SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X] Filed by a Party other than the Registrant [_]
Check the appropriate box:
[X] Preliminary Proxy Statement
[_] CONFIDENTIAL, FOR USE OF THE COMMISSION ONLY
(AS PERMITTED BY RULE 14a-6(e)(2))
[_] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Rule 14a-12
COCA-COLA BOTTLING CO. CONSOLIDATED
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
---------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
---------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
---------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
---------------------------------------------------------------------------
(5) Total fee paid:
---------------------------------------------------------------------------
[_] Fee paid previously with preliminary materials.
---------------------------------------------------------------------------
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
---------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
---------------------------------------------------------------------------
(3) Filing Party:
---------------------------------------------------------------------------
(4) Date Filed:
---------------------------------------------------------------------------
COCA-COLA BOTTLING CO. CONSOLIDATED
4100 COCA-COLA PLAZA
CHARLOTTE, NORTH CAROLINA 28211
(704) 557-4400
------------------------------------------
Notice of Annual Meeting of Stockholders
to be held on
May 7, 2003
------------------------------------------
To The Stockholders of
Coca-Cola Bottling Co. Consolidated:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Coca-Cola
Bottling Co. Consolidated (the "Company") will be held at the Company's Snyder
Production Center, 4901 Chesapeake Drive, Charlotte, North Carolina 28216 on
Wednesday, May 7, 2003, at 10:00 a.m., local time, for the purpose of
considering and acting upon the following:
1. Election of four members to the Board of Directors for a term of three
years and one member to the Board of Directors for a term of one year
(unless Proposal 2 below is adopted, in which case the terms of all
five such members of the Board of Directors will be one year).
2. Approval of amendments to the Company's Restated Certificate of
Incorporation and Amended and Restated Bylaws to declassify the
Company's Board of Directors so that each director would stand for
re-election on an annual basis.
3. Re-approval of the Company's Annual Bonus Plan.
4. Such other business as may properly come before the meeting or any
adjournment thereof.
The Board of Directors has fixed the close of business on March 24, 2003 as
the record date for determining the stockholders entitled to notice of and to
vote at the meeting or any adjournment thereof, and only holders of Common Stock
and Class B Common Stock of the Company of record on such date will be entitled
to notice of or to vote at the meeting. A list of stockholders will be available
for inspection at least ten days prior to the meeting at the principal executive
offices of the Company at 4100 Coca-Cola Plaza, Charlotte, North Carolina.
The Board of Directors will appreciate your prompt vote. Registered holders
of the Company's stock may vote by a toll-free telephone number, the Internet or
by the prompt return of the enclosed proxy card, dated and signed. Instructions
regarding all three methods of voting are contained in the proxy card. The proxy
may be revoked at any time before it is exercised and will not be exercised if
you attend the meeting and vote in person.
By Order of the Board of Directors
Henry W. Flint
Secretary
April 4, 2003
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS OF
COCA-COLA BOTTLING CO. CONSOLIDATED
to be held on MAY 7, 2003
Introduction
This Proxy Statement is being furnished by the Board of Directors of
Coca-Cola Bottling Co. Consolidated (the "Company") in connection with the
solicitation of proxies by the Board of Directors for use at the Annual Meeting
of Stockholders to be held at the Company's Snyder Production Center, 4901
Chesapeake Drive, Charlotte, North Carolina on Wednesday, May 7, 2003, at 10:00
a.m., local time, and at any adjournment thereof. This Proxy Statement and the
accompanying form of proxy are first being mailed to stockholders of the Company
on or about April 4, 2003. The principal executive offices of the Company are
located at 4100 Coca-Cola Plaza, Charlotte, North Carolina 28211.
Record Date, Vote Required and Related Matters
The Board of Directors has fixed the close of business on March 24, 2003 as
the record date for the determination of stockholders entitled to notice of and
to vote at the Annual Meeting of Stockholders. At the close of business on March
24, 2003, the Company had issued and outstanding 6,642,577 shares of Common
Stock and 2,400,752 shares of Class B Common Stock. Each share of Common Stock
is entitled to one vote per share and each share of Class B Common Stock is
entitled to 20 votes per share (or an aggregate of 54,657,517 votes with respect
to the Common Stock and the Class B Common Stock voting together as a single
class). Each stockholder may exercise his right to vote either in person or by
properly executed proxy. The Common Stock and Class B Common Stock will vote
together as a single class on all matters considered at the Annual Meeting of
Stockholders.
Any proxy delivered by telephone, by Internet or by returning the
accompanying proxy card may be revoked by the person delivering the proxy at any
time before the authority thereby granted is exercised by filing an instrument
revoking it or a duly executed proxy bearing a later date with the Secretary of
the Company or if the person delivering the proxy attends the meeting and votes
in person. If a choice is specified in the proxy, shares represented thereby
will be voted in accordance with such choice. If no choice is specified, the
proxy will be voted FOR the five nominees to the Board of Directors listed
herein, FOR approval of amendments to the Company's Restated Certificate of
Incorporation and Amended and Restated Bylaws to declassify the Company's Board
of Directors so that each director would stand for re-election on an annual
basis and FOR re-approval of the Company's Annual Bonus Plan.
The presence, in person or by proxy, of the holders of a majority of the
votes eligible to be cast by the holders of Common Stock and Class B Common
Stock voting together as a class is necessary to constitute a quorum at the
Annual Meeting of Stockholders. Directors are elected by a plurality of the
votes cast at a meeting at which a quorum is present. The affirmative vote of
holders of a majority of the total votes of the Company's Common Stock and Class
B Common Stock, voting together as a single class, present in person or by proxy
and entitled to vote at the 2003 Annual Meeting of Stockholders is required to
re-approve the Company's Annual Bonus Plan. The proposal to declassify the
Company's Board of Directors requires both the affirmative vote of not less than
two thirds of all the shares of the Company's Common Stock and Class B Common
Stock, voting together as a single class, outstanding and entitled to vote at
the 2003 Annual Meeting of the Stockholders and the affirmative vote of holders
of a majority of the total votes of the Company's Common Stock and Class B
Common Stock, voting together as a single class, present in person or by proxy
and entitled to vote at the 2003 Annual Meeting of Stockholders. An abstaining
vote counts towards establishing a quorum, but its effects on the actual vote
counts differs
1
depending on the subject matter of the vote. In the election of directors, an
abstaining vote is not counted and therefore has no effect on the election;
however, in a vote on the other proposals to be considered at the meeting, an
abstaining vote has the effect of a vote against the proposal. A broker non-vote
counts towards establishing a quorum. In the proposals for the election of
directors and re-approval of the Company's Annual Bonus Plan and in connection
with the second vote described above with respect to the proposal to declassify
the Company's Board of Directors, broker non-votes are not included in the
tabulation of the voting results and therefore do not affect the outcome of the
vote. However, for purposes of the first vote described above with respect to
the proposal to declassify the Company's Board of Directors, a broker non-vote
has the effect of a vote against the proposal. A broker "non-vote" occurs when a
nominee holding shares for a beneficial owner does not vote on a particular
matter because the nominee does not have discretionary voting power for that
particular matter and has not received instructions from the beneficial owner.
The Board of Directors has been informed that J. Frank Harrison, III
intends to vote an aggregate of 1,985,298 shares of the Company's Common Stock
and 2,399,250 shares of the Company's Class B Common Stock (representing an
aggregate of 91.4% of the total voting power as of the record date) FOR electing
the Board of Directors' nominees for director, FOR approval of amendments to the
Company's Restated Certificate of Incorporation and Amended and Restated Bylaws
to declassify the Company's Board of Directors so that each director would stand
for re-election on an annual basis and FOR re-approval of the Company's Annual
Bonus Plan.
The Board of Directors is not aware of any matters to be brought before the
Annual Meeting of Stockholders or any adjournment thereof other than the
election of five directors, approval of amendments to the Company's Restated
Certificate of Incorporation and Amended and Restated Bylaws to declassify the
Company's Board of Directors, re-approval of the Company's Annual Bonus Plan and
routine matters incidental to the conduct of the meeting. If, however, other
matters are properly presented, it is the intention of the persons named in the
accompanying proxy or their substitutes to vote the shares represented by the
proxy in accordance with their best judgment on such matters.
Principal Stockholders
At March 24, 2003, the only persons known to the Company to be beneficial
owners of more than 5% of the Common Stock or Class B Common Stock of the
Company were as follows:
Amount and
Nature of Percentage Percentage
Beneficial of Total of Total
Name and Address Class Ownership Class Votes(1) Votes(1)
---------------- ----- --------- ----- -------- --------
J. Frank Harrison, III, J. Frank Common Stock 4,384,548 (2)(5) 48.5%
Harrison Family, LLC and three Class B Common 2,399,250 (3)(5) 99.9% 49,970,298 91.4%
Harrison Family Limited
Partnerships, as a group
4100 Coca-Cola Plaza
Charlotte, NC 28211
The Coca-Cola Company Common Stock 1,984,495 (4)(5) 29.9%
One Coca-Cola Plaza Class B Common 497,670 (5) 20.7% 11,937,895 21.8%
Atlanta, GA 30313
Coca-Cola Enterprises Inc. Common Stock 696,100 (6) 10.5% 696,100 1.3%
2500 Windy Ridge Parkway
Atlanta, GA 30339
2
Wachovia Corporation Common Stock 349,684 (7) 5.3% 349,684 0.6%
One Wachovia Center
Charlotte, NC 28288
- ----------
(1) In calculating the total votes and percentage of total votes, no effect is
given to conversion of Class B Common Stock into Common Stock. A total of
6,642,577 shares of Common Stock and 2,400,752 shares of Class B Common
Stock was outstanding on March 24, 2003.
(2) Consists of (a) 1,984,495 shares of Common Stock held by The Coca-Cola
Company subject to the terms of the Voting Agreement and Irrevocable Proxy
(described in note (5) below) as to which Mr. Harrison, III has shared
voting and no investment power; (b) 803 shares of Common Stock held by Mr.
Harrison, III as custodian for certain of his children as to which Mr.
Harrison, III has sole voting and investment power; and (c) 2,399,250
shares of Class B Common Stock beneficially owned by such persons as
described in note (3) that are convertible into shares of Common Stock.
(3) Consists of (a) a total of 1,605,534 shares of Class B Common Stock held by
the JFH Family Limited Partnership -- FH1, JFH Family Limited Partnership
-- SW1 and JFH Family Limited Partnership -- DH1 (collectively, the
"Harrison Family Limited Partnerships"), as to which Mr. Harrison, III, in
his capacity as the Consolidated Stock Manager of J. Frank Harrison Family,
LLC (the general partner of each of the Harrison Family Limited
Partnerships), has sole voting and investment power; (b) 235,786 shares of
Class B Common Stock held by a trust for the benefit of certain relatives
of the late J. Frank Harrison, Jr. as to which Mr. Harrison, III has sole
voting and investment power as trustee; (c) 260 shares of Class B Common
Stock held by Mr. Harrison, III as custodian for certain of his children as
to which Mr. Harrison, III has sole voting and investment power; (d)
497,670 shares of Class B Common Stock held by The Coca-Cola Company
subject to the terms of the Voting Agreement and Irrevocable Proxy
(described in note (5) below) as to which Mr. Harrison, III has shared
voting and no investment power; and (e) 60,000 shares of Class B Common
Stock held by Mr. Harrison, III as to which he has sole voting and
investment power.
(4) Such information is derived from Amendment No. 25 to Schedule 13D filed by
The Coca-Cola Company on February 25, 2003. With respect to the Common
Stock ownership information, the amount shown excludes 497,670 shares
issuable upon conversion of shares of Class B Common Stock.
(5) J. Frank Harrison, III, Reid M. Henson (as trustee of certain trusts), J.
Frank Harrison Family LLC and the Harrison Family Limited Partnerships are
parties to a Voting Agreement with The Coca-Cola Company. The Coca-Cola
Company has also granted an Irrevocable Proxy to Mr. Harrison, III, the
terms of which provide that Mr. Harrison, III has been granted an
irrevocable proxy for life concerning the shares of Common Stock and Class
B Common Stock owned by The Coca-Cola Company. See "Certain Transactions."
(6) Such information is derived from Amendment No. 4 to Schedule 13G filed by
Coca-Cola Enterprises Inc. on February 14, 2002.
(7) Such information is derived from Amendment No. 1 to Schedule 13G filed by
Wachovia Corporation on February 12, 2003. Wachovia Corporation has sole
voting power with respect to all such shares, sole investment power with
respect to 340,244 such shares and shared investment power with respect to
4,740 shares. A subsidiary of Wachovia Corporation serves as an investment
advisor for clients, and a portion of such shares are beneficially owned by
such clients. The remainder of such shares are held by a subsidiary of
Wachovia Corporation in a fiduciary capacity for its customers.
3
Proposal 1:
Election of Directors
The Company's Board of Directors consists of between nine and twelve
members as fixed from time to time by the stockholders of the Company or the
Board of Directors. The Board of Directors currently has ten members. The Board
of Directors is currently divided into three classes, as nearly equal in number
as possible, with staggered three-year terms. The Board of Directors is
permitted to appoint individuals as directors to fill vacancies on the Board of
Directors.
