COCA-COLA BOTTLING CO. CONSOLIDATED
ANNUAL BONUS PLAN
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 theCompany in meeting and exceeding its business goals.
The Plan will be administered by the CompensationCommittee 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)), eitherthe 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 outsidedirectors, 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 referencesherein 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 ofthe 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 coveredemployees (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 (ifany) 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.
Eligibility: The Committee is authorized to grant cash awards to any officer, including officers who are directors and to otheremployees 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. Managementwill 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 madeto any individual participant based upon performance for any fiscal year period shall be $1,000,000.
|3.||The Base Salary is the participants base salary level set for the fiscal year. The Approved Bonus % Factor is a number set by the Committee (maximum = 100%) to reflect eachparticipants relative responsibility and the contribution to Company performance attributed to each participants 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 individuals performance during such fiscalyear. Since the Committee is necessarily required to evaluate subjective factors related to each individuals performance in order to arrive at this number, and since such evaluations cannot be made until after the close of the fiscal year towhich 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 asperformance-based compensation that is not subject to the deduction limits of Section 162(m).|
The Overall Goal Achievement Factor used in calculating the Gross Cash Award for each participant will be determined on the basis of multiplying the weightagefactor 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:
Amount of Award
(as a % of max.)
89.0 or less
|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 theformula 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 IndexedPerformance 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 taxwithholding 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 (TCCC) are violated.|
Payment Date: Awards shall be paid upon determination (and certification by the Committee, as provided below) ofthe results under each of the performance criteria specified in Paragraph 5 above following the closing of the Companys books for the fiscal year to which such awards relate; provided, however, that the Committee shall have discretionto delay its certification and payment of awards for any fiscal year until following notification from the Companys independent auditors of the final audited results of operations for the fiscal year. In any event, the Committee shall providewritten 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 maynot 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), noawards 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 Companys shareholders required inorder for all such payments to covered employees to qualify as performance-based compensation under Section 162(m).
ANNEX FOR 2005
APPROVED PERFORMANCE CRITERIA FOR
AWARDING BONUS PAYMENTS
1. Operating Cash Flow (A)
2. Free Cash Flow (B)
3. Net Income
4. Unit Volume
5. Market Share
6. Value Measure
(9 X OCF Debt)
|*||Set as Part of Approved Plan|
|**||Target goals omitted pursuant to Instruction 2 to Item 402(k) of Regulation S-K.|
|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 assetsand 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 beexcluded 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 extentthat 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 incalculating the budget.|