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Six weeks from now, 2,000 black present and former employees must tell Coca-Cola whether they will participate in the company’s proposed settlement of its race discrimination suit. If they’re unhappy with the deal worked out between their class action attorneys and the company, they can “opt out” and pursue individual settlements at their own expense. But they will have to make that decision without one critical piece of information: How much will Coke pay them now? For about 500 employees, the decision is especially problematic. Part of their “cash” settlement is in stock options. The exercise price of some of those options now is more than the current value of Coke stock, making them, at least for now, virtually worthless. And at least one prominent critic of the settlement, a former Coke human resources manager, has expressed shock that the $82.8 million cash portion of the $192 million settlement, highly touted by the company and plaintiffs’ lawyers, is about half the $159.3 million compensation package that former Coke Chairman and CEO M. Douglas Ivester secured when he stepped down last year. Previous news reports based on information released by Coke had valued Ivester’s retirement package at $17.8 million. The settlement arrangement, when compared to Ivester’s severance package, “saddens me immensely,” says Larry D. Jones, a class member and former Coke benefits manager who tried to organize a boycott against the company last year. “The way it’s laid out, you’re required to opt out before you get all the information,” he says. “You have to ask yourself if that is by design. … There is no reason why they couldn’t have done a better job, other than they intended to keep us in the dark.” SOME HAVE NO OPTIONS According to the class notice, Jones and others like him who signed severance agreements when they were laid off last year do not, by virtue of those agreements, have the option to pursue litigation outside the settlement. Jones isn’t sure whether the waiver he signed before he received his severance really bars him and others from opting out of the settlement or whether it’s “an attempt to intimidate people not to opt out.” But, he asks: “What do you do? The thing is done. It’s an uphill battle to challenge it.” A Coke spokesman and plaintiffs’ lawyers confirm that Coke employees eligible for the settlement must choose to participate or pursue separate litigation before they are told of their individual awards. Those who want to opt out must tell the company by March 19 or they will automatically be included, according to the class notice. The notice doesn’t say when class members will receive more detailed information. Coke spokesman Ben Deutsch declined to discuss Coke’s reasons for requiring eligible employees to decide whether to accept the settlement before they are notified of their actual award. But, he insists in a written statement, “The notice is extremely detailed, and we are going to make every effort to ensure that class members have as much information as possible to make an informed decision about the monetary compensation.” Deutsch says employees can easily determine how much in compensatory damages each will receive. The Compensatory Damages Fund will pay $370 for every tenth of a year they have worked for Coke — which Deutsch estimates will account for two-thirds of each cash award. Class members can “get a reasonably accurate idea on what they can recover from the back-pay fund” based on the examples included in the class notice, he stated. But it may not be that simple. Jeffrey O. Bramlett of Bondurant, Mixson & Elmore, one of several firms representing the plaintiffs as a class, explains, “People in upper salary grades will tend to have bigger back pay awards. … In general, there is more back pay flowing to people in higher salary grades. That doesn’t speak to any individual circumstances. There are some areas of the company where the [salary] disparities are greater than others.” Cash awards for employees who do not participate in the settlement revert to Coke. So, rather than redistribute the funds among those employees who settle, the cash pool shrinks each time someone opts out. WHO’S IN, WHO’S OUT Bramlett says the complexities attached to distributing money from two cash funds prevent his staff from computing individual awards until attorneys know exactly who is in and who is out. Those funds total $82.8 million — a $58.7 million Compensatory Damages Fund and a $24.1 million Back Pay Fund. “Until we know who the specific opt-outs are, we are not running the numbers for the individuals. It’s a fairly expensive thing to do,” he says. “Every time we do one of those data runs, we spend several thousand dollars of what is the class’s money to make those predictions. … We’re trying to be prudent in the expenditure of class money, not to mention our money.” Plaintiffs’ attorneys have been guaranteed $20.7 million in legal fees and an additional $1.5 million in expenses as part of the settlement. Plaintiffs’ attorneys and firms include Cyrus Mehri of the Washington firm, Mehri, Malkin & Ross; Bondurant attorneys Bramlett, H. Lamar Mixson, Steven J. Rosenwasser and Joshua F. Thorpe; James E. Voyles of DeVille, Milhollin & Voyles; and three attorneys at Gordon, Silberman, Wiggins & Childs in Birmingham, Ala. Jones says the notice is so complicated that he has heard from class members who “simply don’t understand this thing.” CLASS ‘WELL-EDUCATED’ Bramlett says the class notice “invites people who have questions to call us” as one of the services the attorneys are paid to offer class members. Many class members, he says, have done so already. And Bramlett argues that the class of eligible employees “is an exceptionally well-educated work force. They work in a company where stock options are a major form of compensation. … I think the class members are probably more savvy than most people walking around in the world about stock options.” But Jones says no one has returned his calls, and class members have asked him for help, he says, because no one has returned their