Four of the directors' terms expire in 2003. The Board of Directors
proposes to fill these positions at the Annual Meeting of Stockholders with
nominees to serve until the 2006 Annual Meeting of Stockholders and until their
successors are duly elected and qualified. In addition, one director will be
elected to fill a vacancy created by the death of J. Frank Harrison, Jr. in
November 2002. Mr. Harrison, Jr. was elected to the Board of Directors at the
Annual Meeting of Stockholders in 2001 for a term expiring in 2004. The Board of
Directors proposes to fill this position at the Annual Meeting of Stockholders
with a nominee to serve until the 2004 Annual Meeting of Stockholders and until
her successor is duly elected and qualified.
If the Company's stockholders adopt Proposal 2 as described in this proxy
statement, the Company's Board of Directors will be declassified and the term of
each member of the Company's Board of Directors will expire at the 2004 Annual
Meeting of Stockholders. See "Proposal 2: Approval of Amendments to the
Company's Restated Certificate of Incorporation and Bylaws to Declassify the
Company's Board of Directors" on page 19 of this proxy statement.
It is the intention of the persons named as proxies in the accompanying
form of proxy to vote all proxies solicited for the five nominees listed below,
unless the authority to vote is withheld. Each nominee other than Deborah S.
Harrison is currently a member of the Board of Directors. If for any reason any
nominee shall not become a candidate for election as a director at the meeting,
an event not now anticipated, the proxies will be voted for the five nominees
including such substitutes as shall be designated by the Board of Directors. The
proxies solicited hereby will in no event be voted for more than five persons.
Nominees for Election of Directors in 2003
(Terms Expiring in 2006/1/)
H. W. MCKAY BELK, age 46, is President, Merchandising and Marketing of
Belk, Inc., an operator of retail department stores, a position he has held
since May 1998. Mr. Belk served as President and Chief Merchandise Officer of
Belk Store Services, Inc., a provider of services to retail department stores,
from March 1997 to April 1998. Mr. Belk served as President, Merchandise and
Sales Promotion of Belk Store Services, Inc. from April 1995 through March 1997.
Mr. Belk is also a director of Belk, Inc., an operator of retail department
stores. He has been a director of the Company since May 1994 and is Chairman of
the Audit Committee and a member of the Finance Committee and Compensation
Committee.
WILLIAM B. ELMORE, age 47, is President and Chief Operating Officer of the
Company, positions he has held since January 2001. He was Vice President, Value
Chain from July 1999 to
/1/ If the Company's stockholders approve Proposal 2, the terms of such
nominees will expire in 2004.
4
December 2000, Vice President, Business Systems from August 1998 to June 1999,
Vice President, Treasurer from June 1996 to July 1998 and Vice President,
Regional Manager for the Virginia, West Virginia and Tennessee Divisions from
August 1991 to May 1996. Mr. Elmore has been a director of the Company since
January 2001. He is a member of the Executive Committee and the Retirement
Benefits Committee.
JOHN W. MURREY, III, age 60, has practiced law in St. Paul, Virginia since
November 2002. Mr. Murrey was of counsel to the law firm of Shumacker Witt
Gaither & Whitaker, P.C., in Chattanooga, Tennessee through December 2002, a
firm with which he was associated since 1970. Mr. Murrey is a director of The
Dixie Group, Inc., a carpet manufacturer. He has been a director of the Company
since March 1993 and is a member of the Retirement Benefits Committee.
DENNIS A. WICKER, age 50, has been a partner in the Raleigh, North Carolina
office of the law firm of Helms Mulliss & Wicker, PLLC since 2001. He served as
Lt. Governor of North Carolina from 1993 to 2001. Mr. Wicker served as Chairman
of North Carolina Community Colleges and as Chairman of North Carolina's
Technology Council. Mr. Wicker also serves as a director of First Bancorp. Mr.
Wicker has been a director of the Company since May 2001. Mr. Wicker is a member
of the Audit Committee and the Compensation Committee.
Nominee for Election of Director in 2003
(Term Expiring in 2004)
DEBORAH S. HARRISON, age 42, has been an affiliate broker with Fletcher
Bright Company, a real estate brokerage firm located in Chattanooga, Tennessee,
since February 1997. Ms. Harrison has also served as a Trustee of the Girls'
Preparatory School in Chattanooga, Tennessee since 1997.
Continuing Directors
(Terms Expiring in 2004)
J. FRANK HARRISON, III, age 48, is Chairman of the Board of Directors and
Chief Executive Officer of the Company. Mr. Harrison, III served as Vice
Chairman of the Board of Directors from November 1987 through his election as
Chairman in December 1996 and was appointed as the Company's Chief Executive
Officer in May 1994. He was first employed by the Company in 1977 and has served
as a Division Sales Manager and as a Vice President. Mr. Harrison, III is a
director of Wachovia Bank & Trust, N.A., Southern Region Board. He is Chairman
of the Finance Committee and Vice-Chairman of the Executive Committee.
NED R. McWHERTER, age 72, has been Chairman of the Board of Directors of
Volunteer Distributing Company, Inc., a beverage distributor, and Eagle
Distributors, Inc., a snack food distributor. He has also served as a Governor
of the United States Postal Service since 1995. Mr. McWherter served as Governor
of the State of Tennessee from January 1987 to January 1995. Mr. McWherter is a
director of Piedmont Natural Gas Co., a distributor of natural gas. He has been
a director of the Company since 1995 and is Chairman of the Compensation
Committee and a member of the Finance Committee.
JAMES L. MOORE, JR., age 60, has been Vice Chairman of the Board of
Directors since January 2001. He was President of the Company from March 1987 to
December 2000. Mr. Moore has been a director of the Company since 1987. He is
Chairman of the Retirement Benefits Committee and is a member of the Executive
Committee.
5
Continuing Directors
(Terms Expiring in 2005/2/)
SHARON A. DECKER, age 46, has been President of Doncaster, a division of
the Tanner Companies, a women's apparel company, since 1999. Ms. Decker was
President and Chief Executive Officer of the Lynnwood Foundation, which created
and manages a conference facility and leadership institute, from 1997 until
1999. From 1980 until 1997, she served Duke Energy Corporation in a number of
capacities, including as Corporate Vice President and Executive Director of the
Duke Power Foundation. She also serves as a director of Family Dollar Stores,
Inc., a discount retailer. Ms. Decker has been a director of the Company since
May 2001. Ms. Decker is a member of the Audit Committee and the Retirement
Benefits Committee.
REID M. HENSON, age 63, has served as a consultant to the Company since May
2000. Mr. Henson served as Vice Chairman of the Board of Directors of the
Company from 1983 to May 2000. Mr. Henson served as a consultant to JTL
Corporation, a management company, and later as President of JTL Corporation. He
has been a director of the Company since 1979 and is Vice Chairman of the
Retirement Benefits Committee and is a member of the Executive Committee, the
Audit Committee and the Finance Committee.
CARL WARE, age 59, retired from The Coca-Cola Company in February 2003. Mr.
Ware served as Executive Vice President, Public Affairs and Administration for
The Coca-Cola Company, from January 2000 to February 2003. He served as
President of the Africa Group of The Coca-Cola Company from January 1993 to
January 2000. Mr. Ware has been a director of the Company since February 2000.
Mr. Ware is a director of The Georgia Power Company, a public utility,
ChevronTexaco Corp., a petroleum products company, and National Life of Vermont
Financial Corporation, an insurance company. Mr. Ware is a member of the Finance
Committee and the Compensation Committee.
J. Frank Harrison, III and Deborah S. Harrison are brother and sister. In
accordance with the operating agreement of J. Frank Harrison Family, LLC and a
trust for the benefit of certain relatives of the late J. Frank Harrison, Jr.,
J. Frank Harrison, III intends to vote the shares of the Company's stock owned
or controlled by such entities for the election of Ms. Harrison to the Company's
Board of Directors.
- -----------------
/2/ If the Company's stockholders approval Proposal 2, the terms of such
Directors will expire in 2004.
6
Beneficial Ownership of Management
The following table presents certain information on March 24, 2003
regarding the beneficial ownership of the Common Stock and Class B Common Stock
of the Company by its directors, by the nominees for director, by the Named
Executive Officers in the Summary Compensation Table and by all directors,
nominees for director and executive officers as a group. Information concerning
beneficial ownership of the Common Stock and Class B Common Stock by Mr.
Harrison, III is presented above under the caption "Principal Stockholders" and
is not included in the following table.
Amount and
Nature of Percentage
Beneficial of
Name Class(1) Ownership Class
---- -------- --------- -----
H.W. McKay Belk Common Stock 520(2) *
Sharon A. Decker Common Stock 0 -
William B. Elmore Common Stock 1,000(3) *
Deborah S. Harrison Common Stock 0(4) -
Reid M. Henson Common Stock 2,000 *
Ned R. McWherter Common Stock 1,000 *
James L. Moore, Jr. Common Stock 1,000 *
John W. Murrey, III Common Stock 1,000 *
Robert D. Pettus, Jr. Common Stock 0 -
David V. Singer Common Stock 3,000(3) *
Carl Ware Common Stock 0 -
Dennis A. Wicker Common Stock 0 -
Directors, nominees for director and executive
officers as a group (excluding Mr. Harrison,
III) (21 persons) Common Stock 9,825 *
- ---------
* Less than 1% of the outstanding shares of such class.
(1) None of such persons other than Ms. Harrison beneficially owns any shares
of Class B Common Stock.
(2) Includes 300 shares held by Mr. Belk as custodian for certain of his
children.
(3) Held jointly with his wife.
(4) Excludes shares of Class B Common Stock held by the JFH Family Limited
Partnership - DH1 and shares held by a trust for certain relatives of the
late J. Frank Harrison, Jr. Ms. Harrison has no voting or investment power
with respect to such shares.
7
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
executive officers, directors and certain persons who beneficially own more than
10% of the Company's Common Stock to file with the Securities and Exchange
Commission initial reports of ownership and reports of changes in ownership of
the Common Stock and other equity securities of the Company. Executive officers,
directors and such greater than 10% stockholders are required to furnish the
Company with copies of all such reports they file. Based solely on its review of
the copies of such reports received by it and written representations that no
other reports were required for such persons, the Company believes that, during
fiscal year 2002, all filing requirements applicable to its executive officers,
directors and such greater than 10% stockholders were complied with on a timely
basis.
The Board of Directors and its Committees
Directors who are not employees of the Company and who are not members of
the Harrison family are paid $25,000 as an annual retainer, $1,200 for each
Board meeting attended and $1,000 for each Committee meeting attended. The Board
of Directors held four meetings during 2002. No directors other than Mr.
McWherter and Mr. Ware attended fewer than 75% of the total number of meetings
of the Board of Directors and the Committees of the Board of Directors on which
he or she served during 2002.
Under the Company's Director Deferral Plan, directors of the Company who
are not also employees of the Company may defer payment of their annual retainer
and meeting fees until they no longer serve on the Board of Directors. Fees
deferred are deemed to be invested in certain investment vehicles selected by
the directors. Upon resignation or retirement, a participating director will be
entitled to receive a cash payment based upon the amount of fees deferred and
the investment return on the selected investment vehicle. If a director's
service terminates prior to age 65, amounts accrued under his or her account are
paid out in a single cash payment. If a director's service terminates at or
after age 65, amounts accrued under his or her account are paid out, at the
election of the director, either in a single cash payment or in ten equal annual
installments (with an imputed 8% return on the deferred installments).
The Board of Directors has an Audit Committee whose current members are
Messrs. Belk (Chairman), Henson and Wicker and Ms. Decker. The Audit Committee
supervises the Company's relationship with the Company's independent accountants
and the Company's internal audit function, evaluates external and internal audit
performance, evaluates policies and procedures and oversees the Company's
processes relating to external and internal accounting functions, including the
financial reporting process and internal controls, and monitors the Company's
compliance with the Audit Committee Charter and other audit-related rules and
regulations applicable to the Company. The Board of Directors adopted certain
amendments to the written charter for the Audit Committee on March 5, 2003. A
copy of the Audit Committee's charter as so amended is attached hereto as
Appendix A. The Audit Committee met four times in 2002. All members of the Audit
Committee are independent, as defined by NASD Rule 4200(a)(14), except for Mr.
Henson. Mr. Henson is not independent because he was an executive officer of the
Company until May 31, 2000 and because he received compensation from the
Company, other than compensation for board service, in excess of $60,000 during
the last fiscal year. The Board of Directors believes Mr. Henson's knowledge of
the Company and the industry, together with his long tenure as Chairman of the
Audit Committee and his familiarity with the Company's internal auditors and
independent accountants and their procedures, will enable the Committee to
better perform its function of evaluating the integrity of the Company's
financial statements and reviewing the Company's external and internal audit
processes.
8
The Board of Directors has a Compensation Committee whose current members
are Messrs. McWherter (Chairman), Belk, Ware and Wicker. The Compensation
Committee administers the Company's compensation plans, reviews and establishes
the compensation of the Company's officers and makes recommendations to the
Board of Directors concerning such compensation and related matters. The
Compensation Committee met three times in 2002.
The Board of Directors does not have a standing Nominating Committee.
9
Executive Compensation
The table below shows certain compensation information for the three
fiscal years ended December 29, 2002, December 30, 2001 and December 31, 2000
concerning the Company's Chief Executive Officer and its four other most highly
compensated executive officers (collectively, the "Named Executive Officers").
