TEXAS BOTTLING GROUP INC, 10-Q, 1997-08-13

TEXAS BOTTLING GROUP INC
10-Q, 1997-08-13
BOTTLED & CANNED SOFT DRINKS & CARBONATED WATERS

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<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
-------------

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

For the transition period from _____________ to _____________

Commission file number 33-69275
--------

TEXAS BOTTLING GROUP, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)

NEVADA 75-2158578
- --------------------------------- -------------------
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)

1999 BRYAN STREET, SUITE 3300, DALLAS, TEXAS 75201
---------------------------------------------------
(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, 541,917 shares of the Company's Common Stock Class
A, par value $2.00 per share, and 228,357 shares of the Company's Common
Stock Class B, par value $2.00 per share, were outstanding.

DOCUMENTS INCORPORATED BY REFERENCE:
None

<PAGE>

PART 1
FINANCIAL INFORMATION

ITEM 1: FINANCIAL STATEMENTS

TEXAS BOTTLING GROUP, INC. AND SUBSIDIARY

CONSOLIDATED BALANCE SHEETS-JUNE 30, 1997 AND DECEMBER 31, 1996
(Amounts in Thousands Except Share Data)

<TABLE>
JUNE 30, 1997 DECEMBER 31, 1996
------------- -----------------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 6,657 $ 636
Receivables-
Trade accounts, net of allowance for doubtful
accounts of $532 and $544 in 1997 and 1996 25,465 21,349
Other 4,053 3,280
--------- ---------
29,518 24,629

Inventories 11,073 9,327
Prepaid expenses and other 2,182 1,498
Deferred tax asset 10,661 9,645
--------- ---------
Total current assets 60,091 45,735
--------- ---------
PROPERTY, PLANT, & EQUIPMENT
Land 4,866 4,866
Buildings and improvements 20,826 20,819
Machinery and equipment 16,616 16,393
Vehicles 17,404 16,662
Vending equipment 32,187 27,215
Furniture and fixtures 5,604 5,500
--------- ---------
97,503 91,455

Less-accumulated depreciation (53,933) (50,312)
--------- ---------
Property, plant, and equipment, net 43,570 41,143
--------- ---------
OTHER ASSETS:
Franchise rights, net of accumulated amortization of
$37,962 and $36,140 in 1997 and 1996 107,540 109,362
Goodwill, net of accumulated amortization of $18,319
and $17,455 in 1997 and 1996 50,812 51,676
--------- ---------
Franchise rights and goodwill 158,352 161,038
Deferred financing costs and other assets, net of accumulated
amortization of $3,030 and $2,335 in 1997 and 1996 7,808 7,852
Deferred tax asset - 355
--------- ---------
Total other assets 166,160 169,245
--------- ---------
Total assets $ 269,821 $ 256,123
--------- ---------
--------- ---------

The accompanying notes are an integral part of these consolidated balance sheets
</TABLE>

2
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TEXAS BOTTLING GROUP, INC. AND SUBSIDIARY

CONSOLIDATED BALANCE SHEETS-JUNE 30, 1997 AND DECEMBER 31, 1996
(Amounts in Thousands Except Share Data)

<TABLE>
JUNE 30, 1997 DECEMBER 31, 1996
------------- -----------------
<S> <C> <C>
CURRENT LIABILITIES:
Accounts payable $ 20,753 $ 15,496
Accrued payroll 2,118 573
Accrued insurance 2,997 3,342
Accrued interest 2,919 1,364
Contribution to employees' benefit plans 2,001 2,158
Current maturities of long-term debt 15,734 16,500
-------- --------
Total current liabilities 46,522 39,433
-------- --------

LONG-TERM DEBT, net of current maturities 204,551 203,000

OTHER LIABILITIES 5,124 3,864

POST RETIREMENT BENEFIT OBLIGATION 6,150 6,157

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY:
Common stock Class A, $2 par value; 1,100,249 shares
authorized; 541,917 issued and outstanding as of
June 30, 1997 and 1996 1,084 1,084
Common stock Class B, $2 par value; 228,357 shares
authorized, issued and outstanding as of June 30, 1997
and 1996 (convertible to 558,332 shares of Class A) 457 457
Additional paid-in-capital 43,459 43,459
Retained deficit (37,526) (41,331)
-------- --------
Total stockholders' equity 7,474 3,669
-------- --------
Total liabilities and stockholders' equity $269,821 $256,123
-------- --------
-------- --------

