<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended JUNE 30, 1997
-----------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 33-69274
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THE COCA-COLA BOTTLING GROUP (SOUTHWEST), INC.
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(Exact name of registrant as specified in its charter)
NEVADA 75-2158578
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(State or other jurisdiction (I.R.S. Employer
of incorporation or organizatio) Identification No.)
1999 BRYAN STREET, SUITE 3300, DALLAS, TEXAS 75201
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(Address of principal executive offices)(Zip Code)
Registrant's telephone number, including area code: (214) 969-1910
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
--- ---
The aggregate market value of the voting stock held by non-affiliates of
the registrant, as of August 1, 1997 was $0.00.
As of August 1, 1997, 100,000 shares of the Company's common stock , par
value $.10 per share, were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE:
None
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PART I
FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
THE COCA-COLA BOTTLING GROUP (SOUTHWEST), INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS--JUNE 30, 1997 AND DECEMBER 31, 1996
(Amounts in Thousands, Except Share Data)
June 30, December 31,
1997 1996
-------- ------------
CURRENT ASSETS:
Cash and cash equivalents $ 3,308 $ 3,182
Receivables-
Trade accounts, net of allowance
for doubtful accounts of $537 as of
June 30, 1997 and $540 as of December 31, 1996 20,689 17,782
Other 11,602 6,818
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32,291 24,600
Inventories 11,170 9,843
Prepaid expenses and other 2,301 2,400
Deferred tax asset 6,204 5,848
--------- ---------
Total current assets 55,274 45,873
--------- ---------
PROPERTY, PLANT AND EQUIPMENT, at cost:
Land 5,780 5,796
Buildings and improvements 27,680 28,257
Vending machines, machinery and equipment 74,265 69,444
Furniture and fixtures 3,404 3,859
Transportation equipment 18,550 17,745
--------- ---------
129,679 125,101
Less-Accumulated depreciation and amortization (81,137) (79,424)
--------- ---------
Property, plant and equipment, net 48,542 45,677
OTHER ASSETS:
Franchise rights, net of accumulated
amortization of $39,526 as of June 30,
1997 and $37,744 as of December 31, 1996 103,830 105,910
Goodwill, net of accumulated amortization of $2,079
as of June 30, 1997 and $1,874 as of
December 31, 1996 13,637 13,558
--------- ---------
Franchise rights and goodwill 117,467 119,468
Deferred financing costs, and other assets,
net of accumulated amortization of $5,260
as of June 30, 1997 and $13,834 as of
December 31, 1996 17,701 16,301
Deferred tax asset 1,717 3,725
--------- ---------
Total other assets 136,885 139,494
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Total assets $ 240,701 $ 231,044
--------- ---------
--------- ---------
The accompanying notes are an integral part of
these consolidated balance sheets.
2
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THE COCA-COLA BOTTLING GROUP (SOUTHWEST), INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS--JUNE 30, 1997 AND DECEMBER 31, 1996
(Amounts in Thousands, Except Share Data)
June 30, December 31,
1997 1996
-------- ------------
CURRENT LIABILITIES:
Accounts payable $ 22,532 $ 21,289
Accrued payroll 1,984 2,692
Accrued interest 1,640 1,629
Other accrued liabilities 1,678 1,392
Current maturities of long-term debt 13,672 12,816
-------- --------
Total current liabilities 41,506 39,818
-------- --------
LONG-TERM DEBT, net of current maturities 241,597 238,027
OTHER LIABILITIES 12,376 13,326
COMMITMENTS AND CONTINGENCIES
STOCKHOLDER'S EQUITY:
Common stock, $.10 par value; 250,000 shares
authorized: 100,000 shares issued and outstanding 10 10
Additional paid-in capital 26,223 26,223
Retained deficit (81,011) (86,360)
-------- --------
Total stockholder's equity (54,778) (60,127)
-------- --------
Total liabilities and stockholder's equity $240,701 $231,044
-------- --------
-------- --------
The accompanying notes are an integral
part of these consolidated balance sheets.
3
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THE COCA-COLA BOTTLING GROUP (SOUTHWEST), INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE PERIODS ENDED JUNE 30, 1997 AND 1996
(Amounts in Thousands)
<TABLE>
Three Months Ended Six Months Ended
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1997 1996 1997 1996
------- ------- -------- --------
<S> <C> <C> <C> <C>
NET REVENUES $64,931 $67,164 $123,600 $123,959
------- ------- -------- --------
COSTS AND EXPENSES:
Cost of goods sold (exclusive of
depreciation shown below) 33,837 35,800 62,718 65,068
Selling, general and administrative 17,828 17,802 37,833 35,675
Depreciation and amortization 3,854 3,365 7,334 6,640
------- ------- -------- --------
55,519 56,967 107,885 107,383
------- ------- -------- --------
Operating income 9,412 10,197 15,715 16,576
INTEREST:
Interest on debt (5,116) (5,261) (10,144) (10,496)
Deferred financing cost (146) (146) (292) (301)
Interest income 39 37 90 87
------- ------- -------- --------
(5,223) (5,370) (10,346) (10,710)
Equity in earnings of unconsolidated
subsidiary 1,453 2,616 1,832 3,582
------- ------- -------- --------
Income before income taxes 5,642 7,443 7,201 9,448
Provision for income taxes (1,184) (630) (1,852) (910)
------- ------- -------- --------
Net Income 4,458 6,813 5,349 8,538
------- ------- -------- --------
------- ------- -------- --------
</TABLE>
The accompanying notes are an integral part
of these consolidated statements.
4
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THE COCA-COLA BOTTLING GROUP (SOUTHWEST), INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTH PERIODS ENDED JUNE 30, 1997 AND 1996
(Amounts in Thousands)
1997 1996
------- -------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 5,349 $ 8,538
Ajustments to reconcile net income to net
cash provided by operating activities-
Depreciation and amortization 7,334 6,640
Deferred tax provision 1,652 660
Amortization of deferred financing costs 292 301
Deferred compensation (520) 790
Earnings of unconsolidated subsidiary (1,832) (3,582)
Change in assets and liabilities:
Receivables (7,691) (6,933)
Inventories (1,565) (3,082)
Prepaid expenses and other 99 (1,468)
Payables 1,243 5,545
Accrued expenses (411) (1,418)
------- -------
Net cash provided by operating activities 3,950 5,991
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property, plant and equipment, net (3,253) (8,990)
Other noncurrent assets acquired (123) (164)
------- -------
Net cash used in investing activities (3,376) (9,154)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings under revolving
credit facility 6,350 7,550
Payments on long-term debt (6,798) (4,074)
------- -------
Net cash provided (used) by financing activities (448) 3,476
------- -------
NET INCREASE IN CASH AND CASH
EQUIVALENTS 126 313
CASH AND CASH EQUIVALENTS, beginning of period 3,182 3,053
------- -------
CASH AND CASH EQUIVALENTS, end of period $ 3,308 $ 3,366
------- -------
------- -------
The accompanying notes are an integral part of these consolidated statements.
5
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THE COCA-COLA BOTTLING GROUP (SOUTHWEST), INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTH PERIODS ENDED JUNE 30, 1997 AND 1996
(Amounts in Thousands)
<TABLE>
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND
FINANCIAL ACTIVITIES: 1997 1996
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<S> <C> <C>
Purchase of certain vending machines, machinery and transportation
equipment through issuance of long-term debt $4,444 $ -
------ ------
------ ------
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
6
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THE COCA-COLA BOTTLING GROUP (SOUTHWEST), INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1997 AND 1996
(1) BASIS OF PRESENTATION:
The accompanying unaudited consolidated financial statements of The
Coca-Cola Bottling Group (Southwest) Inc., a Nevada corporation (the
"Company") and its wholly owned subsidiaries have been prepared in
accordance with generally accepted accounting principles for interim
financial information and reflect, in the opinion of management, all
adjustments, which are normal and recurring in nature, necessary for a fair
presentation of financial position, results of operations, and changes in
cash flows at June 30, 1997 and for all periods presented. These interim
financial statements do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statements and should be read in conjunction with the consolidated
financial statements of the Company included in Form 10-K for the fiscal
year ended December 31, 1996. The results of operations for the period
ended June 30, 1997 are not necessarily indicative of results to be
expected for the entire year ending December 31, 1997.
