Exhibit 10.1

 

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April 6, 2016

Coca-Cola Bottling Co. Consolidated

Mr. Clifford M. Deal, III

Senior Vice President and CFO

4100 Coca-Cola Plaza

Charlotte, NC 28211

Re:   Incidence Pricing Agreement

Dear Mr. Deal:

This letter (this “Agreement”) confirms our incidence pricing program with
Coca-Cola Bottling Co. Consolidated (“Bottler”) starting in 2016 (the “Program”)
for the Term defined below. The Program described below applies only to
concentrate that the Bottler purchases from The Coca-Cola Company through its
Coca-Cola North America division (CCNA) for producing the beverages under the
“Brands” listed in Attachment A that ultimately will be sold as finished goods
to your customers who resell the finished goods directly or indirectly to
retailers and consumers who are located in the respective authorized territories
for the Brands, as permitted in the respective agreements between The Coca-Cola
Company (“Company”) or by and through CCNA and the Bottler for the Brands
(“Covered Sales”). The Program described below will not apply to concentrate
that the Bottler purchases from CCNA that is used to manufacture finished goods
for resale to CCNA or to authorized Coca-Cola bottlers that are not owned and
controlled by the Bottler (“Excluded Sales”).

1.         The Brands will include the following Company beverages that are
bottler-produced:

 

  ●  

All Sparkling beverages (e.g., Coca-Cola, diet Coke, Sprite, etc.), including
aluminum bottles

  ●  

FUZE Refreshments (Coldfill only) and Minute Maid Adult Refreshment (Coldfill
only)

All TCCC products imported from Mexico in glass bottles will be excluded from
the brands.

2.         The Program shall be for 1 year beginning on January 1, 2016, and
shall end on December 31, 2016, unless terminated earlier by either party as
permitted herein (the “Term”). In addition, Bottler may terminate this Agreement
pursuant to Paragraphs 3 and/or 5.f below.

 

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3.         During the Term, both parties temporarily waive the pricing
provisions, including “most favored nations” provisions relating to pricing, if
any, for each of the Brands listed in Attachment A that are contained in the
agreements between them for those Brands (the “Existing Contracts”), and both
parties agree that the pricing for the Brands shall be governed by this
Agreement during the Term. In agreeing to this waiver, the parties acknowledge
that Bottler is relying on the fact that the Company by and through CCNA has
offered this Program to all Coca-Cola bottlers in the United States in
substantially the same form and using substantially the same methodology as
stated in this Agreement. If CCNA offers a materially different incidence
pricing program to any bottler, CCNA will either make such program available to
Bottler or Bottler may terminate this Program effective at the end of the next
calendar quarter by giving not less than thirty (30) days written notice to
CCNA. However, the parties acknowledge that Other Participating Bottlers (as
defined below) will have different Incidence Rates and that such differences
shall not be deemed a material difference in incidence pricing programs. CCNA
will continue to publish prices for the Brands in accordance with the terms of
the Existing Contracts, but such published prices shall be informational only
and shall not apply during the Term, unless this Agreement is terminated early
as permitted in this Agreement.

4.         During the Term, CCNA will bill Bottler for concentrate at the master
bottler contract prices (“MBCs”) by Brand category that are communicated
annually by CCNA to Bottler. MBC pricing will change no more than once per year.
This is a billing price and does not reflect the incidence price (see Paragraph
5 below). CCNA shall charge the same MBCs to every bottler that elects to
participate in an incidence pricing program substantially similar to this
Program during the Term (“Other Participating Bottlers”), before taking account
of any funding that Bottler or Other Participating Bottlers may elect to net
pursuant to Paragraph 5.i below.

5.         Within 15 days after the end of each calendar month, CCNA will
calculate an effective “Incidence Pricing Revenue” (“IPR”) for each category, as
follows.

a.         The Bottler or CCNA will calculate its Dead Net Net Selling Income
(“DNNSI”) during the preceding month for Covered Sales of each Brand and
multiply the DNNSI by the “Incidence Rate” for that Brand to yield an IPR for
each Brand. The sum of these IPRs is the Total IPR for that month.

b.         “DNNSI” in general shall equal “Revenue less CCF/CMA/CTM/Rebates”.
During the Program, the Bottler will use the same process to calculate DNNSI for
all of the months of the Program. Bottler will not alter the process or
definition of DNNSI during the Program. For auditing purposes, Bottler will
provide copies (hard or electronic) of the results of their sales systems (e.g.,
Margin Minder, Northstar, CONA) to CCNA. The financial data to be provided will
include volume, gross revenues, deductions (CTM, CCF, other discounts, etc.) and
DNNSI.

c.         New Government Legislation DNNSI Adjustment:

In the event that a Bottler enters into the Program and has Covered Sales in
geographies where the following items occur, an adjustment will be made to DNNSI
for the change in:

 

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  1.