Summary Compensation Table
Annual Compensation
-------------------
Long-Term
Name and Other Annual Compensation All Other
Principal Position Year Salary Bonus Compensation(1) Payouts Compensation(2)
------------------ ---- ------ ----- --------------- ------- ---------------
J. Frank Harrison, III 2002 $ 660,829 $762,397 $ 247,718 $ 2,330,360(3) $ 258,264
Chairman of the Board of 2001 634,927 680,803 196,988 1,427,350(3) 261,370
Directors and Chief Executive 2000 607,101 658,705 206,063 1,424,676(3) 257,940
Officer
William B. Elmore 2002 484,167 422,625 183,400 - 42,378
President and 2001 406,667 336,420 (4) - 40,607
Chief Operating Officer 2000 243,333 127,488 (4) - 26,175
James L. Moore, Jr. 2002 572,797 658,717 (4) - 116,904
Vice Chairman of the 2001 572,797 611,747 (4) - 117,291
Board of Directors 2000 571,407 621,488 55,138 - 114,031
Robert D. Pettus, Jr 2002 345,833 241,500 (4) - 79,084
Executive Vice President 2001 298,409 201,853 (4) - 78,220
and Assistant to the Chairman 2000 279,575 152,388 (4) - 55,170
David V. Singer 2002 393,933 272,688 (4) - 81,278
Executive Vice President 2001 375,800 243,504 (4) - 80,844
and Chief Financial Officer 2000 328,800 178,808 (4) - 57,770
- --------
(1) With respect to Mr. Harrison, III, includes $192,265, $148,326 and
$142,453 attributable to the use of corporate transportation for
fiscal years 2002, 2001 and 2000, respectively. With respect to Mr.
Elmore, includes $154,870 for a country club initiation fee and an
associated income tax gross-up for fiscal year 2002. With respect to
Mr. Moore, includes $44,061 in country club dues and an associated
income tax gross-up for fiscal year 2000.
(2) The components of the amounts shown in this column consist of (a)
Company contributions to the Company Savings Plan for Messrs.
Harrison, Elmore, Moore, Pettus and Singer of $5,500 each for fiscal
year 2002, $5,250 each for fiscal year 2001, and $5,250 each for
fiscal year 2000, (b) Company contributions to the Supplemental
Savings Incentive Plan for Messrs. Harrison, Elmore, Moore, Pettus and
Singer, respectively, of $25,421, $20,166, $25,786, $30,776 and
$17,842 for fiscal year 2002, $25,131, $18,760, $27,288, $31,189 and
$17,684 for fiscal year 2001, and $21,755, $13,236, $24,028, $24,742
and $14,477 for fiscal year 2000, (c) split-dollar life insurance
premiums paid by the Company for the benefit of Messrs. Harrison,
Elmore, Moore, Pettus and Singer, respectively, of $226,533, $15,931,
$82,054, $40,486 and $39,616 for fiscal year 2002, $229,931, $15,931,
$82,054, $40,486 and $39,616 for fiscal year 2001, and $229,931,
$7,337, $82,054, $23,986 and $18,839 for fiscal year 2000, and (d)
excess group life insurance premiums paid by the Company for the
benefit of Messrs. Harrison, Elmore, Moore, Pettus and Singer,
respectively, of $810, $781, $3,564, $2,322 and $620 for fiscal year
2002, $1,058, $666, $2,699, $1,295 and $594 for fiscal year 2001, and
$1,004, $352, $2,699, $1,192 and $504 for fiscal year 2000. With
respect to Mr. Singer, the amounts shown in this column also include
$17,700, $17,700 and $18,700 for fiscal years 2002, 2001 and 2000,
respectively, of director compensation received from South Atlantic
Canners, a co-operative in which
10
the Company is a member. The Company suspended premium payments on
split-dollar life insurance policies for the Named Executive Officers in
2002.
(3) During 1999, Mr. Harrison, III received a restricted stock award of
200,000 shares of the Company's Class B Common Stock that vests in equal
installments over a 10-year period subject to the achievement of certain
performance goals by the Company. Because performance goals were
exceeded for fiscal years 2002, 2001 and 2000, 20,000 shares vested with
respect to each of those years. See "Report of the Compensation
Committee on Annual Compensation of Executive Officers." The amount with
respect to fiscal years 2002, 2001 and 2000 are based on the value of
the Company's Common Stock on the last day of each such fiscal year, and
includes an income tax gross-up in each such fiscal year of $1,076,160,
$659,150 and $667,176, respectively.
(4) Such Named Executive Officer did not receive personal benefits during
the listed years in excess of the lesser of $50,000 and 10% of his
annual salary and bonus.
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Option
Information
The table below sets forth certain information related to the exercise of
stock options by Mr. Harrison, III during 2002. Mr. Harrison, III was the only
Named Executive Officer who held any stock options in 2002. At the end of fiscal
year 2002, Mr. Harrison, III did not hold any stock options.
Number of Securities Underlying
Shares Acquired on Unexercised Options at Fiscal
Name Exercise Value Realized Year End
- --------------------------------------------------------------------------------------------------------------------
Exercisable Unexercisable
----------- -------------
J. Frank Harrison, III 150,000 $2,521,732 0 0
Retirement Plan
The Company maintains a tax-qualified retirement plan for the majority of
its non-union employees including the Named Executive Officers (the "Retirement
Plan") providing for payments computed on an actuarial basis. The following
table sets forth the estimated annual benefits payable under the Retirement Plan
in a single life annuity upon retirement at age 65 to persons born in 1950 at
the compensation and years of service classifications set forth below.
ANNUAL BENEFIT UNDER RETIREMENT PLAN
Years of Service
Five-Year ------------------------------------------------------------------------------
Average Compensation 15 Years 20 Years 25 Years 30 Years 35 Years
- ---------------------- --------- ---------- ---------- ---------- ---------
$125,000 $23,663 $31,550 $39,438 $47,325 $47,325
150,000 29,663 39,550 49,438 59,325 59,325
175,000 35,663 47,550 59,438 71,325 71,325
200,000 41,663 55,550 69,438 83,325 83,325
Compensation for purposes of determining a participant's "five-year
average compensation" generally includes the salaries and bonuses shown in the
Summary Compensation Table. However, because the Retirement Plan is a
tax-qualified pension plan, the maximum amount of five-year average compensation
under the terms of the Retirement Plan is $200,000. As of December 29, 2002,
each of the Named Executive Officers has a five-year average compensation of
$200,000 for purposes of the Retirement Plan and the Named Executive Officers
have the following years of service for purposes of
11
the Retirement Plan: Mr. Harrison III, 26 years; Mr. Elmore, 18 years; Mr.
Moore, 16 years; Mr. Pettus, 18 years; and Mr. Singer, 17 years.
Officer Retention Plan
Under the Company's Officer Retention Plan (the "Retention Plan"),
eligible participants (including Named Executive Officers) normally receive a
20-year annuity payable in equal monthly installments commencing at retirement
or, in certain instances, upon termination of employment or after a Change in
Control (as defined below). The retirement benefits under the Retention Plan
increase with each year of participation as set forth in an agreement between
the participant and the Company. Benefits under the Retention Plan are reduced
by 50% for participants who terminate employment due to severance that is before
age 60 and not due to death or disability. The Retention Plan also provides for
a lump sum death benefit. If a participant dies before annuity payments have
begun, this death benefit equals the retirement benefit accrued as of the date
of death, reduced by 50% if before death the participant's employment had
terminated by severance rather than retirement. If a participant dies after
annuity payments have begun, the present value of the remaining monthly
installments (assuming an 8% per annum discount rate) is paid to the
participant's beneficiary in a lump sum.
Upon a Change in Control (as defined below), any participant actively
employed on the Change in Control date is eligible for a Change in Control
benefit in lieu of any other benefits to which he may have been entitled under
the Retention Plan. The Change in Control benefit is equal to the retirement
benefit the participant would have received had he continued to work through
normal retirement age (age 60).
For purposes of the Retention Plan and Supplemental Savings Plan (as
described below), a Change in Control generally occurs in the following
circumstances:
(a) when a person or group other than the Harrison family acquires shares
of the Company's capital stock having the voting power to designate a
majority of the Company's Board of Directors;
(b) when a person or group other than the Harrison family acquires or
possesses shares of the Company's capital stock having power to cast
(i) more than 20% of the votes regarding the election of the Board of
Directors and (ii) a greater percentage of the votes regarding the
election of the Board of Directors than the shares owned by the
Harrison family;
(c) upon the sale or disposition of all or substantially all of the assets
of the Company and its subsidiaries outside the ordinary course of
business other than to a person or group controlled by the Company or
the Harrison family; or
(d) upon the merger or consolidation of the Company with another entity
where the Company is not the surviving entity.
The estimated annual benefits payable upon retirement at age 60 for each
of the Named Executive Officers other than Mr. Moore are currently: Mr.
Harrison, III, $1,416,638; Mr. Elmore, $491,479; Mr. Pettus, $410,013; and Mr.
Singer, $732,231. The Company, with the approval of the Compensation Committee,
has agreed to pay Mr. Moore's annual benefit over ten years. His annual payout
will be $584,704.
Supplemental Savings Incentive Plan
Pursuant to the Company's Supplemental Savings Incentive Plan
("Supplemental Savings Plan"), eligible participants may elect to defer a
portion of their annual salary and bonus. The Company matches
12
30% of the first 6% of salary (excluding bonuses) deferred by the participant.
The Company also may make discretionary contributions to participants' accounts.
These discretionary contributions are intended to offset the reductions in
maximum benefits payable under the Retirement Plan or other qualified plans
sponsored by the Company. Participants are immediately vested in all
contributions they make and become fully vested in Company contributions upon
termination of employment due to death, disability or retirement at or after age
55, five years of service (vesting in 20% annual increments) or (for certain
participants) a Change in Control (as defined above). Participant deferrals and
contributions are deemed invested in either a fixed benefit option or certain
investment funds specified by the Company. Balances in the fixed benefit option
accrue up to a 13% return (depending upon the participant's age, years of
service and other factors).
During 2002, Company contributions for the Named Executive Officers under
the Supplemental Savings Plan were: Mr. Harrison, III, $25,421; Mr. Elmore,
$20,166; Mr. Moore, $25,786; Mr. Pettus, $30,776; and Mr. Singer, $17,842. No
Named Executive Officer received a distribution under the Supplemental Savings
Plan in 2002.
Employment Arrangements
In connection with the termination of his prior Employment Agreement, the
Company and James L. Moore, Jr. agreed that (a) he would continue to serve as
Vice Chairman of the Board of Directors, (b) his base salary would continue at
the annual rate set forth in the Summary Compensation Table and (c) he would
continue to participate in the Company's Annual Bonus Plan for 2001 and 2002.
This arrangement terminated in accordance with its terms on December 31, 2002.
The Company has entered into a consulting agreement with Reid M. Henson,
who previously served as a Vice Chairman of the Company's Board of Directors,
pursuant to which Mr. Henson agreed to continue to serve as a director of the
Company through the expiration of his term in 2002. Mr. Henson has agreed to
serve as a director for a term expiring in 2005. See "Election of Directors."
Mr. Henson has also agreed to assist the Company with major projects and provide
the Company with general oversight and guidance. Mr. Henson receives a fee of
$350,000 per year for his consulting services under this agreement. The
agreement does not modify the retiree benefits to which Mr. Henson is otherwise
entitled. The agreement extends through May 31, 2005, but is subject to
termination by Mr. Henson or upon Mr. Henson's death, disability or failure to
perform his duties under the agreement.
Compensation Committee Interlocks and Insider Participation
H.W. McKay Belk, Ned R. McWherter, Carl Ware and Dennis A. Wicker serve on
the Compensation Committee. None of such persons has ever been an officer or
employee of the Company or any of its subsidiaries. During 2002, no executive
officer of the Company served as a director or member of the compensation
committee (or other committee performing similar functions) of any other entity
of which an executive officer served on the Board of Directors or Compensation
Committee of the Company.
13
Report of the Compensation Committee
On Annual Compensation of Executive Officers
The Board's Compensation Committee, currently composed of Messrs. H.W.
McKay Belk, Ned R. McWherter, Carl Ware and Dennis A. Wicker, administers the
Company's compensation plans, reviews executive compensation and makes
recommendations to the Board concerning such compensation and related matters.
This report relates to the Company's compensation policy for its executive
officers, including the Named Executive Officers, for fiscal year 2002.
The Company's executive compensation policy is designed to establish an
appropriate relationship between executive pay and the creation of long-term
shareholder value, while motivating and retaining key employees. To achieve
these goals, the Company's executive compensation policy supplements annual base
compensation with an opportunity to earn bonuses based upon corporate
performance as well as factors related to each individual's performance.
Accordingly, a significant portion of any executive's compensation may consist
of performance-based bonuses. Measurement of corporate performance is primarily
based on Company objectives, which are set based on industry conditions and
industry-wide and Company performance levels and approved by the Board of
Directors. The performance of individual executives is evaluated on the basis of
both pre-determined performance goals for the Company and factors related to the
contributions of each individual.