(2) INVENTORIES:
Inventories consist of the following (in thousands):
June 30, Dec. 31,
1997 1996
-------- --------
Raw materials $ 2,733 $ 1,991
Repair parts and supplies 194 513
Finished goods 8,243 7,339
-------- --------
$ 11,170 $ 9,843
-------- --------
-------- --------
7
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(3) INVESTMENT IN UNCONSOLIDATED SUBSIDIARY:
Summarized financial information for Texas Bottling Group, Inc.
("TBG") as of June 30, 1997 and December 31, 1996, is as follows (in
thousands):
June 30 Dec. 31
1997 1996
--------- ----------
Current assets $ 60,091 $ 45,735
Noncurrent assets 209,730 210,388
Current liabilities 46,522 39,433
Long-term debt 204,551 203,000
Other liabilities 5,124 3,864
Postretirement benefit obligation 6,150 6,157
Stockholders' equity 7,474 3,669
FOR THE SIX MONTH PERIODS
ENDED JUNE 30, 1997 AND 1996:
1997 1996
-------- --------
Net revenues $105,400 $109,070
Cost of goods sold 55,855 58,224
Net income before income taxes 5,909 8,773
Net income 3,805 7,273
The Company's equity in 1997 net income resulted in the Company
recording income from TBG of $1,832,000.
(4) INCOME TAXES:
The Company's provision for income taxes for the six months ended
June 30, 1997 and 1996, is as follows (in thousands):
1997 1996
------ -----
Current $ 200 $ 250
Deferred 1,652 660
------ -----
$1,852 $ 910
------ -----
8
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(5) COMMITMENTS, CONTINGENCIES, AND RELATED PARTIES:
The Company is a member of a soft drink canning cooperative and owns
approximately 4% (qualifying shares) at June 30, 1997. The Company had
purchases of $2,944,000 and $540,000 for the periods ended June 30, 1997
and 1996 from this cooperative.
The Company's transactions with TBG included purchases of
approximately $6,367,000 and $8,376,000 and sales of approximately
$6,658,000 and $5,814,000 for the periods ended June 30, 1997 and 1996.
The Company had purchases from Western Container Corporation, a
plastic bottle manufacturer of which the Company's subsidiaries are
shareholders, of $2,921,000 and $4,743,000 for the periods ended June 30,
1997 and 1996.
(6) SUBSEQUENT EVENT:
On August 1, 1997, the Company received a dividend from TBG in the
amount of $4.6 million and paid a dividend to the Company's shareholder in
the amount of $8.5 million.
9
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
GENERAL
Unit growth of soft drink sales is measured in equivalent case sales which
convert all wholesale bottle, can and pre-mix unit sales into a value of
equivalent cases of 192 ounces each. Unit sales of post-mix and contract
bottling are not generally included in discussions concerning unit sales volume
as post-mix sales are essentially sales of syrup and not of packaged products,
and contract bottling is done as capacity permits and does not represent
licensed products for the franchised territory. However, all references to net
revenues and gross profit include volumes for post-mix and contract sales.
RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 1997 COMPARED TO THREE MONTHS ENDED JUNE 30, 1996
NET REVENUES. Net Revenues for the Company decreased by 3.3% or
approximately $2.2 million to $64.9 million in 1997. Soft drink net revenues
decreased 6.4% primarily as a result of a $1.6 million decrease in contract
bottling sales in 1997 versus 1996. The Company ceased all its contract
bottling operations for private label brands in late 1996. Equivalent case
sales decreased 0.8% in 1997 and the net effective selling price per equivalent
case decreased 2.8% in 1997 versus 1996. Net revenues for post-mix as a
percentage of total net revenues increased to 12.7% in 1997, as compared to
12.4% in 1996. Net revenues for Automated & Custom Food Services, Inc.
increased in 1997 by approximately 5.0% over 1996.
GROSS PROFIT. Gross Profit decreased by 0.9% from $31.4 million to $31.1
million, as reductions in raw material costs for PET bottles and sweetener
offset the lower net effective selling price noted above. The reduction in raw
material cost accounted for an improvement in gross profit as a percentage of
net revenues to 47.9% in 1997 as compared to 46.7% in 1996.
SELLING, GENERAL & ADMINISTRATIVE. Selling, general and administrative
expenses were flat in 1997. Selling, general and administrative expense as a
percentage of net revenues increased to 27.5% in 1997 from 26.5% in 1996.
Higher labor costs associated with increased hiring for certain key sales
positions as well as increased marketing expenditures were offset by favorable
trends in group health plans and refunds relating to prior years workers'
compensation insurance premiums.
OPERATING INCOME. As a result of the above, together with a $0.5 million
increase in depreciation and amortization, operating income for the period ended
June 30, 1997 decreased to $9.4 million, or 14.5% of net revenue, compared to
$10.2 million or 15.2% of net revenue for the same period in 1996.
10
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INTEREST EXPENSE. Net interest expense decreased by approximately $0.1
million in 1997 due primarily to lower debt levels as a result of scheduled
principal payments.
EQUITY IN INCOME OF UNCONSOLIDATED SUBSIDIARY. The Company recognized
equity in the income of TBG in 1997 of $1.8 million. TBG recorded net income
of approximately $2.8 million in 1997 compared to net income of approximately
$5.3 million in 1996. TBG's operating income was 17.8% lower in 1997 compared to
1996.
SIX MONTHS ENDED JUNE 30, 1997 COMPARED TO SIX MONTHS ENDED JUNE 30, 1996
NET REVENUES. Net Revenues for the Company decreased by 0.3% or
approximately $0.4 million to $123.6 million in 1997. Soft drink net revenues
decreased 2.6% primarily as a result of a $3.0 million decrease in contract
bottling sales in 1997 versus 1996. The Company ceased all its contract
bottling operations for private label brands in late 1996. Equivalent case
sales increased 0.6% in 1997 and the net effective selling price per equivalent
case decreased 0.3% in 1997 versus 1996. Net revenues for post-mix as a
percentage of total net revenues increased to 12.3% in 1997, as compared to
12.0% in 1996. Net revenues for Automated & Custom Food Services, Inc.
increased in 1997 by approximately 4.7% over 1996.
GROSS PROFIT. Gross Profit increased by 3.4% from $58.9 million to $60.9
million, primarily as a result of reductions in raw material costs for PET
bottles and sweetener. The reduction in raw material cost accounted for an
improvement in gross profit as a percentage of net revenues to 49.3% in 1997 as
compared to 47.5% in 1996.
SELLING, GENERAL & ADMINISTRATIVE. Selling, general and administrative
expenses increased 6.0% or approximately $2.2 million in 1997. Selling, general
and administrative expense as a percentage of net revenues increased to 30.6% in
1997 from 28.8% in 1996. A significant increase in expenditures for marketing
related items such as display racks, barrels and point-of-sale materials
accounted for the largest portion of the increase. These types of expenditures
have historically been expensed as incurred although they may benefit sales
results in future periods as well as the current period. Higher labor costs
associated with increased hiring for certain key sales positions also
contributed to the increase. These increases were offset by favorable trends in
group health plans and refunds relating to prior years workers' compensation
insurance premiums.
OPERATING INCOME. As a result of the above, together with a $0.7 million
increase in depreciation and amortization, operating income for the period ended
June 30, 1997 decreased to $15.7 million, or 12.7% of net revenue, compared to
$16.6 million or 13.4% of net revenue for the same period in 1996.
INTEREST EXPENSE. Net interest expense decreased by approximately $0.4
million in 1997 due primarily to lower debt levels as a result of scheduled
principal payments.
11
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EQUITY IN INCOME OF UNCONSOLIDATED SUBSIDIARY. The Company recognized
equity in the income of TBG in 1997 of $1.8 million. TBG recorded net income
of approximately $3.8 million in 1997 compared to net income of approximately
$7.3 million in 1996. TBG's operating income was 16.7% lower in 1997 compared to
1996.
LIQUIDITY AND CAPITAL RESOURCES
For the six months ended June 30, 1997, cash provided by operating
activities was $4.0 million, generated primarily by net income plus depreciation
and amortization. Investing activities used $3.4 million primarily for
additions to property, plant and equipment while financing activities used $0.4
million primarily from payments on long-term debt net of borrowings under the
revolving credit facility. Of total additions to property, plant and equipment
of $7.7 million, $4.4 million were acquired through the issuance of long-term
debt.
