---- ----
(in thousands, except per share data)
SUMMARY OF OPERATIONS
<S> <C> <C> <C> <C> <C>
Net sales.................................... $928,502 $ 802,141 $773,763 $ 761,876 $723,896
-------- --------- -------- --------- --------
Cost of sales................................ 534,919 452,893 435,959 447,636 427,140
Selling expenses............................. 207,244 183,125 177,734 158,831 149,992
General and administrative expenses.......... 69,001 56,776 58,793 54,720 54,559
Depreciation expense......................... 36,754 33,672 28,528 26,746 24,188
Amortization of goodwill and intangibles..... 13,294 12,332 12,238 12,230 12,309
-------- --------- -------- --------- --------
Total costs and expenses..................... 861,212 738,798 713,252 700,163 668,188
-------- --------- -------- --------- --------
Income from operations....................... 67,290 63,343 60,511 61,713 55,708
Interest expense............................. 39,947 37,479 30,379 33,091 31,385
Other income (expense), net.................. (4,098) (1,594) (4,433) (3,401) 63
-------- --------- --------- --------- --------
Income before income taxes, extraordinary charge
and effect of accounting change........... 23,245 24,270 25,699 25,221 24,386
Income taxes................................. 8,367 9,004 9,535 9,685 10,239
-------- --------- -------- --------- --------
Income before extraordinary charge and effect of
accounting change......................... 14,878 15,266 16,164 15,536 14,147
Extraordinary charge......................... - - - (5,016) -
Effect of accounting change.................. - - - - (2,211)
-------- --------- -------- --------- --------
Net income................................... $ 14,878 $ 15,266 $ 16,164 $ 10,520 $ 11,936
-------- --------- -------- --------- --------
Basic net income per share:
Income before extraordinary charge and
effect of accounting change............ $ 1.78 $ 1.82 $ 1.74 $ 1.67 $ 1.52
Extraordinary charge...................... - - - (.54) -
Effect of accounting change............... - - - - (.24)
-------- --------- -------- --------- --------
Net income................................ $ 1.78 $ 1.82 $ 1.74 $ 1.13 $ 1.28
-------- --------- -------- --------- --------
Diluted net income per share:
Income before extraordinary charge and
effect of accounting change............ $ 1.75 $ 1.79 $ 1.73 $ 1.67 $ 1.52
Extraordinary charge...................... - - - (.54) -
Effect of accounting change............... - - - - (.24)
-------- --------- -------- --------- --------
Net income................................ $ 1.75 $ 1.79 $ 1.73 $ 1.13 $ 1.28
-------- --------- -------- --------- --------
</TABLE>
- ----------
* All years presented are 52-week years, except for fiscal 1998 which consists
of 53 weeks. See Notes 2 and 13 to Consolidated's consolidated financial
statements incorporated by reference in this Proxy Statement/Prospectus for
information concerning Consolidsated's investment in Piedmont Coca-Cola Bottling
Partnership. In 1994, Consolidated changed its method of accounting for
postemployement benefits. In 1995, Consolidated recorded an extraordinary charge
related to the repurchase at a premium of a portion of its long-term debt.
8
<PAGE>
<TABLE>
<CAPTION>
FISCAL YEAR*
--------------------------------------------------------------
1998 1997 1996 1995 1994
---- ---- ---- ---- ----
(in thousands, except per share data)
Cash dividends per share:
<S> <C> <C> <C> <C> <C>
Common.................................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Class B Common............................ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ========= ======== ========= ========
OTHER INFORMATION
Weighted average number of common shares
outstanding............................... 8,365 8,407 9,280 9,294 9,294
Weighted average number of common shares
outstanding - assuming dilution........... 8,495 8,509 9,330 9,316 9,296
Ratio of earnings to fixed charges........... 1.42 1.49 1.54 1.51 1.54
YEAR-END FINANCIAL POSITION
Total assets................................. $825,228 $ 778,033 $702,396 $ 676,571 $664,159
-------- --------- -------- --------- --------
Long-term debt............................... 491,234 493,789 439,453 419,896 432,971
-------- --------- -------- --------- --------
Shareholders' equity......................... 15,786 9,273 22,269 38,972 33,981
-------- --------- -------- --------- --------
</TABLE>
9
<PAGE>
COKE-CAROLINA
Set forth below is certain unaudited selected consolidated financial
data for Coke-Carolina for each of the years in the five year period ended
January 31, 1999. This selected consolidated financial data should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations of Coke-Carolina" and Coke-Carolina's unaudited
historical financial statements and accompanying notes included elsewhere in
this Proxy Statement/Prospectus.
<TABLE>
<CAPTION>
YEARS ENDED JANUARY 31,
1999 1998 1997 1996 1995
(unaudited)
OPERATING RESULTS:
<S> <C> <C> <C> <C> <C>
Total sales (net of discounts). $21,886,864 $19,860,813 $20,046,304 $18,956,016 $17,676,524
Depreciation................... 660,226 643,106 616,572 575,403 498,876
Soft drink tax................. 204,912 294,983 382,424 385,921 355,640
Net operating income (1) ...... 719,784 351,785 849,555 700,430 752,943
Other income (expenses) (2) ... 140,617 87,598 (16,615) 82,372 179,186
Income taxes................... 299,600 161,291 314,497 298,591 358,433
Net income..................... $ 560,801 $ 272,092 $ 518,442 $ 484,210 $ 573,696
--------- --------- --------- --------- ---------
EARNINGS PER SHARE:
Basic
Net income................... $ 130.94 $ 63.53 $ 121.05 $ 113.05 $ 133.95
Diluted
Net income................... $ 130.94 $ 63.53 $ 121.05 $ 113.05 $ 133.95
BALANCE SHEET DATA:
Current assets................ $ 4,363,743 $ 3,891,011 $ 3,916,771 $ 3,881,050 $ 4,267,023
Property, plant & equip.(3)... 3,108,601 3,331,692 3,264,742 3,247,367 2,860,732
Total assets.................. 7,820,786 7,567,800 7,544,902 7,476,267 7,403,161
Current liabilities........... 659,506 539,022 359,915 381,421 364,226
Long-term debt................ - - - - -
Stockholders' equity.......... 7,161,279 7,028,778 7,184,987 7,094,845 7,038,935
</TABLE>
(1) Net operating income includes dividends received from South Atlantic Canners
and Southeastern Containers, cooperatives owned by bottlers to supply them
with raw materials and finished goods.
(2) Other income (expenses) includes gains or losses from Coke-Carolina's wholly
owned subsidiary, Heath Oil Company, Inc.
(3) Net of accumulated depreciation.
10
<PAGE>
COMPARATIVE PER SHARE DATA
The following table includes selected historical per share data and the
corresponding unaudited pro forma per share amounts for Consolidated Common
Stock and Coke-Carolina Common Stock for the periods indicated, giving effect to
the merger as if it had occurred on December 29, 1997. The data presented are
based upon the financial statements and detailed notes appearing elsewhere in,
or incorporated by reference into, this Proxy Statement/Prospectus. The
comparative per share data does not necessarily indicate the results of future
operations of the combined organization or the actual results that would have
occurred if the merger had occurred on December 29, 1997.
CONSOLIDATED
Year Ended
January 3, 1999
Income per common share:
Historical.............................................. $1.78
Pro forma combined...................................... $1.65
Cash dividends per common share:
Historical.............................................. $1.00
Pro forma combined...................................... $1.00
Book value per common share:
Historical.............................................. $1.89
Pro forma combined...................................... $1.75
COKE-CAROLINA
Year Ended
January 31, 1999
Income per common share:
Historical.............................................. $130.94
Pro forma equivalent (a)................................ $132.48
Cash dividends per common share:
Historical.............................................. $100.00
Pro forma equivalent (a)................................ $80.30
Book value per common share:
Historical.............................................. $1,672.02
Pro forma equivalent (a)................................ $140.51
(a) Represents pro forma equivalent Coke-Carolina amounts calculated by
multiplying the Consolidated pro forma combined amounts by an assumed
exchange ratio of 80.3 shares of Consolidated Common Stock for each share of
Coke-Carolina Common Stock, which is calculated assuming the total merger
consideration is $36,600,000 and that Coke-Carolina shareholders elect to
receive 56% of their merger consideration in shares of Consolidated Common
Stock. If the Coke-Carolina shareholders elect to receive 57% of their
merger consideration in shares of Consolidated Common Stock (I.E., a 1%
change), the pro forma equivalent income per common share, cash dividends
per common share and book value per common share would be $134.81, $81.70
and $142.98, respectively.
11
<PAGE>
RISK FACTORS
Coke-Carolina shareholders should carefully consider the following risk
factors as well as the other information set forth in this Proxy
Statement/Prospectus:
THE MARKET PRICE OF CONSOLIDATED COMMON STOCK MAY FALL. THIS WILL REDUCE THE
VALUE OF THE MERGER CONSIDERATION TO BE PAID TO COKE-CAROLINA SHAREHOLDERS.
The majority of the merger consideration (between 51% and 60%) will be
paid in shares of Consolidated Common Stock. For purposes of determining the
number of shares to be issued in the merger, the Consolidated Common Stock is
valued at $59.60 per share, regardless of the actual market price per share of
Consolidated Common Stock at the time of the merger. If the actual price of
Consolidated Common Stock is less than $59.60 per share, the value of each
Coke-Carolina shareholder's merger consideration would be decreased. For
example, if a Coke-Carolina shareholder elects to receive $1,000 of merger
consideration in shares of Consolidated Common Stock, he would receive the
number of shares obtained by dividing $1,000 by $59.60 per share or 16.77 shares
of Consolidated Common Stock (subject to adjustment to avoid issuing a fraction
of a share). If, however, the actual market price per share of Consolidated
Common Stock were only $30.00 per share, those 16.77 shares would be worth only
$503 on the open market.
COKE-CAROLINA SHAREHOLDERS MAY HAVE INDEMNIFICATION OBLIGATIONS.
The merger agreement requires that the Coke-Carolina shareholders
jointly and severally indemnify Consolidated against damages resulting from (a)
any breach of Coke-Carolina's representations and warranties contained in the
merger agreement, (b) any failure by Coke-Carolina to perform its covenants and
agreements contained in the merger agreement, (c) any inaccuracy in any
certificate or document executed by Coke-Carolina in connection with the closing
and (d) any accounts receivable of Coke-Carolina existing on the closing date
that are not collected within 180 days after the closing. Additionally, each
shareholder of Coke-Carolina will make certain representations in the
transmittal letter, for which such shareholder will be solely liable in the
event of a breach. To secure these obligations, $3,660,000 of the merger
consideration is being placed in escrow at closing. However, the Coke-Carolina
shareholders' indemnification obligations are not limited to the amount of such
escrow. Instead, each Coke-Carolina shareholder could be liable for the full
amount of merger consideration that he or she receives. If Consolidated has an
indemnity claim, the Coke-Carolina shareholders may not receive some or all of
the consideration being held in escrow. In addition, if the amount of such
indemnity claims exceeds the escrow amount, the Coke-Carolina shareholders will
be obligated to return or repay some or all of the merger consideration that
they receive.
CONSOLIDATED MAY NOT BE ABLE TO INTEGRATE COKE-CAROLINA'S OPERATIONS QUICKLY OR
EFFECTIVELY.
Consolidated has entered into the merger agreement with the expectation
that the merger will result in benefits to it through the access to new
Coca-Cola bottling territories and the integration of the operations of
Coke-Carolina with the operations of Consolidated. There is no assurance that
the integration can be achieved quickly or efficiently. If Consolidated fails to
integrate the operations of Coke-Carolina quickly and efficiently, the combined
company's business and results of operations could be adversely impacted.
CONSOLIDATED MAY BE ADVERSELY IMPACTED BY CHANGES IN MARKETING FUNDING SUPPORT.
Material changes in the performance requirements or decreases in levels
of marketing funding historically provided to Consolidated and Coke-Carolina by
The Coca-Cola Company and other
12
<PAGE>
franchisers, or the inability to meet performance requirements for the
anticipated levels of such marketing funding support payments, could adversely
affect future earnings. The Coca-Cola Company is under no obligation to continue
marketing funding at past levels.
13
<PAGE>
THE COKE-CAROLINA SPECIAL MEETING
SPECIAL MEETING
This Proxy Statement/Prospectus is being furnished to Coke-Carolina
shareholders in connection with the solicitation of proxies by the Coke-Carolina
board of directors for use at the special meeting of shareholders to be held on
May 20, 1999 at 11:00 a.m., local time, at Coke-Carolina's corporate offices
located at 480 E. Liberty Street, Sumter, South Carolina 29151. Only holders of
record of Coke-Carolina Common Stock at the close of business on April 20, 1999
(the "Record Date") will be entitled to notice of, and to vote at, the
Coke-Carolina special meeting. At the Coke-Carolina special meeting, holders of
Coke-Carolina Common Stock will be asked to approve the merger agreement, a copy
of which is attached as Annex A to this Proxy Statement/Prospectus, pursuant to
which Coke-Carolina will be merged with and into a subsidiary of Consolidated.
Coke-Carolina intends to mail this Proxy Statement/Prospectus and the
accompanying notice of Coke-Carolina special meeting, proxy card and other
materials (including the Election Form and the transmittal letter) on or about
April 22, 1999 to shareholders entitled to vote at the Coke-Carolina special
meeting. The costs of soliciting proxies will be borne by Coke-Carolina.
THE COKE-CAROLINA BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE MERGER
AND THE MERGER AGREEMENT, HAS UNANIMOUSLY DETERMINED THAT THE MERGER IS FAIR TO
AND IN THE BEST INTERESTS OF COKE-CAROLINA AND ITS SHAREHOLDERS, AND UNANIMOUSLY
RECOMMENDS THAT HOLDERS OF SHARES OF COKE-CAROLINA COMMON STOCK VOTE FOR
APPROVAL OF THE MERGER AGREEMENT.
The Consolidated board of directors has approved the merger and the
issuance of Consolidated Common Stock and the Installment Notes in the merger.
No approval by shareholders of Consolidated is required to effect the merger.
RECORD DATE; SHARES ENTITLED TO VOTE; VOTE REQUIRED
The close of business on April 20, 1999 has been fixed by the
Coke-Carolina board of directors as the Record Date for determining the holders
of Coke-Carolina Common Stock who are entitled to notice of and to vote at the
Coke-Carolina special meeting. As of the Record Date, there were 4,283 shares of
Coke-Carolina Common Stock outstanding, of which 3,212.50 shares (approximately
75.0% of the outstanding shares of Coke-Carolina Common Stock) were beneficially
owned by directors and executive officers of Coke-Carolina and their affiliates.
The holders of record of shares of Coke-Carolina Common Stock on the Record Date
are entitled to one vote per share of Coke-Carolina Common Stock on each matter
submitted to a vote at the Coke-Carolina special meeting. Consequently,
directors and officers of Coke-Carolina and their affiliates effectively may
exercise voting rights with respect to approximately 75.0% of the outstanding
shares of Coke-Carolina Common Stock at the Coke-Carolina special meeting. The
presence in person or by proxy of the holders of shares representing a majority
of the shares of Coke-Carolina Common Stock issued and outstanding and entitled
to vote is necessary to constitute a quorum for the transaction of business at
the Coke-Carolina special meeting. Under the South Carolina Business Corporation
Act, however, the affirmative vote of holders of two-thirds of the outstanding
shares of Coke-Carolina Common Stock is required to approve the merger
agreement. An abstention from voting, while counting for purposes of determining
the presence of a quorum, will have the practical effect of a vote against
approval of the merger agreement.
On the Record Date, directors and officers of Coke-Carolina who have
indicated their intention to vote in favor of the merger agreement held 3,212.50
shares (approximately 75.0% of all outstanding shares) of Coke-Carolina Common
Stock.
14
<PAGE>
PROXIES; PROXY SOLICITATION
Shares of Coke-Carolina Common Stock represented by properly executed
proxies received at or prior to the Coke-Carolina special meeting that have not
been revoked will be voted by W.S. Heath, A.T. Heath III and/or R. Bland Roper
(the proxies named herein) at the Coke-Carolina special meeting in accordance
with the instructions contained therein. Shares of Coke-Carolina Common Stock
represented by properly executed proxies for which no instruction is given will
be voted FOR approval of the merger agreement. Coke-Carolina shareholders are
requested to complete, sign and return promptly the enclosed proxy card in the
enclosed postage-prepaid envelope to ensure that their shares are voted at the
Coke-Carolina special meeting. A Coke-Carolina shareholder who has executed and
returned a proxy may revoke it at any time prior to its exercise at the
Coke-Carolina special meeting by executing and returning a proxy bearing a later
date with respect to the same shares, by delivering to the Secretary of
Coke-Carolina a written notice of revocation bearing a later date than the proxy
being revoked, or by attending the Coke-Carolina special meeting and voting such
shares in person. Mere attendance at the Coke-Carolina special meeting will not
in and of itself revoke a proxy. If a Coke-Carolina shareholder is not the
registered holder of his or her shares, such shareholder must obtain appropriate
documentation from the registered holder in order to be able to vote the shares
in person.
If the Coke-Carolina special meeting is postponed or adjourned for any
reason, at any subsequent reconvening of the Coke-Carolina special meeting, all
proxies will be voted in the same manner as such proxies would have been voted
at the original convening of the meeting (except for any proxies which have
theretofore effectively been revoked or withdrawn), notwithstanding that they
may have been effectively voted on the same or any other matter at a previous
meeting.
In addition to solicitation by mail, directors, officers and employees
of Coke-Carolina may solicit proxies by telephone, facsimile or otherwise. Such
directors, officers and employees of Coke-Carolina will not be additionally
compensated for such solicitation but may be reimbursed for out-of-pocket
expenses incurred in connection therewith.
15
<PAGE>
THE MERGER
This section contains detailed information regarding Consolidated and
Coke-Carolina's reasons for the merger, the events leading up to the execution
of the merger agreement and certain of the terms of the merger agreement. The
merger agreement and certain of its exhibits are attached to this Proxy
Statement/Prospectus as Annexes A, B, C, D, E and F and are collectively
referred to herein as the "Merger Documents."
PLEASE NOTE THAT THE FOLLOWING DESCRIPTION OF THE MERGER IS A SUMMARY
ONLY. YOU SHOULD READ THE FOLLOWING SUMMARY AND ALL OF THE MERGER DOCUMENTS FOR
A FULL UNDERSTANDING OF THE TERMS OF THE MERGER.
GENERAL
At the effective time of the merger, Coke-Carolina will merge with and
into Sumter Merger Corporation, Inc., a newly-formed Delaware corporation and a
wholly-owned subsidiary of Consolidated ("Newco"). As a result, the separate
corporate existence of Coke-Carolina will cease and Newco will continue as the
surviving corporation under Delaware and South Carolina law. All references
herein to the "Surviving Corporation" are to Newco following the effectiveness
of the merger.
EFFECTIVE TIME
If the merger is approved by the requisite vote of Coke-Carolina
shareholders at the Coke-Carolina special meeting and the other conditions to
the merger are satisfied or waived (where permitted by the merger agreement),
the parties will cause certificates of merger to be filed with the Secretaries
of State of Delaware and South Carolina. The merger agreement provides that
Consolidated and Coke-Carolina will cause the merger to be consummated as
promptly as practicable after satisfaction or waiver of the conditions to
closing. The merger will be effective at 11:59 p.m. on the closing date. See
"THE MERGER AGREEMENT -- Conditions to the Consummation of the Merger."
MERGER CONSIDERATION
At the effective time of the merger, each share of Coke-Carolina Common
Stock issued and outstanding immediately prior to the effective time (other than
any shares held by Coke-Carolina as treasury stock, which will be canceled, and
other than shares as to which dissenters' rights are properly exercised) will be
converted into the right to receive merger consideration, which, prior to any
adjustments, will have an aggregate value of $36,600,000. The merger
consideration will be allocated among three different components: (a) shares of
Consolidated Common Stock (valued at $59.60 per share), (b) the Installment
Notes and (c) cash. The base merger consideration payable with respect to each
share of Coke-Carolina Common Stock will have an aggregate value of $8,545.41
(assuming 4,283 shares of Coke-Carolina Common Stock are outstanding on the
closing date), subject to certain adjustments as described below in "--
Shareholders' Equity Escrow Fund" and "-- Indemnification Escrow Fund."
Each Coke-Carolina shareholder is receiving a merger consideration
election form (the "Election Form") along with a copy of this Proxy
Statement/Prospectus. This Election Form enables Coke-Carolina shareholders to
elect the relative amounts of Consolidated Common Stock, Installment Notes and
cash that they wish to receive in exchange for their shares of Coke-Carolina
Common Stock. Coke-Carolina shareholders should complete the Election Form and
return it to counsel to Coke-Carolina as soon as possible. If a Coke-Carolina
shareholder does not return the Election Form to counsel to Coke-Carolina
16
<PAGE>
at least five calendar days prior to the closing date, such shareholder will be
deemed to have elected to receive all of his or her merger consideration in cash
(subject, however, to the minimum and maximum Consolidated Common Stock
percentage election provisions described below).
The merger agreement provides that the total merger consideration to be
paid by Consolidated cannot consist of less than 51% or more than 60% of
Consolidated Common Stock, regardless of the elections made by the Coke-Carolina
shareholders.
MINIMUM CONSOLIDATED COMMON STOCK PERCENTAGE. If Coke-Carolina
shareholders in the aggregate do not initially elect to receive 51% of the
aggregate merger consideration in the form of shares of Consolidated Common
Stock, the elections will be automatically amended to increase the amount of
stock to be received to 51%. If possible, those amendments will be made among
only those Coke-Carolina shareholders who have elected to receive shares of
Consolidated Common Stock (with such adjustments weighted to reflect each such
shareholder's pro rata interest in Coke-Carolina). However, if necessary, all
Coke-Carolina shareholders (even those who did not initially elect to receive
Consolidated Common Stock) may have their elections amended proportionately as
needed to obtain the required minimum stock percentage. The elections of those
Coke-Carolina shareholders who did not elect to receive Consolidated Common
Stock will also be increased pro rata based on their relative percentage
interests in Coke-Carolina. To the extent that any Coke-Carolina shareholder
receives more Consolidated Common Stock than he or she initially elected to
receive, his or her elections as to cash and Installment Notes will be decreased
proportionately, provided that the cash election will not be reduced below the
3.5% minimum cash payment described below.
MAXIMUM CONSOLIDATED COMMON STOCK PERCENTAGE. If the Coke-Carolina
shareholders in the aggregate initially elect to receive more than 60% of the
aggregate merger consideration in the form of shares of Consolidated Common
Stock, the election of each Coke-Carolina shareholder who elected to receive
more than 60% of his or her merger consideration in the form of Consolidated
Common Stock will be automatically amended to reduce proportionately the stock
to be received by such shareholder so that the aggregate percentage of
Consolidated Common Stock for all Coke-Carolina shareholders is 60%. These
Coke-Carolina shareholders will have their elections reduced on a pro rata basis
but weighted to reflect each such shareholder's percentage interest in
Coke-Carolina, but without reducing any such Coke-Carolina shareholder's
election of Consolidated Common Stock below 60%. To the extent that any
Coke-Carolina shareholder receives less Consolidated Common Stock than he or she
initially elected to receive, the amount of cash and Installment Notes that he
or she elected to receive will be increased proportionately.
The merger agreement also provides that each Coke-Carolina shareholder
must elect to receive 3.5% of his or her aggregate merger consideration in cash.
A portion of this will be held by the shareholders' representatives to cover
pre- and post-transaction closing costs and will fund a post-closing defense
fund.
SHAREHOLDERS' EQUITY ESCROW FUND. The Shareholders' Equity Escrow Fund
will be used to settle an adjustment that will increase or decrease the merger
consideration based on the amount by which Coke-Carolina's shareholders' equity
(excluding the shareholders' equity of Heath Oil Company, Inc., but including
Heath Oil's cash and cash equivalents, payables for goods and/or services, and
accrued but unpaid taxes) as of the closing date of the merger differs from
$6,651,881. Such shareholders' equity will be calculated in accordance with
certain stipulated guidelines. The Shareholders' Equity Escrow Fund will be
funded at closing through the deposit of an amount of cash equal to the amount
of such adjustment based on a preliminary closing balance sheet for
Coke-Carolina, with the final amount of such adjustment to be determined within
120 days of closing (unless the final amount of the adjustment is disputed). At
least seven days prior to the closing date, Coke-Carolina will deliver to
Consolidated and Newco an
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estimated closing date balance sheet. The difference between the stipulated
shareholders' equity reported on this balance sheet and $6,651,881 will be the
closing date adjustment. Newco will deposit the amount of any such adjustment
into an escrow account with SunTrust Bank, Atlanta (in such capacity, the
"Shareholders' Equity Escrow Agent").
Within 120 days after the closing, Consolidated's independent
accountants will prepare an unaudited balance sheet reflecting the actual
shareholders' equity on the closing date. Following delivery of such balance
sheet, the shareholders' representatives will have 30 days to deliver to
Consolidated, Newco and the Shareholders' Equity Escrow Agent written notice of
any disagreement. If the shareholders' representatives do not deliver any such
notice during this 30 day period, the closing date balance sheet will become
final and binding. If, however, the shareholders' representatives deliver a
notice of dispute during such period, Consolidated and the shareholders'
representatives will negotiate in good faith to resolve any disagreements. If
the parties have not resolved all disagreements within 30 days after delivery of
the notice of disagreement, a firm of independent public accountants of
nationally recognized standing will be selected to resolve all disputes as soon
as practical following their selection. The fees and expenses of such
independent public accountants will be divided equally between the Coke-Carolina
shareholders (50%) and Consolidated and Newco (50%).
Within seven days after the closing date balance sheet is finalized, the
final post-closing adjustment will be settled as follows: To the extent that the
final adjustment is positive (I.E., the actual shareholders' equity is greater
than $6,651,881), the Shareholders' Equity Escrow Agent will make the
appropriate payment to the shareholders' representatives for distribution to the
Coke-Carolina shareholders. Any remaining balances in the Shareholders' Equity
Escrow Fund will be paid in cash to Newco. If, however, the amount of the
Shareholders' Equity Escrow Fund is not sufficient to cover the amount owed to
the Coke-Carolina shareholders, Newco will promptly tender to the shareholders'
representatives the balance of any required payment for distribution to the
Coke-Carolina shareholders. Such amount will be paid in cash, unless such
payment would cause the amount of Consolidated Common Stock issued as merger
consideration to fall below 51% of the total merger consideration. In such case,
such amount would be paid in shares of Consolidated Common Stock (valued at
$59.60 per share) in lieu of cash to the extent necessary to maintain the 51%
minimum percentage. These shares of Consolidated Common Stock will be allocated
among the Coke-Carolina shareholders in the same relative proportions that they
elected to receive their closing date merger consideration.
To the extent that the final adjustment is negative (I.E., the actual
shareholders' equity is less than $6,651,881), the Shareholders' Equity Escrow
Agent will satisfy such amount by transferring amounts from the Shareholders'
Equity Escrow Fund to Newco. Any remaining amounts in the Shareholders' Equity
Escrow Fund will then be disbursed to the shareholders' representatives for
distribution to the Coke-Carolina shareholders. If the amount of the
Shareholders' Equity Escrow Fund is insufficient to cover the amount owed to
Newco, the balance of any such amount will be paid to Newco from the
Indemnification Escrow Fund.
Any amounts remaining in the Shareholders' Equity Escrow Fund after all
disagreements are resolved will be delivered to the shareholders'
representatives for distribution to the Coke-Carolina Shareholders.
Sales proceeds (after deducting taxes and selling costs) obtained from
Coke-Carolina's sale of real property located at the corner of Washington and
Warren Streets in Sumter, South Carolina pursuant to a contract with Mallard
Creek Development LLC will be included in the calculation of the closing date
shareholders' equity. If this real property is not sold prior to the final
adjustment, the sale of this real property will be considered a disputed item
and will be resolved by negotiation between Consolidated and the shareholders'
representatives or by a firm of independent public accountants as set forth
above. If the
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real property is sold pursuant to the contract on or before December 31, 1999,
the net proceeds of such sale shall be paid promptly in accordance with the
settlement provisions set forth for the final post-closing adjustment.
INDEMNIFICATION ESCROW FUND. The Indemnification Escrow Fund will be
used to fund partially the indemnification obligations of the Coke-Carolina
shareholders. The Indemnification Escrow Fund will be funded at closing with a
deposit of $3,660,000 of the merger consideration with each Coke-Carolina
shareholder funding his or her proportionate amount by placing in escrow shares
of Consolidated Common Stock, Installment Notes and cash in the same relative
proportions that he or she is receiving the balance of his or her merger
consideration. To the extent that the Indemnification Escrow Fund is not
utilized to satisfy indemnification claims, up to $1,830,000 will be released to
the shareholders' representatives 18 months after the closing date, provided
that the balance remaining after such release is not less than $1,830,000. The
remaining balance will be released to the shareholders' representatives 42
months after the closing date. For a discussion of the Coke-Carolina
shareholders' indemnification obligations, see "The Merger
Agreement--Indemnification."
DELIVERY OF MERGER CONSIDERATION ON THE CLOSING DATE. On the Closing
Date, Consolidated and Newco will deliver:
o the Shareholders' Equity Escrow Fund to the Shareholders' Equity
Escrow Agent;
o the Indemnification Escrow Fund to the Indemnification Escrow
Agent; and
o the remainder of the base merger consideration to the
shareholders' representatives for distribution to the
Coke-Carolina shareholders.
NO FRACTIONAL SHARES. No certificates representing fractional shares of
Consolidated Common Stock will be issued in the merger. Any payment made in
shares of Consolidated Common Stock will be rounded up to the nearest whole
share.
STOCK DIVIDENDS OR SIMILAR ADJUSTMENTS. If, at any time before the
effective time of the merger, Consolidated issues any dividends payable in
shares of Consolidated Common Stock, combines the outstanding Consolidated
Common Stock into a smaller number of shares, subdivides the outstanding
Consolidated Common Stock, or reclassifies the Consolidated Common Stock, the
merger consideration will be adjusted so that each Coke-Carolina shareholder
will be entitled to receive the same merger consideration that such shareholder
would have received if the effective time of the merger had occurred prior to
the record date for payment of such stock dividend, combination, subdivision or
reclassification of the Consolidated Common Stock.
NO FURTHER OWNERSHIP RIGHTS IN COKE-CAROLINA COMMON STOCK. From and
after the effective time of the merger, and until surrendered and exchanged,
each outstanding certificate formerly representing shares of Coke-Carolina
Common Stock will be deemed to represent only the right to receive the merger
consideration. No dividends or other distributions declared or made after the
effective time of the merger with respect to shares of Consolidated Common Stock
with a record date after the effective time will be paid to the Coke-Carolina
shareholders' representatives on account of an unsurrendered certificate
formerly representing shares of Coke-Carolina Common Stock with respect to any
shares of Consolidated Common Stock issuable as part of the merger consideration
for such unsurrendered shares, until the surrender of the certificate.
Similarly, no interest will be paid on any Installment Note issuable as part of
the merger consideration for such unsurrendered shares until the surrender of
the certificate. From and after the effective time, the stock transfer books of
Coke-Carolina will be closed and no transfer of shares of Coke-Carolina Common
Stock on the books of Coke-Carolina will be made.
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NON-SOLICITATION AGREEMENT
Shareholders of Coke-Carolina holding 3,307.5 shares, or approximately
77.2% of all outstanding Coke-Carolina shares, have agreed until June 30, 1999
not to solicit or encourage the submission of proposals or offers with respect
to the sale of the stock or assets of Coke-Carolina to any person or entity
other than Consolidated or any of its subsidiaries.
SHAREHOLDERS' REPRESENTATIVES AND EXCHANGE PROCEDURES
Under the merger agreement, W.S. Heath, A.T. Heath III and R. Bland
Roper are appointed the shareholders' representatives. The shareholders'
representatives, acting together, are the only parties authorized to receive the
merger consideration on behalf of the Coke-Carolina shareholders and thereupon
distribute the merger consideration to each shareholder as provided in the
merger agreement. They are the sole persons authorized to execute, deliver and
accept delivery of, on behalf of each Coke-Carolina shareholder, the Adjustment
Escrow Agreement, the Indemnification Escrow Agreement and any other documents
to be delivered by or on behalf of the Coke-Carolina shareholders pursuant to
the merger agreement. The shareholders' representatives also will have exclusive
authority to issue or make any claim, demand, or notice to Newco or Consolidated
on behalf of the Coke-Carolina shareholders or any of them and generally to deal
with Newco and Consolidated on behalf of the Coke-Carolina shareholders with
respect to all matters related to the merger agreement. Neither Newco nor
Consolidated will have any responsibility or liability for any of the errors or
omissions of the shareholders' representatives or any disagreement or
dissatisfaction which the Coke-Carolina shareholders or any of them may have
with the decisions made or actions taken by the shareholders' representatives.
Not less than two days prior to the closing (and from time-to-time
thereafter for any late-delivering Coke-Carolina shareholders), the
shareholders' representatives will provide Consolidated and Newco with the name,
address, taxpayer identification number and the number of shares of Consolidated
Common Stock, the principal amount of the Installment Notes and the amount of
cash to be received by each Coke-Carolina shareholder. The cash portion of the
merger consideration will be delivered in a lump sum to the shareholders'
representatives, and the certificates for the shares of Consolidated Common
Stock and the requisite Installment Notes will be delivered (on behalf of
Consolidated) to the shareholders' representatives for distribution to the
Coke-Carolina shareholders. Not later than the closing, the shareholders'
representatives will tender to Newco transmittal letters executed by each
Coke-Carolina shareholder which will accompany all certificates for shares of
Coke-Carolina Common Stock that have been previously delivered to the legal
counsel for Coke-Carolina by the Coke-Carolina shareholders and subsequently
forwarded to the shareholders' representatives. In addition, in the case of
non-individual Coke-Carolina shareholders, a certificate dated as of the closing
date and executed by an officer or other authorized representative of such
non-individual Coke-Carolina shareholder will be delivered to Newco and will (a)
certify that any action required to be taken by such shareholder in connection
with the authorization of the merger and the surrender of such certificates has
been duly taken in accordance with applicable law and (b) authenticate the
signature and title of the officers or other authorized representative executing
such documents.
If less than all of the outstanding shares of Coke-Carolina Common Stock
are delivered at closing, then from time-to-time thereafter the shareholders'
representatives may make additional deliveries of shares of Coke-Carolina Common
Stock (together with transmittal letters) and Consolidated and Newco will tender
the appropriate remaining portion of the merger consideration to the
shareholders' representatives. No dividends or interest will be paid on the
merger consideration payable to any Coke-Carolina shareholder who fails to
properly deliver his or her shares of Coke-Carolina Common Stock on the closing
date, but it will be paid once delivered. If any Coke-Carolina shareholder fails
to tender his or
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her shares prior to January 1, 2006, then such Coke-Carolina shareholder will
forfeit his or her right to receive any merger consideration or other
consideration pursuant to the merger agreement. All consideration otherwise
payable to any such shareholder will then become the property of Newco, free and
clear of all claims and interest of any person whatsoever.
The merger agreement provides that tender of the applicable portion of
the merger consideration to the shareholders' representatives will fully and
completely satisfy and discharge the obligations of the Surviving Corporation
and Consolidated to tender the merger consideration to the Coke-Carolina
shareholders.
BACKGROUND OF THE MERGER
During May 1998, Consolidated and Coke-Carolina entered into preliminary
discussions regarding a strategic business combination between the two
companies.
Subsequently, representatives of the two companies discussed strategic
benefits of a combination of Coke-Carolina and Consolidated, including
geographic synergies between their bottling territories, consolidation
opportunities and customer expansion and service opportunities. At the request
of Consolidated, Coke-Carolina provided Consolidated with preliminary financial
and other information relating to its business.
Discussions between the parties continued to progress during the period
from May to September 1998 regarding the terms of a business combination
transaction, including a range for the proposed purchase price and the form of
the consideration. These discussions culminated in the execution of a letter of
intent on September 28, 1998 concerning the merger and the issuance of a press
release by both Coke-Carolina and Consolidated announcing the execution of the
letter of intent.
After the execution of the letter of intent, representatives of
Consolidated conducted additional due diligence investigations of Coke-Carolina
and counsel for both parties worked to prepare the merger agreement and related
documents from October to early November 1998. The negotiations between the
parties temporarily slowed from December 1998 to early March 1999 as they had
discussions relating to, among other things, potential environmental exposures
and the value to be placed on the shares of Consolidated Common Stock to be
issued in the merger. During this time, Coke-Carolina engaged professional
consultants to provide an independent evaluation of any potential environmental
exposures related to properties held by Coke-Carolina. In March 1999, the
parties resolved the open issues by reducing the total merger consideration from
$37,100,000 to $36,600,000 and reached an agreement that shares of Consolidated
Common Stock should be given a value of $59.60 per share (instead of $65.00 per
share) for purposes of the transaction.
On December 2, 1998, the board of directors of Consolidated approved the
merger in principle. On March 23, 1999, the executive committee of the board of
directors of Consolidated approved the revised terms of the merger agreement,
including (a) reducing the total merger consideration from $37,100,000 to
$36,600,000, (b) giving shares of Consolidated Common Stock a value of $59.60
per share for purposes of the transaction and (c) entering into other agreements
relating to on-site environmental liabilities.
On March 25, 1999, the board of directors of Coke-Carolina determined
that the merger was in the best interests of the shareholders of Coke-Carolina
and approved the merger and the merger agreement.
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COKE-CAROLINA REASONS FOR THE MERGER; RECOMMENDATION OF THE BOARD OF DIRECTORS
OF COKE-CAROLINA
The board of directors of Coke-Carolina has unanimously approved the
terms of the merger agreement and the transactions contemplated thereby. The
decision of Coke-Carolina's board to approve the merger and the merger agreement
was based in significant part upon its view that a business combination with
Consolidated offered the best alternative to Coke-Carolina's shareholders. The
board of directors of Coke-Carolina recommends that the shareholders of
Coke-Carolina vote FOR the approval of the merger agreement. In reaching these
conclusions, the Coke-Carolina board of directors considered, with the
assistance of management and its legal and financial advisors, among other
things, the following factors:
o The consideration to be received by Coke-Carolina's shareholders
in the merger. The Coke-Carolina board of directors noted the
fact that the value of the Consolidated Common Stock is fixed for
purposes of determining the number of shares to be received by
Coke-Carolina shareholders, and, accordingly, will not be
adjusted to reflect any increases or decreases in the market
price of the shares of Consolidated Common Stock.
o The opportunity for Coke-Carolina shareholders to receive
Consolidated Common Stock in a transaction that is tax-free for
federal income tax purposes (except as to the Installment Notes
and cash received) and thus continue to participate in the growth
of the business conducted by Coke-Carolina and Consolidated after
the merger and the potential appreciation in the value of
Consolidated Common Stock without paying current United States
federal income tax with respect to this portion of the merger
consideration. With respect to Consolidated's Common Stock,
Coke-Carolina's board of directors also concluded that it
represents a more liquid investment than Coke-Carolina Common
Stock due to the fact that the Consolidated Common Stock is
publicly traded on the Nasdaq National Market.
o The financial condition, results of operations and cash flows of
each of Coke-Carolina and Consolidated, both on a historical and
on a prospective basis. In this regard, the Coke-Carolina board
of directors believes that Coke-Carolina historically had been,
and the combined Consolidated/Coke-Carolina prospectively is
reasonably likely (absent unforeseen circumstances) to continue
to be, a relatively strong financial performer, with generally
superior results of operations, cash flows and prospects.
o The sustained growth of Consolidated, including through
successful acquisitions, and the volume growth of Consolidated in
its markets.
o The strategic fit between Coke-Carolina and Consolidated,
resulting in projected significant operating synergies and cost
savings expected at this time to be available to the combined
Consolidated/Coke-Carolina, including possible synergies and cost
savings with respect to (a) the consolidation of corporate,
administrative and support functions, (b) enhanced purchasing
power with respect to raw materials and finished goods inventory,
(c) other unspecified opportunities (it being recognized that
such opportunities were likely in a combination of large
businesses within the same industry, but that, until the merger
was completed or nearly completed, many of those opportunities
could not be identified with specificity).
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o The Coke-Carolina board of directors believed that, given the
uncertainties in the carbonated soft drink bottling industry
generally, as well as the other factors discussed below, the
combined company would be better able to offer the shareholders
of Coke-Carolina the best opportunity to continue to realize
increases in the value of their equity.
o The terms of the merger agreement, including the amount and form
of the consideration, the parties' representations, warranties,
covenants and agreements, and the conditions of their respective
obligations set forth in the merger agreement. The Coke-Carolina
board of directors, based on presentations by its financial and
legal advisors, deemed the terms of the merger agreement,
including terms addressing the fixed value of Consolidated Common
Stock without a collar limitation, and the representations and
warranties of Coke-Carolina, to be fair to Coke-Carolina. See
"THE MERGER AGREEMENT."
o The uncertainties in the carbonated soft drink bottling industry,
including the likelihood of continuing consolidation of the
industry and the possibility of changes in the industry. The
Coke-Carolina board of directors considered the possibility that
these changes in the industry, depending on their nature, could
be disadvantageous to Coke-Carolina. In this regard, the
Coke-Carolina board of directors believed that, although the
uncertainties of the carbonated soft drink bottling industry
could also be advantageous to Coke-Carolina and disadvantageous
to Consolidated, the combined company would be better able to
respond to the changes in the industry and to take advantage of
the opportunities that such changes might bring.
o The fact that shareholders of Coke-Carolina will not receive the
full benefit of any future growth in the value of their equity
that Coke-Carolina may have achieved as an independent company,
and the potential disadvantage to Coke-Carolina shareholders who
receive Consolidated Common Stock in the event that Consolidated
does not perform as well in the future as Coke-Carolina may have
performed as an independent company.
The foregoing discussion of information and factors considered and given
weight by the Coke-Carolina board of directors is not intended to be exhaustive.
In view of the wide variety of factors considered in connection with its
evaluation of the terms of the merger, the Coke-Carolina board of directors did
not find it practicable to, and did not, quantify or otherwise attempt to assign
relative weights to the specific factors considered in reaching their
determinations. In addition, individual members of the Coke-Carolina board of
directors may have given different weights to different factors. After taking
into consideration all of the factors set forth above, the Coke-Carolina board
of directors continues to believe that the merger is in the best interests of
Coke-Carolina and its shareholders and continues to recommend approval and
adoption of the merger agreement and approval of the merger.
THE COKE-CAROLINA BOARD OF DIRECTORS UNANIMOUSLY APPROVED THE MERGER AND
THE MERGER AGREEMENT, HAS UNANIMOUSLY DETERMINED THAT THE MERGER IS FAIR TO, AND
IN THE BEST INTERESTS OF, COKE-CAROLINA AND ITS SHAREHOLDERS, AND UNANIMOUSLY
RECOMMENDS THAT HOLDERS OF SHARES OF COKE-CAROLINA COMMON STOCK VOTE FOR
APPROVAL OF THE MERGER AGREEMENT.
CONSOLIDATED REASONS FOR THE MERGER
Consolidated has grown significantly since 1984, making several
acquisitions and becoming the second-largest Coca-Cola bottler in the United
States, and continues to seek acquisitions of Coca-Cola
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bottlers engaged in the carbonated and noncarbonated beverage bottling industry
to expand its presence in the marketplace.
The factors considered by the Consolidated board of directors in
reaching its decision to approve the merger agreement and the merger included:
o Coke-Carolina's Coca-Cola bottling territory is contiguous to
Consolidated's bottling territory, providing the opportunity to
realize synergies and cost reductions by combining the two
companies' production and distribution operations.
o The opportunity to reduce expenses by combining the two
companies' marketing and administrative systems and programs.
o The potential for growth in the bottling territory served by
Coke-Carolina.
o The ability of Consolidated to provide a single bottling source
to large chain customers with outlets in the territories
presently served separately by Consolidated and Coke-Carolina.
o The terms of the merger agreement, including the amount and form
of the consideration, the parties' representations, warranties,
covenants and agreements, and the conditions of their respective
obligations set forth in the merger agreement.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
In connection with the filing of the Registration Statement of which
this Proxy Statement/Prospectus constitutes a part, Kennedy Covington Lobdell &
Hickman, L.L.P. delivered a tax opinion to Consolidated and Coke-Carolina. The
following discussion summarizes the conclusions set forth in such opinion, and
is qualified in its entirety by reference to such opinion (including the
assumptions contained therein), which is an exhibit to the Registration
Statement. The opinion and the following discussion of certain U.S. federal
income tax considerations of the merger to Coke-Carolina shareholders are based
on certain factual assumptions related to the ownership and operations of
Consolidated and Coke-Carolina, and certain representations made by Consolidated
and Coke-Carolina.
This discussion is based on the current provisions of the Internal
Revenue Code of 1986, as amended (the "Code"), applicable Treasury regulations,
judicial authority and administrative rulings and practice. This discussion is
for general information only, is not exhaustive of all possible tax
considerations, and is not intended to be (and should not be construed as) tax
advice. For example, this discussion does not address all aspects of U.S.
federal income taxation that may be relevant to a particular Coke-Carolina
shareholder in light of such shareholder's investment circumstances, or to
certain types of shareholders subject to special treatment under U.S. federal
income tax laws (for example, insurance companies, tax-exempt organizations,
financial institutions or broker-dealers, persons who are not citizens or
residents of the United States or who are foreign corporations, foreign
partnerships or foreign estates or trusts, persons who received their
Coke-Carolina stock through the exercise of employee stock options or otherwise
as compensation, and persons who hold Coke-Carolina stock as part of a hedge,
straddle or conversion transaction) and does not discuss any aspect of state,
local or foreign taxation. Further, this discussion assumes that all
Coke-Carolina shareholders hold their shares of Coke-Carolina Common Stock as
capital assets within the meaning of section 1221 of the Code.
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There can be no assurance that the Internal Revenue Service (the "IRS")
will not take a view contrary to those expressed herein. No ruling from the IRS
has been or will be sought with respect to any aspect of the merger. Moreover,
legislative, judicial or administrative changes or interpretations may be
forthcoming that could alter or modify the statements and conclusions set forth
herein. Any such changes or interpretations may or may not be retroactive and
could affect the tax consequences of the merger to Coke-Carolina shareholders.
The merger will constitute a reorganization within the meaning of
section 368(a) of the Code. The federal income tax consequences of the merger
for a particular Coke-Carolina shareholder will depend in part on the amount and
type of consideration received by such shareholder in the merger. See "THE
MERGER-Merger Consideration."
A Coke-Carolina shareholder who receives cash upon the exercise of
dissenters' rights, or who exchanges his or her shares of Coke-Carolina Common
Stock solely for cash will recognize gain or loss equal to the difference
between the amount of cash received and the adjusted basis of such shareholder's
shares of Coke-Carolina Common Stock, unless such payment, under such
shareholder's particular facts and circumstances, is deemed to have the effect
of a dividend distribution and not a redemption treated as an exchange under the
principles of section 302 of the Code. Any gain or loss recognized will be
capital gain or loss, and will constitute long-term capital gain or loss if such
shareholder has held his or her shares of Coke-Carolina Common Stock for more
than one year.
A Coke-Carolina shareholder who exchanges his or her shares of
Coke-Carolina Common Stock solely for cash and Installment Notes will recognize
gain or loss in an amount equal to the difference between the sum of the amount
of cash and the fair market value of the Installment Notes received and the
adjusted basis of such shareholder's shares of Coke-Carolina Common Stock,
unless such payment, under the shareholder's particular facts and circumstances,
is deemed to have the effect of a dividend distribution and not a redemption
treated as an exchange under the principles of section 302 of the Code. Unless
the receipt of the cash and Installment Notes has the effect of a dividend
distribution under the exchanging shareholder's particular facts and
circumstances, any gain or loss recognized will be capital gain or loss and will
constitute long-term capital gain or loss if such shareholder has held his or
her shares of Coke-Carolina Common Stock for more than one year.
A Coke-Carolina shareholder who exchanges his or her shares of
Coke-Carolina Common Stock solely for shares of Consolidated Common Stock and
cash will recognize gain in an amount equal to the lesser of (i) the amount of
gain realized with respect to all of his or her Coke-Carolina Common Stock and
(ii) the amount of cash received. No loss may be recognized by any such
shareholder. Unless the receipt of cash has the effect of a dividend
distribution under the exchanging shareholder's particular facts and
circumstances, any gain recognized by such shareholder will be capital gain and
will constitute long-term capital gain if such shareholder has held his or her
shares of Coke-Carolina Common Stock for more than one year.
A Coke-Carolina shareholder who exchanges his or her shares of
Coke-Carolina Common Stock for shares of Consolidated Common Stock, Installment
Notes and cash will recognize gain in amount equal to the lesser of (i) the
amount of gain realized with respect to all of his or her Coke-Carolina Common
Stock, and (ii) the sum of the amount of cash and the fair market value of the
Installment Notes received. No loss may be recognized by any such shareholder.
Unless the receipt of the cash and Installment Notes has the effect of a
dividend distribution under the exchanging shareholder's particular facts and
circumstances, any gain recognized will be capital gain and will constitute
long-term capital gain if such shareholder has held his or her shares of
Coke-Carolina Common Stock for more than one year.
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In determining whether the receipt of cash or Installment Notes by any
Coke-Carolina shareholder who also receives Consolidated Common Stock has the
effect of the distribution of a dividend, the shareholder will be treated for
federal income tax purposes as if he or she exchanged his or her Coke-Carolina
Common Stock exclusively for Consolidated Common Stock, and then received such
cash and Installment Notes (if any) in redemption of Consolidated Common Stock
after the merger. In making this determination, certain attribution rules
(including rules that attribute to a person ownership of shares owned by certain
family members) as set forth in sections 302 and 318 of the Code will apply.
BEFORE ELECTING ANY PARTICULAR COMBINATION OF MERGER CONSIDERATION, EACH
COKE-CAROLINA SHAREHOLDER SHOULD CONSULT HIS OR HER TAX ADVISOR TO DETERMINE
WHETHER THE RECEIPT OF CASH AND (IF APPLICABLE) INSTALLMENT NOTES UNDER THE
PROPOSED ELECTION WILL BE TREATED AS A DIVIDEND UNDER THE APPLICABLE RULES.
A Coke-Carolina shareholder who recognizes gain and receives Installment
Notes in the merger may be entitled to report his or her gain under the
installment method. In general, under that method, the shareholder would be
required to recognize, in the year of the merger, a portion of his or her total
realized gain equal to a fraction the numerator of which is the amount of cash
received and the denominator of which is the sum of the amount of cash received
and the face amount of the Installment Notes received. Such shareholder would
recognize additional gain based on a similar formula upon the receipt of each
principal payment under the Installment Notes. Interest payments received under
the Installment Notes would be ordinary income. COKE-CAROLINA SHAREHOLDERS WHO
RECEIVE INSTALLMENT NOTES SHOULD CONSULT THEIR OWN TAX ADVISORS TO DETERMINE
WHETHER THE INSTALLMENT METHOD IS PERMITTED AND, IF SO, WHETHER TO ELECT OUT OF
THE INSTALLMENT METHOD.
The aggregate federal income tax basis of the Consolidated Common Stock
(including shares of Consolidated Common Stock held in the Indemnification
Escrow Fund) received by a Coke-Carolina shareholder in exchange for his or her
Coke-Carolina Common Stock in the merger will be the same as the aggregate
federal income tax basis of the shares of Coke-Carolina Common Stock exchanged
therefor, decreased by (i) the sum of the amount of cash and the fair market
value of Installment Notes (if any) received by such shareholder in exchange for
shares of Coke-Carolina Common Stock and (ii) the amount of any loss recognized
by such shareholder in such exchange, and increased by the sum of the amount of
gain recognized by such shareholder and any amount treated as a dividend
distribution to such shareholder. The holding period of Consolidated Common
Stock for which shares of Coke-Carolina Common Stock are exchanged in the merger
(including shares of Consolidated Common Stock held in the Indemnification
Escrow Fund) will include the period that such shares of Coke-Carolina Common
Stock were held by the shareholder.
EACH COKE-CAROLINA SHAREHOLDER SHOULD CONSULT HIS OR HER OWN TAX ADVISOR
AS TO THE TAX CONSEQUENCES OF THE INDEMNIFICATION ESCROW FUND, INCLUDING,
WITHOUT LIMITATION, THE POSSIBLE APPLICATION OF THE INSTALLMENT METHOD RULES AND
THE TAX TREATMENT OF INSTALLMENT NOTES, IF ANY, HELD IN THE INDEMNIFICATION
ESCROW FUND.