Base salaries, including the base salary of J. Frank Harrison, III, the
Company's Chairman and Chief Executive Officer, were adjusted from the prior
year. The Committee periodically reviews base salary levels for its executives
in comparison with those of other companies in the soft drink bottling industry,
as well as other industries. For fiscal year 2002, the Committee primarily
relied upon a study published by Watson Wyatt Data Services that surveyed 1,503
public corporations, including many "Fortune 500" companies but excluding
financial services companies and non-profits. The survey provided compensation
information by separate categories of employers. Employer categorization factors
included those defined by industry, size and geographic location. The Company
strives to maintain executive base salaries at a level that will permit it to
compete with other major companies for managers with comparable qualifications
and abilities. Based on information contained in the Watson Wyatt survey, the
Compensation Committee believes that the overall compensation of the Company's
executive officers generally places them above the median compensation of
similarly situated executives in all industries covered by the survey. The
Committee believes that Mr. Harrison, III's overall compensation also places him
above the median compensation of similarly situated executives.
Other factors considered by the Committee in its periodic review of
executive salary levels include (i) the Company's total operating budget for
each fiscal year, (ii) the impact of annual changes in the consumer price index
and (iii) a comparison of the Company's executive compensation programs to
available information concerning those of other public companies in the soft
drink bottling industry. Due to wide disparities in levels of executive
compensation revealed in the published information regarding the companies
included in the Company's peer group index, the Compensation Committee did not
believe that such information provided a meaningful basis for evaluating the
overall compensation of the Company's executive officers for fiscal year 2002,
and therefore relied principally upon the information contained in the Watson
Wyatt survey for purposes of such evaluation.
The Company's Annual Bonus Plan is administered by the Compensation
Committee, which annually selects participants who hold key positions with the
Company or its subsidiaries. The total cash bonus awardable to a participant is
determined by multiplying such participant's base salary by three factors: (i)
the participant's approved bonus percentage factor; (ii) the participant's
indexed performance factor; and (iii) the Company's overall goal achievement
factor. The participant's approved bonus percentage factor is based on the
relative responsibility and contribution to the Company's performance
14
attributed to the participant's position with the Company, while the
participant's indexed performance factor is determined by such individual's
actual performance during the fiscal year (except that, for purposes of Section
162(m) of the Internal Revenue Code, the indexed performance factor for the
Named Executive Officers is set at the beginning of the fiscal year). The
overall goal achievement factor is determined by the Company's performance in
relation to pre-set Company performance goals, as discussed below.
Annual goals for selected Company performance indicators under the Annual
Bonus Plan are set either in the fourth quarter preceding a fiscal year or the
first quarter of a fiscal year. These goals are approved by the Compensation
Committee and ratified by the Board of Directors. The selected performance
indicators for fiscal year 2002 under the Annual Bonus Plan were operating cash
flow, free cash flow, net income, equivalent case volume, market share and a
value measure. The Compensation Committee assigns different weights to each of
the performance indicators based on the perceived need to focus more or less on
any particular objective in a given year. The corporate performance indicators
and related weights are established after evaluating industry conditions,
available information on the performance of other companies in the soft drink
bottling industry, the Company's prior year performance and the Company's
specific needs for the current year. For fiscal year 2002, the following weights
were assigned to the performance indicators: operating cash flow - 30%; free
cash flow - 40%; net income - 10%; equivalent case volume - 5%; value measure -
10%; and market share - 5%. The performance indicators, as weighted, make up the
Company's overall goal achievement factor, which is calculated on the basis of a
graduated scale ranging from a goal achievement of between 89% and 110% of each
particular performance indicator. In fiscal year 2002, actual performance
equaled or exceeded the 100% target for all of the performance indicators. As a
result of the Company's performance with respect to the performance indicators,
the terms of the Annual Bonus Plan provided for a bonus award to executive
officers, including Mr. Harrison, III, in an amount equal to 115.0% of 2002 base
salary multiplied by each officer's approved bonus percentage factor and by each
officer's indexed performance factor.
Although the Company's Annual Bonus Plan enables the Compensation
Committee to calculate bonuses derived from the factors described above, the
Compensation Committee has absolute discretion to decrease or eliminate awards
under the Company's Annual Bonus Plan. The Compensation Committee did not elect
to so decrease or eliminate bonus awards with respect to fiscal year 2002. The
amount of annual bonus awards under the Annual Bonus Plan for each of the Named
Executive Officers for the fiscal years 2000, 2001 and 2002 is included in the
Summary Compensation Table under the heading "Bonuses." However, for any Named
Executive Officer whose compensation may be subject to the deduction limits of
Section 162(m) of the Internal Revenue Code, payment of bonuses for 2002 under
the Annual Bonus Plan is conditioned on re-approval of the Annual Bonus Plan by
the stockholders. See "Re-Approval of the Company's Annual Bonus Plan" at page
21.
During 1999, Mr. Harrison, III received a restricted stock award of
200,000 shares of the Company's Class B Common Stock that vests in equal
installments over a 10 year period subject to the achievement of at least 80% of
the overall goal achievement factor for the selected performance indicators used
in determining bonuses under the Company's Annual Bonus Plan. The award also
includes cash payments by the Company to Mr. Harrison, III for the reimbursement
of income taxes related to the vesting of restricted stock. This restricted
stock award is intended to qualify as "performance-based compensation" under
Section 162(m) of the Internal Revenue Code. The primary purpose of the award is
to make a significant portion of Mr. Harrison, III's compensation dependent on
the Company achieving its performance goals. The award was approved by the
Company's stockholders at the annual meeting held on May 12, 1999. Pursuant to
the terms of the award, 20,000 shares vested, effective January 1, 2003, based
on the determination of the Compensation Committee that at least 80% of the
overall goal achievement factor had been obtained for fiscal year 2002.
15
The Company's total annual compensation package for its executives also
includes the opportunity: (i) to participate, on the same basis as other
non-union employees, in the Coca-Cola Bottling Co. Consolidated Savings Plan;
(ii) to participate in the Company's Retirement Plan; (iii) to elect to defer a
portion of base compensation and receive limited matching contributions from the
Company under the Supplemental Savings Incentive Plan; and (iv) for certain key
executives selected by the Compensation Committee, to receive additional
retirement and survivor benefits pursuant to the Officer Retention Plan. This
overall package is designed to attract and retain qualified executives and to
ensure that such executives have a continuing stake in the long-term success of
the Company. Certain officers of the Company were also eligible to participate
in the Officers' Split-Dollar Life Insurance Plan, but premium payments by the
Company were suspended during 2002.
The Company believes that all compensation paid or payable to its executive
officers covered under Section 162(m) of the Internal Revenue Code will qualify
for deductibility under such Section. The Company's compensation policies apply
equally to all of its executive officers, including the Chief Executive Officer.
Submitted by the Compensation Committee of the Board of Directors.
H. W. McKay Belk
Ned R. McWherter
Carl Ware
Dennis A. Wicker
Report Of The Audit Committee
The Board's Audit Committee, currently composed of Messrs. H.W. McKay Belk,
Reid M. Henson and Dennis A. Wicker and Ms. Sharon A. Decker, supervises the
Company's relationship with PricewaterhouseCoopers LLP, the Company's
independent accountants, and the Company's internal audit function, evaluates
external and internal audit performance, evaluates policies and procedures and
oversees the Company's processes relating to external and internal accounting
functions including the financial reporting process and internal controls, and
monitors the Company's compliance with the Audit Committee Charter and other
rules and regulations applicable to the Company. This report relates to certain
actions taken by the Audit Committee in fulfilling such role.
During fiscal year 2002, the Audit Committee discussed with the Company's
independent accountants and internal auditors the overall scope and plans for
their respective audits. The Audit Committee also met periodically with the
internal auditors and independent accountants to discuss the results of their
examinations, the overall quality of the Company's financial reporting and their
evaluations of the Company's internal controls.
In fulfilling such audit oversight responsibilities, the Audit Committee
reviewed and discussed with management the audited financial statements included
in the Annual Report on Form 10-K for the fiscal year ended December 29, 2002.
This review included a discussion of the quality and the acceptability of the
Company's financial reporting and controls. The Company's management has the
primary responsibility for the financial statements and reporting process,
including the Company's systems of internal controls.
During the past fiscal year, the Audit Committee further discussed with the
Company's independent accountants the matters required to be discussed by
Statement on Auditing Standards No. 61. The Audit Committee also received during
the past fiscal year the written disclosures and the letter from its
16
independent accountants required by Independence Standards Board Standard No. 1
and has discussed with the independent accountants their independence.
In reliance on the reviews, discussions and disclosures referred to above,
the Audit Committee recommended to the Board of Directors that the Company's
audited financial statements for the fiscal year ended December 29, 2002 be
included in the Company's Annual Report on Form 10-K for such fiscal year.
Submitted by the Audit Committee of the Board of Directors.
H. W. McKay Belk
Sharon A. Decker
Reid M. Henson
Dennis A. Wicker
17
Common Stock Performance Graph
Presented below is a line graph comparing the yearly percentage change in
the cumulative total return on the Company's Common Stock against the cumulative
total return of the Standard & Poor's 500 Index and a peer group for the period
commencing December 31, 1997 and ending December 31, 2002, covering the
Company's last five fiscal years. This peer group is comprised of Anheuser-Busch
Companies, Inc.; Cadbury Schweppes plc (through September 2000); Coca-Cola
Enterprises Inc.; The Coca-Cola Company; Cott Corporation; National Beverage
Corp.; PepsiCo, Inc.; The Quaker Oats Company; Triarc Companies, Inc.;
PepsiAmericas (formerly known as Whitman Corporation); and The Seagram Company
Ltd. (through September 2000).
[GRAPHIC REMOVED HERE]
- ----------------------------------------------- ---------- ---------- ---------- ---------- ---------- ----------
Dec-97 Dec-98 Dec-99 Dec-00 Dec-01 Dec-02
- ----------------------------------------------- ---------- ---------- ---------- ---------- ---------- ----------
Coca-Cola Bottling Co. Consolidated $100 $ 85 $ 71 $ 58 $ 60 $104
- ----------------------------------------------- ---------- ---------- ---------- ---------- ---------- ----------
S&P 500(R) $100 $129 $156 $141 $125 $ 97
- ----------------------------------------------- ---------- ---------- ---------- ---------- ---------- ----------
Peer Group $100 $110 $ 99 $119 $106 $101
- ----------------------------------------------- ---------- ---------- ---------- ---------- ---------- ----------
- -------
(1) Assumes that $100 was invested in the Company's Common Stock, in the
Standard & Poor's 500 Index and in the peer group on December 31, 1997 and
that all dividends were reinvested on a quarterly basis. Returns for the
companies included in the peer group have been weighted on the basis of the
total market capitalization for each company.
18
Proposal 2:
Approval of Amendments to the Company's Restated
Certificate of Incorporation and Amended and Restated Bylaws to Declassify the
Company's
Board of Directors
Declassification Proposal
The Company's Restated Certificate of Incorporation and Amended and
Restated Bylaws (the "Bylaws") provide that the Board of Directors will be
divided into three classes, as nearly equal in number as possible, with each
class having a three-year term. The Board of Directors has unanimously adopted
resolutions, subject to stockholder approval, amending the Company's Restated
Certificate of Incorporation and Bylaws to provide for a declassified Board of
Directors, such that all directors will be elected annually.
The Company adopted its current classified Board structure in 1980 with the
approval of the Company's stockholders. At that time, the Company also adopted
several other provisions in its Restated Certificate of Incorporation and Bylaws
designed to protect the classified Board structure. One such provision permits
directors to be removed prior to the expiration of their terms only for cause
and only by the affirmative vote of the holders of not less than a majority of
all of the shares of stock outstanding and entitled to vote for the election of
directors. This provision was adopted to conform to Delaware law which provides
that where a corporation's board of directors is classified, a director may be
removed only for cause unless otherwise provided in the corporation's
certificate of incorporation. In addition, the Company adopted supermajority
voting requirements providing that the affirmative vote of the holders of not
less than two thirds of all the shares of Company stock outstanding and entitled
to vote thereon would be required to amend the provisions of the Restated
Certificate of Incorporation and Bylaws establishing the classified Board
structure including the for cause removal provision described above. The
supermajority voting requirements also apply to amendments to the provisions of
the Restated Certificate of Incorporation and Bylaws establishing the minimum
and maximum number of directors of the Company and the manner of election of
directors.
The Board is recommending to the Company's stockholders a proposal to amend
the Company's Restated Certificate of Incorporation and Bylaws to declassify the
Company's Board of Directors. If the stockholders approve this proposal, the
terms of all of the Company's directors, including the directors elected at the
2003 Annual Meeting of Stockholders, would be reduced to one year. As a result,
the terms of all directors would end at the 2004 Annual Meeting of Stockholders,
and all directors would thereafter be elected for one-year terms at each Annual
Meeting of Stockholders. In addition, in accordance with Delaware law, the
proposal would delete the for cause removal provision described above, such that
any or all directors could be removed by the Company's stockholders with or
without cause with the approval of a majority of the voting power of all of the
then outstanding shares. Finally, because the supermajority voting requirements
described above would no longer be necessary to protect the classified Board
structure, the proposal would delete such supermajority voting requirements. The
full text of the proposed amendments is attached to this Proxy Statement as
Appendix B.
