<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[X] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
Coca-Cola Enterprises Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE> 2
COCA-COLA ENTERPRISES INC.(LOGO)
<TABLE>
<C> <C>
Summerfield K. Johnston, Jr. PO Box 723040
Vice Chairman and Atlanta, GA 31139
Chief Executive Officer 770 989-3000
</TABLE>
March 10, 1997
Dear Share Owner,
You are cordially invited to attend the 1997 Annual Meeting of Share Owners
of Coca-Cola Enterprises Inc., which will be held in Wilmington, Delaware on
Monday, April 21, 1997, at 10:30 a.m. The enclosed meeting notice and proxy
statement contain details concerning the business to be discussed at the
meeting.
Please sign, date and return your proxy card in the enclosed envelope at
your earliest convenience to assure that your shares will be represented and
voted at the meeting, even if you cannot attend.
/s/ Summerfield K. Johnston, Jr.
Summerfield K. Johnston, Jr.
<PAGE> 3
COCA-COLA ENTERPRISES INC.(LOGO)
NOTICE OF 1997 ANNUAL MEETING OF SHARE OWNERS
<TABLE>
<S> <C>
TIME: 10:30 a.m. (local time), Monday, April 21, 1997
PLACE: Hotel du Pont
11th and Market Streets
Wilmington, Delaware
AGENDA: Consider and act upon the following:
</TABLE>
1. The election of five directors to serve until the
2000 Annual Meeting of Share Owners of Coca-Cola Enterprises
Inc. (the "Company"). Those nominated by the Board are:
<TABLE>
<S> <C>
Howard G. Buffett Jean-Claude Killy
Johnnetta B. Cole Henry A. Schimberg
Claus M. Halle
</TABLE>
2. The Company's 1997 Stock Option Plan;
3. The Company's Long-Term Incentive Plan (effective
January 1, 1997);
4. The Company's Executive Management Incentive Plan
(effective January 1, 1997);
5. An amendment to the Company's certificate of
incorporation to increase the authorized common stock of the
Company and to effect a 3-for-1 split of the common stock of
the Company;
6. The appointment of Ernst & Young LLP as independent
auditors of the Company for the 1997 fiscal year;
7. The creation of an independent nominating committee
pursuant to a share-owner proposal; and
8. The transaction of such other business as may
properly come before the meeting and any adjournments of it.
RECORD DATE: Holders of common stock of the Company at the close of business
on February 19, 1997 are entitled to vote.
More information about the above can be found in the attached proxy
statement. A list of share owners as of the record date is available for
inspection during normal business hours from April 4 through April 18, 1997, at
the offices of Morris, Nichols, Arsht and Tunnell, 1201 North Market Street,
Wilmington, Delaware.
By Order of the Board of Directors
J. GUY BEATTY, JR.
Secretary
Atlanta, Georgia
March 10, 1997
EACH SHARE OWNER IS ENCOURAGED TO EXECUTE AND RETURN THE ENCLOSED PROXY
PROMPTLY. A SHARE OWNER WHO DECIDES TO ATTEND THE MEETING MAY, IF SO DESIRED,
REVOKE THE PROXY AND VOTE THE SHARES IN PERSON.
<PAGE> 4
COCA-COLA ENTERPRISES INC.
2500 WINDY RIDGE PARKWAY
ATLANTA, GEORGIA 30339
March 10, 1997
PROXY STATEMENT
FOR ANNUAL MEETING OF SHARE OWNERS
TO BE HELD APRIL 21, 1997
This proxy statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Coca-Cola Enterprises Inc. (the "Company")
to be voted at the 1997 Annual Meeting of Share Owners of the Company and at any
adjournments thereof. The Annual Meeting will be held at the Hotel du Pont, 11th
and Market Streets, Wilmington, Delaware, on Monday, April 21, 1997, at 10:30
a.m., local time.
The mailing address of the principal executive offices of the Company is
Post Office Box 723040, Atlanta, Georgia 31139. The approximate date on which
this proxy statement and form of proxy are first being sent or given to share
owners is March 10, 1997.
VOTING
Only owners of record of shares of common stock of the Company ("Company
Stock") at the close of business on February 19, 1997, are entitled to notice of
and to vote at the Annual Meeting or any adjournments thereof. Each share owner
of record on the record date is entitled to one vote for each share of Company
Stock so owned. On February 19, 1997, there were 125,804,095 shares of Company
Stock issued and outstanding. Under the Company's bylaws, the holders of a
majority of the issued and outstanding shares of Company Stock, present in
person or represented by proxy at the Annual Meeting, will constitute a quorum
for the transaction of business. Share owners may vote in favor of all nominees
for election as directors, withhold their votes as to all nominees or withhold
their votes as to specific nominees. With respect to all other proposals, share
owners may vote in favor of or against each proposal or may abstain from voting.
Share owners should specify their choices on the enclosed form of proxy card.
Recommendations of the Board of Directors
If no specific instructions are given with respect to the matters to be
acted upon, the shares represented by a properly signed proxy card will be voted
in accordance with the recommendations of the Board of Directors, which are as
follows:
FOR the election of the following five directors nominated by the
Board to serve until the 2000 Annual Meeting of Share Owners:
<TABLE>
<S> <C>
Howard G. Buffett Jean-Claude Killy
Johnnetta B. Cole Henry A. Schimberg
Claus M. Halle
</TABLE>
FOR approval of the Company's 1997 Stock Option Plan;
FOR approval of the Company's Long-Term Incentive Plan (effective
January 1, 1997);
FOR approval of the Company's Executive Management Incentive Plan
(effective January 1, 1997);
FOR approval of an amendment to the Company's certificate of
incorporation to increase the authorized common stock of the Company and to
effect a 3-for-1 stock split;
<PAGE> 5
FOR ratification of Ernst & Young LLP's appointment as independent
auditors of the Company for the 1997 fiscal year;
AGAINST a share-owner proposal to create an independent nominating
committee.
If any other matters properly come before the Annual Meeting, the persons
named as proxies will vote upon such matters according to their judgment as to
what is in the best interest of the Company.
The five nominees for directors receiving the highest vote totals will be
elected as directors of the Company. Therefore, abstentions and broker nonvotes*
will have no effect on the vote for the election of directors.
With respect to all other proposals, the affirmative vote of the holders of
a majority of the Company Stock present, or represented and entitled to vote, at
the Annual Meeting, will be required to approve such proposals. Abstentions will
be counted as present and entitled to vote, and will have the effect of "No"
votes. Broker nonvotes will not be included in vote totals and will have no
effect on the outcome of each vote.
Proxies and votes will be tabulated by First Chicago Trust Company of New
York, the transfer agent for the shares of Company Stock. Because certain
holders of more than a majority of Company Stock (see "Principal Share Owners")
have advised the Company of their intention to vote all such shares in
accordance with the recommendations of the Board of Directors, the presence of a
quorum and approval of all proposals except the share-owner proposal are
reasonably assured.
All proxies delivered pursuant to this solicitation are revocable at any
time prior to voting at the option of the persons executing them either by
giving written notice to the Secretary of the Company, by delivering a proxy
bearing a later date, or by voting in person at the Annual Meeting. All properly
executed proxies delivered and not revoked will be voted at the Annual Meeting
in accordance with the directions given.
All expenses incurred in connection with the solicitation of proxies will
be borne by the Company. Such costs include charges by brokers, banks,
fiduciaries and custodians for forwarding proxy materials to beneficial owners
of Company Stock held in their names. Solicitation may be undertaken by mail,
telephone and personal contact by directors, officers and employees of the
Company without additional compensation.
- ---------------
*"Broker nonvotes" are limited proxies submitted by brokers who do not have the
required voting authority from the beneficial owners.
2
<PAGE> 6
PRINCIPAL SHARE OWNERS
Set forth in the table below is information as of February 19, 1997 (except
as otherwise noted) with respect to persons known to the Company to be the
beneficial owners of more than five percent of the Company Stock:
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENT
NAME AND ADDRESS BENEFICIALLY OWNED OF CLASS
- ---------------- ------------------ --------
<S> <C> <C>
The Coca-Cola Company.................................. 56,318,906(1) 44.8
One Coca-Cola Plaza
Atlanta, Georgia 30313
Summerfield K. Johnston, Jr............................ 11,198,065(2) 8.8
2500 Windy Ridge Parkway
Atlanta, Georgia 30339
</TABLE>
- ---------------
(1) The Coca-Cola Company has advised the Company that it intends to vote its
shares of Company Stock in accordance with the recommendations of the Board
of Directors.
(2) Summerfield K. Johnston, Jr. is Vice Chairman of the Board of Directors and
Chief Executive Officer of the Company. See "Election of Directors (Proposal
No. 1) -- Information Concerning Directors" and "-- Security Ownership of
Directors and Officers" below. Mr. Johnston has advised the Company that he
intends to vote his shares of Company Stock in accordance with the
recommendations of the Board of Directors.
ELECTION OF DIRECTORS
(PROPOSAL NO. 1)
NOMINEES
Pursuant to the bylaws of the Company, the Board of Directors has set the
number of directors of the Company at fourteen. The directors are divided into
three classes, with approximately one-third of the members of the Board of
Directors to be elected by the share owners annually to serve three-year terms.
The terms of Howard G. Buffett, Johnnetta B. Cole, T. Marshall Hahn, Jr., Claus
M. Halle and Henry A. Schimberg expire at the Annual Meeting. Under the
Company's bylaws, Mr. Hahn cannot be nominated to another term because he is age
70.
The Board of Directors has named Howard G. Buffett, Johnnetta B. Cole,
Claus M. Halle, Jean-Claude Killy and Henry A. Schimberg to stand for election
as directors at the Annual Meeting. Each of the nominees has consented to serve
as a director if elected at the Annual Meeting. Should any one or more of these
nominees become unable to serve for any reason, or choose not to serve (which is
not anticipated), the Board of Directors may designate a substitute nominee or
nominees (in which event the persons named in the enclosed proxy card will vote
all valid proxy cards for the election of such substitute nominee or nominees),
allow the vacancy or vacancies to remain open until a suitable candidate or
candidates are located, or by resolution provide for a lesser number of
directors.
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS A VOTE FOR THE ELECTION OF
HOWARD G. BUFFETT, JOHNNETTA B. COLE, CLAUS M. HALLE, JEAN-CLAUDE KILLY AND
HENRY A. SCHIMBERG AS DIRECTORS TO HOLD OFFICE UNTIL THE 2000 ANNUAL MEETING OF
SHARE OWNERS, AND UNTIL THEIR RESPECTIVE SUCCESSORS ARE ELECTED AND QUALIFIED.
3
<PAGE> 7
INFORMATION CONCERNING DIRECTORS
Set forth below with respect to the directors and nominees for director of
the Company is information regarding their principal occupations (which have
continued for at least the past five years unless otherwise noted) and certain
other information.
- --------------------------------------------------------------------------------
NOMINEES FOR ELECTION TO TERM EXPIRING 2000
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
- ---------------------- HOWARD G. BUFFETT, 42, has been Chairman of the Board, The
- ---------------------- GSI Group (manufacturer of agricultural equipment) since
- ---------------------- June 1996 and President of Buffett Farms since 1989. Mr.
- ---------------------- Buffett served as Chairman of the Executive Committee and
(PHOTO) President, International Operations of The GSI Group from
- ---------------------- September 1995 to June 1996. Mr. Buffett was Corporate Vice
- ---------------------- President and Assistant to the Chairman and a director of
- ---------------------- Archer Daniels Midland Company (agricultural processor and
- ---------------------- merchandiser) from 1992 to 1995. He is a director of
Berkshire Hathaway Inc. (diversified holding company) and
Lindsay Manufacturing (manufacturer of agricultural
irrigation equipment). He has been a director of the Company
since 1993.
- ---------------------- JOHNNETTA B. COLE, 60, has been President of Spelman
- ---------------------- College, Atlanta, Georgia since 1987. Dr. Cole is also a
- ---------------------- director of NationsBank South, N.A., Merck & Co., Inc.
- ---------------------- (manufacturer of health maintenance and restoration prod-
(PHOTO) ucts), Management Training Corporation (management services
- ---------------------- for Job Corp centers and correctional institutions) and The
- ---------------------- Home Depot, Inc. (home improvement retailer). She has been a
- ---------------------- director of the Company since 1990.
- ----------------------
- ---------------------- CLAUS M. HALLE, 69, is an international consultant to The
- ---------------------- Coca-Cola Company. He is also a director of The Coca-Cola
- ---------------------- Bottling Company of New York, Inc. He has been a director of
- ---------------------- the Company since 1988.
(PHOTO)
- ----------------------
- ----------------------
- ---------------------- JEAN-CLAUDE KILLY, 53, has been Chairman and Chief Executive
- ---------------------- Officer of The Company of the Tour de France (organizer and
- ---------------------- promoter of sporting events) since 1994 and Chairman of the
- ---------------------- Board of Coca-Cola Beverages, S.A. (French Coca-Cola
(PHOTO) bottler) since 1993. From 1992 until 1996, he served as
- ---------------------- Chairman of the Board of Amaury Sport Organization
- ---------------------- (organizer of recreational, cultural and sporting
- ---------------------- activities). Mr. Killy is a director of Amaury Sport
- ---------------------- Organization and The Philippe Amaury Editions, S.A.
(publisher) and serves as a member of the International
Olympic Committee.
</TABLE>
4
<PAGE> 8
- ---------------------- HENRY A. SCHIMBERG, 64, has served as President, Chief
- ---------------------- Operating Officer and a director of the Company since
- ---------------------- 1991.
(PHOTO)
- ----------------------
- ----------------------
- --------------------------------------------------------------------------------
INCUMBENT DIRECTORS -- TERMS EXPIRING 1998
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
- ---------------------- L. PHILLIP HUMANN, 51, is President and a director of
- ---------------------- SunTrust Banks, Inc. He is also a director of Equifax
- ---------------------- Inc. (information services company) and Haverty
(PHOTO) Furniture Companies, Inc. (furniture retailer). He has
- ---------------------- been a director of the Company since 1992.
- ----------------------
- ----------------------
- ---------------------- E. NEVILLE ISDELL, 53, has been a Senior Vice
- ---------------------- President of The Coca-Cola Company since 1989 and
- ---------------------- President of the Greater Europe Group of The
- ---------------------- Coca-Cola Company since 1995. From 1993 to 1995, Mr.
(PHOTO) Isdell served as President of the Northeast
- ---------------------- Europe/Middle East Group of The Coca-Cola Company and
- ---------------------- from 1989 to 1993 he was President of the Northeast
- ---------------------- Europe/Africa Group of The Coca-Cola Company. He is
- ---------------------- also adirector of Coca-Cola Amatil Limited
(Australian-based soft the Company since 1993.
- ---------------------- SCOTT L. PROBASCO, JR., 68, is a director and Chairman
- ---------------------- of the Executive Committee of the Board of SunTrust
- ---------------------- Bank, Chattanooga, N.A. He is also a director of
(PHOTO) Chattem, Inc. (branded consumer products and specialty
- ---------------------- chemicals), Provident Life and Accident Insurance
- ---------------------- Company of America and SunTrust Banks, Inc. He has
- ---------------------- been a director of the Company since 1991.
- ----------------------
- ---------------------- FRANCIS A. TARKENTON, 57, is a business consultant and
- ---------------------- a public speaker. He is also Chairman and founder of
- ---------------------- the Fran Tarkenton Small Business NETwork. He served
- ---------------------- as Chairman of the Board of Directors and Chief
(PHOTO) Executive Officer of KnowledgeWare, Inc. (computer
- ---------------------- software company) from 1986 to 1994. He is also a
- ---------------------- director of Sterling Software, Inc. (computer software
- ---------------------- company) and Pre-Paid Legal Services. He has been a
- ---------------------- director of the Company since 1986.
</TABLE>
5
<PAGE> 9
- --------------------------------------------------------------------------------
INCUMBENT DIRECTORS -- TERMS EXPIRING 1999
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
- ---------------------- JOHN L. CLENDENIN, 62, has been Chairman of the Board of
- ---------------------- BellSouth Corporation (telecommunications holding company)
- ---------------------- since 1984. He served as President and Chief Executive
- ---------------------- Officer of BellSouth Corporation from 1994 to 1996. He is
(PHOTO) also a director of Equifax Inc., Providian Corporation
- ---------------------- (insurance holding company), RJR Nabisco Holdings Corp.
- ---------------------- (manufacturer of tobacco products and packaged foods), The
- ---------------------- Kroger Co. (retail grocery chain), Wachovia Corp. (bank
- ---------------------- holding company), Springs Industries, Inc. (producer of
finished fabrics, home furnishings and industrial fabrics)
and National Service Industries, Inc. (producer of lighting
equipment, envelopes and chemicals and provider of linen
services). He has been a director of the Company since 1986.
- ---------------------- M. DOUGLAS IVESTER, 49, has served as President and a
- ---------------------- director of The Coca-Cola Company since 1994. He was
- ---------------------- Executive Vice President and Principal Operating
- ---------------------- Officer/North America of The Coca-Cola Company from 1993 to
(PHOTO) 1994. He was Senior Vice President of The Coca-Cola Company
- ---------------------- and President of its North America Business Sector from 1991
- ---------------------- to 1993. He is a director of Georgia-Pacific Corporation
- ---------------------- (manufacturer and distributor of pulp, paper and building
- ---------------------- products). Mr. Ivester has been Chairman of the Board of
Directors of the Company since 1993.
- ---------------------- JOHN E. JACOB, 62, has been Executive Vice President of
- ---------------------- Anheuser-Busch Companies, Inc. (brewer) since 1994 and a
- ---------------------- director of that company since 1990. He served as President
- ---------------------- and Chief Executive Officer of the National Urban League,
(PHOTO) Inc. (community-based social service and advocacy agency)
- ---------------------- from 1982 to 1994. He is a director of LTV Corporation
- ---------------------- (manufacturer of steel and energy products). He has been a
- ---------------------- director of the Company since 1986.
