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Management Agreement

This is an actual contract by Coca Cola Bottling Co. Consolidated.

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Sectors: Food, Beverages and Tobacco
Governing Law: North Carolina, View North Carolina State Laws
Effective Date: August 31, 1994
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MANAGEMENT AGREEMENT


This Management Agreement ("Agreement") made and entered into this day of May, 1994, by and among Coca-Cola Bottling Co. Consolidated, a Delaware corporation ("Manager") and South Atlantic Canners, Inc., a South Carolina corporation ("SAC").


W I T N E S S E T H:


By this Agreement, SAC intends to retain Manager for the purpose of managing its day to day operations as is more fully described in the Agreement. Manager has managerial expertise, knowledge of the industry, access to certain raw materials, and other capabilities which indicate that its services will be beneficial to SAC and its membership. Under this Agreement, it is anticipated that Manager will supervise day to day operations without material interference from the SAC Board of Directors ("SAC Board") and that the SAC Board will generally perform the typical board functions of supervising the performance of management and establishing policy for SAC. The parties recognize, however, that the SAC Board has a legal obligation to SAC and its membership to oversee and direct the operations of SAC and nothing contained in this Agreement shall remove from the SAC Board its obligations or ability to direct the business and affairs of SAC. It is anticipated that a smooth working relationship will be established through the adoption each year of an annual business plan ("Annual Business Plan"), under which Manager can perform its responsibilities as described herein.


The parties believe that the efficiencies to be derived from Manager's supervisory capabilities and the additional purchasing volume Manager brings to SAC in its capacity as a member will prove to be beneficial to Manager and to SAC's membership in general.


NOW, THEREFORE, in consideration of the mutual promises, obligations and agreements contained herein, the parties hereto, intending to be legally bound, do hereby agree as follows:


Section 1. Definitions.


1.01 Defined Terms. The following terms shall have the meanings set forth in the Section of this Agreement indicated below:


Defined Term Section


Agreement Preamble
Annual Business Plan Preamble
Claimant Section 10.03(a)
Claim Section 10.02
CPI Section 6.01


SAC Bank Account Section 6.03(d)
Disclosing Party Section 9.04
Effective Date Section 8.01
Environmental Manager Section 3.01(c)(4)
Environmental Laws Section 3.01(c)(4)(i)
Expansion Section 3.01(c)(3)
Facility Section 2.01
FICA Section 3.02
FUTA Section 3.02
Indemnitee Section 10.02
Losses Section 10.02
Manager Preamble
Manager's Corporate Offices Section 3.01
Manager Employee(s) Section 3.01(c)(2)
Management Fee Section 6.01
Notified Party Section 10.03(a)
Physical Case Section 6.01
Proposed Budget Section 3.01(a)(2)
Receiving Party Section 9.04
Reimbursable Expenses Section 6.02
Rules Section 10.02
SAC Preamble
SAC Board Preamble
SAC Business Section 2.01
SAC Employee(s) Section 3.01(c)(2)
SAC Executive Committee Section 3.01(a)(5)
Summary of Major Operational
and Business Items Section 3.01(a)(2)
Term Section 8.02


Section 2. Appointment of Manager.


2.01 Appointment of and Acceptance by Manager. SAC hereby appoints and retains Manager for the purpose of managing SAC's canning, bottling, and other soft drink packaging operations (the "SAC Business"), effective as of the Effective Date, and authorizes Manager to supervise, direct and control the day-to- day operation of the SAC Business at 601 Cousar Street, Bishopville, South Carolina (the "Facility") in accordance with this Agreement. In the appointment of Manager to handle day to day operations hereunder, both SAC and Manager understand and agree that the business and affairs of SAC shall be under the direction and control of the SAC Board, and Manager agrees to carry out the policies and directives of the SAC Board. Manager hereby accepts this appointment and agrees to perform its duties in accordance with this Agreement.