calls, either. One of the least understood issues is the assignment of stock options, he says. In order to attain the full value of their settlement compensation, class members whose “cash compensation” includes stock options would have to buy shares of Coke stock at prices that currently are either near or above the actual market price, according to the class notice. Stock options will be priced according to the year, between 1996 and 1999, when an employee at an eligible pay grade would have qualified for them. The majority of those eligible for stock options are mid-level employees in grades 10-13 who will receive from 18 to 27 percent of their back pay settlement in options, according to the settlement notice. Employees in grades 14 and up must take from 30 to 53 percent of their back pay as options, depending on their pay grades. Coke has more than 20 employee pay grades, but only one black employee ranks above grade 18. A formula assigns each option a cash value for purposes of the settlement. For example, options that should have been granted in 1996 are valued at $20.04. Those options can be exercised at a price of $48.875. While exercising those options now would certainly be profitable, the stock would have to rise from its current price in order for the employee to realize the $20.04 “cash” value assigned by the settlement. Coke closed Wednesday at $58.06 a share. Options granted in 1997 and 1998 can be exercised at $59.75 and $65.875 — more than the current price of Coke stock. For current employees, that may not be a problem, because they have up to eight years to exercise their options. Class attorney Bramlett acknowledges that stock options “are probably more attractive” to class members who remain employees at the Coca-Cola Co. than to former employees. Current employees can hold on to the options for years with the expectation that the market price will rise. But former employees have just 18 months to exercise their options. In negotiating the settlement, Bramlett says class attorneys eventually agreed that for class members deprived of compensation, attorneys wanted, as closely as possible, to duplicate the compensation that they should have originally received. “Some of that compensation,” he says, “was in stock options.” The settlement may appear more complicated because it will be tailored to each individual employee, he says. “Longevity matters. The longer you’ve been there, the longer you’ve been discriminated against,” he says. “The attention given to being precise in channeling and targeting a remedy to those people where discrimination was clearest is what we tried to accomplish. Is it more complicated? Yes. Is it fairer? Arguably it is.” COKE: NO INTENT TO CONFUSE Coke spokesman Deutsch says the inclusion of stock options and their explanation “is certainly not intended to confuse people. … The stock option piece of the ‘make whole’ back-pay component requires individuals to understand the benefits and tax implications of this form of compensation. We have encouraged and will continue to encourage class members to consult with tax advisers and plaintiffs’ attorneys in order to thoroughly review their options.” But Jones questions, “How many of the 2,000 [class members] have tax advisers? How many can afford a tax adviser? How many will be able to do it and find a tax adviser who will give them good information? You’re asking too much.” Jones says that he urged class attorneys while they were mediating with Coke not to make stock options a part of the settlement package. Some people will never have the money to buy the stock options assigned to them in place of cash. In addition, he says, the volatility of Coke stock over the past two years has ended an era when Coke stock prices never went anywhere but up. IVESTER PACKAGE Jones also is frustrated that the cash portion of the settlement is dwarfed by former CEO Ivester’s separation package. The cash and stock grant portion of Ivester’s separation package is valued at $159.3 million, according to Coke shareholder reports and letters signed by Ivester and Board Chairman Herbert Allen Jr. It includes a total of $9 million a year in wages and cash incentives through 2003 when Ivester turns 55; unrestricted stock grants that in December 1999 totaled $113,587,500; $58,700 a month in retirement payments for the remainder of his life, an estimated 22 years (Ivester is 53); plus an additional $66,300 monthly for 24 months that will then drop to $56,300 monthly for the remainder of Ivester’s life; $4,331 a month for 27 years in deferred compensation; and consulting fees of $675,000 a year for five years. That amount does not include additional benefits, among them $250,000 in vested stock options with an exercise price of $53.41 each, which Coke values at more than $42 million; unspecified reimbursements to cover the cost of federal, state, and local taxes on the stock grants, Ivester’s company car, a 1996 Mercury Grand Marquis; his Buckhead office rent, secretarial services, home security system fees and club dues through May 2001; his laptop computer and cellular telephones; and comprehensive medical benefits for him and his wife for the remainder of their lives. Deutsch says the $17.8 million listed as Ivester’s compensation in the shareholders’ report and in 2000 news releases does not include the value of the stock shares, which were listed in previous shareholder reports, or Ivester’s retirement payments, which are recorded elsewhere. They include only the actual cost of “immediate compensation” that Coke paid to Ivester in 1999 in connection with his retirement and “discounted components” that “reflect future payments.” Jones says the comparatively large payment to Ivester is disturbing. “The class was kept absolutely in the dark. … After all this time, we have to swallow the fact they gave Ivester all this money. I don’t know how Coke expects us to go off quietly. I don’t know how they expect us not to fight this settlement. … This company has all the resources to do the right thing. It has gone to great lengths to do wrong.”

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