EACH COKE-CAROLINA SHAREHOLDER IS URGED TO CONSULT HIS OR HER OWN TAX
ADVISOR AS TO THE PARTICULAR TAX CONSEQUENCES TO SUCH HOLDER OF THE MERGER,
INCLUDING THE APPLICABILITY AND EFFECT OF ANY STATE, LOCAL AND FOREIGN TAX LAWS
AND OF CHANGES IN APPLICABLE TAX LAWS.
REGULATORY APPROVALS REQUIRED
Under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended (the "HSR Act"), and the rules promulgated thereunder by the Federal
Trade Commission (the "FTC"), certain acquisition transactions (such as the
merger) may not be consummated unless notice has been given and certain
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information has been furnished to the Antitrust Division of the Department of
Justice (the "DOJ") and the FTC and specified waiting period requirements have
been satisfied. Both Consolidated and Coke-Carolina filed with the DOJ and the
FTC a Notification and Report Form with respect to the merger on November 18,
1998. On December 1, 1998, the parties were informed by the FTC that early
termination of the applicable waiting period under the HSR Act had been granted.
At any time before or after the effective time of the merger, the FTC or the DOJ
could take such action under the antitrust laws as it deems necessary or
desirable in the public interest, including seeking to enjoin the merger or
seeking the divestiture of Coke-Carolina by Consolidated, in whole or in part,
or the divestiture of substantial assets of Consolidated, Coke-Carolina or their
respective subsidiaries. State attorneys general and private parties may also
bring legal action under Federal or state antitrust laws in certain
circumstances. Based on an examination of information available to Consolidated
and Coke-Carolina relating to the businesses in which Consolidated,
Coke-Carolina and their respective subsidiaries are engaged, Consolidated and
Coke-Carolina believe that the consummation of the merger will not violate the
antitrust laws.
Consolidated and Coke-Carolina do not believe that any other material
governmental approvals or actions will be required for consummation of the
merger. See "THE MERGER AGREEMENT -Conditions to the Consummation of the
Merger."
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Upon consummation of the merger, A.T. Heath, III, Executive Vice
President and General Manager of Coke-Carolina, will enter into a Noncompetition
and Consulting Agreement with the Surviving Corporation, pursuant to which he
will provide certain consulting services to the Surviving Corporation and agree
not to compete with Consolidated or the Surviving Corporation for a period of
nine years after the closing date. In return for his services and agreement not
to compete, Mr. Heath will receive $15,000 per month for the first 36 months of
the term of the agreement, $10,000 per month for the next 36 months of the term
of the agreement, and $5,000 per month for the final 36 months of the term of
the agreement. See "THE MERGER AGREEMENT--Noncompetition and Consulting
Agreement."
DISSENTERS' RIGHTS
Any Coke-Carolina shareholder who lawfully dissents from the merger in
accordance with the South Carolina Business Corporation Act and who properly
exercises the right to demand payment of the fair value of such holder's shares
will thereafter have only those rights provided to a dissenting shareholder by
the South Carolina Business Corporation Act and will have no right to receive
any merger consideration. See "Dissenters' Rights."
ACCOUNTING TREATMENT
The merger will be treated by Consolidated as a "purchase" for financial
reporting and accounting purposes, in accordance with generally accepted
accounting principles. After the merger, the results of operations of
Coke-Carolina will be included in the consolidated financial statements of
Consolidated. The purchase price (I.E., the aggregate merger consideration) will
be allocated based on the fair values of the assets acquired and the liabilities
assumed. Any excess of cost over fair value of the net tangible assets of
Coke-Carolina acquired will be recorded as identifiable intangible assets.
NASDAQ NATIONAL MARKET LISTING FOR CONSOLIDATED COMMON STOCK; NO SECONDARY
MARKET FOR INSTALLMENT NOTES
In accordance with NASD rules, Consolidated has filed a Nasdaq National
Market Notification and Report Form for the Listing of Additional Shares with
respect to the shares of Consolidated Common
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Stock issuable to Coke-Carolina shareholders pursuant to the merger agreement.
Consolidated does not intend to register the Installment Notes under Section 12
of the Securities Exchange Act of 1934 or to list the notes for trading on
Nasdaq or on any securities exchange. Accordingly, it is anticipated that there
will be no secondary market for the Installment Notes and Coke-Carolina
shareholders who elect to receive Installment Notes as a portion of their merger
consideration will be required to hold such notes until their maturity.
RESALE OF CONSOLIDATED COMMON STOCK AND THE INSTALLMENT NOTES
The Consolidated Common Stock and Installment Notes issued pursuant to
the merger will generally be transferable under the Securities Act except for
shares or Installment Notes issued to any Coke-Carolina shareholder who may be
deemed to be an affiliate of Coke-Carolina (an "Affiliate") for purposes of Rule
145 under the Securities Act. An Affiliate generally is defined as including,
without limitation, directors, executive officers and beneficial owners of 10%
or more of a class of common stock of a company. Coke-Carolina has agreed to use
its commercially reasonable efforts to cause each Affiliate to deliver to
Consolidated, on or prior to the closing date, a written agreement providing,
among other things, that such Affiliate will not transfer any Consolidated
Common Stock or Installment Notes received in the merger unless (i) such
transfer is made in conformity with the limitations of Rule 145 under the
Securities Act (permitting limited resales under certain circumstances), (ii)
such transfer has been registered under the Securities Act or (iii) in the
opinion of counsel reasonably acceptable to Consolidated, such transfer is
exempt from registration under the Securities Act. This Proxy
Statement/Prospectus does not cover resales of shares of Consolidated Common
Stock or Installment Notes received by any person who may be deemed to be an
Affiliate. As stated above, it is anticipated that there will be no secondary
market available for resales of the Installment Notes by any Coke-Carolina
shareholders.
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THE MERGER AGREEMENT
PLEASE NOTE THAT THE FOLLOWING DESCRIPTION OF THE MERGER AGREEMENT IS
ONLY A SUMMARY. IN ADDITION TO THE FOLLOWING SUMMARY, YOU SHOULD READ THE MERGER
AGREEMENT ATTACHED AS ANNEX A, AS WELL AS THE FORM OF INSTALLMENT NOTE, THE FORM
OF SHAREHOLDERS' EQUITY ESCROW AGREEMENT, THE FORM OF INDEMNIFICATION ESCROW
AGREEMENT, THE FORM OF A.T. HEATH, III NON-COMPETITION AND CONSULTING AGREEMENT,
THE FORM OF AFFILIATE AGREEMENT AND PROVISIONS OF THE CODE OF LAWS OF THE STATE
OF SOUTH CAROLINA RELATING TO DISSENTERS' RIGHTS ATTACHED, RESPECTIVELY, AS
ANNEXES B, C, D, E, F AND G FOR A FULL UNDERSTANDING OF THE MERGER. ALL OF THESE
AGREEMENTS AND INSTRUMENTS ARE INCORPORATED BY REFERENCE INTO THIS PROXY
STATEMENT/PROSPECTUS.
BECAUSE YOU MAY BE LIABLE FOR BREACHES OF REPRESENTATIONS AND WARRANTIES
OR COVENANTS AND AGREEMENTS CONTAINED IN THE MERGER AGREEMENT, YOU SHOULD REVIEW
IT CAREFULLY. CERTAIN OF THE REPRESENTATIONS AND WARRANTIES ARE QUALIFIED BY
REFERENCE TO THE DISCLOSURE LETTER. PLEASE CONTACT THE CHIEF FINANCIAL OFFICER
OF CONSOLIDATED IN THE MANNER DESCRIBED IN "WHERE YOU CAN FIND MORE INFORMATION"
IF YOU WOULD LIKE A COPY OF THE DISCLOSURE LETTER.
THE MERGER
THE MERGER. The merger agreement provides that, following the approval
and adoption of the merger agreement by the shareholders of Coke-Carolina and
the satisfaction or waiver of the other conditions to the merger, Coke-Carolina
will be merged with and into Newco (with Newco being the Surviving Corporation).
The merger will be effective at 11:59 p.m. on the closing date.
CERTIFICATE OF INCORPORATION AND BY-LAWS. The merger agreement provides
that the Certificate of Incorporation and Bylaws of Newco, as in effect
immediately prior to the effective time, will be the Certificate of
Incorporation and Bylaws of the Surviving Corporation. The board of directors
and officers of Newco will be the board of directors and officers of the
Surviving Corporation.
MERGER CONSIDERATION
Consolidated will pay $36,600,000 of base merger consideration in
connection with the merger in a combination of shares of Consolidated Common
Stock, Installment Notes and cash. At the effective time, each issued and
outstanding share of Coke-Carolina Common Stock will be converted into the right
to receive the merger consideration. See "THE MERGER - Merger Consideration."
The merger consideration is subject to adjustment based on the actual
shareholders' equity of Coke-Carolina at the closing date. See "THE MERGER -
Merger Consideration - Shareholders' Equity Escrow Fund." In addition, a portion
of the merger consideration will be placed in escrow to fund the indemnification
obligations of the Coke-Carolina shareholders. See "THE MERGER - Merger
Consideration - Indemnification Escrow Fund."
REPRESENTATIONS AND WARRANTIES
PLEASE NOTE THAT THE FOLLOWING DESCRIPTION OF THE REPRESENTATIONS AND
WARRANTIES CONTAINED IN THE MERGER AGREEMENT IS A SUMMARY ONLY. ARTICLES III AND
IV OF THE MERGER AGREEMENT CONTAIN
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THE COMPLETE, DEFINITIVE REPRESENTATIONS, AND WARRANTIES. IN LIGHT OF THE
INDEMNIFICATION PROVISIONS OF THE MERGER AGREEMENT, YOU SHOULD REVIEW ARTICLES
III AND IV CLOSELY.
The merger agreement includes various representations and warranties,
including representations and warranties by Coke-Carolina, Consolidated and
Newco as to, among other things:
o their respective corporate organization, good standing and power;
o their respective authority to execute, deliver and perform their
obligations under the merger agreement and related documents;
o the enforceability of the merger agreement and related documents;
o the merger agreement's non-contravention of any law or any of their
respective agreements, charters or bylaw provisions;
o the accuracy of information supplied by each of them in connection with
this Proxy Statement/Prospectus and the Registration Statement; and
o the absence of the need for governmental or third-party filings,
consents, approvals or actions with respect to any transaction
contemplated by the merger agreement (except for certain regulatory
filings specified in the merger agreement).
The merger agreement includes a number of additional representations and
warranties by Coke-Carolina as to, among other things:
o the capital structure of Coke-Carolina and its stockholder relations;
o the absence of any undisclosed distributions or dividends since January
31, 1998;
o the absence of any liability or obligation to pay brokers' fees or
commissions with respect to the merger;
o its good and marketable title to, or valid leasehold interests in, all
property and assets used by it and the condition of its significant
tangible assets, including real property and personal property;
o the absence of subsidiaries and affiliated businesses or operations of
Coke-Carolina other than Heath Oil Company, Inc.;
o the preparation of financial statements in accordance with historical
practice and which fairly present Coke-Carolina's financial condition as
of the dates indicated;
o the absence of certain undisclosed specified material changes or events
since January 31, 1998 (other than entering into the merger agreement);
o the absence of any undisclosed loans or reimbursement agreements or
arrangements by Coke-Carolina or any of its subsidiaries to any other
person;
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o the absence of any undisclosed liabilities, whether accrued, absolute,
or contingent, except those reserved against in the most recent
financial statements and those which have arisen after the most recent
financial statements in the ordinary course of business;
o compliance in all material respects with all laws (other than those
concerning environmental matters) applicable to the business of
Coke-Carolina;
o the filing of tax returns and payment of taxes by Coke-Carolina and its
subsidiary and the absence of certain audits, examinations, liens,
agreements and parachute payments with respect to tax obligations;
o the nature and condition of real property owned, leased or occupied by
Coke-Carolina, including Coke-Carolina's compliance with codes,
ordinances, license and permit requirements and laws relating to zoning,
occupancy and land use;
o the status of Coke-Carolina's ownership of the right to use all
intellectual property which is material to the conduct of its business,
the absence of the infringement of others' rights to such intellectual
property, and the absence of any claims or licenses or conflicts,
violations or defaults with respect to such intellectual property;
o disclosure of material contracts and the absence of any breach under
such contracts;
o the status of Coke-Carolina's labor relations with its employees and
information as to its employee arrangements or union agreements
currently in effect;
o the status of Coke-Carolina's employee benefit plans and certain other
matters relating to the Employee Retirement Income Security Act of 1974,
as amended;
o Coke-Carolina's outstanding powers of attorney, insurance coverage and
bank accounts;
o disclosure of current, pending or threatened material litigation,
proceedings or investigations;
o the absence of undisclosed guaranties, indemnification or liability for
any other person or entity;
o the absence of any environmental liability with respect to certain
"off-site" matters (with no representation or warranty being made as to
"on-site" matters);
o the absence of certain improper payments;
o compliance with applicable antitrust laws, regulations and ordinances;
o certain information with respect to Coke-Carolina's case sales, basic
franchise agreements and relationships with major suppliers and
customers;
o disclosure of any and all organizations, clubs and facilities of which
Coke-Carolina is a member;
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o maintenance of business records in accordance with good and sound
accounting and business practices;
o the absence of any requirement for any special payments or voting
procedures in connection with the merger under South Carolina law or
Coke-Carolina's articles of incorporation; and
o the Coke-Carolina shareholder vote required to approve the merger.
Additionally, by executing the transmittal letter, each Coke-Carolina
shareholder will make additional representations and warranties to Consolidated
and Newco, including as to:
o such shareholder's power and authority to execute, deliver and perform
the transmittal letter;
o the transmittal letter's enforceability against such shareholder;
o the performance of the transmittal letter not conflicting with any
charter document, agreement or law applicable to such shareholder;
o such shareholder's sole and exclusive title to and ownership of such
shareholder's Coke-Carolina shares, free and clear of any liens or
restrictions, defects of title or claims; and
o such shareholder's review of this Proxy Statement/Prospectus and the
merger agreement and his or her full and complete access to information
concerning Coke-Carolina and to legal and financial advisors.
INDEMNIFICATION
The merger agreement provides for the indemnification of Consolidated
and Newco by the Coke-Carolina shareholders in certain circumstances. To provide
protection to Consolidated and Newco, the Indemnification Escrow Fund will be
funded at closing with a deposit of $3,660,000 of the merger consideration with
each Coke-Carolina shareholder funding his or her proportionate amount by
placing in escrow shares of Consolidated Common Stock, Installment Notes and
cash in the same relative proportions in which he or she is receiving the
balance of his or her merger consideration.
The Indemnification Escrow Fund will be used to partially fund the
Coke-Carolina shareholders' obligations to indemnify Consolidated and Newco
against damages resulting from (a) any breach of Coke-Carolina's representations
and warranties contained in the merger agreement, (b) any failure by
Coke-Carolina to perform its covenants and agreements contained in the merger
agreement, (c) any inaccuracy in any certificate or document executed by
Coke-Carolina in connection with the closing or (d) any failure of Coke-Carolina
to collect within 180 days of the closing date any account receivable (but
excluding any note receivable) of Coke-Carolina existing on the closing date.
All indemnification claims owed to Consolidated and Newco will first be paid out
of the Indemnification Escrow Fund, provided that if an account receivable is
collected after the indemnification claim is paid from the Indemnification
Escrow Fund, the amount collected will be paid to the shareholders'
representatives for distribution to the Coke-Carolina shareholders. The
Indemnification Escrow Fund will be administered by SunTrust Bank, Atlanta (in
such capacity, the "Indemnification Escrow Agent"), whose fees and expenses will
be paid 50% by Newco and 50% from the shareholder expense fund. Any dividends
payable on the Consolidated Common Stock and interest payable on the Installment
Notes held in the Indemnification Escrow Fund
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will be paid to the registered holders thereof, and earnings on any cash shall
be delivered to the shareholders' representatives, on the last day of each
calendar quarter.
To the extent that the Indemnification Escrow Fund is not utilized to
satisfy any indemnification claims (and subject to adjustment for pending
claims), at the conclusion of the eighteenth month following the closing date,
amounts will be released so that $1,830,000 will remain in the escrow fund. The
released amount will be disbursed to the shareholders' representatives for
distribution to the Coke-Carolina shareholders. Forty-two months following the
closing, the remaining balance in the Indemnification Escrow Fund will be
released to the shareholders' representatives for distribution to the
Coke-Carolina shareholders.
Additionally, each Coke-Carolina shareholder will indemnify Consolidated
and Newco with respect to the additional representations and warranties made by
such shareholder in the transmittal letter.
Consolidated will defend, indemnify and hold Coke-Carolina and the
Coke-Carolina shareholders harmless from and promptly pay the full amount of
claims or demands as a result of (a) a breach of any representation or warranty
of Consolidated or Newco contained in the merger agreement or in any certificate
or document delivered by Consolidated or Newco that is specified in the merger
agreement, (b) any failure by Consolidated or Newco to perform or comply with
any covenant, obligation or agreement required by the merger agreement, (c) any
event arising out of the Surviving Corporation's business subsequent to the
merger becoming effective and (d) any on-site environmental matters.
Consolidated agrees to release each of the Coke-Carolina shareholders and each
of Coke-Carolina's officers and directors from any liability or obligation with
respect to on-site environmental matters and environmental liability unrelated
to on-site matters except as otherwise provided in the merger agreement.
All indemnification claims must be made prior to the end of the
eighteenth calendar month following the closing except for (i) representations
and warranties under the transmittal letter which will have a perpetual statute
of limitations, (ii) representations and warranties relating to tax or antitrust
matters which will have the statutorily prescribed statute of limitations and
(iii) off-site environmental matters which will have a five year statute of
limitations. However, this statute of limitations does not apply to
Consolidated's obligation to indemnify the Coke-Carolina shareholders with
respect to on-site environmental matters.
The merger agreement provides that any claim for indemnification (other
than claims regarding breaches of representations or warranties contained in the
transmittal letter and claims involving actual fraud) that Consolidated or Newco
might otherwise be entitled to assert will be subject to a "liability
deductible" of $183,000. Claims for indemnification by either party will
automatically be reduced by any amounts otherwise recovered by such party
(including insurance proceeds and the present value of any tax benefits). The
merger agreement also provides that each Coke-Carolina shareholder's aggregate
liability for all indemnification claims will be limited to such shareholder's
portion of the merger consideration and that, if the Indemnification Escrow Fund
should be exhausted, Consolidated and Newco must use their best efforts to
collect any excess claims from the Coke-Carolina shareholders on a pro rata
basis.
Except with respect to claims relating to breaches of representations
made in each Coke-Carolina shareholder's transmittal letter, Coke-Carolina
shareholders will be jointly and severally liable for breaches of
representations.
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CONDUCT OF BUSINESS PENDING CLOSING
The merger agreement requires Coke-Carolina to conduct its business in
the ordinary course and consistent with its current practices until the closing
date. In addition, except as otherwise permitted, the merger agreement provides
that Coke-Carolina must:
o use reasonable care to maintain all equipment and facilities in
accordance with customary maintenance procedures;
o maintain insurance at current levels;
o not amend its articles of incorporation or bylaws, alter its
capital structure or declare any dividend or distribution except
for cash dividends that will be taken into account when
determining the adjustment to the merger consideration based upon
shareholders' equity;
o not issue any stock or take certain actions with respect to its
outstanding capital stock;
o use commercially reasonable efforts to preserve its business
organizations and goodwill, retain the services of its present
employees and preserve its relationships with its customers and
suppliers;
o use commercially reasonable efforts to comply with all applicable
laws;
o confer on a regular basis with Consolidated about Coke-Carolina's
business and prospects and promptly notify Consolidated of any
significant change in Coke-Carolina's business, properties,
assets, condition, operations or prospects;
o not make any acquisition or investment in any business or
otherwise create any subsidiary;
o not initiate, solicit or encourage any proposal or offer to
acquire all or any substantial part of the business and
properties or capital stock of Coke-Carolina;
o not commence any litigation or waive or allow to lapse any
material rights of Coke-Carolina;
o not adopt a shareholder rights plan or comparable arrangement;
o not change its accounting principles or practices;
o not enter into any material commitment or transaction other than
in the ordinary course of business or make any capital
expenditure in excess of $25,000;
o not issue any letter of credit, guaranty, reimbursement agreement
or indemnity to or on behalf of another person other than in the
ordinary course of business;
o not make any special payment to any of its employees, officers,
directors or shareholders except for normal compensation and
benefits and not make any change in its employment arrangements
with its employees other than salary raises in the ordinary
course;
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o not borrow or loan any money other than in the ordinary course
and consistent with past practices;
o not take any actions that would make Coke-Carolina's
representations and warranties untrue or incorrect;
o not authorize or adopt any proposal other than as contemplated by
the merger agreement that would grant Coke-Carolina shareholders
the right to dissent from the merger and obtain an appraisal of
their shares; and
o timely and accurately make all required tax filings.
ADDITIONAL COVENANTS
The merger agreement contains certain additional covenants:
ACCESS TO INFORMATION. Coke-Carolina will afford to Consolidated and its
representatives reasonable access during normal business hours and upon
reasonable notice to all of Coke-Carolina's properties, books and records and
will furnish to Consolidated and Newco (i) a copy of each document filed with or
received by Coke-Carolina from any governmental authority and (ii) all other
information and documents concerning its businesses, properties and personnel as
Consolidated may reasonably request. In addition, Coke-Carolina will notify
Consolidated in writing of any change or the occurrence of any event which may
have an adverse effect on Coke-Carolina.
SEC FILINGS. Consolidated and Newco are to prepare all filings in
connection with the merger required under applicable securities laws.
Coke-Carolina has agreed to provide necessary information and otherwise
cooperate with Consolidated and Newco in connection with preparing such filings.
SHAREHOLDER APPROVAL. The board of directors of Coke-Carolina will
submit to, and recommend the approval by, the Coke-Carolina shareholders of the
merger and the merger agreement. Subject to its fiduciary duties, the board of
directors of Coke-Carolina will use its reasonable efforts to obtain the
requisite shareholder approval.
EXPENSES. All costs and expenses incurred in connection with the merger
and the merger agreement by Consolidated and Newco will be borne by them. All
costs and expenses of Coke-Carolina and its shareholders (including the fees of
Overend & Company, Inc. and the fees and expenses of Sutherland Asbill &
Brennan, LLP) will reduce the merger consideration paid to Coke-Carolina
shareholders.
BOOKS AND RECORDS. All books and records of Coke-Carolina on its
premises at the time of closing will remain.
AGREEMENT TO COOPERATE. Coke-Carolina and Consolidated will use all
commercially reasonable efforts to take all actions and to do all things
necessary, proper or advisable to close the merger and will consult with each
other prior to issuing any public announcement or other statement with respect
to the merger and the merger agreement.
DISSENTING SHAREHOLDERS. Coke-Carolina will give Consolidated and Newco
prompt notice of any demands received by Coke-Carolina for appraisal of shares
pursuant to Chapter 13 of the South Carolina Business Corporation Act.
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EMPLOYEE AND EMPLOYEE BENEFIT MATTERS. The merger agreement contains
provisions relating to terminating and freezing Coke-Carolina's employee benefit
plans and transitioning Coke-Carolina's employees to Consolidated's employee
benefit plans and agreements.
CONDITIONS TO THE CONSUMMATION OF THE MERGER
Completion of the merger is subject to a number of conditions precedent
that either Consolidated or Coke-Carolina may waive if not satisfied, unless
such waivers are otherwise prohibited by law.
CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER. The
respective obligations of each party to effect the merger are subject to the
following conditions:
o the merger and the merger agreement must be approved and adopted
by the requisite vote of the shareholders of Coke-Carolina under
applicable law without any dissenting shares;
o each of Consolidated, Newco, and Coke-Carolina must have
delivered to the other certified resolutions of their respective
boards of directors authorizing and approving the execution and
delivery of the merger agreement, the consummation of the merger
and all other necessary and desirable corporate actions with
respect to the merger;
o the registration statement of which this Proxy
Statement/Prospectus forms a part must be effective in accordance
with the provisions of the Securities Act and no stop order
suspending its effectiveness has been issued;
o there must be no court order which prevents the consummation of
the merger;
o there must be no pending or threatened legal proceeding that
could (i) prevent consummation of the merger, (ii) prohibit or
limit Consolidated from exercising all material rights and
privileges pertaining to its ownership of any of its assets,
including the Surviving Corporation and its other subsidiaries,
or (iii) compel Consolidated or any of its subsidiaries to
dispose or hold separate all or any material portion of its
business or assets as a result of the merger;
o neither Coke-Carolina nor Newco will have taken any action or
failed to take any action which would cause the merger to fail to
be treated as a "forward triangular merger" pursuant to Section
368(a)(1)(A) and (a)(2)(D) of the Internal Revenue Code; and
o there must be an order issued by a court of appropriate
jurisdiction authorizing the trusts established under the wills
of A.T. Heath and Ann H. Heath to vote their shares in favor of
the merger and the merger agreement.
CONDITIONS TO OBLIGATION OF COKE-CAROLINA SHAREHOLDERS TO EFFECT THE
MERGER. The obligation of the Coke-Carolina shareholders to effect the merger is
subject to the following additional conditions:
o Consolidated and Newco must have performed in all material
respects their respective agreements contained in the merger
agreement, the representations and warranties of Consolidated and
Newco must be true and correct in all material respects and
Consolidated and Newco must deliver a certificate to the
shareholders' representatives confirming the foregoing; and
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o The shareholders' representatives must have received a legal
opinion addressed to the shareholders from Witt, Gaither &
Whitaker, P.C., counsel to Consolidated, in the form required by
the merger agreement.
CONDITIONS TO OBLIGATIONS OF CONSOLIDATED TO EFFECT THE MERGER. The
obligations of Consolidated and Newco to effect the merger are subject to the
following additional conditions:
o Coke-Carolina must have performed in all material respects its
agreements contained in the merger agreement, the representations
and warranties of Coke-Carolina contained in the merger agreement
must be true and correct in all material respects and the
shareholders' representatives must have signed and delivered to
Consolidated and Newco a certificate confirming the foregoing;
o Consolidated and Newco must have received an opinion from
Sutherland Asbill & Brennan LLP, counsel to Coke-Carolina, in the
form required by the merger agreement;
o There must not have occurred any event which would have a
material adverse effect on Coke-Carolina, in the reasonable
opinion of Consolidated and Newco;
o Each officer and director of Coke-Carolina must have delivered a
release to Consolidated in the form required by the merger
agreement;
o The Coca-Cola Company must have consented to the merger and to
the transfer and/or assignment of Coke-Carolina's franchises to
Newco, and there must be no event or condition relating to
Coke-Carolina which would impair Newco's ability to operate a
business for the manufacture, distribution and sale of soft drink
products in such territories;
o Coke-Carolina must have identified all persons or entities that
it reasonably believes to be "affiliates" (as interpreted by Rule
145 of the Securities Act of 1933) and must have used reasonable
efforts to cause all such affiliates to execute the agreements
contemplated by the merger agreement; and
o Consolidated's board of directors must not have withdrawn its
approval of the merger agreement.
TERMINATION, AMENDMENT AND WAIVER
TERMINATION. The merger agreement may be terminated and the merger may
be abandoned at any time prior to the effective time, whether before or after
approval by the shareholders of Coke-Carolina:
o by mutual consent of Consolidated and Coke-Carolina; or
o by either Consolidated or Coke-Carolina if (i) the merger has not
been consummated within five business days after the
Coke-Carolina shareholders meeting is held or abandoned (the
"Termination Date"), or (ii) any federal or state court has
issued a final, nonappealable permanent order restraining,
enjoining or otherwise prohibiting the merger (in each case
provided that the terminating party has not caused the delay in
the effective time by a failure to fulfill its obligations under
the merger agreement); or
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o by any party if the board of directors of Coke-Carolina withdraws
or modifies in a manner adverse to Consolidated or Newco its
approval or recommendation of the merger; or
o by Consolidated and Newco if the Coke-Carolina board of directors
withdraws or modifies in a manner adverse to Consolidated and
Newco its approval or recommendation of the merger or the merger
agreement; or
o by Consolidated and Newco if (i) any closing condition contained
in Sections 8.1 and 8.3 of the merger agreement has not been
satisfied or waived, or (ii) Coke-Carolina has breached a
covenant or agreement contained in the merger agreement which by
its nature cannot be cured by the Termination Date, other than a
breach that has not had or would not reasonably be expected to
have a material adverse effect (in the reasonable opinion of
Consolidated or Newco); or
o by Coke-Carolina if (i) any closing condition contained in
Sections 8.1 and 8.2 of the merger agreement has not been
satisfied or waived or (ii) Consolidated has breached a covenant
or agreement contained in the merger agreement which has not been
cured or waived prior to the Termination Date, other than a
breach that has not had or would not reasonably be expected to
have a material adverse effect on the business of Consolidated.
In the event of termination of the merger agreement, the merger
agreement will become void and none of Coke-Carolina, Consolidated or their
respective officers or directors will have any further liability or obligation
under the merger agreement except for payment of certain expenses, if
applicable.
AMENDMENT AND WAIVER. Prior to closing, the merger agreement may be
amended by Consolidated, Newco and Coke-Carolina. After the closing, the merger
agreement may be amended by Consolidated and the shareholders' representatives.
However, after the Coke-Carolina shareholders approve the merger agreement, no
amendment may be made which reduces the merger consideration or alters the form
of the merger consideration or in any way materially adversely affects the
rights of the Coke-Carolina shareholders without their further approval, except
as expressly authorized by them. The merger agreement may not be amended except
by an instrument in writing signed by all of the parties to the merger
agreement. At any time prior to the effective time, the parties to the merger
agreement may extend the time for the performance of any of the obligations or
other acts of the parties to the merger agreement, waive in writing any
inaccuracies in the representations and warranties contained in the merger
agreement or in any document delivered in connection with the merger agreement
and waive in writing compliance with any of the agreements or conditions
contained in the merger agreement or in any document delivered in connection
with the merger agreement.
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DESCRIPTION OF INSTALLMENT NOTES
GENERAL
The Installment Notes are to be issued under an Indenture to be dated as
of the closing date (the "Indenture") between Consolidated and First Union
National Bank, as Trustee (the "Trustee"). The terms of the Installment Notes
include those set forth in the Indenture and those made part of the Indenture by
reference to the Trust Indenture Act of 1939, as amended (the "Trust Indenture
Act"). The Installment Notes are subject to all such terms, and holders (the
"Noteholders") of Installment Notes are referred to the Indenture and the Trust
Indenture Act for a statement thereof.
THE FOLLOWING IS A SUMMARY OF CERTAIN PROVISIONS OF THE INDENTURE AND
THE INSTALLMENT NOTES. THE FOLLOWING SUMMARY DOES NOT PURPORT TO BE COMPLETE AND
IS EXPRESSLY SUBJECT AND QUALIFIED IN ITS ENTIRETY BY REFERENCE TO ALL OF THE
PROVISIONS OF THE INDENTURE, INCLUDING THOSE TERMS MADE A PART THEREOF BY THE
TRUST INDENTURE ACT. YOU MAY OBTAIN A COPY OF THE INDENTURE IN THE MANNER
DESCRIBED UNDER "WHERE YOU CAN FIND MORE INFORMATION."
The Installment Notes may be exchanged or transferred at the designated
office or agency of Consolidated (which initially will be the corporate trust
office of the Trustee, at 230 South Tryon Street, 9th Floor, Charlotte, North
Carolina 28288) and payments of principal and interest will be made by check
mailed to the address of the Noteholders as such address appears in the
Installment Note register which is initially to be maintained by the Trustee.
The Installment Notes will be issued only in fully registered form, without
coupons. The Installment Notes will be unsecured senior obligations of
Consolidated. There is not, and is not anticipated that there will be, an
established trading market for the Installment Notes.
TERMS OF THE INSTALLMENT NOTES
The Installment Notes will be limited to $17.0 million in principal
amount and will mature seven years from the closing date. The Installment Notes
will bear interest at 5.75% per annum, payable quarterly to Noteholders of
record at the close of business on March 15, June 15, September 15 and December
15, immediately preceding the interest payment date on March 31, June 30,
September 30 and December 31 of each year, commencing June 30, 1999. Twenty
percent of the original principal balance of the Installment Notes will be paid
in conjunction with the interest payment occurring on December 31, 2001, 2002,
2003, and 2004, with the balance of the outstanding principal plus all accrued
and unpaid interest being paid seven years from the closing date.
REDEMPTION OFFER
Pursuant to the terms of the Indenture and the Installment Notes,
Consolidated can offer to redeem any or all of the Installment Notes at any
time. Consolidated has the right to choose the time of the redemption, the
principal amount of Installment Notes to be redeemed and the price of the
redemption. Each Noteholder can either accept any redemption offer and tender
all or part of such holder's Installment Notes or it can reject the offer. If
any holder chooses to accept in part or reject the offer, the Installment Notes
retained by such holder will continue to accrue interest. The Trustee will
select among the Installment Notes on a pro rata basis if the aggregate
principal amount of Installment Notes tendered for redemption exceeds the
aggregate principal amount of Installment Notes that Consolidated offers to
redeem.
To make the redemption offer, Consolidated will provide notice to the
Trustee not less than 30 days nor more than 60 days before the date for
redemption (the "Redemption Date") of its desire to make
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the offer. Within 10 days of receipt of such notice, the Trustee will provide a
notice to each Noteholder detailing the terms of the redemption offer and each
holder's rights with respect to such offer.
RANKING OF THE INSTALLMENT NOTES
The Indebtedness evidenced by the Installment Notes will be senior
unsecured obligations of Consolidated.
SET-OFF RIGHTS
Consolidated may be entitled to set-off certain of its damages suffered
in connection with the merger agreement (including damages arising from breaches
of representations and warranties contained in each Coke-Carolina shareholder's
transmittal letter) against amounts owed pursuant to the Installment Notes. If
Consolidated exercises any such set-off rights, such exercise will be effected
by Consolidated delivering the applicable Installment Notes to the Trustee for
cancellation along with instructions relating to such set-off.
DEFAULTS
An event of default is defined in the Indenture as (i) Consolidated's
failure to pay or perform any obligation, liability or indebtedness of
Consolidated to the Noteholders under the Installment Notes as and when due
(whether upon demand, at maturity or by acceleration, and subject to the terms
of the Installment Notes, the Indenture and the merger agreement), (ii) the
commencement of a proceeding by or against Consolidated for dissolution (other
than administrative dissolution where prompt re-instatement efforts are
initiated and followed through to completion), (iii) the insolvency of or the
business failure of Consolidated, (iv) the appointment of a custodian, trustee,
liquidator or receiver for a material portion of the property of Consolidated,
(v) an assignment for the benefit of creditors of a material portion of the
property of Consolidated, or (vi) the filing of a petition under any bankruptcy,
insolvency or debtor's relief law or the filing of a petition for any adjustment
of indebtedness, composition, or extension by or against Consolidated. A default
under the preceding sentence is not an event of default until the Trustee or the
holders of at least 20% in principal amount of the Installment Notes notify
Consolidated of the default and Consolidated does not cure such default within
three days after receipt of such notice. Such notice must specify the default,
demand that it be remedied and state that such notice is a "Notice of Default."
Consolidated will pay interest on overdue principal and defaulted interest at 8%
per annum.
If an event of default occurs and is continuing, the Trustee or the
holders of at least 20% in principal amount of the outstanding Installment Notes
may declare the principal of and accrued but unpaid interest on all the
Installment Notes to be due. Upon such a declaration, such principal and
interest will be due and payable immediately. Under certain circumstances, the
holders of a majority in principal amount of the outstanding Installment Notes
may rescind any such acceleration with respect to the Installment Notes and its
consequences.
Subject to the provisions of the Indenture relating to the duties of the
Trustee, in case an event of default occurs and is continuing, the Trustee will
be under no obligation to exercise any of the rights or powers under the
Indenture at the request or direction of any of the holders of the Installment
Notes unless such Noteholders have offered to the Trustee reasonable indemnity
or security against any loss, liability or expense. Except to enforce the right
to receive payment of principal or interest when due, no holder of an
Installment Note may pursue any remedy with respect to the Indenture or the
Installment Notes unless (i) such Noteholder has previously given the Trustee
notice that an event of default is continuing, (ii) holders of at least 20% in
principal amount of the outstanding Installment Notes have requested in writing
that the Trustee pursue the remedy, (iii) such Noteholders have offered the
Trustee
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reasonable security or indemnity against any loss, liability or expense, (iv)
the Trustee has not complied with such request within 60 days after the receipt
thereof and the offer of security or indemnity and (v) the holders of a majority
in principal amount of the outstanding Installment Notes have not given the
Trustee a direction inconsistent with such request within such 60-day period.
Subject to certain restrictions, the holders of a majority in principal amount
of the outstanding Installment Notes are given the right to direct the time,
method and place of conducting any proceeding for any remedy available to the
Trustee or of exercising any trust or power conferred on the Trustee. The
Trustee, however, may refuse to follow any direction that conflicts with law or
the Indenture or that the Trustee determines is unduly prejudicial to the rights
of any other holder of an Installment Note or that would involve the Trustee in
personal liability.
The Indenture provides that if a default exists and is known to the
Trustee, the Trustee must mail to each holder of the Installment Notes notice of
the default within 15 days after it occurs. Except in the case of a default in
the payment of principal of or interest on any Installment Note, the Trustee may
withhold notice if and so long as a committee of its trust officers determines
that withholding notice is not opposed to the interest of the holders of the
Installment Notes.
AMENDMENTS AND WAIVERS
Subject to certain exceptions, the Indenture may be amended with the
consent of the holders of a majority in principal amount of the Installment
Notes then outstanding and any past default or compliance with any provisions
may also be waived with the consent of the holders of a majority in principal
amount of the Installment Notes then outstanding. However, without the consent
of each holder of an outstanding Installment Note affected thereby, no amendment
may (i) reduce the amount of Installment Notes whose holders must consent to an
amendment, (ii) reduce the rate of or extend the time for payment of interest on
any Installment Note, (iii) reduce the principal of or change the time for
payment of or change the stated maturity date of any Installment Note, (iv) make
any Installment Note payable in money other than that stated in the Installment
Note, and (v) make any change in the amendment provisions which require each
Noteholder's consent or in the waiver provisions.
Without the consent of any holder of the Installment Notes, Consolidated
and the Trustee may amend the Indenture to cure any ambiguity, omission, defect
or inconsistency, to add to the covenants of Consolidated for the benefit of the
holders of the Installment Notes or to surrender any right or power conferred
upon Consolidated, to comply with any requirement of the Commission in
connection with the qualification of the Indenture under the Trust Indenture
Act, and to make any change that does not adversely affect the rights of any
Noteholder of the Installment Notes.
The consent of the Noteholders of the Installment Notes is not necessary
under the Indenture to approve the particular form of any proposed amendment.
Consent is sufficient if it approves the substance of the proposed amendment.
After an amendment under the Indenture becomes effective, Consolidated
is required to mail to holders of the Installment Notes a notice briefly
describing such amendment. However, the failure to give such notice to all
holders of the Installment Notes, or any defect therein, will not impair or
affect the validity of the amendment.
CONCERNING THE TRUSTEE
First Union National Bank is to be the Trustee under the Indenture and
has been appointed by Consolidated as Registrar and Paying Agent with regard to
the Installment Notes.
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The holders of a majority in principal amount of the outstanding
Installment Notes will have the right to direct the time, method and place of
conducting any proceeding for exercising any remedy available to the Trustee,
subject to certain exceptions. The Indenture provides that if an event of
default occurs (and is not cured), the Trustee will be required to use the
degree of care of a prudent man in the conduct of his own affairs. Subject to
such provisions, the Trustee will be under no obligation to exercise any of its
rights or powers under the Indenture at the request of any holder of Installment
Notes, unless such Noteholder will have offered to the Trustee security and
indemnity satisfactory to it against any loss, liability or expense and then
only to the extent required by the terms of the Indenture.
GOVERNING LAW
The Indenture provides that it and the Installment Notes will be
governed by the laws of the State of Delaware.
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INFORMATION ABOUT CONSOLIDATED
Consolidated produces, markets and distributes carbonated and
noncarbonated beverages, primarily products of The Coca-Cola Company.
Consolidated has been in the soft drink manufacturing business since 1902.
Consolidated has grown significantly since 1984. During this time period,
Consolidated has made several acquisitions which have resulted in its becoming
the second largest Coca-Cola bottler in the United States.
In its soft drink operations, Consolidated holds franchises under which
it produces and markets, in certain regions, carbonated soft drink products of
The Coca-Cola Company, including Coca-Cola classic, caffeine free Coca-Cola
classic, diet Coke, caffeine free diet Coke, Cherry Coke, TAB, Sprite, diet
Sprite, Surge, Citra, Mello Yello, diet Mello Yello, Mr. PiBB, Barq's Root Beer,
diet Barq's Root Beer, Fresca, Minute Maid orange and diet Minute Maid orange
sodas. Consolidated also distributes and markets POWERaDE, Cool from Nestea,
Fruitopia and Minute Maid Juices To Go in certain of its markets. Consolidated
produces and markets Dr Pepper in most of its regions. Various other products,
including Seagrams' products and Sundrop, are produced and marketed by
Consolidated in one or more of its regions under franchise agreements with the
companies that manufacture the concentrate for those beverages. In addition,
Consolidated also produces soft drinks for other Coca-Cola bottlers.
Consolidated's principal soft drink is Coca-Cola classic. During the
last three fiscal years, sales of products under the trademark Coca-Cola have
accounted for more than half of Consolidated's soft drink sales. In total, the
products of The Coca-Cola Company accounted for approximately 89% of
Consolidated's soft drink sales during fiscal year 1998.
Following the effective time of the merger, Consolidated intends to
operate Coke-Carolina as a wholly-owned subsidiary of Consolidated.
The principal executive offices of Consolidated are located at 1900
Rexford Road, Charlotte, NC 28211. The telephone number is (704) 551-4400.
Consolidated is organized under the laws of Delaware.
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BUSINESS OF COKE-CAROLINA
GENERAL. Coke-Carolina has historically been primarily engaged in the
production of carbonated beverages and the marketing and distribution of
carbonated and noncarbonated beverages, mainly products of The Coca-Cola
Company. Coke-Carolina is also engaged in the sale of snack foods through
automated vending machines and until the first quarter of 1998 operated an oil
distributorship in Sumter County, South Carolina through a wholly owned
subsidiary, Heath Oil Company, Inc. ("Heath Oil").
Coke-Carolina began operations in 1918 and was incorporated in South
Carolina in 1919. Coke-Carolina's executive offices are located at 480 E.
Liberty Street, Sumter, South Carolina. Sales for Coke-Carolina, exclusive of
Heath Oil's operations, were approximately $21.9 million, $19.9 million, $20.0
million and $19.0 million for the fiscal years ended January 31, 1999, 1998,
1997 and 1996, respectively. Sales of carbonated and noncarbonated beverages,
and their related products, represented approximately 97% of total sales for the
fiscal years ended January 31, 1999 and 1998, respectively.
PRODUCTS. In its soft drink operations, Coke-Carolina holds franchises
under which it produces and/or distributes and markets in its territory
carbonated soft drink products of The Coca-Cola Company, including Coca-Cola
classic, caffeine free Coca-Cola classic, diet Coke, caffeine free diet Coke,
Cherry Coke, Tab, Sprite, diet Sprite, Surge, Mello Yello, Mr. PiBB, Barq's Root
Beer, Fresca, and Minute Maid Orange. Coke-Carolina also distributes and markets
POWERaDE, Nestea products, Fruitopia products and Minute Maid products.
Coke-Carolina stopped distribution of Welch's products as of January 1999
(substituting it with sales of Minute Maid products), intends to stop
distributing Schweppes products effective April 30, 1999 (and thereafter will
sell Seagram's products), and is in the process of stopping distribution of Le
Bleu water (and is instead selling water bottled by The Coca-Cola Company). In
1998 the increases in manufacturing materials and labor costs and the reductions
in the number of cases produced drove the costs of goods sold per case to the
point that it was no longer profitable for Coke-Carolina to operate a
manufacturing facility. After December 18, 1998, all beverage products sold by
Coke-Carolina were purchased from South Atlantic Canners, Consolidated, The
Minute Maid Company and Durham Coca-Cola.
Coke-Carolina's principal soft drink is Coca-Cola classic. During the
last three fiscal years, sales of products under the trademark Coca-Cola have
accounted for a significant majority of Coke-Carolina's soft drink sales. In
total, the products of The Coca-Cola Company accounted for approximately 93% of
Coke-Carolina's soft drink sales for fiscal years ended January 31, 1998 and
1999, respectively.
FRANCHISES. Coke-Carolina holds exclusive franchises from The Coca-Cola
Company to produce and market its soft drinks in bottles, cans and pre-mix
containers for specific geographic areas of South Carolina. It is one of many
companies holding such franchises from The Coca-Cola Company. Additionally,
Coke-Carolina holds distribution contracts with other soft drink distributors.
Coke-Carolina has no legal relationship with The Coca-Cola Company, or with any
other soft drink or water companies, other than pursuant to its franchise
agreements and other contracts arising in the ordinary course of business.
The Coca-Cola Company is the sole owner of the secret process under
which the primary component (either concentrate or syrup) of Coca-Cola is
manufactured. The concentrate, when mixed with water and sweetener, produces
syrup, which when mixed with carbonated water produces the soft drink known as
"Coca-Cola" or "Coke." Under the terms of the franchise agreements and
amendments thereto for Coca-Cola, Coca-Cola classic, Cherry Coke, Sprite and Mr.
PiBB (and their respective caffeine-free formulations) (collectively the "Coke
Products"), covering certain territories within South Carolina (collectively the
"Coke Agreements"), Coke-Carolina is required to purchase concentrate or syrup
for Coke Products manufactured and bottled by Coke-Carolina only from The
Coca-Cola
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Company. Coke-Carolina purchases sweeteners from other sources, as
needed. The concentrate or syrup is sold to Coke-Carolina at a price determined
unilaterally by The Coca-Cola Company subject to a ceiling price, increases in
which are limited to increases in the Consumer Price Index and, in the case of
syrup, increases in the price of sweeteners.
Coke-Carolina is required to bottle or can Coke Products in a prescribed
manner, to maintain suitable plants and equipment, to promote the sale of Coke
Products vigorously, to use the distinctive Coca-Cola bottle and approved
containers for bottled and canned Coke Products, and to refrain from dealing in
any product which is an imitation of or substitute for any Coke Product.
The Coke Agreements remain in effect for an unlimited term, and provide
that they may be terminated upon due notice by The Coca-Cola Company if, in the
judgment of The Coca-Cola Company, there has been a violation of any of the
prescribed terms thereof, and are subject to automatic termination if
Coke-Carolina is placed in receivership or becomes bankrupt.
In May 1978, the rights to produce, market and distribute Coca-Cola
products in Georgetown County, South Carolina were assigned to Coke-Carolina by
a Company that was subsequently acquired by Consolidated. The initial assignment
was for a period of ten years with an option for an additional ten year period.
This sub-bottling contract for the Georgetown territory expired on May 1, 1998,
although Consolidated has permitted Coke-Carolina to continue to operate in the
Georgetown territory on a temporary basis.
Except to the extent reflected in the price of the concentrate or syrup,
no royalty or other compensation is paid under the franchise agreements to The
Coca-Cola Company for the use of the trade names and trademarks "Coca-Cola" and
"Coke" and associated patents, copyrights, designs and labels. In consideration
of the assignment of the rights to produce, sell and distribute Coca-Cola
products in the Georgetown territory, Coke-Carolina pays a monthly royalty fee
to Consolidated of $0.25 for each gallon of Coca-Cola syrup used in Coca-Cola
products sold in Georgetown County, South Carolina.
The franchise agreements relating to the Company's soft drink products
with companies other than The Coca-Cola Company are similar to the Coke
Agreements in that they are renewable at the option of Coke-Carolina and require
purchase of concentrate or syrup for certain beverages only from the respective
franchisors at prices unilaterally fixed by such franchisors. Additional
restrictions as to use of trademarks, approved bottles, cans and labels, sale of
imitators or substitutes, and cause for termination are similar as well. The
territories covered by the franchise agreements for the products of other
companies vary somewhat from the territories covered by the Coke Agreements.
These variations do not have a material effect on the business of
Coke-Carolina's soft drink operations taken as a whole.
CUSTOMERS. For the fiscal year ended January 31, 1999, Coke-Carolina had
approximately 4,186 customers (including full-service vending machines), of
which 55 customers accounted for approximately 42% of Coke-Carolina's revenues.
The loss of any one of these customers would have an adverse impact on
Coke-Carolina's business in the short term, and Coke-Carolina does not believe
it would be able to replace the lost business quickly; however, Coke-Carolina
also believes that it would not suffer any long term material adverse impact
from the loss of any one of these customers.
FACILITIES AND EQUIPMENT. In addition to its executive offices,
Coke-Carolina operated its sole production facility in Sumter, South Carolina
until December 18, 1998, when Coke-Carolina found it no longer financially
efficient to manufacture its products as compared to purchasing them from
manufacturing cooperatives. Coke-Carolina has four sales centers located in
Lancaster, Camden, Georgetown and Sumter, South Carolina. Coke-Carolina owns all
of the real property associated with its sales centers.
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MARKETING. Coke-Carolina's soft drink products are sold and distributed
directly by its employees to retail stores and other outlets, including food
markets, institutional accounts and vending machine outlets. For the fiscal year
ended January 31, 1999, approximately 64% of Coke-Carolina's physical case
volume was in the take-home channel through supermarkets, convenience stores,
drug stores and other retail stores. The remaining volume was in the cold drink
channel, primarily through dispensing machines, owned either by Coke-Carolina,
retail outlets or third party vending companies.
Coke-Carolina now sells its soft drink products primarily in
non-refillable bottles, both glass and plastic, and in cans, in varying
proportions from market to market. For example, there may be as many as ten
different packages for Coca-Cola Classic within a single geographical area.
Physical unit sales of soft drinks for fiscal year ended January 31, 1999 were
approximately 50% cans, 46% non-refillable bottles and 4% pre-mix and post-mix.
Advertising in various media, primarily television and radio, is relied
upon extensively in the marketing of Coke-Carolina's soft drinks. The
franchisors have joined Coke-Carolina in making substantial expenditures in
cooperative advertising in Coke-Carolina's marketing areas. Coke-Carolina also
benefits from national advertising programs conducted by The Coca-Cola Company.
In addition, Coke-Carolina expends substantial funds on its own behalf for
extensive local sales promotions of Coke-Carolina's soft drink products. These
expenses are partially offset by marketing funds which the franchisors provide
to Coke-Carolina in support of a variety of marketing programs, such as price
promotions, merchandising programs and point-of-sale displays.
The substantial outlays which Coke-Carolina makes for advertising are
generally regarded as necessary to maintain or increase sales volume, and any
curtailment of the funding provided by The Coca-Cola Company for advertising or
marketing programs which benefit Coke-Carolina could have a material effect on
the business of Coke-Carolina.
SEASONALITY. Sales by Coke-Carolina are somewhat seasonal, with the
highest sales volume occurring in May, June, July and August.
COMPETITION. Coke-Carolina's competitors include several large soft
drink manufacturers engaged in the distribution of nationally advertised
products, as well as similar companies which market lesser-known soft drinks in
limited geographical areas and manufacturers of private brand soft drinks. In
the territory in which Coke-Carolina operates, between 85% and 90% of carbonated
soft drink sales in bottles, cans and pre-mix/post-mix containers are accounted
for by Coke-Carolina and its principal competition, Pepsi-Cola. Coke-Carolina's
carbonated beverage products also compete with, among others, noncarbonated
beverages and citrus and noncitrus fruit drinks.
The principal methods of competition of Coke-Carolina, and the soft
drink industry generally, are point-of-sale merchandising, new product
introductions, packaging changes, price promotions, quality and frequency of
distribution and advertising.
ENVIRONMENTAL REMEDIATION. Coke-Carolina does not currently have any
material capital expenditure commitments for environmental remediation for any
of its properties.
SOFT DRINK TAX. A soft drink tax has been in place in South Carolina for
numerous years. However, the South Carolina soft drink tax has been repealed and
is being phased out ratably over a six-year period beginning July 1, 1996.