- ----------------------
- ---------------------- SUMMERFIELD K. JOHNSTON JR., 64, has served as Vice Chairman
- ---------------------- of the Board of Directors and Chief Executive Officer of the
- ---------------------- Company since 1991. Mr. Johnston is a director of SW
(PHOTO) Centrifugal, Inc. (bronze foundry), The Coca-Cola Bottling
- ---------------------- Company of New York, Inc. and SunTrust Bank, Chattanooga,
- ---------------------- N.A.
- ----------------------
- ----------------------
</TABLE>
6
<PAGE> 10
- ---------------------- ROBERT A. KELLER, 66, is a consultant to The Coca-Cola
- ---------------------- Company. He is also a director of The Coca-Cola
- ---------------------- Bottling Company of New York, Inc. He has been a
(PHOTO) director of the Company since 1986.
- ----------------------
- ----------------------
- ----------------------
COMMITTEES AND MEETINGS OF THE BOARD OF DIRECTORS
In accordance with the bylaws of the Company, the Board of Directors has
established eight standing committees: an Executive Committee, an Audit
Committee, a Compensation Committee, a Committee on Directors, a Public Issues
Review Committee, a Retirement Plan Review Committee, a Capital Projects Review
Committee and an Affiliated Transaction Committee.
The Executive Committee, during the intervals between meetings of the Board
of Directors, may exercise the powers of the Board of Directors except with
respect to a limited number of matters, which include amending the certificate
of incorporation or the bylaws of the Company and recommending to the share
owners of the Company a merger of the Company, the sale of all or substantially
all of the assets of the Company or the dissolution of the Company. Members are
Messrs. Johnston (Chairman), Clendenin, Hahn, Isdell, Ivester and Probasco. The
Executive Committee did not meet in 1996, but took formal action by written
consent.
The Audit Committee recommends to the Board of Directors the engagement of
the independent auditors of the Company and reviews with the independent
auditors the scope and results of the audits, reviews the adequacy and
effectiveness of the Company's internal controls, reviews the quality and
integrity of the Company's annual and interim external financial reports,
reviews the professional services furnished by the independent auditors to the
Company and handles any other matters the Board of Directors deems appropriate.
Members are Messrs. Humann (Chairman), Hahn, Tarkenton and Dr. Cole. The Audit
Committee met four times in 1996.
The Compensation Committee reviews and approves all salary arrangements,
including annual and long-term incentive awards and other remuneration, for
officers of the Company. It also is responsible for administration of the
Company's stock option and restricted stock plans, incentive plans, and certain
other compensation plans. Members are Messrs. Hahn (Chairman), Halle, Keller and
Tarkenton. The Compensation Committee met four times in 1996.
The Committee on Directors recommends to the Board of Directors candidates
for election to the Board of Directors and reviews matters relating to potential
director conflicts of interest and directors' fees and retainers. The Committee
on Directors considers nominees for directorships submitted by share owners. All
nominations by share owners must be made in accordance with the bylaws of the
Company. See "Share-Owner Proposals for 1998 Annual Meeting." Members are
Messrs. Clendenin (Chairman), Halle, Jacob and Johnston. The Committee on
Directors met once in 1996.
The Public Issues Review Committee reviews Company policy and practice
relating to significant public issues of concern to the share owners, the
Company, its employees, the communities served by the Company and the general
public. Members are Messrs. Buffett (Chairman), Clendenin, Schimberg, Probasco
and Dr. Cole. The Public Issues Review Committee met once in 1996.
The Retirement Plan Review Committee reviews the administration of all
employee retirement plans for the Company and the financial condition of all
trusts and other funds established pursuant to such plans. Members are Messrs.
Jacob (Chairman), Buffett, Humann, and Isdell. The Retirement Plan Committee met
once in 1996.
7
<PAGE> 11
The Capital Projects Review Committee reviews and approves all proposed
capital projects for property, plant and equipment of the Company where the
amount involved for a specific project is $1 million or more. Capital projects
of $10 million or more require approval of the full Board of Directors. Members
are Messrs. Johnston (Chairman), Isdell, Ivester and Schimberg. The Capital
Projects Review Committee did not meet in 1996, but took formal action by
written consent.
The Affiliated Transaction Committee, reviews, considers and negotiates any
proposed merger or consolidation or purchase of an equity interest or assets,
other than in the ordinary course of business, from any entity in which The
Coca-Cola Company has a 20 percent or greater equity or other ownership
interest, and which transaction has an aggregate value exceeding $10 million.
The Affiliated Transaction Committee considers whether any proposed transaction,
as described above, should be approved by a vote of the share owners of the
Company which is greater than or in addition to any vote required by law.
Members are Messrs. Clendenin (Chairman), Jacob and Tarkenton. The Affiliated
Transaction Committee met eight times in 1996.
In 1996, the Board of Directors held six meetings. Each director attended
at least 75 percent of the total of all meetings of the Board and each committee
on which such director served, except for Mr. Buffett.
COMPENSATION OF DIRECTORS
Directors are compensated with annual retainers and attendance fees.
However, as outlined below, compensation is not paid in some cases where the
director is also an employee of the Company or The Coca-Cola Company.
Service on the Board of Directors. Each nonemployee director receives an
annual retainer of $30,000 and a fee of $1,000 for each meeting of the Board of
Directors attended.
Service on Committees of the Board. Each director who is neither an
employee of the Company nor of The Coca-Cola Company receives a fee of $1,000
for each meeting of a committee of the Board attended, and an annual fee of
$3,000 if he or she chairs a committee of the Board.
During 1996, the directors received $513,000 in retainers and fees. Each
director is entitled to reimbursement for reasonable expenses incurred in
attending a meeting of the Board or a committee. One-third of each director's
retainer and fees is automatically held in a deferred compensation plan account,
which is valued as if the amount had been invested in Company Stock. Directors
can elect to have any of the balance of their retainers and fees placed in this
account, or in another deferred compensation account that is credited with
interest at the prime lending rate of SunTrust Bank, Atlanta, N.A., adjusted
annually, based upon a weighted average prime lending rate.
Following the Company's 1986 public offering, each nonemployee director,
and each director who was not an employee of The Coca-Cola Company, received an
option to purchase 1,500 shares of Company Stock at $16.50 per share, the
initial public offering price. Similar options were awarded to
subsequently-elected directors who were not employees of the Company or The
Coca-Cola Company. In 1997, each nonemployee director was granted an option to
purchase 2,500 shares of Company Stock at $47.6875 per share, the average market
price on the date of grant, January 2, 1997. These options become exercisable
only upon the market price of the Company Stock reaching designated levels, with
the first such level being a 15% increase over the grant date price, the three
succeeding levels each being a 15% increase over the preceding level, and the
fifth level being twice the grant date price, or $95.375. Upon attaining each
level, options for 500 shares become exercisable. The average daily market price
(which is itself the average of that day's high and low price) over twenty
consecutive trading days must be at or above the designated level before the
level is deemed to have been reached. The directors lose the right to exercise
any options which have not become exercisable within five years from the date of
grant. As with all other option plans of the Company, appropriate adjustments
will be made to the terms of the options to reflect the stock split, if approved
by the share owners.
8
<PAGE> 12
There is a retirement plan for directors, available to directors who are
neither employees or retirees of the Company, The Coca-Cola Company, or their
respective subsidiaries. It pays one-twelfth of the current annual retainer each
month for as many months as the retired director served on the Board. If the
retired director dies before the term of the payments is over, the payments go
to the surviving spouse. To be eligible, the retired director had to have served
at least five years on the Board and had to be at least age 55 at retirement.
SECURITY OWNERSHIP OF DIRECTORS AND OFFICERS
The number of shares of Company Stock and of the common stock of The
Coca-Cola Company ("Coca-Cola Stock") owned beneficially by each director, each
nominee for director, and each other "named executive officer" (see "Executive
Compensation -- Summary of Cash and Certain Other Compensation" below) and by
all directors and named executive officers as a group, as of February 19, 1997,
is set forth in the table below. Unless otherwise indicated, all persons shown
in the table have sole voting and investment power with regard to the shares
shown.
<TABLE>
<CAPTION>
NUMBER OF SHARES BENEFICIALLY OWNED
-----------------------------------------------------
THE COCA-COLA COMPANY
COMPANY STOCK COMMON STOCK
------------------------- -------------------------
NUMBER OF PERCENTAGE NUMBER OF PERCENTAGE
NAME SHARES OWNED OF CLASS SHARES OWNED OF CLASS
---- ------------ ---------- ------------ ----------
<S> <C> <C> <C> <C>
Howard G. Buffett(1)(2)..................... 5,520 * 30,086 *
John L. Clendenin(2)........................ 2,500 * 0 *
Johnnetta B. Cole(3)........................ 2,575 * 500 *
T. Marshall Hahn, Jr.(2)(4)................. 7,000 * 35,826,771 1.5
Claus M. Halle(2)(5)........................ 10,500 * 1,658,300 *
L. Phillip Humann(3)(6)..................... 4,514 * 40 *
E. Neville Isdell(2)(7)..................... 2,500 * 982,828 *
M. Douglas Ivester(2)(8).................... 12,960 * 4,838,594 *
John E. Jacob(2)............................ 500 * 0 *
Summerfield K. Johnston, Jr.(9)............. 11,198,065 8.8 90,400 *
Robert A. Keller(2)(10)..................... 4,577 * 541,633 *
Jean-Claude Killy........................... 2,000 * 5,000 *
Scott L. Probasco, Jr.(2)(11)............... 529,491 * 30,000 *
Henry A. Schimberg(12)...................... 2,086,480 1.7 43,879 *
Francis A. Tarkenton(2)(13)................. 15,247 * 164,000 *
John R. Alm(14)............................. 717,119 * 0 *
Norman P. Findley III(15)................... 220,667 * 51,474 *
G. David Van Houten, Jr.(16)................ 216,149 * 2,743 *
All directors and executive officers as a
group (27 persons), including those
directors and nominees named above(17).... 17,011,864 13.2 44,293,316 1.8
</TABLE>
- ---------------
<TABLE>
<S> <C>
* Less than one percent
(1) Includes 20 shares of Company Stock held by his minor
children, 25,196 shares of Coca-Cola Stock owned jointly
with his wife and 90 shares of Coca-Cola Stock held by his
minor children.
(2) Beneficial ownership as reported in the table includes, with
respect to Messrs. Buffett, Clendenin, Hahn, Halle, Isdell,
Ivester, Jacob, Keller, Probasco and Tarkenton, 500 shares
of Company Stock which may be acquired by each such director
upon the exercise of outstanding stock options.
(3) Beneficial ownership as reported in the table includes, with
respect to Mr. Humann and Dr. Cole, 2,000 shares of Company
Stock which may be acquired by each such director upon the
exercise of outstanding stock options.
</TABLE>
9
<PAGE> 13
<TABLE>
<S> <C>
(4) Includes 35,826,771 shares of Coca-Cola Stock held by Emory
University, Atlanta, Georgia, as of December 31, 1996. Mr.
Hahn serves as Chairman of Emory University's Investment
Committee.
(5) Includes 10,000 shares of Company Stock held in a trust of
which he is co-trustee and beneficiary, 36,880 shares of
Coca-Cola Stock owned by his wife and of which he has
disclaimed beneficial ownership, 100,000 shares of Coca-Cola
Stock owned by a foundation of which he is a co-trustee, and
58,300 shares of Coca-Cola Stock held in a charitable trust
of which he is a donor.
(6) Includes 14 shares of Company Stock held in the Company's
dividend reinvestment plan and 40 shares of Coca-Cola Stock
held in trust for his son.
(7) Includes 1,200 shares of Coca-Cola Stock owned by his
daughter, 305,000 shares of Coca-Cola Stock which are
subject to transfer restrictions, options to acquire 644,999
shares of Coca-Cola Stock which are exercisable or will be
exercisable within sixty days from the date of this table,
and 3,433 shares of Coca-Cola Stock held in trust through
The Coca-Cola Company Thrift Plan as of December 31, 1996.
(8) Includes 796 shares of Company Stock owned by his wife and
85 shares of Company Stock jointly owned by his
mother-in-law and his wife, all of which he has disclaimed
beneficial ownership; and 210 shares of Company Stock
jointly owned with his parents, 1,550,000 shares of
Coca-Cola Stock which are subject to transfer restrictions,
options to acquire 2,666,024 shares of Coca-Cola Stock which
are exercisable or will be exercisable within sixty days
from the date of this table, and 101,930 shares of Coca-Cola
Stock held in trust through The Coca-Cola Company Thrift
Plan as of December 31, 1996.
(9) Includes 1,850 shares of Company stock owned by his wife,
420,000 shares of Company Stock owned by his daughter,
11,516 shares of Company Stock held in two custodial
accounts for his daughter, 108,538 shares of Company Stock
held in trust for his daughter, 561,847 shares of Company
Stock held in a trust for his son of which he is a
co-trustee, and 1,364,656 shares of Company Stock held in a
trust of which he is a co-trustee. Also, includes options to
acquire 818,366 shares of Company Stock which are
exercisable or will be exercisable within sixty days from
the date of this table, 3,833 shares of Company Stock held
in trust through the Company's Matched Employee Savings and
Investment Plan ("MESIP") as of December 31, 1996, and
23,441 shares of Company Stock held pursuant to the
Company's Supplemental Matched Employee Savings and
Investment Plan ("SuppMESIP") as of December 31, 1996.
Includes 88,000 shares of Coca-Cola Stock held by two trusts
of which he is a co-trustee, 960 shares of Coca-Cola Stock
held as custodian for his daughter and 1,440 shares of
Coca-Cola Stock held in a trust for his son of which he is a
co-trustee.
(10) Includes 103 shares of Company Stock owned by his wife,
11,366 shares of Coca-Cola Stock owned by his wife and
88,373 shares of Coca-Cola Stock held in trusts of which his
wife is a trustee, all of which he has disclaimed beneficial
ownership, and 5,412 shares held in a family foundation.
(11) Includes 2,500 shares of Company Stock owned by his wife of
which he has disclaimed beneficial ownership.
(12) Includes 1,550 shares of Company Stock owned by his wife,
388,349 shares of Company Stock held pursuant to his
Deferred Compensation Agreement (See "Executive
Compensation -- Employment Contracts and Termination of
Employment Arrangements"), options to acquire 612,900 shares
of Company Stock which are exercisable or will be
exercisable within sixty days from the date of this table,
and 425,000 restricted shares of Company Stock which are
subject to forfeiture. Includes 1,552 shares of Company
Stock and 39,706 shares of Coca-Cola Stock held in trust
through the MESIP and 14,429 shares of Company Stock and
4,173 shares of Coca-Cola Stock held pursuant to the
SuppMESIP, all as of December 31, 1996.
(13) Includes 247 shares of Company Stock held in the Company's
dividend reinvestment plan.
</TABLE>
10
<PAGE> 14
(14) Includes 3,577 shares of Company Stock owned by his wife, 50
shares of Company Stock owned by his children, 199,346
shares of Company Stock held pursuant to his Deferred
Compensation Agreement (See "Executive
Compensation -- Employment Contracts and Termination of
Employment Arrangements"), options to acquire 171,800 shares
of Company Stock which are exercisable or will be
exercisable within sixty days from the date of this table,
200,000 restricted shares of Company Stock which are subject
to forfeiture, 18,087 shares of Company Stock held in trust
through the MESIP and 12,759 shares of Company Stock held
pursuant to the SuppMESIP, both as of December 31, 1996.
(15) Includes options to acquire 103,866 shares of Company Stock
which are exercisable or will be exercisable within sixty
days from the date of this table, 85,000 restricted shares
of Company Stock which are subject to forfeiture, and 1,766
shares of Company Stock held in trust through the MESIP and
335 shares of Company Stock held pursuant to the SuppMESIP,
both as of December 31, 1996. Includes options to acquire
32,000 shares of Coca-Cola Stock which are exercisable or
will be exercisable within sixty days from the date of this
table, and 19,474 shares of Coca-Cola Stock held in trust
through The Coca-Cola Company Thrift Plan as of December 31,
1996.
(16) Includes options to acquire 125,626 shares of Company Stock
which are exercisable or will be exercisable within sixty
days from the date of this table, 45,000 restricted shares
of Company Stock which are subject to forfeiture, and 2,593
shares of Company Stock held in trust through the MESIP and
12,849 shares of Company Stock and 2,743 shares of Coca-Cola
Stock held pursuant to the SuppMESIP, all as of December 31,
1996.
(17) Includes options to acquire 2,764,635 shares of Company
Stock which are exercisable or will be exercisable within
sixty days from the date of this table, 1,155,000 restricted
shares of Company Stock which are subject to forfeiture and
includes 1,855,000 shares of Coca-Cola Stock which are
subject to transfer restrictions, and 3,343,023 shares of
Coca-Cola Stock subject to options which are exercisable or
will be exercisable within sixty days from the date of this
table.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 and regulations of the
Securities and Exchange Commission thereunder require the Company's executive
officers and directors and certain persons who own more than ten percent of
Company Stock to file initial reports of ownership and changes in ownership with
the Securities and Exchange Commission and the New York Stock Exchange.
Executive officers, directors and certain persons owning more than ten percent
of Company Stock are required by Securities and Exchange Commission regulations
to furnish the Company with copies of all Section 16(a) forms they file. Based
on its review of the copies of such forms received by it and written
representations from each such person who did not file a Form 5 that no Form 5
was due, and except as reported in prior proxy statements, the Company believes
that all filing requirements applicable to such persons have been complied with
in 1996 and prior years, except that the Form 5 timely filed in 1996 for Jarratt
H. Jones, Vice President, Human Resources, inadvertently omitted two
reallocations of fund balances in the Company's 401(k) plan and excess benefits
plan. An appropriate filing was made upon the discovery of this error.