In connection with the 1995 Bank Agreement the Company has entered into an
interest rate cap agreement which caps the three month LIBOR rate at 9% on a
notional principal amount of $60 million for four years. The Company has no
interest rate exposure under the agreement other than the initial purchase cost
of $0.6 million.
The Company will continue to evaluate the realizability of its deferred tax
asset in relation to future taxable income and adjust the valuation allowance
accordingly. At June 30, 1997, the Company recognized provision for income
taxes of $1.9 million of which $1.7 million represents deferred taxes.
On August 1, 1997 the Company received a dividend from TBG in the amount of
$4.6 million and paid a dividend to the Company's sole shareholder in the amount
of $8.5 million.
12
<PAGE>
PART II
OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
On May 30, 1997, the sole shareholder of the Class A Common Stock of the
Registrant, by written consent in lieu of the annual meeting, elected Edmund M.
Hoffman, Robert K. Hoffman, Robert W. Decherd and Richard Ware II to serve as
Directors of the Registrant.
ITEM 5. OTHER INFORMATION.
DIVIDEND PAYMENT. On August 1, 1997, the Registrant paid dividends in the
aggregate amount of $8.5 million to its shareholders of record on July 18, 1997.
CHANGE OF CONTROL. CCBG Corporation is the sole shareholder of the
Registrant. By an agreement dated August 11, 1997, the Limited Liability
Company Agreement of Hoffman Family Investments, L.L.C. (the "Family L.L.C.")
has been amended effective March 21, 1997 to add Robert K. Hoffman as a Manager
of the Family L.L.C. As a Manager of the Family L.L.C., Robert K. Hoffman has
sole voting power and investment power over 15,158 shares of Class A Common
Stock of CCBG Corporation held by CCBG Stock Management Limited Partnership (the
"Partnership") because the Family L.L.C. is the General Partner of the
Partnership. With the addition of the shares held by the Partnership, Robert K.
Hoffman is the beneficial owner of 71,200 shares of Class A Common Stock of CCBG
Corporation, which is 93.4% of the outstanding voting stock of CCBG Corporation
(73.8% of the voting stock after conversion of the outstanding Class B Common
Stock, including stock which may be issued pursuant to vested incentive stock
options).
13
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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10.1 The Coca-Cola Bottling Group (Southwest), Inc. Management Incentive
Plan approved by the Board of Directors of the Registrant June 4, 1997
effective January 1, 1997.
10.2 Amendment Agreement dated June 1, 1997 related to the Management
Incentive Agreement effective January 1, 1994, by and between the
Registrant and Charles F. Stephenson.
10.3 Management Incentive Agreement executed June 5, 1997, effective
January 1, 1997, by and between The Coca-Cola Bottling Group
(Southwest), Inc. and Charles F. Stephenson.
10.4 Southwest Coca-Cola Bottling Company, Inc. Amendment to Management
Incentive Plan adopted by the Board of Directors of Southwest Coca-Cola
Bottling Company, Inc. effective June 1, 1997.
10.5 Amendment Agreement dated June 1, 1997 related to the Management
Incentive Agreement effective January 1, 1994, entered by and among
Southwest Coca-Cola Bottling Company, Inc. and all managers who were
participants in the 1994 Management Incentive Plan.
10.6 Amendment Agreement dated June 1, 1997 related to the Management
Incentive Agreement effective January 1, 1994 by and between Coca-Cola
Bottling Company of the Southwest and E. T. Summers, III.
10.7 Amendment Agreement dated June 1, 1997 related to the Management
Incentive Agreement effective January 1, 1994 by and between the
Registrant and E. T. Summers, III.
10.8 Management Incentive Agreement executed June 30, 1997, effective
January 1, 1997, entered by and among the Registrant, Texas Bottling
Group, Inc., Coca-Cola Bottling Company of the Southwest and E.T.
Summers, III.
27 Financial Data Schedule
(b) Reports on Form 8-K
No report on Form 8-K was filed for the quarter ended June 30, 1997.
14
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
The Coca-Cola Bottling Group (Southwest), Inc.
(Registrant)
Date AUGUST 12, 1997 By: /s/ CHARLES F. STEPHENSON
--------------- -----------------------------------
Charles F. Stephenson
President and Chief Financial
Officer (duly authorized officer and
Principal Financial Officer)
15
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INDEX TO EXHIBITS
Exhibit
No. Description of Exhibit
- ------- ----------------------
10.1 The Coca-Cola Bottling Group (Southwest), Inc. Management
Incentive Plan approved by the Board of Directors of the Registrant
June 4, 1997 effective January 1, 1997.
10.2 Amendment Agreement dated June 1, 1997 related to the
Management Incentive Agreement effective January 1, 1994, by and
between the Registrant and Charles F. Stephenson.
10.3 Management Incentive Agreement executed June 5, 1997,
effective January 1, 1997, by and between The Coca-Cola Bottling
Group (Southwest), Inc. and Charles F. Stephenson.
10.4 Southwest Coca-Cola Bottling Company, Inc. Amendment to
Management Incentive Plan adopted by the Board of Directors of
Southwest Coca-Cola Bottling Company, Inc. effective June 1, 1997.
10.5 Amendment Agreement dated June 1, 1997 related to the
Management Incentive Agreement effective January 1, 1994, entered
by and among Southwest Coca-Cola Bottling Company, Inc. and all
managers who were participants in the 1994 Management Incentive
Plan.
10.6 Amendment Agreement dated June 1, 1997 related to the
Management Incentive Agreement effective January 1, 1994 by and
between Coca-Cola Bottling Company of the Southwest and E. T.
Summers, III.
10.7 Amendment Agreement dated June 1, 1997 related to the
Management Incentive Agreement effective January 1, 1994 by and
between the Registrant and E. T. Summers, III.
10.8 Management Incentive Agreement executed June 30, 1997,
effective January 1, 1997, entered by and among the Registrant,
Texas Bottling Group, Inc., Coca-Cola Bottling Company of the
Southwest and E.T. Summers, III.
27 Financial Data Schedule
16
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EXHIBIT 10.1
THE COCA-COLA BOTTLING GROUP (SOUTHWEST), INC.
MANAGEMENT INCENTIVE PLAN
1. Purpose.
The Coca-Cola Bottling Group (Southwest), Inc. (the "Company") and its
subsidiaries, Southwest Coca-Cola Bottling Company, Inc. and Texas Bottling
Group, Inc. (the "Bottling Operations") desire to establish an incentive plan
(the "Plan") to retain key managers, motivate them to be creative and innovative
while working to achieve the Company's financial goals, and provide a scaled
financial reward based on continuous service and achievement of the Company's
aspirational cash flow goals for defined periods of time.
2. Administration
The Plan shall be administered by the Incentive Plan Committee (the
"Committee") appointed by the Board of Directors of the Company (the "Board").
The Committee shall have at least three members at all times, all of whom shall
be directors or employees of the Company or a subsidiary of the Company. The
Board may increase or decrease the number of members on the Committee from time
to time at its discretion, so long as there are at least three members of the
Committee at any time. Each member of the Committee shall serve on the Committee
until such member submits a written resignation or is removed by action of the
Board. 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
by the Committee 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 of the
Company and/or the Bottling Operations, the affected Participants (as defined
below), and their respective successors in interest.