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EMPLOYEES. As of March 1, 1999, Coke-Carolina had a total of
approximately 140 full-time employees, none of whom are union members.
Management of Coke-Carolina believes that its relationship with its employees is
good.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS OF COKE-CAROLINA
All references to fiscal 1998, 1997 and 1996 are to the fiscal years
ended January 31, 1999, January 31, 1998 and January 31, 1997, respectively.
FINANCIAL REVIEW OVERVIEW - FISCAL 1998
Coke-Carolina's financial results for fiscal 1998 reflect a strong 9%
increase in physical case sales volume and a 0.8% increase in net selling price
per case. These increases were the result of Coke-Carolina's continued
commitment to strengthen its cold drink and vending markets and develop its "new
age" product market. The strong volume increase also reflects the benefits
received from the acquisition of additional advertising weeks with major
supermarket customers.
During fiscal 1998 sales revenue, net of discounts, increased 10.2% to
$21,886,864 yet costs of goods sold increased 12.9% to $13,274,141. These
increases resulted in gross profit increasing 6.4% or $578,597. While the total
gross profit increased, the gross profit per case decreased from $3.63 per case
to $3.53 per case. Total operating expenses increased less than 1% for the
fiscal year. With strong growth in sales volume and net revenues and stable
operating expenses, net income for the fiscal year increased 106.1% over the
previous fiscal year. Net income increased from $272,091 in fiscal 1997 to
$560,801 in fiscal 1998. Net income per case rose from $0.11 per case in fiscal
1997 to $0.23 per case in fiscal 1998 and earnings per share increased from
$63.53 in fiscal 1997 to $130.94 in fiscal 1998.
Coke-Carolina's expansion of distribution of its "new age" products -
Minute Maid juices, Fruitopia, POWERaDE and bottled water - continued to
demonstrate strong growth in all market segments. New age products net revenues
increased 79.4% over the previous fiscal year. Minute Maid and Fruitopia case
volume increased 58%, POWERaDE increased 105% and bottled water case volume rose
125%.
Coke-Carolina's commitment to the cold drink and vending segments of the
beverage business remained at the forefront in its strategy for sustained
growth. Capital investment in cold drink and vending equipment continued to
comprise over 50% of Coke-Carolina's total capital expenditures. This emphasis
on the cold drink and vending markets yielded strong growth in both volume and
revenues in fiscal 1998.
The twenty-ounce plastic bottle package experienced a slight decrease in
sales volume of 1.8% yet average revenue per case increased from $11.04 in
fiscal 1997 to $11.62 in fiscal 1998. The price adjustment negatively affected
the sales volume of the twenty-ounce plastic bottle package, yet net sales
revenues increased 3.3%. The decrease in twenty-ounce plastic bottle carbonated
beverage volume was more than offset by the volume increases experienced with
"new age" products.
Coke-Carolina's aggressive pursuit of sustained growth was also evident
in the supermarket channels. The acquisition of additional advertising weeks and
the willingness to keep net sales prices down resulted in volume growth of 12.6%
in Coke-Carolina's can segment and 14.6% growth in the two liter segment. The
average revenue per case of cans sold in fiscal 1998 decreased 1.6% from $6.75
to $6.64. The two liter revenue per case decreased from $8.00 in fiscal 1997 to
$7.96 in fiscal 1998.
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FINANCIAL REVIEW OVERVIEW - FISCAL 1997
Coke-Carolina's financial results for the fiscal 1997 reflect a small
decrease in physical case volume sales and net selling price per case. The
decreases experienced by Coke-Carolina were the result of the most intense price
competition in the history of the soft drink industry.
Sales, net of discounts, remained virtually unchanged in fiscal 1997,
yet Coke-Carolina experienced a 1.8% decrease in cost of goods sold during
fiscal 1997. The decrease in cost of goods sold resulted in an increase in
Coke-Carolina's gross profit margin of 2.4%. However, Coke-Carolina experienced
a 9.7% increase in operating expenses which resulted in net income and earnings
per share decreasing significantly from fiscal 1996.
Coke-Carolina continued to expand distribution of its "new age"
products--Minute Maid juices and Fruitopia products increased over 10%, while
POWERaDE products increased over 14%. With the introduction of a new brand of
bottled water, Le Bleu, sales volumes increased 125.4%.
Coke-Carolina continued its commitment to expanding its cold soft drink
business with significant increases in capital expenditures, such as increased
purchases of vending machines and cold drink coolers. Coke-Carolina recognizes
that the cold drink market channel expands the availability of Coke-Carolina's
products and generally provides a solid return on investment.
Coke-Carolina remains committed to establishing strong volume growth by
continued development of new age products, by its commitment to increasing
distribution of twenty-ounce plastic bottles in both vending and cold drink
market segments and by aggressive pursuit of the expansion of Coke-Carolina's
marketing calendars and calendar trade marketing customers. An example of
Coke-Carolina's aggressiveness can be seen in the acquisition of thirteen
additional advertising weeks with a major supermarket customer that comprises
approximately 10% of Coke-Carolina's volume.
RESULTS OF OPERATIONS: FISCAL 1998 COMPARED TO FISCAL 1997
Net sales for fiscal 1998 increased significantly compared to fiscal
1997:
<TABLE>
<CAPTION>
Fiscal 1998 Fiscal 1997 Increase %Increase
----------- ----------- -------- ---------
<S> <C> <C> <C> <C>
Net Sales Revenue $21.89 million $19.86 million $2.03 million 10.2%
Physical Case Volume 2.44 million 2.23 million 209,834 cases 9.4%
Net Sales per Case $8.97 $8.90 $0.07 0.8%
</TABLE>
These strong increases in net sales were the result of the continued
emphasis in the supermarket and take home channels and the cold drink and
vending channels. The strong increase in net revenues were tempered slightly by
the 10.8% increase in price discounts which rose from $8.28 million in fiscal
1997 to $9.17 million in fiscal 1998. This increase in price discounts was
largely the result of the increased case volume and the continued pressure on
net prices in the supermarket channels with the acquisition of additional
advertising weeks.
Coke-Carolina reported net income of $560,801, or net income per share
of $130.94, for fiscal 1998 compared to $272,092, or $63.53 per share, for
fiscal 1997. This increase in net income was the result of strong growth in net
revenues and case volume and the relative stability of operating expenses in the
beverage operation. Coke-Carolina's profit from operations of Heath Oil was
$46,952. Heath Oil discontinued all wholesale and retail operations during the
first quarter of 1998 and began the disposition of its assets at that time. The
disposition of these assets accounted for most of the profits of Heath Oil
during 1998.
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<PAGE>
Cost of goods sold increased 12.9% or $1.5 million in fiscal 1998
compared to the previous year. The increase was due largely to the increased
sales volume. Manufacturing materials and labor costs continued to increase
during fiscal 1998. The increases in manufacturing materials and labor costs and
the reductions in the number of cases produced drove the costs of goods sold per
case to the point that it was no longer profitable to operate a manufacturing
facility. After December 18, 1998 all beverage products sold by Coke-Carolina
were purchased from South Atlantic Canners and Snyder Production Facility, both
managed by Consolidated. The purchase of products sold should allow
Coke-Carolina to better control the cost of goods sold and aid in the budgeting
of cost of goods expenditures in the future.
Total operating expenses increased less than 1% over fiscal 1997
expenses. Salaries and advertising costs increased in the aggregate $400,495 or
9% and 21.7%, respectively. These additional costs were the result of the growth
in case sales and the aggressive advertising plan that Coke-Carolina continues
to follow. Decreases in administrative expenses - employee medical aid and
pension costs, 25.7% and 89.4%, respectively - resulted in $419,061 of cost
savings. The reduction in employee benefit costs was the direct result of the
proposed merger of Coke-Carolina with Consolidated. Coke-Carolina believes that
if it is to sustain the volume growth that it experienced in 1998, it will have
to continue to maintain or increase advertising costs in the future.
Depreciation expenses increased 3% in fiscal 1998. The increase in
depreciation costs is directly attributed to Coke-Carolina's aggressive cold
drink and vending strategy. Other income in fiscal 1998 was comprised of
interest earned on savings and checking funds. Interest earnings remained
unchanged from fiscal 1997 to fiscal 1998. The income tax rate for federal and
state taxes was 35% in fiscal 1998 and 38% in fiscal 1997.
RESULTS OF OPERATIONS: FISCAL 1997 COMPARED TO FISCAL 1996
Net sales for fiscal 1997 decreased 0.94% compared to fiscal 1996:
Fiscal 1997 Fiscal 1996 Decrease
----------- ----------- --------
Net Sales $19.86 million $20.05 million $185,491
Net Sales per Case $8.90 $8.91 $0.01
While fiscal 1997 net sales were slightly below net sales for fiscal 1996, gross
sales revenues increased by 1.0%. This increase was due to shifts in package mix
away from two liter packages, sold predominately in the supermarket and take
home channel to the twenty-ounce plastic and can packages sold in the cold drink
and vending (individual servings) channels. The increase in gross sales revenues
was offset by intense price competition in the soft drink industry. As a result
of the price competition, price discounts increased from $8.03 million in fiscal
1996 to $8.28 million in fiscal 1997, representing a 3% increase.
Coke-Carolina reported net income of $272,092, or net income per share
of $63.53, for fiscal 1997 compared to $518,447, or $121.05 per share, for
fiscal 1996. The large decrease in net income was mostly the result of increased
operating expenses, such as employee wages, employee medical insurance, and
advertising expenses in the Coca-Cola operations. Coke-Carolina experienced a
significant decrease in operating losses from Heath Oil Company, its
wholly-owned subsidiary. The decrease in the net losses--$123,636 in fiscal
1996, to $10,416 in fiscal 1997--was the result of reduced operating costs as
Coke-Carolina moved toward the discontinuance of Heath Oil's operations.
Cost of goods sold decreased by 1.8% for fiscal 1997 in comparison to
the previous year. This decrease was primarily due to raw material cost
remaining relatively stable--sugar and plastic bottles decreased in cost from
the previous year while syrup concentrates continued its annual increase in
cost.
50
<PAGE>
Operating expenses increased 9.7% in fiscal 1997 in comparison to the
previous year. This increase was primarily due to increases in employee wages of
7% and a 61% increase in employee medical insurance. Higher advertising
expenses, such as increased customer marketing expenses and additional
participation in The Coca-Cola Company's advertising programs, resulted in an
11% increase in advertising cost. Coke-Carolina believes the increase in
advertising is necessary if sustained volume growth is to occur in the future.
Depreciation expenses increased by 5% in fiscal 1997. The increase in
depreciation was attributable to increased purchases of vending equipment. Other
income of Coke-Carolina for the year was comprised mainly of interest earned on
savings and checking fund balances. Interest revenue showed little change from
fiscal 1996 to fiscal 1997 as interest rates and average balances in accounts
remained relatively unchanged. The effective tax rate for federal and state
income taxes was approximately 38% for both fiscal 1997 and fiscal 1996.
LIQUIDITY AND CAPITAL RESOURCES
CAPITAL RESOURCES. Coke-Carolina has historically financed its
operations and capital expenditures solely with funds provided by operating
activities. Cash flows from operating activities totaled $1,221,027 for fiscal
1998, after adding back depreciation totaling $660,226. Cash flows from
operating activities totaled $921,656 for fiscal 1997, after adding back
depreciation totaling $643,106.
Operating cash flows for fiscal 1998 exceeded Coke-Carolina's total
expenditures for the same period by $351,710 due to increased operating income
producing higher net income . However, operating cash flows for fiscal 1997 were
inadequate to meet Coke-Carolina's total expenditures for the same period due to
capital expenditures and stockholder dividends exceeding available cash flow. In
order to meet cash flow and other operating requirements for fiscal 1997,
Coke-Carolina utilized $435,989 of accumulated retained earnings.
CAPITAL INVESTING ACTIVITIES. Additions to property, plant and equipment
during fiscal 1998 were approximately $726,712. For fiscal 1998, Coke-Carolina
invested 54% of its capital expenditures in vending and cold drink equipment,
26% in production machinery, 18% in vehicles and 2% in plant capital
improvements. During fiscal 1997, expenditures for property, plant and equipment
were approximately $709,300, of which Coke-Carolina invested 55% in vending and
cold drink equipment, 24% in production machinery and 21% in vehicles.
Coke-Carolina estimates that its capital expenditures are approximately 4% and
3% of sales, net of discounts for fiscal 1998 and fiscal 1997, respectively.
In the past fiscal years, Coke-Carolina's use of capital expenditures,
beyond production expenditures, has been to invest in maintaining and expanding
its vending and cold drink market segments. Coke-Carolina will continue to look
for opportunities to expand its vending and cold drink market segments which
will have the effect of requiring additional capital expenditures for such items
as vehicles and vending and cold drink equipment. In connection with the merger,
Consolidated is purchasing certain vending equipment and is loaning such
equipment to Coke-Carolina without charge for placement in Coke-Carolina's
territory. If the merger is not consummated, Coke-Carolina will reimburse
Consolidated for its costs.
FORWARD-LOOKING STATEMENTS
Certain information included in this Proxy Statement/Prospectus contains
statements regarding Coke-Carolina that are "forward-looking statements" within
the meaning of Section 27A of the Securities Act and Section 21E of the Exchange
Act. Such forward-looking statements include, but are not limited
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<PAGE>
to, future prospects, developments, and business strategies for its operations.
Such forward-looking statements involve important risks and uncertainties that
could significantly affect anticipated results in the future and, accordingly,
such results may differ from those expressed in any forward-looking statements.
These risks and uncertainties include, but are not limited to, uncertainties
affecting the soft drink business generally, effects of competition, and the
effects of changes in the economy. Investors are cautioned that any such
statements are not guarantees of future performance.
YEAR 2000
The Year 2000 problem is the result of computer programs being written
using two digits (rather than four digits) to define the applicable year. Any of
Coke-Carolina's programs that have time-sensitive software may recognize a date
using "00" as the year 1900 instead of the year 2000. Generally speaking, this
could result in system failures or miscalculations.
Coke-Carolina has reviewed and continues to review its computer systems
to identify the systems and software that could be affected by the year 2000
issue. Coke-Carolina's original plan to resolve any year 2000 issues was to
internally modify existing route accounting software and upgrade current
personal computer software. It was anticipated such changes would resolve the
year 2000 issue for Coke-Carolina and could be tested and implemented by
December 31, 1999, without any significant impact on Coke-Carolina's operating
cash flow.
Coke-Carolina recently reevaluated its strategy in resolving any year
2000 issues. It is believed that the purchase of all new operating software and
hardware is the best solution to the year 2000 issue which will allow
Coke-Carolina to become more efficient in all phases of its operations. It is
estimated the cost of replacing the existing computer software and hardware
would be approximately $300,000. The anticipated expenditures would have a
material and significant impact on Coke-Carolina's future financial results and
operating cash flows.
52
<PAGE>
COKE-CAROLINA COMMON STOCK PRICES AND DIVIDENDS
Coke-Carolina has one class of common stock outstanding, the par value
of which is $100 per share. There is no established public trading market for
the Coke-Carolina Common Stock. As of March 31, 1999, 4,283 shares of
Coke-Carolina Common Stock were outstanding and held of record by 86 persons.
With respect to the Coke-Carolina Common Stock, in fiscal 1996, fiscal
1997, and fiscal 1998, Coke-Carolina made quarterly dividend payments of $20.00
per share in each of the first, second and third quarters, and $40.00 per share
in the fourth quarter, for an aggregate annual dividend of $100.00 per share,
per fiscal year.
Pursuant to the merger agreement, the issued and outstanding shares of
Coke-Carolina Common Stock will be converted into the right to receive the
merger consideration, composed of Consolidated Common Stock, Installment Notes
and cash. See "THE MERGER - Merger Consideration." To the extent a shareholder
of Coke-Carolina receives Consolidated Common Stock as part of such
shareholder's portion of the merger consideration, the amount and frequency of
future dividends with respect to Consolidated Common Stock will be determined by
Consolidated's board of directors.
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<PAGE>
COKE-CAROLINA PRINCIPAL SHAREHOLDERS AND MANAGEMENT OWNERSHIP
The following table sets forth, as of March 31, 1999, certain
information with respect to ownership of the outstanding Coke-Carolina Common
Stock by (i) all persons known to Coke-Carolina to own beneficially more than 5%
of the outstanding Coke-Carolina Common Stock, (ii) each director of
Coke-Carolina, (iii) each executive officer of Coke-Carolina, and (iv) all
directors and executive officers of Coke-Carolina as a group. Unless otherwise
indicated, to Coke-Carolina's knowledge, each listed shareholder has sole voting
and investment power over all shares listed.
<TABLE>
<CAPTION>
Coke-Carolina Common Stock
--------------------------
Number of
Shares
Beneficially Percentage of
Name and Address of Beneficial Owner Owned Outstanding Shares
- ------------------------------------ ----- ------------------
<S> <C> <C> <C>
Trustees of the
Ann H. Heath Trust(1)
Post Office Box 1150
Sumter, South Carolina 29151 ........................ 1,071 25.0%
Trustees of the
Trust of A.T. Heath(1)
Post Office Box 1150
Sumter, South Carolina 29151 ........................ 1,097 25.6%
Trustees of the
Raymon Schwartz Trust(2)
10 Law Range
Sumter, South Carolina 29150 ........................ 235 5.5%
A.B. Heath
Director
Post Office Box 787
Sumter, South Carolina 29151 ........................ 60(3) 1.4%
A.T. Heath III
Executive Vice President and Director
21 Swan Lake Drive
Sumter, South Carolina 29150 ........................ 199(3) 4.7%
W.S. Heath(4)
President and Director
72 Paisley Park
Sumter, South Carolina 29150 ........................ 209 4.9%
Peter J. Flanagan
Vice President of Operations and Treasurer
66 Paisley Park
Sumter, South Carolina 29150 ....................... 5 *
</TABLE>
54
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Harriette Wimberly
Director
30 Swan Lake Drive
Sumter, South Carolina 29150 ........................ 144.5 3.4%
R. Bland Roper
Director
Post Office Box 153
Laurens, South Carolina 29360 ....................... 66 1.5%
Ramon Schwartz, Jr ..................................
Director
10 Law Range
Sumter, South Carolina 29150 ........................ 90(3) 2.1%
Dorothy H. Kent
Director and Secretary
600 John Ballentine Road
Irmo, South Carolina 29063 ......................... 36(3) *
All Executive Officers and Directors ................ 3,212.50 75.0%
</TABLE>
- ----------
* Less than one percent.
(1) The trustees of each such trust are A.T. Heath, III, A.B. Heath and
Dorothy H. Kent. The trustees exercise voting control and maintain the
investment power over the trust, and are, consequently, the beneficial
owners of all shares owned by the trust.
(2) The trustees of such trust are Ramon Schwartz, Jr. and Edith S. Joel.
The trustees exercise voting control and maintain the investment power
over the trust, and are, consequently, the beneficial owners of all
shares owned by the trust.
(3) Does not include the shares of the trusts for which the individual is a
beneficial owner by virtue of being a trustee and exercising voting
control and maintaining investment power.
(4) Mr. Heath's shares are owned by him in his capacity as Trustee of the
William S. Heath Trust; however, Mr. Heath exercises voting control and
maintains the investment power over the trust.
Consequently, Mr. Heath is the beneficial owner of the shares.
55
<PAGE>
COMPARISON OF RIGHTS OF COMMON STOCKHOLDERS
OF CONSOLIDATED AND COKE-CAROLINA
The rights of Consolidated shareholders are governed by Consolidated's
Restated Certificate of Incorporation (the "Consolidated Certificate of
Incorporation"), its Bylaws (the "Consolidated Bylaws") and the Delaware General
Corporation Law (the "DGCL"). The rights of Coke-Carolina shareholders are
governed by the articles of incorporation of Coke-Carolina (the "Coke-Carolina
Articles of Incorporation"), the Coke-Carolina Bylaws (the "Coke-Carolina
Bylaws"), and the South Carolina Business Corporation Act (the "SCBCA"). After
the effective time, the rights of Coke-Carolina shareholders who become
Consolidated shareholders will be governed by the Consolidated Certificate of
Incorporation, the Consolidated Bylaws and the DGCL.
The following is a summary of the material differences between the
rights of holders of Consolidated Common Stock and rights of holders of
Coke-Carolina Common Stock. This summary is not intended to be complete and is
qualified in its entirety by reference to applicable provisions of the DGCL and
SCBCA, and to the Consolidated Certificate of Incorporation, the Coke-Carolina
Articles of Incorporation and the Bylaws of each of Consolidated and
Coke-Carolina.
VOTING RIGHTS
CONSOLIDATED. The Consolidated Certificate of Incorporation provides for
the following classes of capital stock:
o Common Stock, entitling its holders to one vote for each share
held of record;
o Class B Common Stock, entitling its holders to 20 votes for each
share held of record;
o Class C Common Stock, entitling its holders to 1/20th of a vote
for each share held of record; and
o Convertible Preferred Stock, Non-Convertible Preferred Stock and
Preferred Stock (collectively, the "Consolidated Preferred
Stock"), none of which entitles its holders to any voting rights,
except as otherwise expressly required by applicable law.
Consolidated does not utilize cumulative voting in the election of
directors. Except as described in the Consolidated Certificate of Incorporation,
all three classes of common stock have the same rights, including the right to
share equally in the liquidation or dissolution of the Company. Further, except
to the extent otherwise provided by law, holders of Common Stock, Class B Common
Stock and Class C Common Stock vote together as a single voting group on all
matters brought before Consolidated's stockholders.
As of March 11, 1999, Consolidated had issued and outstanding (a)
6,023,739 shares of Common Stock, (b) 2,341,108 shares of Class B Common Stock,
(c) no shares of Class C Common Stock and (d) no shares of Consolidated
Preferred Stock.
COKE-CAROLINA. Coke-Carolina's Articles of Incorporation provides for a
single class of common stock. Coke-Carolina's Bylaws provide that each holder of
capital stock is entitled to one vote for each share held of record.
Coke-Carolina's Bylaws provide for cumulative voting in the election of
directors. Cumulative voting in the election of directors permits a shareholder
to cast the number of votes equal to
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<PAGE>
the number of his or her shares multiplied by the number of directors to be
elected. A shareholder may give one nominee all of these votes or may distribute
the votes among the nominees as he or she desires.
ACTION BY SPECIAL MEETINGS; WRITTEN CONSENTS
CONSOLIDATED. Under the DGCL, special meetings of stockholders may be
called by the board of directors or any such person or persons as may be
authorized by the certificate of incorporation or by the bylaws. The
Consolidated Bylaws provide that a special meeting may be called by
Consolidated's Chairman of the Board, any Vice-Chairman, President, Secretary or
its board of directors or by the holders of not less than 10% of the total votes
entitled to be cast at the special meeting.
As permitted by the DGCL, Consolidated's Certificate of Incorporation
provides that no action may be taken by the stockholders without a meeting
unless a written consent to such action is signed by the holders of all of the
Consolidated stock entitled to vote on such action. The Consolidated Bylaws
provide that any action may be taken without a meeting, provided that a written
consent setting forth the action is signed by holders of outstanding stock
representing at least the minimum number of votes necessary to authorize such
action if a meeting were held.
COKE-CAROLINA. Under the SCBCA, special meetings of shareholders may be
called by the board of directors or any person or persons as may be authorized
by the articles of incorporation or by the bylaws or by the holders of at least
10% of all the votes entitled to be cast on any issue which would be brought
before a special meeting. The Coke-Carolina Bylaws provide that special meetings
of the shareholders may be called at any time by either the President of the
corporation, by any three directors, the holders of at least forty percent or
more of the capital stock issued, or whenever so requested by the directors. The
SCBCA provides action required or permitted to be taken at a shareholders'
meeting may be taken without a meeting if the action is taken by all the
shareholders entitled to vote on the action and such action is evidenced by
written consent describing the action taken, signed by all such shareholders
entitled to vote on the action.
BOARD OF DIRECTORS; FILLING VACANCIES; REMOVAL
CONSOLIDATED. The Consolidated Certificate of Incorporation and Bylaws
provide that the number of directors which will comprise the full board of
directors of the corporation will consist of no less than nine and no more than
twelve members, the exact number to be determined from time to time by the
stockholders or the board of directors of Consolidated. Directors are not
required to be shareholders of Consolidated. There are currently eleven members
on the Consolidated board of directors. The board of directors is to be divided
as equally as possible into three classes. Each class of directors is elected
for a term of three years, so that the term of one class expires each year.
Vacancies and newly created directorships may be filled by a majority of the
directors remaining in office, even though less than a quorum. Consolidated
directors may be removed from office, prior to the expiration of their
three-year term, only for cause and only by the vote of a majority of all the
shares of stock entitled to vote for the election of directors.
COKE-CAROLINA. The Coke-Carolina Bylaws provide that the number of
directors which will comprise the full board of directors of the corporation
will consist of no less than five and no more than ten members, the exact number
to be determined annually by the stockholders of Coke-Carolina. Each director of
Coke-Carolina is required to be a shareholder of Coke-Carolina, and a transfer
by a director of all of his or her stock in the corporation operates as a
resignation of his or her position as a director of Coke-Carolina. There are
currently seven members on the Coke-Carolina board of directors. According to
the SCBCA, vacancies in the board of directors may be filled by the shareholders
or by the remaining directors in office, even if less than a quorum of directors
are remaining in office. The SCBCA also
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<PAGE>
provides one or more directors may be removed from office without cause by the
affirmative vote of shareholders if the number of votes cast for removal exceeds
the number of votes cast against removal. If cumulative voting is authorized, a
director may not be removed from office if the number of votes sufficient to
elect him under cumulative voting is voted against removal.
LIABILITY OF DIRECTORS
CONSOLIDATED. As permitted by the DGCL, the Consolidated Certificate of
Incorporation limits the personal liability of its directors for monetary
damages for a breach of the fiduciary duty, except in connection with (a) any
breach of the director's duty of loyalty to Consolidated or its stockholders,
(b) acts or omissions not in good faith or which involve intentional misconduct
or a knowing violation of law, (c) section 174 of the DGCL or (d) for any
transaction from which the director derived an improper personal benefit.
COKE-CAROLINA. Although permitted by the SCBCA, Coke-Carolina's Articles
of Incorporation do not attempt to limit the personal liability of its
directors. Under the SCBCA, any such limitation would not eliminate or limit the
liability of a director of Coke-Carolina for (a) any breach of a director's duty
of loyalty to the corporation or the shareholders; (b) acts or omissions not in
good faith or which involve gross negligence, intentional misconduct or a
knowing violation of law; (c) unlawful payment of a dividend or an unlawful
stock purchase or redemption; or (d) any transaction involving improper personal
benefits to the director.
INDEMNIFICATION OF OFFICERS AND DIRECTORS
CONSOLIDATED. The Consolidated Bylaws provide that the corporation will
indemnify its directors to the fullest extent permitted by law. Under Delaware
law, a corporation may, and in certain circumstances must, indemnify its
officers, directors, employees and agents against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by them in connection with suits and other legal proceedings if they
acted in good faith and in a manner they reasonably believed to be in or not
opposed to the best interests of the corporation, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe their conduct
was unlawful. As to actions by or in the right of Consolidated, the DGCL
prohibits indemnification of a person serving as a director, officer, employee
or agent of a corporation, or serving at the request of the corporation as a
director, officer, trustee, employee or agent of or in any other capacity with
another corporation, partnership, joint venture, trust or other enterprise, in
respect of any claim, issue or matter as to which such person has been adjudged
liable to the corporation unless and only to the extent that the Court of
Chancery or the court in which such action or suit was brought determines that,
despite the adjudication of liability but in view of all the circumstances, such
person is entitled to indemnity for such expenses which such court deems proper.
Under the DGCL, a determination that the director or officer has met the
statutory standard of conduct is a prerequisite to indemnification by a
corporation (other than court-ordered or mandatory indemnification). Under the
DGCL, this determination can be made (i) by the board of directors by majority
vote of directors not at the time parties to the proceeding for which
indemnification is sought (even though such directors do not constitute a
quorum); (ii) by a committee of directors designated by a majority vote of
directors (even though less than a quorum); (iii) by special legal counsel; or
(iv) by the stockholders.
COKE-CAROLINA. The SCBCA permits a corporation to indemnify directors
and officers in substantially the same way as the DGCL. Although permitted by
the SCBCA, neither Coke-Carolina's Articles of Incorporation or Coke-Carolina's
Bylaws attempt to provide for indemnification of directors and officers to the
extent permitted by the SCBCA.
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DIVIDENDS AND DISTRIBUTIONS
CONSOLIDATED. A Delaware corporation, unless otherwise restricted by its
certificate of incorporation, may pay dividends out of surplus, or if no surplus
exists, out of net profits for the fiscal year in which the dividend is declared
and/or for the preceding fiscal year (but the directors may not declare and pay
dividends out of such net profits if the amount of capital of the corporation is
less than the aggregate amount of capital represented by the issued and
outstanding stock of all classes having preference upon the distribution of
assets). The Consolidated Certificate of Incorporation limits dividends as
follows:
o no dividend of cash or property is payable on the Class B Common
Stock unless an equal dividend is to be paid on the Common Stock
and an equal or greater dividend is to be paid on the Class C
Common Stock;
o no dividend of cash or property is payable on the Common Stock
unless an equal dividend is to be paid on the Class C Common
Stock (dividends may be paid on the Common Stock without a
corresponding dividend on the Class B Common Stock);
o no dividend of cash or property is payable on the Class C Common
Stock unless an equal dividend is to be paid on the Common Stock;
and
o no dividend in the form of common stock may be made on any of the
classes of common stock unless a like dividend is to be made to
the other classes of common stock.
COKE-CAROLINA. Unless provided otherwise by its articles of
incorporation, under the SCBCA a South Carolina corporation may pay dividends or
make other distributions with respect to its shares if after the dividend or
distribution the corporation has the ability to pay its debts as they become due
and has net assets in excess of all senior claims upon dissolution.
Coke-Carolina's Articles of Incorporation do not limit its ability to pay
dividends or make other distributions on common stock.
SHAREHOLDER APPROVAL OF MERGERS
DGCL. Under the DGCL, a merger generally must be approved by the
stockholders of each constituent corporation by the affirmative vote of the
holders of a majority of the outstanding shares entitled to vote on the merger.
Stockholders of the surviving corporation need not approve the merger if: (i)
the corporation's certificate of incorporation will not be amended as a result
of the merger; (ii) each share of the corporation's stock outstanding
immediately prior to the effective date of the merger will be an identical
outstanding or treasury share of the corporation after the effective date of the
merger; and (iii) either no shares of the corporation's common stock and no
securities convertible into such stock will be issued pursuant to the merger or
the authorized unissued shares or treasury shares of the corporation's common
stock to be issued pursuant to the merger do not exceed 20% of the shares of the
corporation's common stock outstanding immediately prior to the effective date
of the merger.
SCBCA. Under the SCBCA a corporation may merge into another corporation
if the board of directors of each corporation party to the merger adopts and its
shareholders, to the extent required, approve a plan of merger. The board of
directors is required to recommend the plan of merger to the shareholders,
unless the board of directors determines that because of conflict of interest or
other special circumstances, it should make no recommendation and communicates
the basis for its determination to the shareholders with the plan. The plan of
merger must be approved by the shareholders by two-thirds (2/3rds) of the votes
entitled to be cast on the plan, regardless of the class or voting group to
which the
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<PAGE>
shares belong. Under the SCBCA, shareholders of the surviving corporation need
not approve the merger if: (i) the articles of incorporation of the surviving
corporation will not differ (apart from certain minor changes allowed) from its
articles before the merger; (ii) each shareholder of the surviving corporation
whose shares were outstanding immediately before the effective date of the
merger will hold the same number of shares, and such shares will have identical
designations, preferences, limitations, and relative rights, immediately after;
(iii) the number of voting shares outstanding immediately after the merger, plus
the number of voting shares issuable as a result of the merger, will not exceed
by more than 20% the total number of voting shares of the surviving corporation
outstanding immediately before the merger; and (iv) the number of participating
shares outstanding immediately after the merger, plus the number of
participating shares issuable as a result of the merger, will not exceed by more
than 20% the total number of participating shares outstanding immediately before
the merger.
ANTI-TAKEOVER PROVISIONS
CONSOLIDATED. The DGCL prohibits certain business combinations between a
corporation and any person who has acquired beneficial ownership of 15% or more
of the voting stock of the corporation (an "interested shareholder") for a
period of three years from the date such stockholder became an interested
stockholder, unless (i) such interested stockholder, prior to becoming an
interested stockholder, obtained the approval of the board of directors of
either the business combination or the transaction that resulted in such person
becoming an interested stockholder, (ii) such interested stockholder became the
beneficial owner of at least 85% of the outstanding shares of voting stock of
the corporation (excluding shares owned by persons who are directors, officers,
their affiliates or associates and by subsidiaries of the corporation and
certain employee stock plans) in the same transaction in which the interested
stockholder became an interested stockholder or (iii) on or subsequent to the
date the interested stockholder became an interested stockholder, the business
combination is approved by the board of directors and is authorized at a meeting
of stockholders by the affirmative vote of at least two-thirds (2/3rds) of the
voting stock that is not owned by the interested stockholder. In general, a
Delaware corporation must specifically elect, through an amendment to its bylaws
or certificate of incorporation, not to be governed by these provisions,
Consolidated has not made such an election and, therefore, is subject to the
terms of these provisions. Article VIII of the Consolidated Bylaws states that
the provisions of the North Carolina Shareholder Protection Act (which requires
the affirmative vote of 95% of the voting shares of a corporation in certain
circumstances) do not apply to transactions involving Consolidated.
COKE-CAROLINA. The SCBCA has implemented certain measures which could
have the effect of discouraging takeover attempts not supported by
Coke-Carolina's board of directors. Section 35-2-219 of the Code of Laws of
South Carolina imposes super majority voting requirements or a fair pricing
procedure for certain business combinations with a shareholder that beneficially
owns 10% or more of the voting power of the outstanding voting shares unless a
"fair price" is met. Section 35-2-109 contains provisions restricting the voting
rights of persons who, through certain acquisitions ("control share
acquisitions"), are able to exercise control over certain South Carolina
corporations. A South Carolina corporation must specifically elect, through an
amendment to its bylaws or articles of incorporation, not to be governed by
these provisions. Coke-Carolina has not made such an election with respect to
either the fair price or the control share acquisition provisions of South
Carolina law, and thus both apply to Coke-Carolina.
AMENDMENT TO CERTIFICATE OF INCORPORATION, ARTICLES OF INCORPORATION AND BYLAWS
CONSOLIDATED. The DGCL requires the affirmative vote of the holders of a
majority of the shares entitled to vote to amend Consolidated's Certificate of
Incorporation. Under the DGCL, the approval of a separate class of shares is
also required if the proposed amendment would materially affect the rights or
powers of that class, as enumerated by statute. Because Consolidated has
different classes of stock
60
<PAGE>
outstanding, approval of a proposed amendment would require the approval of each
class of stock outstanding if such amendment would materially affect the rights
of such class. In addition, the Consolidated Certificate of Incorporation
requires the affirmative vote of the holders of two-thirds of the shares
entitled to vote to amend the provisions of the Certificate of Incorporation
relating to (a) the board of directors (such as number, term, classes, vacancies
and removal) and (b) the manner in which the Certificate of Incorporation may be
amended. The DGCL provides that the stockholders have the power to amend the
bylaws, and, as permitted by the DGCL, the Consolidated Certificate of
Incorporation confers upon the board of directors the power to amend the bylaws,
except that the directors may not adopt an amendment:
o Raising the quorum requirement to more than a majority of
stockholders having voting power or raising the voting
requirement for transaction business to more than a majority of
the votes cast;
o Providing that Consolidated is to be managed by anyone other than
the board of directors or its executive committee; and
o Amending any provision in the Consolidated Bylaws that
specifically requires shareholder approval for such amendment.
In addition, the Consolidated Bylaws require the affirmative vote of
two-thirds of the shares outstanding and entitled to vote in order to amend the
provisions in the bylaws relating to (a) actions by written consent of the
stockholders; (b) the number, term and qualification of directors and the manner
in which directors may be removed; (c) the manner in which the board of
directors may take action; and (d) the manner in which the bylaws may be
amended.
COKE-CAROLINA. Generally, under the SCBCA an amendment to a
corporation's articles of incorporation must be approved by: (a) two-thirds of
the votes entitled to be cast on the amendment, regardless of the class or
voting group to which the shares belong, and (b) two-thirds of the votes
entitled to be cast on the amendment within each voting group entitled to vote
as a separate voting group on the amendment. The holders of the outstanding
shares of a class are entitled to vote as a separate voting group (if
shareholder voting is otherwise required under the SCBCA) on a proposed
amendment to Coke-Carolina's Articles of Incorporation if the amendment would
result in certain fundamental changes to the rights and preferences of that
class. Because Coke-Carolina does not have separate classes of stock
outstanding, approval of a proposed amendment requires the approval of the
common stockholders voting as a single class. The SCBCA permits the following
provisions of a corporation's articles of incorporation to be amended by action
of the board of directors without shareholder approval: (a) changes in the
issued and unissued shares of an outstanding class of shares into a greater
number of whole shares, if the corporation has only that class of shares
outstanding, (b) minor changes to the corporate name and (c) certain minor
technical amendments. Except for certain types of provisions which may be
amended or repealed only by the shareholders, a South Carolina corporation's
board of directors may amend the corporation's bylaws unless the articles of
incorporation or bylaws reserve the power to the shareholders or the
shareholders, in adopting, amending or repealing a particular bylaw, provide
that the board of directors may not adopt, amend or repeal that bylaw or any
bylaw on that subject. Coke-Carolina's bylaws permit amendment of the bylaws
only by the shareholders.
SHAREHOLDER INSPECTION RIGHTS
CONSOLIDATED. Under the DGCL, any stockholder may inspect the books and
records of a corporation so long as such inspection is for a proper purpose.
61
<PAGE>
COKE-CAROLINA. Under the SCBCA, any shareholder may also inspect and
copy certain corporate records regardless of the shareholder's purpose, and may
also inspect and copy the corporation's accounting records, the record of
shareholders, excerpts from meetings of the board of directors (or any committee
thereof), minutes of shareholder meetings, and any action taken by the board of
directors or shareholders by written consent, if the shareholder's demand is
made in good faith and for a proper purpose. Coke-Carolina has not taken steps
to limit access by its 2% or less shareholders. The SCBCA also allows
shareholders holding at least 1% of any class of shares to conduct an inspection
of a corporation's tax returns.
APPRAISAL RIGHTS
CONSOLIDATED. The DGCL provides for stockholder appraisal rights in
connection with mergers and consolidations generally, but does not permit
appraisal rights for holders of any class or series of stock which, at the
record date fixed to determine stockholders entitled to receive notice of and to
vote at the meeting to act upon the agreement of merger or consolidation, were
either (i) listed on a national securities exchange or designated as a national
market system security on an interdealer quotation system by the National
Association of Securities Dealers, Inc. or (ii) held of record by more than
2,000 holders, so long as stockholders receive shares of the surviving
corporation or another corporation whose shares are so listed or designated or
held of record by more than 2,000 holders.
COKE-CAROLINA. Under the SCBCA, shareholders who comply with the
procedures for enforcing appraisal rights may exercise such rights, under
certain circumstances, upon the merger of a corporation, the consummation of a
plan of share exchange to which the corporation is the acquired party, the sale
or other disposition of all or substantially all of the corporation's assets
other than in the usual and regular course of business if the shareholder is
entitled to vote on the sale or exchange, upon certain fundamental amendments to
the articles of incorporation, the approval of a control share acquisition, and
as provided by the articles of incorporation, bylaws or resolution of the board
of directors.
62
<PAGE>
DISSENTERS' RIGHTS
Each shareholder of Coke-Carolina is entitled to dissent from the merger
and obtain payment of the Fair Value (as defined below) for his shares of
Coke-Carolina Common Stock pursuant to Chapter 13 of Title 33 of the SCBCA, a
copy of which is attached hereto as Appendix G. Any shareholder who does not
timely comply with the provisions of the SCBCA will be bound by the terms of the
merger agreement and will be entitled to receive Consolidated Common Stock,
Installment Notes or cash, or a combination thereof, as applicable, as provided
in the merger agreement.
The term "Fair Value" means the value of shares of Coke-Carolina Common
Stock immediately before the shareholder vote authorizing the merger is taken,
excluding any appreciation or depreciation in anticipation of the merger (unless
exclusion would be inequitable). The value of the shares of Coke-Carolina Common
Stock will be determined by techniques that are generally accepted in the
financial community. The Fair Value of the Coke-Carolina shares may be more or
less than the consideration that a holder of such stock would be entitled to
receive in the merger.
The following is a summary of the procedures to be followed by
Coke-Carolina shareholders who wish to dissent from the merger. It does not
purport to be a complete statement of the procedures to be followed by
Coke-Carolina shareholders desiring to exercise dissenters' rights of appraisal.
In the event of a conflict between this summary and the provisions of the SCBCA,
the SCBCA will prevail. Because exercise of such rights requires strict
adherence to the statutory provisions referred to in this summary, each
Coke-Carolina shareholder who may desire to exercise such rights should adhere
to the provisions of such laws and consult with such holder's legal advisers.
Pursuant to Section 33-13-210 of the SCBCA, any shareholder who wishes
to assert dissenters' rights (i) must deliver to Coke-Carolina prior to the
shareholders' vote on the merger written notice of his or her intent to demand
payment of the Fair Value for his shares if the merger is effectuated (a "Notice
of Intent"), and (ii) must not vote his or her shares in favor of the merger. A
vote in favor of the merger cast by the holder of a proxy solicited by
Coke-Carolina does not disqualify a shareholder from demanding payment of the
Fair Value for his shares. A record shareholder of Coke-Carolina may assert
dissenters' rights as to fewer than all the shares registered in his name if (i)
he or she dissents with respect to all shares beneficially owned by any one
person, and (ii) he or she notifies Coke-Carolina in writing of the name and
address of each person on whose behalf he asserted dissenters' rights. If he or
she does so, the shares as to which he or she dissents and the other shares will
be treated as though they were registered in the names of different
shareholders. A beneficial shareholder may assert dissenters' rights as to
shares of Coke-Carolina held on his or her behalf only if (i) he or she dissents
with respect to all shares of which he or she is the beneficial shareholder or
over which he or she has power to direct the vote with regard to the merger, and
(ii) he or she notifies Coke-Carolina in writing of the name and address of the
record shareholder of the shares of Coke-Carolina to which he or she is
exercising dissenters' rights, if known to him or her.
Within ten days of the shareholder approval of the merger, the Surviving
Corporation will give written notice to each shareholder who timely filed a
Notice of Intent (the "Dissenters' Notice"). The Dissenters' Notice must (i)
state where the demand for payment and certificated shares must be sent, (ii)
inform the holders of uncertificated shares of any restrictions on transfer
after receipt of the payment demand, (iii) include a form for demanding payment,
(iv) specify a date by which Coke-Carolina must receive the payment demand, such
date to be more than 30 but less than 60 days after the Dissenters' Notice was
delivered, and (v) contain a copy of Chapter 13 of Title 33 of the SCBCA.
Each shareholder sent a Dissenters' Notice and electing to assert
dissenters' rights must file with the Surviving Corporation a notice (the
"Payment Demand") demanding payment of the Fair Value,
63
<PAGE>
certifying whether he (or the beneficial shareholder on whose behalf he or she
is asserting dissenters' rights) acquired beneficial ownership of the shares
before the date specified in the Dissenters' Notice. Any shareholder filing a
Payment Demand is required to deposit his or her share certificates with the
Surviving Corporation simultaneously with filing the Payment Demand. A
shareholder who files a Payment Demand with the Surviving Corporation retains
all other rights of a shareholder until such rights are canceled or modified by
the merger.
Within sixty days after the expiration of the period in which
shareholders electing to assert dissenters' rights must file the Payment Demand,
the Surviving Corporation will pay each dissenting shareholder who filed a
Payment Demand the amount the Surviving Corporation deems to be the Fair Value
of his or her shares, plus accrued interest. The payment of the Fair Value will
be accompanied by (i) Coke-Carolina's balance sheet, (ii) Coke-Carolina's income
statement, (iii) a statement of changes in shareholders' equity of
Coke-Carolina, (iv) the latest available interim financial statements, if any,
of Coke-Carolina, (v) a statement of Coke-Carolina's determination of the Fair
Value and an explanation of how the Fair Value was calculated, (vi) an
explanation of how the interest was calculated, (vi) a statement of the
shareholder's right to demand additional payment and (vii) a copy of Chapter 13
of Title 33 of the SCBCA.
The Surviving Corporation may elect to withhold payment described in the
immediately preceding paragraph as to any shares of those dissenting
shareholders (or the beneficial owner on whose behalf he or she has filed a
Payment Demand) who were not the beneficial owners on the date set forth in the
Dissenters' Notice as the date of the first announcement to the news media or to
the shareholders of the terms of the merger, unless the beneficial ownership of
the shares devolved upon him or her by operation of law from a person who was
the beneficial owner on the date of the first announcement (the "After-Acquired
Shares"). To the extent the Surviving Corporation elects to withhold payment to
shareholders of After-Acquired Shares after consummating the merger, the
Surviving Corporation will estimate the Fair Value, plus accrued interest, and
will offer to pay this amount for the After-Acquired Shares to such shareholders
who agree to accept it in full satisfaction of their Payment Demand. A
shareholder of After-Acquired Shares may reject the Surviving Corporation's
offer and demand payment in accordance with the procedures of the Shareholder
Counteroffer (defined below).
If the dissenting shareholder believes that (i) the amount paid by the
Surviving Corporation (or offered in the case of After-Acquired Shares) is less
than the Fair Value of his shares or that the interest due is calculated
incorrectly, (ii) Coke-Carolina fails to make payment within 60 days of the
dissenter's Payment Demand or (iii) Coke-Carolina, having failed to take the
proposed action, does not return the certificate or release the transfer
restrictions within 60 days of the dissenter's Payment Demand, the dissenting
shareholder may notify the Surviving Corporation in writing of his or her own
estimate of the Fair Value of his shares and amount of interest due and demand
payment of his or her estimate (less the amount paid by the Surviving
Corporation, if any) (the "Shareholder Counteroffer"). The dissenting
shareholder must deliver the Shareholder Counteroffer to the Surviving
Corporation within thirty days after the Surviving Corporation made payment (or
offered to make payment in the case of After-Acquired Shares) to the dissenting
shareholder.
If a dissenting shareholder provides a Shareholder Counteroffer to the
Surviving Corporation and it remains unsettled for sixty days after receipt by
the Surviving Corporation of the Shareholder Counteroffer, the Surviving
Corporation will commence a legal proceeding within the sixty day period,
whereby the appropriate court will determine the Fair Value of the shares and
accrued interest due. In the event the Surviving Corporation does not commence
the legal proceeding within the sixty day period, the Surviving Corporation will
pay each dissenting shareholder who has filed a Shareholder Counteroffer, the
amount claimed by the dissenting shareholder to be the Fair Value and amount of
interest due (less the Fair Value and accrued interest amounts previously paid
by the Surviving Corporation, if any).
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<PAGE>
The court will determine all costs of the proceeding, including the
compensation of appraisers appointed by the court, but excluding fees and
expenses of attorneys and experts of the parties. Such costs will be assessed
against the Surviving Corporation, except that the court may assess the costs
against all or some of the dissenters, in amounts the court finds equitable, to
the extent the court finds any dissenters acted arbitrarily, vexatiously or not
in good faith in making a Shareholder Counteroffer. The court may also assess
the fees and expenses of counsel and experts for the respective parties, in
amounts the court finds equitable, in the following manner: (i) against the
Surviving Corporation and in favor of any or all dissenters if the court finds
the Surviving Corporation did not substantially comply with the requirements of
the SCBCA, or (ii) against either the Surviving Corporation or a dissenting
shareholder, in favor of any other party, if the court finds that the party
against whom the fees and expenses are assessed acted arbitrarily, vexatiously,
or not in good faith with respect to the rights provided by the SCBCA.
Neither Consolidated nor the Surviving Corporation will have dissenters'
rights in connection with the merger.
OTHER MATTERS
The Coke-Carolina board of directors is not aware of any matter to be
presented at the Coke-Carolina special meeting or any adjournments or
postponements thereof that is not listed in the Notice of Special Meeting and
discussed above. If other matters should come before the Coke-Carolina special
meeting, however, the proxyholders will vote in accordance with their best
judgment.
The financial statements of Coke-Carolina included in this Proxy
Statement/Prospectus have been prepared by management of Coke-Carolina and have
not been audited by any firm of independent public accountants. Such financial
statements have been prepared on an income tax basis.
LEGAL MATTERS
The validity of the shares of Consolidated Common Stock and Installment
Notes offered hereby will be passed upon for Consolidated by Witt, Gaither &
Whitaker, P.C., general counsel for Consolidated. As of March 11, 1999, members
of Witt, Gaither & Whitaker, P.C. reported ownership of shares of Consolidated
Common Stock as follows: John W. Murrey, III, 1,000 shares; Hugh J. Moore, Jr.,
100 shares; and Harold A. Schwartz, Jr., 100 shares. John W. Murrey, III is a
director of Consolidated and John F. Henry, Jr., Secretary of Consolidated, also
is a member of Witt, Gaither & Whitaker, P.C.
Kennedy Covington Lobdell & Hickman, L.L.P., tax counsel for
Consolidated, has delivered an opinion concerning certain Federal income tax
consequences of the merger. See "THE MERGER--Certain Federal Income Tax
Considerations."
EXPERTS
The consolidated balance sheets of Coca-Cola Bottling Co. Consolidated
and its subsidiaries at January 3, 1999 and December 28, 1997 and the related
consolidated statements of operations, of cash flows and of changes in
shareholders' equity for the years ended January 3, 1999, December 28, 1997 and
December 29, 1996 incorporated in this Prospectus by reference to the Annual
Report on Form 10-K of Coca-Cola Bottling Co. Consolidated for the year ended
January 3, 1999, have been so incorporated in reliance on the reports of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
said firm as experts in accounting and auditing.
65
<PAGE>
<TABLE>
<CAPTION>
INDEX TO FINANCIAL STATEMENTS
CAROLINA COCA-COLA BOTTLING COMPANY, INC.
AND SUBSIDIARY CONSOLIDATED FINANCIAL STATEMENTS
Page
<S> <C>
Consolidated Statement of Assets, Liabilities, and Equity - Income
Tax Basis as of January 31, 1999 and 1998.............................................. FS-2
Consolidated Statement of Revenue, Expenses, and Changes in
Retained Earnings - Income Tax Basis For the Years Ended
January 31, 1999, 1998 and 1997........................................................ FS-4
Consolidated Statement of Changes in Stockholders' Equity - Income
Tax Basis For the Years Ended January 31, 1999, 1998 and 1997.......................... FS-6
Consolidated Statement of Cash Flows - Income Tax Basis For the Years Ended
January 31, 1999, 1998 and 1997........................................................ FS-7
Notes to Financial Statements............................................................ FS-8
</TABLE>
FS-1
<PAGE>
CAROLINA COCA COLA BOTTLING COMPANY, INC.
Sumter, South Carolina
CONSOLIDATED STATEMENTS OF ASSETS, LIABILITIES, AND
EQUITY - INCOME TAX BASIS
As of January 31, 1999 and 1998
As of As of
January 31, January 31,
1999 1998
---- ----
Assets:
Current Assets:
Cash and Cash Equivalents 1,854,859.80 1,503,149.86
Accounts Receivable, Trade 1,088,580.75 1,178,972.20
Accounts Receivable, Other 151,241.20 00.00
Accounts Receivable, Shareholders 137,465.65 00.00
Inventories 1,040,037.75 906,389.89
Bottles and Cases 17,527.75 83,992.25
Cash Surrender Value of Life Insurance 74,030.01 69,798.00
Prepaid Income Taxes 00.00 148,709.00
----------------------------
Total Current Assets 4,363,742.91 3,891,011.20
Investments: (At Cost)
Bottlers' Coop., Canners and Containers
and Other 323,071.93 325,226.97
Notes Receivable 25,369.73 19,869.73
------------- ------------
Total Investments 348,441.66 345,096.70
Property, Plant, and Equipment:
Land 124,280.53 147,061.99
Buildings 2,190,420.74 2,242,870.23
Machinery and Equipment 1,500,052.57 1,551,818.53
Vending Machines 2,873,210.05 2,926,218.60
Furniture and Fixtures 60,199.27 61,191.58
Autos and Trucks 627,586.05 628,660.05
------------- ------------
Total 7,375,749.21 7,557,820.98
Less: Accumulated Depreciation 4,267,148.41 4,226,128.79
------------- ------------
Total Property, Plant, and Equipment 3,108,600.80 3,331,692.19
------------- ------------
Total Assets 7,820,785.37 7,567,800.09
============ ============
FS-2
<PAGE>
CAROLINA COCA COLA BOTTLING COMPANY, INC.