11
<PAGE> 15
EXECUTIVE COMPENSATION
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following table provides certain summary information concerning
compensation paid or accrued by the Company to or on behalf of the Company's
Chief Executive Officer and each of the four other most highly compensated
executive officers (determined as of the end of the last fiscal year) (hereafter
referred to as the named executive officers) for the fiscal years ended December
31, 1996, 1995 and 1994:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
---------------------------------------------------------------------
AWARDS PAYOUTS
------------------------ -------
RESTRICTED SECURITIES
OTHER ANNUAL STOCK UNDERLYING LTIP ALL OTHER
SALARY BONUS COMPENSATION AWARDS OPTIONS/ PAYOUTS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($) ($) ($)(1) ($)(2) SARS(#) ($) ($)(3)
- --------------------------- ---- ------- ------- ------------ ---------- ---------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Summerfield K. Johnston, 1996 985,000 935,750 2,908,199 0 900,000 380,439 104,102
Jr. 1995 945,000 756,000 2,143,522 2,039,400 65,500 185,792 62,203
Vice Chairman and Chief 1994 900,000 675,000 126,353 2,117,000 147,000 0 44,356
Executive Officer
Henry A. Schimberg......... 1996 885,000 840,750 2,951,493 11,687,500(4) 0 336,570 623,317
President and Chief 1995 840,000 672,000 2,147,057 3,072,600 58,200 163,042 512,929
Operating Officer 1994 800,000 600,000 148,346 3,248,500 129,000 0 1,483,097
John R. Alm................ 1996 410,000 332,100 574,604 5,500,000(5) 0 113,322 52,162
Senior Vice President and 1995 392,000 271,460 404,946 428,400 18,600 54,708 26,068
Chief Financial Officer 1994 370,000 238,650 40,840 456,250 43,000 0 29,132
Norman P. Findley III...... 1996 310,000 251,100 72,693 2,062,500(6) 0 54,887 20,309
Senior Vice President 1995 236,000 153,400 58,885 192,600 8,800 27,170 13,862
1994 224,500 134,700 (7) 200,750 21,000 0 10,184
G. David Van Houten, Jr.... 1996 300,000 240,750 588,843 0 42,100 55,463 19,495
Senior Vice President 1995 245,000 144,060 48,059 192,600 8,800 26,819 14,852
1994 225,000 173,250 (7) 200,750 20,000 0 13,058
</TABLE>
- ---------------
(1) "Other Annual Compensation" in 1996 includes the following reportable
perquisites and other personal benefits, securities or property: for Mr.
Johnston, $82,703 for nonbusiness use of Company aircraft; for Mr.
Schimberg, $55,597 for nonbusiness use of Company aircraft.
(2) Dividends are paid on all shares of restricted stock at the same rate paid
on shares of Company Stock generally. Restricted stock awarded to executive
officers is subject to vesting only upon the attainment of certain increases
in the market price of Company Stock and, in the case of restricted stock
granted in 1996, the grantee's continued employment with the Company. The
requisite increases required for complete vesting of the 1994 and 1995
grants have been met. The 1996 grant has the following target market prices:
$39.75, $45.25, $51.75, $59.00 and $67.25. Any portion of the 1996
restricted stock which has not met the target price by January 2, 2001 will
be forfeited.
(3) "All Other Compensation" in 1996 includes: for Mr. Johnston $39,400 paid to
a defined contribution pension plan; $217 for term life insurance and
$64,485 as imputed interest income; for Mr. Schimberg, $26,550 paid to a
defined contribution pension plan; $217 for term life insurance $105,977 as
imputed interest income and $490,573 in interest and dividends on an account
to which he is entitled upon termination of employment (See "Executive
Compensation -- Employment Contracts and Termination of Employment
Arrangements"); for Mr. Alm, $16,400 paid to a defined contribution pension
plan; $331 for term life insurance; and $13,568 as imputed interest income
and $21,863 in interest and dividends on an account to which he is entitled
upon termination of employment (See "Executive Compensation -- Employment
Contracts and Termination of Employment Arrangements"); for Mr. Findley,
$15,213 paid to a defined contribution pension plan; $551 for term life
insurance; and $4,545 as imputed interest income; and for Mr. Van Houten,
$15,192 paid to a defined contribution pension plan; $246 for term life
insurance; and $4,057 as imputed interest income.
12
<PAGE> 16
(4) At December 31, 1996, Mr. Schimberg held 425,000 restricted shares of
Company Stock, having a market value at that date of $20,612,500.
(5) At December 31, 1996, Mr. Alm held 200,000 restricted shares of Company
Stock, having a market value at that date of $9,700,000.
(6) At December 31, 1996, Mr. Findley held 85,000 restricted shares of Company
Stock, having a market value at that date of $4,122,500.
(7) Perquisites and other personal benefits, securities or property for this
named executive officer during 1994 did not exceed the lesser of $50,000 or
10% of salary and bonus, and there were no other items of "Other Annual
Compensation."
STOCK OPTIONS GRANTED
The following table contains information concerning the grant of stock
options during 1996 to the named executive officers, under the Company's 1995
Stock Option Plan.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
----------------------------------------------------------------------------------
NUMBER OF % OF TOTAL GRANT DATE
SECURITIES OPTIONS GRANTED EXERCISE OR PRESENT
UNDERLYING TO EMPLOYEES IN BASE/PRICE VALUE
NAME OPTIONS GRANTED(1) FISCAL YEAR ($/SH) EXPIRATION DATE ($)(2)
- ---- ------------------ --------------- ----------- --------------- -----------
<S> <C> <C> <C> <C> <C>
Mr. Johnston......... 900,000 46.9 27.0625 January 2, 2006 9,108,000
Mr. Schimberg........ -- -- -- -- --
Mr. Alm.............. -- -- -- -- --
Mr. Findley.......... -- -- -- -- --
Mr. Van Houten....... 42,100 2.2 27.0625 January 2, 2006 426,052
</TABLE>
- ---------------
(1) Options granted in 1996 are performance-based options and are exercisable
only upon the per share price of the Company Stock reaching designated
levels: 20% of the grants vest at $39.75; 20% at $45.25; 20% at $51.75; 20%
at $59.00; and the balance at $67.25. Any portion of the 1996 options which
has not vested by January 2, 2001 will be forfeited.
(2) The "grant date present value" is based upon the Black-Scholes option
pricing model adapted for use in valuing executive stock options. The actual
value, if any, an executive may realize upon exercise of the option will
depend on the excess of the stock price over the exercise price on the date
the option is exercised, so there is no assurance the value realized by an
executive will be at or near the value estimated by the Black-Scholes model.
The principal assumptions incorporated into the valuation model by the
Company are as follows: (i) dividend yield of .3%, (ii) expected volatility
of 25%, (iii) risk-free interest rate of 6.19%, and (iv) expected life of
six years. No assumptions were made regarding nontransferability or risk of
forfeiture. The assumptions chosen materially impact the resulting
valuations.
OPTION/SAR EXERCISES AND HOLDINGS
The following table provides information with respect to the named
executive officers concerning the exercise of options and/or stock appreciation
rights ("SARs") during the last fiscal year and the number of unexercised
options and SARs held as of the end of the fiscal year.
13
<PAGE> 17
AGGREGATED OPTION AND SAR EXERCISES IN LAST FISCAL YEAR,
AND FISCAL YEAR-END OPTION AND SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY
NUMBER AND SARS AT FISCAL OPTIONS/SARS AT
OF SHARES YEAR-END(#) FISCAL YEAR-END($)
ACQUIRED --------------------- -------------------------
ON VALUE EXERCISABLE/ EXERCISABLE/
NAME EXERCISE REALIZED($) UNEXERCISABLE UNEXERCISABLE
- ---- ------------ ------------ --------------------- -------------------------
<S> <C> <C> <C> <C>
Mr. Johnston................ 0 0 796,533/ 763,667 41,192,025/ 16,774,320
Mr. Schimberg............... 0 0 593,500/ 38,800 20,984,275/ 1,188,444
Mr. Alm..................... 0 0 165,600/ 12,400 5,888,913/ 379,812
Mr. Findley................. 0 0 115,933/ 5,867 3,946,063/ 179,706
Mr. Van Houten.............. 0 0 152,103/ 39,547 5,766,206/ 901,805
</TABLE>
LONG-TERM INCENTIVE PLANS
The following table provides information concerning awards made during the
last fiscal year to the named executive officers under the Company's long-term
incentive plans. Payouts, if any, under the long-term incentive plans of the
Company will be reported in the Summary Compensation Table for the year of
payout. Under the 1996-1998 plan, payouts are based upon the annual growth rate
of the Company's cash operating profit (operating income plus depreciation and
amortization) over a three-year period. Whether a payout is at the threshold,
target or maximum amount depends upon the amount of the percentage increase in
the Company's cash operating profit over the relevant three-year period. Any
payouts earned under the plans would be made either (i) 50% in the first year
following the end of the relevant three-year period and the balance two years
after that, (ii) in full in the first year following the end of the relevant
three-year period if the employee retired during such three-year period, or
(iii) in full in the year following death or disability. The plans provide that
awards may be prorated when a participant retires or leaves the Company for
immediate employment at The Coca-Cola Company or certain of its affiliates.
LONG-TERM INCENTIVE PLAN AWARDS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
ESTIMATED FUTURE PAYOUTS
UNDER
PERFORMANCE OR NON-STOCK PRICE-BASED PLANS
OTHER PERIOD UNTIL ----------------------------
MATURATION OR THRESHOLD TARGET MAXIMUM
NAME PAYOUT ($)(1) ($)(1) ($)(1)
- ---- --------------------- --------- ------ -------
<S> <C> <C> <C> <C>
Mr. Johnston....................................... 3-year period ending 40% of 80% of 160% of
December 31, 1998 salary salary salary
Mr. Schimberg...................................... 3-year period ending 40% of 80% of 160% of
December 31, 1998 salary salary salary
Mr. Alm............................................ 3-year period ending 30% of 60% of 120% of
December 31, 1998 salary salary salary
Mr. Findley........................................ 3-year period ending 30% of 60% of 120% of
December 31, 1998 salary salary salary
Mr. Van Houten..................................... 3-year period ending 30% of 60% of 120% of
December 31, 1998 salary salary salary
</TABLE>
- ---------------
(1) "Salary" is the average annual base salary, as reported in the Summary
Compensation Table, over the same three-year period.
PENSION PLANS
The Company sponsors a noncontributory, qualified defined benefit pension
plan which provides benefits for substantially all employees, excluding
employees who are included in a unit of employees covered by a collective
bargaining agreement negotiated in good faith. Retirement
14
<PAGE> 18
income benefits are based upon a participant's highest average annual
compensation during any three of the last ten consecutive calendar years and the
participant's years of credited service.
The Company also maintains unfunded, nonqualified defined benefit pension
plans which provide supplementary retirement benefits and benefits which are not
provided by the qualified plan due to the limits set forth in the Internal
Revenue Code. The combined benefit provided by the qualified and nonqualified
plans is limited to 200% of the maximum annual benefit allowed at age 65 under
Section 415 of the Internal Revenue Code. The maximum benefit for 1996 was
$240,000.
The following table shows the estimated annual benefits payable at normal
retirement age (65) under the defined benefit qualified and nonqualified plans.
PENSION PLAN TABLE
<TABLE>
<CAPTION>
YEARS OF SERVICE AT RETIREMENT
---------------------------------------------------------------------------------------
REMUNERATION 5 10 15 20 25 30 35 40 45
- ------------ ------- ------- ------- ------- ------- ------- ------- ------- -------
<C> <S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 500,000 .................. 34,216 68,433 102,649 136,865 171,081 205,298 239,514 240,000 240,000
550,000 .................. 37,716 75,433 113,149 150,865 188,581 226,298 240,000 240,000 240,000
600,000 .................. 41,216 82,433 123,649 164,865 206,081 240,000 240,000 240,000 240,000
650,000 .................. 44,716 89,433 134,149 178,865 223,581 240,000 240,000 240,000 240,000
700,000 .................. 48,216 96,433 144,649 192,865 240,000 240,000 240,000 240,000 240,000
750,000 .................. 51,716 103,433 155,149 206,865 240,000 240,000 240,000 240,000 240,000
800,000 .................. 55,216 110,433 165,649 220,865 240,000 240,000 240,000 240,000 240,000
900,000 .................. 62,216 124,433 186,649 240,000 240,000 240,000 240,000 240,000 240,000
1,000,000 .................. 69,216 138,433 207,649 240,000 240,000 240,000 240,000 240,000 240,000
1,250,000 .................. 86,716 173,433 240,000 240,000 240,000 240,000 240,000 240,000 240,000
1,500,000 .................. 104,216 208,433 240,000 240,000 240,000 240,000 240,000 240,000 240,000
1,750,000 .................. 121,716 240,000 240,000 240,000 240,000 240,000 240,000 240,000 240,000
2,000,000 .................. 139,216 240,000 240,000 240,000 240,000 240,000 240,000 240,000 240,000
2,250,000 .................. 156,716 240,000 240,000 240,000 240,000 240,000 240,000 240,000 240,000
2,500,000 .................. 174,216 240,000 240,000 240,000 240,000 240,000 240,000 240,000 240,000
</TABLE>
Benefits shown in the table above are computed as straight-life annuity
amounts upon retirement at age 65 and are not subject to reduction for Social
Security or other amounts.
Covered compensation includes salary and bonuses (annual and long-term).
Covered compensation excludes Other Annual Compensation, Restricted Stock Awards
and All Other Compensation, as each is set out in the Summary Compensation
Table.
Covered compensation for 1996 as well as years of credited service at the
end of the fiscal year for the executive officers is summarized below:
<TABLE>
<CAPTION>
OFFICER COMPENSATION CREDITED SERVICE
- ------- ------------ ----------------
<S> <C> <C>
Mr. Johnston................................. $2,301,189 42 Years
Mr. Schimberg................................ 2,062,320 15 Years
Mr. Alm...................................... 855,422 19 Years
Mr. Findley.................................. 615,987 9 Years
Mr. Van Houten............................... 596,213 26 Years
</TABLE>
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT ARRANGEMENTS
Mr. Schimberg's Restated Compensation Agreement with Johnston Coca-Cola
Bottling Group, Inc. ("Johnston Coca-Cola") dated December 16, 1991, as amended,
had a balance of $9,139,346 in cash and 388,349 shares of Company Stock at
December 31, 1996. The cash is credited with interest semiannually, at a rate
paid by SunTrust Bank, Atlanta, N.A. on six-month certificates of deposit of
like amount, and any dividends earned on the Company Stock are credited to the
cash account. The stock and amounts held in cash will be paid to Mr. Schimberg
upon the termination of
15
<PAGE> 19
his employment. Mr. Schimberg may elect installment payments over a period not
to exceed ten years, but if he makes no such election, the Company may pay
installments over a period of not more than five years. Payments will commence
within 60 days after the termination of Mr. Schimberg's employment; interest on
installment payments of cash would accrue at the rate of interest equal to the
yield to maturity on ten-year United States Treasury bonds having an issue date
nearest the date on which amounts become payable, unless another interest rate
is agreed upon by Johnston Coca-Cola and Mr. Schimberg. Mr. Schimberg has the
right to request payment of all or any part of the value of his account prior to
his termination of employment, but any such payments are at the sole discretion
of the Board of Directors of Johnston Coca-Cola.
Mr. Alm's Deferred Compensation Agreement with Johnston Coca-Cola, dated
December 16, 1991, as amended, had a balance at December 31, 1996 of $51,069 in
cash and 199,346 shares of Company Stock. Dividends earned on the Company Stock
are held as cash in the account, which earns interest in the same manner
provided for Mr. Schimberg and described above. Mr. Alm is entitled to the value
of his account only upon the termination of his employment with the Company. Mr.
Alm may elect an installment period not to exceed ten years, but if no such
election is made, the Company may pay installments over a period not to exceed
five years. Payments will commence within 60 days after Mr. Alm's termination of
employment.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee is responsible for establishing and reviewing
the salaries, compensation plans and other remuneration of the officers of the
Company. The programs adopted by the Committee link compensation to the
Company's financial performance and growth in share-owner value.
Compensation Philosophy. The Company's compensation program applicable to
all of the executive officers continues to be based on three primary elements:
- Base salary compensation
- Annual cash incentive compensation
- Long-term incentive compensation
The 1996 programs adopted by the Committee continue the compensation
policies and plans established in 1992. Significant incentives have been
provided to the Company's management based on successes in both increasing cash
operating profit and increasing the price of the Company Stock.
The Committee's guidelines call for the total individual compensation
package (salary, bonus and incentives) to fall within the 50th to 75th
percentile ranges for comparable positions at comparable companies, with higher
ranges achieved only in the event of the Company's outstanding performance. The
overall compensation packages in 1996 for the executive officers fell within the
framework of these guidelines. The incentive program is designed to provide high
risk and high reward potential, evidenced by the use of cash incentives based on
the achievement of aggressive goals in increasing cash operating profit,
together with performance-vested restricted stock and stock options. Compared to
compensation programs at Fortune 125 industrial companies, the Company's 1996
incentive program continues to rank among the highest in degree of difficulty as
determined by the Company's independent compensation consultants.
Base Salary Compensation. The Committee's goal in setting base salary
compensation is to be in the 50th percentile to 75th percentile base salary
levels of consumer products companies of comparable size, using data from its
independent compensation consultants. These companies are representative of the
consumer products industry generally and are therefore broader than the peer
group of publicly traded soft drink companies used for comparison of five-year
cumulative return in this proxy statement. Further, the companies are selected
without regard to financial performance.
16
<PAGE> 20
When adjusting base salary for individual executive officers in 1996, the
Committee considered the financial success the Company experienced during 1995,
changed duties and responsibilities, base salaries paid to individuals in
comparable positions in other companies, and significant individual performance
during the preceding year. While such judgments must at some point be
subjective, the Committee was assisted by the recommendations of the Company's
senior human resources executives and its Chief Executive Officer (who did not
participate in discussions relating to his compensation) and independent
compensation consultants.