Rationale for Proposal
The adoption by the Company - and many other major corporations - of a
classified board reflected widespread concern over hostile and non-negotiated
attempts to acquire control of corporations to the disadvantage of stockholders.
A classified board has been widely viewed as discouraging proxy contests for the
election of directors, or acquisitions of substantial blocks of stock, by a
person or group seeking to acquire control of a corporation because the extended
and staggered terms of directors could operate to prevent changing the
composition of, or the acquisition of control of, the board in a relatively
short period of time. In a hostile takeover attempt, for example, a classified
board may encourage a person seeking control of a corporation to initiate
arm's-length discussions with the board of directors of that corporation, which
may be in a position to negotiate a higher price or more favorable terms for
stockholders or to try and prevent a takeover that the corporation's board of
directors believes is not in the best interest of the stockholders. A classified
board has also been viewed by some corporations as promoting stability and as
helping to maintain a greater continuity of experience as most directors at any
given time will generally have at least one year of experience with a
corporation.
19
A classified board has also been viewed by some corporations as promoting
stability and as helping to maintain a greater continuity of experience as most
directors at any given time will generally have at least one year of experience
with a corporation.
However, recent corporate governance reforms initiated by The Nasdaq Stock
Market place heavy emphasis on the independence of directors and, in certain
circumstances, require corporations to adjust the composition of their boards of
directors and committees of the board to comply with independence requirements.
The Company currently intends to comply with these independence requirements in
the time periods permitted under Nasdaq rules whether or not it is obligated to
do so under such rules. Consequently, a potential disadvantage of a classified
board structure is the lack of flexibility in implementing changes to the board
in response to these corporate governance reforms. In addition, some investors
have come to view classified boards as having the effect of insulating directors
from being accountable to a corporation's stockholders. For example, a
classified board of directors limits the ability of stockholders to elect all
directors on an annual basis and exercise influence over a corporation and may
discourage proxy contests in which stockholders have an opportunity to vote for
a competing slate of nominees. The election of directors is the primary means
for stockholders to influence corporate governance policies and to hold
management accountable for its implementation of those policies.
After due consideration of the various issues concerning the
declassification of the Company's Board, the Board of Directors unanimously
determined to propose to the stockholders the declassification of the Board so
that (i) each director would stand for re-election on an annual basis, (ii)
directors would be subject to removal without cause by a majority of the voting
power of the Company's stock and (iii) the provisions in the Restated
Certificate of Incorporation and Bylaws relating to the number, election and
term of directors would be subject to amendment by stockholders holding a
majority of the voting power of the Company's stock. This determination by the
Board is in furtherance of its goal of ensuring that the Company's corporate
governance policies comply with applicable rules and regulations and maximize
management accountability to the stockholders. The Board also considered the
fact that J. Frank Harrison, III and entities controlled by him currently hold
91.4% of the total voting power of the Company's stock.
Voting Requirement and Recommendation
Adoption of this Proposal 2 requires both the affirmative vote of not less
than two thirds of all the shares of the Company's Common Stock and Class B
Common Stock outstanding and entitled to vote at the 2003 Annual Meeting of the
Stockholders, voting together as a single class, and the affirmative vote of
holders of a majority of the total votes of the Company's Common Stock and Class
B Common Stock present in person or by proxy and entitled to vote at the 2003
Annual Meeting of Stockholders, voting together as a single class.
The Board of Directors recommends that the Stockholders vote FOR the
proposed amendments to the Company's Restated Certificate of Incorporation and
Bylaws to declassify the Company's Board of Directors.
20
Proposal 3:
Re-approval of the
Company's Annual Bonus Plan
Re-Approval Proposal
The Company's Annual Bonus Plan (the "Bonus Plan") was previously approved
by the Company's stockholders at the 1997 Annual Meeting of Stockholders. Under
Section 162(m) of the Internal Revenue Code of 1986, as amended ("Section
162(m)"), the stockholders must periodically re-approve the performance goals
and criteria used under the Bonus Plan to enable all compensation paid to
"covered employees" pursuant to the Bonus Plan to continue to qualify as
"performance-based compensation" within the meaning of Section 162(m). Such
payments will thereby be exempt from the provisions of Section 162(m) that would
otherwise deny the Company a federal income tax deduction for compensation
expense to the extent that aggregate compensation payments to any "covered
employee" exceed $1 million in any fiscal year. Section 162(m) defines the term
"covered employee" to mean the Company's Chief Executive Officer and the other
four executive officers whose compensation is required to be disclosed in the
Summary Compensation Table of the Company's Proxy Statement (i.e., the Named
Executive Officers).
The Board or Directors is submitting the Comapany's Bonus Plan to the
Company's stockholders for re-approval of the performance goals and criteria
under the Bonus Plan. Specifically, the Board is proposing that the stockholders
approve the employees eligible to receive bonuses under the Bonus Plan, the
business criteria and general formula used to calculate the amount of the
bonuses and the maximum amount that may be paid to any individual participant in
the Bonus Plan for any single fiscal year. The Company has not amended the Bonus
Plan in any material respect since it was last approved. The full text of the
Bonus Plan is attached to this Proxy Statement as Appendix C.
Description of the Bonus Plan
The purpose of the Bonus Plan is to advance the best interests of the
Company and its stockholders by providing key management employees with
additional incentives to assist the Company in meeting and exceeding its
business goals. The Company's Bonus Plan is administered by the Compensation
Committee of the Board of Directors. In order to satisfy the requirements of
Section 162(m), the Bonus Plan provides that, during any period in which the
Compensation Committee is not comprised entirely of two or more "outside
directors" (as defined in the regulations under Section 162(m)), the Board of
Directors will delegate administration of the Bonus Plan to a separate Bonus
Plan Committee that is comprised entirely of two or more "outside directors."
All of the present members of the Compensation Committee are "outside directors"
for purposes of Section 162(m).
The Compensation Committee will select participants (based on management
recommendations) to be eligible to receive cash awards under the Bonus Plan. The
Compensation Committee is authorized to grant such cash awards to any officer,
including officers who are directors, and to other employees of the Company or
its affiliates who hold key positions. Approximately twenty-eight employees,
including J. Frank Harrison, III and William B. Elmore, both of whom are members
of the Company's Board of Directors, are currently participants in the Bonus
Plan.
The total cash bonus which may be awarded to a participant is determined by
multiplying such participant's base salary by three factors: (1) the
participant's approved bonus percentage factor; (2) the participant's indexed
performance factor; and (3) the Company's overall goal achievement factor.
The approved bonus percentage factor for each participant is determined by
the participant's position with the Company or its affiliates and is based upon
the relative responsibility and contribution to the
21
Company's performance attributed to such position. The maximum approved bonus
percentage factor for any participant is 100%.
The indexed performance factor for each participant is determined by such
participant's actual performance during the fiscal year, as evaluated by the
Compensation Committee at year end. In order to satisfy the requirements of
Section 162(m) that all "performance-based compensation" be determined in
accordance with an objective formula, the Bonus Plan provides that the indexed
performance factor will be fixed at 1.2 for all participants who are "covered
employees" under Section 162(m).
The overall goal achievement factor will be determined for each fiscal year
by the Company's performance in relation to annual goals established by the
Compensation Committee for six selected performance indicators. These indicators
are: (1) operating cash flow; (2) free cash flow; (3) net income; (4) equivalent
case volume; (5) market share; and (6) a value measure based on operating cash
flow. The Compensation Committee will establish annual performance goals with
respect to each of these indicators by no later than the ninetieth day of the
applicable fiscal year. The indicators are weighted each year based on the
Compensation Committee's determination of the relative importance of a
particular indicator for a given year. In establishing the relative weighting of
each indicator, the Compensation Committee considers industry conditions,
available information on performance of other companies in the soft drink
bottling industry, performance in prior years and the Company's specific needs
for the current year. The overall goal achievement factor, which is used to
derive a participant's total cash bonus in accordance with the above formula, is
calculated on the basis of a graduated scale ranging from 0.8 (for goal
achievement exceeding 89% of the target) to a maximum of 1.2 (for goal
achievement of 110% of the target), multiplied by the weight assigned to each
performance indicator.
Payment of cash awards under the Bonus Plan with respect to a fiscal year
will be made in the following year, after the Compensation Committee has
determined the level of attainment with respect to the performance goals. The
Company will not make any awards under the Bonus Plan if any material aspects of
the Company's bottle contracts with The Coca-Cola Company have been violated
during the fiscal year. The Compensation Committee has discretion to approve a
pro-rated award for any employee who assumes a key position with the Company
during the fiscal year, provided that any such participant has been employed by
the Company for at least three calendar months during the fiscal year.
Although the formula described above permits a precise, objective
calculation of the annual bonuses to be paid to each participant, the
Compensation Committee has discretion to decrease, eliminate or otherwise amend
awards under the Company's Bonus Plan. In accordance with Section 162(m), the
Compensation Committee's discretionary authority may only be exercised in a
manner which reduces, rather than increases, the amount of any participant's
bonus award as calculated in accordance with such formula. In no event will any
individual participant receive a bonus under the Bonus Plan for any single
fiscal year in excess of $1 million.
The Compensation Committee is authorized to amend, modify or terminate the
Bonus Plan retroactively at any time, in part or in whole, in any manner that
would not cause payments to "covered employees" under the Bonus Plan to cease to
qualify as "performance-based compensation" under Section 162(m). Any amendment
that would cause payments to "covered employees" under the Bonus Plan to cease
to qualify as "performance-based" compensation under Section 162(m) requires
approval of the full Board of Directors of the Company.
Because future awards under the Bonus Plan are based on the Company's
performance in future years, amounts payable under the Bonus Plan are not
determinable for future years. However, with respect to fiscal year 2002,
amounts payable under the Bonus Plan with respect to each of the Named Executive
Officers are set forth in the Summary Compensation Table on page 10 of this
proxy statement.
22
In addition, amounts payable under the Bonus Plan to all executive officers as a
group totaled $3,405,583 for fiscal year 2002 and amounts payable to all
employees other than executive officers totaled $855,870 for fiscal year 2002.
No amounts are payable under the Bonus Plan to non-employee directors.
In accordance with Section 162(m), payment of any future awards under the
Bonus Plan has been made subject to receipt of approval of the performance goals
and criteria under the Bonus Plan by the Company's stockholders to the extent
that the deductibility of such payments would be limited by Section 162(m). In
addition, payment of any award under the Bonus Plan for 2002 performance for any
Named Executive Officer whose compensation may be subject to the Section 162(m)
deduction limits is conditioned on the re-approval of the Bonus Plan by the
stockholders.
Required Vote and Recommendation
The affirmative vote of holders of a majority of the total votes of the
Company's Common Stock and Class B Common Stock present in person or by proxy
and entitled to vote at the 2003 Annual Meeting of Stockholders, voting together
as a single class, is required to re-approve the Bonus Plan.
The Board of Directors recommends that the stockholders vote FOR the
re-approval of the Company's Bonus Plan.
23
Equity Compensation Plans
The following table sets forth certain information as of December 29, 2002,
concerning the Company's one outstanding equity compensation arrangement.
Equity Compensation Plan Information
Number of Number of securities
securities to be remaining available for
issued upon Weighted-average future issuance under
exercise of exercise price of equity compensation
outstanding outstanding plans (excluding
options, warrants options, warrants securities reflected in
Plan Category and rights and rights column (a))
(a) (b) (c)
- ------------------------------- ---------------------- --------------------- ------------------------
Equity compensation plans 120,000 (1) 0
approved by security
holders (1)
Equity compensation plans not - - -
approved by security
holders
---------------------- --------------------- ------------------------
Total 120,000 (1) 0
- ---------------------------------
(1) Represents a restricted stock award to J. Frank Harrison, III that was
approved by the Company's stockholders on May 12, 1999. Pursuant to the
award, 20,000 shares of the Company's Class B Common Stock either vest or
fail to vest each year through fiscal year 2008 based on the Company's
achievement of certain performance goals. As a restricted stock award, no
amounts are payable by Mr. Harrison upon the vesting of such shares.
Certain Transactions
Transactions with The Coca-Cola Company
Concentrates and Syrups; Marketing Programs. The Company's business
consists primarily of the production, marketing and distribution of soft drink
products of The Coca-Cola Company, which is the sole owner of the secret
formulas under which the primary components (either concentrates or syrups) of
its soft drink products are manufactured. Accordingly, the Company purchases a
substantial majority of its requirements of concentrates and syrups from The
Coca-Cola Company in the ordinary course of its business. The prices of these
concentrates and syrups are generally set by The Coca-Cola Company from time to
time in its discretion. The following table summarizes the significant
transactions between the Company and The Coca-Cola Company during 2002:
24
Transaction Amount (in millions)
----------------------------------------------------------------------
Payments by the Company for concentrate, $ 292.0
syrup, sweetener and other miscellaneous
purchases
Payments by the Company for local media 0
Payments by the Company for customer 50.2
marketing programs
Marketing funding support payments to the 56.0
Company
Local media and presence marketing support 17.7
provided by The Coca-Cola Company
on the Company's behalf
Piedmont Coca-Cola Bottling Partnership. On July 2, 1993, Piedmont
Coca-Cola Bottling Partnership (the "Partnership") was formed by wholly owned
subsidiaries of the Company and The Coca-Cola Company to distribute and market
finished bottle, can and fountain beverage products under trademarks of The
Coca-Cola Company and other third party licensors in portions of North Carolina,
South Carolina, Virginia and Georgia. Initially, the Company and The Coca-Cola
Company each beneficially owned a 50% interest in the Partnership. On January 2,
2002, The Coca-Cola Company sold a 4.651% beneficial interest in the Partnership
to the Company for $10 million, so that the Company now beneficially owns a
54.651% interest in the Partnership and The Coca-Cola Company beneficially owns
a 45.349% interest in the Partnership. The price for the interest in the
Partnership was the result of arms-length negotiations between the Company and
The Coca-Cola Company. The initial term of the Partnership is through 2018,
subject to early termination as a result of certain events. Each partner's
interest is subject to certain limitations on transfer, rights of first refusal
and other purchase rights upon the occurrence of specified events.