Sumter, South Carolina
CONSOLIDATED STATEMENTS OF ASSETS, LIABILITIES, AND
EQUITY - INCOME TAX BASIS CONTINUED
As of January 31, 1999 and 1998
As of As of
January 31, January 31,
1999 1998
---- ----
Liabilities and Stockholders' Equity:
-------------------------------------
Current Liabilities:
Accounts Payable 508,016.76 495,303.75
Income Tax Payable 127,600.00 00.00
Accrued Taxes, Sales, Gas, Bottler's 23,889.61 43,718.02
------------- ------------
Total Current Liabilities 659,506.37 539,021.77
Stockholders' Equity:
Capital Stock, 5,000 cm Shares Authorized
and Issued at $100.00 a Share Par Value 500,000.00 500,000.00
Less: Treasury Stock, 717 Shares at
$100.00 a Share Par Value 71,700.00 71,700.00
------------- ------------
Capital Stock, 4,283 Common Shares
Outstanding 428,300.00 428,300.00
Retained Earnings 6,732,979.00 6,600,478.32
------------- ------------
Total Stockholders' Equity 7,161,279.00 7,028,778.32
------------- ------------
Total Liabilities and Stockholders'
Equity 7,820,785.37 7,567,800.09
============ ============
FS-3
<PAGE>
CAROLINA COCA COLA BOTTLING COMPANY, INC.
Sumter, South Carolina
CONSOLIDATED STATEMENTS OF REVENUE, EXPENSES, AND CHANGES
IN RETAINED EARNINGS - INCOME TAX BASIS
For the Years Ended January 31, 1999, 1998, and 1997
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended
1-31-99 1-31-98 1-31-97
------------- ------------- -------------
<S> <C> <C> <C>
Sales:
Bottle Sales 11,485,481.68 10,521,560.34 10,462,392.06
Fountain Syrup Sales 895,307.37 736,602.63 746,079.88
Can Sales 8,733,510.11 7,879,782.93 8,189,962.53
Snack Sales 719,796.14 676,068.42 634,726.85
Miscellaneous Sales 52,768.97 46,798.88 13,142.88
------------- ------------- -------------
Total Sales 21,886,864.27 19,860,813.20 20,046,304.20
Cost of Production:
Overhead Costs in Beginning Inventory 49,851.77 74,013.66 86,522.44
Coca Cola Syrup 924,016.46 1,142,610.11 1,299,234.30
Soda Water Syrup 528,655.04 526,058.27 486,032.79
Sprite Syrup 331,895.01 393,537.76 442,045.80
Tab Syrup 4,351.61 7,879.60 6,191.72
Fountain Syrup 670,947.62 512,546.39 461,380.95
Cans 5,316,090.62 4,623,173.60 4,860,720.61
Cartons 6,353.28
Bottles and Cases Used 35,682.28 37,784.99 35,995.19
Non-Returnable Bottles Used 835,830.23 959,601.50 1,099,332.99
Crowns and Closures 113,664.32 136,845.05 138,338.69
Plant Salaries and Wages 586,249.29 538,316.49 563,361.62
Bottlers' Tax 204,911.67 294,983.00 382,424.26
Carbonic Gas 23,175.52 26,352.94 25,243.18
Sugar 184,616.49 167,225.93 224,881.07
Labels 95,743.68 105,466.13 143,200.59
Plant Supplies 41,282.69 50,056.65 46,012.63
Pallets 25,845.75 12,156.26 17,118.05
Lights and Power 89,468.11 86,594.47 86,115.35
Fuel 17,453.60 8,665.70 17,335.30
Water 11,724.07 15,814.35 22,940.12
Machinery Repairs 58,679.10 39,799.59 51,674.26
Maintenance Building & Grounds 50,497.94 40,107.79 30,553.96
Freight 296,981.43 225,178.31 179,451.06
Depreciation on Machinery 121,495.76 122,107.29 98,529.96
Syrup Charge for Georgetown 22,136.50 20,676.50 23,554.83
Full Service Bottle Cases 2,428,763.26 1,326,377.88 981,700.74
Snacks 309,314.19 321,858.59 289,224.86
Less: Overhead Cost in Ending Inventory (25,021.84) (49,851.77) (74,013.66)
------------- ------------- -------------
Cost of Production 13,354,302.17 11,772,290.31 12,025,103.66
------------- ------------- -------------
Gross Profit 8,532,562.10 8,088,522.89 8,021,200.54
Less: Selling Expenses 4,841,630.62 4,419,565.06 4,217,501.14
------------- ------------- -------------
</TABLE>
FS-4
<PAGE>
CAROLINA COCA COLA BOTTLING COMPANY, INC.
Sumter, South Carolina
CONSOLIDATED STATEMENTS OF REVENUE, EXPENSES, AND CHANGES
IN RETAINED EARNINGS - INCOME TAX BASIS
CONTINUED
For the Years Ended January 31, 1999, 1998, and 1997
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended
1-31-99 1-31-98 1-31-97
------- ------- -------
<S> <C> <C> <C>
Gross Operating Income 3,690,931.48 3,668,957.83 3,803,699.40
Less: General and Administrative
Expenses 3,125,950.35 3,512,177.94 3,029,974.96
------------ ------------ ------------
Net Operating Income 564,981.13 156,779.89 773,724.44
Other Revenue:
Interest Received 87,835.50 87,836.86 88,024.98
Dividends From Coops 136,313.00 182,522.91 67,112.89
Miscellaneous Income 24,679.02 22,659.40 27,712.21
------------ ------------ ------------
Total Other Revenue 248,827.52 293,019.17 182,850.08
------------ ------------ ------------
Net Income Before Subsidiary Earnings 813,808.65 449,799.06 956,574.52
Net Gain or (Loss) from Wholly Owned
Subsidiary - Heath Oil Co., Inc. Note A 46,592.03 (10,416.35) (123,635.83)
------------ ------------ ------------
Net Income Before Income Tax 860,400.68 439,382.71 832,938.69
Provision For Income Tax:
Federal Income Tax 259,439.00 144,866.00 272,339.00
State Income Tax 40,161.00 22,425.00 42,158.00
------------ ------------ ------------
Total Income Tax 299,600.00 167,291.00 314,497.00
------------ ------------ ------------
Net Income 560,800.68 272,091.71 518,441.69
Less: Dividends Paid 428,300.00 428,300.00 428,300.00
------------ ------------ ------------
Retained Earnings for Year (Deficit) 132,500.68 (156,208.29) 90,141.69
Retained Earnings, February 1 6,600,478.32 6,756,686.61 6,666,544.92
------------ ------------ ------------
Retained Earnings, January 31 6,732,979.00 6,600,478.32 6,756,686.61
============ ============ ============
Earnings Per Share on 4,283 Shares 130.94 63.53 121.05
============ ============ ============
</TABLE>
FS-5
<PAGE>
CAROLINA COCA COLA BOTTLING COMPANY, INC.
Sumter, South Carolina
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY -
INCOME TAX BASIS
For the Years Ended January 31, 1999, 1998 and 1997
<TABLE>
<CAPTION>
Year Ended 1-31-99 Year Ended 1-31-98 Year Ended 1-31-97
------------------------------------------------------------------------------
Per Share Per Share Per Share
--------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Stockholders' Equity:
February 1 7,028,778.32 1,641.09 7,184,986.61 1,677.56 7,094,844.92 1,656.51
Add: Net Income for Year 560,800.68 130.94 272,091.71 63.53 518,441.69 121.05
Less: Dividends Paid 428,300.00 100.00 428,300.00 100.00 428,300.00 100.00
------------ -------- ------------ -------- ------------ --------
Retained Earnings for Year 132,500.68 30.94 (156,208.29) (36.47) 90,141.69 21.05
------------ -------- ------------ -------- ------------ --------
Stockholders' Equity, January 31 7,161,279.00 1,672.03 7,028,778.32 1,641.09 7,184,986.61 1,677.56
============ ======== ============ ======== ============ ========
</TABLE>
Per Share data is based on 4,283 common shares issued and outstanding.
FS-6
<PAGE>
<TABLE>
<CAPTION>
CAROLINA COCA COLA BOTTLING COMPANY, INC.
Sumter, South Carolina
CONSOLIDATED STATEMENT OF CASH FLOWS - INCOME TAX BASIS
For the Years Ended January 31, 1999, 1998 and 1997
Year Ended Year Ended Year Ended
1-31-99 1-31-98 1-31-97
----------- ------------ -----------
<S> <C> <C> <C>
Cash Flows From Operating Activities:
Net Income For Year 560,800.68 272,091.71 518,441.69
Adjustments to Reconcile Net Income to Net Cash
Provided by Operating Activities:
Depreciation 660,225.98 643,106.49 616,571.92
Net Gain on Sale of Assets (68,165.93) (118,856.89)
Changes in Current Assets & Liabilities:
(Increase) Decrease in Accounts Receivable (198,315.40) (196,827.95) 72,018.78
(Increase) Decrease in Inventory (133,647.86) (41,289.33) 68,689.08
(Increase) Decrease in Bottles & Crates 66,464.50 (36,796.25) 17,367.00
(Increase) Decrease in Prepaid Expense 0.00 17,569.23 (17,569.23)
Increase (Decrease) in Accounts Payable (7,115.40) 193,203.62 (35,603.28)
Increase (Decrease) in Income Tax Payable 276,309.00 (162,806.00) 75,906.00
Increase in Cash Value of Life Insurance (4,232.01) (4,175.00) (2,461.00)
--------- --------- ---------
Total Adjustments 591,522.88 411,984.81 676,062.38
---------- ---------- ----------
Net Cash Provided by Operating Activities 1,152,323.56 684,076.52 1,194,504.07
Cash Flows From Investing Activities:
Purchased Machinery and Equipment (47,688.04) (189,447.98) (190,379.80)
Purchased Vehicles (36,665.00) (132,495.35) (151,548.45)
Purchased Vending Machines (321,660.55) (305,426.93) (246,963.26)
Purchased Open Type Coolers (93,689.09) (83,657.32) (88,959.17)
Made Improvements in Real Property (7,998.00) (15,684.37) (16,850.00)
Proceeds from Sale of Property 138,684.00 177,750.82
Increase (Decrease) Investments in Bottlers Coops. 2,155.04 (1,308.15) 14,171.75
Payment Received on Mortgage on Notes 9,500.00 19,600.00 24,500.00
Remove Fully Depreciated or Abandoned Property 16,654.99 1,860.00
Increase on Notes Receivable (63,969.73)
Charge Off Mortgage Notes as Bad Debt 9,758.76
Notes Issued (15,000.00)
Purchased Furniture (251.98)
Cost of Land Donated to City of Sumter 300.00
----------- ---------- -----------
Net Cash Used in Investing Activities (372,313.62) (691,765.11) (530,629.08)
Cash Flows Used in Financing Activities:
Dividends Paid (428,300.00) (428,300.00) (428,300.00)
----------- ----------- -----------
Net Increase or (Decrease) in Cash 351,709.94 (435,988.59) 235,574.99
Cash at Beginning of Year, Feb. 1 1,503,149.86 1,939,138.45 1,703,563.46
- ------------ ------------ ------------
Cash at End of Year, Jan. 31 1,854,859.80 1,503,149.86 1,939,138.45
============ ============ ============
</TABLE>
See accompanying notes.
FS-7
<PAGE>
CAROLINA COCA COLA BOTTLING COMPANY, INC.
NOTES TO FINANCIAL STATEMENTS
Business Activity
The company is a manufacturer of carbonated beverages. It has a
franchise from Coca-Cola USA to sell Coca-Cola products in a designated
territory in South Carolina. This area is Williamsburg, Clarendon, Sumter, Lee,
Kershaw, Lancaster, and Chester counties. The company sells on credit to a
variety of retail customers in this area.
The company operated an oil distributorship in Sumter County, South
Carolina under a wholly owned subsidiary, Heath Oil Company, Inc. The company
has discontinued this activity and all operations have ceased. The company is in
the process of liquidating Heath Oil Company by selling all its assets.
Basis of Accounting
The financial statements have been prepared on the accrual method of
accounting used for federal income tax purposes. Consequently, as indicated
below, certain revenues and expenses are recognized in the determination of
income in different reporting periods than they would be if the financial
statements were prepared in conformity with generally accepted accounting
principles. Although income tax rules are used to determine the timing of the
reporting of revenues and expenses, nontaxable revenues and nondeductible
expenses are included in the determination of net income.
Net Income - Income Tax Basis
In accordance with the Company's policy, net income - income tax basis
includes nontaxable revenue and nondeductible expenses in addition to taxable
revenues, deductible expenses, and income taxes.
Basis of Consolidation
The Carolina Coca Cola Bottling Company, Inc. and its wholly owned
subsidiary, Heath Oil Company, Inc., present financial statements on the
consolidated basis. Due to the incompatibility of parent and subsidiary
operations the net income of the subsidiary is shown on one line on the
consolidated statement of revenue, expenses and changes in retained earnings.
Inventories
Inventories of the parent consist primarily of raw material and are
stated at cost on the Last In First Out Method. The use of LIFO results in
ending inventory devaluation from the FIFO method.
The corporation is required by the Internal Revenue Service to
capitalize overhead costs in inventory. This procedure is not in accordance with
generally accepted accounting principles. The amount of overhead cost
capitalized under this rule is:
On January 31, 1997 74,013.66
On January 31, 1998 49,851.77
On January 31, 1999 25,021.84
FS-8
<PAGE>
Property, Plant and Equipment
Property and equipment are carried at cost. Depreciation is provided on
accelerated and straight line methods to expense the assets over their useful
lives which are as follows:
Years
Machinery and Equipment 7
Vehicles 5
Building 15 to 40
Vending Machines 7 to 8
Furniture 7
The depreciation expensed for the fiscal year ended January 31, 1999 was
$660,225.98 and $643,106.49 for the prior year. The corporation uses methods
established by the Internal Revenue Service to write off its depreciable assets.
These accelerated methods are at faster rates and over shorter lives than
allowed under generally accepted accounting principles.
Amortization of Goodwill
Cost of investments in purchased companies in excess of the underlying
fair value of net assets at dates of acquisition have been written off in full
at the date of acquisition. The company has no intangible assets in its
accounts. The last acquisition was the Georgetown Coca Cola Bottling Company on
May 1, 1978.
Cash
Cash includes demand deposits and short term money market investments due within
a year.
FS-9
<PAGE>
ANNEX A
AGREEMENT AND PLAN OF MERGER
<PAGE>
- --------------------------------------------------------------------------------
AGREEMENT
AND
PLAN OF MERGER
BY AND AMONG
COCA-COLA BOTTLING CO. CONSOLIDATED
AND
CAROLINA COCA-COLA BOTTLING COMPANY, INC.
MARCH 26, 1999
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
----
<S> <C> <C>
ARTICLE I
THE MERGER...........................................................................1
1.1 The Merger....................................................................1
1.2 Effective Time of the Merger..................................................2
1.3 Effects of the Merger.........................................................2
1.4 Articles of Incorporation, Bylaws and Directors and Officers..................2
ARTICLE II
CONVERSION OF SHARES AT EFFECTIVE TIME...............................................2
2.1 Merger Consideration and Conversion of Shares of Coke-Carolina Common Stock...2
(a) Merger Consideration...................................................2
(b) Election as to Form of Closing Date Merger Consideration...............2
(c) Conversion of Outstanding Shares of Coke-Carolina Common Stock.........4
(d) Cancellation of Treasury Shares........................................5
(e) Delivery of Transmittal Letters and Coke-Carolina Common Stock
Certificates...........................................................5
(f) Delivery of Closing Merger Consideration...............................6
2.2 Shareholders' Equity Merger Consideration.....................................7
(a) Pre-Closing Date Determination of Shareholders' Equity Merger
Consideration..........................................................7
(b) Final Determination and Settlement of Shareholders' Equity Merger
Consideration..........................................................8
(c) Sale of Certain Properties............................................10
2.3 Status of Securities After Effective Time....................................10
(a) Generally.............................................................10
(b) Stock Books Closed....................................................10
(c) Limitation on Liability...............................................10
2.4 Stock Dividends, Etc.........................................................10
2.5 Dissenter's Rights...........................................................11
2.6 Closing......................................................................11
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF CONSOLIDATED AND NEWCO ...........................11
3.1 Organization of Consolidated and Newco.......................................12
3.2 Authorization of Transaction.................................................12
3.3 Noncontravention.............................................................12
3.4 SEC Reports..................................................................12
i
<PAGE>
3.5 Registration Statement; Proxy Statement; Other Filings.......................13
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF COKE-CAROLINA.....................................13
4.1 Capital Stock and Stockholder Relations......................................13
4.2 Dividends....................................................................14
4.3 Authorization; Binding Agreement.............................................14
4.4 No Conflict..................................................................14
4.5 Corporate Organization and Good Standing.....................................15
4.6 Organizational Documents.....................................................15
4.7 Brokers' Fees................................................................15
4.8 Title to Assets..............................................................15
4.9 Subsidiaries and Affiliates..................................................16
4.10 Financial Statements.........................................................16
4.11 Events Subsequent to January 31, 1998........................................16
4.12 Loans, Letters of Credit, Reimbursement Arrangements.........................18
4.13 Undisclosed Liabilities......................................................18
4.14 Legal Compliance.............................................................19
4.15 Tax Matters..................................................................19
4.16 Real Property................................................................20
(a) General...............................................................20
(b) Codes, Ordinances, Use and Notice of Condemnation.....................20
(c) Licenses and Permits..................................................21
(d) No Notice of Violations...............................................21
(e) Utility Connections...................................................21
(f) Real Estate Taxes and Utilities.......................................21
(g) Access................................................................21
(h) Zoning and Land Use...................................................21
(i) Good Title............................................................21
4.17 Intellectual Property........................................................21
4.18 Rolling Stock and Other Tangible Personal Property...........................22
4.19 Contracts....................................................................23
4.20 Employee Arrangements, Union Agreements and Benefit Plans and Government
Compliance...................................................................24
4.21 Employee Benefit Plans.......................................................26
4.22 [Intentionally Omitted]......................................................28
4.23 Powers of Attorney...........................................................28
4.24 Insurance....................................................................28
4.25 Litigation and Claims........................................................28
4.26 Guaranties...................................................................29
4.27 Environmental, Health, and Safety Matters; Environmental Protection..........29
(a) Environmental Liabilities.............................................29
(b) On-Site Matters.......................................................29
ii
<PAGE>
(c) Off-Site Matters......................................................29
4.28 Absence of Certain Payments..................................................29
4.29 Antitrust Matters............................................................29
4.30 Case Sales Report............................................................30
4.31 Product Franchise............................................................30
4.32 Organizations and Clubs......................................................30
4.33 Bank Accounts................................................................30
4.34 Major Suppliers and Customers................................................30
4.35 Business Records.............................................................31
4.36 Disclosure...................................................................31
4.37 Registration Statement; Proxy Statement; Other Filings.......................31
4.38 Statutory Provisions; Articles of Incorporation..............................31
4.39 Vote.........................................................................31
4.40 No Other Representations or Warranties.......................................31
ARTICLE V
CONDUCT OF BUSINESS PENDING THE MERGER..............................................32
5.1 Conduct of Business..........................................................32
5.2 Notification by Coke-Carolina................................................34
ARTICLE VI
INDEMNIFICATION.....................................................................34
6.1 Consolidated's and Newco's Right to Indemnification..........................34
(a) Generally.............................................................34
(b) Accounts Receivable...................................................35
6.2 Escrow of Base Merger Consideration..........................................35
(a) The Fund..............................................................35
(b) Partial Release of Indemnification Escrow Fund to Shareholders'
Representatives.......................................................35
(c) Final Release.........................................................36
(d) How Held..............................................................36
6.3 Indemnification by Consolidated..............................................37
6.4 Notice of Potential Claims...................................................37
6.5 Liability Reduced By Recoveries..............................................38
6.6 Duty To Mitigate.............................................................38
6.7 Liability Deductible.........................................................38
6.8 Scope of Liability...........................................................38
6.9 Method of Payment............................................................39
(a) To Consolidated and Newco.............................................39
(b) By Consolidated And Newco.............................................39
6.10 Period of Limitation For Claims..............................................39
6.12 Exclusive Remedies...........................................................39
6.13 Release of Certain Contribution Rights.......................................39
iii
<PAGE>
ARTICLE VII
ADDITIONAL COVENANTS AND AGREEMENTS.................................................40
7.1 Access to Information........................................................40
7.2 Proxy Statement; Registration Statement; Other Filings.......................40
(a) Coke-Carolina's Obligations...........................................40
(b) Consolidated's and Newco's Obligations................................40
(c) Consolidated's and Newco's "Other" Obligations........................41
(d) Cooperation...........................................................41
7.3 Shareholders' Approval.......................................................41
7.4 Costs and Expenses...........................................................41
7.5 Books and Records............................................................41
7.6 Agreement to Cooperate.......................................................42
7.7 Public Statements............................................................42
7.8 Dissenting Shareholders......................................................42
7.9 Consulting/Non-competition Agreement.........................................42
7.10 Memorabilia..................................................................42
7.11 Consent As To Representation.................................................42
7.12 Certain Employee and Employee Benefits Matters...............................43
(a) Generally.............................................................43
(b) Pension Plans.........................................................43
(c) Medical/Dental Benefits...............................................44
(d) Life Insurance........................................................45
(e) Severance Benefits....................................................45
(f) Stay Bonuses..........................................................46
(g) Personal Items........................................................46
7.13 Shareholders' Representatives................................................46
(a) Appointment and Acceptance............................................46
(b) Authorization...........................................................46
(c) Shareholders' Expense Fund..............................................48
(d) Actions.................................................................48
(e) Successors..............................................................48
(f) Expenses................................................................49
(g) Indemnification and Release.............................................49
(h) Survival of Authorizations..............................................49
7.14 No Shop Letter...............................................................49
ARTICLE VIII
CONDITIONS TO CLOSING...............................................................50
8.1 Conditions to Each Party's Obligation to Effect the Merger...................50
8.2 Conditions to Obligations of Coke-Carolina Shareholders
to Effect the Merger.........................................................51
8.3 Conditions to Obligation of Consolidated and Newco to Effect the Merger......51
iv
<PAGE>
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER...................................................52
9.1 Termination..................................................................52
9.2 Effect of Termination........................................................53
9.3 Amendment....................................................................53
9.4 Waiver.......................................................................53
ARTICLE X
DEFINITIONS.........................................................................53
10.1 "Reasonable commercial efforts"..............................................53
10.2 Definition of Knowledge......................................................54
ARTICLE XI
EXHIBITS............................................................................54
ARTICLE XII
GENERAL PROVISIONS..................................................................54
12.1 Notices......................................................................54
12.2 Interpretation...............................................................55
12.3 Integration and Governing Law................................................56
12.4 Counterparts.................................................................56
12.5 Parties in Interest..........................................................56
12.6 Partial Invalidity and Severability..........................................56
</TABLE>
v
<PAGE>
<TABLE>
<CAPTION>
DEFINED TERMS
Page
----
<S> <C> <C>
Additional Cash Component....................................................................4
Additional Cash Election Percentage..........................................................4
affiliates .............................................................................52
Agreement ..............................................................................1
any Tax benefit.............................................................................38
Articles of Merger...........................................................................1
Base Merger Consideration....................................................................2
best efforts .............................................................................39
Calculation Guidelines.......................................................................7
Carolina Coca-Cola Bottling Company.........................................................22
Case Sales Report...........................................................................30
Cash Component ..............................................................................4
Cash Portion ..............................................................................3
Certificate of Merger........................................................................2
Closing .............................................................................11
Closing Date .............................................................................11
Closing Date Adjustment......................................................................8
Closing Date Merger Consideration............................................................2
Closing Date Merger Consideration Election...................................................3
Closing Date Merger Consideration Election Form..............................................3
Closing Date Merger Consideration Elections..................................................3
Closing Date Merger Consideration Ratio......................................................4
COBRA .........................................................................27, 44
Code .............................................................................26
Coke-Carolina ..............................................................................1
Coke-Carolina Common Stock...................................................................3
Coke-Carolina Employees.....................................................................43
Coke-Carolina Intellectual Property.........................................................22
Coke-Carolina Pension Plan..................................................................43
Coke-Carolina Plans.........................................................................43
Coke-Carolina Shareholder....................................................................2
Coke-Carolina Shareholders...................................................................2
Commission .............................................................................13
Consolidated ..............................................................................1
Consolidated Common Stock....................................................................3
Consolidated Pension Plan...................................................................43
Consolidated Plans..........................................................................43
Consolidated SEC Reports....................................................................12
Delivered Shares.............................................................................6
vi
<PAGE>
Disclosure Letter...........................................................................13
Dissenting Shares...........................................................................11
Effective Time ..............................................................................2
Employee Benefit Plans......................................................................27
Environmental Liability.....................................................................29
ERISA .............................................................................26
Escrow Agent .............................................................................36
Estimated Closing Date Balance Sheets........................................................7
Exchange Act .............................................................................13
Final Closing Date Balance Sheets............................................................8
forward triangular merger...................................................................50
Franchise Agreements........................................................................30
Heath Oil ..............................................................................7
including .............................................................................55
Indemnification Escrow Agreement.............................................................5
Indemnification Escrow Fund.................................................................35
Indemnification Escrow Fund Allocation.......................................................5
Indemnity Payment...........................................................................38
Installment Note.............................................................................3
Installment Notes............................................................................3
Insurance Policies..........................................................................28
key man .............................................................................45
Liability Cap .............................................................................38
Liability Deductible........................................................................38
Loss .............................................................................38
Mandatory Cash Component.....................................................................4
Mandatory Cash Election......................................................................4
Mandatory Cash Election Percentage...........................................................4
material .............................................................................29
Material Contracts..........................................................................23
Merger ..............................................................................1
Merger Consideration.........................................................................2
Multi-employer Plan.........................................................................26
Net Proceeds .............................................................................10
Newco ..............................................................................1
Newco Employees.............................................................................43
no action .............................................................................52
Normal Retirement Age.......................................................................43
On-Site Matters.............................................................................29
Other Filings .............................................................................41
Per Share Divisor............................................................................4
Permitted Liens.............................................................................15
Post-Closing Adjustment......................................................................8
vii
<PAGE>
Proxy Statement.............................................................................40
Real Estate .............................................................................20
Reasonable commercial efforts...............................................................53
Registration Statement......................................................................41
Retirement Plan.............................................................................26
Rolling Stock .............................................................................23
Securities Act .............................................................................13
Senior Executive............................................................................31
Shareholders Meeting.........................................................................3
Shareholders Representatives................................................................46
Shareholders' Equity Escrow Agent............................................................8
Shareholders' Equity Escrow Agreement........................................................8
Shareholders' Equity Escrow Fund.............................................................8
Shareholders' Meeting.......................................................................41
Shareholder's Equity Merger Consideration....................................................2
Specified Percent............................................................................5
Stock Election Percentage....................................................................5
subject to the fiduciary duties of the Board of Directors under ............................41
Subsidiary .............................................................................20
Surviving Corporation........................................................................2
Tax .............................................................................19
Tax Returns .............................................................................19
Taxes .............................................................................19
Termination Date............................................................................52
threatened .............................................................................55
to Coke-Carolina's knowledge................................................................54
to its knowledge............................................................................54
Transaction Documents.......................................................................47
Transmittal Letter...........................................................................5
Transmittal Letters..........................................................................5
Trust Indenture..............................................................................3
</TABLE>
viii
<PAGE>
AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger (this "Agreement") is dated as of
March 26, 1999, by and among Coca-Cola Bottling Co. Consolidated, a Delaware
corporation ("Consolidated"), Sumter Merger Corporation, Inc., a Delaware
corporation and a wholly owned subsidiary of Consolidated ("Newco"), and
Carolina Coca-Cola Bottling Company, Inc., a South Carolina corporation
("Coke-Carolina").
WITNESSETH:
WHEREAS, the parties hereto have agreed that subject to the terms and
conditions hereof, Coke-Carolina will be merged with and into Newco (said
transaction being hereinafter referred to as the "Merger") pursuant to this
Agreement such that the Merger will qualify as a "forward triangular merger"
pursuant to Sections 368(a)(1)(A) and (a)(2)(D) of the Internal Revenue Code of
1986, as amended; and
WHEREAS, the Boards of Directors of Consolidated and Newco, and the
Board of Directors of Coke-Carolina have approved the Merger pursuant to the
terms and conditions of this Agreement (and a certified copy of such action has
been provided to the other party), the Board of Directors of Coke-Carolina in
accordance with this Agreement will recommend to the shareholders of
Coke-Carolina in accordance with this Agreement that they approve the Merger
pursuant to the terms and conditions of this Agreement; and
WHEREAS, the parties hereto desire to make this Agreement for the
purpose of setting forth the terms and conditions of the Merger, including the
representations, warranties, covenants and agreements to be made in connection
with the Merger.
Notwithstanding the foregoing, this Agreement shall not be deemed an
offer to buy or a solicitation of an offer to sell Consolidated Common
Stock and/or the Installment Notes, such offer and sale being made only
by virtue of the prospectus of Consolidated and Newco as more
particularly set forth in Section 7.2 below.
NOW, THEREFORE, in consideration of the premises, the Merger
Consideration, and the mutual representations, warranties, covenants and
agreements contained herein, the legal sufficiency of such consideration being
hereby acknowledged, the parties hereto, intending to be legally bound, hereby
agree as follows:
ARTICLE I
THE MERGER
1.1 THE MERGER. Upon the terms and subject to the conditions of this
Agreement, at the Effective Time (as defined in Section 1.2 hereof), in
accordance with the applicable provisions of the Delaware General Corporation
Law and the South Carolina Business Corporation Act, Coke-Carolina shall be
merged with and into Newco in accordance with this
<PAGE>
Agreement and the Plan of Merger, and articles of merger in the form attached
hereto as Exhibit 1.1(a) (the "Articles of Merger") and a certificate of merger
in the form attached hereto as Exhibit 1.1(b) (the "Certificate of Merger")
shall be filed with the South Carolina Secretary of State and the Delaware
Secretary of State, respectively, and the separate existence of Coke-Carolina
shall thereupon cease. Newco shall be the surviving corporation in the Merger,
and as such is sometimes referred to hereafter as the "Surviving Corporation".
1.2 Effective Time of the Merger. As promptly as practicable after the
satisfaction or waiver of the conditions set forth in Article VIII hereof, the
parties shall cause the Merger to be consummated. The Merger shall become
effective at the time specified in the Articles of Merger (the "Effective
Time"); being 11:59 p.m. on the Closing Date.
1.3 Effects of the Merger. The Merger shall have the effects set forth
in Section 259 of the Delaware General Corporation Law and Section 33-11-106 of
the South Carolina Business Corporation Act.
1.4 Articles of Incorporation, Bylaws and Directors and Officers. As of
the Effective Time: (i) the Articles of Incorporation of Newco as in effect
immediately prior to the Effective Time shall be the Articles of Incorporation
of the Surviving Corporation; (ii) the Bylaws of Newco as in effect immediately
prior to the Effective Time shall be the Bylaws of the Surviving Corporation;
and (iii) the Board of Directors and officers of Newco shall be the Board of
Directors and officers of the Surviving Corporation.
ARTICLE II
CONVERSION OF SHARES AT EFFECTIVE TIME
2.1 Merger Consideration and Conversion of Shares of Coke-Carolina
Common Stock.
(a) Merger Consideration. The "Merger Consideration" consists of (i) the
Base Merger Consideration and (ii) the Shareholders' Equity Merger Consideration
(if any). The "Base Merger Consideration" is Thirty-Six Million Six Hundred
Thousand Dollars ($36,600,000). The "Shareholder's Equity Merger Consideration"
(if any) is determined pursuant to Section 2.2. The Base Merger Consideration
minus (if applicable) any negative Closing Date Adjustment with respect to
Shareholders' Equity Merger Consideration (as determined pursuant to Section
2.2) is the "Closing Date Merger Consideration." The Merger Consideration is
subject to (A) reduction by any negative Post-Closing Adjustment with respect to
Shareholders' Equity Merger Consideration (as determined pursuant to Section 2.2
below) and (B) the indemnification rights and obligations as provided in Article
VI below; and such adjustments and indemnification rights and obligations,
together with the rights and obligations of the Shareholders' Representatives
(as provided in Section 7.13), are established as an integral part of the manner
and basis of converting the Coke-Carolina Common Stock, as more particularly
provided in Section 2.1(c) below.
2
<PAGE>
(b) Election as to Form of Closing Date Merger Consideration.
(i) Generally. This Subsection sets forth the basis for each
shareholder of Coke-Carolina (individually a "Coke-Carolina Shareholder"
and collectively the "Coke-Carolina Shareholders") to elect the form of
Closing Date Merger Consideration into which his shares of $100.00 par
value Coke-Carolina common stock ("Coke-Carolina Common Stock") will be
converted (as to each shareholder a "Closing Date Merger Consideration
Election" and collectively the "Closing Date Merger Consideration
Elections"). Such election shall be in the form attached as Exhibit
2.1(b)(i) (the "Closing Date Merger Consideration Election Form") and
shall be among the following: (A) a mandatory cash component; (B) an
additional cash component (such mandatory cash component and additional
cash component is referred to in the aggregate as the "Cash Portion");
(C) Consolidated's installment promissory notes in the form of Exhibit
2.1(b)(i)(C) (individually an "Installment Note" and collectively the
"Installment Notes") to be held pursuant to a trust indenture in a form
to be agreed to by Consolidated and Coke-Carolina as soon as practicable
after the signing of this Agreement (the "Trust Indenture"); and (D)
Consolidated's $1.00 par value common stock (valued at $59.60 per share)
("Consolidated Common Stock").
(ii) Election Procedure. Contemporaneously with the giving of
notice of the meeting of the Coke-Carolina Shareholders to consider the
Merger ("Shareholders Meeting"), each Coke-Carolina Shareholder shall be
provided with a Closing Date Merger Consideration Election Form. If a
Coke-Carolina Shareholder does not return such Closing Date Merger
Consideration Election Form to Coke-Carolina at least five (5) calendar
days prior to the Closing Date, then such Coke-Carolina Shareholder
shall be deemed to have elected to have all of his Coke-Carolina Common
Stock converted into cash (subject to Subsection (iii) below).
(iii) Minimum Consolidated Common Stock Election. Notwithstanding
the preceding or any other provision of this Agreement, in no event
shall less than 51% of the Closing Date Merger Consideration be in
Consolidated Common Stock. If the Closing Date Merger Consideration
Elections as to Consolidated Common Stock of all the Coke-Carolina
Shareholders aggregate less than 51% of the Closing Date Merger
Consideration, then the Closing Date Merger Consideration Elections
shall automatically be amended to increase the stock elections (pro rata
on the basis of the elected percentages among only the Coke-Carolina
Shareholders electing Consolidated Common Stock but weighted to reflect
each such shareholder's pro-rata interest in Coke-Carolina) to equal 51%
of the Closing Date Merger Consideration; provided, however, if after
giving effect to the foregoing the aggregate stock election is still
less than 51% of the Closing Date Merger Consideration, then the
election shall automatically be further amended to increase the stock
elections (among all the other Coke-Carolina Shareholders pro rata on
the basis of their relative percentage interests in Coke-Carolina) to
equal 51% of the Closing Date Merger Consideration. If any such
amendment occurs, then the elections as to Cash Portion and Installment
Notes will be decreased on a pro-rata basis reflecting each Coke-
Carolina Shareholder's elected ratio between the Cash Portion and
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the Installment Notes (but the cash election shall not be reduced below
the Mandatory Cash Election Percentage).
(iv) Maximum Consolidated Common Stock Election. Notwithstanding
the preceding or any other provision of this Agreement, no more than 60%
of the Closing Date Merger Consideration shall be in Consolidated Common
Stock. If the Closing Date Merger Consideration Elections as to
Consolidated Common Stock exceed 60% of the Closing Date Merger
Consideration, then: (A) the Closing Date Merger Consideration Elections
as to Consolidated Common Stock shall be automatically amended to reduce
the amount of Consolidated Common Stock received (pro rata on the basis
of the elected percentages among only the Coke-Carolina Shareholders
electing greater than 60% stock, but weighted to reflect each such
shareholder's percentage interest in Coke-Carolina and without reducing
any such Coke-Carolina Shareholder below 60%) to equal 60% of the
Closing Date Merger Consideration; and (B) the elections as to the
Installment Notes will be increased on a pro rata basis reflecting each
Coke-Carolina Shareholder's elected ratio between the Cash Portion and
the Installment Notes.
(v) Mandatory Election as to Cash - for Shareholders' Expense
Fund. Notwithstanding the preceding or any other provision of this
Agreement, each Closing Date Merger Consideration Election shall
automatically be an election of 3.5% of the Base Merger Consideration
(the "Mandatory Cash Election Percentage") to be paid in cash with
respect to the Shareholders' Expense Fund (the "Mandatory Cash
Election").
The ratio of the components into which the shares of Coke-Carolina Common Stock
of each Coke-Carolina Shareholder have been elected to be converted (after any
adjustments pursuant to the foregoing) is such Coke-Carolina Shareholder's
"Closing Date Merger Consideration Ratio."
(c) Conversion of Outstanding Shares of Coke-Carolina Common Stock. Each
share of Coke-Carolina Common Stock issued and outstanding immediately prior to
the Effective Time shall, as of the Effective Time, by virtue of the Merger and
without any action on the part of its holder, be converted solely into the right
to receive a portion of the Closing Date Merger Consideration determined as
follows (subject to such share's holder's Closing Date Merger Consideration
Election, after any adjustments required by Section 2.1(b) above):
(i) Mandatory Cash Component. The Closing Date Merger
Consideration divided by the number of shares of Coke-Carolina Common
Stock issued and outstanding at the Effective Time (the "Per Share
Divisor") and multiplied by the Mandatory Cash Election Percentage (the
"Mandatory Cash Component").
(ii) Additional Cash Component. To the extent the holder of such
share being converted has elected cash pursuant to Section 2.1(b) (and
subject to adjustments in such election as provided in Section 2.1 (b))
(the "Additional Cash Election Percentage"), the Closing Date Merger
Consideration divided by the Per Share Divisor and multiplied by the
Additional Cash Election Percentage (the "Additional Cash Component";
and
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the Mandatory Cash Component and the Additional Cash Component are
collectively the "Cash Component").
(iii) Installment Notes Component. To the extent the holder of
such share being converted has elected Consolidated Installment Notes
pursuant to Section 2.1(b) (and subject to adjustments in such election
as provided in Section 2.1(b)) (the "Installment Note Election
Percentage"), the Closing Date Merger Consideration divided by the Per
Share Divisor and multiplied by the Installment Note Election
Percentage;
(iv) Consolidated Stock Component. To the extent the holder of
such share being converted has elected Consolidated Common Stock
pursuant to Section 2.1(b) (and subject to adjustments in such election
as provided in Section 2.1(b)) (the "Stock Election Percentage"), that
number of shares of Consolidated Common Stock equal in value to the
Closing Date Merger Consideration divided by the Per Share Divisor and
multiplied by the Stock Election Percentage;
(v) Indemnification Escrow Fund Allocation. The "Specified
Percent" of the components in items (i) through (iv) shall be placed in
the Indemnification Escrow Fund in accordance with Section 2.1(f) (the
"Indemnification Escrow Fund Allocation") and subject to the provisions
of the escrow agreement (the "Indemnification Escrow Agreement") in the
form of Exhibit 2.1(c)(v). The "Specified Percent" is the percent
determined by dividing $3,660,000 by the lesser of (A) the Closing Date
Merger Consideration and (B) $36,600,000; and
(vi) Shareholders' Equity Component. The amount of cash and
stock, if any, determined pursuant to Section 2.2;
all subject to the indemnification rights and obligations as set forth in
Article VI and to the rights and obligations of the Shareholders'
Representatives as set forth in Section 7.13; and without limiting the
foregoing, the rights and obligations in Article VI and the office of the
Shareholders' Representatives is established pursuant to this Agreement and the
Merger as an integral part of the manner and basis of converting the
Coke-Carolina Common Stock.
The calculations in this Subsection (c) shall be made based on numbers
carried out to two (2) decimal places, but the final amount of payments to each
Coke-Carolina Shareholder shall be rounded up to the nearest whole penny and any
payment of shares shall be rounded up to the nearest whole share, as
appropriate.
(d) Cancellation of Treasury Shares. Each share of Coke-Carolina Common
Stock, if any, held by Coke-Carolina in its treasury immediately prior to the
Effective Time shall be canceled and retired, and no Merger Consideration shall
be payable in respect thereof.
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(e) Delivery of Transmittal Letters and Coke-Carolina Common Stock
Certificates.
(i) At the Closing. At the Closing, Coke-Carolina shall deliver
to Newco: (A) duly completed and executed transmittal letters in the
form attached hereto as Exhibit 2.1(e)(i) (the "Transmittal Letters" or
as to a single shareholder a "Transmittal Letter"); (B) all certificates
for shares of Coke-Carolina Common Stock that have been previously
delivered to Coke-Carolina by the Coke-Carolina Shareholders; and (C) in
the case of non-individual Coke-Carolina Shareholders, a certificate
dated as of the Closing Date and executed by an officer or other
authorized representative of such non-individual Coke-Carolina
Shareholder certifying (1) that any action required to be taken to
authorize (or provisions of articles or certificates of incorporation,
by-laws, partnership agreements, wills, trusts or applicable law
authorizing) such non-individual Coke-Carolina Shareholder's execution
and delivery of its Transmittal Letter and/or any other certificates,
agreements or other instruments and documents executed and delivered by
such Coke-Carolina Shareholder pursuant to this Agreement and the
performance of its obligations under its Transmittal Letter and this
Agreement has been taken and (2) the signature and title of the officers
or other authorized person executing such documents.
(ii) After the Closing. Notwithstanding the foregoing, if duly
completed and executed Transmittal Letters and Certificates for shares
of Coke-Carolina Common Stock are delivered from time-to-time by the
Shareholders' Representatives to Newco after the Closing, then Newco
shall deliver that portion of the Merger Consideration to which such
Coke-Carolina Shareholder is entitled in accordance with Subsection (f)
below; provided, however, that no dividends, interest on unpaid
dividends, or interest on an installment note shall be paid on the
Merger Consideration payable to any Coke-Carolina Shareholder until he
makes such delivery; and provided, further, the holder of any shares of
Coke-Carolina Common Stock who does not deliver a duly completed and
executed Transmittal Letter and a share certificate for his shares to
Newco prior to January 1, 2006, shall not have any right to any Merger
Consideration pursuant to this Agreement (or any other consideration)
and such Merger Consideration and any other consideration shall become
the property of Newco, free and clear of all claims and interest of any
person whatsoever.
(iii) Fiduciary or Custodial Coke-Carolina Shareholders.
Consolidated may, with respect to any Coke-Carolina Shareholder that
owns Coke-Carolina Common Stock in a fiduciary capacity or as a
custodian under gifts to minors act, permit alternative arrangements to
respond to the inability or unwillingness of such fiduciary or custodian
to make representations and warranties set forth in the Transmittal
Letter (such as by (A) having the beneficiaries of such fiduciary
Coke-Carolina Shareholder or other person with respect to such custodian
Coke-Carolina Shareholder (including the custodian in his individual
capacity) consent to the making of such representations and warranties
by such fiduciary or custodian Coke-Carolina Shareholder and assume the
liability of such fiduciary or custodian Coke-Carolina Shareholder with
respect to such representations and warranties to the extent that the
fiduciary or custodian is determined to be legally unauthorized or
unable to make such representations and warranties and assume such
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liability and (B) obtaining a legal opinion as to the enforceability of
the agreement of such beneficiaries or other person with respect to such
representations and warranties and indemnification); provided, however,
that any such alternative arrangement shall not either (1) result in
higher purchase price being paid, directly or indirectly, for
Coke-Carolina Common Stock acquired from such Coke-Carolina Shareholder
or (2) disadvantage in any way whatsoever any other Coke-Carolina
Shareholder, Newco, Coke-Carolina or Consolidated.
(f) Delivery of Closing Merger Consideration. At the Closing as to those
shares of Coke-Carolina Common Stock as to which the deliveries required by
Section 2(e)(i) have then been made and from time-to-time thereafter as to those
shares of Coke-Carolina Common Stock as to which the deliveries required by
Section 2(e)(ii) have been made (the "Delivered Shares"), Newco shall pay the
following (which payment in the case of Consolidated Common Stock may, at
Consolidated's election, be made by delivery to its transfer agent of an
irrevocable letter of instructions for issuance and delivery of Consolidated
Common Stock in accordance with the foregoing):
(i) To the Shareholders' Equity Escrow Agent: cash in the amount
of the Closing Date Adjustment as defined and specified in Section 2.2
below divided by the Per Share Divisor and multiplied by the Delivered
Shares shall be delivered to the Shareholders' Equity Escrow Agent by
wire transfer of immediately available funds;
(ii) To the Indemnification Escrow Agent: the Indemnification
Escrow Fund Allocation as to the Delivered Shares shall be delivered by
the Shareholders' Representatives to the Indemnification Escrow Agent;
and
(iii) To Shareholders' Representatives: the balance of the Base
Merger Consideration as to the Delivered Shares shall be delivered to
the Shareholders' Representatives as follows: (A) the Cash Component as
to the Delivered Shares shall be delivered in a lump sum to the
Shareholders' Representatives (in immediately available funds pursuant
to wire transfer instructions to be provided by the Shareholders'
Representatives to Consolidated and Newco not less than seven (7)
calendar days prior to the Closing), who shall place that portion
representing one hundred percent (100%) less the Specified Percent of
the Mandatory Cash Component in the Shareholders' Expense Fund, and (B)
the certificates for the shares of Consolidated Common Stock and the
Installment Notes as to the Delivered Shares will be delivered to the
Shareholders' Representatives for distribution to the Coke-Carolina
Shareholders.
Not less than two (2) calendar days prior to the Closing (and from time-to-time
thereafter for any subsequent delivering Coke-Carolina Shareholders), the
Shareholders' Representatives will provide Consolidated and Newco, as to each
Coke-Carolina Shareholder who has made the deliveries pursuant to Section
2(e)(i), with (i) the number of shares of Consolidated Common Stock, (ii) the
principal amount of the Installment Note, and (iii) the amount of the Cash
Component.
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2.2 Shareholders' Equity Merger Consideration.
(a) Pre-Closing Date Determination of Shareholders' Equity Merger
Consideration.
(i) Generally. The Merger Consideration will be increased (which
constitutes Shareholders' Equity Merger Consideration) or decreased, as
applicable, dollar for dollar to account for any increase or decrease in
the shareholders' equity of Coke-Carolina as of the Closing Date
(excluding the shareholders' equity of Heath Oil, Inc. ("Heath Oil"),
but including Heath Oil's cash and cash equivalents, payables for goods
and/or services, and accrued but unpaid taxes) from the amount of Six
Million Six Hundred Fifty-one Thousand Eight Hundred Eighty-one Dollars
($6,651,881.00).
(ii) Determination of Closing Date Adjustment. Estimated closing
date balance sheets as of the close of business on the Closing Date for
Coke-Carolina and Heath Oil (the "Estimated Closing Date Balance
Sheets") will be prepared by Coke-Carolina on a tax basis consistent
with its past practice and subject to Exhibit 2.2(a)(ii) (the
"Calculation Guidelines") and delivered to Consolidated and Newco for
review seven (7) calendar days prior to Closing. The Estimated Closing
Date Balance Sheets shall be acceptable to Consolidated and Newco in
their reasonable discretion. The difference between Coke-Carolina's
shareholders' equity (excluding Heath Oil's shareholders' equity, but
including Heath Oil's cash and cash equivalents, payables for goods
and/or services, and accrued but unpaid taxes) as shown in the Estimated
Closing Date Balance Sheets and $6,651,881.00 is the "Closing Date
Adjustment".
(iii) If Closing Date Adjustment is Positive. If the Closing Date
Adjustment is positive (and thus constitutes Shareholders' Equity Merger
Consideration), Newco will deposit the amount of such adjustment, in
cash, into the "Shareholders' Equity Escrow Fund".
(iv) If Closing Date Adjustment is Negative. If the Closing Date
Adjustment is negative, then (A) such amount shall reduce the Base
Merger Consideration (and such reduced Base Merger Consideration
constitutes the Closing Date Merger Consideration) and (B) Newco shall
deposit cash equal to such amount into the Shareholders' Equity Escrow
Fund.
For purposes of Subsection (iii) and Subsection (iv) above, the Shareholders'
Equity Escrow Fund will be held by SunTrust Bank, Atlanta pursuant to the
"Shareholders' Equity Escrow Agreement" in the form attached hereto as Exhibit
2.2(a)(iv). While holding the Shareholders' Equity Escrow Fund, SunTrust Bank,
Atlanta shall be referred to hereinafter as the "Shareholders' Equity Escrow
Agent".
(b) Final Determination and Settlement of Shareholders' Equity Merger
Consideration.
(i) Closing Date Balance Sheet. Final closing date balance sheets
(the "Final
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Closing Date Balance Sheets") will be prepared for Coke-Carolina and
Heath Oil by Consolidated's certified public accounting firm on a tax
basis consistent with Coke-Carolina's past practice and subject to the
Calculation Guidelines and delivered to the Shareholders'
Representatives for review within one hundred twenty (120) days after
Closing. Consolidated and Newco shall make available its accountant's
personnel involved in the preparation of the Final Closing Date Balance
Sheets and the related work papers without creating any further
liability or obligation on the part of the Consolidated and Newco. The
difference (or any part thereof) between the shareholders' equity of
Coke-Carolina (excluding Heath Oil's shareholders' equity, but including
Heath Oil's cash and cash equivalents, payables for goods and/or
services, and accrued but unpaid taxes) as shown on the Final Closing
Date Balance Sheets and $6,651,881 shall be defined as the "Post-Closing
Adjustment". Thirty (30) calendar days subsequent to such delivery, the
Final Closing Date Balance Sheets shall be final and binding, unless,
prior to the expiration of such period, the Shareholders'
Representatives deliver to Consolidated and Newco and the Shareholders'
Equity Escrow Agent a written description of each (if any) disagreement
with the Final Closing Date Balance Sheets, and Consolidated, Newco and
the Shareholders' Representatives shall thereafter negotiate in good
faith to resolve any disagreement with respect thereto. Any positive
Post-Closing Adjustment reflected in the Final Closing Date Balance
Sheets as initially delivered to the Shareholders' Representatives shall
be deemed final and binding upon such delivery for purposes of
settlement pursuant to Subsection (b)(iii) below; and without limiting
or being limited by the foregoing, any disagreement as to the amount of
the Post-Closing Adjustment shall defer the settlement of only the
disagreed amounts, and all other aspects of the Final Closing Date
Balance Sheets shall be final and binding.
(ii) Dispute Resolution. If after a period of thirty (30) days
following the date on which the written description of the objection(s)
(if any) was delivered, Consolidated, Newco and the Shareholders'
Representatives have not resolved each such disagreement, then a firm of
independent public accountants of nationally recognized reputation shall
be selected, which firm of accountants shall make a final and binding
resolution of the unresolved disagreements. Such selection shall be made
in the following manner: (A) Consolidated and Newco shall submit a list
of three "Big Five" accounting firms together with the name of the
partner at each firm who will be responsible for handling the firm's
engagement (and none of such specified firms or such specified partners
shall have rendered services to Consolidated within the preceding three
(3) years), and the Shareholders' Representatives shall select one firm
from such list within fourteen (14) days; (B) if no such selection is
made by the Shareholders' Representatives within such period, then
Consolidated and Newco may select any of such firms. The resolution of
the disagreements shall be made as soon as practical. The costs and
expenses for the services of such accountants shall be split 50%/50% by
the Shareholders' Representative, on the one hand, and by Consolidated
and Newco, on the other hand.