3. Principles of the Plan
The Plan will reward certain managers of the Company and the Bottling
Operations for the successful attainment of cumulative cash flow goals for the
combined operations of the Bottling Operations for successive periods of three
years (each period is referred to as a "Performance Period"). In each fiscal
year during the operation of this Plan and subject to the discretion of the
Board, a new Performance Period will commence on January 1 and be designated to
end on December 31 of the third consecutive year following the commencement
year. The initial Performance Period under the Plan will be 1997 through 1999. A
cash
1
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award amount (the "Award") will be determined for each manager who is offered
the opportunity to participate in the Plan (a "Participant"), based on such
manager's position and ability to increase the combined cash flow of the
Bottling Operations. For each Performance Period, the Board of Directors will
establish a minimum level of cumulative cash flow (the "Cash Flow Threshold")
for the Bottling Operations which must be achieved before any portion of the
Award will be paid, and a formula (the "Award Formula") for determining the
percentage, in a range from 50% to 150%, of the Award to be paid to each
Participant (the "Award Payable") based on the Actual Cash Flow (defined
below) in excess of the Cash Flow Threshold. All Participants will receive
the same percentage of Award based on Actual Cash Flow. Each fiscal year, the
Board will determine whether a new Performance Period will be established for
the three-year period beginning in such year, and will determine the Cash
Flow Threshold for such Performance Period. Therefore, one or two years of
one Performance Period may overlap with years included in other Performance
Periods. For example: the years 1998 and/or 1999 of the initial Performance
Period may also be included in the Performance Period 1998 - 2000, and in the
Performance Period 1999 - 2001, should the Board designate a new Performance
Period in 1998 or 1999.
4. Eligibility
Each Participant will be a party to a Management Incentive Agreement
("Agreement") with the Company and the employer of such Participant. The
Agreements for the initial Performance Period shall be in the form of Exhibit A
attached to this Plan. The Committee will recommend to the Board of Directors of
the Company a list of employees to be offered the opportunity to become
Participants and the amount of the Award for each Participant who is not also a
member of the Committee. The Board of Directors shall determine the
participation and Award for any Committee member on its own motion. Each
Participant and respective Award must be approved by the Board of Directors
before an Agreement is entered with such Participant. Designation as a
Participant in one Performance Period will not assure designation in future
Performance Periods.
5. Calculation and Payment of Award
Awards made under the Plan shall be paid by the employer of each
Participant solely on account of attainment of specified levels of cumulative
cash flow for the combined Bottling Operations. For purposes of this Plan, "cash
flow" is based on the audited financial information of the Company for each
fiscal year in any Performance Period and is determined by adding the following
items on the Statement of Operations for Southwest Coca-Cola Bottling Company,
Inc. and Texas Bottling Group, Inc. for the year ended on December 31 of each
such year: consolidated net income, income taxes paid or accrued, interest
expense net of interest income, depreciation, amortization, accruals for Awards
under this Plan, and other non-cash charges to the extent deducted in
calculating consolidated net income. At the end of each Performance Period, the
actual three-year cumulative cash flow will be determined and certified in
writing by the Chief Financial Officer of the Company. This certified cash flow
("Actual Cash Flow") will be a factor in the Award Formula established by the
Board of Directors for such Performance Period, and
2
<PAGE>
incorporated in the Agreements for such Performance Period. The Award designated
in each Agreement will be multiplied by the percentage resulting from the
Award Formula to determine the portion of the Award to be paid in cash to the
respective Participant. Awards will be paid on the following schedule: on
March 1 immediately following each Performance Period, two-thirds (2/3) of
the Award Payable will be paid, and on March 1 two years after the first payment
is made, the remaining one-third (1/3) of the Award Payable will be paid.
Awards earned in each Performance Period will be paid in cash to Participants
who have been employed continuously by the Company or a subsidiary of the
Company throughout the Performance Period and through the payment date,
except as provided in this Plan and the Agreements. Termination of employment
due to death, disability or retirement will eliminate the requirement that
the Participant must be employed on the date payment is made under this Plan,
and may result in proration of an Award for partial participation or
accelerated payment of an Award, at the discretion of the Board.
6. Discretion of the Board; Amendments, Modification and Termination of
the Plan
All Awards shall be made solely on the basis of the performance goals set
forth in the Agreements in compliance with the terms of this Plan. The Board
shall have no authority to amend any Agreement to increase the amount of an
Award, but the Board shall have the authority to reduce or eliminate an Award in
accordance with the terms of the related Agreement. In its sole discretion, the
Board may adjust the Cash Flow Threshold for a Performance Period to incorporate
anticipated increases in cash flow from after-acquired operations or significant
decreases in cash flow resulting from divestitures or from significant and
unforeseen increases in expenses without the consent of any Participant. Subject
to the foregoing limitations on Board discretion, the Board may terminate the
Plan in whole or in part and may suspend the Plan in whole or in part from time
to time without affecting outstanding Agreements. In addition, the Board may
amend the Plan from time to time to correct any defect, 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, or take
necessary action to effect legal compliance of the Plan, all without the
approval of the shareholders of the Company and Texas Bottling Group, Inc.
Individual Agreements may be amended by mutual written consent of the Company
and the affected Participant. The terms of all Agreements for a specific
Performance Period may be amended through action of the Board provided that the
majority of Participants for such Performance Period accept such amendment by
written consent.
3
<PAGE>
EXHIBIT 10.2
AMENDMENT AGREEMENT
This agreement to amend (the "Amendment") the Management Incentive
Agreement effective January 1, 1994 (the "Agreement"), issued pursuant to The
Coca-Cola Bottling Group (Southwest), Inc. Management Incentive Plan (the
"Plan") is entered by and among The Coca-Cola Bottling Group (Southwest), Inc.
(the "Company") and Charles F. Stephenson.
WHEREAS, The Company desires to establish a Management Incentive Plan
("Parent Plan") based on three-year cumulative cash flow for the combined
operations of Southwest Coca-Cola Bottling Company, Inc. and Texas Bottling
Group, Inc.;
WHEREAS, the Plan is based solely on the combined cash flow of Southwest
Coca-Cola Bottling Company, Inc. and Texas Bottling Group, Inc. for a five-year
period which overlaps the time period to be covered by the Parent Plan, and is
therefore redundant; and
WHEREAS, Charles F. Stephenson has participated in the design and
implementation of the Parent Plan;
NOW, THEREFORE, in consideration of the foregoing, the payments to be
received under the Plan and for other good and valuable consideration, the
parties to this Amendment agree as follows:
A. Paragraph 1 of the Agreement is hereby amended to read as follows:
"1. PAYMENT OF BONUS. If Manager qualifies to receive the Incentive Bonus,
the Annual Component of the Incentive Bonus will be paid on June 13, 1997,
one-half of the Three Year Component of the Incentive Bonus will be paid on
March 1, 1998 and the remaining one-half of the Three Year Component of the
Incentive Bonus will be paid on March 1, 1999."
B. Paragraph 2 of the Agreement is hereby amended to read as follows:
"2. ONE-TIME BONUS CONCEPT. The amount of the Annual Component of the
Incentive Bonus will be determined on June 1, 1997 by comparing the actual
annual cash flow of the Company in each year from January 1, 1994 through
December 31, 1996 to projected annual cash flow goals, and the Three Year
Component of the Incentive Bonus will be determined by comparing the total cash
flow for such three year period with the sum of the annual projected cash flow
goals, according to the formula described in Paragraph 4 below."
C. Paragraph 3 (a) of the Agreement is hereby amended by substituting the
year 1996 for 1997, and deleting the reference to the financial statements for
fiscal 1998.
1
<PAGE>
D. Paragraph 3 (b) of the Agreement is hereby amended by substituting the
following chart of Cash Flow Targets:
YEAR CASH FLOW TARGET
---- ----------------
1994 $ 85,315,000
1995 89,581,000
1996 94,060,000
------------
Three Year Total $268,956,000
E. Paragraph 3(d) of the Agreement is hereby amended by substituting
"Three" for "Five" every place where "Five" appears in the paragraph.
F. Paragraphs 5, 6, and 7 of the Agreement are hereby amended by
substituting "on the payment date" for "February 1, 1999" in each place where
"February 1, 1999" appears in such paragraphs.
APPROVED AND ACCEPTED effective June 1, 1997.
THE COCA-COLA BOTTLING
GROUP (SOUTHWEST), INC.
By: /s/ ROBERT K. HOFFMAN
-------------------------------
Its: Co-Chairman
------------------------------
By: /s/ CHARLES F. STEPHENSON
-------------------------------
Charles F. Stephenson
2
<PAGE>
EXHIBIT 10.3
THE COCA-COLA BOTTLING GROUP (SOUTHWEST), INC.
MANAGEMENT INCENTIVE AGREEMENT
This Management Incentive Agreement ("Agreement") is entered by and
between The Coca-Cola Bottling Group (Southwest), Inc. (the "Company" and the
"Employer") and CHARLES F. STEPHENSON ("Manager"), effective January 1, 1997.