The accompanying notes are an integral part of these consolidated balance sheets.
</TABLE>

<PAGE>

TEXAS BOTTLING GROUP, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENT OF OPERATIONS

FOR THE PERIODS ENDED JUNE 30, 1997 AND 1996
(Amounts in Thousands)

<TABLE>
THREE MONTHS ENDED SIX MONTHS ENDED
1997 1996 1997 1996
--------- --------- ---------- ---------
<S> <C> <C> <C> <C>
NET REVENUES $ 56,553 $ 59,963 $ 105,400 $ 109,070

COSTS AND EXPENSES:
Cost of goods sold (exclusive of depreciation
shown below) 30,528 32,074 55,855 58,224
Selling, general, and administrative 13,392 13,846 27,570 26,867
Depreciation and amortization 3,629 3,083 7,075 6,093
--------- --------- ---------- ---------
47,549 49,003 90,500 91,184
--------- --------- ---------- ---------
Operating income 9,004 10,960 14,900 17,886

INTEREST:
Interest on debt (4,446) (4,520) (8,831) (8,987)
Deferred financing cost (143) (143) (286) (286)
Interest income -0- 69 23 135
--------- --------- ---------- ---------
(4,589) (4,594) (9,094) (9,138)

Other income, net 101 16 103 25
--------- --------- ---------- ---------
Income before income taxes 4,516 6,382 5,909 8,773

Provision for income taxes (1,567) (1,070) (2,104) (1,500)
--------- --------- ---------- ---------
Net income $ 2,949 $ 5,312 $ 3,805 $ 7,273
--------- --------- ---------- ---------
--------- --------- ---------- ---------
</TABLE>

The accompanying notes are an integral part of these consolidated statements

4
<PAGE>

TEXAS BOTTLING GROUP, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE PERIODS ENDED JUNE 30, 1997 AND 1996
(Amounts in Thousands)

1997 1996
--------- --------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 3,805 $ 7,273
Adjustments to reconcile net
income to net cash provided by
operating activities -
Depreciation and amortization 7,075 6,093
Deferred tax provision 1,957 1,500
Amortization of deferred financing costs 286 286
Deferred compensation 410 477
Change in assets and liabilities
Receivables (4,889) (956)
Inventories (1,746) (4,079)
Prepaid expenses (684) (916)
Accounts payable 6,802 1,943
Accrued expenses 1,210 (1,519)
Contribution to employees' benefit plans (157) (76)
Other liabilities (1,767) 136
Postretirement benefit obligation (7) 90
-------- --------
Net cash provided by operating
activities 12,295 10,252
-------- --------

CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property, plant,
and equipment (2,143) (5,900)
Other noncurrent assets acquired (599) (3)
-------- --------
Net cash used by investing
activities (2,742) (5,903)
-------- --------

CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings under line of credit 5,500 2,000
Payments on long-term debt (9,032) (7,000)
-------- --------

Net cash used by financing activities (3,532) (5,000)
-------- --------

NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS 6,021 (651)

CASH AND CASH EQUIVALENTS, beginning of period 636 5,864
-------- --------

CASH AND CASH EQUIVALENTS, end of period $ 6,657 $ 5,213
-------- --------
-------- --------

The accompanying notes are an integral part of these consolidated statements.