(iii) Settlement. Within seven (7) calendar days subsequent to
the Final Closing Date Balance Sheets (or any aspect thereof) becoming
final and binding in accordance with the foregoing, such amount of the
Post-Closing Adjustment will be
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settled as follows:
(A) Post-Closing Adjustment is Positive. To the extent that any
final and binding Post-Closing Adjustment is positive, the
Shareholders' Equity Escrow Agent shall immediately transfer
funds in cash to the Shareholders' Representatives for
distribution to the Coke-Carolina Shareholders, and the remaining
amount, if any, shall be transferred to Newco in cash. If the
amount of the Shareholders' Equity Escrow Fund is not sufficient
to cover the amount owed to the Coke-Carolina Shareholders, then
Newco shall promptly deliver to the Shareholders' Representatives
the balance of any required payments in cash for distribution to
the Coke-Carolina Shareholders; provided, however, that if such
cash, whether from the Shareholders' Equity Fund or delivered by
Newco, would cause the Consolidated Common Stock component (at a
deemed value of $59.60 per share) to fall below fifty-one percent
(51%) of the Merger Consideration, then Newco shall deliver
additional shares of Consolidated Common Stock (at a deemed value
of $59.60 per share) in lieu of cash so that the aggregate amount
of the Consolidated Common Stock is 51% of the aggregate Merger
Consideration. Such Consolidated Common Stock shall be allocated
in accordance with the Closing Date Merger Consideration Ratios
(treating Installment Notes as cash).
(B) Post-Closing Adjustment is Negative. To the extent that any
final and binding Post-Closing Adjustment is negative, the
Shareholders' Equity Escrow Agent shall first pay the
Post-Closing Adjustment due to Newco by wire transfer in
immediately available funds from the Shareholders' Equity Escrow
Fund pursuant to wire transfer instructions to be provided by
Newco. If the amount of the Shareholders' Equity Escrow Fund is
insufficient to cover the amount owed to Newco, then Newco shall
receive an immediate distribution from the Indemnification Escrow
Fund (without consideration of the Liability Deductible specified
in Section 6.7 below) pursuant to Article VI below.
(C) Amounts after All Disagreements Resolved. After all
disagreements are resolved, then any remaining amounts in the
Shareholders' Equity Escrow Fund will be transferred immediately
to the Shareholders' Representatives for distribution to the
Coke-Carolina Shareholders.
(c) Sale of Certain Properties. Coke-Carolina is undertaking to sell the
real property located at the corner of Washington and Warren, Sumter, South
Carolina pursuant to a contract with Mallard Creek Development LLC. It is the
intention of the parties that such sale proceeds, net of selling and taxes and
other directly related selling costs (excluding the time and expenses of
personnel of Carolina Coke, Newco or Consolidated) ("Net Proceeds") will be
included in the calculation of the Shareholders' Equity Merger Consideration. If
any of such property is not sold prior to the final determination of all other
matters affecting the Shareholders' Equity Merger Consideration in accordance
with Subsection (b), then the sale of such property shall be considered a
disputed item and, if the property is sold pursuant to such contract (including
extensions or replacements thereof) on or before December 31, 1999, then the Net
Proceeds shall
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be paid promptly following the sale in accordance with Subsection (b).
2.3 Status of Securities After Effective Time.
(a) Generally. From and after the Effective Time, and until surrendered
and exchanged, each outstanding certificate formerly representing shares of
Coke-Carolina Common Stock shall be deemed for all purposes to represent only
the right to receive the Merger Consideration conferred upon such shares in
accordance with Section 2.1 above.
(b) Stock Books Closed. From and after the Effective Time, the stock
transfer books of Coke-Carolina shall be closed and no transfer of shares of
Coke-Carolina Common Stock on the books of Coke-Carolina shall be made.
(c) Limitation on Liability. Neither Consolidated nor Newco shall be
liable to any holder of Coke-Carolina Common Stock for any Merger Consideration
delivered to a public official in accordance with any applicable abandoned
property, escheat, execution, garnishment or similar order that Consolidated
and/or Newco reasonably believes is binding.
2.4 Stock Dividends, Etc. If Consolidated shall, at any time before the
Effective Time, (i) issue a dividend in shares of Consolidated Common Stock,
(ii) combine the outstanding Consolidated Common Stock into a smaller number of
shares, (iii) subdivide the outstanding Consolidated Common Stock, or (iv)
reclassify the Consolidated Common Stock, then, in such event, the Base Merger
Consideration under Section 2.1(b)(i) above shall be adjusted, so that each
Coke-Carolina Shareholder (after the adjustments) shall be entitled to receive
such Merger Consideration as such shareholder would have been entitled to
receive if the Effective Time had occurred prior to the happening of such event
(or, if applicable, the record date in respect thereof).
2.5 Dissenter's Rights. "Dissenting Shares" means any shares of
Coke-Carolina Common Stock held by any Coke-Carolina Shareholder who becomes
entitled to payment of the fair value of their shares under the South Carolina
Business Corporation Act. If required by the South Carolina Business Corporation
Act (but only to the extent required thereby), shares of Coke-Carolina Common
Stock which are issued and outstanding immediately prior to the Effective Time
and which are held by holders thereof who have properly exercised dissenter's
rights with respect thereto in accordance with the South Carolina Business
Corporation Act will not be exchangeable for the right to receive the Merger
Consideration, and holders of such Dissenting Shares will (if Consolidated, in
its sole and absolute discretion, elects to waive the conditions to closing set
forth in Sections 8.1), instead be entitled to receive payment of the fair value
of such Dissenting Shares in accordance with the South Carolina Business
Corporation Act unless and until such holders fail to perfect or effectively
withdraw or lose their rights to dissent and receive payment of fair value under
the South Carolina Business Corporation Act. If, after the Effective Time, any
shareholder of Dissenting Shares fails to perfect or effectively withdraws or
loses such rights, such Dissenting Shares will thereupon be treated as if they
had been converted into and have become exchangeable for, at the Effective Time,
the right to receive the Merger Consideration, without any interest thereon
through the time of such withdrawal or loss
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of rights. Notwithstanding anything to the contrary contained in this Section
2.5, if the Merger is rescinded, abandoned or not effectuated for any reason,
then the right of any Coke-Carolina Shareholder to be paid the fair value of
such shareholder's Dissenting Shares pursuant to the South Carolina Business
Corporation Act shall cease. Coke-Carolina shall give Consolidated and Newco
immediate notice of any demands and withdrawals of such demands received by
Coke-Carolina relating to the exercise of, or of Coke-Carolina's learning of the
intent to exercise, dissenter's rights under the South Carolina Business
Corporation Act. Prior to the Effective Time, Coke-Carolina shall not, without
the prior consent of Consolidated and Newco, make any payment with respect to
any demands for payment of fair value or offer to settle or settle any such
demands. The provisions of this Section shall not be deemed to waive or
compromise the rights and remedies of Consolidated and Newco to seek
indemnification for a breach of the representations and warranties contained in
Section 4.3 and/or to elect to terminate this transaction for a failure of the
condition to Closing specified in Section 8.1.
2.6 Closing. Unless this Agreement shall have been terminated pursuant
to Article IX, and subject to satisfaction or waiver of the conditions to
closing set forth in Article VIII, the closing (the "Closing") of the
transactions contemplated by this Agreement shall take place at the offices of
Sutherland Asbill & Brennan LLP, 999 Peachtree Street, N.E., Atlanta, Georgia
commencing at 10:00 a.m., E.S.T. on the second business day after all conditions
to Closing have been satisfied or waived, unless otherwise agreed to by
Consolidated and Newco. The date on which the Closing occurs is referred to
herein as the "Closing Date."
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF CONSOLIDATED AND NEWCO
Consolidated and Newco represent and warrant as of the date hereof and
as of the Closing Date as follows:
3.1 Organization of Consolidated and Newco. Consolidated and Newco are
corporations duly organized, validly existing, and in good standing under the
laws of the State of Delaware and have full power and authority, corporate and
other, to conduct the business in which they are engaged. Newco is duly
qualified to transact business as a foreign corporation in the State of South
Carolina.
3.2 Authorization of Transaction. Consolidated and Newco have full power
and authority to execute and deliver this Agreement and to perform their
respective obligations hereunder. This Agreement constitutes the valid and
legally binding obligation of Consolidated and Newco, enforceable in accordance
with its terms and conditions, except that (i) such enforcement may be subject
to bankruptcy, insolvency, reorganization, moratorium or other similar laws now
or hereafter in effect relating to creditor's rights and (ii) the remedy of
specific performance and injunctive and other forms of equitable relief may be
subject to equitable defenses and to the discretion of the court before which
any proceeding therefor may be brought. Except for the already satisfied
compliance with the provisions of the Hart-Scott-Rodino Antitrust Improvements
Act, filing of the merger documents with the Delaware and South Carolina
Secretaries of State, compliance with applicable federal and state securities
laws, and
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obtaining the consent of The Coca-Cola Company pursuant to Section 8.3(e),
neither Consolidated nor Newco need give any notice to, make any filing with, or
obtain any authorization, consent, or approval of any government or governmental
agency in order to consummate the transactions contemplated by this Agreement.
3.3 Noncontravention. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby, will
(a) violate any constitution, statute, regulation, rule, injunction, judgment,
order, decree, ruling, charge, or other restriction of any government,
governmental agency, or court to which Consolidated or Newco is subject or any
provision of their charter or bylaws or (b) conflict with, result in a breach
of, constitute a default under, result in the acceleration of, create in any
party the right to accelerate, terminate, modify, or cancel, or require any
notice under any agreement, contract, lease, license, instrument, or other
arrangement to which Consolidated or Newco is a party or by which they or any of
their assets are bound.
3.4 SEC Reports. Except as disclosed on Exhibit 3.4 hereof, Consolidated
has timely filed all required forms, reports, statements and documents with the
Securities and Exchange Commission since January 1, 1998, all of which have
complied in all material respects with all applicable requirements of the
Securities Act of 1933 (as amended) and the Securities Exchange Act of 1934 (as
amended) (the "Consolidated SEC Reports"). As of their respective dates, the
Consolidated SEC Reports were prepared in all material respects in accordance
with the requirements of the Securities Act of 1933 (as amended) and the
Securities Exchange Act of 1934 (as amended) as the case may be, and did not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading. The
financial statements (including any related notes) of Consolidated included in
the Consolidated SEC Reports were prepared in conformity with generally accepted
accounting principles applied on a consistent basis (except as otherwise stated
in such financial statements or, in the case of audited statements, the related
report of Pricewaterhouse Coopers, LLP, independent certified public accountants
for Consolidated), and present fairly in all material respects the consolidated
financial position, results of operations and cash flows of Consolidated as of
the dates and for the periods indicated, subject, in the case of unaudited
interim consolidated financial statements, to condensation, the absence of notes
not required for quarterly financial statements thereto and normal year-end
audit adjustments.
3.5 Registration Statement; Proxy Statement; Other Filings. None of the
information supplied or to be supplied by Consolidated or Newco expressly for
inclusion in (i) the Registration Statement, (ii) the Proxy Statement, or (iii)
any other documents to be filed with the Securities and Exchange Commission (the
"Commission") or any regulatory agency in connection with the transactions
contemplated hereby, will, at the respective times such documents are filed,
and, in the case of the Registration Statement, when it becomes effective and at
all times necessary for the issuance of the shares of Consolidated Common Stock
and the Installment Notes in the Merger, fail to comply with the Securities Act
of 1933 as amended (the "Securities Act"), or, with respect to the Proxy
Statement, when mailed and at all times through the date of the Shareholders'
Meeting, contain any untrue statement of a material fact or omit to
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state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading, or necessary to correct any statement in any earlier
communication with respect to the Shareholders' Meeting which has become false
or misleading. All documents which Consolidated or Newco files with the
Commission and any regulatory agency in connection with the Merger will comply
in all material respects with the applicable provisions of the Securities Act,
the Securities Exchange Act of 1934, as amended (the "Exchange Act") and state
securities laws and the rules and regulations thereunder.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF COKE-CAROLINA
Coke-Carolina represents and warrants as follows (1) as of the date
hereof and (2) except for events occurring between the execution of this
Agreement and the Closing Date and in the case of those involving acts or
omissions by Coke-Carolina during such interim period, except for those acts or
omissions which are permitted by Article V, as of the Closing Date:
4.1 Capital Stock and Stockholder Relations. The authorized capital
stock of Coke-Carolina consists solely of five thousand (5,000) shares of common
stock $100.00 par value per share, of which Four Thousand Two Hundred
Eight-Three (4,283) shares of Coke-Carolina Common Stock are issued and
outstanding and constitute all of the issued and outstanding shares of
Coke-Carolina equity securities. Section 4.1 of the letter setting forth the
disclosures contemplated by this Article IV (the "Disclosure Letter") sets forth
a complete and accurate list (as reflected in the stock transfer ledger of
Coke-Carolina) of the name and address of each Coke-Carolina Shareholder, the
number of shares of Coke-Carolina Common Stock owned of record by such
shareholder of record, and the percentage ownership of record of such
shareholder. All issued and outstanding Coke-Carolina Common Stock has been duly
authorized, validly issued, fully paid, and is nonassessable. There are no
outstanding options, warrants, contracts, preemptive or subscription rights,
proxies, calls, commitments, demands or understandings of any character to which
Coke-Carolina is a party obligating Coke-Carolina to issue any Coke-Carolina
Common Stock; any options, warrants or rights with respect to Coke-Carolina
Common Stock to which Coke-Carolina is a party; or any other securities relating
thereto. There are no existing or outstanding securities of any kind issued by
Coke-Carolina convertible into or exchangeable for Coke-Carolina Common Stock or
other securities. There are no outstanding or authorized stock appreciation,
phantom stock, profit participation, or similar rights with respect to
Coke-Carolina to which Coke-Carolina is a party. There are no outstanding
obligations of Coke-Carolina to repurchase, redeem or otherwise acquire any
Coke-Carolina Common Stock. There are no voting trusts, proxies, or other
agreements or understandings with respect to the voting of the capital stock of
Coke-Carolina to which Coke-Carolina is a party. There are no pending or
threatened claims or causes of action whatsoever against Coke-Carolina brought
by any current or former stockholder of Coke-Carolina or of any corporation
heretofore merged with or into Coke-Carolina arising out of or in any way
connected with any act or omission by Coke-Carolina. To Coke-Carolina's
knowledge, no event has occurred which would be reasonably expected to cause any
such present or former stockholder to come to have any such claim or cause of
action against Coke-Carolina or any officer, director or stockholder of
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Coke-Carolina, by virtue of, or in any way connected with, the transactions
contemplated by this Agreement or otherwise.
4.2 Dividends. Except as disclosed in Section 4.2 of the Disclosure
Letter, since January 31, 1998, Coke-Carolina has not made any distribution,
declaration, setting aside or payment of any dividend, or any other distribution
with respect to the Coke-Carolina Common Stock, or any direct or indirect
redemption, purchase or other acquisition or sale of any Coke-Carolina Common
Stock.
4.3 Authorization; Binding Agreement. The execution, delivery and
performance of this Agreement by Coke-Carolina, and the consummation by
Coke-Carolina of the transactions contemplated hereby, have been unanimously
approved and duly authorized by the board of directors of Coke-Carolina in
accordance with the Articles of Incorporation and bylaws of Coke-Carolina, as
well as applicable law including Section 33-11-103 of the South Carolina
Business Corporation Act. This Agreement has been duly and validly executed and
delivered by Coke-Carolina, and (subject to approval by Coke-Carolina's
Shareholders and the already satisfied compliance with the Hart-Scott-Rodino
Antitrust Improvements Act and federal and state securities laws) is a legal,
valid and binding obligation of Coke-Carolina, enforceable in accordance with
its terms and conditions, except that (i) such enforcement may be subject to
bankruptcy, insolvency, reorganization, moratorium or other similar laws now or
hereafter in effect relating to creditor's rights and (ii) the remedy of
specific performance and injunctive and other forms of equitable relief may be
subject to equitable defenses and to the discretion of the court before which
any proceeding therefor may be brought.
4.4 No Conflict. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby, will
violate any constitution, statute, regulation, rule, injunction, judgment,
order, decree, ruling, charge, or other restriction of any government,
governmental agency, or court to which Coke-Carolina is subject or any provision
of the charter, bylaws or other organizational document of Coke-Carolina. Except
as set forth in Section 4.4 of the Disclosure Letter, neither the execution and
the delivery of this Agreement, nor the consummation of the transactions
contemplated hereby, will (i) conflict with, result in a breach of, constitute a
default under, result in the acceleration of, create in any party the right to
accelerate, terminate, modify, cancel, or require any notice under any
agreement, contract, lease, license, instrument, or other arrangement to which
Coke-Carolina is a party or by which it is bound or to which any of
Coke-Carolina's assets are subject and required to be disclosed to Consolidated
pursuant to this Agreement or (ii) result in the imposition of any lien, charge,
encumbrance or other security interest upon any of Coke-Carolina's assets.
Except as set forth in Section 4.4 of the Disclosure Letter, Coke-Carolina is
not required to give any notice to, make any filing with, or obtain any
authorization, consent, or approval of any third person, government or
governmental agency in order for the parties to (i) execute this Agreement, and
(ii) consummate the transactions contemplated hereby, other than compliance with
(i) the provisions of the Hart-Scott-Rodino Antitrust Improvements Act (already
satisfied) and federal and state securities law, (ii) compliance with the
provisions of the South Carolina Business Corporation Act, and (iii) the filing
of the Articles of Merger with the South Carolina and Delaware Secretaries of
State.
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4.5 Corporate Organization and Good Standing. Coke-Carolina is a
corporation duly organized, validly existing and in good standing under the laws
of the State of South Carolina, with all requisite corporate power and authority
to own, operate and lease its properties and to carry on its business as it is
now being conducted, and does not transact business outside of the State of
South Carolina such that it would need to be qualified or licensed to do
business in any other state.
4.6 Organizational Documents. Coke-Carolina has delivered to
Consolidated and Newco complete and true copies of the charter documents and
bylaws of Coke-Carolina (as amended and in effect as of the date hereof), the
minute books (containing all known records of meetings of the stockholders, the
board of directors, and any committees of the board of directors). Section 4.6
of the Disclosure Letter contains a true and complete list of all of the current
officers and directors of Coke-Carolina.
4.7 Brokers' Fees. Coke-Carolina (and to its knowledge, the shareholders
of Coke-Carolina) has no liability or obligation to pay any fees or commissions
to any broker, finder, or agent with respect to the transactions contemplated by
this Agreement other than to Overend & Company, Inc., the fees of which will not
be paid by Coke-Carolina, Consolidated or Newco.
4.8 Title to Assets. Except as reflected in Coke-Carolina's financial
statements as of January 31, 1998 or disclosed in Section 4.8 of the Disclosure
Letter, Coke-Carolina has good and marketable title to (or in the case of leases
or other contracts, the full and unencumbered right to exercise its rights under
such leases or other agreements) the properties and assets used by it, free and
clear of all mortgages, deeds of trust, liens, security interests, pledges,
encumbrances, encroachments, easements, leases, agreements, covenants, charges,
restrictions, option, joint ownership or adverse claims or rights whatsoever,
except for Permitted Liens, and except for properties and assets disposed of in
the ordinary course of business since January 31, 1998. "Permitted Liens" means:
(i) rights of lessors or lessees under the terms of leases which have been
disclosed to Consolidated in this Agreement or the Disclosure Letter; (ii) liens
for Taxes not yet due and payable; (iii) rights-of-way, building use
restrictions, exceptions, variances, reservations or limitations of any nature
whatsoever of public record; (iv) liens reflected in the Financial Statements;
(v) liens imposed by applicable law and incurred in the ordinary course of
business for obligations not yet due and payable to laborers, materialmen and
the like; (vi) zoning or other restrictions, variances, covenants,
rights-of-way, encumbrances, easements and or other minor irregularities of
title, none of which, individually or in the aggregate, interferes in any
material respect with the current use or occupancy of any of the real property
by Coke-Carolina, has a material adverse effect on the value thereof, or would
impair in any material respect the ability of Coke-Carolina to sell such
property for its current use; and (vii) with respect to items of personal
property, unperfected purchase money security interests existing in the ordinary
course of business without the execution of a security agreement.
4.9 Subsidiaries and Affiliates. Except for Heath Oil Company, Inc.,
Coke-Carolina has no subsidiaries or affiliated businesses or operations, and
there are no other assets, operations, or the like owned, employed or used by
Coke-Carolina in the operation of its
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business that would not inure to the sole benefit and control of Newco as the
Surviving Corporation as of the Effective Time.
4.10 Financial Statements. Except as specified in Section 4.10 of the
Disclosure Letter, the financial statements (including any related notes) of
Coke-Carolina dated January 31, 1998 (a complete and accurate copy of which is
attached to the Disclosure Letter): (a) are in accordance with Coke-Carolina's
books and records, (b) have been prepared in conformity with historical past
practice on a consistent basis for Coke-Carolina, (c) fairly present in all
material respects, consistent with historical practice, Coke-Carolina's
financial condition as of the date indicated and the results of Coke-Carolina's
operations for the period indicated, and (d) have been prepared as generally
described in Section 4.10 of the Disclosure Letter; provided, however, that the
foregoing representations and warranties in this Section 4.10 shall not be
breached by acts, omissions, facts or circumstances that either (i) are not a
breach of a representation or warranty directly applicable to such acts,
omissions, facts or circumstances (for example the requirement to disclose only
specified contracts as set forth in Subsection 4.19) or (ii) as to which
representations and warranties are expressly disclaimed in this Agreement.
4.11 Events Subsequent to January 31, 1998. Since January 31, 1998,
other than the actions relating to entering into this Agreement (including
entering into arrangements with Consolidated) and other than as set forth in
Section 4.11 of the Disclosure Letter, Coke-Carolina has conducted its business
in the ordinary course and there has not been any change in the business,
financial condition, operations, results of operations, relationships with any
suppliers or (other than in the ordinary course of business) customers of
Coke-Carolina which would constitute or be expected to result in an adverse
effect upon Coke-Carolina. Without limiting the generality of the foregoing,
since January 31, 1998 and except as set forth in Section 4.11 of the Disclosure
Letter:
(a) Coke-Carolina has not sold, leased, transferred, or assigned any of
its assets, tangible or intangible, other than in the ordinary course of
business;
(b) Coke-Carolina has not entered into any agreement, contract, lease,
or license (or series of related agreements, contracts, leases, and licenses)
either involving more than Twenty-Five Thousand Dollars ($25,000.00) or outside
the ordinary course of business;
(c) no party (including Coke-Carolina) has accelerated, terminated,
modified, or canceled any agreement, contract, lease, or license (or series of
related agreements, contracts, leases, and licenses, with the same third party)
involving more than Twenty-five Thousand Dollars ($25,000.00) to which
Coke-Carolina is a party or by which Coke-Carolina or its assets are bound;
(d) Except as disclosed in Section 4.10 or Section 4.12 of the
Disclosure Letter, Coke-Carolina has not granted or allowed to be imposed any
lien, claim, charge, security interest or other encumbrance upon any of its
assets, other than equipment operating leases entered into in the ordinary
course of business or Permitted Liens, nor has Coke-Carolina issued any note,
bond, or other debt instrument or created, incurred, assumed, or guaranteed any
indebtedness for
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borrowed money or capitalized lease obligation (other than endorsements of
negotiable instruments in the ordinary course of business);
(e) Coke-Carolina has not made any capital expenditure (or series of
related capital expenditures with the same third party) either involving more
than Twenty-Five Thousand Dollars ($25,000.00) or outside the ordinary course of
business;
(f) Coke-Carolina has not made any capital investment in, or any
acquisition of the securities or assets (excluding raw materials or product or
supplies) of, any third party;
(g) Coke-Carolina has not delayed or postponed the payment of accounts
payable or other liabilities beyond the payment terms applicable to said
accounts payable or liabilities;
(h) Coke-Carolina has not canceled, compromised, waived, or released any
right or claim (or series of related rights and claims with the same third
party) involving more than Twenty-Five Thousand Dollars ($25,000.00);
(i) Coke-Carolina has not granted any license or sublicense of any
rights under or with respect to any of its intellectual property;
(j) there has been no change made or authorized in the charter or bylaws
of Coke-Carolina;
(k) Coke-Carolina has not issued, sold, or otherwise disposed of any of
the Coke-Carolina Common Stock, or granted any options, warrants, or other
rights to purchase or obtain (including upon conversion, exchange or exercise)
any of the Coke-Carolina Common Stock;
(l) Coke-Carolina has not experienced any damage, destruction, or loss
(whether or not covered by insurance) materially and adversely affecting its
properties or business;
(m) Coke-Carolina has not made any loan to, or entered into any other
transaction with or on behalf of (including guarantees of debt), any of its
directors, officers, or employees other than normal salary, bonuses and employee
benefits paid or granted in the ordinary course of business consistent with past
practice;
(n) Coke-Carolina has not granted any increase in the base compensation
of, and has not granted any bonus, dividend, or other form of compensation to,
any of its directors, officers, or employees outside the ordinary course of
business, and has not adopted, amended, modified, or terminated any bonus,
profit-sharing, incentive, severance, or other plan, contract, or commitment for
the benefit of any of its directors, officers, or employees (or taken any such
action with respect to any other Employee Benefit Plan);
(o) Coke-Carolina has not made any other change in employment terms for
any of its directors, officers, or key employees;
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(p) Coke-Carolina has not made or pledged to make any charitable
contribution;
(q) Coke-Carolina has not incurred any liability, contingent or
otherwise, except in the ordinary and usual course of business;
(r) Coke-Carolina has not made any change in any method of accounting or
principle of accounting; and
(s) Coke-Carolina has not committed to take any action that would result
(or would reasonably be expected to result) in any of the foregoing.
Notwithstanding the foregoing, Section 4.11 of the Disclosure Letter
does not need to list Franchise Agreements, leases (including capital leases)
disclosed (or not required to be disclosed) pursuant to this Agreement,
indebtedness for borrowed money disclosed (or not required to be disclosed)
pursuant to this Agreement, insurance policies disclosed (or not required to be
disclosed) pursuant to this Agreement or employee-related matters disclosed (or
not required to be disclosed) pursuant to this Agreement, and contracts,
agreements or other arrangements involving or relating to: (1) any marketing
agreements or understanding including any chain marketing agreement, calendar
marketing agreement, or promotional discount letter, special arrangements,
whether providing for discounts, incentive awards or otherwise, which is
materially consistent with practices since December 31, 1997; (2) sales of soft
drink products pursuant to ordinary purchase orders; (3) arrangements with
respect to on-location cold drink equipment; or (4) purchases of raw materials
and packaging materials in the ordinary course of business for the production of
soft drinks necessary for the continued operation of the business of
Coke-Carolina (including providing a reasonable inventory of finished products,
raw materials and packaging materials).
4.12 Loans, Letters of Credit, Reimbursement Arrangements. Coke-Carolina
has not made any loans to, issued any letters of credit, or entered into any
form of reimbursement agreement or arrangement (excluding endorsements of
negotiable instruments in the ordinary course of business) to any party except
as set forth in Section 4.11 or Section 4.12 of the Disclosure Letter.
4.13 Undisclosed Liabilities. Except as set forth in Section 4.13 of the
Disclosure Letter, Coke-Carolina does not have any liability whatsoever, whether
accrued, absolute, contingent or otherwise (and there is no basis for any
present or future action, suit, proceeding, hearing, investigation, charge,
complaint, claim, or demand against it giving rise to any liability), except for
(a) liabilities set forth and adequately reserved against in the Most Recent
Financial Statements (defined in Section 4.15 below) rather than in any notes
thereto; and (b) liabilities which have arisen after the Most Recent Financial
Statements in the ordinary course of business (none of which results from,
arises out of, relates to, is in the nature of, or was caused by any breach of
contract, breach of warranty, tort, infringement, or violation of law);
provided, however, that the foregoing representations and warranties in this
Section 4.13 shall not be breached by acts, omissions, facts or circumstances
that either (i) are not a breach of a representation or warranty directly
applicable to such acts, omissions, facts or circumstances (for
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example the requirement to disclose only specified contracts as set forth in
Section 4.19) or (ii) as to which representations and warranties are expressly
disclaimed in this Agreement.
4.14 Legal Compliance. Except as set forth in Section 4.14 of the
Disclosure Letter, Coke-Carolina has complied in all material respects with all
applicable laws (including rules, regulations, codes, plans, injunctions,
judgments, orders, decrees, rulings, and charges thereunder) of federal, state,
local, and foreign governments (and all agencies thereof), and no action, suit,
proceeding, hearing, investigation, charge, complaint, claim, demand, or notice
has been filed, commenced or threatened against it alleging any failure so to
comply. THE PROVISIONS OF THIS SECTION SHALL NOT APPLY TO ENVIRONMENTAL MATTERS,
WHICH ARE THE SUBJECT OF SECTION 4.27 BELOW.
4.15 Tax Matters. For purposes of this Agreement, "Tax" or "Taxes" means
taxes, fees, levies, duties, tariffs, imposts, and governmental impositions or
charges of any kind in the nature of (or similar to) taxes, payable to any
federal, state, local or foreign taxing authority, including income, franchise,
profits, gross receipts, ad valorem, unclaimed property, net worth, value added,
sales, use, business and occupation, service, real or personal property, special
assessments, capital stock, business license, payroll, withholding, employment,
social security, workers' compensation, unemployment compensation, utility,
severance, fuel, heavy motor vehicle, soft drink, production, excise, stamp,
occupation, premiums, windfall profits, transfer and gains taxes and additions
to tax, penalties and interest imposed with respect thereto; and "Tax Returns"
means returns, reports, and information statements with respect to Taxes
required to be filed with the Internal Revenue Service or any other taxing
authority, domestic or foreign, including consolidated, combined and unitary tax
returns (including returns required in connection with any Employee Plan).
Except as listed in Section 4.15 of the Disclosure Letter:
(a) Each of Coke-Carolina and its Subsidiary has filed all Tax Returns
that it was required to file. All such Tax Returns were correct and complete in
all respects. All Taxes owed by any of Coke-Carolina and its Subsidiary (whether
or not shown on any Tax Return) have been paid or accrued on the interim
financial statement of Coke-Carolina dated February 28, 1999, a copy of which is
attached to Section 4.15(a) of the Disclosure Letter. Coke-Carolina currently is
not the beneficiary of any extension of time within which to file any Tax Return
or to make any Tax payment. No claim has been made since December 31, 1993 by
any authority in a jurisdiction where any of Coke-Carolina and its Subsidiary
does not file Tax Returns that any of Coke-Carolina and its Subsidiary is or may
be subject to taxation by that jurisdiction.
(b) Each of Coke-Carolina and its Subsidiary has withheld and paid all
Taxes required to have been withheld and paid in connection with amounts paid or
owing to any employee, independent contractor, creditor, stockholder, or other
third party.
(c) No director or officer (or employee responsible for Tax matters) of
any of Coke-Carolina or its Subsidiary has received any written notice from any
authority that it expects to assess any additional Taxes for any period for
which Tax Returns have been filed. There is no dispute or claim concerning any
Tax liability of Coke-Carolina or its Subsidiary claimed or raised by any
authority in writing. As concerns income Tax, Section 4.15 of the Disclosure
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Letter sets forth all federal, state and local Tax Returns filed with respect to
Coke-Carolina for taxable periods ended on or after December 31, 1993 that have
been audited, and indicates those Tax Returns that currently are the subject of
audit.
(d) None of Coke-Carolina and its Subsidiary has waived any statute of
limitations in respect of Taxes or agreed to any extension of time with respect
to a Tax assessment or deficiency.
(e) None of Coke-Carolina or its Subsidiary has filed a consent under
Code ss.341(f) concerning collapsible corporations. None of Coke-Carolina or its
Subsidiary has made any payments, is not obligated to make any payments, or is a
party to any agreement that under certain circumstances could obligate it to
make any payments that will not be deductible under Code ss.280G. None of
Coke-Carolina or its Subsidiary has been a United States real property holding
corporation within the meaning of Code ss.897(c)(2) during the applicable period
specified in Code ss.897(c)(1)(A)(ii). None of Coke-Carolina or its Subsidiary
is a party to any tax allocation or sharing agreement. Other than with respect
to Heath Oil Company, Inc., none of Coke-Carolina or its Subsidiary (i) has been
a member of an affiliated group filing a consolidated federal income Tax Return
and (ii) has any liability for the Taxes of any person or entity (other than
Coke-Carolina and its Subsidiary) under Reg. ss.1.1502-6 (or any similar
provision of state or local law), as a transferee or successor, by contract, or
otherwise.
(f) The unpaid Taxes of Coke-Carolina and its Subsidiary (i) did not, as
of the Most Recent Financial Statements, exceed the reserve for tax liability
set forth on the face of the Most Recent Financial Statements (rather than in
any notes thereto) and (ii) will not exceed the reserve on the preliminary
Closing balance sheet as finally determined pursuant to Section 2.2.
(g) For purposes of this Section, "Subsidiary" means (i) any corporation
with respect to which Coke-Carolina (or a Subsidiary thereof) owns a majority of
the common stock or has the power to vote or direct the voting of sufficient
securities to elect a majority of the directors, and (ii) any unincorporated
entity with respect to which Coke-Carolina (or a Subsidiary thereof) owns a
majority of the capital or profits interests.
4.16 Real Property. Section 4.16 of the Disclosure Letter lists all real
property that Coke-Carolina owns for the operation of its business (the "Real
Estate"). There is no real property leased by Coke-Carolina. For all Real
Estate, Section 4.16 of the Disclosure Letter sets forth (i) the address of the
property, (ii) a list of any leases of any portion of the property to another
and (iii) any liens or encumbrances on the property other than Permitted Liens.
(a) General. Except for the Real Estate, there is no real property
owned, leased or occupied by Coke-Carolina.
(b) Codes, Ordinances, Use and Notice of Condemnation. There are no
existing, pending, or proposed material violations of any fire or health codes,
building ordinances, or rules of the Board of Fire Underwriters (or organization
exercising functions similar thereto), with respect to the Real Estate, nor is
there any defect in the Real Estate which would render all or any
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part thereof unsuitable for its continued use by Coke-Carolina in the manner
currently used by Coke-Carolina. Coke-Carolina has not received any notice and
there are not any condemnation, zoning or land use proceedings or deliberations
in process or proposed as to the Real Estate.
(c) Licenses and Permits. Coke-Carolina holds all licenses,
certificates, permits, franchises and rights from all appropriate federal,
state, local, foreign and other public authorities necessary for its occupancy
and use of the Real Estate, all of which are specified in Section 4.16 of the
Disclosure Letter; provided, however, that the foregoing shall not require
disclosure of state and local businesses or similar licenses required of
businesses generally; and provided, further, that nothing in the foregoing
requires any disclosure with respect to such licenses, permits or other
authorizations required by Environmental Laws, or compliance with applicable law
or any other matter covered by Sections 4.17, 4.18, 4.19, 4.20, 4.21, 4.24,
4.27, 4.28 and 4.29.
(d) No Notice of Violations. Coke-Carolina is in compliance with all
applicable laws, rules and regulations relating to its occupancy and use of the
Real Estate. Coke-Carolina has not received any notice of violation of any
federal, state, local, or foreign laws, ordinances, rules, regulations or orders
relating to its occupancy and use of the Real Estate. THE PROVISIONS OF THIS
SECTION SHALL NOT APPLY TO ENVIRONMENTAL MATTERS, WHICH ARE THE SUBJECT OF
SECTION 4.27 BELOW.
(e) Utility Connections. All public utility connections located on or
serving the Real Estate have been completed, installed, activated, paid for and
are in operational condition and are in compliance with all appropriate codes,
rules and regulations.
(f) Real Estate Taxes and Utilities. Coke-Carolina is not aware of, nor
has it received, any notice or information of any condition which would result
in an increase in the assessments covering the Real Estate or utility rates
affecting the Real Estate.
(g) Access. Coke-Carolina presently has the right to use all accesses
from the Real Estate to and from public thoroughfares, as such accesses are
presently configured and utilized, except as disclosed in Section 4.16 of the
Disclosure Letter.
(h) Zoning and Land Use. Coke-Carolina is not in violation of any zoning
or land use laws, regulations, rules or ordinances.
(i) Good Title. Except as set forth on Section 4.16 of the Disclosure
Letter, Coke-Carolina has good and marketable title to each parcel of Real
Estate, free and clear of any liens, mortgages, deeds to secure debt, security
interests, easements, covenants, or other restrictions, except for recorded
easements, covenants, and other restrictions which do not materially impair the
current use, occupancy, or value, or the marketability of title, of the property
subject thereto and except for Permitted Liens.
4.17 Intellectual Property. Set forth in Section 4.17 of the Disclosure
Letter, is a complete and accurate list of all intellectual property rights
owned by or licensed to Coke-
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Carolina, including all rights in and to servicemarks, trademarks, tradenames
(including the name "Carolina Coca-Cola Bottling Company" and all variations
thereof), copyrights, patents and the like whether or not subject to
registration, but excluding (1) any licenses pertaining to the use of computer
software applications (other than any such applications, or any customized
variations thereof, which have been specifically designed for and licensed to
Coke-Carolina for use in its business) and (2) rights under agreements with soft
drink licenses (collectively the "Coke-Carolina Intellectual Property").
(a) There are no other forms of intellectual property rights necessary
for the operation of the businesses of Coke-Carolina as presently conducted
other than the Coke-Carolina Intellectual Property. Each item of Coke-Carolina
Intellectual Property owned or used by Coke-Carolina immediately prior to the
Closing hereunder will be owned or available for use by Newco on identical terms
and conditions immediately subsequent to the Closing hereunder. Coke-Carolina
has taken all necessary action to maintain and protect each item of
Coke-Carolina Intellectual Property that it owns or uses.
(b) Since December 31, 1993, Coke-Carolina has never interfered with,
infringed upon, misappropriated, or otherwise come into conflict with any
intellectual property rights of third parties, and Coke-Carolina has not
received any charge, complaint, claim, demand, or notice alleging any such
interference, infringement, misappropriation, or violation (including any claim
that Coke-Carolina must license or refrain from using any intellectual property
rights of any third party). To Coke-Carolina's knowledge, no third party has
interfered with, infringed upon, misappropriated, or otherwise come into
conflict with any of the Coke-Carolina Intellectual Property, and the Surviving
Corporation, will not interfere with, infringe upon, misappropriate, or
otherwise come into conflict with, any intellectual property rights of third
parties as a result of a course of business pre-dating the Effective Time.
(c) With regard to each item of the Coke-Carolina Intellectual Property:
(i) to Coke-Carolina's knowledge, Coke-Carolina possesses all
right, title, and interest in and to the item, free and clear of any
security interest, license, or other restriction;
(ii) to Coke-Carolina's knowledge, the item is not subject to any
outstanding injunction, judgment, order, decree, ruling, or charge;
(iii) to Coke-Carolina's knowledge, no action, suit, proceeding,
hearing, investigation, charge, complaint, claim, or demand is pending
or threatened which challenges the legality, validity, enforceability,
use, or ownership of the item; and
(iv) Coke-Carolina has never agreed to indemnify any third party
for or against any interference, infringement, misappropriation, or
other conflict with respect to the item.
4.18 Rolling Stock and Other Tangible Personal Property. Other than
property
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subject to equipment leases (as to which there is not existing any material
default or event of default or event which with notice or lapse of time would
constitute a default other than as set forth in Section 4.18 of the Disclosure
Letter), Coke-Carolina has good, valid and marketable title to all machinery,
equipment, and other tangible personal property (including the Rolling Stock (as
defined below)) used in its business as presently conducted, free and clear of
all liens, claims, charges and encumbrances other than Permitted Liens. Each
such item of tangible personal property is in good operating condition and
repair (subject to normal wear and tear and normal maintenance requirements), is
suitable for the purposes for which it presently is used and, to Coke-Carolina's
knowledge, is free from material defects (patent and latent) except as set forth
in Section 4.18 of the Disclosure Letter. Section 4.18 of the Disclosure Letter
sets forth a list (by make, model, year and vehicle identification number) of
all automobiles, trucks, trailers, vans and the like used or usable by
Coke-Carolina (the "Rolling Stock"). Except as set forth on Section 4.18 of the
Disclosure Letter, the Rolling Stock is in compliance with all applicable safety
requirements (either by regulatory requirement) and is in operating condition,
except for any individual units of the Rolling Stock which are temporarily out
of service due to customary repair and maintenance requirements. The location of
all the Rolling Stock and other personal property set forth in Section 4.18 of
the Disclosure Letter is known to Coke-Carolina except to the extent noted.
4.19 Contracts. Section 4.19 of the Disclosure Letter sets forth the
following oral or written contracts and other agreements to which Coke-Carolina
is a party:
(a) any agreement (or group of related agreements, with the same third
party) for the lease of personal property providing for lease payments in excess
of Twenty-five Thousand Dollars ($25,000.00) per annum;
(b) any agreement (or group of related agreements with the same third
party) for the purchase or sale of supplies, products, or other personal
property, or for the furnishing or receipt of services, the performance of which
will extend over a period of more than one year or involve consideration in
excess of Twenty-Five Thousand Dollars ($25,000.00);
(c) any agreement concerning a partnership or joint venture;
(d) any agreement (or group of related agreements with the same third
party) under which Coke-Carolina has created, incurred, assumed, or guaranteed
any indebtedness for borrowed money, or any capitalized lease obligation, in
excess of Twenty-Five Thousand Dollars ($25,000.00) or under which it has
imposed a lien on any of its assets, tangible or intangible;
(e) any agreement concerning confidentiality or noncompetition
(excluding Franchise Agreements);
(f) any agreement under which it has advanced or loaned any amount to
any of its directors, officers, and employees;
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(g) any other agreement (or group of related agreements with the same
third party) the performance of which involves consideration in excess of
Twenty-Five Thousand Dollars ($25,000.00).
The foregoing are referred to hereafter as the "Material Contracts".
Notwithstanding the foregoing, Section 4.19 of the Disclosure Letter does not
need to list (and the phrase "Material Contracts" does not include) Franchise
Agreements, leases (including capital leases) disclosed (or not required to be
disclosed) pursuant to this Agreement, indebtedness for borrowed money disclosed
(or not required to be disclosed) pursuant to this Agreement, insurance policies
disclosed (or not required to be disclosed) pursuant to this Agreement or
employee-related matters disclosed (or not required to be disclosed) pursuant to
this Agreement, and contracts, agreements or other arrangements involving or
relating to: (1) any marketing agreement or understanding including any chain
marketing agreement, calendar marketing agreement, or promotional discount
letter, special arrangements, whether providing for discounts, incentive awards
or otherwise, which is materially consistent with practices since December 31,
1997; (2) sales of soft drink products pursuant to ordinary purchase orders; (3)
arrangements with respect to on-location cold drink equipment; or (4) purchases
of raw materials and packaging materials in the ordinary course of business for
the production of soft drinks necessary for the continued operation of the
business of Coke-Carolina (including providing a reasonable inventory of
finished products, raw materials and packaging materials). With respect to the
Material Contracts, except as set forth in Section 4.19 of the Disclosure
Letter: (i) all are enforceable in all material respects in accordance with
their terms in a manner that obtains for, or imposes upon, the parties the
primary benefits and obligations of such agreements; (ii) Coke-Carolina is not,
and to Coke-Carolina's knowledge no party thereto is, in breach or default, and
no event has occurred which with notice or lapse of time would constitute a
breach or default, or permit termination, modification, or acceleration, under
the agreement; (iii) Coke-Carolina has not assigned any of its rights or
obligations under any of the Material Contracts; (iv) Coke-Carolina has not
received any outstanding notice of cancellation or termination in connection
with any of them; (v) neither the execution, delivery or performance of any of
them violated, violates or will violate any applicable law; (vi) neither
Coke-Carolina nor, to Coke-Carolina's knowledge, any other party currently
contemplates any termination, amendment or change to any of them; and (vii)
Coke-Carolina is not, and to Coke-Carolina's knowledge no party thereto is the
subject of bankruptcy proceedings, nor has had a trustee appointed on its behalf
or is insolvent. Coke-Carolina has delivered to Consolidated and Newco a correct
and complete copy of each written Material Contract (as amended to date) and a
written summary setting forth the terms and conditions of each oral agreement
constituting a Material Contract referred to in Section 4.19 of the Disclosure
Letter.
4.20 Employee Arrangements, Union Agreements and Benefit Plans and
Government Compliance.
(a) Section 4.20 of the Disclosure Letter sets forth a complete and
accurate list of written (and a description of those oral) employment,
consulting or collective bargaining contracts, deferred compensation, change in
control agreements, golden parachute agreements, profit-sharing, bonus, option,
share purchase or other benefit or compensation commitment,
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benefit plans, arrangements, policies or plans, including all welfare plans of
or pertaining to the present or former employees, directors or consultants of
Coke-Carolina or of any other entity which is a member of a controlled group
including Coke-Carolina or which is under common control with Coke-Carolina that
either (i) apply to at least five percent (5%) of the employees of Coke-Carolina
or such affiliated entity or (ii) obligate Coke-Carolina or such affiliated
entity to make any payments in excess of ten thousand dollars ($10,000) per
year. Except as set forth in Section 4.20 of the Disclosure Letter,
Coke-Carolina has complied with all of its respective obligations, including the
payment of all contributions, the filing of all reports, and the payment or
accrual of all expenses for the period between the end of the previous plan year
and the Closing Date, with respect to such contracts, commitments, arrangements
and plans. The plans have been maintained in compliance with all applicable laws
and regulations. Except as set forth in Section 4.20 of the Disclosure Letter,
the levels of insurance reserves and accrued liabilities with regard to all such
plans are reasonable and are sufficient to provide for all incurred but
unreported claims and any retroactive premium adjustments.
(b) Except as set forth in Section 4.20 of the Disclosure Letter (or
except where the minimum annual payments required from Coke-Carolina with
respect to any such arrangement have not exceeded, and are not expected to
exceed, ten thousand dollars ($10,000), Coke-Carolina does not have any oral or
written employment, consulting or collective bargaining contracts, deferred
compensation, change in control agreements, golden parachute agreements,
profit-sharing, bonus, option, share purchase or other benefit or compensation
commitment, benefit plans, arrangements or plans, including all welfare plans of
or pertaining to the present or former employees, directors, or consultants of
Coke-Carolina.
(c) Section 4.20 of the Disclosure Letter sets forth the name of each
salaried employee of Coke-Carolina and such employee's annual salary, position
and hire date.
(d) Except as disclosed in Section 4.20 of the Disclosure Letter,
Coke-Carolina is in compliance with all worker compensation laws and
requirements of all applicable states.
(e) Except to the extent set forth in Section 4.20 of the Disclosure
Letter:
(i) Coke-Carolina is in compliance with all applicable laws
respecting employment (if any) and employment practices, terms and
conditions of employment and wages and hours and occupational safety and
health;
(ii) Coke-Carolina has no (and has not had any) collective
bargaining agreements;
(iii) There is no unfair labor practice, charge or complaint or
any other matter against or involving Coke-Carolina pending or, to
Coke-Carolina's knowledge, threatened before the National Labor
Relations Board or any court of law;
(iv) There is no labor strike or organized dispute, slowdown or
stoppage actually pending or, to Coke-Carolina's knowledge, threatened
against Coke-Carolina
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and Coke-Carolina has not experienced any such work stoppage or other
organized labor difficulty since December 31, 1997;
(v) To Coke-Carolina's knowledge, no certification or
decertification question or organizational drive exists or has existed
within the past twenty-four (24) months respecting the employees of
Coke-Carolina;
(vi) No grievance proceeding or arbitration proceeding arising
out of or under any collective bargaining agreement is pending against
Coke-Carolina, or, to Coke-Carolina's knowledge, threatened; and, to
Coke-Carolina's knowledge, no basis for any claim therefor exists;
(vii) Except for general labor relation laws, no agreement
(including any collective bargaining agreement), arbitration or court
decision or governmental order which is binding on Coke-Carolina in any
way limits or restricts Coke-Carolina from relocating or closing any of
its operations;
(viii) There are no charges, or known administrative proceedings
or formal complaints of discrimination (including discrimination based
upon sex, age, marital status, race, national origin, sexual preference,
handicap or veteran status) pending or, to Coke-Carolina's knowledge,
threatened before the Equal Employment Opportunity Commission or any
federal, state or local agency or court against Coke-Carolina; and
(ix) There have been no governmental audits of the equal
employment opportunity practices of Coke-Carolina since December 31,
1993.
Coke-Carolina hereby disclaims any representation and warranty as to whether any
existing plans or arrangements can be altered or otherwise amended after the
Closing.
4.21 Employee Benefit Plans.
(a) The only employee pension benefit plan as defined in Section 3(2) of
The Employee Retirement Income Security Act of 1974 ("ERISA") and including all
trusts executed in connection therewith, adopted or sponsored or maintained or
contributed to by Coke-Carolina with respect to which or as the result of which
Coke-Carolina has or may have had or may have any liability (specifically
including any liability for a partial or complete withdrawal from a
"Multi-employer Plan" as defined in Sections 3(37) and 4001(a)(3) of ERISA and
any other liability arising under Title IV of ERISA) during the last five (5)
years is the "Retirement Plan For Employees Of The Carolina Coca-Cola Bottling
Company" (the "Retirement Plan"). The term "Coke-Carolina" specifically includes
for the purposes of this Section 4.21 Coke-Carolina and any member of a
controlled group with Coke-Carolina under Section 414(b),(c),(m) or (o) the
Internal Revenue Code of 1986, as amended, and the regulations promulgated
thereunder (the "Code") or any organization to which Coke-Carolina is a
successor or parent corporation within the meaning of Section 4069(b) of ERISA.
Coke-Carolina has never been required to make nor has it made any contribution
to any Multi-employer Plan.
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(b) The Retirement Plan is a qualified plan under Section 401(a) of the
Code, the trust with respect to such plan is exempt from taxation under Section
501(a) of the Code and is subject to a favorable determination letter which will
be in effect at the Closing Date. No action has been taken (or failure to take
action has occurred) by Coke-Carolina which would cause such deter mination
letter to be revoked. The Retirement Plan has been administered and operated in
accordance with its terms and in a manner so as to preserve such qualification,
including those provisions required by all subsequent laws (including the
Uniformed Services Employment and Re-employment Rights Act of 1994) whose
effective date is prior to the Closing Date. All Notices of Reportable Events
required to be filed with the Pension Benefit Guaranty Corporation have been
timely filed.
(c) Section 4.21 of the Disclosure Letter lists any employee welfare
benefit plan within the meaning of Section 3(1) of ERISA maintained or
contributed to by Coke-Carolina during the last five (5) years and with respect
to any group health plan subject to COBRA, maintained or contributed to by
Coke-Carolina during the last five (5) years. "COBRA" means the provisions for
the continuation of health care enacted by the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended, as set forth in Section 4980B of the
Code (and any amendments or predecessor or successor provisions) and Sections
601 through 608 of ERISA (and any amendments or predecessor or successor
provisions), including any regulations promulgated under the applicable
provisions of the Code and ERISA. As of the Closing Date, each of the employee
benefit plans set forth in Section 4.21 of the Disclosure Letter and the
Retirement Plan (collectively, the "Employee Benefit Plans") are in material
compliance with, and have been administered in material compliance with, the
provisions of ERISA, the Code and any applicable regulations.
(d) In connection with each Employee Benefit Plan and except as set
forth in Section 4.21 of the Disclosure Letter:
(i) Coke-Carolina has provided to the Buyer true, complete and correct
copies of (A) each Employee Benefit Plan (or, in the case of any
unwritten Employee Benefit Plan, a description thereof), (B) each trust
agreement, group annuity contract, and any other contract relating to
any Employee Benefit Plan, (C) the three (3) most recent Forms 990 and
the three (3) most recent Annual Reports, including all schedules,
exhibits, and audits (Form 5500) filed for each Employee Benefit Plan
for which such a filing is required; and there has been no material
change or amendment to any of such documents or filings relating to the
Employee Benefit Plans since January 31, 1998, (D) the most recent
Summary Plan Descriptions and all Summary of Material Modifications
prepared subsequent to such Summary Plan Descriptions, (E) the three (3)
most recent Summary Annual Reports prepared and distributed for each
Employee Benefit Plan for which such document is required, (F) the three
(3) most recent actuarial reports for the Retirement Plan, (G) all
Notices of Reportable Events filed with the Pension Benefit Guaranty
Corporation, (H) with respect to the Retirement Plan, a copy of the
written policies and procedures reasonably designed to promote and
facilitate overall compliance with the requirements of Section 401(a) of
the Code and all corrections made since January 7,
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1997, as a result of such policies and procedures, and (I) a copy of all
Forms 5330 filed since December 31, 1993.