Annual Incentive Compensation. For fiscal 1996, the Committee approved an
Annual Incentive Plan for the officers and executive managers of the Company
which continued in all material respects the plans begun in 1992. The 1996 plan
established target award levels based solely upon financial results in attaining
budgeted cash operating profit increases over the prior year, consistent with
management's belief that cash operating profit growth is the primary measure of
the Company's financial performance. Under the plan, 100% of a participant's
award would be earned in the event the Company achieved its budgeted cash
operating profit target, with reduced awards payable if a minimum threshold goal
is not attained and increased awards payable if the budgeted cash operating
profit growth is exceeded.
A significant portion of the cash compensation payable to the Company's
executive officers is tied to the Annual Incentive Plan. Once minimum
performance targets are achieved, potential awards range from 6% to 115% of
salary, the percentage for each recipient commensurate with his or her level of
responsibility and, thus, ability to contribute to growth in cash operating
profit. Cash awards under the Annual Incentive Plan for 1996 were paid to the
Company's executive officers with corporate-wide responsibilities based upon
attaining 103% of the Company's budgeted cash operating profit, and ranged from
41% to 95% of salary, depending on the individual's position with the Company.
Cash awards under the 1996 Annual Incentive Plan paid to the Company's executive
officers with group responsibilities ranged from 72% to 91% of salary, based
upon their respective business units attaining between 102% and 108% of budgeted
cash operating profit.
Long-Term Incentive Compensation. Both the Company's management and the
Compensation Committee believe that significant stock ownership in the Company
links the economic interests of share owners and management and, therefore, is a
major incentive for management. The Company's long-term incentive plans and
programs are designed to provide the recipient with a proprietary interest in
the growth and performance of the Company and the value of its shares.
The Company has established stock ownership guidelines for its management
group, including all executive officers. Under these guidelines each individual
executive is expected to own Company Stock with value equal to a multiple of the
executive's base salary. Ownership levels are based on the executive's position
in the Company, and multiples range from two to seven times base salary. While
compliance with the ownership guidelines is voluntary, failure to meet the
guidelines within a specified period disqualifies the executive from
participation in any future grants of stock options or restricted stock by the
Company until the guidelines are met. At December 31, 1996, ninety-two percent
(92%) of all management employees subject to the guidelines had met or exceeded
their ownership objectives.
The Company's long-term incentive compensation consists of a three-year
cash incentive plan, a stock option plan and a restricted stock award plan.
Three-year Cash Incentive Plan. The Committee approved a three-year cash
incentive plan for the years 1996 through 1998 that is designed to provide cash
compensation to the senior officers and certain executive managers, based solely
upon annual cash operating profit growth for such three-year period. Once the
minimum required increases are achieved, potential awards under the plan range
from 10% to 160% of salary, the percentage for each participant commensurate
with his or her level of responsibility and, thus, ability to contribute to
growth in cash operating profit. Any awards earned under the 1996-1998 plan are
not payable until 1999.
17
<PAGE> 21
Stock Option Plan and Restricted Stock Plan. In furtherance of the
Committee's belief that significant ownership by executive management of the
Company's shares is essential for long-term growth in share-owner value, the
Committee made awards for 1996 under the stock option plan and restricted stock
award plan.
A total of 1,960,000 option shares (and phantom option shares) was awarded
during fiscal 1996. Of this total, 1,089,600 option shares were awarded to
executive officers, 900,000 of which were awarded to the Vice Chairman and Chief
Executive Officer. The option exercise price is equal to $27.0625, the average
of the high and low market price of the Company Stock on the date of grant. Two
types of options were awarded in 1996, as described below:
(1) For the Chief Executive Officer and most employees in Senior
Executive Band positions (including most executive officers), options
become exercisable in 20% increments only in the event the market value of
Company Stock increases to specified levels within five years from the date
of grant. The first 20% increment becomes exercisable when the stock grows
approximately 47%, and all options become exercisable when the stock price
grows 150% over the market price on the date of grant.
(2) For Executive Band and other management positions, options become
exercisable in 33 1/3% increments over a three-year period regardless of
the market price of Company Stock.
Stock options awarded in 1996 to the Chief Executive Officer and other
members of the Senior Executive Band are entirely performance driven, because
they provide value to the recipient only in the event of significant increases
in the market value of the Company Stock. The number of individual option grants
approved by the Committee in 1996 was determined by a formula based upon a
percentage of base salary in relation to the market value of the Company's
shares on date of grant, which percentage varies with each individual's level of
responsibility, with the highest percentages being assigned to the Chief
Executive Officer. No consideration was given to the number of shares already
owned by a recipient.
The Compensation Committee believes that the restricted stock award plan,
in building stock ownership among the Company's executive officers, enhances the
potential for profitability and growth in share-owner value. The Committee
determined that special incentive awards should be made to six of the Company's
key executive officers in order to insure management continuity and minimize
uncertainties which could result from retirement of the Chief Executive Officer
and Chief Operating Officer. With the assistance of the Company's independent
compensation consultants, the Committee designed a program covering these six
officers which requires continued service and contains noncompete restrictions
following termination of employment, in exchange for a three-year grant of
restricted stock for which vesting is conditioned on growth in the Company Stock
price at the 80th percentile of the historical growth rate of the S&P 500.
Specifically, the program has the following characteristics:
(1) Shares of restricted stock awarded in 1996 can be earned in 20%
increments based upon a schedule which is indexed to increases in market
price of the Company Stock. The first 20% increment can be earned based on
approximately 47% incremental growth in the value of the Company Stock,
with 100% of the shares being earned when the stock price grows 150% over
the market price on the grant date. In order for any shares to vest the
stock performance targets must be met within five years of the grant date.
(2) Once shares are earned at each 20% incremental level, the
executive is required to remain employed with the Company for five
additional years to receive the shares. Certain exceptions are made in case
of death, disability, retirement, involuntary termination without cause, or
termination for good cause. Further, executives are required not to compete
with the Company for two years following termination of employment.
(3) No other restricted stock or stock option grants would be made to
these executive officers for three years.
18
<PAGE> 22
The average market price of the Company Stock on the date of grant was
$27.0625 per share. A total of 1,085,000 shares was awarded under the restricted
stock award plan in fiscal 1996, to six key executive officers. No restricted
stock was awarded to the Vice Chairman and Chief Executive Officer.
The guidelines established by the Committee for the 1996 grants of stock
options and restricted stock awards for officers and executive managers were
based on advice from the Company's independent compensation consulting firm. The
Company's consultant stated to the Committee that it relied upon its review of
similar plans and incentive compensation practices at comparable companies and
used data from its own compensation surveys to make its recommendation.
Compensation of Chief Executive Officer. The Committee established fiscal
1996 compensation for the Company's Chief Executive Officer on the basis of the
following principles and guidelines.
- The Chief Executive Officer's base salary and incentive compensation
should reflect his performance in that capacity, measured primarily by the
extent to which the Company attained its specified cash operating profit
growth target. For fiscal 1995, the Company's cash operating profit
increased 9%, exceeding the 8% goal established by the budget approved by
the Company's Board of Directors.
- The Chief Executive Officer's base salary compensation should also be
reviewed in the context of amounts paid to chief executives with
comparable levels of experience and qualifications at other consumer
products companies engaged in the same or similar businesses, considering
also the historic salary levels paid by the Company to its Chief Executive
Officer.
- While the Committee believes the Chief Executive Officer's base salary
compensation should be commensurate with amounts paid by comparable
companies in the marketplace, it is the Committee's primary objective that
the majority of the Chief Executive Officer's compensation be tied to the
financial performance of the Company. The Committee approved a 4.2%
increase for the base salary portion of the Chief Executive Officer's
compensation for 1996.
- A significant portion of the Chief Executive Officer's cash compensation
should be directly tied to the Company's financial performance. Under the
Company's 1996 Annual Incentive Compensation Plan the Chief Executive
Officer could earn an award of as much as 115% of base salary depending
upon the amount of the Company's 1996 cash operating profit in relation to
the increase set forth in the Company's budget approved by the Board of
Directors. The actual award was 95% of salary, which related to the
Company's achievement of 103% of its budgeted cash operating profit for
1996. In addition, the Chief Executive Officer earned an award under the
1994-1996 Long-Term Cash Incentive Plan of 61.3% of his average salary
during the three-year period. The Company's Long-Term Cash Incentive Plans
are, by their terms, directly tied to the Company's financial performance,
and the award earned for the three-year period 1994-1996 related to the
Company's achievement of compound annual cash operating profit growth of
9.6%, exceeding the 8% compounded growth rate set forth in the Company's
budget approved by the Board of Directors.
- In line with the Committee's belief that significant ownership by
management is essential for long-term growth in share-owner value, stock
option awards should promote share-owner value by providing the potential
for additional stock ownership to the Chief Executive Officer. The
Committee determined that a multi-year grant of stock options for the
Chief Executive Officer was appropriate, and with the assistance of its
independent compensation consultants the Committee designed a high
risk/high reward program. The option award to the Chief Executive Officer
represented the equivalent of three years of option grants, exercisable
only in the event the Company's share price increases above the growth
rate of the historical S&P 500, as described above. No other stock grants
would be made to the Chief Executive Officer during this three-year
period. The Chief Executive Officer's long-term
19
<PAGE> 23
incentive compensation was set without adjustment to reflect his ownership
of the Company Stock he obtained in 1991 in exchange for his interest in
Johnston Coca-Cola.
Section 162(m) of the Internal Revenue Code. Section 162(m) of the
Internal Revenue Code limits the deductibility for federal tax purposes of
certain compensation paid to certain executive officers. Excepted from this
limitation is "performance-based" compensation, which is approved by the
Company's share owners. Consequently, the Company's Board of Directors has
recommended that the 1997 Stock Option Plan, the Executive Management Incentive
Plan (effective January 1, 1997) and the Long-Term Cash Incentive Plan
(effective January 1, 1997), each applicable to executive officers, be submitted
to the Company's share owners for approval under the provisions of Section
162(m).
If approved by the Company's share owners, the Company believes that all
compensation paid or payable under the terms of the above plans to its executive
officers covered under Section 162(m) of the Internal Revenue Code will qualify
for deductibility under such Section. Conversely, no compensation will be paid
pursuant to these plans unless the share owners' approval is obtained.
T. Marshall Hahn, Jr., Chairman
Claus M. Halle
Robert A. Keller
Francis A. Tarkenton
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
Set forth below is a line graph presentation showing a five-year comparison
of the cumulative total return on Company Stock to both the S&P Composite 500
Index and an index of peer group companies selected by the Company. The peer
group consists of three publicly traded North American soft drink bottlers:
Coca-Cola Beverages Ltd., Coca-Cola Bottling Co. Consolidated and Whitman
Corporation. The graph assumes $100 invested on December 31, 1991, in Company
Stock and in each index, with the subsequent reinvestment of dividends on a
quarterly basis.
<TABLE>
<CAPTION>
Measurement Period
(Fiscal Year Covered) CCE Peer group* S&P 500
<S> <C> <C> <C>
12/31/91 $ 100 $ 100 $ 100
12/31/92 79.98 101.23 107.61
12/31/93 99.89 125.97 118.41
12/31/94 118.22 124.16 120.01
12/31/95 176.88 176.10 164.95
12/31/96 320.04 199.58 202.73
</TABLE>
20
<PAGE> 24
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
STOCK OWNERSHIP BY AND DIRECTOR RELATIONSHIPS WITH THE COCA-COLA COMPANY
The Company was formed initially as a wholly owned subsidiary of The
Coca-Cola Company, and The Coca-Cola Company remains the largest share owner of
the Company, owning as of February 19, 1997, directly and indirectly through its
subsidiaries, 56,318,906 shares of Company Stock, representing approximately 45%
of the outstanding Company Stock. In addition, two directors of the Company are
executive officers of The Coca-Cola Company, and two other directors of the
Company are former executive officers of The Coca-Cola Company.
AGREEMENTS AND TRANSACTIONS WITH THE COCA-COLA COMPANY
The Company and The Coca-Cola Company have entered into significant
transactions and agreements with one another, incident to their respective
businesses, and the Company and The Coca-Cola Company are expected to enter into
material transactions and agreements from time to time in the future.
Material agreements and transactions between the Company and The Coca-Cola
Company during 1996 are described below.
Bottle Contracts and Purchases of Finished Product. The Company and its
subsidiaries (referred to collectively as the "Company") purchase syrups and
concentrates from The Coca-Cola Company and manufacture, package, distribute and
sell liquid nonalcoholic refreshment products under bottle contracts with The
Coca-Cola Company. These contracts give the Company the exclusive right to
produce and market beverage products of The Coca-Cola Company in bottles and
cans in specified territories. The bottle contracts also provide The Coca-Cola
Company with the ability to set prices of the syrups and concentrates for the
beverages of The Coca-Cola Company, as well as the terms of payment and other
terms and conditions under which the Company purchases such syrups and
concentrates. The Company has other agreements with The Coca-Cola Company under
which it purchases finished product for sale within its territories. From
January 1996 until the Company's acquisition of the bottling and canning
facilities in France and Belgium in July 1996 (see "Purchase of Coca-Cola
Bottlers" below), the Company paid $35.8 million to The Coca-Cola Company for
finished product in cans for distribution in the Netherlands.
During the Company's fiscal year ended December 31, 1996, the Company
purchased from The Coca-Cola Company approximately $1.9 billion of syrups,
concentrates and finished product under the bottle contracts and other
agreements relating to one-year appointments of the Company to sell fountain
syrup. The Company expects the price of syrup and concentrate in 1997 to be
affected by an increase of approximately 2.8% in the United States and
approximately 3-4% in Europe.
Purchase of Finished Product from Joint Venture. During 1996, the Company
purchased finished product from Coca-Cola Nestle Refreshments Company, USA, a
joint venture between The Coca-Cola Company and Nestle S.A. During 1996 total
payments to The Coca-Cola Company, on behalf of the joint venture, were
approximately $20.9 million.
Purchase of Coca-Cola Bottlers. On July 26, 1996, the Company acquired the
bottling and canning operations of The Coca-Cola Company in France and Belgium
for a total consideration of approximately $915 million, including assumed debt.
On August 12, 1996, the Company acquired the interest of The Coca-Cola Company
in Coca-Cola Bottling Company West, Inc. and Grand Forks Coca-Cola Bottling Co.
for which The Coca-Cola Company received approximately $45.8 million.
Administrative Services Agreements. During 1996, The Coca-Cola Company
provided certain administrative, telecommunications and personnel services to
the Company. In general, the Company pays The Coca-Cola Company for each service
rendered at a rate believed by management of
21
<PAGE> 25
the Company to approximate an arm's-length rate for such services. The amount
paid by the Company in 1996 to The Coca-Cola Company for services was
approximately $354,000.
Management Services. The Company manages the production operations at
various production facilities on behalf of The Coca-Cola Company. During 1996,
The Coca-Cola Company incurred charges from the Company of approximately $8.3
million for management fees, manufacturing expenses, rent and other
miscellaneous expenses associated with the Company's management of a syrup plant
in Eagan, Minnesota and noncarbonated hot-fill facilities in Harrisburg,
Pennsylvania and until March 1996, in Northampton, Massachusetts.
Engineering Services. Enterprises Consulting, Inc. ("ECI"), a wholly owned
subsidiary of the Company, provided construction design consulting and other
engineering services to The Coca-Cola Company. In 1996, The Coca-Cola Company
incurred fees of approximately $902,000 for these services.
Dispensing Equipment. During 1996, the Company purchased fountain
dispensing equipment and vehicles from The Coca-Cola Company for $10.7 million
in conjunction with the Integrated Operating System program which is being
managed by the Company. In addition, The Coca-Cola Company reimbursed the
Company $22.6 million for the cost of parts and labor in connection with repairs
on cooler, dispensing or post-mix equipment owned by The Coca-Cola Company.
Lease of Office Space. The Company's Belgian offices occupy approximately
39,000 square feet of office space leased from The Coca-Cola Company. In 1996
the Company incurred approximately $455,000 in rental and related charges. The
Coca-Cola Company paid the Company approximately $1.1 million for rental and
related charges for approximately 19,000 square feet of space leased from the
Company in France and the Netherlands.
Point-of-Sale Expenses. The Company purchases point-of-sale and other
advertising items from The Coca-Cola Company. In 1996, the Company paid The
Coca-Cola Company approximately $11.5 million for such items and will continue
to purchase such materials in 1997.
Sweetener Requirements Agreement. The Company and The Coca-Cola Company
were parties in 1996 to an arm's-length agreement for the purchase by the
Company from The Coca-Cola Company of substantially all of the Company's 1996
requirements for sweetener in the United States. The amount paid by the Company
to The Coca-Cola Company under this agreement during 1996 totaled approximately
$246.7 million. The Company and The Coca-Cola Company have made a similar
arrangement that provides for fixed pricing for sweetener in 1997.
Transshipping. Under the terms of its bottle contracts with The Coca-Cola
Company, the Company is prohibited from directly or indirectly selling any of
the beverage products of The Coca-Cola Company outside its exclusive
territories. Under such contracts, The Coca-Cola Company has the right to assess
transshipment damages on behalf of bottlers in other territories for beverage
products of The Coca-Cola Company produced by the Company and found in another
bottler's territory, regardless of fault. The amount due to The Coca-Cola
Company in 1996 for transshipment assessments was approximately $727,000. The
Coca-Cola Company generally retains a portion of the assessments to offset its
administrative and investigation costs and remits the remainder to the bottlers
into whose territories the beverages were transshipped.
Sales of Syrups, Bottle and Can Products and Agency Billing and Delivery
Arrangements. The Company has entered into agreements with The Coca-Cola
Company pursuant to which it sells fountain syrup back to The Coca-Cola Company
at prices which generally equate to the prices charged by The Coca-Cola Company
to the Company. The Company then delivers such syrup to certain of the major
fountain accounts of The Coca-Cola Company, and sometimes, on behalf of The
Coca-Cola Company, invoices and collects the receivables with respect to such
sales. In addition to the fountain syrup sales, the Company also sells bottle
and can beverage products to The Coca-Cola Company at prices which generally
equate to the prices charged by the Company to its major customers. In 1996, the
amounts paid by The Coca-Cola Company to the Company for
22
<PAGE> 26
fountain syrups, bottle and can beverage products, and delivery, billing and
collection totaled approximately $294.6 million.