On March 5, 2003, the Board of Directors of the Company authorized the
purchase of half of The Coca-Cola Company's remaining interest in Piedmont for
approximately $53.5 million, subject to the completion of a mutually
satisfactory definitive purchase agreement and regulatory approval. This
transaction, which is anticipated to close on March 31, 2003, would increase the
Company's ownership interest in Piedmont from 54.651% to slightly more than 77%.
The Company manufactures and packages products and manages the Partnership
pursuant to a management agreement. In connection with the management agreement,
the Company receives a fee based on total case sales, reimbursement for its
out-of-pocket expenses and reimbursement for sales branch, divisional and
certain other expenses. The term of the management agreement is through 2018,
subject to early termination in the event of certain change in control events, a
termination of the Partnership or a material default by either party. During
2002, the Company received management fees of $17.9 million from the
Partnership. The Company sells product at cost to the Partnership. These sales
amounted to $55.4 million in 2002. The Company subleases various fleet and
vending equipment to the Partnership at cost. These sublease rentals amounted to
$8.7 million in 2002. The Partnership also subleases various fleet and vending
equipment to the Company at cost. These sublease rentals amounted to $0.2
million during fiscal year 2002.
Stock Rights and Restrictions Agreement. Pursuant to a Stock Rights and
Restrictions Agreement dated January 27, 1989 (the "Rights and Restrictions
Agreement") between the Company and The Coca-Cola Company, The Coca-Cola Company
agreed (a) not to acquire additional shares of Common Stock or Class B Common
Stock except in certain circumstances and (b) not to sell or otherwise dispose
of shares of Class B Common Stock without first converting them into Common
Stock except in certain circumstances. The Coca-Cola Company granted the Company
a right of first refusal with respect to any
25
proposed disposition of any shares owned by it, and the Company granted The
Coca-Cola Company certain registration rights with respect to such shares. The
Coca-Cola Company further agreed that if its equity ownership reaches 30.67% or
more of the Company's outstanding common stock of all classes, or its voting
interest reaches 23.59% or more of the votes of all outstanding shares of all
classes, then it will (i) negotiate in good faith with the Company to sell to
the Company the number of shares of Common Stock or Class B Common Stock
necessary to reduce its equity ownership to 29.67% of the outstanding common
stock of all classes and (ii) convert the number of shares of Class B Common
Stock necessary to maintain its ownership of Class B Common Stock to between 20%
and 21% of the outstanding shares of Class B Common Stock and to maintain its
voting interest at between 22.59% and 23.59% of the votes of all outstanding
shares of all classes.
Additionally, if the Company issues new shares of Class B Common Stock upon
the conversion or exercise of any security, warrant or option of the Company
that results in The Coca-Cola Company owning less than 20% of the outstanding
shares of Class B Common Stock and less than 20% of the total votes of all
outstanding shares of all classes of the Company, The Coca-Cola Company has the
right to exchange shares of Common Stock for shares of Class B Common Stock in
order to maintain its ownership of at least 20% of the outstanding shares of
Class B Common Stock and at least 20% of the total votes of all outstanding
shares of all classes of the Company. Under the Rights and Restrictions
Agreement, The Coca-Cola Company also has a preemptive right to purchase a
percentage of any newly issued shares of any class in order for it to maintain
ownership of both 29.67% of the outstanding shares of common stock of all
classes and 22.59% of the total votes of all outstanding shares of all classes.
Each of the percentages referenced in this paragraph and the preceding paragraph
are subject to downward adjustment if The Coca-Cola Company voluntarily disposes
of shares of Common Stock or Class B Common Stock or if the Company exercises
its right of redemption referred to below.
Pursuant to the Rights and Restrictions Agreement, The Coca-Cola Company
has also granted the Company the right, from January 27, 1995 through January
27, 2019, to call for redemption in full or in part that number of shares that
would reduce The Coca-Cola Company's ownership of the equity of the Company to
20% at a price (which will not be less than $42.50 per share except with respect
to shares acquired pursuant to the rights described in the preceding two
paragraphs) and on such terms as set forth in the Rights and Restrictions
Agreement. The option will expire prior to the end of its stated term if Mr.
Harrison, III ceases to exercise voting control with respect to the Company.
The Coca-Cola Company was also given the right to have its designee
proposed by the Company for nomination to the Company's Board of Directors and
to have such person nominated at each subsequent election of the Company's
directors, subject to certain conditions. Carl Ware's appointment as a director
of the Company was made in accordance with the terms of this agreement. Mr. Ware
was Executive Vice President, Public Affairs and Administration of The Coca-Cola
Company until his retirement in February 2003.
Voting Agreement and Irrevocable Proxy. The Coca-Cola Company, Mr.
Harrison, III and Mr. Henson, in his capacity as co-trustee of certain trusts,
are also parties to a Voting Agreement dated January 27, 1989 (the "Voting
Agreement"). Pursuant to the Voting Agreement, Messrs. Harrison, III and Henson
(as co-trustee) agreed to vote their shares of Common Stock and Class B Common
Stock for a nominee of The Coca-Cola Company for election as a director to the
Company's Board of Directors. Additionally, The Coca-Cola Company granted an
irrevocable proxy (the "Irrevocable Proxy") with respect to all shares of Class
B Common Stock and Common Stock owned by The Coca-Cola Company to Mr. Harrison,
III for life. The Irrevocable Proxy covers all matters on which holders of Class
B Common Stock or Common Stock are entitled to vote other than certain mergers,
consolidations, asset sales and other fundamental corporate transactions.
26
Pursuant to the terms of the Voting Agreement, Mr. Harrison, III was
granted the option (assignable to the Company) to purchase the shares of Class B
Common Stock held by The Coca-Cola Company for $38.50 per share plus an amount
sufficient to give The Coca-Cola Company a 25% compounded annual rate of return
from May 7, 1987 after taking into account dividends and other distributions
previously received thereon. This option may be exercised if the
disproportionate voting rights of the Class B Common Stock are terminated for
certain reasons.
The Voting Agreement and Irrevocable Proxy terminate upon the written
agreement of the parties or at such time as The Coca-Cola Company no longer
beneficially owns any shares of the Company's Common Stock. The Irrevocable
Proxy also terminates at such time as either (a) Mr. Harrison, III or certain
entities controlled by him do not beneficially own the 712,796 shares of Class B
Common Stock that are currently part of the holdings of the Harrison Family
Limited Partnerships or (b) certain trusts holding shares of Class B Common
Stock subject to the Voting Agreement do not beneficially own at least 50% of
the Class B Common Stock held by them at the date of the Voting Agreement.
Other Transactions
The Company has a production arrangement with Coca-Cola Enterprises Inc. to
buy and sell finished products at cost. Sales to Coca-Cola Enterprises Inc.
under this agreement were $23.6 million in fiscal year 2002. Purchases from
Coca-Cola Enterprises Inc. under this agreement were $20.3 million in fiscal
year 2002.
Along with a number of other Coca-Cola bottlers, the Company has become a
member in Coca-Coca Bottlers' Sales & Services Company LLC, a Delaware limited
liability company (the "Sales and Services Company"), which was recently formed
for the purposes of facilitating various procurement functions and distributing
certain specified beverage products of The Coca-Cola Company and with the
intention of enhancing the efficiency and competitiveness of the Coca-Cola
bottling system in the United States. Coca-Cola Enterprises Inc. is also a
member in the Sales and Services Company.
The Company leases its Snyder Production Center and certain adjacent
property from Harrison Limited Partnership One ("HLP") pursuant to a lease that
expires in December 2010. HLP's sole general partner is a corporation of which
Mr. Harrison, Jr.'s estate is the sole stockholder. HLP's sole limited partner
is a trust of which Mr. Harrison, III and Mr. Henson are co-trustees and
descendants of J. Frank Harrison, Jr. are beneficiaries. Total payments under
this lease were $2.9 million in 2002.
The Company leases its corporate headquarters and an adjacent office
building from Beacon Investment Corporation, of which Mr. Harrison, III is the
sole stockholder. Total payments under this lease were $2.8 million in 2002.
The Company purchases certain computerized data management products and
services from Data Ventures LLC, of which the Company currently holds a 63.75%
equity interest. Mr. Harrison, III previously owned a 32.5% equity interest, but
Mr. Harrison, III contributed his interest in Data Ventures LLC to the Company
in December 2002. Mr. Harrison, III did not receive any financial consideration
for the contribution of such interest, nor did the Company assume any
liabilities in connection therewith. During fiscal year 2002, the Company paid
$523,000 to Data Ventures LLC in connection with the purchase of products and
services. Data Ventures LLC has an unsecured line of credit of $4.5 million from
the Company. Borrowings of $4.0 million were outstanding on the line of credit
on December 29, 2002, which was the maximum outstanding amount during 2002.
Prior to July 1, 2001, interest on borrowings was computed at the prime rate as
published by The Wall Street Journal, less one percent. Beginning on July 1,
2001, interest on borrowings was computed at the prime rate plus 0.5%. The
27
Company recorded a loan loss provision of $0.5 million in 2002 related to its
outstanding loan to Data Ventures LLC. The total loan loss provision on December
29, 2002 was $2.9 million.
During fiscal year 2002, the law firm of Shumacker Witt Gather & Whitaker,
P.C. rendered legal services to the Company. John W. Murrey, III, a director of
the Company, was of counsel to the firm until December 2002.
Also during fiscal year 2002, the law firm of Helms, Mulliss & Wicker,
L.L.P. rendered legal services to the Company. Dennis A. Wicker, a director of
the Company, is a partner in such firm.
Independent Accountants
General
PricewaterhouseCoopers LLP, independent public accountants, audited the
financial statements of the Company for fiscal year 2002 and for each fiscal
year since 1968. Representatives of PricewaterhouseCoopers LLP are expected to
be present at the Annual Meeting of Stockholders with an opportunity to make a
statement if they desire to do so, and they are expected to be available to
respond to appropriate questions. The Board of Directors, consistent with past
practice, will defer the annual selection of independent accountants until after
the Annual Meeting of Stockholders. The Audit Committee of the Board of
Directors will then consider the engagement of independent public accountants to
audit the Company's financial statements for the current fiscal year and will
make its recommendation to the Board of Directors for final approval.
The Audit Committee has considered whether the provision of services by
PricewaterhouseCoopers LLP other than the audit of the financial statements of
the Company for fiscal year 2002 and the review of the financial statements for
the first three quarters of fiscal year 2002 is compatible with maintaining
PricewaterhouseCoopers LLP's independence.
Audit Fees
PricewaterhouseCoopers LLP billed the Company $277,320 for professional
services rendered for the audit of the Company's annual financial statements for
fiscal year 2002 and the reviews of the financial statements included in the
Company's Quarterly Reports on Form 10-Q filed for the first three quarters of
2002. In addition, PricewaterhouseCoopers LLP billed Piedmont Coca-Cola Bottling
Partnership, in which the Company beneficially owns a 54.651% interest, $79,000
for professional services rendered for the audit of its annual financial
statements for fiscal year 2002.
Financial Information Systems Design and Implementation Fees
PricewaterhouseCoopers LLP rendered no professional services for the design
and implementation of financial information systems to the Company or Piedmont
during fiscal year 2002.
All Other Fees
PricewaterhouseCoopers LLP billed the Company $189,355 for all other
professional services rendered during fiscal year 2002, including fees for
audit-related services of $118,452 and non-audit services of $70,903.
Audit-related services consisted principally of audits of financial statements
of employee benefit plans and reviews of SEC registration statements and
prospectuses. Non-audit services consisted primarily of tax consulting services.
Other than as set forth above under "Audit Fees," PricewaterhouseCoopers LLP did
not provide any services to Piedmont during fiscal year 2002.
28
Stockholder Proposals
If any stockholder wishes to present a proposal to the stockholders of the
Company at the 2004 Annual Meeting of Stockholders, such proposal must be
received by the Company for inclusion in the proxy statement and form of proxy
relating to such meeting on or before December 5, 2003. In addition, if the
Company receives notice of stockholder proposals after February 18, 2004, then
the persons named as proxies in such proxy statement and form of proxy will have
discretionary authority to vote on such stockholder proposals, without
discussion of such matters in the proxy statement and without such proposals
appearing as a separate item on the proxy card.