(ii) Neither Coke-Carolina nor any fiduciary as defined in Section 3(21)
of ERISA has taken any action or failed to take any action which would
result in any liability to Coke-Carolina with respect to any Employee
Benefit Plan, other than the payment of the specified benefits and
ordinary administrative costs.
(iii) There is not any contract, plan or commitment or legal requirement
(other than the funding requirement of ERISA with respect to the
Retirement Plan), that would require Coke-Carolina to create any
additional employee benefit plan to provide or designed to provide
benefits for any of its present or former employees or their dependents
or beneficiaries or that would require Coke-Carolina to make any
additional contribution to or to pay any expense of the Retirement Plan
or to any Employee Benefit Plan for matters occurring prior to the
Closing Date. Every contract held by or with respect of an Employee
Benefit Plan may be terminated without any cost, including termination
fees and market value adjustments, imposed by the other party to such
contract; and
(iv) There is no action, suit, grievance, arbitration or other manner of
litigation, or claim with respect to the assets of any Employee Benefit
Plan (other than routine claims for benefits made in the ordinary course
of Employee Benefit Plan administration for which administrative review
procedures have not been exhausted) pending, to Coke-Carolina's
knowledge, threatened or imminent against or with respect to the
Employee Benefit Plan, Coke-Carolina or any other fiduciary (as defined
in Section 3(21) of ERISA) of any Employee Benefit Plan (including any
action, suit, grievance, arbitration or other manner of litigation, or
claim regarding conduct which allegedly interferes with the attainment
of rights under any Employee Benefit Plan).
4.22 [Intentionally Omitted]
4.23 Powers of Attorney. All outstanding powers of attorney executed on
behalf of Coke-Carolina (including copies thereof) are set forth in Section 4.23
of the Disclosure Letter.
4.24 Insurance. Section 4.24 of the Disclosure Letter lists all of
Coke-Carolina's insurance policies now in force (all of such policies, whether
or not listed being referred to as the "Insurance Policies"), and such list
states the type of policy, the policy number, the limits of coverage, the
carrier, the annual premium and the expiration date. Copies of the Insurance
Policies have been provided to Consolidated and Newco. Except as set forth in
Section 4.24 of the Disclosure Letter: (a) the premiums due on the Insurance
Policies have been timely paid, (b) the Insurance Policies comply with all of
Coke-Carolina's contractual requirements, (c) no notice of cancellation or
termination of any Insurance Policy has been given to Coke-Carolina by the
carrier of any such policy or predecessor policy since December 31, 1996, (d)
Coke-Carolina has not assigned any of its rights or obligation under any of the
Insurance Policies, (e) no act or omission by Coke-Carolina has occurred which,
with notice or lapse of time or both, would constitute a material breach or
default under any of them, (f) neither the execution, delivery or
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performance of any of them violated, violates or will violate any applicable
law; and (g) neither Coke-Carolina nor, to Coke-Carolina's knowledge, any other
party currently contemplates any termination, amendment or change to any of
them. Any self-insurance arrangements affecting Coke-Carolina are designated in
Section 4.24 of the Disclosure Letter.
4.25 Litigation and Claims. Section 4.25 of the Disclosure Letter sets
forth each instance (i) in which Coke-Carolina is subject to any outstanding
injunction, judgment, order, decree, ruling, claim or charge, (ii) in which
Coke-Carolina is a party or is threatened to be made a party to any action,
claim, suit, proceeding, hearing, or investigation of, in, or before any court
or quasi-judicial or administrative agency of any federal, state, local, or
foreign jurisdiction or before any arbitrator (excluding any such injunction,
judgement, order, decree, ruling, claim or charge disclosed, or not required to
be disclosed, pursuant to each other provision of this Agreement) or (iii) as to
which an act or omission has occurred that could reasonably be expected to
result in a claim, proceeding or investigation.
4.26 Guaranties. Except as set forth in Section 4.26 of the Disclosure
Letter, Coke-Carolina is not a guarantor, indemnitor or otherwise liable for any
liability or obligation (including indebtedness) of any other person or entity,
excluding endorsements of negotiable instruments in the ordinary course of
business.
4.27 Environmental, Health, and Safety Matters; Environmental
Protection.
(a) Environmental Liabilities. The phrase "Environmental Liability"
means any common law, statutory or other liability or obligation (including
assessment, remediation, removal, clean-up, restoration or other corrective
action and including fines, penalties, punitive or exemplary damages and whether
assessed with respect to personal injury or property damage, damage to the
natural resources or the environment or otherwise) pursuant to any federal,
state, or local law, rule, regulation, ordinance or other penal or regulatory
provision relating to environmental matters (including petroleum and any
fractions or by-products of it) or without limiting the foregoing, relating to
prevention, minimization, removal or remediation of pollution, to generation,
storage, use, disposal, reporting, tracking or other actions involving hazardous
substances and wastes (including petroleum and any fractions or by-products of
it), or to permits for any of the foregoing or relating to health or safety
matters relating to any of the foregoing.
(b) On-Site Matters. The parties acknowledge that they have negotiated
an adjustment to the Merger Consideration to account for any current or
potential Environmental Liability (whether arising from claims by governmental
authorities or any other person, including adjacent or nearby property owners,
lessees, occupants or invitees) involving or related to either (i) any of the
premises on which Coke-Carolina or any Subsidiary or any predecessor in interest
to either of them currently or previously either conducted its business
(including others' property on which either of them installed and/or owned or
operated above-ground or underground storage tasks) or otherwise owned or leased
or (ii) the manner in which any of them conducted its business at any such
premises (such liabilities and obligations being collectively, "On-Site
Matters"). Thus, Consolidated specifically agrees that COKE-CAROLINA MAKES NO,
AND HEREBY DISCLAIMS ALL, REPRESENTATIONS OR WARRANTIES WHATSOEVER WITH REGARD
TO ON-SITE MATTERS.
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(c) Off-Site Matters. There are no past or present events, conditions,
circumstances, activities, practices, incidents, actions or plans which may give
rise to any Environmental Liability not involving or relating to On-Site
Matters. The representation or warranty in this Subsection (c) shall apply
regardless of whether Consolidated or Newco had knowledge or reason to believe
that it was breached at or prior to the Closing.
4.28 Absence of Certain Payments. Other than for services legitimately
and openly performed under applicable law and business discounts customarily
granted in the ordinary course of business, neither Coke-Carolina nor any agent,
employee or representative of Coke-Carolina has made or offered to make to any
customer, supplier, government official, insurance carrier, referral source,
employee or agent or any other person or entity, any payment, gratuity, gift,
service or thing of material value since December 31, 1997 except as listed in
Section 4.28 of the Disclosure Letter. For purposes of this Section, "material"
means a fair market value of one hundred dollars ($100.00) or more.
4.29 Antitrust Matters. The business and operations of Coke-Carolina, or
any predecessor, affiliate, parent or subsidiary thereof, is and throughout any
applicable statutory period of limitation has been in compliance with all laws,
regulations and/or ordinances, whether federal, state or municipal, pertaining
or relating in any way to the regulation of competition or trade among or
between business entities, including Sections 1 and 2 of the Sherman Act,
Section 3 of the Clayton Act, the Robinson-Patman Act, the Lanham Act, Section 5
of the Federal Trade Commission Act and applicable state or municipal antitrust
and trade laws, regulations and/or ordinances.
4.30 Case Sales Report. A complete and true copy of the case sales
report for the period commencing January, 1996 and ending December, 1998
(collectively the "Case Sales Report") is set forth in Section 4.30 of the
Disclosure Letter. The Case Sales Report fairly presents in all material
respects the sales of Coke-Carolina for the period then ended consistent with
past practice.
4.31 Product Franchise. Section 4.31 of the Disclosure Letter lists each
agreement that defines the basic right of Coke-Carolina to manufacture, market
or distribute soft drink or bottled water products (so that no disclosure is
required of, among other things, term processing agreements, approved bottle/can
agreements, FIGAL agreements and the like entered into with bottlers generally
in the ordinary course of business) (the "Franchise Agreements"). Copies of the
Franchise Agreements have been furnished to Consolidated and Newco prior to the
date hereof. With respect to the Franchise Agreements: (a) all are enforceable
in all material respects in accordance with their terms in a manner that obtains
for, or imposes upon, the Parties the primary benefits and obligations of such
agreements, (b) Coke-Carolina has not assigned any of its rights or obligations
under any of the Franchise Agreements, (c) no act or omission by Coke-Carolina
has occurred which, with notice or lapse of time or both, would constitute a
material breach or default under any of them, (d) Coke-Carolina has not received
any outstanding notice of cancellation or termination in connection with any of
them, (e) neither the execution, delivery or performance of any of them
violated, violates, or will violate any applicable law, and (f)
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neither Coke-Carolina nor, to Coke-Carolina's knowledge, any other party
currently contemplates any termination, amendment or change to any of them.
4.32 Organizations and Clubs. Set forth in Section 4.32 of the
Disclosure Letter is a list of all organizations, clubs, and facilities, of
which Coke-Carolina is a member or to which it pays dues or fees on behalf of
itself or otherwise provides to any person, which person shall be identified in
Section 4.32 of the Disclosure Letter.
4.33 Bank Accounts. Section 4.33 of the Disclosure Letter sets forth a
complete and accurate list of each bank or financial institution at which
Coke-Carolina has an account or safe deposit box (giving the address and account
numbers) and the names of the persons authorized to draw thereon or to have
access thereto.
4.34 Major Suppliers and Customers. Section 4.34 of the Disclosure
Letter sets forth a list of Coke-Carolina's ten (10) largest suppliers and ten
(10) largest customers for the year ended January 31, 1999, together with in
each case the amount paid or billed during such period. Coke-Carolina is not
engaged in any dispute with any of such suppliers or customers other than minor
accounts receivable disputes that in Coke-Carolina's reasonable opinion do not
threaten the customer relationship. No Senior Executives of Coke-Carolina have
been notified that any supplier or customer intends to diminish the amount of
business which it will engage in with Coke-Carolina in the future by more than
ten percent (10%). During the period from February 1, 1998 through the date of
this Agreement, no sales of products by Coke-Carolina to its customers have been
made, to Coke-Carolina's knowledge, which have resulted or will result in such
customer holding materially more product inventory than such customer normally
maintains and sells in the ordinary course of business. No Senior Executive of
Coke-Carolina or any parent or child (or spouse of any of them) has any material
financial interest in any supplier or customer of Coke-Carolina, to
Coke-Carolina's knowledge. "Senior Executive" means A.T. Heath III, Peter J.
Flanagan, and W.S. Heath.
4.35 Business Records. To Coke-Carolina's knowledge, the business
records have been maintained in accordance with good and sound accounting and
business practices.
4.36 Disclosure. None of Coke-Carolina's representations or warranties
in this Agreement either (a) contains any untrue statement of a material fact or
(b) omits to state a fact necessary to make such representation or warranty
(giving full effect to any dollar, time or other limitation specified in, and
only with respect to the subject matter contained in, such representation or
warranty) not materially misleading. The foregoing does not impose the
obligation to disclose the implications of disclosed facts.
4.37 Registration Statement; Proxy Statement; Other Filings. None of the
information related to Coke-Carolina provided by Coke-Carolina or its lawyers to
Consolidated or its lawyers whether included directly or incorporated by
reference in (i) the Registration Statement, and (ii) the Proxy Statement, will
in the case of the Registration Statement, when it becomes effective and as of
the Effective Time and in the case of the Proxy Statement, when it is first
mailed to the Coke-Carolina Shareholders, as such Registration Statement or
Proxy
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Statement is then amended or supplemented, and at all times through the date of
the Shareholders' Meeting, contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading, or necessary to correct any statement in any earlier
communication with respect to the Shareholders' Meeting (in which Coke-Carolina
has participated) which has become false or misleading.
4.38 Statutory Provisions; Articles of Incorporation. Except for Chapter
11 of the South Carolina Business Corporation Act, there are no other provisions
of applicable law or of Coke-Carolina's corporate governance documents which
apply to this Agreement, the Articles of Merger, the Merger, to the transactions
contemplated hereby, which requires any vote of Coke-Carolina's Shareholders
other than as set forth in Section 4.39 below, or requires any consideration to
be paid to Coke-Carolina's Shareholders other than the Merger Consideration as
defined herein.
4.39 Vote. The two-thirds vote of the Shareholders is the only vote or
approval of the holders of Coke-Carolina's capital stock necessary to approve
(i) this Agreement in accordance with its terms, (ii) the Articles of Merger and
(iii) the transactions contemplated hereby.
4.40 No Other Representations or Warranties. No representation or
warranty is made by Coke-Carolina except as expressly set forth in this Article
IV. Without limiting the foregoing or any other disclaimer in this Agreement,
Coke-Carolina expressly disclaims any and all representations and warranties (a)
as to cold drink equipment, lighted signs, empty returnable bottles and cases,
and product in the trade, for which no representations or warranties are made
and (b) as to the future success of profitability of Coke-Carolina's business
after the Closing Date. Except as set forth in this Agreement and the Disclosure
Letter, no person has been authorized by Coke-Carolina to make any
representation or warranty relating to Coke-Carolina, the Business or the
transactions contemplated hereby, and, if made, such representation or warranty
must not be relied upon as having been authorized by Coke-Carolina.
ARTICLE V
CONDUCT OF BUSINESS PENDING THE MERGER
5.1 Conduct of Business. Except as otherwise contemplated by this
Agreement or as set forth in Section 5 of the Disclosure Letter, after the date
hereof and prior to the Effective Time or earlier termination of this Agreement,
unless Consolidated and Newco shall otherwise agree in writing or as otherwise
expressly contemplated by this Agreement, Coke-Carolina shall:
(a) conduct its businesses in the ordinary and usual course of business;
(b) use commercially reasonable care to maintain all equipment and
facilities in accordance with its customary maintenance procedures and in
operable condition in compliance with applicable law;
(c) maintain in effect all insurance at levels currently maintained by
Coke-Carolina;
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(d ) not (i) amend or propose to amend its charter or by-laws; or (ii)
split, combine or reclassify its outstanding capital stock or declare, set aside
or pay any dividend or distribution payable in cash, stock, property or
otherwise, except for cash dividends that will be taken into account in the
determination of the Shareholders' Equity Merger Consideration.
(e) not (i) authorize the issuance of, or issue, sell, grant, pledge or
dispose of, or agree to issue, sell, grant, pledge or dispose of, any additional
shares of, or any options, warrants or rights of any kind to acquire any shares
of, its capital stock of any class or any debt or equity securities convertible
into or exchangeable for such capital stock; (ii) pledge, dispose of or encumber
any material assets or interests therein, other than in the ordinary course of
business and consistent with past practice; (iii) redeem, purchase, acquire or
offer to purchase or acquire any shares of its capital stock; or (iv) enter into
any contract, agreement, commitment or arrangement with respect to any of the
foregoing;
(f) use commercially reasonable efforts to preserve intact its business
organizations and goodwill, keep available the services of its present officers,
employees, and independent contractors, and preserve the goodwill and business
relationships with suppliers, distributors, customers, and others having
business relationships with Coke-Carolina;
(g) use commercially reasonable efforts to insure compliance with all
applicable statutes and regulations, and preserve good relationships with
governmental agencies having jurisdiction over Coke-Carolina;
(h) confer on a regular basis as requested by Consolidated and Newco
with one or more representatives of Consolidated to discuss operational and
business matters of materiality and the general status of ongoing operations and
business;
(i) undertake in good faith to promptly notify Consolidated and Newco of
any significant changes in the business, properties, assets, condition
(financial or other), results of operations or prospects of Coke-Carolina,
including any pending or threatened claims, suits, actions or other potential
liabilities;
(j) not organize any subsidiary, acquire the capital stock or other
equity securities of any corporation or limited liability company, acquire an
ownership interest in any other business association, acquire, or propose to
acquire, all or any part of the business and properties of any entity not a
party to this Agreement, whether by merger, purchase of assets, or otherwise
except for purchases of raw materials, product or supplies in the ordinary
course of business;
(k) not initiate, solicit, or encourage, and will not directly or
indirectly through any officer, director or employee, investment banker,
attorney, accountant or other agent employed or retained by Coke-Carolina or any
of its subsidiaries initiate, solicit or encourage, any proposal or offer to
acquire all or any substantial part of the business and properties or capital
stock of Coke-Carolina or any of its subsidiaries, whether by Merger, purchase
of assets, tender offer or otherwise;
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(l) not commence litigation or waive or allow to lapse any material
claims or rights;
(m) not adopt any shareholder rights plan or comparable arrangement, or
take any other action that is intended to prevent Newco from acquiring the
Coke-Carolina Common Stock other than enforcing the terms of this Agreement;
(n) not make any change in any method, practice or principle of
accounting or application thereof;
(o) not enter into any material commitment or transaction, other than in
the ordinary course of business, and shall not make any capital expenditure or
investment which exceeds Twenty-Five Thousand Dollars ($25,000);
(p) not issue any letter of credit, guaranty, reimbursement agreement,
or indemnity to or on behalf of any other party other than endorsements of
negotiable instruments in the ordinary course of business;
(q) not pay, loan, or advance any amount or asset to, or sell, transfer
or lease any asset to, any employee, officer, director, or shareholder except
for normal compensation involving salary and benefits, and all such loans or
advances to officers, directors or shareholders having previously incurred shall
be been repaid or written off prior to the Closing Date;
(r) not enter into or amend any employment, severance, bonus, special
pay arrangement with respect to hiring, termination of employment or other
similar arrangements or agreements with any directors, officers or key
employees;
(s) with the exception of employee raises granted in the ordinary course
of business and to reflect years of service or change of job responsibilities,
not adopt, enter into or amend any bonus, profit sharing, compensation, stock
option, pension, retirement, deferred compensation, health care, employment or
other employee benefit plan, agreement, trust, fund or arrangement for the
benefit or welfare of any employee, retiree, or terminated employee, except as
required to comply with changes in applicable law;
(t) other than in the ordinary course of business and consistent with
past practice, not incur any indebtedness for borrowed money or guarantee any
such indebtedness (except for endorsements of negotiable instruments in the
ordinary course of business) or issue or sell any debt securities or make any
loans or advances, nor permit any of its assets to be subject to any mortgage,
lien, security interest, restriction or charge of any kind, other than Permitted
Liens;
(u) not agree in writing, or otherwise, to take any of the foregoing
actions or any other action (except as permitted by Article V) which would make
any representation or warranty contained in Article IV untrue or incorrect in
any respect as of the Closing Date;
(v) not authorize or resolve to adopt any plan or proposal other than as
contemplated by this Agreement that would grant any right to the Coke-Carolina
Shareholders to dissent from
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and obtain an appraisal of their shares pursuant to, the statutory rights of
shareholders prescribed by Chapter 13 of the South Carolina Business Corporation
Act; and
(w) accurately and timely file any and all federal, state, and local
income and other Tax returns and reports (and pay the tax shown due on such
return) regarding the operations of Coke-Carolina, including any gross receipts,
franchise and excise, sales and use, privilege license property tax and soft
drink tax.
5.2 Notification by Coke-Carolina. Coke-Carolina shall undertake in good
faith to advise Consolidated and Newco forthwith of (a) any notice concerning
violations, condemnation proceedings, or tax or utility rate increases that may
affect the Real Estate and (b) any written notice received of violations
involving Environmental Matters.
ARTICLE VI
INDEMNIFICATION
6.1 Consolidated's and Newco's Right to Indemnification. If the Closing
occurs, then as a result of, and as are integral part of, the conversion of the
Coke-Carolina Common Stock pursuant to Article II above, the Coke-Carolina
Shareholders shall jointly and severally indemnify and hold Consolidated and
Newco harmless as provided in this Article VI, from and against the full amount
of:
(a) Generally: any and all claims, demands, losses, damages,
liabilities, costs, obligations or expenses (including reasonable
expenses and fees of counsel involving claims by persons not parties to
this Agreement) incurred by Consolidated and/or Newco, directly or
indirectly, as a result of a breach of any representation or warranty,
or a failure to perform or comply with any covenant, agreement or
undertaking, of Coke-Carolina contained in this Agreement, or an
inaccuracy in any certificate or document executed by Coke-Carolina and
delivered to Consolidated and/or Newco in connection with the Closing
including the Disclosure Letter; and
(b) Accounts Receivable: for any account receivable of
Coke-Carolina existing on the Closing Date that is not collected within
one hundred eighty (180) days from the date of Closing, and in
determining whether an account has been collected, payments by an
account debtor shall be applied to the oldest accounts outstanding of
such account debtor, unless (i) otherwise reasonably indicated by
remittance advice or similar documentation that such payment should not
be applied to the oldest accounts outstanding or (ii) the debtor is on a
cash basis at the Closing Date; and Consolidated will make reasonable
efforts to collect Coke-Carolina's accounts but it shall not be required
to institute any legal proceeding, but it shall be required to hire a
collection agent in accordance with current practice; provided, however,
that if any such receivable is subsequently collected (1) after one
hundred eighty (180) days and (2) Consolidated has been actually paid
out of the Indemnification Escrow Fund (and not just charged against the
Liability Deductible), then the amount collected, net of taxes and
collection costs, shall be paid to the Shareholders' Representatives for
distribution to the Coke-Carolina
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Shareholders; and, provided, further, that this Subsection (b) does not
apply to notes receivable.
All undisputed claims, undisputed portions of partially disputed claims, and
disputed claims that have been resolved by agreement of the parties or by
non-appealable court decision or otherwise shall first be applied against the
Liability Deductible (defined in Section 6.7 below and except as expressly
provided therein) and then paid in the manner set forth in Section 6.9 hereof,
subject to the Shareholder indemnity limitations set forth in Section 6.8 below.
In the event that Consolidated or Newco exercise their rights to
indemnification, no party other than Consolidated and Newco shall have a right
of contribution and indemnity from the Surviving Corporation.
6.2 Escrow of Base Merger Consideration.
(a) The Fund. In order to provide protection to Consolidated and Newco,
Three Million Six Hundred Sixty Thousand Dollars ($3,660,000) of the Base Merger
Consideration will be delivered by Consolidated and Newco on behalf of the
Coke-Carolina Shareholders at Closing into the "Indemnification Escrow Fund" in
the Closing Date Merger Consideration Ratios. All Consolidated Common Stock
shares subject to this Article VI shall have a deemed value of Fifty- Nine and
60/100ths Dollars ($59.60) per share at all times while held in the
Indemnification Escrow Fund. The Consolidated Common Stock component will be
deposited in separate certificates issued in the names of each applicable
Coke-Carolina Shareholder, and the Installment Note component shall be deposited
in separate Installment Notes in the same manner. All such certificates for the
Consolidated Common Stock and all such Installment Notes will be held by the
Escrow Agent. Any dividends payable on the Consolidated Common Stock and
interest payable on the Installment Note held in the Indemnification Escrow Fund
shall be paid to the registered holder. Earnings on any cash shall be delivered
to the Shareholders' Representatives on the last day of each calendar quarter.
(b) Partial Release of Indemnification Escrow Fund to Shareholders'
Representatives. At the conclusion of the eighteenth (18th) complete calendar
month following the Closing Date funds will be released from the Indemnification
Escrow Fund in an amount that will leave an Indemnification Escrow Fund balance
of One Million Eight Hundred Thirty Thousand Dollars ($1,830,000). The funds so
released shall be disbursed to the Shareholders' Representatives in the Closing
Date Merger Consideration Ratios. However, in addition to the funds being
retained, additional funds will be retained and not released to the
Shareholders' Representatives to the extent that an indemnification claim is
made (but solely as to such claim) and unresolved that could be satisfied out of
such Base Merger Consideration otherwise subject to being released. Subject to
the foregoing, the method of the release shall be as follows:
(i) The Escrow Agent shall deliver the certificates representing the
shares of Consolidated Common Stock to Consolidated. Consolidated shall
promptly cause its transfer agent to prepare and deliver to the
Shareholders' Representatives certificates in the appropriate amount,
based on the Closing Date Merger Consideration Ratios, in the names of
the Coke-Carolina Shareholders, provided that the Shareholders'
Representatives have first provided to Consolidated the same information
as set forth in
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Section 2.1(e) above. The transfer agent shall prepare certificates
consistent with Subsection (a) for the balance of the shares of
Consolidated Common Stock held in the Indemnification Escrow Fund, and
deliver such certificates to the Escrow Agent.
(ii) The Escrow Agent shall deliver the Installment Notes to
Consolidated. Consolidated shall promptly prepare and deliver to the
Shareholders' Representatives Installment Notes in the appropriate
amount, based on the Closing Date Merger Consideration Ratios in the
names of the Coke-Carolina Shareholders, provided that the Shareholders'
Representatives have first provided to Consolidated the same information
as set forth in Section 2.1(e) above. Consolidated shall prepare
Installment Notes for the balance of the Installment Note component of
the Indemnification Escrow Fund, and deliver such Installment Notes to
the Escrow Agent.
(iii) The Escrow Agent shall deliver to the Shareholders'
Representatives the appropriate amount of cash, based on the Closing
Date Merger Consideration Ratios.
(c) Final Release. At the conclusion of the forty-second (42nd) complete
calendar month following the Closing Date, any remaining balance in the
Indemnification Escrow Fund will be released to the Shareholders'
Representatives in the Closing Date Merger Consideration Ratios. No release
shall be made to the extent that an indemnification claim has been made and is
unresolved that could be satisfied out of such Base Merger Consideration being
released. Subject to the foregoing, the method of the release shall be in the
same manner as the partial release.
(d) How Held. The Indemnification Escrow Fund will be held and
administered by SunTrust Bank, Atlanta (the "Escrow Agent"), pursuant to the
Indemnification Escrow Agreement. Fifty percent (50%) of all fees and expenses
of the Escrow Agent shall be paid by Newco. The remaining fifty percent (50%),
if not otherwise paid from the Shareholders' Expense Fund, shall be paid out of
the income generated by the Indemnification Escrow Fund prior to any
distribution of such income to the Shareholders' Representatives.
6.3 Indemnification by Consolidated. Consolidated shall defend,
indemnify and hold Coke-Carolina and the Coke-Carolina Shareholder (and each of
them) harmless from and against, and reimburse and promptly pay to them the full
amount of, any and all claims, demands, losses, damages, liabilities, costs,
obligations or expenses (including reasonable expenses and fees of counsel)
incurred by them (or any of them), directly or indirectly, as a result of:
(a) a breach of any representation, warranty or agreement of
Consolidated and/or Newco contained in this Agreement or in any certificate or
document delivered by Consolidated or Newco which is specified in this
Agreement;
(b) a failure of Consolidated and/or Newco to perform or comply with any
covenant, agreement or obligation required by this Agreement;
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(c) any event or circumstance arising out of or relating to the conduct
of the business of the Surviving Corporation subsequent to the Effective Time;
and
(d) any On-Site Matters.
6.4 Notice of Potential Claims. Promptly after either party becomes
aware of any claim whatsoever which would be subject to indemnification set
forth in Sections 6.1 or 6.3 above, such party shall provide the other party
with written notice of such claim stating all information regarding the claim
that the party possesses. The duty to provide information is a continuing one,
and the party claiming indemnification shall provide all new and/or additional
information to the indemnifying party as it becomes available. Nothing herein
shall be deemed to prevent any party from making a claim for indemnification
hereunder for potential or contingent claims or demands provided the notice sets
forth the specific basis for any such potential or contingent claim or demand to
the extent then feasible and the notifying party has reasonable grounds to
believe that such a claim or demand may be made. Upon the determination that a
claim is subject to indemnification (either by agreement or by non-appealable
court decision) and the indemnified party has suffered an out of pocket loss,
the claim shall bear interest at the same rate as the Installment Notes from the
date which is thirty (30) days subsequent to the date on which notice of claim
was given to the other party, until the date the claim is satisfied (which in
the case of claims by Consolidated and/or Newco is the date on which the claim
is applied to the Liability Deductible pursuant to Section 6.7 below or the date
that the claim is paid out of the Indemnification Escrow Fund). All claims for
indemnification must be made prior to the expiration of the applicable
representation and warranty as provided in Section 6.11 below. Claims (or such
portions thereof which are not objected to) will be deemed accepted unless the
potential indemnifying party (including the Shareholders' Representatives on
behalf of the Coke-Carolina Shareholders) delivers to the party claiming
indemnification a written objection to the claim (or portion thereof) within
thirty (30) days after it has received notice of the claim. The notice of
objection shall specify the portion of the claim which is objected to, and the
specific matters relied upon by the party making the objection. If the
indemnifying party submits to the indemnified party a bona fide settlement offer
from the third party claimant of any third party claim (which settlement offer
shall include as an unconditional term the release by the claimant or plaintiff
to the indemnified party from all liability in respect of such claim and which
settlement offer does not involve admission of any fact or circumstance or
impose any other term or condition that is objectionable to any indemnified
party in its reasonable discretion) and the indemnified party refused to consent
to such settlement, then thereafter the indemnifying party's liability to the
party claiming indemnification for indemnification with respect to such third
party claim shall not exceed the settlement amount included in such bona fide
settlement offer, and the indemnified party shall either assume the defense of
such third party claim or pay the indemnifying party's attorneys' fees and other
out-of-pocket costs incurred thereafter in continuing the defense of such third
party claim.
6.5 Liability Reduced By Recoveries. The amount of any indemnifiable
loss ("Loss") suffered by a party under this Agreement shall be reduced by the
amount, if any, of the monetary recovery or benefit (net of reasonable expenses
incurred in obtaining such recovery or benefit) the party seeking
indemnification under this Agreement shall have actually received with
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respect thereto from any other person (including the present value of any Tax
benefit under federal, state, or local income Tax and any recovery under any
insurance policies paid for by Coke-Carolina prior to the Closing); and if such
a recovery or benefit is received or enjoyed by an indemnified party after it
receives payment or other credit under this agreement with respect to a Loss (an
"Indemnity Payment"), then a refund equal in aggregate amount of the recovery,
net of reasonable expenses and Tax or other costs incurred in obtaining
recovery, shall be made promptly to the indemnifying party. For purposes of the
foregoing, the phrase "any Tax benefit" shall consist solely of those future Tax
benefits that can be reasonably estimated by Consolidated and Newco during the
current or next succeeding Tax year. The present value of such benefit shall be
calculated using the prevailing applicable federal rate promulgated by the
Internal Revenue Service.
6.6 Duty To Mitigate. Notwithstanding anything in this Agreement to the
contrary, the indemnified party shall act in good faith and in a commercially
reasonable manner to mitigate any Loss it may suffer.
6.7 Liability Deductible. Subject to the last sentence of this Section,
Consolidated and Newco shall not be entitled to indemnification pursuant to this
Article VI unless and until the aggregate amount of all indemnification claims
made by Consolidated and Newco under this Agreement exceed One Hundred
Eighty-Three Thousand Dollars ($183,000) (the "Liability Deductible"). Only the
amounts in excess of the Liability Deductible are recoverable. For purposes of
this Agreement, all claims by Consolidated and Newco shall be deemed joint
claims regardless of whether Consolidated or Newco is entitled to make the
claim. The Liability Deductible shall not apply to claims by Consolidated and
Newco either (1) regarding breaches of the representations and warranties
contained in a Transmittal Letter or (2) involving actual fraud.
6.8 Scope of Liability. All liability of the Coke-Carolina Shareholders
for breaches of the representations and warranties of Article IV regardless by
whom made are joint and several except that: (a) each Coke-Carolina Shareholder
represents severally only as to matters set forth in his Transmittal Letter, (b)
each Coke-Carolina Shareholder's aggregate liability (including for breaches of
representations and warranties in the Transmittal Letter) is limited to the
Merger Consideration received by that Coke-Carolina Shareholder (the "Liability
Cap"); and (c) Consolidated and Newco must use their best efforts to collect pro
rata from each Coke-Carolina Shareholder if the Indemnification Escrow is
exhausted. For purposes of this Section: (i) "best efforts" means a good faith,
vigorous attempt to collect, including filing a lawsuit unless it is obviously
futile in the reasonable opinion of Newco and Consolidated; (ii) thereafter,
Consolidated and Newco shall use their best efforts to collect any shortfall on
a pro rata basis from each of the remaining Coke-Carolina Shareholders; and
(iii) if litigation against a Coke-Carolina Shareholder is necessary by
Consolidated and Newco, then any reasonable costs of the litigation (including
court costs and fees and expenses of counsel) will be borne by the Coke-
Carolina Shareholders, pro rata as provided above.
6.9 Method of Payment.
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(a) To Consolidated and Newco. All indemnification claims owed to
Consolidated and Newco in accordance with Section 6.1 shall be paid out of the
Indemnification Escrow Fund in the Closing Date Merger Consideration Ratios. The
Escrow Agent shall return the stock certificates for the shares of Consolidated
Common Stock and the Installment Notes to Consolidated for cancellation and
re-issuance (in the reduced amounts) in the same manner as the First Release
from the Indemnification Escrow Fund.
(b) By Consolidated And Newco. All indemnification claims payable by
Consolidated and Newco shall be paid by wire transfer of immediately available
funds to the Shareholders' Representatives.
6.10 Period of Limitation For Claims. All claims shall be made prior to
the expiration of the eighteenth (18th) complete calendar month subsequent to
the Closing Date, except for: (a) representations and warranties under the
Transmittal Letter which shall be perpetual; (b) representations and warranties
relating to taxes and antitrust matters, which shall extend for the applicable
statutory periods of limitations, including any extension or waiver of such
periods; and (c) off-site Environmental Matters under Subsection 4.27(b), which
shall extend for a period of five (5) years duration subsequent to the Closing
Date; provided, however, that the foregoing limitations do not apply to
Consolidated's obligation to indemnify the Coke-Carolina Shareholders with
respect to On-Site Matters
6.12 Exclusive Remedies. If the Closing occurs, then the remedies
provided in this Article VI constitute the sole and exclusive remedies for
recoveries against another party for breaches of the representations and
warranties in this Agreement and for the matters specifically listed in this
Article VI as being indemnified against, but neither the foregoing nor anything
else in this Agreement shall limit the right of a party to enforce the
performance of this Agreement or of any contract, document or other instrument
executed and delivered pursuant to this Agreement by any remedy available to it
in equity.
6.13 Release of Certain Contribution Rights. If the Closing occurs,
Consolidated does hereby release each of the Coke-Carolina Shareholders and each
of Coke-Carolina's officers and directors from, and waives as to each of the
Coke-Carolina Shareholders and Coke-Carolina's officers and directors, any
claim, demand, cause of action, liability, obligation or right for contribution,
indemnity or otherwise, whether known or unknown, contingent or accrued and
whether under common law principles, any statute (including CERCLA) or any other
applicable law with respect to (a) On-Site Matters and (b) except for the rights
expressly provided in this Article VI, any Environmental Liability not involving
or related to On-Site Matters.
ARTICLE VII
ADDITIONAL COVENANTS AND AGREEMENTS
7.1 Access to Information. Coke-Carolina shall provide to Consolidated,
Newco and their accountants, counsel, lenders and other representatives,
reasonable access during normal business hours and upon reasonable notice
throughout the period prior to the Effective Time to all of Coke-Carolina's
respective properties, books, contracts, commitments and records
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(including Tax Returns) and, during such period, shall further cause
Coke-Carolina to promptly furnish to Consolidated and Newco (a) a copy of each
report, schedule and other document filed or received by any of them pursuant to
the requirements of federal or state tax or securities laws and the
Hart-Scott-Rodino Antitrust Improvements Act, or filed with or received by any
of them from the Securities and Exchange Commission, Federal Trade Commission,
Department of Justice or any federal or state Tax authority and (b) all other
information and documents concerning its businesses, properties and personnel as
Consolidated and Newco may reasonably request; provided, however, that no
investigation pursuant to this Section 7.1 or otherwise shall affect any
representations or warranties made herein or the conditions to the obligations
of the respective parties to close the transaction contemplated by this
Agreement. Coke-Carolina shall undertake in good faith to promptly advise
Consolidated in writing of any change or occurrence of any event after the date
of this Agreement having, or which, insofar as can reasonably be foreseen, in
the future may have, an adverse effect upon Coke-Carolina.
7.2 Proxy Statement; Registration Statement; Other Filings.
(a) Coke-Carolina's Obligations. Coke-Carolina shall provide necessary
information to Consolidated, Newco and their counsel so that they can prepare
and file with the Commission as promptly as practicable, a proxy
statement/prospectus with respect to the Shareholders' Meeting referred to in
Section 7.3 and the issuance of the Consolidated Common Stock and Installment
Notes described in Article II. The term "Proxy Statement" means such proxy
statement/prospectus at the time it initially is mailed to the Coke-Carolina
Shareholders and all amendments or supplements thereto duly filed and similarly
mailed. Coke-Carolina agrees to notify Consolidated promptly (but in no event
later than the date of the Shareholders' Meeting referred to in Section 7.3) of
any information related to Coke-Carolina, whether included directly therein or
incorporated by reference in the Proxy Statement, of which it becomes aware
contains any untrue statement of a material fact or omits to state a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading. The
Proxy Statement shall be used in the prospectus of Consolidated and Newco to be
included in the Registration Statement described in Subsection (b) below. The
Proxy Statement shall include the recommendations of the Board of Directors of
Coke-Carolina in favor of the Merger.
(b) Consolidated's and Newco's Obligations. Consolidated and Newco,
subject to Subsection (a) above, shall prepare and shall file with the
Commission, as promptly as practicable, a Registration Statement on Form S-4
under the Securities Act covering the Consolidated Common Stock and Installment
Notes to be issued in the Merger, which Registration Statement shall include the
Proxy Statement referenced in Section 7.2(a) above and shall use all reasonable
efforts to have the Registration Statement declared effective by the Commission
as promptly as practicable. Consolidated and Newco shall also take such action
as is reasonably required to be taken with respect to the issuance of
Consolidated Common Stock and the Installment Notes in the Merger under state
blue sky or securities laws. The term "Registration Statement" means such
Registration Statement at the time it becomes effective and all amendments or
supplements thereto duly filed. Consolidated and Newco agree to correct promptly
(but in no event later than the date of the Shareholders' Meetings referred to
in Section
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7.3) any information provided by them for use in the Registration Statement
which contains any untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
(c) Consolidated's and Newco's "Other" Obligations. As soon as
practicable after the date hereof, Consolidated and Newco shall promptly prepare
and file any other filings required under the Exchange Act, the Securities Act
or any other federal or state securities laws relating to the Merger and the
transactions contemplated herein ("Other Filings").
(d) Cooperation. Consolidated, Newco and Coke-Carolina shall cooperate
with each other in the preparation of such Proxy Statement and Registration
Statement.
7.3 Shareholders' Approval. The Board of Directors of Coke-Carolina, in
accordance with applicable law (including the provisions of Sections 33-11-103
and 33-13-200 of the South Carolina Business Corporation Act) and the terms of
this Agreement, shall promptly submit this Agreement and the transactions
contemplated hereby (along with its recommendation for approval thereof) for the
approval of the Coke-Carolina Shareholders at a special meeting of shareholders
(the "Shareholders' Meeting") to be held as soon as practicable after the
Registration Statement is declared effective by the Commission and, subject to
the fiduciary duties of the Board of Directors of Coke-Carolina under applicable
law and as otherwise provided herein, shall use its commercially reasonable
efforts to obtain shareholder approval of this Agreement and the transactions
contemplated hereby. For purposes of the foregoing, the phrase "subject to the
fiduciary duties of the Board of Directors under applicable law" shall mean that
the Board of Directors of Coke-Carolina may withdraw, modify or change such
recommendation to the extent that the Board of Directors of Coke-Carolina
determines, after having received the advice of outside legal counsel to
Coke-Carolina, that the failure to withdraw, modify, or change such
recommendation is reasonably likely to result in a breach of the Board of
Directors' fiduciary duties under applicable law.
7.4 Costs and Expenses. Whether or not the Merger is consummated (and
except as provided in Section 7.3 above), all costs and expenses incurred in
connection with this Agreement and the transactions contemplated hereby by
Consolidated and Newco shall be paid by them, and all costs and expenses of
Shareholders and Coke-Carolina (including the fees of Overend & Company, Inc.
and the fees and expenses of the Sutherland Asbill & Brennan LLP as legal
counsel to Coke-Carolina and its shareholders) shall, if borne by Coke-Carolina,
Consolidated or Newco, reduce the Merger Consideration.
7.5 Books and Records. All Books and Records of Coke-Carolina, on the
premises at the time of Closing, shall remain.
7.6 Agreement to Cooperate. Subject to the terms and conditions herein
provided, each of the parties hereto shall use their reasonable commercial
efforts to take, or cause to be taken, all action to do, or cause to be done,
all things necessary, proper or advisable under applicable laws and regulations
to consummate and make effective the transactions contemplated
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by this Agreement, including using their best efforts to obtain all necessary or
appropriate waivers, consents and approvals, to effect all necessary
registrations and filings (including the Other Filings), to enter into
negotiations, provide information or propose settlements reasonably calculated
to avoid or eliminate any impediment under any antitrust law that may be
asserted by any governmental authority and to prevent the commencement of
proceedings to enjoin or delay consummation of the Merger by such governmental
authority or, if such proceedings are commenced, to thereafter prevent the entry
of any injunction or other order delaying or preventing the Merger, and to lift
any injunction or other legal bar to the Merger (and, in such case, to proceed
with the Merger as expeditiously as possible), subject, however, to receiving
the requisite vote of the Coke-Carolina Shareholders. Each party hereto agrees
to allow the other to review each regulatory filing, including the Other Filings
made by such party prior to the filing thereof during the term of this
Agreement.
7.7 Public Statements. Coke-Carolina acknowledges that since
Consolidated is a publicly traded company, it will not issue any press release
or make any announcement relating to the subject matter of this Agreement or the
transactions contemplated hereby without the prior written approval of
Consolidated. Coke-Carolina shall, and shall cause its agents and
representatives to, keep the terms and conditions of this Agreement confidential
unless otherwise approved by Consolidated, in writing.
7.8 Dissenting Shareholders. Coke-Carolina shall give Consolidated and
Newco prompt notice of any demands received by Coke-Carolina for appraisal of
shares and the exercise of dissenter's rights pursuant to Chapter 13 of the
South Carolina Business Corporation Act.
7.9 Consulting/Non-competition Agreement. At the Closing, Coke-Carolina
will enter into a consulting and non-competition agreement with A.T. Heath, III
in the form specified in Exhibit 7.9.
7.10 Memorabilia. The Coke-Carolina Shareholders shall be entitled to
any Coca-Cola memorabilia and personal effects on the premises of Coke-Carolina
that are not carried on the financial records of Coke-Carolina as having any
value. In particular, Mr. W.S. Heath and Mr. A.T. Heath, III will be given 45
days after Closing to remove personal items from their offices.
7.11 Consent As To Representation. Consolidated and Newco each
acknowledge that the law firm of Sutherland Asbill & Brennan LLP is expected,
after the Merger, to represent the Coke-Carolina Shareholders and the
Shareholders' Representatives in connection with this Agreement and agrees that
it shall be entitled to represent the Coke-Carolina Shareholders and the
Shareholders' Representatives in any disputes that arise concerning this
Agreement or any other agreement to be delivered pursuant to this Agreement and
waives any conflict of interest that may result from its representing
Coke-Carolina under this Agreement or otherwise.
7.12 Certain Employee and Employee Benefits Matters.
(a) Generally. As of the Effective Time, all employees of Coke-Carolina
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("Coke-Carolina Employees") shall become employees of Newco ("Newco Employees")
and shall continue to participate without interruption in all plans providing
benefits to the Coke-Carolina Employees and their dependents and beneficiaries
("Coke-Carolina Plans") as of the Effective Time. As soon as practicable
following the Effective Time, Consolidated and Newco will take all steps
necessary to provide for termination of participation in the Coke-Carolina Plans
and participation by the Newco Employees in all plans providing benefits to the
employees of Consolidated or Newco and their dependents and beneficiaries
("Consolidated Plans") without interruption. All first-day-at-work requirements
and preexisting condition limitations will be waived with respect to all Newco
Employees and their spouses and dependents under all Consolidated Plans. Service
by Newco Employees with Coke-Carolina will be treated as service with
Consolidated under all current and future replacement Consolidated Plans except
for vesting service for Consolidated's 401(k) plan and except as otherwise
limited by this Section 7.12. In the case of a Newco Employee who terminates
employment and is subsequently rehired, service with Coke-Carolina shall be
taken into account for purposes of the Consolidated Plans to the extent required
by applicable law and the terms of and practices under each Consolidated Plan as
applied to all other employees.
(b) Pension Plans.
(i) Coke-Carolina Pension Plan. Following the Effective Time,
Consolidated and/or Newco will amend the Carolina Coca-Cola Bottling Company
Defined Benefit Plan (the "Coke-Carolina Pension Plan") to cease accruals in
accordance with Section 204(h) of ERISA and all other applicable law. The
accrued benefits of participants in the Coke-Carolina Pension Plan will be
preserved in accordance with the requirements of Section 411(d)(6) of the Code
and other applicable law either under the Coke-Carolina Pension Plan, the
Restated Retirement Plan for the Employees of Coca-Cola Bottling Co.
Consolidated (the "Consolidated Pension Plan") or any other successor plan.
Benefits accrued under the Coke-Carolina Pension Plan shall be subject to
actuarial adjustment if paid before "Normal Retirement Age" (as defined in the
Coke-Carolina Pension Plan) based on factors no less favorable than the
adjustment factors for such purpose under the Coke-Carolina Pension Plan as of
the Effective Time. Service by Newco Employees after the Effective Time shall be
credited under the Consolidated Pension Plan for all purposes other than benefit
accrual after accruals cease under the Coke-Carolina Pension Plan. As soon as
practicable after the Effective Time, Consolidated and/or Newco will provide
each individual with an accrued benefit under the Coke-Carolina Pension Plan
with a statement setting forth the amount of such accrued benefit.
(ii) Consolidated Pension Plan. Newco Employees will begin to
accrue benefits pursuant to the benefit accrual formula under the Consolidated
Pension Plan immediately following the cessation of accruals under the
Coke-Carolina Pension Plan and will continue to accrue benefits until their
termination of employment on the same basis as other employees of Consolidated.
Newco Employees shall be credited with their period of service for Coke-Carolina
for all purposes under the Consolidated Pension Plan, including eligibility for
all early retirement subsidies, other than for the accrual of benefits. Newco
Employees who are credited with at least five (5) or more "Years of Service" (as
defined in the Coke-Carolina Pension Plan) as of the Effective Time will be
fully vested in any benefit accrued under the
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Consolidated Pension Plan. Newco Employees who are credited with less than five
(5) "Years of Service" as of the Effective Time will be credited with such
period of service for purposes of vesting in the Consolidated Pension Plan,
subject to the Consolidated Pension Plan's break in service rules. Compensation
taken into account under the Coke-Carolina Pension Plan for purposes of benefit
accrual before the Effective Time will be taken into account to the extent
necessary to determine the amount of the five (5) year "Average Compensation"
used for calculating the accrued benefit of Newco Employees under the
Consolidated Pension Plan.
Notwithstanding the foregoing, the total number of "Years of Accrual
Service" or "Years of Service" (as defined in the Coke-Carolina Plan) that can
be credited under either the Coke-Carolina Pension Plan or the Consolidated
Pension Plan or in both plans, in the aggregate, will be thirty (30). The total
pension benefit payable to a Newco Employee shall be equal to the sum of his
accrued benefit under the Coke-Carolina Pension Plan and his accrued benefit
under the Consolidated Pension Plan.
(c) Medical/Dental Benefits.
(i) Active Employees. Newco Employees will be eligible for the
same medical and dental benefit options as all other employees of Consolidated
or Newco.
(ii) COBRA. Consolidated and Newco shall be responsible to
provide all notices required to be given and coverage required to be provided
pursuant to Section 4980B of the Code and Sections 601 et seq. of ERISA
("COBRA") at or after the Effective Time with respect to the existing medical
and dental benefits plan maintained by Coke-Carolina or with respect to
participation by any Newco Employee in any medical and dental benefits plan
maintained by Consolidated or Newco.
(iii) Current Retirees. Former Coke-Carolina Employees and their
spouses and/or dependents who are receiving post-retirement medical and dental
benefits as of the Effective Time will be eligible to receive such benefits
under the provisions of Consolidated's plan for retirees. The premium cost for
these benefits will be borne fully by Consolidated and/or Newco, but
Coke-Carolina employees will be responsible for deductibles and co-pay
requirements consistent with the provisions of Consolidated's retiree plan. Upon
the death of a covered retiree described in the foregoing sentence, medical and
dental benefits coverage for such retiree's spouse and/or dependents shall cease
except as otherwise required by COBRA.
(iv) Future Retirees. Service by Newco Employees with
Coke-Carolina before the Effective Time will not be credited under the
Consolidated medical and dental benefits plan for purposes of eligibility for
post-retirement medical and dental benefits, but service by Newco Employees on
and after the Effective Time with Newco, Consolidated or any affiliate will be
credited under the Consolidated medical and dental benefits plan for purposes of
eligibility for post-retirement medical and dental benefits in the same manner
as such service is credited for all other employees of Consolidated or Newco.
Mr. W. S. Heath and Mr. A. T. Heath, III will be eligible to participate in the
retiree medical and dental benefits plan of Consolidated as of the Effective
Time with respect to medical and dental coverage for themselves and their
spouses
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and/or dependents. The premiums for such coverage, if elected, shall be paid by
Mr. W. S. Heath and Mr. A. T. Heath, III, respectively, with current monthly
premium rates of $97.92 for single medical coverage, $273.36 for family medical
coverage, $20.40 for single dental coverage and $59.16 for family dental
coverage. Such rates may be adjusted from time to time and will be the same as
such premium rates for Consolidated's other retirees.
(d) Life Insurance.
(i) Active Employees. Newco Employees will be eligible to
participate in the group term life insurance plan maintained by Consolidated
pursuant to which the premium for life insurance in the amount of their annual
salary will be paid for by Consolidated and/or Newco. Newco Employees will also
be eligible to purchase (A) additional life insurance under the group term plan
in an amount of up to twice their annual salary and (B) whole life insurance
under a policy that is owned by the Employee and is, therefore, portable upon
termination of employment.
(ii) Retiree Coverage. Consolidated and Newco will provide life
insurance benefits to current retirees of Coke-Carolina at the same level
(counting both group and "key man" coverage) as such benefits are in effect as
of the Effective Time but adjusted in the future as provided under the terms of
the post-retirement life insurance plan maintained by Coke-Carolina as of the
Effective Date. No post-retirement life insurance (other than any benefits
provided under the whole life policy described in item (i) above) will currently
be available to active Newco Employees as of the Effective Date. Mr. W. S. Heath
and Mr. A. T. Heath, III shall be eligible for retiree life insurance at current
levels of $110,000 and $160,000, respectively, under the Consolidated retiree
life insurance plan as of the Effective Time based on monthly premiums of $3.96
per $1,000 of coverage, with the cost of such coverage to be paid by Mr. W. S.
Heath and Mr. A. T. Heath, III, respectively. Such rates may be adjusted from
time to time and will be the same as such premium rates for Consolidated's other
retirees.
(iii) Key Man Coverage. The "key man" life insurance benefits
maintained by Coke-Carolina will be discontinued as of the Effective Time.
(e) Severance Benefits. Severance benefits in the amount provided below
will be paid by Consolidated or Newco to Newco Employees whose employment is
involuntarily terminated as a result of a job elimination that occurs within one
year of the Effective Time or who voluntarily terminate employment within one
year of the Effective Time. Such severance benefits will be in addition to the
payment of any accrued but unused vacation. The amount of the severance benefit
shall be equal to one week of pay (at the rate in effect at the time of the
termination of employment, but not less than the rate in effect immediately
prior to the Effective Time) for each year of service with Coke-Carolina, Newco
and Consolidated, with a minimum of two weeks of pay. Years of service shall be
calculated based on the individual's original date of hire. Credit for a partial
year of service will be equal to the following percentage of one week of pay:
(i) 1-3 months of service -- 25%; (ii) 4-6 months of service -- 50%; (iii) 7-9
months of service -- 75%; and (iv) 10-12 months of service -- 100%. Severance
benefits will be paid in a lump sum as soon as practicable following termination
of employment. The cost of severance
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benefits with respect to payments in excess of 13 weeks of pay shall be borne
equally by Consolidated and the Coke-Carolina shareholders. Nothing in this
Agreement modifies the prior agreement between Consolidated and Coke-Carolina as
to production employees.