5
<PAGE>

TEXAS BOTTLING GROUP, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE PERIODS ENDED JUNE 30, 1997 AND 1996
(Amounts in Thousands)

SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND
FINANCIAL ACTIVITIES: 1997 1996
---- ----
Purchase of certain vending machines,
computer equipment and fleet through
issuance of long term debt. $4,318 $ -
------ -----
------ -----

The accompanying notes are an integral part of these consolidated statements

6
<PAGE>

TEXAS BOTTLING GROUP, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 1997

1. BASIS OF PRESENTATION

The accompanying unaudited consolidated financial statements of Texas
Bottling Group, Inc., a Nevada corporation, ("TBG" or "the Company") and its
wholly owned subsidiary 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 fair presentation of financial position, results of
operations, and changes in cash flow at June 30, 1997 and for all periods
presented. These interim financial statements do not include all the
information and footnotes required by generally accepted accounting
principles for complete financial statements and should be read in
conjunction with the Company's audited financial statements included in Form
10-K for the 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 $ 3,136 $3,351
Finished goods 6,523 4,940
Repair parts and supplies 1,414 1,036
------- ------
$11,073 $9,327
------- ------
------- ------

3. 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 $ 147 $ -0-
Deferred 1,957 1,500
------ ------
$2,104 $1,500
------ ------
------ ------

<PAGE>

4. COMMITMENTS, CONTINGENCIES AND RELATED PARTIES

The Company paid $350,000 for the periods ended June 30, 1997 and 1996
to The Coca-Cola Bottling Group (Southwest), Inc. ("CCBG"), holder of the
Company's Class A common stock, under a management agreement. The agreement
is for a period of one year and is renewable automatically. The Company also
had sales of approximately $6,367,000 and $8,376,000 and purchases of
approximately $6,658,000 and $5,814,000 with a subsidiary of CCBG for the
periods ended June 30, 1997 and 1996.

An officer of Coca-Cola Bottling Company of the Southwest ("CCBSW"), the
wholly-owned subsidiary of the Company, serves on the Board of Directors of
Western Container Corporation, ("Western") a plastic bottle manufacturing
cooperative. The Company had purchases of $5,634,000 and $7,546,000 from
Western for the periods ended June 30, 1997 and 1996.

5. SUBSEQUENT EVENT

On August 1, 1997 the Company paid a $9.4 million dividend to
shareholders of record on July 18, 1997. The dividend amounted to $8.54 per
share on Class A shares and $8.54 per share on the number of Class A shares
each Class B share was convertible into.

<PAGE>

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 for other distributors as capacity
permits and does not include licensed products for the franchised territory.
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 1997 decreased 5.7% or $3.4 million to
$56.6 million compared to $60.0 million for 1996. This decrease in net
revenues was due primarily to lower net effective selling prices for 6-pack
and 12-pack cans and 20 oz 8-pack PET bottles as well as a decrease in case
sales volume. Lower net effective prices resulted from increased price
competition in the market. Equivalent case sales decreased 1.7% in 1997
compared to 1996. Net revenues from post-mix as a percentage of total net
revenues increased to 8.4% for 1997 as compared to 8.0% for 1996. Net
revenues from the Company's Snappy Snack Division increased to 5.5% of net
revenue in 1997, as compared to 4.5% in 1996.

GROSS PROFIT. Gross profit for 1997 decreased 6.7% or $1.9 million to
$26.0 million compared to $27.9 million for the same period in 1996. This
decrease in gross profit was due to lower net effective selling prices
partially offset by lower raw material costs, primarily sweetner, cans and
PET bottles. Gross profit as a percentage of net revenues decreased to 46.0%
for 1997 compared to 46.5% for 1996 due to the lower net effective selling
prices.

SELLING, GENERAL & ADMINISTRATIVE. Selling, general and administrative
expenses for 1997 decreased 3.3% to $13.4 million from $13.8 million for the
same period in 1996, as a result of decreases in casualty insurance reserves
partially offset by increases in labor costs and expenditures on
merchandising equipment.

OPERATING INCOME. As a result of the above, operating income for 1997
decreased to $9.0 million or 15.9% of net revenue compared to $11.0 million
or 18.3% of net revenue for the same period in 1996.

INTEREST EXPENSE. Net interest expense was $4.6 million for both 1997
and 1996.