Additional Information
The entire cost of soliciting proxies will be borne by the Company. In
addition to this proxy statement, proxies may be solicited by the Company's
directors, officers and other employees by personal contact, telephone,
facsimile and e-mail. Such persons will receive no additional compensation for
such services. Georgeson & Co., Inc., Wall Street Plaza, New York, New York
10005 has been retained to assist the Company in the solicitation of brokers,
banks and other similar entities holding shares for other persons. Georgeson &
Co., Inc. will receive a payment of $6,500 (plus out-of-pocket expenses) for
these services. All brokers, banks and other similar entities and other
custodians, nominees and fiduciaries will be requested to forward solicitation
materials to the beneficial owners of the shares of Common Stock held of record
by such persons, and the Company will pay such brokers, banks and other
fiduciaries all of their reasonable out-of-pocket expenses incurred in
connection therewith.
Form 10-K
A copy of the Company's Annual Report on Form 10-K filed with the
Securities and Exchange Commission is available to stockholders without charge
upon written request to David V. Singer, Executive Vice President and Chief
Financial Officer, Coca-Cola Bottling Co. Consolidated, P. O. Box 31487,
Charlotte, North Carolina 28231.
Henry W. Flint
Secretary
April 4, 2003
29
Appendix A
COCA-COLA BOTTLING CO. CONSOLIDATED
AUDIT COMMITTEE CHARTER
I. Committee Role
The Audit Committee's role is to act on behalf of the Board of Directors
(the "Board") in the oversight of all material aspects of the Company's
financial reporting, internal control and audit functions. The Audit Committee's
role includes a particular focus on the qualitative aspects of financial
reporting to shareholders and on Company processes and procedures for the
management of business and financial risk and for compliance with significant
regulatory requirements.
II. Committee Membership
The membership of the Audit Committee (the "Committee") shall comply at all
times with applicable requirements of law. Accordingly, the Board shall appoint
to the Committee, in the manner prescribed by the Bylaws of the Company, members
who meet the following criteria:
1. The Committee shall consist of at least three Board members. Committee
members shall meet the independence, financial literacy and expertise and other
qualification requirements of the federal securities laws and the applicable
rules and regulations of the Securities and Exchange Commission (the "SEC") and
The Nasdaq Stock Market. The Board shall determine in its business judgment the
adequacy of the qualifications of each member of the Committee.
2. Committee appointments, including that of the Chairman, shall be
approved by the full Board.
III. Resources
1. The Committee shall have access to its own counsel and other advisors
at the Committee's sole discretion, and the Company shall provide for
appropriate funding, as determined by the Committee, for such counsel and
advisors. The Committee may request any officer, employee, investment banker,
financial analyst, consultant, or the Company's outside counsel or independent
accountants to attend any meeting of the Committee or to provide pertinent
information as necessary.
2. The Company shall provide such other resources to the Committee as may
be required by applicable law, including the rules and regulations of the SEC
and The Nasdaq Stock Market.
IV. Primary Committee Responsibilities
In meetings its responsibilities, the Committee is expected to:
General Responsibilities
1. Provide an open avenue of communication between the internal auditors,
the independent accountants, management and the Board.
2. Review, assess the adequacy of and, if necessary, update the
Committee's charter annually with approval by the Board. The Company's
annual proxy statement will disclose that a charter has been adopted,
and a copy of the charter will be included as an
appendix to the annual proxy statement, in each case, in accordance
with the rules and regulations of the SEC.
3. As necessary, meet with the director of internal auditing, the
independent accountants and management in separate executive sessions
to discuss any matters that the Committee or these groups believe
should be discussed privately with the Committee.
4. Report Committee actions to the Board with such recommendations as the
Committee may deem appropriate.
5. Conduct or authorize investigations into any matters within the
Committee's scope of responsibilities.
6. Meet at least three times per year or more frequently as circumstances
require.
7. Issue a report annually to be included in the Company's annual proxy
statement. Such report shall comply in all respects with applicable
law, including the rules and regulations of the SEC.
8. Perform such other functions as assigned by the Company's Certificate
of Incorporation or Bylaws, the Board or by applicable law, including
the rules and regulations of the SEC, the Public Company Accounting
Oversight Board ("PCAOB") and The Nasdaq Stock Market.
Oversight of the Company's Relationship with the Independent Accountants
9. Approve in advance all auditing services and permitted non-audit
services (including the fees and terms thereof) to be performed for
the Company by its independent auditor, subject to de minimis or other
exceptions afforded by applicable law, including the rules and
regulations of the SEC, the PCAOB and The Nasdaq Stock Market. The
Committee may delegate its authority to so approve such services to
the extent permitted by applicable law.
The Committee shall have the sole authority for the appointment,
compensation, retention and oversight of the work of the independent
accountants. The independent accountants shall report directly to the
Committee.
10. Review the experience and qualifications of the primary managers of
the independent accounting team (including such managers' experience
and qualifications in light of the requirements of the SEC and the
PCAOB), review the quality control procedures of the independent
accountants, review matters of audit quality and consistency, evaluate
the performance of the independent accountants, and review and approve
the compensation of the independent accountants.
11. Confirm and take or recommend any appropriate actions to assure the
independence of the independent accountants. Obtain written
disclosures regarding the independent accountants' independence as
required by the Independence Standards Board and other applicable
rules and regulations and discuss with the independent accountants all
significant relationships to determine the independent accountants'
independence. Review the hiring by the Company of any employees of the
independent accountants who were engaged on the Company's account.
12. Obtain and review a report from the independent accountants at least
annually regarding (a) the independent accountant's internal
quality-control procedures, (b) any material issues raised by the most
recent internal quality-control review, or peer review, of the firm,
or by any inquiry or investigation by governmental or professional
authorities within the preceding five year period respecting one or
more of the independent audits carried out by the firm, (c) any steps
taken to deal with any such issues, and (d) all relationships between
the independent accountant and the Company.
13. Ensure the rotation of the audit partners of the Company's independent
accountants to the extent required by applicable law.
Oversight of the Company's Internal Audit Function
14. Review the appointment, compensation, replacement, reassignment, or
dismissal of the director of internal auditing.
15. Confirm and take or recommend any appropriate actions to assure the
independence of the director of internal auditing.
16. Consider and review with management and the director of internal
auditing:
(a) The internal auditing department budget and staffing.
(b) The internal auditing department's compliance with Institute of
Internal Auditor's Standards of Professional Practice of Internal
Auditing.
Oversight of the Company's Audit Process
17. Review and approve, in consultation with the independent accountants
and the director of internal auditing, the audit scope and plan of the
internal auditors and the independent accountants and the proposed
staffing with respect thereto.
18. Review with the director of internal auditing and the independent
accountants the coordination of audit effort to assure completeness of
coverage, reduction of redundant efforts and the effective use of
audit resources.
Financial Statement and Disclosure Matters
19. Inquire of and discuss with management, the director of internal
auditing and the independent accountants the following:
(a) The Company's significant risks or exposures and the steps
management has taken to monitor and control such risks or exposures.
(b) The significant financial reporting issues and judgments and
estimates made in the preparation of the Company's financial
statements including the appropriateness, comparability and
consistency of the Company's financial statements.
(c) Any transaction as to which management obtained a letter under
Statement of Auditing Standards No. 50.
(d) The effect of any material "off-balance sheet" financing or other
similar structure on the Company's financial statements.
(e) Major changes to the Company's accounting principles and
practices.
(f) Any material issue affecting the audit of the Company's financial
statements on which the national office of the independent accountants
was consulted by the Company's independent accounting team.
(g) Matters that the Company's independent accountants are required
to report to the Committee pursuant to applicable law.
20. Review with management and the independent accountants at the
completion of the annual examination:
(a) The Company's annual financial statements and related footnotes.
(b) The independent accountants' audit of the financial statements
and their report thereon.
(c) Any significant changes required in the independent accountants'
audit plan.
(d) Any serious difficulties or disputes with management encountered
during the course of the audit.
(e) Other matters related to the conduct of the audit which are to be
communicated to the Committee under generally accepted auditing
standards including Statement of Auditing Standards No. 61.
21. Consider and review with the independent accountants and the director
of internal auditing:
(a) The adequacy of the Company's internal controls including
computerized information system controls and security.
(b) Any related significant findings and recommendations of the
independent accountants and internal auditors together with
management's responses thereto.
22. Consider and review with management and the director of internal
auditing:
(a) Significant findings during the year and management's responses
thereto.
(b) Any significant difficulties encountered in the course of any
audits, including any restrictions on the scope of work or access
to required information.
(c) Any significant changes required in the planned scope of the
audit plan.
23. Review with management and the independent accountants interim
financial information prior to public releases of quarterly results
and filings on Form 10-Q (including the results of the independent
accountants' review of the quarterly financial statements).
24. Review annual filings on Form 10-K prior to filing with the SEC.
25. Review existing regulatory matters and other regulatory and accounting
initiatives that may have a material impact on the financial
statements and related Company compliance policies. Review with
management and the independent accountants any correspondence with
governmental authorities and any employee complaints or published
reports which, in each case, raise material issues regarding the
Company's financial statements or accounting policies.
Compliance Oversight Responsibilities
26. Review with the director of internal auditing the results of internal
auditing's review of the Company's compliance with its Code of
Business Conduct, other codes of ethics and other Company compliance
programs and policies covering risks material to the Company or its
financial statements and approve any waivers of any such codes or
compliance programs and policies in accordance with the terms of such
codes or compliance programs and policies.
27. Establish procedures for:
(a) the receipt, retention, and treatment of complaints received by
the Company regarding accounting, internal accounting controls, or
auditing matters; and
(b) the confidential anonymous submission by employees of the Company
of concerns regarding questionable accounting or auditing matters.
28. Review and approve any insider, affiliated or related party
transaction to the extent required by applicable law and review the
Company's disclosure policies with respect thereto.
V. Limitation of the Committee's Role
While the Committee has the responsibilities and powers set forth in this
Charter, it is not the duty of the Committee to plan or conduct audits or to
determine that the Company's financial statements and disclosures are complete
and accurate and are in accordance with generally accepted accounting principles
and applicable rules and regulations. These are the responsibilities of
management and the independent accountant.
Appendix B
Amendments to the Company's
Restated Certificate of Incorporation
and
Amended and Restated Bylaws
Set forth below is the text of Articles Seventh and Eighth of the Company's
Restated Certificate of Incorporation and Article III, Sections 2, 4 and 5 and
Article IX of the Company's Amended and Restated Bylaws as such text would be
amended if the stockholders approve Proposal 2.
Changes in Restated Certificate of Incorporation:
SEVENTH.
(a) The number of directors of the Corporation shall be determined from
time to time by the stockholders or the Board of Directors and shall be not less
than nine and not more than twelve. The term of each director shall be the
period from the effective date of such director's election to the next annual
meeting of stockholders and such director's successor is elected and qualified
or until such director's earlier resignation or removal. The directors need not
be elected by written ballot unless required by the By-Laws of the Corporation.
(b) The term of each director who is serving as a director on [insert
effective date of the Certificate of Amendment that makes the amendment
eliminating the three-year staggered terms for directors] shall expire at the
next annual meeting of stockholders after such date and upon the election and
qualification of such director's successor, or upon such director's earlier
resignation or removal, notwithstanding that such director may have been elected
for a term that extended beyond the date of such next annual meeting of
stockholders.
(c) Vacancies and newly-created directorships may be filled by a majority
of the directors then in office, although less than a quorum, or by a sole
remaining director.
EIGHTH. The Corporation reserves the right to amend, alter, change or
repeal any provision contained in this Certificate of Incorporation, in the
manner now or hereafter prescribed by statute, and all rights conferred upon
stockholders herein are granted subject to this reservation. Notwithstanding any
other provision of this Certificate of Incorporation or the By-Laws of the
Corporation (and in addition to any other vote that may be required by law, this
Certificate of Incorporation or the By-Laws of this Corporation), the
affirmative vote of the holders of not less than two thirds of all the shares of
stock outstanding and entitled to vote therein shall be required to amend,
alter, change or repeal this Article EIGHTH of this Certificate of
Incorporation.
Changes in Amended and Restated Bylaws:
Article III
DIRECTORS
*** SECTION 2. Number, Term and Qualification. The number of directors of
the Corporation shall be determined from time to time by the stockholders or the
Board of Directors and shall be not less than nine and not more than twelve. The
term of each director shall be the period from the effective date of such
director's election to the next annual meeting of stockholders and such
director's successor is elected and qualified or until such director's earlier
resignation or removal. Directors need not be residents of the State of Delaware
or stockholders of the Corporation.
*** SECTION 4. Removal. Directors may be removed from office, with or
without cause, by a vote of stockholders holding shares having a majority of the
votes then entitled to be voted at an election of directors. If any directors
are so removed, new directors may be elected at the same meeting.
SECTION 5. Vacancies. Vacancies and newly-created directorships may be
filled by a majority of the directors then in office, although less than a
quorum, or by a sole remaining director.