(f) Stay Bonuses. If Consolidated requests that a Coke-Carolina Employee
remain employed beyond the Effective Time and advises such Coke-Carolina
employee, in writing, that such employment will be temporary, then Consolidated
and Newco will pay such employee (in addition to all other compensation and
benefits payable to such employee) a lump sum stay bonus in the amount of one
week's pay for every two weeks worked, with any fractional two-week period
earning a pro-rata portion of one week, rounded to the nearest day (at the rate
in effect at the time of the request to remain employed, but not less than the
rate in effect immediately prior to the Effective Time) upon the completion of
the stated temporary period of continued employment, regardless of any severance
benefits to be paid pursuant to Section 7.12(e) above.
(g) Personal Items. Mr. W. S. Heath and Mr. A. T. Heath, III will have
45 days following the Effective Time to remove their personal items from their
offices. As of the first business day following Effective Time, title to the
vehicle currently used by A.T. Heath III will be transferred to him without his
payment of any consideration to Coke-Carolina. W.S. Heath, A.B. Heath, P.J.
Flanagan and Pat Joyner may each purchase the automobile currently used by each
for its book value.
7.13 Shareholders' Representatives.
(a) Appointment and Acceptance. As an integral component of the
conversion of the Coke-Carolina Common Stock as set forth in Article II without
requiring any action by any Coke-Carolina Shareholder, in order to facilitate
the consummation of the transactions contemplated by this Agreement and the
resolution of certain matters after the Closing between Consolidated, Newco and
the Coke-Carolina Shareholders, W.S. Heath, A.T. Heath III, and R. Bland Roper
and their successors, acting as hereinafter provided, shall serve as the
attorney-in-fact and agent for each of the Coke-Carolina Shareholders in his
name, place and stead in connection with the transactions contemplated by this
Agreement (the "Shareholders' Representatives"). The Shareholders'
Representatives shall act in accordance with the terms of this Section 7.13 and
the other applicable provisions of this Agreement, such appointment being
irrevocable and coupled with an interest. By executing and delivering this
Agreement under the heading "Shareholders' Representatives," the Shareholders'
Representatives hereby (a) accept their appointment and authorization as the
Shareholders' Representatives as attorney-in-fact and agent on behalf of each of
the Coke-Carolina Shareholders in accordance with the terms of this Agreement
and (b) agree to perform their obligations under, and otherwise comply with,
this Agreement.
(b) Authorization. The Shareholders' Representatives have the sole
authority, without restriction:
(i) As to Deliveries. To: (A) deliver to Consolidated and/or
Newco on behalf of
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the Coke-Carolina Shareholders, as provided in this Agreement, the share
certificates representing all of the shares for Coke-Carolina Common
Stock, the Transmittal Letters, and all other materials to be delivered
in connection therewith; (B) execute, deliver, and accept delivery of,
on each Coke-Carolina Shareholder's behalf, the Shareholders' Equity
Escrow Agreement, the Indemnification Escrow Agreement and any other
agreements, instruments and documents to be, or as, delivered by or on
behalf of the Coke-Carolina Shareholders pursuant to this Agreement
(other than the Transmittal Letters); (C) after the Closing, execute,
deliver, and accept delivery of, on behalf of the Coke-Carolina
Shareholders, such amendments as may be deemed by the Shareholders'
Representatives in their sole and absolute discretion to be appropriate
under this Agreement (but only to the extent Coke-Carolina has the power
to amend this Agreement prior to the Closing) or the other exhibits,
schedules and other attachments to any of this Agreement, the
Shareholders' Equity Escrow Agreement, the Indemnification Escrow
Agreement and the other contracts, instruments and documents delivered
by or on behalf of Coke-Carolina or the Coke-Carolina Shareholders
pursuant to this Agreement (the "Transaction Documents"); and (D)
execute and deliver, and to accept deliver of, on behalf of the
Coke-Carolina Shareholders, such agreements, instruments, and other
documents as may be deemed by the Shareholders' Representatives in their
sole and absolute discretion to be appropriate under the Transaction
Documents.
(ii) Notices and Determinations. To bind the Coke-Carolina
Shareholders by all notices received or given, by all agreements and
determinations made, and by all agreements, instruments and other
documents executed and delivered by the Shareholders' Representatives
under the Transaction Documents (including the post-closing adjustments
pursuant to Article 2 of this Agreement);
(iii) Disputes and Consents. To: (A) dispute or to refrain from
disputing any claim made by Consolidated and/or Newco under any
Transaction Document; (B) negotiate and compromise any dispute which may
arise under, and exercise or refrain from exercising remedies available
under any Transaction Document (including the post-closing adjustments
pursuant to Article II of this Agreement) and sign any releases or other
documents with respect to such dispute or remedy; (C) waive any
condition or right contained in any Transaction Document; (D) give any
and all consents under any Transaction Document; (E) give such
instructions and to do such other things and refrain from doing such
other things as the Shareholders' Representatives shall in their sole
and absolute discretion deem necessary or appropriate to carry out the
provisions of any Transaction Document; (F) initiate any judicial or
arbitration proceeding on behalf of the Coke-Carolina Shareholders or
any of them, or file any documents, or make any decision in connection
therewith; and
(iv) Payments: Receipt and Disbursement. To: (A) receive any
payments made to any Coke-Carolina Shareholder or to the Shareholders'
Representatives on such Coke-Carolina Shareholder's behalf pursuant to
any Transaction Document including the Merger Consideration; (B) invest
such funds pending their disbursement in such manner as the
Shareholders' Representatives in their sole and absolute discretion deem
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appropriate; and (C) disburse to the Coke-Carolina Shareholders payments
made to the Shareholders' Representatives under any Transaction Document
in accordance with the respective interests of each Coke-Carolina
Shareholder, but only after (1) payment of any accountants', attorneys'
and others' fees and expenses incurred by or on behalf of the
Coke-Carolina Shareholders in connection with the consummation of the
transactions contemplated by this Agreement or otherwise in connection
with the Transaction Documents and (2) withholding such amounts as the
Shareholders' Representatives in their sole and absolute discretion deem
appropriate to pay such costs and expenses that may be incurred after
the Closing relating to potential disputes arising with respect to
obligations of the Coke-Carolina Shareholders under any Transaction
Document (such withheld funds to be held in, and disbursed from the
Shareholders' Expense Fund as described in Article 2).
(v) Certain Limitations. Notwithstanding the foregoing or
anything else in the Transaction Documents, the Shareholders'
Representatives shall have no authority with respect to any alleged
breach by a Coke-Carolina Shareholder of a representation, warranty or
covenant in the Transmittal Letter.
(c) Shareholders' Expense Fund. The amounts for the Shareholders'
Expense Fund shall be held by the Shareholders' Representatives in an
interest-bearing account in a bank and shall be used to pay fees, costs,
expenses and contingencies under any Transaction Document and those incurred in
representing the Coke-Carolina Shareholders with respect to other matters
arising out of any Transaction Document. The Shareholders' Representatives may
from time to time distribute to the Coke-Carolina Shareholders in accordance
with their respective interests, amounts in the Shareholders' Expense Fund that
the Shareholders' Representatives, in their sole and absolute discretion,
determine are in excess of the amounts necessary to pay fees, costs, expenses
and contingencies under any Transaction Document.
(d) Actions. Each Coke-Carolina Shareholder hereby waives their
individual right to take any action whatsoever, where the power to act has been
granted to the Shareholders' Representatives. Neither Consolidated, Newco, the
Escrow Agent and/or the Escrow Agent shall be obligated to act upon any claim,
notice, communication or demand whatsoever made by one or more Coke-Carolina
Shareholders, where the authority to act on behalf of the Coke-Carolina
Shareholders has been granted to the Shareholders' Representatives hereunder.
The provisions of this Section 7.14 shall apply and continue in full force and
effect notwithstanding any dispute or disagreement among the Coke-Carolina
Shareholders, or the Coke Carolina Shareholders and the Shareholders'
Representatives. Additionally Consolidated, Newco, the Escrow Agent, the
Indemnification Escrow Agreement and any other person shall be entitled to rely
on any and all actions taken by the Shareholders Representative under any
Transaction Document without liability to, or obligation to inquire of, any of
the Coke-Carolina Shareholders. All notices, counter-notices or other
instruments or designations delivered by the Shareholders' Representatives shall
not be effective unless, but shall be effective if, signed by each of the
Shareholders' Representatives, and if not so fully signed, such document shall
have no force and effect whatsoever, and Consolidated, Newco, the Escrow Agent
and/or the Escrow Agent or any other person may proceed without regard to any
such document. Facsimile or photographic
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copies of signatures shall be deemed coequal to original signatures for all
purposes. Consolidated, Newco, the Escrow Agent and/or the Escrow Agent and any
other person are hereby expressly authorized to rely upon any writing which
reasonably appears to have been signed by the Shareholders' Representatives, and
any other person may act upon the same without any duty of inquiry as to the
genuineness of the writing.
(e) Successors. If one or more Shareholders' Representatives resigns or
ceases to function in their capacity as such for any reason whatsoever, then the
Coke-Carolina Shareholders who own (or owned) at least 50.01% of the issued and
outstanding capital stock of Coke-Carolina immediately prior to the Effective
Date shall appoint a successor; provided, however, that if for any reason no
successor has been appointed pursuant to the foregoing provision within 30 days,
then Consolidated, Newco, or any Coke-Carolina Shareholder may petition a court
of competent jurisdiction for the appointment of a successor. The Coke-Carolina
Shareholders may at any time and for any reason remove any Shareholders'
Representatives by written consent of the Coke-Carolina Shareholders who own (or
owned) at least 50.01% of the issued and outstanding capital stock of
Coke-Carolina immediately prior to the Effective Date, and may contemporaneously
therewith appoint a successor by such written consent.
(f) Expenses. The Shareholders' Representatives are not entitled to any
fee for activities pursuant to this Agreement, but they will be reimbursed (by
their own action) from the Shareholders' Expense Fund (to the extent it has
sufficient funds) or by the Coke-Carolina Shareholders for their expenses
(including attorneys' fees and expenses) actually incurred in connection with
their performance of their duties in accordance with this Agreement.
(g) Indemnification and Release. By executing and delivering the
Transmittal Letter, each Coke-Carolina Shareholder jointly and severally agrees
to indemnify and hold the Shareholders' Representatives harmless from and
against any and all liability, loss, cost, damage or expense (including
attorneys' fees) reasonably incurred or suffered by the Shareholders'
Representatives as a result of the performance of their duties under and
Transaction Documents, except such that arises from the gross negligence or
willful misconduct of the Shareholders' Representatives. Each Coke-Carolina
Shareholder hereby expressly releases Consolidated, Newco, the Escrow Agent
and/or the Escrow Agent from all responsibility or liability for (1) any of the
errors, omissions, or otherwise negligent acts of the Shareholders'
Representatives (regardless of whether Consolidated, Newco, the Escrow Agent
and/or the Escrow Agent had knowledge of any of the foregoing), or (2) any
disagreement or dissatisfaction which the Coke-Carolina Shareholders (or any of
them) may have with the decisions made or actions taken (or not taken) by the
Shareholders' Representatives. Each Coke-Carolina Shareholder hereby expressly
agrees to indemnify and hold Consolidated and Newco (and either of them)
harmless from and against any and all liability, loss, cost, damage or expense
(including attorneys' fees) arising out of or relating to challenges by the
Coke-Carolina Shareholders as to acts or omissions of the Shareholders'
Representatives.
(h) Survival of Authorizations. EACH COKE-CAROLINA SHAREHOLDER: (1)
INTENDS FOR THE AUTHORIZATIONS AND AGREEMENTS IN THIS AGREEMENT TO REMAIN IN
FORCE IF HE SUBSEQUENTLY BECOMES MENTALLY OR
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PHYSICALLY DISABLED, INCOMPETENT OR DIES; (2) BY EXECUTING AND DELIVERING THE
TRANSMITTAL LETTER, AUTHORIZES SUCH RECORDINGS AND FILINGS OF THIS AGREEMENT AS
ANY PERSON DEEMS APPROPRIATE; AND (3) BY EXECUTING AND DELIVERING THE
TRANSMITTAL LETTER, DIRECTS THAT NO FILING OF ANY INVENTORY OR POSTING OF A
SURETY BOND SHALL BE REQUIRED OF ANY PERSON SERVING AS THE SHAREHOLDERS'
REPRESENTATIVES.
7.14 No Shop Letter. Consolidated and Newco shall have received the
letter agreement restricting at least two-thirds of the Coke-Carolina
shareholders from negotiating with any other party for the sale of the stock or
assets of Coke-Carolina in the form attached as Exhibit 7.14.
ARTICLE VIII
CONDITIONS TO CLOSING
8.1 Conditions to Each Party's Obligation to Effect the Merger. The
respective obligations of each party to effect the Merger shall be subject to
the fulfillment at or prior to the Effective Time of the following conditions:
(a) Each of Consolidated, Newco, and Coke-Carolina shall have delivered
or caused to be delivered to the other, a certificate that resolutions (which
shall be attached) of their respective Boards of Directors authorizing and
approving the consummation of the transactions contemplated herein, all other
necessary and desirable corporate actions to enable the parties to comply with
the terms hereof and duly adopted by unanimous vote or consent have not been
amended, rescinded or otherwise modified;
(b) The Registration Statement shall have become effective in accordance
with the provisions of the Securities Act, and no stop order suspending such
effectiveness shall have been issued and remain in effect and no proceedings for
that purpose in respect of the Registration Statement shall have been initiated
or threatened;
(c) No preliminary or permanent injunction or other order or decree by
any federal or state court which prevents the consummation of the Merger shall
have been issued and remain in effect (each party agreeing to use its reasonable
commercial efforts to have any such injunction, order or decree lifted);
(d) There shall be no pending or threatened any action or proceeding (or
any investigation or other inquiry that might result in such an action or
proceeding) by any governmental authority or administrative agency before any
governmental authority, administrative agency or court of competent
jurisdiction, domestic or foreign, nor shall there be in effect any judgment,
decree or order of any governmental authority, administrative agency or court of
competent jurisdiction, or any other legal restraint (i) preventing or seeking
to prevent consummation of the Merger, (ii) prohibiting or seeking to prohibit
or limiting or seeking to limit, Consolidated from exercising all material
rights and privileges pertaining to its ownership
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of the Surviving Corporation or ownership or operation by Consolidated or any of
its subsidiaries of all or a material portion of the business assets of
Consolidated or any of its subsidiaries, or (iii) compelling or seeking to
compel Consolidated or any of its subsidiaries to dispose or hold separate all
or any material portion of the business or assets of Consolidated or any of its
subsidiaries, as a result of the Merger or the transactions contemplated by this
Agreement;
(e) Neither Coke-Carolina nor Newco shall have taken any action or
failed to take any action which would cause the Merger to fail to be treated as
a "forward triangular merger" pursuant to Section 368(a)(1)(A) and (a)(2)(D) of
the Internal Revenue Code of 1986, as amended, in the reasonable opinion of
Consolidated and Newco;
(f) Coke-Carolina's Shareholders shall have approved this agreement and
the transactions contemplated by it in accordance with applicable law without
(unless Consolidated waives this qualifier) any Dissenting Shares; and
(g) In the case of trusts established under the wills of A.T. Heath and
Ann H. Heath, a court of appropriate jurisdiction has issued an order no longer
subject to appeal authorizing it to vote in favor of the transactions
contemplated by this agreement (including, without limitation, the execution and
delivery of a transmittal letter with respect to the shares owned by each such
trust).
8.2 Conditions to Obligations of Coke-Carolina Shareholders to Effect
the Merger. The obligation of Coke-Carolina and its shareholders to effect the
Merger shall be subject to the fulfillment at or prior to the Closing Date of
the following additional conditions:
(a) Consolidated and Newco shall have performed in all material respects
their agreements contained in this Agreement required to be performed at or
prior to the Closing and the representations and warranties of Consolidated and
Newco contained in this Agreement shall be true and correct in all material
respects on and as of the date of this Agreement and at and as of the Closing as
if made on and as of such date or time, except as otherwise contemplated or
permitted by this Agreement, and Consolidated and Newco shall tender to the
Shareholders' Representatives a certificate of a duly authorized officer of
Consolidated and Newco to that effect; and
(b) Consolidated and Newco shall have delivered to the Shareholders'
Representatives an opinion addressed to the Shareholders from Witt, Gaither &
Whitaker, P.C., counsel to Consolidated and Newco, dated the Closing Date, as
specified in Exhibit 8.2(b).
8.3 Conditions to Obligation of Consolidated and Newco to Effect the
Merger. The obligation of Consolidated and Newco to effect the Merger shall be
subject to the fulfillment at or prior to the Closing Date of the additional
following conditions, unless waived in whole or in part by Consolidated and
Newco, in writing:
(a) Coke-Carolina shall have performed in all material respects its
agreements contained in this Agreement required to be performed at or prior to
the Closing Date and the
53
<PAGE>
representations and warranties of Coke-Carolina contained in this Agreement
shall be true and correct in all material respects on and as of the date of this
Agreement and at and as of the Closing as if made on and as of such date or time
(except for events occurring between the execution of this Agreement and the
Closing Date and in the case of those involving acts or omissions by Coke
Carolina during such interim period, except for those acts or omissions which
are permitted by Article V) and Consolidated and Newco shall have received a
Certificate of the Shareholders' Representatives to that effect.
(b) Consolidated and Newco shall have received an opinion from
Sutherland Asbill and Brennan LLP, counsel to Coke-Carolina, dated as of the
Closing Date in the form of Exhibit 8.3(b).
(c) Since the date hereof, no event has occurred which would have a
material adverse effect upon Coke-Carolina in the reasonable opinion of
Consolidated and Newco.
(d) Each of the officers and directors of Coke-Carolina as set forth on
Section 4.7 of the Disclosure Letter shall have delivered to Consolidated by the
Closing Date a release as provided in Exhibit 8.3(d).
(e) The Coca-Cola Company shall have consented to the Merger and
transfer and/or assignment of the franchises to Newco (or Newco's designee) for
the franchise territories set forth in Section 4.31 of the Disclosure Letter,
and there shall be no event or condition relating to Coke-Carolina which would
impair Newco's ability subsequent to the Effective Time to operate a business
for the manufacture, distribution and sale of soft drink products in the
territories.
(f) Prior to the Closing Date, Coke-Carolina shall identify all persons
or entities who are reasonably believed by it to be, at the time of the
Shareholders' Meeting held in accordance with Section 7.3 hereof, "affiliates"
of Coke-Carolina for purposes of Rule 145 under the Securities Act (the
"Affiliates"). Coke-Carolina shall use its commercially reasonable efforts to
cause each person or entity identified as an Affiliate to deliver to
Consolidated and Newco, on or prior to the Closing Date, a written agreement
(substantially in the form attached hereto as Exhibit 8.3(f)) stating that such
affiliate will not offer to sell, sell, transfer, or otherwise dispose of any
shares of Consolidated Common Stock or Installment Notes received in the Merger
except: (i) pursuant to an effective registration statement; (ii) in compliance
with Securities Act Rule 145; or (iii) if, in the opinion of counsel reasonably
acceptable to Consolidated and Newco or pursuant to a "no action" letter
obtained by the undersigned from the staff of the Commission, such offer to
sell, sale, transfer or other disposition is otherwise exempt from registration
under the Act.
(g) Consolidated's Board of Directors shall not have withdrawn its
approval of this Agreement.
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
54
<PAGE>
9.1 Termination. This Agreement may be terminated and the Merger
contemplated hereby may be abandoned at any time prior to the Effective Time,
whether before or after approval by the Coke-Carolina Shareholders:
(a) by mutual consent of the parties; or
(b) by any party if (i) the Merger shall not have been consummated on or
before five (5) business days after the Shareholders meeting is held or
abandoned (the "Termination Date"), or (ii) any court of competent jurisdiction
in the United States or any State shall have issued an order, judgment or decree
(other than a temporary restraining order) restraining, enjoining or otherwise
prohibiting the Merger and such order, judgment or decree shall have become
final and nonappealable; provided, however, that the right to terminate this
Agreement under this Section 9.1(b) shall not be available to any party whose
failure to fulfill any obligation under this Agreement has been the cause of, or
resulted in, the failure of the Effective Time to occur on or before the
Termination Date; or
(c) by any party if the Board of Directors of Coke-Carolina shall have
withdrawn or modified in a manner adverse to Consolidated or Newco its approval
or recommendation of the Merger, this Agreement or the transactions contemplated
hereby, or shall have resolved to do any of the foregoing; or
(d) by Consolidated and Newco if the Board of Directors of Coke-Carolina
shall have withdrawn or modified in a manner adverse to Consolidated or Newco
its approval or recommendation of the Merger, this Agreement or the transactions
contemplated hereby, or shall have resolved to do any of the foregoing, if any
closing condition in Section 8.1 and 8.3 has not been satisfied or waived or,
with respect to a breach of any covenant or agreement, such breach has not been
cured prior to the Termination Date other than such breach that has not had or
would not reasonably be expected to have a material adverse effect in the
reasonable opinion of Consolidated and Newco; or
(e) by Coke-Carolina if any closing condition in Section 8.1 and 8.2 has
not been satisfied or waived or, with respect to breach of any covenant or
agreement, such breach has not been cured prior to the Termination Date other
than such breach that has not had or would not reasonably be expected to have a
material adverse effect on the business of Consolidated taken as a whole.
9.2 Effect of Termination. In the event of termination of this Agreement
by either Consolidated or Coke-Carolina, as provided in Section 9.1, there shall
be no liability or obligation on the part of any party hereto except for any
breach of this Agreement.
9.3 Amendment. This Agreement may be amended (i) prior to the Closing by
Consolidated, Newco, Coke-Carolina and (ii) after the closing by Consolidated
and the Shareholders' Representatives; provided, however, that after approval
hereof by the Coke-Carolina Shareholders, no amendment shall be made which
reduces the Merger Consideration or alters the form thereof or in any way
materially adversely affects the rights of the Coke-Carolina
55
<PAGE>
Shareholders without the further approval of them, except as expressly
authorized by them. This Agreement may not be amended except by an instrument in
writing signed by the appropriate parties.
9.4 Waiver. At any time prior to the Effective Time, the parties hereto
may (a) extend the time for the performance of any of the obligations or other
acts of the other parties hereto, (b) waive any inaccuracies in the
representations and warranties contained herein or in any document delivered
pursuant hereto (made by the other parties hereto) and (c) waive compliance with
any of the agreements or conditions contained herein (required of the other
parties hereto); provided, however, that waiver of compliance with any
agreements or conditions herein shall not limit the parties' obligations to
comply with all other agreements or conditions herein. Any agreement on the part
of a party hereto to any such extension or waiver shall be valid if set forth in
an instrument in writing signed on behalf of such party.
ARTICLE X
DEFINITIONS
10.1 "Reasonable commercial efforts" of a party means the efforts of
such party that are commercially reasonable under the circumstances, but such
efforts do not require the payment of any material sums of money or the
incurring of any material liability or obligation and do not guaranty or warrant
success.
10.2 Definition of Knowledge. For the purposes of this Agreement, the
phrases "to Coke-Carolina's knowledge" or "to its knowledge" and variations of
them when used with respect to Coke-Carolina shall refer to all matters actually
known to any of W.S. Heath, A.T. Heath III, P.J. Flanagan, J. Barry Heath, R.
Bland Roper, Kenny Clarke, Barry Lewis and Pat Joyner.
ARTICLE XI
EXHIBITS
Exhibits:
Exhibit 1.1(a) - Articles of Merger
Exhibit 1.1(b) - Certificate of Merger
Exhibit 2.1(b)(i) - Merger Consideration Election Form Exhibit 2.1(b)(i)(C) -
Installment Note(s) Exhibit 2.1(e)(i) - Transmittal Letter(s) Exhibit 2.2(a)(ii)
- - Calculation Guidelines Exhibit 2.1(c)(v) - Indemnification Escrow Agreement
Exhibit 2.2(a)(iv) - Shareholders' Equity Escrow Agreement Exhibit 4 -
Disclosure Letter Exhibit 7.9 - Consulting/Non-Competition Agreement Exhibit
8.2(b) - Witt, Gaither & Whitaker, P.C. Opinion Letter Exhibit 8.3(b) -
Sutherland Asbill and Brennan LLP Opinion Letter
56
<PAGE>
Exhibit 8.3(d) - Release
Exhibit 8.3(f) - Affiliate Agreement
ARTICLE XII
GENERAL PROVISIONS
12.1 Notices. Any notice, demand, request, consent, approval or other
communications required or permitted to be given hereunder shall be in writing
and shall be delivered personally or sent either by facsimile transmission or
nationally recognized overnight courier (utilizing guaranteed next business
morning delivery), addressed to the party to be notified at the following
address, or to such other address as such party shall specify by like notice:
(a) If to Consolidated or Newco, to:
Coca-Cola Bottling Co. Consolidated
1900 Rexford Road
Charlotte, NC 28211
Facsimile: (704) 551-4449
Attention: Mr. Robert D. Pettus, Jr.
with a required copy to:
Witt, Gaither & Whitaker, P.C.
1100 SunTrust Bank Building
Chattanooga, TN 37402
Facsimile: (423) 266-4138
Attention: Mr. John F. Henry, Jr.
(b) If to Coke-Carolina or Shareholders' Representatives, to:
W. S. Heath
72 Paisley Park
Sumter, SC 29150-3114
A. T. Heath III
21 Swan Lake Drive
Sumter, SC 29150-4740
R. Bland Roper
112 1/2 West Main Street
Laurens, SC 29360
57
<PAGE>
with a required copy to:
Overend & Company, Inc.
Suite 200
4401 Northside Pkwy.
Atlanta, GA 30327
Facsimile: (404) 262-2801
Attention: Mr. George D. Overend
with a further required copy to:
Sutherland Asbill & Brennan LLP
999 Peachtree Street, NE
Atlanta, GA 30309-3996
Facsimile: (404) 853-8806
Attention: Mr. Thomas B. Hyman, Jr.
12.2 Interpretation. The parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the parties and no presumption or burden of proof shall
arise favoring or disfavoring any party by virtue of the authorship of any of
the provisions of this Agreement. Any reference to any federal, state, local, or
foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context requires otherwise. The
word "including" shall mean including without limitation. The parties intend
that each representation, warranty, and covenant contained herein shall have
independent significance. The word "threatened" means any act that would cause
one reasonably to believe that the act, omission, fact or circumstance with
respect to which such word is used is likely to occur.
12.3 Integration and Governing Law. This Agreement (including the
documents and instruments referred to herein): (a) constitutes the entire
agreement and supersedes all other prior agreements and understandings, both
written and oral, among the parties, or any of them, with respect to the subject
matter hereof; (b) is not intended to confer upon any other person any rights or
remedies hereunder; (c) shall not be assigned by operation of law or otherwise
(unless the shares of Coke-Carolina Common Stock have been assigned); and (d)
shall be governed in all respects, including validity, interpretation and
effect, by the laws of the State of Delaware (without giving effect to the
provisions thereof relating to conflicts of law), except that the merger shall
be governed by applicable provisions of the Delaware and South Carolina
corporation laws. Notwithstanding the foregoing sentence, each party hereto
consents to the exclusive personal jurisdiction in and by the United States
District Court sitting in Columbia, South Carolina, as a mutually convenient
forum for the judicial resolution of any dispute and voluntarily submits to the
exclusive personal and subject matter jurisdiction of said court in any action
or proceeding with respect to this Agreement.
12.4 Counterparts. This Agreement may be executed in two or more
counterparts,
58
<PAGE>
each of which shall be deemed to be an original, but all of which shall
constitute one and the same agreement. This Agreement may be executed by each
party upon a separate copy, and one or more execution pages may be detached from
one copy of this Agreement and attached to another copy in order to form one or
more counterparts.
12.5 Parties in Interest. This Agreement is binding upon the parties and
their respective successors or assigns (whether or not permitted) and inures to
the benefit of the parties and their permitted successors and assigns. There are
no intended or incidental third party beneficiaries.
12.6 Partial Invalidity and Severability. All rights and restrictions
contained herein may be exercised and shall be applicable and binding only to
the extent that they do not violate any applicable laws and are intended to be
limited to the extent necessary to render this Agreement legal, valid and
enforceable. If any term of this Agreement, or a part thereof, not essential to
the commercial purpose of this Agreement shall be held to be illegal, invalid or
unenforceable by a court of competent jurisdiction, it is the intention of the
parties that the remaining terms hereof, or a part thereof, shall remain in full
force and effect provided that the Merger can be consummated and the parties can
enjoy the benefit of their bargain. To the extent legally permissible, any
illegal, invalid or unenforceable provision of this Agreement shall be replaced
by a valid provision which will implement the commercial purpose of the illegal,
invalid or unenforceable provision so that the parties will each enjoy the
benefit of their bargain hereunder.
SIGNATURES FOLLOW ON THE NEXT PAGE
59
<PAGE>
IN WITNESS WHEREOF, Consolidated, Newco, and Coke-Carolina have caused this
Agreement to be signed as of the date first written above.
Coca-Cola Bottling Co. Consolidated
By: /s/ UMESH KASBEKAR
--------------------------------------------
Vice President, Planning and Administration
--------------- ----------------------------
Sumter Merger Corporation, Inc.
By: /s/ UMESH KASBEKAR
--------------------------------------------
Vice President,
--------------- ----------------------------
Carolina Coca-Cola Bottling Company, Inc.
By: /s/ W.S. HEATH
-------------------------------------
W.S. Heath, President
Shareholders's Representatives:
/s/ W.S. HEATH
- ----------------------------------
W.S. Heath
/s/ A.T. HEATH III
- ----------------------------------
A.T. Heath III
/s/ R. BLAND ROPER
- -----------------------------------
R. Bland Roper
60
Exhibit 1.1(a)
ARTICLES OF MERGER
OF
CAROLINA COCA-COLA BOTTLING COMPANY, INC.
INTO
SUMTER MERGER CORPORATION, INC.
Pursuant to the provisions of Sections 33-11-101 et seq. of the South
Carolina Business Corporation Act (the "Act"), Sumter Merger Corporation, Inc.,
a corporation duly organized and validly existing under the laws of the State of
Delaware ("Sumter"), as the surviving corporation in the merger of a foreign and
domestic corporation as permitted by Section 33-11-107 of the Act, does hereby
submit and file these Articles of Merger for the purpose of merging Carolina
Coca-Cola Bottling Company, Inc., a corporation organized and validly existing
under the laws of the State of South Carolina ("Coke-Carolina"), into Sumter, to
wit:
1. The plan of merger is attached hereto as Exhibit A (the "Plan of
Merger").
2. The Plan of Merger was approved by the shareholders of Sumter and
Coke-Carolina in the manner provided by the laws of the State of Delaware (in
the case of Sumter) and the laws of the State of South Carolina (in the case of
Coke-Carolina).
3. As to each of the undersigned corporations, the designation and
number of shares outstanding of, and the number of votes entitled to be cast by,
each voting group entitled to vote separately on such Plan of Merger were as
follows:
<TABLE>
<S> <C> >
- ---------------------------- ------------------------- ------------------------- -------------------------
Name of Corporation Designation of Voting No. of Shares No. of Votes Entitled
Group Outstanding to Be Cast
- ---------------------------- ------------------------- ------------------------- -------------------------
Sumter common shareholders 100 100
- ---------------------------- ------------------------- ------------------------- -------------------------
Coke-Carolina common shareholders 4283 4283
- ---------------------------- ------------------------- ------------------------- -------------------------
</TABLE>
<TABLE>
<CAPTION>
4. As to each of the voting groups of the undersigned corporations, the
total number of shares cast for and against such Plan of Merger were as follows:
<S> <C> <C> <C>
- ---------------------------- ------------------------- ------------------------- -------------------------
Name of Corporation Designation of Voting Total Voted FOR the Total Voted AGAINST the
Group Plan of Merger Plan of Merger
- ---------------------------- ------------------------- ------------------------- -------------------------
Sumter common shareholders 100 0
- ---------------------------- ------------------------- ------------------------- -------------------------
Coke-Carolina common shareholders 4,283 0
- ---------------------------- ------------------------- ------------------------- -------------------------
</TABLE>
The number of votes cast for such Plan of Merger by each voting group was
sufficient for approval by that voting group.
1
<PAGE>
5. The merger will become effective as of 11:59 p.m. on _____________
___, 1999.
Sumter Merger Corporation, Inc.
By: _____________________
----------------, ----------
2
<PAGE>
Exhibit A
Plan of Merger
of
Carolina Coca-Cola Bottling Company, Inc.
into
Sumter Merger Corporation, Inc.
(pursuant to Section 33-11-101 of the South Carolina Business Corporation Act)
1. The name of the corporation planning to merge is Carolina Coca-Cola
Bottling Company, Inc., a South Carolina corporation. The name of the
surviving corporation is Sumter Merger Corporation, Inc., a Delaware
corporation.
2. The terms and conditions of the merger are set forth in that certain
agreement and plan of merger executed as of ____________ ___, 1999 by
and among, Carolina Coca-Cola Bottling Company, Inc., Sumter Merger
Corporation, Inc., and Coca-Cola Bottling Co. Consolidated, a Delaware
corporation and the parent of Sumter Merger Corporation, Inc. (the
"Agreement and Plan of Merger").
3. The manner and basis of converting the shares of each of the constituent
corporations is as follows: As more particularly set forth in the
Agreement and Plan of Merger, the shares of Sumter Merger Corporation,
Inc. will be unaffected by the merger. Each share of Carolina Coca-Cola
Bottling Company, Inc. existing as of the merger will automatically be
converted into the right to receive consideration which may consist of a
combination of cash, promissory notes, and stock of Coca-Cola Bottling
Co. Consolidated.
4. As of the effective time of the merger, the name of Sumter Merger
Corporation, Inc. will be changed to "Carolina Coca-Cola Bottling
Company, Inc.", which shall continue its existence as a corporation
organized under the laws of the State of Delaware and qualified to
transact business as a foreign corporation in the State of South
Carolina.
3
Exhibit 1.1(b)
CERTIFICATE OF MERGER
MERGING
CAROLINA COCA-COLA BOTTLING COMPANY, INC.
INTO
SUMTER MERGER CORPORATION, INC
(Pursuant to Section 252 of the Delaware General Corporation Law)
SUMTER MERGER CORPORATION, INC., a corporation duly organized and
validly existing under the laws of the State of Delaware ("Sumter"), as the
surviving corporation in the above-referenced merger does hereby submit and file
this Certificate of Merger pursuant to Section 252(c) of the Delaware General
Corporation Law:
1. The name and state of incorporation of each of the constituent corporations
is as follows:
a. Carolina Coca-Cola Bottling, Company, Inc., a South Carolina corporation
b. Sumter Merger Corporation, Inc., a Delaware corporation
2. An Agreement and Plan of Merger has been approved, adopted, certified,
executed, and acknowledged by each of the constituent corporations in accordance
with subsection (c) of Section 252 of the Delaware General Corporation Law.
3. The name of the surviving corporation is Sumter Merger Corporation, Inc., a
Delaware corporation.
4. The only change in the Certificate of Incorporation of the surviving
corporation is that its name shall be relinquished and in place thereof the
surviving corporation shall be known as "Carolina Coca-Cola Bottling Company,
Inc.", a Delaware corporation.
5. The executed Agreement and Plan of Merger is on file at the office of the
surviving corporation's parent corporation, Coca-Cola Bottling Co. Consolidated,
1900 Rexford Road, Charlotte, North Carolina 28211.
6. A copy of the Agreement and Plan of Merger will be furnished by the surviving
corporation, on request and without cost, to any stockholder of any constituent
corporation.
7. The authorized capital stock of the merged corporation (Carolina Coca-Cola
Bottling Company, Inc., a South Carolina corporation) is five thousand (5,000)
shares of common stock, one hundred dollars ($100.00) par value per share.
1
<PAGE>
IN WITNESS WHEREOF, the surviving corporation has caused this
certificate to be signed by its president and attested by its secretary,
effective at 11:59 p.m. on _______ __, 1999.
Sumter Merger Corporation, Inc.
By: _______________________________
-----------------------, ------
ATTEST:
- --------------------------
John F. Henry, Jr., Secretary
2
<PAGE>
ANNEX B
FORM OF INSTALLMENT NOTE
<PAGE>
THIS INSTALLMENT NOTE IS SUBJECT TO THE TERMS OF AN INDENTURE DATED
______________ ___, 1999 (AS AMENDED OR SUPPLEMENTED FROM TIME TO TIME, THE
"INDENTURE") BETWEEN COCA-COLA BOTTLING CO. CONSOLIDATED AND FIRST UNION
NATIONAL BANK, AS TRUSTEE (THE "TRUSTEE"). THE TERMS OF THIS INSTALLMENT NOTE
INCLUDE THOSE STATED IN THE INDENTURE AND THOSE MADE PART OF THE INDENTURE BY
REFERENCE TO THE TRUST INDENTURE ACT OF 1939, AS AMENDED (THE "TRUST INDENTURE
ACT").
THIS INSTRUMENT IS REGISTERED AS TO BOTH PRINCIPAL AND INTEREST WITH THE ISSUER
AND TRANSFER HEREOF MAY BE EFFECTED ONLY BY THE SURRENDER OF THE OLD INSTRUMENT
AND THE ISSUANCE OF A NEW INSTRUMENT BY THE ISSUER TO THE NEW HOLDER. THE HOLDER
HEREOF IS HEREBY NOTIFIED THAT THIS INSTRUMENT IS NOT LISTED NOR IS IT READILY
TRADABLE ON ANY ESTABLISHED SECURITIES MARKET.
INSTALLMENT NOTE
$_____________________________ ISSUE DATE: ___________, 1999
FOR VALUE RECEIVED and pursuant to that certain Agreement and Plan of
Merger dated as of March 26, 1999 (the "APM") by and among Coca-Cola Bottling
Co. Consolidated, a Delaware corporation ("CONSOLIDATED"), Sumter Merger
Corporation, Inc., a Delaware corporation and a wholly owned subsidiary of
Consolidated ("NEWCO"), and Carolina Coca-Cola Bottling Company, Inc., a South
Carolina corporation ("COKE-CAROLINA"), the undersigned, Consolidated (the
"ISSUER") hereby promises to pay to the order of ________________________ (the
"HOLDER") or the assigns of Holder, the sum of __________________________
_______________ plus accrued interest as provided below.
This Installment Note has the following terms:
Maturity:
seven (7) years from date of issue
Interest Rate:
five and three quarters percent (5.75%) simple interest per annum, fixed
rate
Interest Payment Dates:
<PAGE>
accrued and unpaid interest will be paid quarterly in arrears on the
last day of the calendar quarter, except for the final interest payment,
which will be paid on the maturity date
Payments of Principal:
twenty percent (20%) of the original principal balance will be paid in
conjunction with the interest payment occurring on December 31st of
2001, 2002, 2003, and 2004, with the balance of the outstanding
principal plus all accrued and unpaid interest being paid on
________________, 2006
All payments shall be made in lawful money of the United States to the
registered holder of this Installment Note in accordance with the provisions of
the Indenture.
TIME IS OF THE ESSENCE OF THIS INSTALLMENT NOTE.
This Installment Note may NOT be prepaid in whole or in part (i) except
pursuant to a redemption offer as described in the Indenture or (ii) except as
expressly authorized below.
THIS INSTALLMENT NOTE IS SUBJECT TO THE ISSUER'S RIGHTS OF OFFSET AS SET
FORTH IN ARTICLE VI OF THE APM.
The following are events of default under the Indenture: (a) the
Issuer's failure to pay or perform any obligation, liability or indebtedness of
the Issuer to the Holder under this Installment Note as and when due (whether
upon demand, at maturity or by acceleration, and subject to the terms of this
Installment Note, the Indenture and the APM); (b) the commencement of a
proceeding by or against the Issuer for dissolution (other than administrative
dissolution where prompt re-instatement efforts are initiated and followed
through to completion); (c) the insolvency of or the business failure of the
Issuer; (d) the appointment of a custodian, trustee, liquidator or receiver for
a material portion of the property of the Issuer; (e) an assignment for the
benefit of creditors of a material portion of the property of the Issuer; or (f)
the filing of a petition under bankruptcy, insolvency or debtor's relief law or
the filing of a petition for any adjustment of indebtedness, composition or
extension by or against the Issuer. Whenever there is a default under this
Installment Note, the entire balance outstanding hereunder (however acquired or
evidenced) shall, at the option of the Trustee, or as otherwise provided in the
Indenture, become immediately due and payable in accordance with the Indenture.
Additionally, the Holder shall have all rights and remedies available under the
APM and the Indenture.
During the existence of any such default arising from the failure to pay
principal or interest under this Note, the Issuer further promises to pay, on
demand, to the extent permitted by applicable law, additional interest on
overdue installments of principal and, to the extent permitted by law, of
interest at the rate of eight percent (8%) per annum.
Except in connection with the Issuer's exercise of its right of offset
as set forth in Article VI of the APM: (a) the Issuer hereby waives presentment,
protest and demand, notice of protest,
<PAGE>
demand and dishonor and nonpayment of this Note, agrees to pay all reasonable
costs of collection when incurred (including without limitation reasonable
attorneys' fees), and agrees to perform and comply with each of the covenants,
agreements, conditions, provisions and agreements of the Issuer contained in
each and every instrument evidencing or securing said indebtedness; (b) the
Issuer agrees that its liabilities under this Note are absolute and
unconditional without regard to the liability of any other party; and (c) the
Issuer hereby waives the right to interpose any set-off, counterclaim, or
defense or any nature or description whatsoever in connection with any Holder's
enforcement of its rights under this Note.
This Installment Note is subject to all of the terms of the Indenture
and the Trust Indenture Act, and holders of the Installment Notes are referred
to the Indenture and such Act for a statement of the respective rights,
limitations of rights, duties and immunities thereunder of the Issuer, the
Trustee and each Holder and of the terms upon which the Installment Notes are,
and are to be, authenticated and delivered. The terms of this Installment Note
contained herein do not purport to be complete and are qualified by reference to
the Indenture. To the extent permitted by applicable law, in the event of any
inconsistency between the terms of this Note and the terms of the Indenture, the
terms of the Indenture shall control.
This Installment Note shall not be valid until the Trustee or an
authenticating agent manually signs the certificate of authentication on this
Installment Note.
[SIGNATURE PAGE FOLLOWS]
<PAGE>
IN WITNESS WHEREOF, the Issuer executes this Installment Note effective
on the ____ day of _____________, 1999.
COCA-COLA BOTTLING CO. CONSOLIDATED
------------------------------
By:__________________, __________
Attest: _________________________
________________, Secretary
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
First Union National Bank, as Trustee, certifies that this is one of the
Notes referred to in the Indenture.
By:________________________________________
Authorized Signatory
<PAGE>
ANNEX C
FORM OF SHAREHOLDERS' EQUITY ESCROW AGREEMENT
<PAGE>
SHAREHOLDERS' EQUITY ESCROW AGREEMENT
The Undersigned, Coca-Cola Bottling Co. Consolidated, a Delaware
corporation ("Consolidated"); Sumter Merger Corporation, Inc., a Delaware
corporation and wholly-owned subsidiary of Consolidated ("Newco"), W. S. Heath,
A. T. Heath, III and R. Bland Roper as the "Shareholders' Representatives", and
SunTrust Bank, Atlanta, a Georgia Banking Corporation, as escrow agent (the
"Escrow Agent") hereby enter into this Shareholders' Equity Escrow Agreement as
of the ____ day of ________, 1999 (hereinafter this "Escrow Agreement"). Unless
otherwise defined, all capitalized terms used herein shall have the meanings
assigned to them in that certain Agreement and Plan of Merger entered into as of
March 26, 1999 by and among Consolidated, Newco, and Carolina Coca-Cola Bottling
Company ("Coke-Carolina") (the "APM").
ARTICLE I
Items Deposited with Escrow Agent
1.0 Escrow Agent Acceptance. The Escrow Agent hereby accepts its appointment as
Escrow Agent and agrees to hold the Shareholders' Equity Escrow Fund (as defined
herein) in accordance with this Escrow Agreement and agrees to invest such funds
pursuant thereto and no additional duties or obligations shall be implied
hereunder.
1.1 Items Deposited at Closing. The following items are hereby deposited with
the Escrow Agent by the indicated parties to be held and administered by the
Escrow Agent pursuant to the terms of this Escrow Agreement:
a. By Consolidated, Newco and the Shareholders' Representatives: a
photocopy of the executed APM dated as of March 26, 1999 (with the
amount of the Base Merger Consideration redacted); and
b. By Newco: the amount of cash as specified by Section 2.1 (f)(i)
of the APM (the "Shareholders' Equity Escrow Fund").
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1.2 Items Deposited Post-Closing. Subsequent to the Closing, Consolidated shall
cause its certified public accounting firm to deliver to the Escrow Agent (as
provided in Article II of the APM) the Final Closing Date Balance Sheet together
with its calculation of the Post-Closing Adjustment.
ARTICLE II
Deposit, Investment and Disbursement of Funds
2.1 General. The above-listed items shall be held by the Escrow Agent in escrow
under the following instructions, to wit:
Cash. The Escrow Agent shall hold the Shareholders' Equity Escrow
Fund and invest the same in Federated Treasury Obligations Money Market Fund.
2.2 Distribution of Shareholder's Equity Escrow.
(a) Distribution of Income. All income earned on cash held in the
Shareholders' Equity Escrow Fund shall be paid to the Shareholders'
Representatives to be distributed to the shareholders in accordance with their
respective interests in the cash in the Shareholders' Equity Escrow Fund.
(b) Distribution of Corpus. The Shareholders' Equity Escrow Fund will be
distributed as specified in Section 2.2(b) of the APM.
2.3 Reliance on Directions or Agreements. Where directions, instructions or
agreements from more than one of the undersigned are required, such directions,
instructions or agreements may be given by counterpart instruments.
2.4 Actions of Escrow Agent. It is further agreed by the undersigned that:
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(a) The Escrow Agent acts hereunder as a depository only, and is not
responsible or liable in any manner whatsoever for the genuineness or
validity of this Escrow Agreement.
(b) The Escrow Agent shall be protected in acting upon written notice,
request, waiver, consent, certificate, receipt, authorization, power of
attorney or other paper or document which the Escrow Agent in good faith
believes to be genuine and what it purports to be.
(c) The Escrow Agent shall not be liable for anything which it may do or
refrain from doing in connection herewith, other than gross negligence
or willful misconduct on part of the Escrow Agent.
(d) The Escrow Agent may consult with legal counsel in the event of any
dispute or question as to the construction of any of the provisions
hereof or its duties hereunder, and it shall incur no liability and
shall be fully protected in acting in accordance with the opinion and
instructions of such counsel. In such event, the legal fees and expenses
of counsel shall be paid one-half by Newco and one-half by the
Shareholders.
(e) In the event of any disagreement between any of the parties to this
Escrow Agreement or between them or any of them and any other person,
resulting in adverse claims or demands being made in connection with the
subject matter of this escrow or in the event that the Escrow Agent, in
good faith, shall be in doubt as to what action it should take
hereunder, the Escrow Agent may, at its option, file a suit in
interpleader in a court of competent jurisdiction, or refuse to comply
with any claims or demands on it, or refuse to take any other action
hereunder, so long as such disagreement continues or such doubt exists,
and in any such event, the Escrow Agent shall not be or become liable in
any way or to any person for its failure or refusal to act, and the
Escrow Agent shall be entitled to continue so to refrain from acting
until (i) the rights of all parties shall have been fully and finally
adjudicated by a court of competent jurisdiction, or (ii) all
differences shall have been adjusted and all doubt resolved by agreement
among all of the interested persons, and the Escrow Agent shall have
been notified thereof in writing
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signed by all such persons. The rights of the Escrow Agent under this
paragraph are cumulative of all other rights which it may have by law or
otherwise. The filing of such legal action shall not deprive the Escrow
Agent of its compensation earned prior to such filing.
(f) The Escrow Agent shall not have any liabilities or responsibilities
arising under any other agreement to which the Escrow Agent is not a
party, except to recognize the definition of terms contained in the APM
and the specific references to the APM contained herein (as redacted),
even though reference thereto may be made herein or a copy thereof
provided in connection with this Escrow Agreement.
(g) Newco and the Shareholders hereby agree to jointly and severally
indemnify and hold harmless the Escrow Agent against any and all cost,
losses, claims, damages, liabilities, expenses of every kind and nature,
including reasonable costs of investigation, court costs, and reasonable
attorneys' fees, expenses and disbursements which may be incurred by the
Escrow Agent without gross negligence or willful misconduct on the part
of the Escrow Agent, arising out of or in connection with its entering
into this Escrow Agreement or carrying out its duties hereunder in
connection with its acceptance of appointment as the Escrow Agent
hereunder, including any litigation arising from this Escrow Agreement
or involving the subject matter hereof. One-half of such indemnification
amounts shall be paid by the Shareholders and one-half of such
indemnification amounts shall be paid by Newco. The Escrow Agent shall
not be liable for any action taken or admitted by it in good faith and
believed by it to be authorized hereby, nor for action taken or omitted
by it in accordance with the advise of its counsel. The parties to this
Escrow Agreement agree that the indemnification afforded to the Escrow
Agent pursuant to this paragraph (g) shall survive the termination of
this Escrow Agreement.
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ARTICLE III
General Provisions.
3.1 Compensation of Escrow Agent. The Escrow Agent's fee for acting as escrow
agent hereunder shall be $2,500.00 payable as follows: annually, in advance.
3.2 Costs, Fees and Expenses. Fifty percent (50%) of all fees and expenses of
the Escrow Agent shall be paid by Newco. The remaining fifty percent (50%) shall
be paid out of the Shareholder Expense Fund.
3.3 Resignation of Escrow Agent. The Escrow Agent may resign as Escrow Agent
hereunder at any time by providing thirty (30) days written notice to the other
parties hereto, whereupon the Escrow Agent shall deliver the Shareholders'
Equity Escrow Fund to a substitute escrow agent selected by the mutual agreement
of Newco and the Shareholders' Representatives.
3.4 Counterparts. This Escrow Agreement may be executed in any number of
counterparts, all of which when taken together shall constitute one and the same
instrument.
3.5 Binding Effect. This Escrow Agreement shall be binding upon and inure to the
benefit of the parties hereto, their respective legal representatives,
successors and assigns.
3.6 Governing Law. The terms of this Escrow Agreement shall be construed in
accordance with the laws of the State of Georgia.
3.7 Severability. If any provision of this Escrow Agreement is unenforceable,
the remaining provisions shall, to the extent possible, be carried into effect
taking into account the general purpose and spirit of this Escrow Agreement.
3.8 Notices. Any notice, demand, request, consent, approval or other
communications required or permitted to be given hereunder shall be in writing
and shall be delivered personally or sent by nationally recognized overnight
courier (utilizing guaranteed next business morning
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delivery), addressed to the party to be notified at the following address, or to
such other address as such party shall specify by like notice:
(a) If to Consolidated or Newco, to:
Coca-Cola Bottling Co. Consolidated
1900 Rexford Road
Charlotte, NC 28211
Facsimile: (704) 551-4449
Telephone: (704) 551-4400
Tax I.D. #:
Attention: Mr. Robert D. Pettus, Jr.
with a required copy to:
Witt, Gaither & Whitaker, P.C.
1100 SunTrust Bank Building
Chattanooga, TN 37402
Facsimile: (423) 266-4138
Phone: (423) 265-8881
Attention: John F. Henry, Jr., Esq.
(b) If to Shareholders' Representatives, to:
W. S. Heath
72 Paisley Park
Sumter, SC 29150-3114
Phone:
A. T. Heath, III
21 Swan Lake Drive
Sumter, SC 29150-4740
Phone:
and
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R. Bland Roper
112 1/2 West Main Street
Laurens, SC 29360
Facsimile: (864) 984-2539
Phone: (864) 984-2538
with a required copy to:
Overend & Company, Inc.