RECITALS
A. The Company desires to retain the services of certain key managers
and to encourage key managers to seek to attain the financial goals of the
Company through creativity, innovation and good management practices;
B. The Company measures its business success in part by setting
financial goals and evaluating efforts to meet financial goals by increasing
revenue and controlling expenditures;
C. The Company has established a Management Incentive Plan, recorded in
the minutes of the Board of Directors of the Company and expressed in this
Agreement and in similar Agreements with certain other key managers, to
encourage superior long-term performance by key managers of the Company and
subsidiary operations of the Company through payments of cash awards based on
the Company's performance during the three-year period from January 1, 1997
through December 31, 1999; and
D. Manager is currently employed with Employer in a key leadership
position.
AGREEMENT
1. PAYMENT OF BONUS. If Manager qualifies to receive a cash award
pursuant to this Agreement, two-thirds of the Award Payable (defined in
Section 2(c) below) will be paid to Manager on March 1, 2000, and one-third
of the Award Payable will be paid to Manager on March 1, 2002. Payments under
this Agreement will be made by Employer, unless Manager has transferred to a
position with a subsidiary of the Company prior to the payment date, in which
case the Award Payable will be prorated among the employers of the Manager
during the Performance Period on the basis of months worked for each affected
employer.
1
<PAGE>
2. DEFINITIONS.
a. "Cash Flow" is based on the audited financial information of the
Company for each fiscal year in any Performance Period and is determined by
adding the following items on the Statement of Operations for Southwest
Coca-Cola Bottling Company, Inc. and Texas Bottling Group, Inc. for the
year ended on December 31 of each such year: consolidated net income,
income taxes paid or accrued, interest expense net of interest income,
depreciation, amortization, accruals for Awards under this Plan, and other
non-cash charges to the extent deducted in calculating consolidated net
income.
b. "Actual Cash Flow" is Cash Flow as certified to the Board of
Directors of the Company by the Chief Financial Officer of the Company for
purposes of the Plan and this Agreement.
c. "Cash Flow Threshold" is $340,000,000.00.
The Cash Flow Threshold may be adjusted by the Board of Directors of the
Company to incorporate anticipated increases in Cash Flow resulting from the
expansion of the Company's business through acquisition of any other business
by the Company or Texas Bottling Group, Inc. or conversely to incorporate
decreases in cash flow resulting from divestiture or significant increases in
expenditures not foreseeable on the effective date of this Agreement. Any
change in the Cash flow Threshold must be approved by the Board of Directors
of the Company prior to the end of the Performance Period. The Board of
Directors of the Company is not required to make any adjustment in the Cash
Flow Threshold, but may take such action in its sole discretion. Any such
change in the Cash Flow Threshold will be effected by written notice to
Manager prior to the end of the Performance Period setting forth the amended
Cash Flow Threshold.
d. "Award" is $200,000.00
e. "Award Payable" will be calculated by multiplying the Award by
the percentage determined by the following formula (the "Award Formula"):
Percentage = Lesser of y or z, where
y = 150% and
z = Actual Cash Flow - Threshold Cash Flow x 100% + 50%
--------------------------------------
$40,000,000
3. REQUIREMENTS TO QUALIFY FOR THE AWARD. To be qualified to receive
the Award Payable, Manager must have been continuously employed by the
Company or a bottling subsidiary of the
2
<PAGE>
Company during the Performance Period in his present position or another key
management position, and still actively employed on March 1, 2000 to receive
the first installment, and on March 1, 2002 to receive the second
installment. The only exceptions to these requirements are described in
Paragraphs 4, 5, 6 and 7.
4. RESIGNATION DUE TO DISABILITY. If Manager fails to meet the
requirements of Paragraph 3 above because he has resigned from employment
with the Company or a bottling subsidiary of the Company after the
Performance Period ends, but prior to a payment date due to a condition which
meets the definition of "disability" in the Company's Long Term Disability
Insurance Policy or is on medical leave, Manager will receive the Award
Payable as provided in this Agreement. If Manager's resignation due to
disability occurs prior to the end of the Performance Period, the Board of
Directors may waive the "continuous employment" requirement and prorate the
Award Payable based on the ratio of the number of months within the
Performance Period in which Manager was actively employed to the 36 months in
the Performance Period, and the payment date of such partial Award Payable
may be accelerated in the sole discretion of the Board of Directors of the
Company.
5. RESIGNATION DUE TO RETIREMENT. If Manager fails to meet the
requirements of Paragraph 3 above because he has retired from employment with
the Company or a bottling subsidiary of the Company after the Performance
Period ends, but prior to a payment date in accordance with the terms of The
Coca-Cola Bottling Group (Southwest), Inc. and Affiliates Retirement Plan,
Manager will receive the Award Payable as provided in this Agreement. If
Manager's resignation due to retirement occurs prior to the end of the
Performance Period, the Board of Directors may waive the "continuous
employment" requirement and prorate the Award Payable based on the ratio of
the number of months within the Performance Period in which Manager was
actively employed to the 36 months in the Performance Period.
6. DEATH OF MANAGER. If Manager dies while actively employed with the
Company or a bottling subsidiary of the Company after the Performance Period
ends, but prior to a payment date, Manager's estate or designated beneficiary
will receive the Award Payable as provided in this Agreement. If Manager's
death occurs prior to the end of the Performance Period, the Board of
Directors may waive the "continuous employment" requirement and prorate the
Award Payable based on the ratio of the number of months within the
Performance Period in which the Manager was actively employed to the 36
months within the Performance Period, and the payment date of such partial
Award Payable may be accelerated in the sole discretion of the Board of
Directors of the Company.
7. CHANGE OF MAJORITY OWNERSHIP. If, during the term of this Agreement,
the majority ownership of the stock of the Company and/or the Manager's
employer changes, this Agreement shall terminate, and Manager will receive
all or any remaining portion of an Award Payable from the Company, on or
before December 31 of the year in which such change of ownership is
consummated. If the Change of Ownership occurs during the Performance Period,
the Award Payable will be determined using an amended Cash Flow Threshold
which
3
<PAGE>
proportionally adjusts the factors to be utilized in calculating the Award
Payable. For purposes of this Paragraph 7 and Paragraph 8 below, a transfer
of stock ownership from a person or entity which was a shareholder on the
date of this Agreement (a "current shareholder") to a person or entity which
is (a) controlled by or under common control with a current shareholder, (b)
a family member of a current shareholder, or (c) a trust, partnership or
other entity of which a current shareholder or a family member of a current
shareholder is either a grantor, trustee, beneficiary, owner or holder of an
equity or beneficial interest, will not constitute a Change of Majority
Ownership of the Company or, if applicable, the Manager's employer.
8. TERMINATION OF AGREEMENT. This Agreement shall terminate immediately
upon the occurrence of the first of the following events: a) payment of the
entire Award Payable; b) voluntary resignation of the Manager; c) termination
of Manager's employment with the Company or a bottling subsidiary of the
Company, for any reason other than death, disability or retirement (as
defined in Paragraphs 5 and 6 above); or Change of Majority Ownership of the
Company or Manager's employer. This Agreement and the benefits of this
Agreement may be assigned by the Company to any corporate successor of the
Company, but may not be assigned, pledged, or otherwise transferred by
Manager.
9. AMENDMENTS. Manager recognizes that the Board of Directors of the
Company may determine in its sole discretion that modification, suspension or
termination of the Plan is in the best interest of the Company, and that the
Plan provides that the Board of Directors may act in its sole discretion to
suspend or terminate the Plan in whole or in part. This Agreement may be
amended by written agreement between the Manager and the Company. The Board
of Directors of the Company may also make an amendment to the form of all
Agreements for a specific Performance Period, and such amendment shall be
effective for this Agreement when the majority of Participants who are
parties to Agreements for the same Performance Period consent in writing to
such amendment. The Board of Directors may also unilaterally amend this
Agreement if it amends all Agreements for the same Performance Period in
order to correct any defect, 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 or this Agreement,
or take necessary action to effect legal compliance of the Plan or this
Agreement. If Manager transfers from his position with the Company to a
position with Coca-Cola Bottling Company of the Southwest or Southwest
Coca-Cola Bottling Company, Inc., this Agreement will be amended by adding
such employer as a party to this Agreement.