The increased or new handling fees in states where the law requires container
deposits;

 

  2.

The new or expanded escheat tax taking in states with container deposit laws
related to unclaimed bottle deposits that are required to be remitted to the
state; or

 

  3.

If a State adopts new container deposit laws.

Bottler DNNSI can be adjusted to take into account the addition on these items.

d.         The starting Incidence Rate for the Brands shall be communicated by
CCNA to the bottler at the beginning of the Program. Each bottler will have its
own Incidence Rate, and this rate may vary across bottlers.

e.         Intentionally Omitted.

f.         CCNA may change the Incidence Rate at any time by giving not less
than 90 days prior written notice to Bottler. Should CCNA give notice of its
intent to change the Incidence Rate pursuant to this Paragraph 5.f, Bottler
shall have the right to terminate this Program by giving written notice to CCNA
not less than 15 days prior to the date the change in Incidence Rate is
scheduled to take effect.

g.         In order to help inform the calculations and decisions for Paragraph
5.f above, the Bottler and CCNA may mutually elect and agree to share yearly
category P&L information to the Operating Income level with each other. Based
upon this information, CCNA may use a variety of economic indicators such as
Bottler Revenue Growth, GP margin, OI margin, and ROIC to inform, but not
prescribe, potential adjustments to the Incidence Rate (e.g., keep IR same,
increase IR, or decrease IR) for each of the Brands stated in Paragraph 1.

h.         Should CCNA add or change the formula or sweetener system for any
Brand during the Term, CCNA and the Bottler will mutually determine whether to
include the affected Brand in the Program or whether to exclude the affected
Brand and price it pursuant to the Existing Contracts.

i.         At the Bottler’s option, sales of the Brands to customers in the full
service vending channel may be excluded from Covered Sales (Legacy territory
only). If Bottler elects this option, it may not be changed except by mutual
consent.

If the Bottler elects to exclude sales in the full service vending channel from
Covered Sales under this Agreement, the Bottler will agree to provide CCNA with
a report periodically upon request detailing the volume and DNNSI of sales of
Brands sold through the full service vending channel. The purpose of this report
is to enable the financial reconciliation process between CCNA and the Bottler.
Bottler shall provide this report within 10 days of the receipt of the request
from CCNA. Bottler shall also agree to supply CCNA with the underlying detail of
which customers comprise the full service channel, and that the underlying
categorization of full service customers shall remain consistent when reporting
volume and DNNSI to CCNA for the duration of this Agreement.

 

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6.         Settlement Process:

a)        Settlement for Each Current Quarter. See paragraph 5 above for data
requirements:

The Bottler and CCNA shall reconcile the amounts that Bottler has actually paid
to CCNA for concentrate billed at the MBC for each Brand (the “Total Master
Pricing Revenue” or “Total MPR”) during the same period of current quarter,
against the Total IPR calculated above for current quarter. If the Total MPR is
less than the Total IPR, the Bottler shall pay the difference to CCNA no later
than 30 days after the end of current quarter, if the Total MPR is more than the
Total IPR, CCNA shall pay the difference to the Bottler no later than 30 days
after the end of current quarter.

b)        Quarterly Retroactive Adjustment in Quarters 2 through 4

In order to make adjustments to DNNSI that are not included in previous
quarter(s)’s settlements but attributable to previous quarter(s) of current
calendar year, and to adjust the settlement amount between the parties, Bottler
shall provide CCNA, together with volume and DNNSI numbers for current quarter,
the year to date (“YTD”) volume and DNNSI numbers calculated according to
Paragraph 5 above.

In each Quarter 2, 3 and 4, Bottler and CCNA shall recalculate Total MPR, Total
IPR for prior quarter(s) of current calendar year, as well as the discrepancy
between (the “Revised Incidence Pricing Settlement”) using the DNNSI number up
to the end of the last quarter (i.e. the YTD DNNSI less DNNSI for current
quarter). Any variance between the Revised Incidence Pricing Settlement and the
settlement amount that the parties have actually paid up to last quarter will be
included in and paid together with the settlement amount for current quarter as
calculated under Paragraph 5(a) above.

c)        Final Retroactive Adjustment*

 

  1)

At the end of Quarter 1 of the following calendar year, Bottler and CCNA shall
make a final Incidence Pricing settlement adjustment for the prior year final
actuals. However, this final settlement adjustment will not incorporate the
final, reconciled expenses for prior year CTM/CCF.

 

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  2)

Once CTM/CCF actuals are finalized for the prior year, Bottler and CCNA shall
adjust the Incidence Pricing settlement related to the final prior year CTM/CCF
adjustment (item #1 above). Any variance between this final adjusted Incidence
Pricing Settlement and the settlement amount from quarter 1 (prior year) will be
paid or invoiced within 30 days of Bottler and CCNA alignment and no later than
the end of the current calendar year. Thereafter, no further adjustment to the
Incidence Pricing settlement shall be made in the current calendar year related
to prior year actuals.