2.02 Standards of Performance. In providing services under this Agreement, Manager shall give the care and attention to its responsibilities that a reasonable business manager in its position would be expected to give. Manager agrees to provide and employ a sufficient number of personnel with adequate


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training and experience to perform such duties competently and in a businesslike manner in such a way as to cause the operations of SAC to be carried on efficiently and in the best interests of SAC. In its capacity as Manager under this Agreement, Manager shall perform its duties in good faith and shall loyally seek to promote the best interests of SAC. Manager shall perform in a timely and cooperative manner.


2.03 Non-exclusive Service. It is understood and agreed that nothing in this Agreement shall confer upon SAC an exclusive right to Manager's service. Manager may contract with others for the provision of expertise and services similar to those to be provided to SAC as contemplated herein.


2.04 Services to be Performed by SAC's Officers and Others. SAC will continue to have as corporate officers a President, a Secretary and such other officers as may be determined by the SAC Board, who shall perform such functions as the SAC Board may assign to them. Nothing in this Agreement shall prevent SAC from obtaining services from others which are not assigned to Manager under Sections 3 and 4 of this Agreement.


Section 3. Services and Responsibilities of Manager.


3.01 Primary Services and Responsibilities. Within the scope of the authority granted to it under this Agreement and subject to any limitations provided herein, Manager will undertake to manage SAC in a manner such that it may meet its operating requirements. It is anticipated by the parties that, during an interim transition period--from the Effective Date until Manager determines that it is in a position to perform the administrative functions itself (but not later than September 1, 1994), Manager will primarily supervise the administrative services included herein and performed at the Facility and that, following such transition period, Manager will perform such functions primarily at Manager's Corporate Offices located at Rexford Road, Charlotte, North Carolina ("Manager's Corporate Offices"). Manager is hereby authorized to and shall provide the following services or cause the following services to be performed:


(a) Annual Business Plan. Manager will develop (from the information provided by SAC members) an Annual Business Plan to be adopted by the SAC Board prior to the beginning of each fiscal year with such changes as the SAC Board deems necessary.


(1) Adoption. Manager will present the proposed plan to the SAC Board no later than thirty (30) days prior to the beginning of SAC's fiscal year that is the subject of such projections. In the event information necessary to complete such projections are not furnished to Manager, Manager will present projections utilizing the provided information plus reasonable estimates for the unprovided information, which will be based on


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the prior year's information plus 3%, as adjusted for changes made during the year and other changes reasonably anticipated by Manager. As soon as practicable after the Effective Date, Manager will submit to the SAC Board for approval a business plan for the interim period of SAC's 1994 fiscal year commencing the effective date hereof and ending on August 31, 1994. It is anticipated that this interim period business plan will essentially be a continuance of SAC's current business plan for its 1993-94 fiscal year. SAC shall deliver a copy of each Annual Business Plan, and the interim period business plan for the 1993- 94 year, to Manager as soon as practicable following adoption thereof by SAC Board.


(2) General Contents. Manager's proposed Annual Business Plan will contain a proposed annual budget ("Proposed Budget"), a summary of major operational and financial items ("Summary of Major Operational and Business Items") projected for the year in sufficient detail for the SAC Board to determine the nature and extent of proposed operations, an estimate of the Management Fee and Reimbursable Expenses SAC will be asked to pay to Manager for the year, and such other items as the SAC Board may request.


(3) Projections, Developments, and Anticipated Events. The Proposed Budget will contain annual projections of volume, estimated operating revenues based upon pricing at the end of the previous fiscal year, required capital expenditures, operating expenses and cash flow, and the presentation of items will show a breakdown of each item for each of SAC's operating allocation units (cans, bottles, etc.). The Summary of Major Operational and Business Items will include a description of proposed activities in areas for which Manager has operational responsibility under Section 3.01(c), a description of significant developments relating to the business and financial items for which Manager has responsibility under Section 3.01(b), and a description of other major operational and business items, if any, which Manager reasonably anticipates for the upcoming year.