Additionally, the Company and Coca-Cola Bottling Co. Consolidated, another
bottler in which The Coca-Cola Company owns an equity interest, bought from and
sold to each other finished soft drink product. These transactions occurred in
instances where the proximity of one party's production facilities to the other
party's markets, as well as other economic considerations, made it more
efficient for one bottler to buy finished product than produce it. In 1996, the
Company's sales to that bottler totaled approximately $15.1 million and
purchases were approximately $21.7 million. The Company expects that additional
sales and purchases will occur in 1997.
Post-Mix Reimbursement. In 1996, The Coca-Cola Company reimbursed the
Company approximately $6.7 million for lost post-mix margins. The Company's
post-mix margins are decreased in certain territories where The Coca-Cola
Company has requested that the Company purchase packaged post-mix from The
Coca-Cola Company rather than produce it from concentrate.
Marketing Support Arrangements. For 1996, total direct marketing support
paid or payable to the Company by The Coca-Cola Company, or on behalf of the
Company by The Coca-Cola Company, was approximately $447.9 million, for which
the Company paid The Coca-Cola Company approximately $123.1 million for local
media and program expense. In the opinion of management of the Company, the
amount and terms of such marketing support provided to the Company by The
Coca-Cola Company are generally as favorable as provided by The Coca-Cola
Company to other Coca-Cola bottlers who have entered into bottle contracts
similar to those of the Company bottlers. The Coca-Cola Company provided
approximately $120.5 million to the Company in 1996 under a multiyear incentive
program to develop facilities, systems and markets which will support
accelerated placement of additional cold drink vending equipment.
Financing Arrangements. Coca-Cola Financial Corporation ("CCFC") is a
wholly owned subsidiary of The Coca-Cola Company. The business of CCFC includes
loans of funds on a secured basis and leases of equipment to Coca-Cola bottlers,
their customers and other customers of The Coca-Cola Company. Interest rates
charged in connection with such transactions are at competitive levels, but for
some transactions, interest rates may be, to an extent, subsidized by The
Coca-Cola Company. During the Company's 1996 fiscal year, CCFC did not advance
funds or enter into any new equipment leases with the Company or any of its
bottlers. In 1996, the Company paid CCFC approximately $246,000 under existing
equipment leases.
1996 Olympic Games. In 1996, the Company paid The Coca-Cola Company
approximately $4.2 million for Olympic-related expenses including the purchase
of fountain equipment, coolers and special-event trailers and the Company's
portion of the sponsorship fee. In connection with the Olympics, The Coca-Cola
Company paid the Company approximately $1.3 million for cooler and vehicle rent
and repairs, Torch Relay expenses and for certain unpaid accounts receivable
which were guaranteed by The Coca-Cola Company.
RELATIONSHIPS AND TRANSACTIONS WITH MANAGEMENT AND OTHERS
The following executive officers were loaned money by the Company to assist
them in meeting their tax obligations arising from the vesting of restricted
stock during 1996. Each loan was without interest and due to be repaid in full
on or before April 15, 1997. The amount of each loan is shown opposite the name
of the borrower.
<TABLE>
<S> <C>
John R. Alm................................................. $ 367,285
Margaret F. Carton.......................................... 8,262
Norman P. Findley III....................................... 115,620
Robert F. Gray.............................................. 160,884
John C. Heinrich............................................ 132,421
Summerfield K. Johnson III.................................. 163,813
</TABLE>
23
<PAGE> 27
<TABLE>
<S> <C>
Summerfield K. Johnston, Jr................................. 1,733,593
Jarratt H. Jones............................................ 92,529
Lowry F. Kline.............................................. 128,032
Vicki G. Roman.............................................. 82,856
Philip H. Sanford........................................... 151,107
Henry A. Schimberg.......................................... 2,804,850
Gary P. Schroeder........................................... 142,343
G. David Van Houten, Jr..................................... 108,638
O. Michael Whigham.......................................... 10,000
Bernice H. Winter........................................... 89,320
</TABLE>
Additionally, Bernice H. Winter, former Vice President and Controller, has
a loan from the Company having an outstanding balance at December 31, 1996 of
$789,946. The loan was made to enable her to exercise certain incentive stock
options from her previous employer upon her employment by the Company in 1994.
The loan is repaid in quarterly installments and due in full in January 2003. It
is fully secured. Ms. Winter resigned from the Company effective September 30,
1996.
In 1992, the Company made a relocation loan to Gary P. Schroeder, Vice
President, Regional Operations in the amount of $200,000. The loan, which is
generally on the same terms as other relocation loans made by the Company, (i)
is secured by a second mortgage on the residence, (ii) does not accrue interest,
and (iii) does not become due until he leaves the Company or sells the
residence. Upon the sale of the residence, the Company will share in any
appreciation in price.
The Company paid approximately $110,000 of rental and associated charges in
1996 to Mr. Johnston and Summerfield K. Johnston III for the Company's use of
certain facilities owned by them.
Lowry F. Kline, Senior Vice President and General Counsel of the Company,
was a partner in the law firm of Miller & Martin, counsel to the Company, until
March 1, 1996. Miller & Martin received approximately $4.5 million in legal fees
from the Company during 1996.
Jean-Claude Killy, a nominee for election to the Company's Board of
Directors, entered into an agreement in 1993 with the Company's French bottler
under which the bottler pays him approximately $50,000 per year for consulting
services and the use of his name and likeness. This agreement runs through 1998.
Additionally, Mr. Killy has a consulting agreement with an affiliate of The
Coca-Cola Company which obligates Mr. Killy to provide consultation, assistance
and reports on the beverage business in Europe, Latin America and Southeast
Asia. The Company's French bottler reimbursed The Coca-Cola Company for half of
the amounts due to Mr. Killy under this agreement. In 1996, the reimbursement
was approximately $250,000, and it is anticipated that a like amount will be
paid by the bottler in 1997.
APPROVAL OF THE 1997 STOCK OPTION PLAN
(PROPOSAL NO. 2)
The Board of Directors of the Company has adopted the Company's 1997 Stock
Option Plan (the "Option Plan") and directed that the Option Plan be submitted
to the share owners for their approval at the Annual Meeting. The Option Plan
will become effective upon the approval by the holders of a majority of the
shares of Company Stock represented and entitled to vote at the Annual Meeting.
The purpose of the Option Plan is to advance the interest of the Company and its
subsidiaries by encouraging and enabling the acquisition of a financial interest
in the Company by officers and other key employees through grants of stock
options ("Options"). The following summary description of the Option Plan is
qualified in its entirety by reference to the full text of the Option Plan
attached hereto as Exhibit A.
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<PAGE> 28
The total number of shares of Company Stock that may be issued under the
Option Plan pursuant to Options granted may not exceed 5,433,000 shares. Options
may be granted to executive officers, other persons within the senior executive
band and executive band, branch managers, sales center managers, and other
officers and management employees (including nonemployee officers) of the
Company and its subsidiaries who are employed in a position determined by the
Option Committee (as defined below) to be eligible to participate in the Option
Plan. No person will be granted Options to acquire more than 20% of the
aggregate number of shares originally authorized for issuance under the Option
Plan. Approximately 1,000 employees and officers of the Company and its
subsidiaries are currently eligible to participate in the Option Plan.
The Option Plan is to be administered by a committee of the Board of
Directors (the "Option Committee"), and will be comprised of no fewer than two
members who must be "non-employee directors" within the meaning of Rule 16b-3
under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and
"outside directors" within the meaning of Section 162(m) of the Internal Revenue
Code of 1986, as amended (the "Internal Revenue Code"), and the regulations
thereunder. Initially, and until a separate committee is appointed, the Option
Committee will be the Compensation Committee of the Board of Directors. The
Option Committee will determine the persons to whom and the times at which
Options will be granted, the number of shares to be subject to each Option, the
duration of each Option, the times within which the Option may be exercised, the
cancellation of the Option (with the consent of the holder thereof) and the
other conditions of the grant of an Option. The Option Committee, however, may
delegate from time to time to the Chief Executive Officer, the authority to make
awards under the Option Plan, unless such delegation would jeopardize the
benefits of Rule 16b-3 under the Exchange Act or Section 162(m) of the Internal
Revenue Code or regulations thereunder. The Option Committee also may interpret
provisions of the Option Plan. The conditions of the grants of Options need not
be the same with respect to each optionee or with respect to each Option.
No Option granted pursuant to the Option Plan will be transferable
otherwise than by will or by the laws of descent and distribution or pursuant to
a qualified domestic relations order, as defined by the Internal Revenue Code,
or Title I of the Employee Retirement Income Security Act of 1974, as amended,
and the regulations thereunder, unless the Committee determines otherwise.
Options will be granted with an exercise price of one hundred percent or
more of the fair market value of Company Stock on the date of grant. Grants of
Options made in 1997 carry an exercise price of one hundred percent of the fair
market value of the Company Stock on the date of grant. With respect to the 1997
grants, the date of grant is January 2, 1997, and the fair market value on that
date was $47.6875. Payment of the exercise price may be in cash, or with the
prior approval and upon the conditions established by the Option Committee, by
delivery of shares of Company Stock owned by the Optionee or any other manner
approved by the Committee.
Each Option will be exercisable within such time periods as established by
the Option Committee on the date of grant.
The Option Committee has the authority to permit an optionee under the
Option Plan to surrender for cancellation any unexercised outstanding Option and
receive in exchange from the Company either shares of Company Stock, an Option
for shares of Company Stock, or both, in amounts and with features designated by
the Option Committee. Furthermore, the Option Committee may extend the duration
of any Option for a period not to exceed one year without changing the Option
price and on such other terms and conditions as the Option Committee may deem
advisable. Unless so extended by the Option Committee, the duration of an Option
is ten years.
The Option Committee, in its sole discretion, may cause all outstanding
Options held by an optionee upon disability or retirement to become immediately
exercisable. Options exercisable upon the disability or retirement of an
optionee (whether due to Option Committee action or otherwise) or becoming
exercisable thereafter, will expire no later than thirty-six months from the
date of such
25
<PAGE> 29
optionee's disability or retirement, or twelve months after the optionee's
death, whichever occurs first, unless the Option Committee determines otherwise.
Upon the death of an optionee prior to termination of employment, all
outstanding Options held by such optionee will expire no later than twelve
months after such death, unless the Option Committee determines otherwise.
If an optionee's employment with the Company or certain affiliated
companies is terminated for any reason except death, disability or retirement,
then such optionee's Options will expire no later than six months after the date
of such termination of employment; however, any Option held by such optionee may
become exercisable at the discretion of the Option Committee. Although only
officers (including nonemployee officers) and employees of the Company and its
subsidiaries are eligible to receive grants under the Option Plan, the Company
allows the vesting and exercise periods to continue without interruption when
grantees leave the employment of the Company to become employees of certain
affiliated companies, as determined by the Committee at the time options are
granted. Companies that will be treated as affiliated companies will be defined
in each grant of an Option under the Plan. Grants made in 1997 define an
"affiliated company" as The Coca-Cola Company or any company in which The
Coca-Cola Company owns at least 25% of the voting stock or capital if such
company is a party to an agreement with the Company that provides for the
continuation of certain employee benefits upon immediate employment with such
company, which subsequent employment the Company has approved.
In accordance with its authority under the Option Plan, the Option
Committee has determined, and the Board has approved that all Options granted in
1997 to certain Senior Executive Band employees may become exercisable in
increments of 20%, solely upon the attainment of requisite increases in the fair
market value of Company Stock within five years from the date of grant (a
"Performance-Vested Option Grant"). These Options become exercisable only upon
the fair market value of the Company Stock reaching designated levels, with the
first such level being a 15% increase over the grant date price, the three
succeeding levels each being a 15% increase over the preceding level, and the
fifth level being twice the grant date price, or $95.375. The average of the
fair market values of Company Stock (the fair market value for a given day is
the average of that day's high and low price) over twenty consecutive trading
days must be at or above the designated level before the level is deemed to have
been reached.
If an Option under the Performance-Vested Option Grant has not yet become
exercisable and the optionee should become disabled or retire, the Option will
not expire for 36 months from the date of the Optionee's disability or
retirement, during which time the Option may become exercisable upon the
occurrence of the requisite price increases in the value of the Company's Stock.
In the event of the optionee's death, the Option may become exercisable upon the
occurrence of the requisite price increases within 12 months from the date of
such death. However, in no event shall the period in which the increases may be
attained extend past five years from the date of grant.
The Board of Directors of the Company or the Option Committee may amend,
suspend or terminate the Option Plan at any time without the approval of share
owners, except for amendments for which share-owner approval would be required
to retain the benefits of Section 162(m) of the Internal Revenue Code.
Nevertheless, no such amendment, suspension or termination will affect
previously granted awards without the participant's consent unless the Option
Committee determines that the change is in the best interest of all participants
who have received Options.
All Options are nonqualified options for tax purposes. An optionee will not
recognize any taxable income at the time of grant of a nonqualified option. Upon
exercise of a nonqualified option, the optionee will recognize ordinary income
for tax purposes, measured by the excess of the then fair market value of the
shares over the exercise price. The Company will be entitled to a deduction in
the same amount as the ordinary income recognized by the optionee.
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<PAGE> 30
The income recognized by an optionee will be subject to tax withholding.
Upon resale of such shares by the optionee, any difference between the sale
price and the exercise price, to the extent not recognized as ordinary income
upon exercise, as provided above, will be treated as either short-term or
long-term capital gain or loss (depending on the holding period).
The Option Committee, subject to the approval of the Option Plan by the
share owners, has awarded Options under the Option Plan as outlined in the table
entitled "New Plan Benefits" in this proxy statement.
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS A VOTE FOR THE PROPOSAL TO
ADOPT THE 1997 STOCK OPTION PLAN.
APPROVAL OF THE LONG-TERM INCENTIVE PLAN
(EFFECTIVE JANUARY 1, 1997)
(PROPOSAL NO. 3)
The Board of Directors of the Company has adopted the Company's Long-Term
Incentive Plan (effective January 1, 1997) (the "Long-Term Incentive Plan") and
directed that the Long-Term Incentive Plan be submitted to the share owners for
their approval at the Annual Meeting. The Long-Term Incentive Plan will become
effective upon the approval by the holders of a majority of the shares of
Company Stock represented and entitled to vote at the Annual Meeting. The
purpose of the Long-Term Incentive Plan is to advance the interests of the
Company by providing key management and sales employees with incentive to assist
the Company in meeting and exceeding its business goals. The following summary
description of the Long-Term Incentive Plan is qualified in its entirety by
reference to the full text of the Long-Term Incentive Plan attached hereto as
Exhibit B.
The Company intends that the compensation paid pursuant to the Long-Term
Incentive Plan be "performance-based" within the meaning of Section 162(m) of
the Internal Revenue Code.
Cash awards may be made under the Long-Term Incentive Plan to persons who
are executive officers, in the senior executive band, in the executive band,
and, as defined by the Compensation Committee, certain eligible senior staff, of
the Company and its subsidiaries. Approximately 1,000 employees are currently
eligible to participate in the Long-Term Incentive Plan.
The Long-Term Incentive Plan will be administered by a committee of the
Board of Directors (the "Long-Term Incentive Plan Committee") and will be
comprised of no fewer than two members who must be "outside directors" within
the meaning of Section 162(m) of the Internal Revenue Code of 1986, and the
regulations thereunder. Initially, and until a separate committee is appointed,
the Long-Term Incentive Plan Committee will be the Compensation Committee of the
Board of Directors. The Long-Term Incentive Plan Committee may interpret
provisions of the Long-Term Incentive Plan.
Awards made under the Long-Term Incentive Plan will be paid solely on
account of the attainment of specified increases in cash operating profit, as
measured on a corporate-wide basis, over any period of three calendar years (the
"Performance Period") beginning January 1 of any year the Long-Term Incentive
Plan Committee designates as the beginning of a Performance Period. The awards
shall be payable to participants only upon the attainment of preestablished
increases in cash operating profit during the Performance Period. Awards are
stated as a percentage of the participant's average base salary in effect on the
last day of each year of any three-year Performance Period for which an award is
made; however, the Long-Term Incentive Plan provides that the average annual
base salary used to compute the award cannot exceed the annual base salary in
effect on January 1 of the first year of the three-year Performance Period,
increased by 33 1/3%. The percentages that are used to calculate of awards are
determined by the Long-Term
27
<PAGE> 31
Incentive Plan Committee prior to the beginning of the Performance Period and
are based on a participant's position. The maximum percentage that may be used
to calculate any award under the Long-Term Incentive Plan is 160%.
The maximum amount of compensation payable to any individual under the
Long-Term Incentive Plan would be paid to Summerfield K. Johnston, Jr. since it
is based upon a percentage of average base salary. Assuming the maximum
performance goals were met over the three-year period beginning January 1, 1997,
and further assuming Mr. Johnston's base salary increased by the maximum
percentage that may be taken into consideration under the Long-Term Incentive
Plan, he would earn $2,234,400 for the three-year Performance Period. With
respect to the past three completed Performance Periods (1992-1994, 1993-1995
and 1994-1996) however, Mr. Johnston's awards have only averaged $570,242. The
maximum awards under the Long-Term Incentive Plan would be much lower for the
majority of participants. (The pro forma computation in the following "New Plan
Benefits" table uses assumptions based upon the Company's historical attainment
of cash operating profit goals rather than attempting to predict 1997-1999
performance.)
The Long-Term Incentive Plan Committee will have no authority to increase
the amount of an award payable to a participant than would otherwise be due upon
the attainment of a performance goal, but the Long-Term Incentive Plan Committee
will have the authority to reduce or eliminate any award under the Long-Term
Incentive Plan.