*For purposes of Paragraph 6(c) above “prior year” is 2016 and “calendar year”
is 2017.

7.           Both parties shall be entitled to review the other’s calculations
and all relevant underlying records upon written request.

8.           Within two weeks of the end of every month, the Bottler will
provide CCNA package level data for volume, gross revenue, and
CCF/CTM/CMA/Rebates for all of the Brands covered in the Program.

9.           The Bottler will use reasonable efforts to ensure that its key
decision makers will have access to the incidence pricing view in Margin Minder
or other system, or make such other changes that may be reasonably required in
order to ensure that Bottler employees with financial decision-making
responsibility have access to Bottler’s effective COGS under this Program when
making decisions in the performance of their duties.

10.         The parties will meet on a timely basis to jointly develop a
mutually agreeable reporting and review process.

11.         Bottler will share with CCNA in a timely fashion its annual,
quarterly, and monthly forecasting information for the average prices it expects
to charge for each of the Brands by package, to the extent that Bottler
maintains such information in the ordinary course of its business.

12.         The purpose of this Program is to determine the feasibility and
effectiveness of implementing an alternative pricing system. Characteristics of
this Program may or may not be extended past the end of the Program specified in
Paragraph 2, and any such extensions must be achieved by mutual agreement.

13.         Attached as Attachment B is a form of Confidentiality Agreement that
shall govern this Agreement and the information shared between the parties
pursuant to this Agreement.

14.         Rights of Reversion. If either Bottler or CCNA terminates this
Agreement as permitted in Paragraphs 2, 3, or 5.f above, the parties will
reconcile Total MPR against Total IPR as provided in paragraph 6 through the end
of the Term. Beginning on the first day of the quarter following the expiration
or termination of this Agreement, CCNA will resume charging prices to Bottler
for the Brands in accordance with the terms of the Existing Contracts. Nothing
in this

 

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Agreement shall be deemed to modify, change or amend the interpretation of the
Existing Contracts or the parties’ respective rights and obligations thereunder
following termination or expiration of this Agreement.

 

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If this letter accurately sets forth our understanding and agreement, please
sign below and return one copy to me for our files.

Sincerely,

/s/ Bill McCrary

Bill McCrary

Vice-President, Finance - Franchise and Commercial Leadership

Coca-Cola North America

AGREED this 6th day of April, 2016:

Coca-Cola Bottling Co. Consolidated

By:  /s/ Clifford M. Deal, III                                                  

Printed Name:  Clifford M. Deal, III                                    

Title:  Senior Vice President and Chief Financial Officer    

cc:

 

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ATTACHMENT A

COCA-COLA NORTH AMERICA BRANDS

Effective January 1, 2016

 

 

Product

 

Coca-Cola

CF Coca-Cola

Vanilla Coke

Cherry Coca-Cola

 

Coca-Cola Life

 

Diet Coke

CF diet Coke

Coke Zero

CF Coke Zero

Diet Coke with Splenda

Vanilla Coke Zero

Diet Cherry Coke

Cherry Coke Zero

Diet Coke with Lime

 

TAB

 

Sprite

Sprite Zero

Sprite LeBron's Mix

Sprite Tropical

Sprite Cranberry

Sprite Zero Cranberry

 

Fresca

Fresca Peach

Fresca Black Cherry

 

Pibb Xtra

Pibb Zero

 

Mello Yello

Mello Yello Peach

Mello Yello Cherry

Mello Yello Zero

 

Surge

 

 

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Product

 

Barq's:

Root Beer

French Vanilla Crème Soda

Caffeine Free Root Beer

Red Crème Soda

Diet Root Beer

Diet French Vanilla Crème Soda

Diet Red Creme Soda

 

Fanta:

Orange

Grape

Grapefruit

Strawberry

Pineapple

Cherry

Berry

Mango

Apple

Fruit Punch

Peach

Fanta Zero Orange

 

Delaware Punch

 

Red Flash

 

Northern Neck:

Ginger Ale

Diet Ginger Ale

 

Seagram's

Ginger Ale

Diet Ginger Ale*

Raspberry Ginger Ale

Diet Raspberry Ginger Ale

Club Soda

Tonic Water

Diet Tonic Water

Non Flavored Seltzer

 

 

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Product

 

 

Fuze Refreshments

 

Fuze Iced Tea Lemon

 

Fuze Strawberry Lemonade

 

Fuze Iced Tea Half Tea Half Lemonade

 

Fuze Iced Tea Strawberry Red Tea

 

Fuze Iced Tea Honey and Ginseng Green Tea

 

Fuze Berry Punch

 

Fuze Sweet Tea

 