<PAGE>

SIX MONTHS ENDED JUNE 30, 1997 COMPARED TO SIX MONTHS ENDED JUNE 30, 1996

NET REVENUES. Net revenues for 1997 decreased 3.4% or $3.7 million to
$105.4 million compared to $109.1 million for 1996. This decrease in net
revenues was due primarily to a decrease in net effective selling price for
6-pack and 12-pack can packages. Lower net effective prices resulted from
increased price competition in the market. Equivalent case sales decreased
1.4% in 1997 compared to 1996. Net revenues from post-mix as a percentage of
total net revenues increased to 8.3% for 1997 as compared to 7.8% for 1996.
Net revenues from the Company's Snappy Snack Division increased to 5.6% of
net revenue in 1997, as compared to 4.8% in 1996.

GROSS PROFIT. Gross profit for 1997 decreased 2.6% or $1.3 million to
$49.5 million compared to $50.8 million for the same period in 1996. This
decrease in gross profit was due to lower net effective selling prices for
cans partially offset by lower raw material costs, primarily sweetner, cans
and PET bottles. Gross profit as a percentage of net revenues improved to
47.0% for 1997 compared to 46.6% for 1996.

SELLING, GENERAL & ADMINISTRATIVE. Selling, general and administrative
expenses for 1997 increased 2.6% to $27.6 million from $26.9 million for the
same period in 1996, as a result of labor and marketing expense increases
partially offset by decreases in casualty insurance reserves.

OPERATING INCOME. As a result of the above, operating income for 1997
decreased to $14.9 million or 14.1% of net revenue compared to $17.9 million
or 16.4% of net revenue for the same period in 1996.

INTEREST EXPENSE. Net interest expense was $9.1 million for both 1997
and 1996.

LIQUIDITY AND CAPITAL RESOURCES

Cash provided by operating activities was $12.3 million which was
generated primarily by operating income. Investing activities used $2.7
million primarily for additions to property, plant, and equipment, while
financing activities used $3.5 million which reflects the net of borrowings
under the revolving credit facility and the quarterly amortization
requirements of the Term Loan. Of total additions to property, plant and
equipment of $6.4 million, $4.3 million were acquired through the issuance of
long term debt.

The Term Loan entered into in 1995 provides for mandatory annual
prepayment based on excess cash flow as defined for each calendar year. In
accordance with the 1995 Bank Agreement, the Company paid $1.5 million
prepayment in April, 1997.

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 $50 million for four years. The Company has
no interest rate exposure under the agreement other than the initial purchase
cost of $0.5 million.

<PAGE>

The Company will continue to evaluate the realizability of its deferred
tax asset in relation to future taxable income and provide a valuation
allowance if necessary. At June 30, 1997, the Company recognized provision
for income tax of $2.1 million of which $2.0 million was deferred.

<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, and R. A. Walker 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 $9.4 million to its shareholders of record on July 18,
1997.

CHANGE OF CONTROL. CCBG Corporation is the sole shareholder of The
Coca-Cola Bottling Group (Southwest), Inc., the holder of all the outstanding
voting stock of the Registrant. By 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 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).

12
<PAGE>

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 Coca-Cola
Bottling Group (Southwest), Inc., the Board of Directors of Texas
Bottling Group, Inc. and Prudential Insurance Company of America
June 4, 1997, to be effective January 1, 1997.

10.2 Coca-Cola Bottling Company of the Southwest Amendment to
Management Incentive Plan adopted by the Board of Directors of
Coca-Cola Bottling Company of the Southwest effective June 1,
1997.

10.3 Amendment Agreement dated June 1, 1997 by and between
Coca-Cola Bottling Company of the Southwest and the managers who
were participants in the Coca-Cola Bottling Company of the
Southwest Management Incentive Plan effective January 1, 1994.

10.4 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.

10.5 Amendment Agreement dated June 1, 1997 related to the
Management Incentive Agreement effective January 1, 1994, by and
between The Coca-Cola Bottling Group (Southwest), Inc. and E. T.
Summers, III.

10.6 The Coca-Cola Bottling Group (Southwest), Inc. Management Incentive
Agreement executed June 30, 1997 by and among The Coca-Cola
Bottling Group (Southwest), Inc., Texas Bottling Group, Inc.,
Coca-Cola Bottling Company of the Southwest and E. T. Summers, III,
effective January 1, 1997.