The Long-Term Incentive Plan provides that awards may be paid in one or
more installments, as determined by the Long-Term Incentive Plan Committee.
The Long-Term Incentive Plan provides that awards may be prorated in the
following circumstances: (i) when a participant transfers within the Company or
a subsidiary to a position that is ineligible for participation in this plan or
leaves the employment of the Company and obtains employment with an affiliated
company; (ii) when a participant dies, retires or becomes disabled prior to the
end of a Performance Period; and (iii) when an employee is hired or promoted
into a position eligible for participation after a Performance Period has begun.
The Plan defines an "affiliated company" as The Coca-Cola Company or any company
in which The Coca-Cola Company owns at least 25% of the voting stock or capital
if such company is a party to an agreement with the Company that provides for
the continuation of certain employee benefits upon immediate employment with
such company, which subsequent employment of the Company has approved.
The Board of Directors or the Long-Term Incentive Plan Committee may
terminate or suspend the Long-Term Incentive Plan in whole or in part and may
amend the Long-Term Incentive Plan from time to time to correct any defect or
supply any omission or reconcile any inconsistency in the Long-Term Incentive
Plan if such amendment does not constitute the modification of a material term
of the Long-Term Incentive Plan, without the approval of the share owners of the
Company. No action shall be taken, however, without the approval of the share
owners unless the Committee determines that the approval of share owners would
not be necessary to retain the benefits of Section 162(m) of the Internal
Revenue Code.
Subject to the approval of the Long-Term Incentive Plan by the share
owners, the table titled "New Plan Benefits" in this proxy statement shows, for
illustrative purposes only, a pro forma computation of amounts that could be
paid for the 1997-1999 Performance Period.
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS A VOTE FOR THE PROPOSAL TO
ADOPT THE LONG-TERM INCENTIVE PLAN (EFFECTIVE JANUARY 1, 1997).
28
<PAGE> 32
APPROVAL OF THE EXECUTIVE MANAGEMENT INCENTIVE PLAN
(EFFECTIVE JANUARY 1, 1997)
(PROPOSAL NO. 4)
The Board of Directors of the Company has adopted the Company's Executive
Management Incentive Plan (effective January 1, 1997) (the "Executive Incentive
Plan") and directed that the Executive Incentive Plan be submitted to the share
owners for their approval at the Annual Meeting. The Executive Incentive Plan
will become effective upon the approval by the holders of a majority of the
shares of the common stock of the Company represented and entitled to vote at
the Annual Meeting. The purpose of the Executive Incentive Plan is to advance
the interests of the Company by providing executive officers and managers of the
Company with incentive to assist the Company in meeting and exceeding its
business goals. The following summary description of the Executive Incentive
Plan is qualified in its entirety by reference to the full text of the Executive
Incentive Plan attached hereto as Exhibit C.
The Company intends that the cash awards paid pursuant to the Executive
Incentive Plan be "performance-based" compensation within the meaning of Section
162(m) of the Internal Revenue Code.
The Executive Incentive Plan will be administered by a committee of the
Board of Directors (the "Executive Incentive Plan Committee") and will be
comprised of no fewer than two members who must be "outside directors" within
the meaning of Section 162(m) and the regulations thereunder of the Internal
Revenue Code of 1986, as amended. Initially, the Executive Incentive Plan
Committee will be the Compensation Committee of the Board of Directors. The
Executive Incentive Plan Committee may interpret provisions of the Executive
Incentive Plan.
Cash awards may be made under the Executive Incentive Plan to employees who
are executive officers, in the senior executive band and in the executive band.
Approximately 28 officers and employees of the Company are currently eligible to
participate in the Executive Incentive Plan.
Awards made under the Executive Incentive Plan will be paid solely on
account of attainment of the budgeted cash operating profit of each performance
unit of the Company beginning January 1 of any calendar year the Executive
Incentive Plan Committee designates as a "Performance Period." Performance units
are classified as corporate, group, region or any combination thereof. A minimum
award is paid if a specified percentage of the budgeted cash operating profit is
attained, the award is increased upon the attainment of budgeted cash operating
profit and increased further upon the attainment of a specified percentage above
budgeted cash operating profit. Awards are stated as a percentage of base
salary. The maximum percentage that may be used to calculate any award under the
Executive Incentive Plan is 115%.
The Executive Incentive Plan provides that awards may be prorated in the
following circumstances: (i) when an employee transfers within the Company or a
subsidiary to a position that is ineligible for participation in this Plan or
leaves the employment of the Company and obtains employment with an affiliated
company; (ii) when an employee dies, retires or becomes disabled prior to the
end of the Performance Period; (iii) when an employee is hired or promoted into
a position eligible for participation after a Performance Period has begun; and
(iv) when an employee who is in one position is promoted to another such
position during the Performance Period. The Plan defines an "affiliated company"
as The Coca-Cola Company or any company in which The Coca-Cola Company owns at
least 25% of the voting stock or capital if such company is a party to an
agreement with the Company that provides for the continuation of certain
employee benefits upon immediate employment with such company, which subsequent
employment the Company has approved.
The maximum amount of compensation payable to any individual under the
Executive Incentive Plan would be paid to Summerfield K. Johnston, Jr. since it
is based upon a percentage of annual base salary. Assuming the maximum
performance goal was met for the Performance Period
29
<PAGE> 33
beginning January 1, 1997, and further assuming that Mr. Johnston's base salary
increased by the maximum percentage that may be taken into consideration under
the Executive Incentive Plan, he would earn $1,328,250 for the 1997 Performance
Period. With respect to the past three annual Performance Periods, however, Mr.
Johnston's awards have only averaged $788,917. The maximum awards under the
Executive Incentive Plan are much lower for the majority of participants.
The Executive Incentive Plan Committee will have no authority to increase
the amount of an award payable to a participant that would otherwise be due upon
the attainment of a performance goal, but the Executive Incentive Plan Committee
will have the authority to reduce or eliminate any award under the Executive
Incentive Plan.
The Board or the Executive Incentive Plan Committee may terminate or
suspend the Executive Incentive Plan in whole or in part, and may amend the
Executive Incentive Plan from time to time to correct any defect or supply any
omission or reconcile any inconsistency in the Executive Incentive Plan that
does not constitute the modification of a material term of the Executive
Incentive Plan, without the approval of the share owners of the Company. No
action shall be taken, however, without the approval of the share owners unless
the Committee determines that the approval of share owners would not be
necessary to retain the benefits of Section 162(m) of the Internal Revenue Code.
Subject to the approval of the Executive Incentive Plan by the share
owners, the table entitled "New Plan Benefits" in this proxy statement shows,
for illustrative purposes only, the pro forma amounts which would have been
payable to the participants in this plan had it applied to actual 1996 cash
operating profit as compared to budgeted 1996 cash operating profit.
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS A VOTE FOR THE PROPOSAL TO
ADOPT THE EXECUTIVE MANAGEMENT INCENTIVE PLAN (EFFECTIVE JANUARY 1, 1997)
NEW PLAN BENEFITS
The following table shows: (i) grants of options under the Company's 1997
Stock Option Plan; (ii) pro forma amounts which would be earned for the
1997-1999 period under the Long-Term Incentive Plan (effective January 1, 1997);
and (iii) pro forma amounts which would be earned for 1997 under the Executive
Management Incentive Plan (effective January 1, 1997). The table assumes
approval of each plan by the share owners and, in the case of the Executive
Management Incentive Plan and the Long-Term Incentive Plan, are further subject
to the assumptions noted in the footnotes.
<TABLE>
<CAPTION>
Pro Forma
1997 Bonus Pro Forma
Number of Under Payout
Shares Executive Under Long-
Dollar Subject to Management Term
Value of Options Incentive Incentive
Name and Position Options Granted Plan(2) Plan(3)
----------------- ----------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
Summerfield K. Johnston, Jr. ........... (1) 0 $ 997,500 $ 1,339,479
Vice Chairman and Chief Executive
Officer
Henry A. Schimberg...................... (1) 0 902,500 1,211,909
President and Chief Operating Officer
John R. Alm............................. (1) 0 348,300 411,635
Senior Vice President and Chief
Financial Officer
</TABLE>
30
<PAGE> 34
<TABLE>
<CAPTION>
Pro Forma
1997 Bonus Pro Forma
Number of Under Payout
Shares Executive Under Long-
Dollar Subject to Management Term
Value of Options Incentive Incentive
Name and Position Options Granted Plan(2) Plan(3)
----------------- ----------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
Norman P. Findley III................... (1) 0 $ 251,100 $ 296,760
Senior Vice President
G. David Van Houten, Jr. ............... (1) 0 240,000 287,187
Senior Vice President
Executive Group......................... (1) 146,300 4,545,430 5,548,571
Non-Executive Director Group............ (1) 0 0 0
Non-Executive Officer Employee Group.... (1) 1,799,400 6,065,743 26,905,864
</TABLE>
- ---------------
(1) Options have an exercise price equal to the fair market value of Company
Stock of the Company on January 2, 1997, $47.6875 per share. The actual
value an optionee may realize will depend on the excess of the stock price
over the exercise price on the date the vested Options are exercised.
(2) Awards under the Executive Management Incentive Plan are not determinable
until 1998, because they would be based upon full-year financial results for
1997. The table discloses pro forma bonuses for 1997 based on a comparison
of budgeted 1996 cash operating profit to actual 1996 cash operating profit
and assumes 4% annual salary increases for nonofficer participants.
(3) Awards under the Long-Term Incentive Plan are not determinable until 2000,
when the results of the three-year Performance Period (1997 through 1999)
are available. The table discloses pro forma payments as if the terms of the
Long-Term Incentive Plan applied to the period 1994 through 1996 and assumes
a 4% annual salary increase for nonofficer participants over the three-year
term, and a 4% annual salary increase for officer participants over salary
at December 31, 1996.
APPROVAL OF AMENDMENT TO CERTIFICATE OF INCORPORATION
(PROPOSAL NO. 5)
At its meeting on February 18, 1997, the Board of Directors approved a
proposal to amend Article FOURTH of the Company's certificate of incorporation
to increase the authorized shares of the Company Stock and to effect a 3-for-1
split of the Company Stock.
The full text of the amendment is set forth in Exhibit D to this proxy
statement.
The Board anticipates that the increase in the number of outstanding shares
of Company Stock through the stock split may place the market price of the
Common Stock in a range more attractive to investors, particularly individuals,
and may result in a broader market for the stock. If the proposed amendment is
approved by the Company's share owners, the Company will apply to the New York
Stock Exchange for the continued listing of the stock on a split basis.
The Company plans to continue to pay cash dividends on Company Stock on a
quarterly basis. The current annual rate of dividend is 10 cents per share, and
it is anticipated that the same rate will apply after the split. However, the
decision to pay dividends is made quarterly by the Board of Directors and
depends upon a number of factors, including, for example, earnings, cash flow
requirements and management's assessments of future cash flow needs.
Under the amendment, the number of authorized shares of common stock of the
Company would be increased from 500,000,000 to 1,000,000,000. The par value
would continue to be $1 per share. The number of authorized shares of preferred
stock would remain at 100,000,000.
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<PAGE> 35
It is proposed that the amendment implementing the split will be effective
as of the close of business on May 1, 1997. This means that a record owner of
Company Stock as of such time will automatically become the record owner of two
additional shares of Company Stock for each share owned immediately prior to the
split. No action is required of any share owner to effect the split. If the
amendment is approved, new certificates will be issued to represent the
additional shares resulting from the split. It is anticipated that new
certificates will be mailed to the share owners on or about May 12, 1997.
Existing certificates will continue to represent the number of shares they
currently represent and should be retained by each share owner.
The Company has been advised by tax counsel that the proposed stock split
would not result in gain or loss or the realization of taxable income to owners
of Company Stock under existing United States federal income tax laws. The cost
basis for tax purposes of each new share and each share of Company Stock owned
immediately before the split will be equal to one-third of the cost basis for
tax purposes of each share owned immediately before the split. The holding
period for the additional shares will be deemed to be the same as the holding
period for the original share of Company Stock. The laws of jurisdictions other
than the United States may impose income taxes on the issuance of the additional
shares, and share owners are urged to consult their tax advisors.
In accordance with the terms of the various stock option and restricted
stock plans of the Company, it will be necessary to make appropriate adjustments
to the number of shares and price of Common Stock reserved for issuance under
such plans. Upon the effective date of the split, the number of shares issuable
under such plans will be tripled and the exercise price per share, where
applicable, will be adjusted accordingly.
If the proposed amendment to effect the stock split is adopted, the
Company's paid-in capital account will be debited by the $1 par value per share
of the stock issued as a result of the split, and the Company's common stock
account will be increased by a like amount.
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS A VOTE FOR THE PROPOSAL TO
AMEND ARTICLE FOURTH OF THE COMPANY'S CERTIFICATE OF INCORPORATION TO EFFECT A
3-FOR-1 STOCK SPLIT.
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
(PROPOSAL NO. 6)
The Board of Directors of the Company, upon the recommendation of the Audit
Committee, has appointed the firm of Ernst & Young LLP to serve as independent
auditors of the Company for the fiscal year ending December 31, 1997, subject to
ratification of this appointment by the share owners of the Company at the 1997
Annual Meeting. Ernst & Young LLP has served as independent auditors of the
Company since 1986 and is considered by management of the Company to be well
qualified. The Company has been advised by that firm that neither it nor any
member thereof has any financial interest, direct or indirect, in the Company or
any of its subsidiaries in any capacity.
Representatives of Ernst & Young LLP will be present at the Annual Meeting,
where they will have an opportunity to make a statement, if they desire to do
so, and will be available to respond to appropriate questions.
If the share owners do not ratify the appointment of Ernst & Young LLP, the
Board of Directors will reconsider the appointment.
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS A VOTE FOR THE PROPOSAL TO
RATIFY THE APPOINTMENT OF ERNST & YOUNG LLP AS INDEPENDENT AUDITORS OF THE
COMPANY FOR THE 1997 FISCAL YEAR.
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<PAGE> 36
SHARE-OWNER PROPOSAL
(PROPOSAL NO. 7)
The New York City Employees' Retirement System, which owns 231,934 shares
of Company Stock, has notified the Company that it intends to submit the
following proposal at the Annual Meeting:
CREATION OF AN INDEPENDENT NOMINATING COMMITTEE
SHAREHOLDER PROPOSAL
Submitted on behalf of the New York City Employees' Retirement System by
Alan G. Hevesi, Comptroller of the City of New York.
WHEREAS, the board of directors is meant to be an independent body elected
by shareholders and charged by law and shareholders with the duty, authority and
responsibility to formulate and direct corporate policies, and
WHEREAS, this company has provided that the board may designate from among
its members one or more committees, each of which, to the extent allowed, shall
have certain designated authority, and
WHEREAS, we believe that directors independent of management are best
qualified to act in the interest of shareholders and can take steps necessary to
seek, nominate and present new directors to shareholders, and
WHEREAS, we believe the selection of new directors is an area in which
inside directors may have a conflict of interest with shareholders, and
WHEREAS, we believe that an increased role for the independent directors
would help our company improve its long-term financial condition, stock
performance and ability to compete.
NOW THEREFORE BE IT RESOLVED THAT the shareholders request the company
establish a Nominating Committee to recommend candidates to stand for election
to the board of directors. The Committee shall be composed solely of independent
directors. For these purposes, an independent director is one who: (1) has not
been employed by the company or an affiliate in an executive capacity within the
last five years; (2) is not a member of a company that is one of this company's
paid advisors or consultants, (3) is not employed by a significant customer or
supplier; (4) is not remunerated by the company for personal services
(consisting of legal, accounting, investment banking, and management consulting
services (whether or not as an employee) for a corporation, division, or similar
organization that actually provides the personal services, nor an entity from
which the company derives more than 50 percent of its gross revenues); (5) is
not employed by a tax-exempt organization that receives significant
contributions from the company; (6) is not a relative of the management of the
company; and (7) is not part of an interlocking directorate in which the CEO or
other executive officers of the corporation serves on the board of another
corporation that employs the director.
The proponent has submitted the following statement in support of the
proposal:
"As long-term shareholders we are concerned about our company's prospects
for profitable growth. This proposal is intended to strengthen the process by
which nominees are selected. We believe that this will strengthen the board of
directors in its role of advising, overseeing and evaluating management.
We urge you to vote FOR this proposal."
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST THE PROPOSAL TO ESTABLISH
AN INDEPENDENT NOMINATING COMMITTEE.
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<PAGE> 37
This is substantially the same proposal submitted in 1994, 1995 and 1996 by
the proponent. Each time it has been defeated by the share owners.
The Board of Directors continues to be opposed to the proposal for the same
reasons stated last year: there is no tenable link between the composition of
the nominating committee and the profitability of the Company; all but one
member of the Company's existing Committee on Directors are nonemployees; and
the Board believes there is no useful purpose served in arbitrarily denying
certain large share owners the ability to serve on the nominating committee.
SHARE-OWNER PROPOSALS FOR 1998 ANNUAL MEETING
Director nominations and other proposals of share owners intended to be
presented at the 1998 Annual Meeting of Share Owners must be made in writing and
received by the Company on or before November 5, 1997, to be eligible for
inclusion in the Company's proxy statement and form of proxy relating to that
meeting. If not received within such time period, director nominations and other
share-owner proposals may be submitted to share owners at the 1998 Annual
Meeting (although excluded from the Company's proxy statement and form of proxy
relating to that meeting) only if submitted in writing in accordance with
Article I, Section 10 of the bylaws of the Company and received by the Company
not less than 30 days nor more than 60 days prior to the 1998 Annual Meeting.
All share-owner proposals should be submitted by certified mail, return receipt
requested, to the Secretary of the Company, Post Office Box 723040, Atlanta,
Georgia 31139-0040.