(4) Effect of Not Adopting Business Plan Prior to the Commencement of the Fiscal Year. If the SAC Board has not adopted an Annual Business Plan prior to the commencement of any fiscal year, Manager shall continue to provide management functions for SAC based upon the most recently adopted Annual Business Plan (or interim period business plan for the 1993-94 fiscal year, if that is the most recently adopted business plan), until such time as a new Annual Business Plan is adopted and takes effect for such fiscal year; provided, however, that (i) any CPI increases that will be due as part of the Management Fee under Section 6.01 for the new fiscal year and (ii) any previously approved increase in a normal, recurring operating expense (such as, employee compensation) since the adoption of


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the most recent Annual Business Plan will take effect with the beginning of such year.


(5) Performance of Services Under the Annual Business Plan and Deviations Therefrom. In performing its services under this Agreement, Manager shall follow the Annual Business Plan adopted for the fiscal year, unless otherwise directed by the SAC Board. If Manager encounters a business situation which will require it to deviate from the Annual Business Plan or it discovers that it or SAC has inadvertently deviated from the plan, it shall immediately consult with the Executive Committee of the SAC Board ("SAC Executive Committee") about the situation and obtain approval for such deviation. If approval is given by the SAC Executive Committee, Manager shall be allowed to continue with such deviation until the next meeting of the SAC Board at which time the SAC Board can consider the matter. If the SAC Executive Committee does not approve of the deviation, the matter will immediately be brought to the attention of the SAC Board.


(b) Business/Finance. Manager will be responsible for accounting, tax, treasury and internal policy auditing services in connection with the financial management of the SAC Business.


(1) Contracts. Manager shall have the right to enter
into contracts in the ordinary course of business in
accordance with the Annual Business Plan and thereby bind
SAC; provided, however, that the SAC Board may set size
limitations above which approval of the SAC Board is
required.


(2) Treasury Management. Manager will provide
necessary treasury management services for SAC including the
arrangement and administration of financings (subject to SAC
Board approval) and bank transactions and cash management
services including receipt of and responsibility for all
income realized by SAC and disbursement of funds for
satisfaction of the debts, obligations and expenses of SAC
and for distributions of patronage dividends as determined
by the SAC Board.


(3) Accounting. Manager will maintain accounting
systems and records for SAC which shall be sufficiently
separate from Manager's other accounts for the SAC Board to
have full access to its accounts without raising questions
about the confidentiality of Manager's files. Manager shall
provide the following functions or prepare the following
reports:


(i) Accounts receivable, credit and collections
including credit approval, billing, collection and cash
application, as necessary.


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(ii) Accounts payable functions including check
writing and accounting for paid expense and capital
items.


(iii) General accounting functions including
maintenance of general ledger and monthly financial
reporting to the SAC Board.


(iv) Fixed asset record maintenance and
accounting.


(v) Annual budgets.


(vi) Monthly reports to the SAC Board (i)
comparing actual operating and capital expenditures to
those budgeted and set forth in the Annual Business
Plan, (ii) detailing significant management actions
taken by Manager, and (iii) such other matters as the
SAC Board may request.


(4) Taxes. Manager shall handle the federal, state
and local tax reporting and filing as well as the
implementation of tax planning strategies relating to
federal, state and local taxes and user fees. Manager will
also handle any required tax audits and maintain all
Department of Transportation files and furnish copies of
federal income tax returns to the SAC Executive Committee
prior to the filing of such returns.


(5) Internal Policy Audit. Manager will provide
internal auditing services for monitoring compliance with
SAC policies and procedures as Manager deems necessary.


(c) Operations. The major operational responsibilities of Manager shall be in the areas of Manufacturing and Purchasing; Human Resources; Fleet, Transportation and Facility Administration; Environmental Services; Data Processing and Risk Management as follows:


(1) Manufacturing and Purchasing. Manager will
oversee the manufacturing of products which meet franchise
company specifications and will deliver all products within
reasonable age standards as established by the SAC Board.
The initial product age and quality standards to be met by
Manager are described in Exhibit A hereto. Manager will
select and negotiate with vendors and purchase or, if in the
best interest of SAC, lease on SAC's behalf all capital
equipment from such vendors. If Management selects itself
as a vendor or lessor to SAC under this paragraph, this
arrangement must be disclosed to and approved by the SAC
Board. Manager will, on behalf of SAC, procure all raw
materials, supplies, utilities and services which are
required for or incidental to, the operations of the SAC


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Business. Manager will use its best efforts to make such
procurement on a basis similar to that which is available to
Manager; provided, however, that both Manager and SAC hereby
acknowledge that differences may arise with respect to
prices of concentrates and syrup or as a result of different
specifications, sources of supply and freight costs.