10.7 Amendment Agreement dated June 1, 1997 related to the
Management Incentive Agreement effective January 1, 1994, by and
between The Coca-Cola Bottling Group (Southwest), Inc. and
Charles F. Stephenson.

10.8 The Coca-Cola Bottling Group (Southwest), Inc. Management
Incentive Agreement executed June 5, 1997 by and between The
Coca-Cola Bottling Group (Southwest), Inc. and Charles F. Stephenson,
effective January 1, 1997.

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.

13
<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

Texas Bottling Group, Inc.
(Registrant)

Date AUGUST 12 , 1997 By: /s/ CHARLES F. STEPHENSON
---------------------------- ------------------------------
Charles F. Stephenson
Treasurer and Chief Financial
Officer (duly authorized officer
and Principal Financial Officer)

14
<PAGE>

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
Coca-Cola Bottling Group (Southwest), Inc., the Board of
Directors of Texas Bottling Group, Inc. and Prudential Insurance
Company of America June 4, 1997, to be effective January 1, 1997.

10.2 Coca-Cola Bottling Company of the Southwest Amendment to
Management Incentive Plan adopted by the Board of Directors of
Coca-Cola Bottling Company of the Southwest effective June 1,
1997.

10.4 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.

10.6 The Coca-Cola Bottling Group (Southwest), Inc. Management
Incentive Agreement executed June 30, 1997 by and among The
Coca-Cola Bottling Group (Southwest), Inc., Texas Bottling Group,
Inc., Coca-Cola Bottling Company of the Southwest and E. T.
Summers, III, effective January 1, 1997.

27 Financial Data Schedule

<PAGE>
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
<PAGE>

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.

<PAGE>
EXHIBIT 10.2

COCA-COLA BOTTLING COMPANY OF THE SOUTHWEST

AMENDMENT TO MANAGEMENT INCENTIVE PLAN

The Management Incentive Plan established in 1994 by Coca-Cola Bottling
Company of the Southwest 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 10.3

AMENDMENT AGREEMENT

This agreement to amend the Management Incentive Agreements effective
January 1, 1994 (the "Agreements"), 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 the
undersigned employees of the Company who are parties to the Agreements, to be
effective when 5 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 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 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:

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 $ 42,615,000
1995 44,746,000
1996 46.983.000
------------

Three Year Total $134,344,000

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 5 of the employees listed on the signature page of
this Amendment have executed this Amendment.

APPROVED AND ACCEPTED effective June 1, 1997.

COCA-COLA BOTTLING COMPANY
OF THE SOUTHWEST

By: /s/ E.T. SUMMERS, III
--------------------------------
Its: President
-------------------------------

/s/ DAVID GREEN /s/ CURT LEATHERS
- ------------------------------ ------------------------------------
David Green Curt Leathers

/s/ BOBBY SKLOSS /s/ JOHN SUMMERS
- ------------------------------ ------------------------------------
Bobby Skloss John Summers

2
<PAGE>

/s/ RANDY BOONE /s/ JAMES DOEGE
- ------------------------------ ------------------------------------
Randy Boone James Doege

/s/ MONA WEIDNER
- ------------------------------ ------------------------------------
Mona Weidner Keith Jeffrey

<PAGE>

EXHIBIT 10.4

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 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 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:

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

<PAGE>
EXHIBIT 10.5

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:

B. Paragraph 2 of the Agreement is hereby amended to read as follows:

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

<PAGE>
EXHIBIT 10.6

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

<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 i;s 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.

<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

<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 wild 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.

<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

<PAGE>

EXHIBIT 10.7

AMENDMENT AGREEMENT

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 l of the Agreement is hereby amended to read as follows:

B. Paragraph 2 of the Agreement is hereby amended to read as follows:

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/ CHARLES F. STEPHENSON
----------------------------------
Charles F. Stephenson

<PAGE>

EXHIBIT 10.8

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

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
noncash 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.

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

<PAGE>
<ARTICLE> 5

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