EXHIBIT 10.3
THE COCA-COLA BOTTLING GROUP (SOUTHWEST), INC.
MANAGEMENT INCENTIVE AGREEMENT
This Management Incentive Agreement ("Agreement") is entered by and
between The Coca-Cola Bottling Group (Southwest), Inc. (the "Company" and the
"Employer") and CHARLES F. STEPHENSON ("Manager"), effective January 1, 1997.
RECITALS
A. The Company desires to retain the services of certain key managers
and to encourage key managers to seek to attain the financial goals of the
Company through creativity, innovation and good management practices;
B. The Company measures its business success in part by setting
financial goals and evaluating efforts to meet financial goals by increasing
revenue and controlling expenditures;
C. The Company has established a Management Incentive Plan, recorded in
the minutes of the Board of Directors of the Company and expressed in this
Agreement and in similar Agreements with certain other key managers, to
encourage superior long-term performance by key managers of the Company and
subsidiary operations of the Company through payments of cash awards based on
the Company's performance during the three-year period from January 1, 1997
through December 31, 1999; and
D. Manager is currently employed with Employer in a key leadership
position.
AGREEMENT
1. PAYMENT OF BONUS. If Manager qualifies to receive a cash award
pursuant to this Agreement, two-thirds of the Award Payable (defined in
Section 2(c) below) will be paid to Manager on March 1, 2000, and one-third
of the Award Payable will be paid to Manager on March 1, 2002. Payments under
this Agreement will be made by Employer, unless Manager has transferred to a
position with a subsidiary of the Company prior to the payment date, in which
case the Award Payable will be prorated among the employers of the Manager
during the Performance Period on the basis of months worked for each affected
employer.
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2. DEFINITIONS.
a. "Cash Flow" is based on the audited financial information of the
Company for each fiscal year in any Performance Period and is determined by
adding the following items on the Statement of Operations for Southwest
Coca-Cola Bottling Company, Inc. and Texas Bottling Group, Inc. for the
year ended on December 31 of each such year: consolidated net income,
income taxes paid or accrued, interest expense net of interest income,
depreciation, amortization, accruals for Awards under this Plan, and other
non-cash charges to the extent deducted in calculating consolidated net
income.
b. "Actual Cash Flow" is Cash Flow as certified to the Board of
Directors of the Company by the Chief Financial Officer of the Company for
purposes of the Plan and this Agreement.
c. "Cash Flow Threshold" is $340,000,000.00.
The Cash Flow Threshold may be adjusted by the Board of Directors of the
Company to incorporate anticipated increases in Cash Flow resulting from the
expansion of the Company's business through acquisition of any other business
by the Company or Texas Bottling Group, Inc. or conversely to incorporate
decreases in cash flow resulting from divestiture or significant increases in
expenditures not foreseeable on the effective date of this Agreement. Any
change in the Cash flow Threshold must be approved by the Board of Directors
of the Company prior to the end of the Performance Period. The Board of
Directors of the Company is not required to make any adjustment in the Cash
Flow Threshold, but may take such action in its sole discretion. Any such
change in the Cash Flow Threshold will be effected by written notice to
Manager prior to the end of the Performance Period setting forth the amended
Cash Flow Threshold.
d. "Award" is $200,000.00
e. "Award Payable" will be calculated by multiplying the Award by
the percentage determined by the following formula (the "Award Formula"):
Percentage = Lesser of y or z, where
y = 150% and
z = Actual Cash Flow - Threshold Cash Flow x 100% + 50%
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$40,000,000
3. REQUIREMENTS TO QUALIFY FOR THE AWARD. To be qualified to receive
the Award Payable, Manager must have been continuously employed by the
Company or a bottling subsidiary of the
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Company during the Performance Period in his present position or another key
management position, and still actively employed on March 1, 2000 to receive
the first installment, and on March 1, 2002 to receive the second
installment. The only exceptions to these requirements are described in
Paragraphs 4, 5, 6 and 7.
4. RESIGNATION DUE TO DISABILITY. If Manager fails to meet the
requirements of Paragraph 3 above because he has resigned from employment
with the Company or a bottling subsidiary of the Company after the
Performance Period ends, but prior to a payment date due to a condition which
meets the definition of "disability" in the Company's Long Term Disability
Insurance Policy or is on medical leave, Manager will receive the Award
Payable as provided in this Agreement. If Manager's resignation due to
disability occurs prior to the end of the Performance Period, the Board of
Directors may waive the "continuous employment" requirement and prorate the
Award Payable based on the ratio of the number of months within the
Performance Period in which Manager was actively employed to the 36 months in
the Performance Period, and the payment date of such partial Award Payable
may be accelerated in the sole discretion of the Board of Directors of the
Company.