(2) Human Resources.


(i) Manager shall have responsibility for supervising employees of SAC ("SAC Employees") and any employees of Manager providing services for SAC ("Manager Employees") under this Agreement. All such management and supervision by Manager for employees at the Facility shall be within the parameters established in the Annual Business Plan. Manager shall provide overall pay and benefit administration for SAC Employees (if any) and Manager Employees in accordance with the Annual Business Plan. Any necessary labor contract negotiations will be performed by Manager, and Manager will handle the administration of any labor contract (including grievance procedures and arbitration) and any labor relations disputes or other labor matters, and the SAC Board will be advised thereof. Manager will have the authority and responsibility to enter into, amend or terminate any employment agreements and consulting and agency agreements relating to SAC; provided, however, that the SAC Board shall determine who shall perform professional accounting and legal services for SAC and set the terms for their employment. To the extent permitted by the Annual Business Plan or otherwise approved by the SAC Board, Manager may supplement SAC with additional Manager Employees. For such purpose, Manager may utilize its employees or employees of a wholly owned subsidiary of Manager which have adequate training and experience to perform their duties competently and in a businesslike manner. Manager shall have the authority to select, employ and terminate all employees performing services for SAC, whether they be SAC Employees or Manager Employees. Manager shall also have the right to substitute one of its employees for a Manager Employee whenever Manager deems such substitution appropriate. Each Manager Employee and SAC Employee shall be subject to all of Manager's applicable employment policies and practices (unless otherwise restricted by union contracts), and SAC shall not have the right to subject any Manager Employees or SAC Employees to any additional employment policies or practices or other work related rules or regulations (except rules and regulations reasonably related to the health and safety of such employees or required under applicable law) absent Manager's express consent to such action which shall not be unreasonably withheld. Manager shall provide substantially the same job-related education and training to Manager Employees and SAC Employees as Manager provides to its other employees who perform the same or related tasks, and SAC shall reimburse Manager for the cost of the job- related education and training provided by third parties to SAC Employees and Manager Employees. Manager shall compensate


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Manager Employees in accordance with Manager's standard compensation policies and practices for employees who perform the same or related tasks subject to regional pay differences. Manager Employees shall be provided with employee benefits no more favorable as a whole than those provided to Manager's other employees performing the same or related tasks in addition to workers' compensation, unemployment compensation and all other benefits which an employer is required to provide for its employees under applicable law. Manager will adopt and enforce Manager's Code of Business Conduct at the Facility.


(ii) In the event this Agreement is terminated or expires, all Manager Employees employed at the Facility at such time shall have the opportunity to be considered for employment by SAC as SAC Employees. SAC shall be entitled to approach all such persons and discuss future employment with SAC, and Manager shall not attempt to retain or continue such persons in its employment until they have first rejected an offer of employment with SAC or otherwise been informed by SAC that they will not be offered employment.


(3) Fleet, Transportation and Facility Administration.
Manager will provide overall administration of fleet
activities including assessment of required fleet expansion
or replacement, acquisition of required equipment and
direction of preventative maintenance programs in accordance
with the Annual Business Plan. Manager will be responsible
for the administration of all transportation activities
including the receipt of raw materials by or on behalf of
SAC and the delivery of full goods to SAC members. Manager
will also provide for the administration of all facility
activities including preventive and corrective maintenance
and expansion. In particular, Manager will oversee the
anticipated acquisition and installation of two high speed
production lines at the Facility - one generally suited for
2-liter PET bottles and one generally suited for 20-ounce
PET bottles (the "Expansion"). In connection therewith,
Manager shall be responsible for the planning,
implementation and supervision of the design, construction
and start up of the Expansion including the selection of
equipment manufacturers, architects, engineers and
contractors and the procurement of all necessary permits.


(4) Environmental Services. Manager shall provide
environme
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