Fuze Mango Orange Iced Tea

 

Fuze Diet Lemon Tea

 

Minute Maid Refreshment

 

Lemonade

 

Fruit Punch

 

Pink Lemonade

 

Orangeade

 

Peach

 

Tropical Punch

 

Light Lemonade

 

Light Raspberry Passion

 

Light Orangeade

 

 

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ATTACHMENT B

Confidentiality Agreement

THIS CONFIDENTIALITY AGREEMENT is made and entered into as of the 6th day of
April, 2016, by and between Coca-Cola Bottling Co. Consolidated (“Bottler”) and
THE COCA-COLA COMPANY, a Delaware corporation, by and through its Coca-Cola
North America division (“KO”), under the following circumstances:

A.         KO has requested that Bottler allow KO access to certain of Bottler’
data systems to obtain nonpublic information concerning sales of beverages by
Bottler and its affiliates in North America, including its commonwealths,
territories and possessions. This information will include (without limitation)
the identity of individual accounts and show all products sold under license
from KO, sales volume, invoice prices, allowances and discounts. The information
described in the preceding sentence is referred to in this Agreement as the
“Confidential Information.”

B.         Bottler is willing to and agrees to allow certain KO employees to
have such access to the Confidential Information, provided that KO and KO
employee serving as Vice President, Coca-Cola North America Franchise &
Commercial Leadership Finance or such position with comparable responsibilities
(“Employee”) agree to the restrictions on the use and disclosure of the
Confidential Information as provided in this Agreement.

NOW THEREFORE, in consideration of the foregoing and for other good and valuable
legal consideration, the parties agree as follows:

1.         Non-disclosure. KO agrees, and agrees to cause the Employee, to use
the Confidential Information only for the internal purposes of KO, and, except
as permitted by Section 5 of this Agreement, shall make no disclosure whatsoever
of any Confidential Information.

2.         Restricted Access. KO agrees, and agrees to cause Employee, to
restrict access to the Confidential Information (in any form) only to other KO
employees meeting all of the following criteria: (a) the KO employee has a need
to know this information; and (b) the KO employee has been approved by an
authorized KO official (i.e., above Director level) to have access to the
Confidential Information.

3.         No Warranty. The Confidential Information to which KO and the
Employee is being allowed access is prepared in the ordinary business operations
of Bottler and is believed to reflect correctly the records of Bottler and its
affiliates at the date it is entered into the data system, but any express or
implied warranty that the Confidential Information is accurate or complete is
specifically disclaimed by Bottler. Bottler shall have no liability to KO or the
Employee for KO’s or the Employee’s use of or reliance on the Confidential
Information.

4.         Insider Trading. KO acknowledges, and agrees to cause the Employee to
acknowledge, that the information could, under some circumstances, be material
nonpublic information relating to Bottler, and that the use of such information
in the purchase or sale of the securities of Bottler could, under those
circumstances, subject the person responsible for the purchase or sale of such
securities to liability under relevant securities laws and regulations.

 

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5.         Exclusions from Confidential Information. The following information
shall not be considered as “Confidential Information” under this Agreement:

    (a)     Information which is, or subsequently may become, generally
available to the public as a matter of record through no fault of KO or the
Employee;

    (b)     Information which KO can show was previously known to it as a matter
of record at the time of receipt;

    (c)     Information which may subsequently be obtained from a third party
(i) who received the information lawfully and from a disclosing party who was
under no duty to keep such information confidential; and (ii) who obtained the
information through no fault of KO or the Employee;

    (d)     Information which may subsequently be developed by KO or the
Employee independently of any disclosure of Confidential Information from
Bottler hereunder;

    (e)     Information which is required to be disclosed pursuant to the
requirement of a government agency or by operation of law, subsequent to prior
consultation with Bottler’ legal counsel.

6.         Legal Process. KO agrees, and agrees to cause Employee, to notify
Bottler immediately if either becomes subject to legal process compelling them
to disclose Confidential Information, so that Bottler may seek a protective
order or other appropriate remedy. If legally compelled to disclose the
Confidential Information, KO agrees and agrees to cause Employee to furnish only
that portion of the Confidential Information which is legally required to be
disclosed.

7.         Termination. Either party may terminate this Agreement for any reason
by giving not less than ninety (90) days prior written notice.

8.         Effect on Other Agreements. Nothing in this Agreement shall be deemed
to modify, amend or waive any rights either party may have under any bottling or
distribution agreement between the parties.

 

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The parties have executed this Agreement as of the date first above written.

 

Coca-Cola Bottling Co. Consolidated By:  

/s/ Clifford M. Deal, III

 

THE COCA-COLA COMPANY by and through its Coca-Cola North America division
Signature:  

/s/ William McCrary

       Authorized Signing Officer

 

Printed Name:  

William McCrary

  Authorized Signing Officer

 

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