***
Article IX
AMENDMENTS
Except as hereinafter otherwise provided, these By-laws may be amended or
repealed and new by-laws may be adopted by the affirmative vote of a majority of
the number of directors fixed by the Certificate of Incorporation and these
By-laws at any regular or special meeting of the Board of Directors, provided
that
(a) the Board of Directors shall have no power to adopt a bylaw -
(i) Requiring the holders of more than a majority of the shares
having voting power to be present or represented by proxy at any meeting in
order to constitute a quorum or requiring more than a majority of the votes
cast in person or by proxy to be necessary for the transaction of any
business, except where higher percentages are required by law or by the
Certificate of Incorporation, or
(ii) Providing for the management of the Corporation otherwise than by
the Board of Directors or its Executive Committee,
(b) the affirmative vote of two-thirds of the total number of shares
outstanding and entitled to vote shall be required to amend, alter, change or
repeal Article II, Section 8; Article IV, Section 5; and this Article IX of
these By-laws.
Appendix C
COCA-COLA BOTTLING CO. CONSOLIDATED
ANNUAL BONUS PLAN
PURPOSE
The purpose of this Annual Bonus Plan (the "Plan") is to promote the best
interests of the Company and its Shareholders by providing key management
employees with additional incentives to assist the Company in meeting and
exceeding its business goals.
PLAN ADMINISTRATION
The Plan will be administered by the Compensation Committee as elected by the
Board of Directors; provided that, so long as the Company and the Plan are
subject to the provisions of Section 162(m) of the Internal Revenue Code of
1986, as amended ("Section 162(m)"), either the Compensation Committee shall be
composed solely of two or more directors who qualify as "outside directors"
under Section 162(m) or, if for any reason one or more members of the
Compensation Committee cannot qualify as "outside directors," the Board shall
appoint a separate Bonus Plan Committee composed of two or more "outside
directors" which shall have all of the powers otherwise granted to the
Compensation Committee to administer the Plan. All references herein to the
"Committee" shall be deemed to refer to either the Compensation Committee or to
the Bonus Plan Committee, as applicable at any given time. The Committee is
authorized to establish new guidelines for administration of the Plan, delegate
certain tasks to management, make determinations and interpretations under the
Plan, and to make awards pursuant to the Plan; provided, however, that the
Committee shall at all times be required to exercise these discretionary powers
in a manner, and subject to such limitations, as will permit all payments under
the Plan to "covered employees" (as defined in Section 162(m)) to continue to
qualify as "performance-based compensation" for purposes of Section 162(m), and
any action taken by the Committee shall automatically be deemed null and void to
the extent (if any) that it would have the effect of destroying such
qualification. Subject to the foregoing, all determinations and interpretations
of the Committee will be binding upon the Company and each participant.
PLAN GUIDELINES
Eligibility: The Committee is authorized to grant cash awards to any officer,
including officers who are directors and to other employees of the Company and
its affiliates in key positions.
Participation: Management will recommend annually key positions which should
qualify for awards under the Plan. The Committee has full and final authority in
its discretion to select the key positions eligible for awards. Management will
inform individuals in selected key positions of their participation in the Plan.
Qualification and Amount of Award:
1. Participants will qualify for awards under the Plan based on:
(a) Corporate goals set for the fiscal year.
(b) Division/Manufacturing Center goals or
individual goals set for the fiscal year.
(c) The Committee may, in its sole discretion, eliminate any
individual award, or reduce (but not increase) the amount of
compensation payable with respect to any individual award.
2. The total cash award to the participant will be computed as follows:
Gross Cash Award = Base Salary X Approved Bonus % Factor X Indexed
Performance Factor X Overall Goal Achievement Factor.
Notwithstanding the above formula, the maximum cash award that may be
made to any individual participant based upon performance for any
fiscal year period shall be $1,000,000.
3. The Base Salary is the participant's base salary level set for the
fiscal year. The Approved Bonus % Factor is a number set by the
Committee (maximum = 100%) to reflect each participant's relative
responsibility and the contribution to Company performance attributed
to each participant's position with the Company.
4. The Indexed Performance Factor is determined by the Committee prior to
making payments of awards for each fiscal year, based on each
individual's performance during such fiscal year. Since the Committee
is necessarily required to evaluate subjective factors related to each
individual's performance in order to arrive at this number, and since
such evaluations cannot be made until after the close of the fiscal
year to which the award relates, the Indexed Performance Factor will
automatically be set at 1.2 for all participants who are "covered
employees" (as defined in Section 162(m)), in order to allow awards to
such participants to qualify as "performance-based compensation" that
is not subject to the deduction limits of Section 162(m).
5. The Overall Goal Achievement Factor used in calculating the Gross Cash
Award for each participant will be determined on the basis of
multiplying the weightage factor specified in ANNEX A attached hereto
for each of the six performance criteria specified therein (Operating
Cash Flow (as defined in ANNEX A), Free Cash Flow (as defined in ANNEX
A), Net Income, Unit Volume, Market Share, and an overall Value Measure
(as defined in ANNEX A)) by the percentage specified in the following
table for the level of performance achieved with respect to each such
goal:
Goal Achievement Amount of Award
(in percent) (as a % of max.)
------------ ----------------
89.0 or less 0
89.1-94 80
94.1-97 90
97.1-100 100
100.1-105 110
105.1-110 120
6. The Committee will review and approve all awards. The Committee has
full and final authority in its discretion to adjust the Gross Cash
Award determined in accordance with the formula described above in
arriving at the actual gross amount of the award to be paid to any
participant; subject, however, to the limitation that such authority
may be exercised in a manner which reduces (by using lower numbers for
the Indexed Performance Factor or otherwise), but not in a manner which
increases, the Gross Cash Award calculated in accordance with the
formula prescribed in Paragraph 2 above. The gross amount will be
subject to all local, state and federal minimum tax withholding
requirements.
7. Participant must be an employee of the Company on the date of payment
to qualify for an award. Any participant who leaves the employ of the
Company, voluntarily or involuntarily, prior to the payment date, is
ineligible for any bonus. An employee who assumes a key position during
the fiscal year may be eligible for a pro-rated award at the option of
the Committee, provided the participant has been employed a minimum of
three (3) months during the calendar year.
8. Awards under the bonus program will not be made if any material aspects
of the bottle contracts with The Coca-Cola Company are violated.
Payment Date: Awards shall be paid upon determination (and certification by the
Committee, as provided below) of the results under each of the performance
criteria specified in Paragraph 5 above following the closing of the Company's
books for the fiscal year to which such awards relate; provided, however, that
the Committee shall have discretion to delay its certification and payment of
awards for any fiscal year until following notification from the Company's
independent auditors of the final audited results of operations for the fiscal
year. In any event, the Committee shall provide written certification that the
annual performance goals have been attained, as required by Section 162(m),
prior to any payments being made for any fiscal year.
AMENDMENTS, MODIFICATIONS AND TERMINATION
The Committee is authorized to amend, modify or terminate the Plan retroactively
at any time, in part or in whole; provided, however, that any such amendment may
not cause payments to "covered employees" under the Plan to cease to qualify as
"performance-based compensation" under Section 162(m) unless such amendment has
been approved by the full Board of Directors of the Company.
SHAREHOLDER APPROVAL REQUIREMENT
So long as the Company and the Plan are subject to the provisions of Section
162(m), no awards shall be paid to any participants under the Plan unless the
performance goals under the Plan (including any subsequent Plan amendments as
contemplated above) shall have received any approval of the Company's
shareholders required in order for all such payments to "covered employees" to
qualify as "performance-based compensation" under Section 162(m).
ANNEX A
APPROVED PERFORMANCE CRITERIA FOR
AWARDING BONUS PAYMENTS
CORPORATE GOALS
WEIGHTAGE
PERFORMANCE INDICATOR FACTOR* GOAL*
--------------------- ------ ----
1. Operating Cash Flow (A)
2. Free Cash Flow (B)
3. Net Income
4. Unit Volume
5. Market Share
6. Value Measure (* X OCF - Debt)
Total 100%
* Set as Part of Approved Plan
NOTES:
1. Operating cash flow is defined as income from operations before
depreciation and amortization of goodwill and intangibles.
2. Free cash flow is defined as the net cash available for debt or lease
pay down after considering non-cash charges, capital expenditures,
taxes and adjustments for changes in assets and liabilities.
Specifically excluded would be acquisitions and capital expenditures
made because of acquisitions. Specifically excluded from free cash flow
are net proceeds from:
- Investment in or sale of franchise territories
- Sales of real estate
- Sales of other assets
- Other items as defined by the Committee.
3. Net Income is defined as the after-tax reported earnings of the
Company.
4. Unit Volume is defined as bottle, can and pre-mix cases converted to 8
oz. cases.
5. If, and to the extent that, excluding any of the following items
increases the level of goal achievement with respect to any of the
performance indicators, then such item shall be excluded from
determination of the level of goal achievement:
- Unbudgeted events of more than $50,000.
- Impact of non-budgeted acquisition or joint venture transactions
occurring after the commencement of the fiscal year performance
period.
- Adjustments required to implement unbudgeted changes in accounting
principles (i.e., new FASB rulings).
- Unbudgeted changes in depreciation and amortization schedules.
- Unbudgeted premiums paid or received due to the retirement of
refinancing of debt or hedging vehicles.
The Committee shall, however, have discretion to include any of these
specifically excluded items, but only to the extent that the exercise
of such discretion would reduce (but not increase) the amount of any
award otherwise payable under the Plan.
6. Bonus program will not be in force if any material aspects of the
Bottle Contracts with TCCC are violated.
7. For purposes of determining incentive compensation, accounting
practices and principles used to calculate "actual" results will be
consistent with those used in calculating the budget.
[Logo]
The Board of Directors urges you to vote your shares by proxy even if
you plan to attend the 2003 Annual Meeting of Stockholders. You can always
change your vote at the meeting. Registered holders of the Company's stock may
vote in one of three ways.
- ----------------------------------------- ---------------------------------------- --------------------------------------
BY TELEPHONE BY INTERNET BY MAIL
(Available only until 3:00 p.m. Eastern (Available only until 3:00 p.m. Mark, sign and date your proxy card
Daylight Time on May 6, 2003) Eastern Daylight Time on May 6, 2003) and return it in the postage paid
envelope.
On a touch-tone telephone, call TOLL Access the internet voting website at
FREE (866) 214-3731, 24 hours a day, 7 http://www.proxyvotenow.com/coke. If you are entering instructions by
days a week. You will be asked to Enter the Control Number below and telephone or Internet, please do not
enter the Control Number below. Then follow the instructions on your mail your proxy card.
follow the prerecorded directions. screen.
You will incur only your usual
Internet charges.
- ----------------------------------------- ---------------------------------------- --------------------------------------
CONTROL NUMBER:
+ FOLD AND DETACH HERE +
- --------------------------------------------------------------------------------
This Proxy is Solicited on Behalf of the Board of Directors
PROXY COCA-COLA BOTTLING CO. CONSOLIDATED
Annual Meeting of Stockholders, May 7, 2003
The undersigned hereby appoints J. Frank Harrison, III, James L. Moore, Jr. and
Ned R. McWherter, and each of them, proxies, with full power of substitution, to
act and to vote the shares of Common Stock or Class B Common Stock which the
undersigned is entitled to vote at the Annual Meeting of Stockholders to be held
on May 7, 2003, and any adjournment thereof, as follows:
1. ELECTION OF DIRECTORS: [_] FOR all nominees listed below [_] WITHHOLD AUTHORITY
(except as marked to the contrary below) to vote for all nominees listed below
H.W. McKay Belk (01), William B. Elmore (02), John W. Murrey, III (03), Dennis
A. Wicker (04) and Deborah S. Harrison (05)
(Instruction: To withhold authority to vote for any individual write that
nominee's name in the space provided below.)
2. APPROVAL OF AMENDMENTS TO THE COMPANY'S RESTATED CERTIFICATE OF INCORPROATION
AND BYLAWS TO DECLASSIFY THE COMPANY'S BOARD OF DIRECTORS:
[_] FOR approval of amendments [_] AGAINST approval of amendments [_] ABSTAIN
3. RE-APPROVAL OF THE COMPANY'S ANNUAL BONUS PLAN:
[_] FOR re-approval of bonus plan [_] AGAINST re-approval of bonus plan [_] ABSTAIN
4. Acting upon any other business which may be properly brought before said
meeting or any adjournment thereof.
(continued on other side)
+ FOLD AND DETACH HERE +
- --------------------------------------------------------------------------------
(continued from other side)
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY
THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED
IN FAVOR OF THE ELECTION OF ALL NOMINEES AS DIRECTORS AND WILL BE VOTED IN
ACCORDANCE WITH THE BEST JUDGMENT OF THE PROXYHOLDERS IN ACTING UPON ANY OTHER
BUSINESS WHICH MAY BE PROPERLY BROUGHT BEFORE SAID MEETING OR ANY ADJOURNMENT OR
ADJOURNMENTS THEREOF.
The undersigned hereby acknowledges receipt of the Notice of Annual
Meeting of Stockholders, dated April 4, 2003, and the Proxy Statement furnished
therewith.
If you plan to attend the Annual Meeting of
Stockholders on May 7, 2003, please check the
following box: [_]
Dated this ____ day of _____________, 2003
________________________________________(Seal)
Note: Signature should agree with name on
stock certificate as printed thereon.
Executors, administrators, trustees and other
fiduciaries and persons signing on behalf of
corporations or partnerships, should so
indicate when signing.
Please sign, date and return this Proxy in the accompanying prepaid
self-addressed envelope. Thank You.