10. NOTICES. All notices given under this Agreement shall be in writing
and shall be deemed to be delivered when actually received or shall be deemed
received upon deposit in the United States mail, registered or certified,
postage prepaid and, if to the Company, addressed to the Company at 1999
Bryan Street #3300, Dallas, Texas 75201, or if to Manager, at his principal
place of residence.
11. EMPLOYMENT AT WILL. Manager acknowledges that this Agreement is not
an employment agreement, and has no relationship to or effect on the terms of
Manager's
4
<PAGE>
employment with the Company. Manager acknowledges and affirms that his
employment with the Company is terminable at will, subject only to compliance
with existing law, by Manager or Manager's employer (whether the Company or a
subsidiary of the Company) at any time.
IN WITNESS WHEREOF, this Management Incentive Agreement is executed this
5th day of June, 1997.
THE COCA-COLA BOTTLING GROUP
(SOUTHWEST), INC.
By: /s/ ROBERT K. HOFFMAN
------------------------------
Its: Co-Chairman
-----------------------------
MANAGER
/s/ CHARLES F. STEPHENSON
---------------------------------
Charles F. Stephenson
5
<PAGE>
EXHIBIT 10.4
SOUTHWEST COCA-COLA BOTTLING COMPANY, INC
AMENDMENT TO MANAGEMENT INCENTIVE PLAN
The Management Incentive Plan established in 1994 by Southwest Coca-Cola
Bottling Company, Inc. is hereby amended in the following respects:
A. The time period covered by the Plan is reduced from five years to
three years.
B. The Cash Flow Targets for the years 1997 and 1998 are eliminated.
C. The Five Year Component of the Incentive Plan is renamed the Three
Year Component and will be determined by achievement of the combined Cash
Flow Targets for 1994 through 1996.
D. The payment date of the Incentive Bonus is changed from a one-time
payment on February 1, 1999 to the following:
1. Payment of the Annual Component of the Incentive Bonus for the
years 1994 through 1996 will be made on June 13, 1997;
2. Payment of one-half of the Three-Year Component of the Incentive
Bonus will be made on March 1, 1998; and
3. Payment of the remaining one-half of the Three-Year Component of
the Incentive Bonus will be made on March 1, 1999.
<PAGE>
EXHIBIT 10.5
AMENDMENT AGREEMENT
This agreement to amend the Management Incentive Agreements effective
January 1, 1994 (the "Agreements"), issued pursuant to the Southwest
Coca-Cola Bottling Company, Inc. Management Incentive Plan (the "Plan") is
entered by and among Southwest Coca-Cola Bottling Company, Inc. (the
"Company") and the undersigned employees of the Company who are parties to
the Agreements, to be effective when 8 such employees have signed this
agreement (referred to below as the "Amendment").
WHEREAS, The Coca-Cola Bottling Group (Southwest), Inc. (the "Parent"),
the corporate parent of the Company, desires to establish a Management
Incentive Plan ("Parent Plan") based on three-year cumulative cash flow for
the combined operations of the Company and Texas Bottling Group, Inc.;
WHEREAS, the Plan is based solely on the cash flow of the Company for a
five-year period which overlaps the time period to be covered by the Parent
Plan, and is therefore redundant;
WHEREAS, the Board of Directors of the Company believes that the Parent
Plan will be more advantageous for the Company because it will align the
efforts of the Parent, the Company and Texas Bottling Group, Inc. to improve
the financial performance of all three entities; and
WHEREAS, the Board of Directors of the Company has approved the revisions
to the Plan and the Agreements incorporated in this Amendment;
NOW, THEREFORE, in consideration of the foregoing, the payments to be
received under the Plan and for other good and valuable consideration, the
parties to this Amendment agree as follows:
A. Paragraph 1 of the Agreements is hereby amended to read as follows:
"1. PAYMENT OF BONUS. If Manager qualifies to receive the Incentive
Bonus, the Annual Component of the Incentive Bonus will be paid on June 13,
1997, one-half of the Three Year Component of the Incentive Bonus will be
paid on March 1, 1998 and the remaining one-half of the Three Year Component
of the Incentive Bonus will be paid on March 1, 1999."
B. Paragraph 2 of the Agreements is hereby amended to read as follows:
"2. ONE-TIME BONUS CONCEPT. The amount of the Annual Component of the
Incentive Bonus will be determined on June 1, 1997 by comparing the actual
annual cash flow of the Company in each year from January 1, 1994 through
December 31, 1996 to projected annual cash
1
<PAGE>
flow goals, and the Three Year Component of the Incentive Bonus will be
determined by comparing the total cash flow for such three year period with
the sum of the annual projected cash flow goals, according to the formula
described in Paragraph 4 below."
C. Paragraph 3 (a) of the Agreements is hereby amended by substituting
the year 1996 for 1997, and deleting the reference to the financial
statements for fiscal 1998.
D. Paragraph 3 (b)of the Agreements is hereby amended by substituting the
following chart of Cash Flow Targets:
YEAR CASH FLOW TARGET
---- ----------------
1994 $ 42,700,000
1995 44,835,000
1996 47,077,000
------------
Three Year Total $134,612,000
E. Paragraph 3(d) of the Agreements is hereby amended by substituting
"Three" for "Five" every place where "Five" appears in the paragraph.
F. Paragraphs 5, 6, and 7 of the Agreements are hereby amended by
substituting "on the payment date" for "February 1, 1999" in each place where
"February 1, 1999" appears in such paragraphs.
G. The parties agree that the above-stated amendments will be effective
as to all Agreements when 8 of the employees listed on the signature page of
this Amendment have executed this Amendment.
APPROVED AND ACCEPTED effective June 1, 1997.
SOUTHWEST COCA-COLA BOTTLING
COMPANY, INC.
By: /s/ CHARLES F. STEPHENSON
-----------------------------
Its: President
----------------------------
/s/ RONNIE HILL /s/ GARY PHY
- --------------------------- --------------------------------
Ronnie Hill Gary Phy
/s/ BILL PEVEHOUSE /s/ LARRY SHORT
- --------------------------- --------------------------------
Bill Pevehouse Larry Short
2
<PAGE>
/s/ MIKE FLORES /s/ JAMES LONG
- --------------------------- --------------------------------
Mike Flores James Long
/s/ REX CASTLE
- --------------------------- --------------------------------
Bob Bolin Rex Castle
/s/ PAT WALL
- --------------------------- --------------------------------
Pat Wall Steve Arrington
/s/ JOE HOPKINS /s/ PAT STONE
- --------------------------- --------------------------------
Joe Hopkins Pat Stone
/s/ JAMES DEVER
- --------------------------- --------------------------------
Eugene Stout James Dever
/s/ STEWART SWARTZ
- ---------------------------
Stewart Swartz
3
<PAGE>
/s/ JAMES LONG
- --------------------------- --------------------------------
Mike Flores James Long
- --------------------------- --------------------------------
Bob Bolin Rex Castle
/s/ STEVE ARRINGTON
- --------------------------- --------------------------------
Pat Wall Steve Arrington
- --------------------------- --------------------------------
Joe Hopkins Pat Stone
/s/ EUGENE STOUT
- --------------------------- --------------------------------
Eugene Stout James Dever
- ---------------------------
Stewart Swartz
3
<PAGE>
EXHIBIT 10.6
AMENDMENT AGREEMENT
This agreement to amend (the "Amendment") the Management Incentive
Agreement effective January 1, 1994 (the "Agreement"), issued pursuant to the
Coca-Cola Bottling Company of the Southwest Management Incentive Plan (the
"Plan") is entered by and among Coca-Cola Bottling Company of the Southwest (the
"Company") and E. T. Summers, III.