OTHER MATTERS
Management does not know of any matters other than those referred to in the
accompanying notice of the Annual Meeting of Share Owners that may properly come
before the meeting or any adjournments thereof. As to any other matters that may
properly come before the meeting, it is intended that all properly executed
proxies delivered pursuant to this solicitation will be voted on any such
matters in accordance with the discretion of the persons named on the enclosed
proxy.
J. GUY BEATTY, JR.
Secretary
Atlanta, Georgia
March 10, 1997
---------------------
THE COMPANY'S 1996 ANNUAL REPORT, WHICH INCLUDES AUDITED FINANCIAL
STATEMENTS, HAS BEEN MAILED TO SHARE OWNERS OF THE COMPANY. THE ANNUAL REPORT
DOES NOT FORM ANY PART OF THE MATERIAL FOR THE SOLICITATION OF PROXIES.
---------------------
34
<PAGE> 38
EXHIBIT A
COCA-COLA ENTERPRISES INC.
1997 STOCK OPTION PLAN
SECTION 1. PURPOSE
The purpose of the 1997 Stock Option Plan (the "Plan") is to advance the
interest of Coca-Cola Enterprises Inc. (the "Company") and its Subsidiaries (as
defined in Section 4) by encouraging and enabling the acquisition of a financial
interest in the Company by officers and other key employees through grants of
stock options ("Options").
SECTION 2. ADMINISTRATION
The Plan shall be administered by a Compensation Committee (the
"Committee") appointed by the Board of Directors of the Company (the "Board")
from among its members and shall be comprised of not fewer than two members who
shall be "nonemployee directors" within the meaning of Rule 16b-3 under the
Securities Exchange Act of 1934, as amended, and "outside directors" within the
meaning of Section 162(m) of the Internal Revenue Code of 1986, as amended
("Internal Revenue Code"), and the regulations thereunder.
The Committee shall determine the persons to whom and the times at which
Options will be granted, the number of shares to be subject to each Option, the
duration of each Option, the times within which the Option may be exercised, the
cancellation of the Option (with the consent of the holder thereof) and the
other conditions of the grant of an Option. The Committee, however, may
delegate, from time to time, to the Chief Executive Officer the authority to
make Awards under the Plan or to extend the period for exercise of Options
awarded under the Plan, unless such delegation would jeopardize the benefits of
Section 162(m) of the Internal Revenue Code or regulations thereunder.
Conditions of the grants of Options need not be the same with respect to each
optionee or with respect to each Option.
The Committee may, subject to the provisions of the Plan, establish such
rules and regulations for the proper administration of the Plan, may make
interpretations and take other action in relation to the Plan as it deems
necessary or advisable. Each interpretation or other action made or taken
pursuant to the Plan shall be final and conclusive for all purposes and upon all
persons including, but without limitation, the Company, its Subsidiaries, the
Committee, the Board, the affected optionees, and their respective successors in
interest.
In addition to such other rights of indemnification as they have as
directors or as members of the Committee, the members of the Committee shall be
indemnified by the Company against reasonable expenses (including, without
limitation, attorneys' fees) incurred in connection with the defense of any
action, suit or proceeding, or in connection with any appeal, to which they or
any of them may be a party by reason of any action taken or failure to act in
connection with the Plan or any Option granted hereunder, and against all
amounts paid by them in settlement thereof (provided such settlement is approved
to the extent required by and in the manner provided by the Certificate of
Incorporation or Bylaws of the Company relating to indemnification of directors)
or paid by them in satisfaction of a judgment in any such action, suit or
proceeding, except in relation to matters as to which it shall be adjudged in
such action, suit or proceeding that such Committee member or members did not
act in good faith and in a manner he, she or they reasonably believed to be in
or not opposed to the best interest of the Company.
SECTION 3. STOCK
The stock to be issued under the Plan shall be shares of common stock, $1
par value, of the Company (the "Stock"). The Stock shall be made available from
authorized and unissued Stock or from shares of Stock held by the Company in its
treasury. The total number of shares of Stock that
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may be issued under the Plan pursuant to Options granted hereunder shall not
exceed 5,433,000. Stock subject to any unexercised portion of an Option which
expires or is canceled, surrendered or terminated for any reason may again be
subject to Options granted under the Plan. Stock received in payment upon the
exercise of an Option may not be the subject of a subsequent Option.
SECTION 4. ELIGIBILITY
Options may be granted to executive officers, other persons in the senior
executive band, and in the executive band, branch managers, sales center
managers, and other officers and management employees (including non-employee
officers) of the Company and its Subsidiaries. "Subsidiary" shall mean any
corporation or other business organization in which the Company owns, directly
or indirectly, 25% or more of the voting stock or capital at the time of the
granting of such Option.
No person shall be granted the right to acquire pursuant to Options granted
under the Plan more than 20% of the aggregate number of shares of Stock
originally authorized for issuance under the Plan.
SECTION 5. AWARDS OF OPTIONS
(A) OPTION PRICE. The option price shall be 100% or more of the fair
market value of the Stock on the date of grant. The fair market value of shares
of Stock shall be computed on the basis of the average of the high and low
market prices at which a share of Stock shall have been sold on the date for
which the valuation is made, or on the next preceding trading day if such date
was not a trading day, as reported on the New York Stock Exchange Composite
Transactions listing, or as otherwise determined by the Committee.
(B) PAYMENT. The option price shall be paid in full at the time of
exercise. No shares shall be issued until full payment has been received
therefor. Payment may be made in cash or, with the prior approval of and upon
the conditions established by the Committee, by other means, including delivery
of shares of Stock owned by the optionee.
(C) DURATION OF OPTIONS. Subject to the provisions of Section 9 and the
terms of the Option, the duration of Options shall be 10 years from date of
grant.
(D) TIME PERIOD FOR EXERCISE OF OPTION. Subject to the provisions of
Section 9 and terms of the Option, an Option shall be exercisable, in whole or
in part, within such time periods as established on the date of grant by the
Committee, or, when applicable, the Chief Executive Officer.
(E) OTHER TERMS AND CONDITIONS. Options may contain such other provisions,
as the Committee shall determine appropriate from time to time. The grant of an
Option to any officer or employee shall not affect in any way the right of the
Company and any Subsidiary to terminate the relationship between the Company or
Subsidiary and the optionee.
(F) OPTIONS GRANTED TO INTERNATIONAL OPTIONEES. Options granted to an
optionee who is subject to the laws of a country other than the United States of
America may contain terms and conditions inconsistent with provisions of the
Plan (except those necessary to retain the benefits of Section 162(m) of the
Internal Revenue Code), or may be granted under such supplemental documents, as
required under such laws.
(G) WITHHOLDING. The Company and its Subsidiaries shall, to the extent
permitted by law, have the right to deduct from any payment of any kind
otherwise due to the optionee the amount of any federal, state or local taxes
required by law to be withheld with respect to the Stock subject to such Award.
SECTION 6. REPLACEMENT
The Committee from time to time may permit an optionee under the Plan to
surrender for cancellation any unexercised outstanding stock option or stock
appreciation rights of the Company
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and receive in exchange from the Company either shares of Stock, an option for
such number of shares of Stock, or both, in amounts and with features as
designated by the Committee.
SECTION 7. EXTENSION OF THE TERMS OF OPTIONS
The Committee may extend the duration of any Option for a period not to
exceed one year without changing the option price and on such other terms and
conditions as the Committee may deem advisable unless such extension or change
would result in less favorable tax treatment than the optionee would have
received under the original option.
SECTION 8. NONTRANSFERABILITY OF OPTION
An Option granted pursuant to the Plan shall not be transferable otherwise
than by will or by the laws of descent and distribution or pursuant to a
domestic relations order as defined by the Internal Revenue Code unless
otherwise determined by the Committee. Certificate(s) representing the shares of
Stock issued upon exercise of an Option shall be issued only in the name of the
optionee or in the name of such optionee's duly authorized representative. With
the exception of any Option transferred pursuant to a qualified domestic
relations order, Options shall be exercisable, during the lifetime of an
optionee, only by the optionee personally or by the optionee's legal
representative. With respect to any Option transferred pursuant to a qualified
domestic relations order, any such Option shall be exercisable only by the
designated transferee personally or the designated transferee's legal
representative.
SECTION 9. EFFECT OF TERMINATION OF EMPLOYMENT
(A) RETIREMENT AND DISABILITY.
(I) The Committee, in its sole discretion, may cause all outstanding
Options held by an optionee upon his or her retirement or disability to
become immediately exercisable.
(II) All Options exercisable upon retirement or disability of an
optionee (whether due to Committee action or otherwise) or becoming
exercisable thereafter shall expire no later than 36 months from the date
of such optionee's retirement or disability; provided, however, that if the
optionee dies within two years after the optionee's retirement or
disability, the Options shall expire 12 months after his or her death,
unless the Committee determines otherwise.
(B) DEATH WHILE EMPLOYED.
Upon the death of an optionee prior to termination of employment, all
outstanding Options held by such employee expire no later than 12 months after
the employee's death, unless the Committee determines otherwise.
(C) OTHER TERMINATION OF EMPLOYMENT.
(I) Upon the termination of employment of an optionee other than the
death, disability or retirement of the optionee ("Other Termination of
Employment"), then the Committee, in its sole discretion, may cause all
outstanding nonexercisable Options held by such optionee to become
immediately exercisable.
(II) All Options exercisable upon the Other Termination of Employment
(whether due to Committee action or otherwise) or becoming exercisable
thereafter, shall expire no later than six months after the Other
Termination of Employment, unless the Committee determines otherwise.
(D) DEFINITIONS AND OTHER DETERMINATIONS.
(I) For purposes of this Section 9, "retirement" means an optionee's
voluntary termination of employment on a date which is on or after the
earliest date on which such optionee would be eligible for an immediately
payable benefit pursuant to the terms of the defined benefit pension
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plan sponsored by the Company or a Subsidiary in which the optionee
participates. If the optionee does not participate in such a plan, the date
shall be determined as if the optionee participated in the Company's
defined benefit plan covering the majority of its nonbargaining employees
in the United States. With respect to nonemployee officers, "retirement"
means termination of services as an officer at or after age 55.
Notwithstanding the foregoing, options may contain such other definitions
of "retirement," as the Committee determines appropriate.
(II) For purposes of this Section 9, "disability" shall be determined
according to the definition of "disability," in effect at the time of the
determination, in the defined benefit pension plan sponsored by the Company
or a Subsidiary in which the optionee participates. If the optionee does
not participate in such a plan, the definition shall be determined as if
the optionee participated in the Company's defined benefit plan covering
the majority of its nonbargaining employees in the United States.
(III) For purposes of this Section 9, an optionee's employment shall
not be deemed to have terminated if the optionee obtains immediate
employment with certain affiliates of the Company, as defined in an Option,
and termination from such subsequent employment shall be deemed a
termination from the Company, unless the optionee obtains immediate
reemployment with the Company or its Subsidiaries.
SECTION 10. NO RIGHTS AS A SHARE OWNER
An optionee or transferee of an Option shall have no right as a share owner
with respect to any Stock covered by an Option or receivable upon the exercise
of an Option until the optionee or transferee shall have become the holder of
record of such Stock. No adjustments shall be made for dividends in cash or
other property (except for share dividends) or other distributions or rights in
respect of such Stock for which the record date is prior to the date on which
the optionee or transferee shall have in fact become the holder of record of the
share of Stock acquired pursuant to the Option.
SECTION 11. ADJUSTMENT IN THE NUMBER OF SHARES AND IN OPTION PRICE
In the event there is any change in the shares of Stock through the
declaration of stock dividends or stock splits or through recapitalization or
merger, share exchange, consolidation, combination of shares or otherwise, the
Committee or the Board shall make such adjustment, if any, as it may deem
appropriate in the number of shares of Stock available for Options as well as
the number of shares of Stock subject to any outstanding Option and the option
price thereof. Any such adjustment may provide for the elimination of any
fractional shares which might otherwise become subject to any Option without
payment therefor.
SECTION 12. AMENDMENTS, MODIFICATION AND TERMINATION OF THE PLAN
The Board or the Committee may terminate the Plan in whole or in part, may
suspend the Plan in whole or in part from time to time, and may amend the Plan
from time to time, including the adoption of amendments deemed necessary or
desirable to qualify the Options under the laws of various states (including tax
laws) or to correct any defect or supply any omission or reconcile any
inconsistency in the Plan or in any Option granted thereunder, without the
approval of the share owners of the Company. However, no action shall be taken
without the approval of the share owners of the Company if the Committee
determines that the approval of share owners would be necessary to retain the
benefits of Section 162(m) of the Internal Revenue Code.
No amendment or termination or modification of the Plan shall in any manner
affect any Option theretofore granted without the consent of the optionee,
except that the Committee may amend or modify the Plan in a manner that does
affect Options theretofore granted upon a finding by the Committee that such
amendment or modification is necessary to retain the benefits of Sec-
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tion 162(m) of the Internal Revenue Code or that it is not adverse to the
interest of holders of outstanding Options.
The Plan shall terminate five years after the date of approval of the Plan
by the share owners of the Company unless earlier terminated by the Board or by
the Committee.
SECTION 13. GOVERNING LAW
The Plan and all determinations made and actions taken pursuant thereto
shall be governed by the laws of the State of Georgia and construed in
accordance therewith.
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EXHIBIT B
LONG-TERM INCENTIVE PLAN
(AS AMENDED AND RESTATED EFFECTIVE JANUARY 1, 1997)
SECTION 1. PURPOSE.
The purpose of the Long-Term Incentive Plan (the "Plan") is to advance the
interest of Coca-Cola Enterprises Inc. (the "Company") by providing key
management and sales employees with incentive to assist the Company in meeting
and exceeding its business goals.
SECTION 2. ADMINISTRATION.
The Plan shall be administered by a Compensation Committee (the
"Committee") appointed by the Board of Directors of the Company (the "Board")
from among its members and shall be comprised of not fewer than two members who
shall be "outside directors" within the meaning of Section 162(m) and the
regulations thereunder of the Internal Revenue Code of 1986, as amended (the
"Code").
The Committee may, subject to the provisions of the Plan, establish such
rules and regulations or take such action as it deems necessary or advisable for
the proper administration of the Plan. Each determination made or action taken
pursuant to the Plan, including interpretation of the Plan, shall be final and
conclusive for all purposes and upon all persons, including, but not limited to,
the Company, the Committee, the Board, officers, the affected Participants (as
defined in Section 3), and their respective successors in interest.
In addition to such other rights of indemnification as they have as
directors or as members of the Committee, the members of the Committee shall be
indemnified by the Company against reasonable expenses (including, but not
limited to, attorneys' fees) incurred in connection with the defense of any
action, suit or proceeding, or in connection with any appeal, to which they or
any of them may be a party by reason of any action taken or failure to act in
connection with the Plan, and against all amounts paid by them in settlement
thereof (provided such settlement is approved to the extent required by and in
the manner provided by the Certificate of Incorporation or Bylaws of the Company
relating to indemnification of directors) or paid by them in satisfaction of a
judgment in any such action, suit, or proceeding, except in relation to matters
as to which it shall be adjudged in such action, suit or proceeding that such
Committee member or members did not act in good faith and in a manner he, she or
they reasonably believed to be in or not opposed to the best interest of the
Company.
SECTION 3. ELIGIBILITY.
Cash awards ("Awards") may be made under this Plan to the persons who are
executive officers; in the senior executive band; in the executive band;
corporate directors; and, as such positions are defined by the Compensation
Committee, senior staff of the Company and its Subsidiaries ("Participants").
"Subsidiary" shall mean any corporation or other business organization in
which the Company owns, directly or indirectly, 25% or more of the voting stock
or capital during a Performance Period.
SECTION 4. PERFORMANCE GOAL CRITERIA.
Awards made under the Plan shall be paid solely on account of the
attainment of specified increases in cash operating profit ("COP"), as measured
on a corporate-wide basis, over the period of three consecutive calendar years
(the "Performance Period") beginning on January 1 of any year the Compensation
Committee designates as the beginning of a Performance Period for which an Award
shall be made. The Committee shall preestablish the specific COP targets for
each
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Performance Period in accordance with Code Section 162(m) and regulations
thereunder. For the purposes of the Plan, COP is determined as operating income
plus depreciation and amortization, normalized for acquisitions, divestitures
and other significant financial events.
SECTION 5. CALCULATION OF THE AWARD.
The Committee has established Award levels, described as percentages by
which a Participant's Average Annual Base Salary shall be multiplied, to
determine the amount of an Award payable upon the attainment of specified
increases in the corporate-wide COP. "Average Annual Base Salary" means the
average of the base salary in effect on the last day of each year of the
three-year Performance Period for which an Award is made. Notwithstanding the
preceding, the Average Annual Base Salary used to calculate an Award paid to a
Participant may not exceed such Participant's annual base salary in effect on
January 1 that constitutes the beginning of the Performance Period for which the
Award is being paid, increased by 33 1/3%. No Award under the Plan shall exceed
160% of a Participant's Average Annual Base Salary.
SECTION 6. PAYMENT OF AWARD AND DEFINITIONS.
(i) Awards shall be paid in cash after the end of the Performance Period in
one or more installments, as determined by the Committee.
(ii) "Retirement" means a Participant's voluntary termination of employment
on a date which is on or after the earliest date on which such Participant would
be eligible for an immediately payable benefit pursuant to the terms of the
defined benefit pension plan sponsored by the Company or a Subsidiary in which
the Participant participates. If the Participant does not participate in such a
plan, the date shall be determined as if the Participant participated in the
Company's defined benefit plan covering the majority of its non-bargaining
employees in the United States.
(iii) "Disability" shall be determined according to the definition of
"total and permanent disability," in effect at the time of the determination, in
the defined benefit plan sponsored by the Company or a Subsidiary in which the
Participant participates. If the Participant does not participate in such a
plan, the definition shall be determined as if the Participant participated in
the Company's defined benefit plan covering the majority of its non-bargaining
employees in the United States.
SECTION 7. PRORATED AND PARTIAL AWARDS.