Suite 200
4401 Northside Pkwy.
Atlanta, GA 30327
Facsimile: (404) 262-2801
Phone: (404) 262-2800
Attention: Mr. George D. Overend
with a further required copy to:
Sutherland Asbill & Brennan LLP
999 Peachtree Street, NE
Atlanta, GA 30309-3996
Facsimile: (404) 853-8806
Attention: Mr. Thomas B. Hyman, Jr.
(c) If to Escrow Agent:
SunTrust Bank, Atlanta
Corporate Trust Department
3495 Piedmont Road
Building 10-Suite 810
Atlanta, GA 30305-1727
Facsimile: (404) 240-2030
Phone: (404) 240-1954
Attention: Ms. Rebecca Fischer
Or to such other representative or to such other address as may be
designated in a notice given pursuant hereto.
IN WITNESS WHEREOF, the undersigned hereby set forth their hands as of the date
and year first above written.
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Shareholders' Representatives
- -----------------------------------
W. S. Heath, Shareholders' Representative
- ----------------------------------
A. T. Heath, III, Shareholders' Representative
- ---------------------------------
R. Bland Roper, Shareholders' Representative
Coca-Cola Bottling Co. Consolidated
By: ___________________________
-------------------, -------------
Sumter Merger Corporation, Inc.
By: ___________________________
-------------------, --------------
SunTrust Bank, Atlanta, as Escrow Agent
By: ___________________________
-------------------, -------------
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Exhibit A
Wire Transfer Instructions
--------------------------
to be supplied
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ANNEX D
FORM OF INDEMNIFICATION ESCROW AGREEMENT
<PAGE>
INDEMNIFICATION ESCROW AGREEMENT
The Undersigned, Coca-Cola Bottling Co. Consolidated, a Delaware
corporation ("Consolidated"); Sumter Merger Corporation, Inc., a Delaware
corporation and a wholly-owned subsidiary of Consolidated ("Newco")
(Consolidated and Newco being sometimes collectively referred to herein as
"Indemnitees"), W. S. Heath, A. T. Heath, III and R. Bland Roper as the
"Shareholders' Representatives", and SunTrust Bank, Atlanta, a Georgia Banking
Corporation, as escrow agent (the "Escrow Agent") hereby enter into this
indemnification escrow agreement as of the ______ day of __________, 1999
(hereafter this "Indemnification Escrow Agreement"). Unless otherwise defined,
all capitalized terms used herein shall have the meanings assigned to them in
that certain Agreement and Plan of Merger entered into as of March 26, 1999 by
and among Consolidated, Newco, and Carolina Coca-Cola Bottling Company
("Coke-Carolina") (the "APM").
ARTICLE I
Background Statement
Pursuant to the terms of the APM, a portion of the Closing Date Merger
Consideration will be placed in the Indemnification Escrow Fund (as defined
herein) by the Shareholders' Representatives for purposes of providing
protection to the Indemnitees for the Coke-Carolina Shareholders'
indemnification obligations set forth in Article VI of the APM. Due to the
nature of the transaction, Indemnitees are unwilling to enter into the APM
unless an indemnification escrow is appropriately funded. It is the intent of
the parties that (i) all dividends on such pledged stock will be for the benefit
of the registered holders and distributed to as provided for herein, and (ii)
all voting rights of such stock will be exercisable by the registered holders.
There are no restrictions on the shares other than as expressly provided herein
or in the APM. Notwithstanding anything contained herein or in the APM to the
contrary, under no circumstances shall the shares of Consolidated
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Common Stock be held in the Indemnification Escrow Fund for a period longer than
five (5) years from the date hereof. Consolidated, Newco, and the Shareholders'
Representatives acknowledge and agree that the shares of Consolidated Common
Stock held in the Indemnification Escrow Fund shall under no circumstances
exceed forty-nine percent (49%) of the number of shares issued as part of the
Base Merger Consideration. Release of shares of Consolidated common stock held
in the Indemnification Escrow Fund will be governed by terms and conditions of
the APM and this Indemnification Escrow Agreement. It is the express intent of
the parties that the escrow of the shares of Consolidated Common Stock comply
with the provisions of Rev. Proc. 84-42 promulgated by the Internal Revenue
Service.
ARTICLE II
Items Deposited with Escrow Agent
2.0 Escrow Agent Acceptance. The Escrow Agent hereby accepts its appointment as
Escrow Agent and agrees to hold the Indemnification Escrow Fund in accordance
with this Indemnification Escrow Agreement and agrees to invest such Fund
pursuant thereto and no additional duties or obligations shall be implied
hereunder. The following items are (or will be) deposited with the Escrow Agent
by the indicated parties to be held and administered by the Escrow Agent
pursuant to the terms of this Indemnification Escrow Agreement:
2.1 By Indemnitees: A deposit consisting of cash, certificates for shares of
Consolidated Common Stock, and Installment Notes in the aggregate amount of
Three Million Six Hundred Sixty Thousand Dollars ($3,660,000) as listed on
Exhibit A of this Indemnification Escrow Agreement. The Escrow Agent shall
acknowledge receipt of the cash, certificates for shares of Consolidated Common
Stock and Installment Notes.
2.2 By Indemnitees, Coke-Carolina and Shareholders' Representatives: an executed
copy of the APM with the amount of the Base Merger Consideration redacted.
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ARTICLE III
Deposit, Investment and Disbursement of Funds
3.1 General. The items in Section 2.1 above shall be held by the Escrow Agent in
escrow under the following instructions, to wit:
(a) Cash: The Escrow Agent shall invest all cash received in investments
permitted by this Indemnification Escrow Agreement ("Permitted Investments") in
accordance with written instructions received from time to time from the
Shareholders' Representatives. For purposes hereof, Permitted Investments shall
be limited to the following:
(i) direct general obligations of the United States of America or any
agency thereof, or obligations which have the payment of principal and
interest unconditionally guaranteed by the United States of America or
any agency thereof;
(ii) Federated Treasury Obligations Money Market Fund which is rated
triple A;
(iii) prime commercial paper (including variable demand notes) of
companies whose commercial paper is rated A-1 or P-1 or better by
Standard & Poor's or Moody's; and
(iv) repurchase agreements with banks meeting the qualifications set
forth in clause (ii) above and involving securities of the type
enumerated in clauses (i) through (iii) above.
(b) Consolidated Common Stock and Installment Notes. The share
certificates and the Installment Notes held by the Escrow Agent shall be
retained and held in the Escrow Agent's vault, or at such other secure location
as the Escrow Agent determines.
(c) Responsibility. The Escrow Agent shall not be responsible or liable
for the performance of, loss on, or a penalty resulting from any Permitted
Investment made by the Escrow Agent pursuant to this Indemnification Escrow
Agreement. Such investments by the
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Escrow Agent of said cash consideration and the income from such investments
shall be paid only as hereinafter directed in writing. The cash, stock, and
Installment Notes, together with the proceeds from the investments thereof shall
hereinafter be referred to as the "Indemnification Escrow Fund".
3.2 Distribution of Indemnification Escrow Fund.
(a) Distribution of Income. All income earned on cash held in the
Indemnification Escrow Fund shall be paid to the Shareholders' Representatives
to be distributed to the shareholders in accordance with their respective
interests in the cash in the Indemnity Escrow Fund.
(b) Release of Corpus. Release of the Indemnification Escrow Fund held
by the Escrow Agent shall be as follows:
(i) Partial Release. At the conclusion of the eighteenth (18th) complete
calendar month following the Closing Date, funds will be released from
the Indemnification Escrow Fund as provided in and limited by Article VI
of the APM.
(ii) Final Release. At the conclusion of the forty-second (42nd)
complete calendar month following the Closing Date, any remaining
balance in the Indemnification Escrow Fund will be released as provided
in and limited by Article VI of the APM.
3.3 Claims. Pursuant to Article VI of the APM, Indemnitees are entitled, under
certain circumstances and subject to certain limitations, to receive
indemnification as more particularly set forth in the APM. From time-to-time,
Indemnitees may provide the Escrow Agent with a claim for indemnification in the
form attached hereto as Exhibit C (an "Indemnitee Claim Notice"), which must be
accompanied by (i) U.S. Postal Service signed return receipt cards indicating
delivery to the Shareholders' Representatives, and (ii) a certificate from a
corporate officer of Consolidated certifying that the indemnification claim was
sent to the Shareholders'
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Representatives, and that the return receipt cards are for that claim. At the
expiration of thirty (30) days subsequent to the latest date on which the
Shareholders' Representatives were delivered notice of the claim for
indemnification (as evidenced by the return receipt cards), the Escrow Agent
shall make the distribution to Indemnitees as specified in the Indemnitee Claim
Notice (including returning the certificate of the Consolidated Common Stock and
the Installment Note to Indemnitees for cancellation and re-issuance as provided
in Article VI of the APM), unless, prior to the expiration of such thirty-day
period, the Escrow Agent receives written notice from the Shareholders'
Representatives along with confirmation that the objection letter was sent to
the Indemnitees of an objection to the Indemnitees' claim. In the event of such
objection, the Escrow Agent shall not make the distribution to the Indemnitees
specified in the Indemnitee Claim Notice absent the joint written consent of the
Indemnitees and the Shareholders' Representatives, or a certified copy of a
final order of a court of competent jurisdiction, no longer subject to appeal.
3.4 Reliance on Directions or Agreements. Where directions or instructions or
agreements from more than one of the parties to this Indemnification Escrow
Agreement are required, such directions or instructions or agreements may be
given by counterpart instruments.
3.5 Actions of Escrow Agent. It is further agreed by the Undersigned that:
(a) The Escrow Agent acts hereunder as a depository only, and is not
responsible or liable in any manner whatsoever for the genuineness or validity
of this Indemnification Escrow Agreement, or any part thereof, does not warrant
title or validity of the Indemnification Escrow Fund, or the identity or
authority of any person acting on behalf of any other party hereunder.
(b) The Escrow Agent shall be protected in acting upon written notice,
request, waiver, consent, certificate, receipt, authorization, power of attorney
or other paper or document which the Escrow Agent in good faith believes to be
genuine and what it purports to be.
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(c) The Escrow Agent shall not be liable for anything which it may do or
refrain from doing in connection herewith, other than gross negligence or
willful misconduct on part of the Escrow Agent.
(d) The Escrow Agent may consult with legal counsel in the event of any
dispute or question as to the construction of any of the provisions hereof or
its duties hereunder, and it shall incur no liability and shall be fully
protected in acting in accordance with the opinion and instructions of such
counsel. In such event, the legal fees and expenses of counsel shall be paid
one-half by Newco and one-half by Shareholders.
(e) In the event of any disagreement between any of the parties to this
Indemnification Escrow Agreement or between them or any of them and any other
person, resulting in adverse claims or demands being made in connection with the
subject matter of this escrow or in the event that the Escrow Agent, in good
faith, shall be in doubt as to what action it should take hereunder, the Escrow
Agent may, at its option, file a suit in interpleader in a court of competent
jurisdiction, or refuse to comply with any claims or demands on it, or refuse to
take any other action hereunder, so long as such disagreement continues or such
doubt exists, and in any such event, the Escrow Agent shall not be or become
liable in any way or to any person for its failure or refusal to act, and the
Escrow Agent shall be entitled to continue so to refrain from acting until (i)
the rights of all parties shall have been fully and finally adjudicated by a
court of competent jurisdiction, or (ii) all differences shall have been
adjusted and all doubt resolved by agreement among all of the interested
persons, and the Escrow Agent shall have been notified thereof in writing signed
by all such persons. The rights of the Escrow Agent under this paragraph are
cumulative of all other rights which it may have by law or otherwise. The filing
of such legal action shall not deprive the Escrow Agent of its compensation
earned prior to such filing.
(f) The Escrow Agent shall not have any liabilities or responsibilities
arising under any other agreement to which the Escrow Agent is not a party,
except to recognize the definition of terms contained in the APM and the
specific references to the APM contained herein (as
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redacted), even though reference thereto may be made herein or a copy thereof
provided in connection with this Indemnification Escrow Agreement.
(g) Newco and the Shareholders hereby agree to jointly and severally
indemnify and hold harmless the Escrow Agent against any and all costs, losses,
claims, damages, liabilities, expenses of every kind and nature, including
reasonable costs of investigation, court costs, and reasonable attorneys' fees,
expenses and disbursements which may be incurred by the Escrow Agent without
gross negligence or willful misconduct on the part of the Escrow Agent, arising
out of or in connection with its entering into this Indemnification Escrow
Agreement or carrying out its duties hereunder in connection with its acceptance
of appointment as the Escrow Agent hereunder, including any litigation arising
from this Indemnification Escrow Agreement or involving the subject matter
hereof. One-half of such indemnification amounts shall be paid by the
Shareholders' Representatives and one-half of such indemnification amounts shall
be paid by Newco. The Escrow Agent shall not be liable for any action taken or
admitted by it in good faith and believed by it to be authorized hereby, nor for
action taken or omitted by it in accordance with the advice of its counsel. The
parties to this Indemnification Escrow Agreement agree that the indemnification
afforded to the Escrow Agent pursuant to this paragraph (g) shall survive the
termination of this Indemnification Escrow Agreement.
3.6 Interaction with Shareholders' Equity Escrow Agreement. Pursuant to Section
2.2 of the APM, if the Post-Closing Adjustment exceeds the amount of funds held
in the Shareholders' Equity Escrow Fund in favor of Indemnitees, the Escrow
Agent is expressly authorized and directed to make payments to Indemnitees as
set forth in Section 3.3 above without consideration for the liability
deductible specified in Section 6.7 of the APM.
ARTICLE IV
General Provisions.
4.1 Compensation of Escrow Agent. The Escrow Agent's fee for acting as escrow
agent hereunder shall be $3,500, payable as follows: annually, in advance.
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4.2 Costs, Fees and Expenses. Fifty percent (50%) of all fees and expenses of
the Escrow Agent shall be paid by Newco. The remaining fifty percent (50%) shall
be paid out of the Shareholders' Expense Fund.
4.3 Resignation of Escrow Agent. The Escrow Agent may resign as Escrow Agent
hereunder at any time by providing thirty (30) days written notice to
Indemnitees and Shareholders' Representatives, whereupon the Escrow Agent shall
deliver the collected Indemnification Escrow Fund to a substitute escrow agent
selected by the mutual agreement of Indemnitees and Shareholders'
Representatives. Any successor escrow agent shall execute and deliver to the
predecessor Escrow Agent, Newco and the Shareholders an instrument accepting
such appointment and the transfer of the Shareholders' Equity Escrow Fund and
the agreeing to the terms of this Indemnification Escrow Agreement and thereupon
such successor escrow agent shall, without further act, become vested with all
the estates, properties, rights, powers, privileges and duties of the
predecessor Escrow Agent as if originally named herein. If an instrument of
acceptance by a successor escrow agent shall not have been delivered to the
Escrow Agent within thirty (30) days after the giving of such notice of
resignation, the resigning Escrow Agent may at the joint expense of Newco and
the Shareholders petition any court of competent jurisdiction for the
appointment of a successor escrow agent.
4.4 Performance on Non Business Day. Should the performance date pursuant to any
provision of this Indemnification Escrow Agreement fall upon a holiday or on a
day on which the Escrow Agent is not open for business, the performance by the
Escrow Agent on the succeeding business day shall be deemed to be in full
compliance with the terms hereof.
4.5 Counterparts. This Indemnification Escrow Agreement may be executed in any
number of counterparts, all of which when taken together shall constitute one
and the same instrument.
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4.6 Binding Effect. This Indemnification Escrow Agreement shall be binding upon
and inure to the benefit of the parties hereto, their respective legal
representatives, successors and assigns.
4.7 Governing Law. The terms of this Indemnity Escrow Agreement shall be
construed in accordance with the laws of the State of Georgia.
4.8 Severability. If any provision of this Indemnity Escrow Agreement is
unenforceable, the remaining provisions shall, to the extent possible, be
carried into effect taking into account the general purpose and spirit of this
Indemnity Escrow Agreement.
4.9 Notices. Any notice, demand, request, consent, approval or other
communications required or permitted to be given hereunder shall be in writing
and shall be delivered personally or sent either by facsimile transmission or
nationally recognized overnight courier (utilizing guaranteed next business
morning delivery), addressed to the party to be notified at the following
address, or to such other address as such party shall specify by like notice:
(a) If to Indemnitees:
Coca-Cola Bottling Co. Consolidated
1900 Rexford Road
Charlotte, NC 28211
Facsimile: (704) 551-4449
Phone: (704) 551-4400
Tax ID #:
Attention: Mr. Robert D. Pettus, Jr.
with a required copy to:
Witt, Gaither & Whitaker, P.C.
1100 SunTrust Bank Building
Chattanooga, TN 37402
Facsimile: (423) 266-4138
Phone: (423) 265-8881
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Attention: John F. Henry, Jr., Esq.
(b) If to the Shareholders, to:
W. S. Heath
72 Paisley Park
Sumter, SC 29150-3114
Phone:
A. T. Heath, III
21 Swan Lake Drive
Sumter, SC 29150-4740
Phone:
and
R. Bland Roper
112 1/2 West Main Street
Laurens, SC 29360
Facsimile: (864) 984-2539
Phone: (864) 984-2538
with a required copy to:
Overend & Company, Inc.
Suite 200
4401 Northside Pkwy.
Atlanta, GA 30327
Facsimile: (404) 262-2801
Phone: (404) 262-2800
Attention: Mr. George D. Overend
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with a required copy to:
Sutherland, Asbill & Brennan LLP
999 Peachtree Street, NE
Atlanta, GA 30309-8806
Facsimile: (404) 853-8806
Attention: Mr. Thomas B. Hyman, Jr.
(c) If to the Escrow Agent
SunTrust Bank, Atlanta
Corporate Trust Department
3495 Piedmont Road
Building 10 - Suite 810
Atlanta, GA 30305
Facsimile: (404) 240-2030
Attention: Ms. Sandra Thompson
Or to such other representative or to such other address as may be
designated in a notice given pursuant hereto.
THIS SPACE INTENTIONALLY LEFT BLANK
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In Witness Whereof, the undersigned hereby set forth their hands as of the date
and year first above written.
Shareholders' Representatives
- ------------------------------
W. S. Heath, Shareholders' Representative
- ------------------------------
A. T. Heath, III, Shareholders' Representative
- ------------------------------
R. Bland Roper, Shareholders' Representative
Coca-Cola Bottling Co. Consolidated
By: _____________________________
--------------------, -----------------
Sumter Merger Corporation, Inc.
By: ____________________________
-------------------, ----------------
SunTrust Bank, Atlanta, as Escrow Agent
By: ____________________________
-------------------, ----------------
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Exhibit A
Deposits Into The Indemnification Escrow Fund
Cash Deposited: $______________________ [wire transfer instructions]
Shares Deposited ____________ Certificate No. _______
Aggregate Principal Amount of Installment Notes Deposited: $________________
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Exhibit B
Form of Receipt
___________ __, 1999
To: Robert D. Pettus, Jr.
Coca-Cola Bottling Co. Consolidated
1900 Rexford Road
Charlotte, NC 28211
W. S. Heath, Shareholders' Representative
===============================
A. T. Heath, Shareholders' Representative
===============================
R. Bland Roper, Shareholders' Representative
112 1/2 West Main Street
Laurens, SC 29360
I __________________________________ as the Escrow Agent pursuant to the terms
and conditions of that certain Indemnification Escrow Agreement dated as of
_______ __, 1999 by and among Coca-Cola Bottling Co. Consolidated, a Delaware
corporation ("Consolidated"); Sumter Merger Corporation, Inc., a Delaware
corporation and a wholly-owned subsidiary of Consolidated ("Newco"), Carolina
Coca-Cola Bottling Company, Inc., a South Carolina corporation
("Coke-Carolina"), W. S. Heath, A. T. Heath, III and R. Bland Roper as the
"Shareholders' Representatives", and the Escrow Agent, hereby acknowledge
receipt of the following to be held and administered pursuant to the terms and
conditions of the Indemnification Escrow Agreement:
1. ________________ dollars ($_____________) in cash
2. Certificate No. ________ representing ______________ (_____) shares of
Consolidated Common Stock issued to the Shareholders' Representatives in
their representative capacities
3. Installment Notes in the face amount of _____________ dollars ($_______)
issued to the Shareholders' Representatives in their representative
capacities.
Signature
14
<PAGE>
cc: Thomas B. Hyman Jr.
John F. Henry, Jr., Esq.
15
<PAGE>
Exhibit C
Indemnitee Claim Notice
Date of Claim: ______________
Principal Amount of Claim: $__________________
Accrued Interest As Of : $__________________
Total Claim: $__________________
................................................................................
Cash to be Remitted to Indemnitees: $__________________
Offset Against Notes: $_________________
Shares of Consolidated Common
Stock to be surrendered (@ $59.60/share): __________________
Certification:
I, _______________________, __________________ of Coca-Cola Bottling Co.
Consolidated, and _____________ of Sumter Merger Corporation, Inc. hereby
certify that the foregoing is a duly authorized claim for Indemnification (net
of the Liability Deductible, if applicable) pursuant to the terms of the APM,
that this Indemnittee Claim Notice was set to the Shareholders' Representatives,
and that attached hereto are the signed return receipt cards from the U. S.
Postal Service, verifying tender of delivery to the Shareholders'
Representatives on a date not later than _____________.
Dated this ______ day of __________, ________.
- -----------------------------
name:____________________
title: ___________________
16
<PAGE>
ANNEX E
FORM OF A.T. HEATH, III NON-COMPETITION AND CONSULTING AGREEMENT
<PAGE>
NON-COMPETITION AND CONSULTING AGREEMENT
THIS AGREEMENT made this _____ day of _________, 1999 (the "Effective
Date") by and among Carolina Coca-Cola Bottling Company, Inc. (formerly Sumter
Merger Corporation, Inc.), a Delaware corporation and a wholly-owned subsidiary
of Coca-Cola Bottling Co. Consolidated ("New Coke Carolina"), and A. T. Heath,
III, a South Carolina resident ("Consultant").
W I T N E S S E T H :
WHEREAS, Consultant has, prior to the date hereof, been employed by
Carolina Coca-Cola Bottling Company, Inc., a South Carolina corporation, which
as of this date has been merged into New Coke Carolina; and
WHEREAS, Consultant has resigned his employment as of the effective date
of the merger; and
WHEREAS, due to Consultant's knowledge and experience in the business of
the packaging, distribution and sale of soft drink products (particularly those
products of The Coca-Cola Company), New Coke Carolina desires to retain the
services of Consultant as a consultant and adviser to New Coke Carolina after
the merger; and
WHEREAS, due to Consultant's extensive business contacts in the
geographic region of New Coke Carolina's business and his knowledge of the soft
drink business in general, New Coke Carolina would be injured if Consultant
became employed, rendered services to, or otherwise assisted any other business
in the packaging, distribution and sale of soft drink products in the geographic
region served by New Coke Carolina; and
WHEREAS, New Coke Carolina and Consultant have entered into this
Agreement for their mutual interest and benefit;
NOW THEREFORE, for and in consideration of the premises and the
covenants and agreements hereinafter set forth, the legal sufficiency of which
being hereby acknowledged, the parties hereto, intending to be legally bound
hereby, agree as follows:
1. Duties. During the period beginning on the Effective Date and ending
nine (9) years thereafter (the "Consultation Period"), the Consultant agrees to
provide such advice,
<PAGE>
counsel, assistance and services relating to New Coke Carolina as are set forth
below, but only of such nature and at such times as the Consultant and New Coke
Carolina mutually agree (it being acknowledged by New Coke Carolina that during
the Consultation Period the Consultant expects to have business and personal
activities that may result in his not being available on a regular basis or at
any specific time or for any specific number of hours). The duties required
hereunder shall be performed in the city of Sumter, South Carolina, from the
Consultant's homes or own principal office or by telephone (New Coke Carolina
acknowledging that the primary reason for wanting to obtain the Consultant's
services during the Consultation Period is to have access to the Consultant's
knowledge of New Coke Carolina's business and the industry in which it operates
and not to obtain services normally provided by employees) or such other
locations as the parties may mutually agree upon, and shall be limited to:
a. providing advice and assistance regarding the former
operations of New Coke Carolina and the continuance of such operations;
b. familiarizing officers with marketing methods formerly
employed by New Coke Carolina and its subsidiaries and assisting in on-going
marketing programs as to major customers;
c. advising on and assisting with major customer, supplier and
creditor relations, including, without limitation, telephone calls, letters or
personal visits in the territory in South Carolina in which New Coke Carolina
operates on the Effective Date and environs;
d. involvement in legislative activities by maintaining contacts
with legislators; and
e. such additional duties, including specific projects, as may be
mutually agreed to by Consultant and New Coke Carolina.
2. Reimbursement for Certain Expenses. New Coke Carolina shall pay
Consultant such additional amounts for reasonable expenses incurred by
Consultant while performing tasks required hereunder which Consultant has been
specifically asked to perform by New Coke Carolina. Consultant agrees not to
incur any such expenses without the prior written approval of New Coke Carolina.
Consultant shall be reimbursed by New Coke Carolina upon the presentation of
invoices, receipts or other evidence acceptable to New Coke Carolina in
accordance with its standard policies.
3. Terms and Compensation. The term of this Agreement shall commence on
the Effective Date and expire on the ninth (9th) anniversary of the Effective
Date. For the services to be rendered by Consultant hereunder, and for holding
himself available for consultation and advisory services to New Coke Carolina
and as consideration for the non-competition provisions of numbered paragraph 4
below, New Coke Carolina agrees to pay Consultant the sum of Fifteen Thousand
Dollars ($15,000.00) per month for the first thirty-six (36) months from the
Effective
2
<PAGE>
Date, Ten Thousand Dollars ($10,000.00) per month for the next thirty-six (36)
months, and Five Thousand Dollars ($5,000.00) for the final thirty-six (36)
months (such compensation shall be paid to the Consultant's estate or as he
otherwise directs in the event of his disability or death). Consultant is not
entitled to any other compensation hereunder, and without limiting the
foregoing, is not entitled to participate in any employee benefit plans of New
Coke Carolina.
4. Non-Competition. As a material inducement to New Coke Carolina
entering into this Agreement, Consultant covenants to New Coke Carolina that
during the term of this Agreement, he will adhere to the following covenants of
non-competition: Consultant acknowledges that the business of New Coke Carolina
is in a material portion of the State of South Carolina, and that this covenant
of non-competition will apply throughout the State of South Carolina.
Accordingly, Consultant covenants and agrees not to directly or indirectly
compete in any manner with the business conducted by New Coke Carolina or its
subsidiaries, or to directly or indirectly enter into the employment of, or
render any service to, or provide financing for, invest in or aid, abet or
assist any person, firm or corporation which competes with New Coke Carolina in
the business of the packaging, distribution and sale of soft drink products in
the State of South Carolina; provided, however, that the foregoing shall not
prohibit Consultant from making open market purchases and hold the securities of
any publicly-traded company. Consultant will not directly or indirectly solicit
or attempt to solicit the business or patronage of any person, firm or
corporation for purposes of selling the types of products sold by New Coke
Carolina except for the benefit of New Coke Carolina. Consultant expressly
acknowledges that these covenants of non-competition do not impose economic
hardship upon him. If at any time the foregoing provisions shall be deemed to be
invalid or unenforceable or prohibited by the laws of the State of South
Carolina, by reason of being deemed or found to be vague or unreasonable as to
duration, place of performance, or for any other reason, then this paragraph
shall be considered divisible and shall become and be deemed immediately amended
to include only such time and such area as shall be determined to be reasonable
and enforceable by the court or other body having jurisdiction over this
Agreement. Consultant and New Coke Carolina expressly agree that this paragraph
as so amended shall be valid and binding as though any invalid or unenforceable
provision had not been included herein. Consultant further agrees that for the
period described above, he shall not, directly or indirectly, (i) solicit, hire,
or in any manner persuade or attempt to persuade any employee, independent
contractor, consultant or agent of New Coke Carolina to terminate his or her
relationship with New Coke Carolina, or (ii) encourage or cause any customers or
suppliers of New Coke Carolina to cease doing business with New Coke Carolina.
5. Exclusive Remedies. New Coke Carolina and the Consultant agree that,
if Consultant violates any obligation of this Agreement, New Coke Carolina shall
be entitled only to the equitable remedy of injunction, which shall be New Coke
Carolina's exclusive remedy. New Coke Carolina shall have no remedy which in any
way allows money damages or any right to stop Consulting Payments, obtain refund
or setoff of Consulting Payments, or in any way affect the obligation to pay
Consulting Payments.
3
<PAGE>
6. Business Records. Upon termination of this Agreement, Consultant
shall return to New Coke Carolina all copies of all work papers pertaining to
the business of producing, bottling, canning, selling or distributing soft
drinks or noncarbonated beverages (including waters) conducted by New Coke
Carolina and its subsidiaries which have been received by Consultant or prepared
in the performance of Consultant's duties hereunder, including without
limitation, files, documents and customer lists.
7. Waiver. The waiver by either party of a breach of any provision of
this Agreement shall not operate as, nor be construed as, a waiver of any
subsequent or related breach thereof.
8. Independent Contractor. The parties expressly acknowledge that
Consultant is hired as an independent contractor and the parties do not intend
to establish an employer-employee relationship.
9. Entire Agreement. This Agreement represents the entire agreement
between the parties hereto pertaining to the matters herein covered, and any
other prior understandings, agreements or contracts with regard to such matters
are hereby canceled without any further liability whatsoever to either party. No
subsequent change or modification of the terms hereof shall be binding unless in
writing and signed by both of the parties hereto. The actions, courses of
dealing, or customs of the parties shall not operate to amend or modify this
Agreement unless in conformity with the preceding sentence.
10. Severability. If any provision of this Agreement is unenforceable,
the remaining provisions shall, to the extent possible, be carried into effect
taking into account the general purposes and spirit of this Agreement.
11. Benefit. The services of Consultant are being used because of his
special capabilities and qualifications and all of his rights, benefits and
duties hereunder are, therefore, not assignable or transferable in any manner;
provided, however, that the payment of obligations of New Coke Carolina shall
survive the death or incapacity of Consultant.
12. Governing Law. This Agreement shall be governed by and construed
under the laws of the State of South Carolina excluding its conflicts or choice
of law principles.
13. Remedy. In addition to any other remedy given to New Coke Carolina
hereunder or otherwise, the parties hereto declare that it may be difficult or
impossible to measure adequately in money the damages which will accrue to New
Coke Carolina if Consultant shall breach the provisions of Paragraph 4 of this
Agreement. Therefore, if New Coke Carolina, at its election, shall institute any
action or proceeding to enforce the provisions of Paragraph 3 of this Agreement,
Consultant hereby agrees that, with respect to a violation of the provisions of
Paragraph 3 hereof, New Coke Carolina has no adequate remedy at law, and New
Coke Carolina shall be entitled to specific performance of the provisions
contained therein.
4
<PAGE>
IN WITNESS WHEREOF, the undersigned hereby set forth their hands as of
the date first above written.
CAROLINA COCA-COLA BOTTLING
COMPANY, INC., a Delaware corporation
By:___________________________________ ___________________________
Name:_________________________ A. T. Heath III
Title:________________________
* * *
Parent Guaranty
Coca-Cola Bottling Co. Consolidated, a Delaware corporation (the
"Guarantor"), which is the parent of New Coke Carolina, does hereby, as a
primary obligor, absolutely, unconditionally and irrevocably guarantee the
prompt payment and performance of all of the obligations of New Coke Carolina
under and pursuant to the foregoing Agreement without any requirement of notice
or demand of, or failure to perform by, New Coke Carolina; and this guarantee by
the Guarantor shall be an obligation for full and prompt payment and performance
rather than a secondary guarantee of collectibility. No change, amendment or
modification of the foregoing Agreement or waiver of any of its terms shall
diminish, release or discharge the liability of Guarantor under the foregoing
Agreement. The liability of Guarantor under this Guaranty is continuing and
shall only be discharged by the full performance of New Coke Carolina of all of
its obligations under the foregoing Agreement.
COCA-COLA BOTTLING CO. CONSOLIDATED
By:________________________________
Name:___________________________
Title:__________________________
5
<PAGE>
ANNEX F
FORM OF AFFILIATE AGREEMENT
<PAGE>
AFFILIATE AGREEMENT
__________ __, 1999
Coca-Cola Bottling Co. Consolidated
1900 Rexford Road
Charlotte, North Carolina 28211
Ladies and Gentlemen:
This letter is being delivered to you as contemplated by Section 8.3(f)
of that certain Agreement and Plan of Merger dated as of March __, 1999 (the
"Merger Agreement") by and among Coca-Cola Bottling Co. Consolidated
("Consolidated"), Sumter Merger Corporation, Inc. and Carolina Coca-Cola
Bottling Company, Inc. ("Coke-Carolina"). I am a shareholder of Coke-Carolina
and will acquire, among other things, shares of common stock, $1.00 par value
("Consolidated Common Stock"), and 5.75% Installment Notes due 2006 (together
with the Consolidated Common Stock, the "Consolidated Securities") of
Consolidated in the merger contemplated by the Merger Agreement (the "Merger").
I understand that as of the date of this letter I may be deemed to be an
"affiliate" of Coke-Carolina as that term is defined for purposes of Paragraphs
(c) and (d) of Rule 145 promulgated by the Securities and Exchange Commission
(the "Commission") under the Securities Act of 1933, as amended (the "Act").
This Affiliate Agreement evidences certain rights and obligations between me and
Consolidated relative to the Consolidated Securities to be received by me in the
Merger.
In consideration of the Merger and of the mutual covenants contained
herein, the undersigned and Consolidated hereby agree as follows:
1. I have been advised that Consolidated Securities issued to me
pursuant to the Merger have been registered with the Commission under the Act on
a Registration Statement on Form S-4. However, I have been advised that, because
at the time the Merger is submitted to a vote of the shareholders of
Coke-Carolina, (a) I may be deemed to be an affiliate of Coke-Carolina and (b)
the distribution by me of the Consolidated Securities has not been registered
under the Act. I agree that I may not sell, transfer or otherwise dispose of the
Consolidated Securities issued to me in the Merger unless:
(i) such sale, transfer or other disposition is made in
conformity with the limitations of Rule 145 promulgated by
Commission under the Act;
<PAGE>
(ii) such sale, transfer or other disposition has been
registered under the Act; or
(iii) in the opinion of counsel reasonably acceptable to
Consolidated, such sale, transfer or other disposition is
otherwise exempt from registration under the Act.
2. I also understand that there will be placed on the certificates for
the Consolidated Securities, or any substitution therefor, a legend stating in
substance:
[SHARES REPRESENTED BY THIS CERTIFICATE WERE/THIS
INSTALLMENT NOTE WAS] ISSUED IN A TRANSACTION TO WHICH
RULE 145 PROMULGATED UNDER THE SECURITIES ACT OF 1933
APPLIES. THIS SECURITY MAY ONLY BE TRANSFERRED IN
ACCORDANCE WITH THE TERMS OF AN AGREEMENT DATED
__________________, 1999 BETWEEN THE REGISTERED HOLDER
HEREOF AND COCA-COLA BOTTLING CO. CONSOLIDATED, A COPY OF
WHICH AGREEMENT IS ON FILE AT THE PRINCIPAL OFFICES OF
COCA-COLA BOTTLING CO. CONSOLIDATED.
3. I also understand that unless the sale or transfer is made in
conformity with the provisions of Rule 145, or pursuant to a registration
statement under the Act, Consolidated reserves the right to put the following
legend on any certificate issued to my transferee:
THE SECURITIES REPRESENTED HEREBY WERE ACQUIRED FROM A
PERSON WHO RECEIVED SUCH SECURITIES IN A TRANSACTION TO
WHICH RULE 145 PROMULGATED UNDER THE SECURITIES ACT OF
1933 APPLIES. THE SECURITIES MAY ONLY BE TRANSFERRED IN
ACCORDANCE WITH AN EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT OF 1933.
4. I have carefully read this letter and the Merger Agreement and
discussed the requirements of such documents and other applicable limitations
upon my ability to sell, transfer or otherwise dispose of the Consolidated
Securities, to the extent I felt necessary, with my counsel or counsel for
Coke-Carolina.
5. Execution of this letter should not be considered an admission on my
part that I am an "affiliate" of Coke-Carolina as described in the first
paragraph of this letter, nor as a waiver of any rights I may have to object to
any claim that I am such an affiliate on or after the date of this letter.
<PAGE>
6. By Consolidated's acceptance of this letter, Consolidated hereby
agrees with me that upon my request, Consolidated will cause any legend set
forth in paragraphs 2 and 3 above to be removed by delivery of substitute
certificates without any such legend if (i) one (1) year shall have elapsed from
the date that I became the beneficial owner of the Consolidated Securities and
the provisions of Rule 145(d)(2) are then applicable to me, (ii) two (2) years
shall have elapsed from the date that I became the beneficial owner of the
Consolidated Securities and the provisions of Rule 145(d)(3) are then applicable
to me, or (iii) I shall have delivered to Consolidated a copy of a letter from
the staff of the Commission or an opinion of counsel, in form and substance
reasonably satisfactory to Consolidated, to the effect that any such legend is
not required for purposes of the Act.
Very truly yours,
---------------------------------
Name:
Agreed:
COCA-COLA BOTTLING CO. CONSOLIDATED
By:___________________________________
Name:
Title:
<PAGE>
ANNEX G
PROVISIONS OF THE SOUTH CAROLINA BUSINESS CORPORATION ACT
RELATING TO DISSENTERS' RIGHTS
<PAGE>
CHAPTER 13
ARTICLE 1. RIGHT TO DISSENT AND OBTAIN PAYMENT FOR SHARES
SS. 33-13-101. DEFINITIONS.
In this chapter:
(1) "Corporation" means the issuer of the shares held by a dissenter
before the corporate action, or the surviving or acquiring corporation by merger
or share exchange of that issuer.
(2) "Dissenter" means a shareholder who is entitled to dissent from
corporate action under Section 33-13-102 and who exercises that right when and
in the manner required by Sections 33-13-200 through 33-13-280.
(3) "Fair value", with respect to a dissenter's shares, means the value
of the shares immediately before the effectuation of the corporate action to
which the dissenter objects, excluding any appreciation or depreciation in
anticipation of the corporate action to which the dissenter objects, excluding
any appreciation or depreciation in anticipation of the corporate action unless
exclusion would be inequitable. The value of the shares is to be determined by
techniques that are accepted generally in the financial community.
(4) "Interest" means interest from the effective date of the corporate
action until the date of payment, at the average rate currently paid by the
corporation on its principal bank loans or, if none, at a rate that is fair and
equitable under all the circumstances.
(5) "Record shareholder" means the person in whose name shares are
registered in the records of a corporation or the beneficial owner of shares to
the extent of the rights granted by a nominee certificate on file with a
corporation.
(6) "Beneficial shareholder" means the person who is a beneficial owner
of shares held by a nominee as the record shareholder.
(7) "Shareholder" means the record shareholder or the beneficial
shareholder.
SS. 33-13-102. RIGHT TO DISSENT.
(A) A shareholder is entitled to dissent from, and obtain payment of the
fair value of, his shares in the event of any of the following corporate
actions:
(1) consummation of a plan of merger to which the corporation is a party
(i) if shareholder approval is required for the merger by Section 33-11-103 or
the articles of incorporation and the shareholder is entitled to vote on the
merger or (ii) if the corporation is a subsidiary that is merged with its parent
under Section 33-11-104 or 33-11-108 or if the corporation is a parent that is
merged with its subsidiary under Section 33-11-108;
(2) consummation of a plan of share exchange to which the corporation is
a party as the corporation whose shares are to be acquired, if the shareholder
is entitled to vote on the plan;
(3) consummation of a sale or exchange of all, or substantially all, of
the property of the corporation other than in the usual and regular course of
business, if the shareholder is entitled to vote on
G-2
<PAGE>
the sale or exchange, including a sale in dissolution, but not including a sale
pursuant to court order or a sale for cash pursuant to a plan by which all or
substantially all of the net proceeds of the sale must be distributed to the
shareholders within one year after the date of sale;
(4) an amendment of the articles of incorporation that materially and
adversely affects rights in respect of a dissenter's shares because it:
(i) alters or abolishes a preferential right of the shares;
(ii) creates, alters, or abolishes a right in respect of
redemption, including a provision respecting a sinking fund for the redemption
or repurchase, of the shares;
(iii) alters or abolishes a preemptive right of the holder of the
shares to acquire shares or other securities;
(iv) excludes or limits the right of the shares to vote on any
matter, or to cumulate votes, other than a limitation by dilution through
issuance of shares or other securities with similar voting rights; or
(v) reduces the number of shares owned by the shareholder to a
fraction of a share if the fractional share so created is to be acquired for
cash under Section 33-6-104; or
(5) in the case of corporations which are not public corporations, the
approval of a control share acquisition under Article 1 of Chapter 2 of Title
35;
(6) any corporate action to the extent the articles of incorporation,
bylaws, or a resolution of the board of directors provides that voting or
nonvoting shareholders are entitled to dissent and obtain payment for their
shares.
(B) Notwithstanding subsection (A), no dissenters' rights under this
section are available for shares of any class or series of shares which, at the
record date fixed to determine shareholders entitled to receive notice of a vote
at the meeting of shareholders to act upon the agreement of merger or exchange,
were either listed on a national securities exchange or designated as a national
market system security on an interdealer quotation system by the National
Association of Securities Dealers, Inc.
SS. 33-13-103. DISSENT BY NOMINEES AND BENEFICIAL OWNERS.
(a) A record shareholder may assert dissenters' rights as to fewer than
all the shares registered in his name only if he dissents with respect to all
shares beneficially owned by any one person and notifies the corporation in
writing of the name and address of each person on whose behalf he asserts
dissenters' rights. The rights of a partial dissenter under this subsection are
determined as if the shares to which he dissents and his other shares were
registered in the names of different shareholders.
(b) A beneficial shareholder may assert dissenters' rights as to shares
held on his behalf only if he dissents with respect to all shares of which he is
the beneficial shareholder or over which he has power to direct the vote. A
beneficial shareholder asserting dissenters' rights to shares held on his behalf
will notify the corporation in writing of the name and address of the record
shareholder of the shares, if known to him.
G-3
<PAGE>
ARTICLE 2. PROCEDURE FOR EXERCISE OF DISSENTERS' RIGHTS
SS. 33-13-200. NOTICE OF DISSENTERS' RIGHTS.
(a) If proposed corporate action creating dissenters' rights under
Section 33-13-102 is submitted to a vote at a shareholders' meeting, the meeting
notice must state that shareholders are or may be entitled to assert dissenters'
rights under this chapter and be accompanied by a copy of this chapter.
(b) If corporate action creating dissenters' rights under Section
33-13-102 is taken without a vote of shareholders, the corporation shall notify
in writing all shareholders entitled to assert dissenters' rights that the
action was taken and send them the dissenters' notice described in Section
33-13-220.
SS. 33-13-210. NOTICE OF INTENT TO DEMAND PAYMENT.
(a) If proposed corporate action creating dissenters' rights under
Section 33-13-102 is submitted to a vote at a shareholders' meeting, a
shareholder who wishes to assert dissenters' rights (1) must give to the
corporation before the vote is taken written notice of his intent to demand
payment for his shares if the proposed action is effectuated and (2) must not
vote his shares in favor of the proposed action. A vote in favor of the proposed
action cast by the holder of a proxy solicited by the corporation shall not
disqualify a shareholder from demanding payment for his shares under this
chapter.
(b) A shareholder who does not satisfy the requirements of subsection
(a) is not entitled to payment for his shares under this chapter.
SS. 33-13-220. DISSENTERS' NOTICE.
(a) If proposed corporate action creating dissenters' rights under
Section 33-13-102 is authorized at a shareholders' meeting, the corporation
shall deliver a written dissenters' notice to all shareholders who satisfied the
requirements of Section 33-13-210(a).
(b) The dissenters' notice must be delivered no later than ten days
after the corporate action was taken and must:
(1) state where the payment demand must be sent and where
certificates for certificated shares must be deposited;
(2) inform holders of uncertificated shares to what extent
transfer of the shares is to be restricted after the payment demand is received;
(3) supply a form for demanding payment that includes the date of
the first announcement to news media or to shareholders of the terms of the
proposed corporate action and requires that the person asserting dissenters'
rights certify whether or not he or, if he is a nominee asserting dissenters'
rights on behalf of a beneficial shareholder, the beneficial shareholder
acquired beneficial ownership of the shares before that date;
(4) set a date by which the corporation must receive the payment
demand, which may not be fewer than thirty nor more than sixty days after the
date the subsection (a) notice is delivered and set a date by which certificates
for certificated shares must be deposited, which may not be earlier than twenty
days after the demand date; and
(5) be accompanied by a copy of this chapter.
G-4
<PAGE>
SS. 33-13-230. SHAREHOLDERS' PAYMENT DEMAND.
(a) A shareholder sent a dissenters' notice described in Section
33-13-220 must demand payment, certify whether he (or the beneficial shareholder
on whose behalf he is asserting dissenters' rights) acquired beneficial
ownership of the shares before the date set forth in the dissenters' notice
pursuant to Section 33-13-220(b)(3), and deposit his certificates in accordance
with the terms of the notice.
(b) The shareholder who demands payment and deposits his share
certificates under subsection (a) retains all other rights of a shareholder
until these rights are canceled or modified by the taking of the proposed
corporate action.
(c) A shareholder who does not comply substantially with the
requirements that he demand payment and deposit his share certificates where
required, each by the date set in the dissenters' notice, is not entitled to
payment for his shares under this chapter.
SS. 33-13-240. SHARE RESTRICTIONS.
(a) The corporation may restrict the transfer of uncertificated shares
from the date the demand for payment for them is received until the proposed
corporate action is taken or the restrictions are released under Section
33-13-260.
(b) The person for whom dissenters' rights are asserted as to
uncertificated shares retains all other rights of a shareholder until these
rights are canceled or modified by the taking of the proposed corporate action.
SS. 33-13-250. PAYMENT.
(a) Except as provided in Section 33-13-270, as soon as the proposed
corporate action is taken, or upon receipt of a payment demand, the corporation
shall pay each dissenter who substantially complied with Section 33-13-230 the
amount the corporation estimates to be the fair value of his shares, plus
accrued interest.
(b) The payment must be accompanied by:
(1) the corporation's balance sheet as of the end of a fiscal
year ending not more than sixteen months before the date of payment, an income
statement for that year, a statement of changes in shareholders' equity for that
year, and the latest available interim financial statements, if any;
(2) a statement of the corporation's estimate of the fair value
of the shares and an explanation of how the fair value was calculated;
(3) an explanation of how the interest was calculated;
(4) a statement of the dissenter's right to demand additional
payment under Section 33-13-280; and
(5) a copy of this chapter.
G-5
<PAGE>
SS. 33-13-260. FAILURE TO TAKE ACTION.
(a) If the corporation does not take the proposed action within sixty
days after the date set for demanding payment and depositing share certificates,
the corporation, within the same sixty-day period, shall return the deposited
certificates and release the transfer restrictions imposed on uncertificated
shares.
(b) If, after returning deposited certificates and releasing transfer
restrictions, the corporation takes the proposed action, it must send a new
dissenters' notice under Section 33-13-220 and repeat the payment demand
procedure.
SS. 33-13-270. AFTER-ACQUIRED SHARES.
(a) A corporation may elect to withhold payment required by section
33-13-250 from a dissenter as to any shares of which he (or the beneficial owner
on whose behalf he is asserting dissenters' rights) was not the beneficial owner
on the date set forth in the dissenters' notice as the date of the first
announcement to news media or to shareholders of the terms of the proposed
corporate action, unless the beneficial ownership of the shares devolved upon
him by operation of law from a person who was the beneficial owner on the date
of the first announcement.
(b) To the extent the corporation elects to withhold payment under
subsection (a), after taking the proposed corporate action, it shall estimate
the fair value of the shares, plus accrued interest, and shall pay this amount
to each dissenter who agrees to accept it in full satisfaction of his demand.
The corporation shall send with its offer a statement of its estimate of the
fair value of the shares, an explanation of how the fair value and interest were
calculated, and a statement of the dissenter's right to demand additional
payment under Section 33-13-280.
SS. 33-13-280. PROCEDURE IF SHAREHOLDER DISSATISFIED WITH PAYMENT OR OFFER.
(a) A dissenter may notify the corporation in writing of his own
estimate of the fair value of his shares and amount of interest due and demand
payment of his estimate (less any payment under Section 33-13-250) or reject the
corporation's offer under Section 33-13-270 and demand payment of the fair value
of his shares and interest due, if the:
(1) dissenter believes that the amount paid under Section
33-13-250 or offered under Section 33-13-270 is less than the fair value of his
shares or that the interest due is calculated incorrectly;
(2) corporation fails to make payment under Section 33-13-250 or
to offer payment under Section 33-13-270 within sixty days after the date set
for demanding payment; or
(3) corporation, having failed to take the proposed action, does
not return the deposited certificates or release the transfer restrictions
imposed on uncertificated shares within sixty days after the date set for
demanding payment.
(b) A dissenter waives his right to demand additional payment under this
section unless he notifies the corporation of his demand in writing under
subsection (a) within thirty days after the corporation made or offered payment
for his shares.
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ARTICLE 3. JUDICIAL APPRAISAL OF SHARES
SS. 33-13-300. COURT ACTION.
(a) If a demand for additional payment under Section 33-13-280 remains
unsettled, the corporation shall commence a proceeding within sixty days after
receiving the demand for additional payment and petition the court to determine
the fair value of the shares and accrued interest. If the corporation does not
commence the proceeding within the sixty-day period, it shall pay each dissenter
whose demand remains unsettled the amount demanded.
(b) The corporation shall commence the proceeding in the circuit court
of the county where the corporation's principal office (or, if none in this
State, its registered office) is located. If the corporation is a foreign
corporation without a registered office in this State, it shall commence the
proceeding in the county in this State where the principal office (or, if none
in this State, the registered office) of the domestic corporation merged with or
whose shares were acquired by the foreign corporation was located.
(c) The corporation shall make all dissenters (whether or not residents
of this State) whose demands remain unsettled parties to the proceeding as in an
action against their shares and all parties must be served with a copy of the
petition. Nonresidents may be served by registered or certified mail or by
publication, as provided by law.
(d) The jurisdiction of the court in which the proceeding is commenced
under subsection (b) is plenary and exclusive. The court may appoint persons as
appraisers to receive evidence and recommend decisions on the question of fair
value. The appraisers have the powers described in the order appointing them or
in any amendment to it. The dissenters are entitled to the same discovery rights
as parties in other civil proceedings.
(e) Each dissenter made a party to the proceeding is entitled to
judgment for the amount, if any, by which the court finds the fair value of his
shares, plus interest, exceeds the amount paid by the corporation.
SS. 33-13-310. COURT COSTS AND COUNSEL FEES.
(a) The court in an appraisal proceeding commenced under Section
33-13-300 shall determine all costs of the proceeding, including the reasonable
compensation and expenses of appraisers appointed by the court. The court shall
assess the costs against the corporation, except that the court may assess costs
against all or some of the dissenters, in amounts the court finds equitable, to
the extent the court finds the dissenters acted arbitrarily, vexatiously, or not
in good faith in demanding payment under Section 33-13-280.
(b) The court also may assess the fees and expenses of counsel and
experts for the respective parties, in amounts the court finds equitable:
(1) against the corporation and in favor of any or all dissenters
if the court finds the corporation did not comply substantially with the
requirements of Sections 33-13-200 through 33-13-280; or
(2) against either the corporation or a dissenter, in favor of
any other party, if the court finds that the party against whom the fees and
expenses are assessed acted arbitrarily, vexatiously, or not in good faith with
respect to the rights provided by this chapter.
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(c) If the court finds that the services of counsel for any dissenter
were of substantial benefit to other dissenters similarly situated, and that the
fees for those services should not be assessed against the corporation, the
court may award to these counsel reasonable fees to be paid out of the amounts
awarded the dissenters who were benefited.
(d) In a proceeding commenced by dissenters to enforce the liability
under Section 33-13-300(a) of a corporation that has failed to commence an
appraisal proceeding within the sixty-day period, the court shall assess the
costs of the proceeding and the fees and expenses of dissenters' counsel against
the corporation and in favor of the dissenters.
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