5. RESIGNATION DUE TO RETIREMENT. If Manager fails to meet the
requirements of Paragraph 3 above because he has retired from employment with
the Company or a bottling subsidiary of the Company after the Performance
Period ends, but prior to a payment date in accordance with the terms of The
Coca-Cola Bottling Group (Southwest), Inc. and Affiliates Retirement Plan,
Manager will receive the Award Payable as provided in this Agreement. If
Manager's resignation due to retirement occurs prior to the end of the
Performance Period, the Board of Directors may waive the "continuous
employment" requirement and prorate the Award Payable based on the ratio of
the number of months within the Performance Period in which Manager was
actively employed to the 36 months in the Performance Period.
6. DEATH OF MANAGER. If Manager dies while actively employed with the
Company or a bottling subsidiary of the Company after the Performance Period
ends, but prior to a payment date, Manager's estate or designated beneficiary
will receive the Award Payable as provided in this Agreement. If Manager's
death occurs prior to the end of the Performance Period, the Board of
Directors may waive the "continuous employment" requirement and prorate the
Award Payable based on the ratio of the number of months within the
Performance Period in which the Manager was actively employed to the 36
months within the Performance Period, and the payment date of such partial
Award Payable may be accelerated in the sole discretion of the Board of
Directors of the Company.
7. CHANGE OF MAJORITY OWNERSHIP. If, during the term of this Agreement,
the majority ownership of the stock of the Company and/or the Manager's
employer changes, this Agreement shall terminate, and Manager will receive
all or any remaining portion of an Award Payable from the Company, on or
before December 31 of the year in which such change of ownership is
consummated. If the Change of Ownership occurs during the Performance Period,
the Award Payable will be determined using an amended Cash Flow Threshold
which
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proportionally adjusts the factors to be utilized in calculating the Award
Payable. For purposes of this Paragraph 7 and Paragraph 8 below, a transfer
of stock ownership from a person or entity which was a shareholder on the
date of this Agreement (a "current shareholder") to a person or entity which
is (a) controlled by or under common control with a current shareholder, (b)
a family member of a current shareholder, or (c) a trust, partnership or
other entity of which a current shareholder or a family member of a current
shareholder is either a grantor, trustee, beneficiary, owner or holder of an
equity or beneficial interest, will not constitute a Change of Majority
Ownership of the Company or, if applicable, the Manager's employer.
8. TERMINATION OF AGREEMENT. This Agreement shall terminate immediately
upon the occurrence of the first of the following events: a) payment of the
entire Award Payable; b) voluntary resignation of the Manager; c) termination
of Manager's employment with the Company or a bottling subsidiary of the
Company, for any reason other than death, disability or retirement (as
defined in Paragraphs 5 and 6 above); or Change of Majority Ownership of the
Company or Manager's employer. This Agreement and the benefits of this
Agreement may be assigned by the Company to any corporate successor of the
Company, but may not be assigned, pledged, or otherwise transferred by
Manager.
9. AMENDMENTS. Manager recognizes that the Board of Directors of the
Company may determine in its sole discretion that modification, suspension or
termination of the Plan is in the best interest of the Company, and that the
Plan provides that the Board of Directors may act in its sole discretion to
suspend or terminate the Plan in whole or in part. This Agreement may be
amended by written agreement between the Manager and the Company. The Board
of Directors of the Company may also make an amendment to the form of all
Agreements for a specific Performance Period, and such amendment shall be
effective for this Agreement when the majority of Participants who are
parties to Agreements for the same Performance Period consent in writing to
such amendment. The Board of Directors may also unilaterally amend this
Agreement if it amends all Agreements for the same Performance Period in
order to correct any defect, supply any omission or reconcile any
inconsistency in the Plan or in the Awards made thereunder that does not
constitute the modification of a material term of the Plan or this Agreement,
or take necessary action to effect legal compliance of the Plan or this
Agreement. If Manager transfers from his position with the Company to a
position with Coca-Cola Bottling Company of the Southwest or Southwest
Coca-Cola Bottling Company, Inc., this Agreement will be amended by adding
such employer as a party to this Agreement.
10. NOTICES. All notices given under this Agreement shall be in writing
and shall be deemed to be delivered when actually received or shall be deemed
received upon deposit in the United States mail, registered or certified,
postage prepaid and, if to the Company, addressed to the Company at 1999
Bryan Street #3300, Dallas, Texas 75201, or if to Manager, at his principal
place of residence.
11. EMPLOYMENT AT WILL. Manager acknowledges that this Agreement is not
an employment agreement, and has no relationship to or effect on the terms of
Manager's
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employment with the Company. Manager acknowledges and affirms that his
employment with the Company is terminable at will, subject only to compliance
with existing law, by Manager or Manager's employer (whether the Company or a
subsidiary of the Company) at any time.
IN WITNESS WHEREOF, this Management Incentive Agreement is executed this
5th day of June, 1997.
THE COCA-COLA BOTTLING GROUP
(SOUTHWEST), INC.
By: /s/ ROBERT K. HOFFMAN
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Its: Co-Chairman
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MANAGER
/s/ CHARLES F. STEPHENSON
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Charles F. Stephenson
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