(i) If during the years to which the Plan applies, an employee is hired or
promoted into a position eligible for participation in the Plan, the employee
shall be eligible to receive a prorated Award for the period of partial
participation. To calculate the Average Annual Base Salary for a prorated Award,
each year's annual base salary shall be prorated based on the period in which
the employee was employed in the eligible position.
(ii) If a Participant is promoted from one position to another position
eligible for participation under the Plan, the Participant's Award shall be
prorated for the period of time the Participant was employed within each
position. The base salary in effect on the last day of each year shall be
included in the calculation of the Participant's Average Annual Base Salary,
irrespective of the changes of positions. Prorated awards shall be measured
according to the number of whole months in which a Participant was employed
within each position for which the Award is made.
(iii) If, within a Performance Period, a Participant transfers from a
position eligible for participation under the Plan to a position ineligible for
participation, a prorated Award shall be paid to such Participant for the period
of time the Participant was employed within the eligible position. The
Participant's annual base salary in effect on the last day of the Participant's
employment in the eligible position shall be included in the calculation of the
Participant's Average Annual Base Salary, irrespective of the change of
positions. Prorated awards shall be measured according to the number of whole
months in which the Participant was employed within one or more eligible
positions.
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(iv) Partial Awards under this Section 7 shall not be paid to a Participant
whose employment is terminated prior to the last day of the Performance Period
unless the reason for such termination was the Participant's death, disability,
or retirement (as defined in Section 6). To determine the Average Annual Base
Salary to be used in calculating a partial Award, each year's base salary shall
be prorated for the period in which the Participant was employed in an eligible
position during the Performance Period. A partial Award paid to a Participant
whose employment is terminated on account of death or disability shall be
calculated based on the increase in COP as of December 31st of the year
preceding the Participant's termination and shall be paid in the year following
such Participant's termination of employment. A partial Award paid to a
Participant whose employment is terminated on account of retirement shall be
paid in the year following the end of the Performance Period for which the Award
is made, and subject to the Committee's discretion described in Section 8, shall
be calculated on the basis of the increase in COP through the end of the
Performance Period.
(v) For purposes of this Section 7, a Participant's employment with the
Company will be deemed not to be a termination of employment if the
Participant's reason for termination with the Company is due to immediate
employment with any Affiliate; however, in such event, the Participant's Award
shall be subject to proration as if the Participant transferred to a position
within the Company that is ineligible for participation in the Plan. The term
"Affiliate" shall include The Coca-Cola Company or any corporation or business
entity in which The Coca-Cola Company owns, directly or indirectly, 25% or more
of the voting stock or capital if such company is a party to an active
reciprocity agreement with the Company and the Company has assented to the
Participant's subsequent employment.
SECTION 8. DISCRETION OF THE COMPENSATION COMMITTEE.
All Awards shall be made solely on the basis of the performance goals set
forth by the Committee pursuant to Section 4 and only in accordance with the
standards set forth in Section 5. The Committee shall have no authority to
increase the amount of an Award payable to a Participant which would otherwise
be due upon the attainment of the performance goal. The Committee shall,
however, have the authority to reduce or eliminate any Award under the Plan.
SECTION 9. COMMITTEE CERTIFICATION.
Prior to payment of an Award, the Committee shall certify in writing that
the performance targets described in Section 4 have, in fact, been satisfied.
SECTION 10. AMENDMENTS, MODIFICATION AND TERMINATION OF THE PLAN.
The Board or the Committee may terminate the Plan in whole or in part, may
suspend the Plan in whole or in part from time to time, and may amend the Plan
from time to time to correct any defect or supply any omission or reconcile any
inconsistency in the Plan or in the Awards made thereunder that does not
constitute the modification of a material term of the Plan, without the approval
of the share owners of the Company. No action shall be taken, however, without
the approval of the share owners of the Company unless the Committee determines
that the approval of share owners would not be necessary to retain the benefits
of Section 162(m) of the Internal Revenue Code of 1986, as amended.
SECTION 11. GOVERNING LAW.
The Plan and all determinations made and actions taken pursuant thereto
shall be governed by the laws of the State of Georgia and construed in
accordance therewith.
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EXHIBIT C
EXECUTIVE MANAGEMENT INCENTIVE PLAN
(EFFECTIVE JANUARY 1, 1997)
SECTION 1. PURPOSE.
The purpose of the Executive Management Incentive Plan (the "Plan") is to
advance the interest of Coca-Cola Enterprises Inc. (the "Company") by providing
executive officers and managers of the Company with incentive to assist the
Company in meeting and exceeding its business goals.
SECTION 2. ADMINISTRATION.
The Plan shall be administered by a Compensation Committee (the
"Committee") appointed by the Board of Directors of the Company (the "Board")
from among its members and shall be comprised of not fewer than two members who
shall be "outside directors" within the meaning of Section 162(m) and the
regulations thereunder of the Internal Revenue Code of 1986, as amended (the
"Code").
The Committee may, subject to the provisions of the Plan, establish such
rules and regulations or take such action as it deems necessary or advisable for
the proper administration of the Plan. Each interpretation made or action taken
pursuant to the Plan shall be final and conclusive for all purposes and binding
upon all persons, including, but not limited to, the Company, the Committee, the
Board, the affected Participants (as defined in Section 3), and their respective
successors in interest.
In addition to such other rights of indemnification as they have as
directors or as members of the Committee, the members of the Committee shall be
indemnified by the Company against reasonable expenses (including, but not
limited to, attorneys' fees) incurred in connection with the defense of any
action, suit or proceeding, or in connection with any appeal, to which they or
any of them may be a party by reason of any action taken or failure to act in
connection with the Plan, and against all amounts paid by them in settlement
thereof (provided such settlement is approved to the extent required by and in
the manner provided by the Certificate of Incorporation or Bylaws of the Company
relating to indemnification of directors) or paid by them in satisfaction of a
judgment in any such action, suit, or proceeding, except in relation to matters
as to which it shall be adjudged in such action, suit or proceeding that such
Committee member or members did not act in good faith and in a manner he, she or
they reasonably believed to be in or not opposed to the best interest of the
Company.
SECTION 3. ELIGIBILITY.
Cash awards ("Awards") may be made under this Plan to persons who are
executive officers, in the senior executive band, and in the executive band of
the Company and its Subsidiaries ("Participants").
"Subsidiary" shall mean any corporation or other business organization in
which the Company owns, directly or indirectly, 25% or more of the voting stock
or capital during any Performance Period.
SECTION 4. PERFORMANCE GOAL CRITERIA.
The Committee shall establish specific objective targets in relation to the
cash operating profit as budgeted by the Company ("budgeted COP") for each
performance unit of the Company over a period of a calendar year (the
"Performance Period") designated by Compensation Committee as a Performance
Period for which an Award shall be made. Awards under the Plan shall be paid
solely
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on account of the attainment of these targets, which shall be preestablished in
accordance with Code Section 162(m) and regulations thereunder. For the purposes
of the Plan, COP shall be determined as operating income plus depreciation and
amortization, normalized for acquisitions, divestitures and other significant
financial events. For purposes of the Plan, performance units shall be
classified as corporate, group or region, or any combination thereof.
SECTION 5. CALCULATION OF AWARDS.
The Committee shall establish Award levels, described as percentages by
which a Participant's annual base salary shall be multiplied, to determine the
amount of an Award payable upon the attainment of specified targets of budgeted
COP. No award under the Plan shall exceed 115% percent of a Participant's annual
base salary. An award paid to a Participant shall be calculated using the annual
base salary in effect on December 31 of the year for which the Award is made.
Notwithstanding the preceding sentence, the annual base salary used to calculate
an Award paid to a Participant (under this Section 5 or Section 6) may not
exceed such Participant's annual base salary in effect on January 1 of any
Performance Period for which the Award is made, increased by 10%.
SECTION 6. PRORATED AND PARTIAL AWARDS.
(i) A person hired or promoted into a position identified in Section 3
("Eligible Position") during a Performance Period shall receive a prorated Award
for the period of time the person was employed in an Eligible Position, using
the Participant's base salary in effect on December 31 of the Performance Period
for which the Award is made.
(ii) A Participant who is promoted from one Eligible Position to another
Eligible Position during a Performance Period shall receive an Award that is
prorated for the period of time the Participant was employed within each
Eligible Position, using the Participant's annual base salary in effect on
December 31 of the Performance Period for which the Award is made.
(iii) A Participant who is not employed in an Eligible Position on the last
day of the Performance Period due to the Participant's transfer to a position
with the Company or a Subsidiary that is not an Eligible Position shall receive
an Award that is prorated for the period of time the Participant was employed in
an Eligible Position, using the Participant's annual salary on the last day that
the Participant is employed in that Eligible Position.
(iv) A Participant whose employment is terminated prior to the last day of
the Performance Period shall not receive an Award that is prorated for the
period of time the Participant was employed in an Eligible Position unless the
reason for such termination was the Participant's death, disability, or
retirement. For purposes of this Section 6, a Participant's employment with the
Company will be deemed not to be terminated if the Participant's reason for
termination was due to immediate employment with any Affiliate; however, such
Participant's Award shall be prorated as if the Participant transferred from an
Eligible Position to a position that is ineligible for participation in the
Plan. The term "Affiliate" shall include The Coca-Cola Company or any
corporation or business entity in which The Coca-Cola Company owns, directly or
indirectly, 25% or more of the voting stock or capital if such Company is a
party to an active reciprocity agreement with the Company and the Company has
assented to the Participant's subsequent employment.
(v) For purposes of this Section 6:
(a) "Retirement" means a Participant's voluntary termination of
employment on a date which is on or after the earliest date on which such
Participant would be eligible for an immediately payable benefit pursuant
to the terms of the defined benefit pension plan sponsored by the Company
or a Subsidiary in which the Participant participates. If the Participant
does not participate in such a plan, the date shall be determined as if the
Participant
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participated in the Company's defined benefit plan covering the majority of
its non-bargaining employees in the United States.
(b) "Disability" shall be determined according to the definition of
"total and permanent disability," in effect at the time of the
determination, in the defined benefit plan sponsored by the Company or a
Subsidiary in which the Participant participates. If the Participant does
not participate in such a plan, the definition shall be determined as if
the Participant participated in the Company's defined benefit plan covering
the majority of its non-bargaining employees in the United States.
(c) "Prorated" means the determination of the amount of an Award for
partial participation that is measured according to the nearest whole
number of months in which a Participant was employed in an Eligible
Position(s) during the Performance Period for which the Award is made.
SECTION 7. DISCRETION OF THE COMPENSATION COMMITTEE.
All Awards shall be made solely on the basis of the performance goals set
forth by the Committee pursuant to Section 4 and only in accordance with the
standards set forth in Section 5. The Committee shall have no authority to
increase the amount of an Award payable to a Participant which would otherwise
be due upon the attainment of the performance goal. The Committee shall,
however, have the authority to reduce or eliminate any Award under the Plan.
SECTION 8. COMMITTEE CERTIFICATION.
Prior to the payment of an Award, the Committee shall certify in writing
that the performance targets of Section 4 have, in fact, been satisfied.
SECTION 9. AMENDMENTS, MODIFICATION AND TERMINATION OF THE PLAN.
The Board or the Committee may terminate the Plan in whole or in part, may
suspend the Plan in whole or in part from time to time, and may amend the Plan
from time to time to correct any defect or supply any omission or reconcile any
inconsistency in the Plan or in the Awards made thereunder that does not
constitute the modification of a material term of the Plan, without the approval
of the share owners of the Company. No action shall be taken, however, without
the approval of the share owners unless the Committee determines that the
approval of share owners would not be necessary to retain the benefits of
Section 162(m) of the Internal Revenue Code of 1986, as amended.
SECTION 10. GOVERNING LAW.
The Plan and all determinations made and actions taken pursuant thereto
shall be governed by the laws of the State of Georgia and construed in
accordance therewith.
C-3
<PAGE> 49
EXHIBIT D
AMENDMENT TO
ARTICLE FOURTH
CERTIFICATE OF INCORPORATION
OF
COCA-COLA ENTERPRISES INC.
FOURTH: A. The total number of shares of all classes of stock that the
Corporation shall have authority to issue is One Billion One Hundred Million
(1,100,000,000) shares, consisting of One Billion (1,000,000,000) shares of
common stock, par value $1 per share (hereinafter referred to as "Common Stock")
and One Hundred Million (100,000,000) shares of preferred stock, par value $1
per share (hereinafter referred to as "Preferred Stock").
B. The board of directors of the Corporation is authorized, subject to any
limitations prescribed by law, to provide for the issuance of the shares of
Preferred Stock in series, and by filing a certificate pursuant to the
applicable law of the State of Delaware (hereinafter referred to as a "Preferred
Stock Designation") to establish from time to time the number of shares to be
included in each such series, and to fix the designation, powers, preferences,
and rights of the shares of each such series and any qualifications, limitations
or restrictions thereof. The number of authorized shares of Preferred Stock may
be increased or decreased (but not below the number of shares thereof then
outstanding) by the affirmative vote of the holders of a majority of the shares
of Common Stock, without a vote of the holders of the shares of Preferred Stock,
or of any series thereof, unless a vote of any such holders is required pursuant
to the Preferred Stock Designation or Preferred Stock Designations establishing
the series of Preferred Stock.
C. Each holder of shares of Common Stock shall be entitled to one vote for
each share of Common Stock held of record on all matters on which the holders of
shares of Common Stock are entitled to vote.
D. Each share of Common Stock of the Corporation issued and outstanding or
held in the treasury of the Corporation immediately prior to the close of
business on May 1, 1997, that being the time when the amendment of this Article
FOURTH of the Certificate of Incorporation shall have become effective, is
changed into and reclassified as three fully paid and nonassessable shares of
Common Stock, par value $1 per share, and at the close of business on such date,
each holder of record of Common Stock shall, without further action, be and
become the holder of two additional shares of Common Stock for each share of
Common Stock held of record immediately prior thereto. Effective at the close of
business on such date, each certificate representing shares of Common Stock
outstanding or held in treasury immediately prior to such time shall continue to
represent the same number of shares of Common Stock and as promptly as
practicable thereafter, the Corporation shall issue and cause to be delivered to
each holder of record of shares of Common Stock at the close of business on such
date an additional certificate or certificates representing two additional
shares of Common Stock for each share of Common Stock held of record immediately
prior thereto.
D-1
<PAGE> 50
APPENDIX A
[Coca-Cola Enterprises Inc. Logo]
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
OF COCA-COLA ENTERPRISES INC.
P The undersigned hereby (a) appoints J. Guy Beatty, Jr., Lowry F. Kline,
R and Philip H. Sanford, each as proxies with full power of substitution, to
O vote all shares of Common Stock of Coca-Cola Enterprises Inc. owned of
X record by the undersigned and (b) directs Trust Company Bank, Trustee under
Y the Coca-Cola Enterprises Inc. Matched Employee Savings and Investment Plan,
to vote in person or by proxy all shares of Common Stock of Coca-Cola
Enterprises Inc. allocated to any accounts of the undersigned under such
Plan, and which the undersigned is entitled to vote, on all matters which
may come before the 1997 Annual Meeting of Share Owners to be held at the
Hotel du Pont, 11th and Market Streets, Wilmington, Delaware, on April 21,
1997 at 10:30 a.m. local time, and any adjournments thereof, unless
otherwise specified herein.
Proposal 1:
Election of Directors, Nominees:
For terms to expire at the 2000 Annual Meeting of Share Owners:
Howard G. Buffett, Johnnetta B. Cole, Claus M. Halle, Jean-Claude Killy,
and Henry A. Schimberg.
YOUR ARE ENCOURAGED TO SPECIFY YOUR CHOICES BY MARKING
THE APPROPRIATE BOXES, SEE REVERSE SIDE, BUT YOU NEED NOT
MARK ANY BOXES IF YOU WISH TO VOTE IN ACCORDANCE WITH THE SEE REVERSE
BOARD OF DIRECTORS' RECOMMENDATIONS. THE PROXIES CANNOT SIDE
VOTE YOUR SHARES UNLESS YOU SIGN AND RETURN THIS CARD.
/ X / PLEASE MARK YOUR 2516
VOTE AS IN THIS
EXAMPLE
This proxy, when properly executed will be voted in the manner directed
herein. If no directions are given, this proxy will be voted FOR the election
of directors, FOR Proposals 2, 3, 4, 5 and 6, AGAINST Proposal 7, and as the
proxies deem advisable on all other matters that may properly come before the
Meeting.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
The Board of Directors recommends a vote FOR Proposals 1, 2, 3, 4, 5, and 6.
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FOR WITHHELD FOR AGAINST ABSTAIN FOR AGAINST ABSTAIN
1. Election of 2. To approve the Company's [ ] [ ] [ ] 4. To approve the Company's [ ] [ ] [ ]
Directors [ ] [ ] 1997 Stock Option Plan; Executive Management
(See Reverse) Incentive Plan (effective
3. To approve the Company's [ ] [ ] [ ] January 1, 1997);
For, except vote withheld Long-Term Incentive Plan
from the following nominee(s): (effective January 1, 1997); 5. To approve an amendment [ ] [ ] [ ]
to the Company's
______________________________ certificate of Incorporation
to increase the authorized
common stock and to effect
a 3-for-1 split of the
common stock of the Company;
6. To ratify the appointment [ ] [ ] [ ]
of Ernst & Young LLP as
independent auditors of
the Company for the 1997
fiscal year; and
-------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE
AGAINST PROPOSAL 7.
-------------------------------------------------
FOR AGAINST ABSTAIN
7. Share-Owner Proposal [ ] [ ] [ ]
to create an
independent nominating
committee.
-------------------------------------------------
Do you plan to [ ] [ ]
attend the Annual Yes No
Meeting?
SIGNATURE(S)________________________________________________________________ DATE _____________________
Please sign exactly as name appears hereon. Joint owners should each sign. When signing as attorney,
executor, administrator, trustee or guardian, please give your full title as such.
</TABLE>