WHEREAS, The Coca-Cola Bottling Group (Southwest), Inc. (the "Parent"), the
corporate parent of the Company, desires to establish a Management Incentive
Plan ("Parent Plan") based on three-year cumulative cash flow for the combined
operations of the Southwest Coca-Cola Bottling Company, Inc. and Texas Bottling
Group, Inc.;
WHEREAS, the Plan is based solely on the cash flow of the Company for a
five-year period which overlaps the time period to be covered by the Parent
Plan, and is therefore redundant;
WHEREAS, the Board of Directors of the Company believes that the Parent
Plan will be more advantageous for the Company because it will align the efforts
of the Parent, the Company, Southwest Coca-Cola Bottling Company, Inc. and Texas
Bottling Group, Inc. to improve the financial performance of all four entities;
and
WHEREAS, the Board of Directors of the Company has approved the revisions
to the Plan and the Agreement incorporated in this Amendment;
NOW, THEREFORE, in consideration of the foregoing, the payments to be
received under the Plan and for other good and valuable consideration, the
parties to this Amendment agree as follows:
A. Paragraph 1 of the Agreement is hereby amended to read as follows:
"1. PAYMENT OF BONUS. If Manager qualifies to receive the Incentive Bonus,
the Annual Component of the Incentive Bonus will be paid on June 13, 1997,
one-half of the Three Year Component of the Incentive Bonus will be paid on
March 1, 1998 and the remaining one-half of the Three Year Component of the
Incentive Bonus will be paid on March 1, 1999."
B. Paragraph 2 of the Agreement is hereby amended to read as follows:
"2. ONE-TIME BONUS CONCEPT. The amount of the Annual Component of the
Incentive Bonus will be determined on June 1, 1997 by comparing the actual
annual cash flow of the Company in each year from January 1, 1994 through
December 31, 1996 to projected annual cash flow goals, and the Three Year
Component of the Incentive Bonus will be determined by comparing the total cash
flow for such three year period with the sum of the annual projected cash
1
<PAGE>
flow goals, according to the formula described in Paragraph 4 below."
C. Paragraph 3 (a) of the Agreement is hereby amended by substituting the
year 1996 for 1997, and deleting the reference to the financial statements for
fiscal 1998.
D. Paragraph 3 (b) of the Agreement is hereby amended by substituting the
following chart of Cash Flow Targets:
YEAR CASH FLOW TARGET
---- ----------------
1994 $ 42,615,000
1995 44,746,000
1996 46,983,000
------------
Three Year Total $134,344,000
E. Paragraph 3(d) of the Agreement is hereby amended by substituting
"Three" for "Five" every place where "Five" appears in the paragraph.
F. Paragraphs 5, 6, and 7 of the Agreement are hereby amended by
substituting "on the payment date" for "February 1, 1999" in each place where
"February 1, 1999" appears in such paragraphs.
APPROVED AND ACCEPTED effective June 1, 1997.
COCA-COLA BOTTLING COMPANY
OF THE SOUTHWEST
By: /s/ ROBERT K. HOFFMAN
------------------------------
Its: Co-Chairman
-----------------------------
/s/ E. T. SUMMERS, III
----------------------------------
E. T. Summers, III
2
<PAGE>
EXHIBIT 10.7
AMENDMENT AGREEMENT
This agreement to amend (the "Amendment") the Management Incentive
Agreement effective January 1, 1994 (the "Agreement"), issued pursuant to The
Coca-Cola Bottling Group (Southwest), Inc. Management Incentive Plan (the
"Plan") is entered by and among The Coca-Cola Bottling Group (Southwest), Inc.
(the "Company") and E. T. Summers, III.
WHEREAS, The Company desires to establish a Management Incentive Plan
("Parent Plan") based on three-year cumulative cash flow for the combined
operations of Southwest Coca-Cola Bottling Company, Inc. and Texas Bottling
Group, Inc.;
WHEREAS, the Plan is based solely on the combined cash flow of Southwest
Coca-Cola Bottling Company, Inc. and Texas Bottling Group, Inc. for a five-year
period which overlaps the time period to be covered by the Parent Plan, and is
therefore redundant; and
WHEREAS, E. T. Summers, III has participated in the design and
implementation of the Parent Plan;
NOW, THEREFORE, in consideration of the foregoing, the payments to be
received under the Plan and for other good and valuable consideration, the
parties to this Amendment agree as follows:
A. Paragraph 1 of the Agreement is hereby amended to read as follows:
"1. PAYMENT OF BONUS. If Manager qualifies to receive the Incentive Bonus,
the Annual Component of the Incentive Bonus will be paid on June 13, 1997,
one-half of the Three Year Component of the Incentive Bonus will be paid on
March 1, 1998 and the remaining one-half of the Three Year Component of the
Incentive Bonus will be paid on March 1, 1999."
B. Paragraph 2 of the Agreement is hereby amended to read as follows:
"2. ONE-TIME BONUS CONCEPT. The amount of the Annual Component of the
Incentive Bonus will be determined on June 1, 1997 by comparing the actual
annual cash flow of the Company in each year from January 1, 1994 through
December 31, 1996 to projected annual cash flow goals, and the Three Year
Component of the Incentive Bonus will be determined by comparing the total cash
flow for such three year period with the sum of the annual projected cash flow
goals, according to the formula described in Paragraph 4 below."
C. Paragraph 3 (a) of the Agreement is hereby amended by substituting the
year 1996 for 1997, and deleting the reference to the financial statements for
fiscal 1998.
1
<PAGE>
D. Paragraph 3 (b) of the Agreement is hereby amended by substituting the
following chart of Cash Flow Targets:
YEAR CASH FLOW TARGET
---- ----------------
1994 $ 85,315,000
1995 89,581,000
1996 94,060,000
------------
Three Year Total $268,956,000
E. Paragraph 3(d) of the Agreement is hereby amended by substituting
"Three" for "Five" every place where "Five" appears in the paragraph.
F. Paragraphs 5, 6, and 7 of the Agreement are hereby amended by
substituting "on the payment date" for "February 1, 1999" in each place where
"February 1, 1999" appears in such paragraphs.
APPROVED AND ACCEPTED effective June 1, 1997.
THE COCA-COLA BOTTLING
GROUP (SOUTHWEST), INC.
By: /s/ ROBERT K. HOFFMAN
------------------------------
Its: Co-Chairman
-----------------------------
/s/ E. T. SUMMERS, III
----------------------------------
E. T. Summers, III
2
<PAGE>
EXHIBIT 10.8
THE COCA-COLA BOTTLING GROUP (SOUTHWEST), INC.
MANAGEMENT INCENTIVE AGREEMENT
This Management Incentive Agreement ("Agreement") is entered by and among
The Coca-Cola Bottling Group (Southwest), Inc. (the "Company"), Texas Bottling
Group, Inc., Coca-Cola Bottling Company of the Southwest "Employer") and E.T.
SUMMERS, III ("Manager"), effective January 1, 1997.
RECITALS
A. The Company desires to retain the services of certain key managers and
to encourage key managers to seek to attain the financial goals of the Company
through creativity, innovation and good management practices;
B. The Company measures its business success in part by setting financial
goals and evaluating efforts to meet financial goals by increasing revenue and
controlling expenditures;
C. The Company has established a Management Incentive Plan, recorded in
the minutes of the Board of Directors of the Company and expressed in this
Agreement and in similar Agreements with certain other key managers, to
encourage superior long-term performance by key managers of the Company,
Employer and other subsidiary operations of the Company through payments of cash
awards based on the Company's performance during the three-year period from
January 1, 1997 through December 31, 1999; and
D. Manager is currently employed with Employer in a key leadership
position.
AGREEMENT
1. PAYMENT OF BONUS. If Manager qualifies to receive a cash award
pursuant to this Agreement, two-thirds of the Award Payable (defined in Section
2(c) below) will be paid to Manager on March 1, 2000, and one-third of the Award
Payable will be paid to Manager on March 1, 2002. Payments under this Agreement
will be made by Employer, unless Manager has transferred to a position with the
Company or another subsidiary of the Company prior to the payment date, in which
case the Award Payable will be prorated among the employers of the Manager
during the Performance Period on the basis of months worked for each affected
employer.
2. DEFINITIONS.
a. "Cash Flow" is based on the audited financial information of the
Company for each fiscal year in any Performance Period and is determined by
adding the following
1
<PAGE>
items on the Statement of Operations for Southwest Coca-Cola Bottling
Company, Inc. and Texas Bottling Group, Inc. for the year ended on December
31 of each such year: consolidated net income, income taxes paid or accrued,
interest expense net of interest income, depreciation, amortization,
accruals for Awards under this Plan, and other non-cash charges to the
extent deducted in calculating consolidated net income.
b. "Actual Cash Flow" is Cash Flow as certified to the Board of
Directors of the Company by the Chief Financial Officer of the Company for
purposes of the Plan and this Agreement.
c. "Cash Flow Threshold" is $340,000.000.00.
The Cash Flow Threshold may be adjusted by the Board of Directors of the
Company to incorporate anticipated increases in Cash Flow resulting from the
expansion of the Company's business through acquisition of any other business by
the Company, Employer or Texas Bottling Group, Inc., or conversely to
incorporate decreases in cash flow resulting from divestiture or significant
increases in expenditures not foreseeable on the effective date of this
Agreement. Any change in the Cash Flow Threshold must be approved by the Board
of Directors of the Company prior to the end of the Performance Period. The
Board of Directors of the Company is not required to make any adjustment in the
Cash Flow Threshold, but may take such action in its sole discretion. Any such
change in the Cash Flow Threshold will be effected by written notice to Manager
prior to the end of the Performance Period setting forth the amended Cash Flow
Threshold.
d. "Award" is $200,000.00.
e. "Award Payable" will be calculated by multiplying the Award by the
percentage determined by the following formula (the "Award Formula"):
Percentage = Lesser of y or z, where
y = 150% and
z = Actual Cash Flow - Threshold Cash Flow x 100% + 50%
--------------------------------------
$40,000,000
3. REQUIREMENTS TO QUALIFY FOR THE AWARD. To be qualified to receive
the Award Payable, Manager must have been continuously employed by the
Employer, the Company or Southwest Coca-Cola Bottling Company, Inc. during
the Performance Period in his present position or another key management
position, and still actively employed on March 1, 2000 to receive the first
installment, and on March 1, 2002 to receive the second installment. The only
exceptions to these requirements are described in Paragraphs 4, 5, 6 and 7.
2
<PAGE>
4. RESIGNATION DUE TO DISABILITY. If Manager fails to meet the
requirements of Paragraph 3 above because he has resigned from employment with
Employer, the Company or Southwest Coca-Cola Bottling Company, Inc. after the
Performance Period ends, but prior to a payment date due to a condition which
meets the definition of "disability" in the Company's Long Term Disability
Insurance Policy or is on medical leave, Manager will receive the Award Payable
as provided in this Agreement. If Manager's resignation due to disability occurs
prior to the end of the Performance Period, the Board of Directors may waive the
"continuous employment" requirement and prorate the Award Payable based on the
ratio of the number of months within the Performance Period in which Manager was
actively employed to the 36 months in the Performance Period, and the payment
date of such partial Award Payable may be accelerated in the sole discretion of
the Board of Directors of the Company.
5. RESIGNATION DUE TO RETIREMENT. If Manager fails to meet the
requirements of Paragraph 3 above because he has retired from employment with
Employer, the Company or Southwest Coca-Cola Bottling Company, Inc. after the
Performance Period ends, but prior to a payment date in accordance with the
terms of The Coca-Cola Bottling Group (Southwest), Inc. and Affiliates
Retirement Plan, Manager will receive the Award Payable as provided in this
Agreement. If Manager's resignation due to retirement occurs prior to the end of
the Performance Period, the Board of Directors may waive the "continuous
employment" requirement and prorate the Award Payable based on the ratio of the
number of months within the Performance Period in which Manager was actively
employed to the 36 months in the Performance Period.
6. DEATH OF MANAGER. If Manager dies while actively employed with the
Company, Employer or Southwest Coca-Cola Bottling Company, Inc. after the
Performance Period ends, but prior to a payment date, Manager's estate or
designated beneficiary will receive the Award Payable as provided in this
Agreement. If Manager's death occurs prior to the end of the Performance Period,
the Board of Directors may waive the "continuous employment" requirement and
prorate the Award Payable based on the ratio of the number of months within the
Performance Period in which the Manager was actively employed to the 36 months
within the Performance Period, and the payment date of such partial Award
Payable may be accelerated in the sole discretion of the Board of Directors of
the Company.
7. CHANGE OF MAJORITY OWNERSHIP. If, during the term of this Agreement,
the majority ownership of the stock of the Company and/or the Manager's employer
changes, this Agreement shall terminate, and Manager will receive all or any
remaining portion of an Award Payable from the Company, on or before December 31
of the year in which such change of ownership is consummated. If the Change of
Ownership occurs during the Performance Period, the Award Payable will be
determined using an amended Cash Flow Threshold which proportionally adjusts the
factors to be utilized in calculating the Award Payable. For purposes of this
Paragraph 7 and Paragraph 8 below, a.transfer of stock ownership from a person
or entity which was a shareholder on the date of this Agreement (a "current
shareholder") to a person or entity which is (a) controlled by or under common
control with a current shareholder, (b) a family
3
<PAGE>
member of a current shareholder, or (c) a trust, partnership or other entity
of which a current shareholder or a family member of a current shareholder is
either a grantor, trustee, beneficiary, owner or holder of an equity or
beneficial interest, will not constitute a Change of Majority Ownership of the
Company, the Employer or, if applicable, the Manager's employer.
8. TERMINATION OF AGREEMENT. This Agreement shall terminate immediately
upon the occurrence of the first of the following events: a) payment of the
entire Award Payable; b) voluntary resignation of the Manager; c) termination of
Manager's employment with the Company, the Employer or Coca-Cola Bottling
Company of the Southwest, for any reason other than death, disability or
retirement (as defined in Paragraphs 5 and 6 above); or Change of Majority
Ownership of the Company or Manager's employer. This Agreement and the benefits
of this Agreement may be assigned by the Company to any corporate successor of
the Company, but may not be assigned, pledged, or otherwise transferred by
Manager.
9. AMENDMENTS. Manager recognizes that the Board of Directors of the
Company may determine in its sole discretion that modification, suspension or
termination of the Plan is in the best interest of the Company, and that the
Plan provides that the Board of Directors may act in its sole discretion to
suspend or terminate the Plan in whole or in part. This Agreement may be amended
by written agreement between the Manager, the Employer and the Company. The
Board of Directors of the Company may also make an amendment to the form of all
Agreements for a specific Performance Period, and such amendment shall be
effective for this Agreement when the majority of Participants who are parties
to Agreements for the same Performance Period consent in writing to such
amendment. The Board of Directors may also unilaterally amend this Agreement if
it amends all Agreements for the same Performance Period in order to correct any
defect, 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 or this Agreement, or take necessary action to effect legal
compliance of the Plan or this Agreement. If Manager transfers from his position
with Employer to a position with Coca-Cola Bottling Company of the Southwest,
this Agreement will be amended by substituting Southwest Coca-Cola Bottling
Company, Inc. for Employer as a party to this Agreement.
10. NOTICES. All notices given under this Agreement shall be in writing
and shall be deemed to be delivered when actually received or shall be deemed
received upon deposit in the United States mail, registered or certified,
postage prepaid and, if to the Company, addressed to the Company at 1999 Bryan
Street #3300, Dallas, Texas 75201, or if to Manager, at his principal place of
residence.
11. EMPLOYMENT AT WILL. Manager acknowledges that this Agreement is not an
employment agreement, and has no relationship to or effect on the terms of
Manager's employment with the Company. Manager acknowledges and affirms that his
employment with the Company is terminable at will, subject only to compliance
with existing law, by Manager or Manager's employer (whether the Company,
Employer or another subsidiary of the Company) at anytime.
4
<PAGE>
IN WITNESS WHEREOF, this Management Incentive Agreement is executed this
30th day of June, 1997.
THE COCA-COLA BOTTLING GROUP (SOUTHWEST), INC.
By: /s/ ROBERT K. HOFFMAN
------------------------------------
Its: Co-Chairman
-----------------------------------
TEXAS BOTTLING GROUP, INC.
By: /s/ ROBERT K. HOFFMAN
------------------------------------
Its: Co-Chairman
-----------------------------------
COCA-COLA BOTTLING COMPANY OF THE SOUTHWEST
By: /s/ ROBERT K. HOFFMAN
------------------------------------
Its: Co-Chairman
-----------------------------------
MANAGER
/s/ E. T. SUMMERS, III
---------------------------------------
E. T. Summers, III
5
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<PAGE>
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<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
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0
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