EXHIBIT 10.29

 

PEPSICO

 

EXECUTIVE INCOME

 

DEFERRAL PROGRAM

 

Plan Document for the 409A Program

Effective as of January 1, 2005

--------------------------------------------------------------------------------

TABLE OF CONTENTS

 

         Page

--------------------------------------------------------------------------------

ARTICLE I – INTRODUCTION    1 ARTICLE II – DEFINITIONS    2    

2.01

  

ACCOUNT:

   2    

2.02

  

ACT:

   2    

2.03

  

BASE COMPENSATION:

   2    

2.04

  

BENEFICIARY:

   2    

2.05

  

BONUS COMPENSATION:

   3    

2.06

  

CODE:

   3    

2.07

  

COMPANY:

   4    

2.08

  

DEFERRAL SUBACCOUNT:

   4    

2.09

  

DISABILITY:

   4    

2.10

  

DISTRIBUTION VALUATION DATE:

   4    

2.11

  

ELECTION FORM:

   4    

2.12

  

ELIGIBLE EXECUTIVE:

   4    

2.13

  

EMPLOYER:

   5    

2.14

  

ERISA:

   5    

2.15

  

EXECUTIVE:

   5    

2.16

  

409A PROGRAM:

   5    

2.17

  

KEY EMPLOYEE:

   5    

2.18

  

NAV:

   7    

2.19

  

PARTICIPANT:

   7    

2.20

  

PEPSICO ORGANIZATION:

   7    

2.21

  

PERFORMANCE PERIOD:

   7    

2.22

  

PLAN:

   7    

2.23

  

PLAN ADMINISTRATOR:

   8    

2.24

  

PLAN YEAR:

   8    

2.25

  

PRE-409A PROGRAM:

   8    

2.26

  

PROHIBITED MISCONDUCT:

   8    

2.27

  

RECORDKEEPER:

   9    

2.28

  

RETIREMENT:

   9    

2.29

  

RISK OF FORFEITURE SUBACCOUNT:

   10    

2.30

  

SECOND LOOK ELECTION:

   10    

2.31

  

SECTION 409A:

   10    

2.32

  

SEPARATION FROM SERVICE:

   10    

2.33

  

SPECIFIC PAYMENT DATE:

   10    

2.34

  

UNFORESEEABLE EMERGENCY:

   10    

2.35

  

VALUATION DATE:

   11

ARTICLE III – ELIGIBILITY AND PARTICIPATION

   12    

3.01

  

ELIGIBILITY TO PARTICIPATE:

   12    

3.02

  

TERMINATION OF ELIGIBILITY TO DEFER:

   13    

3.03

  

TERMINATION OF PARTICIPATION:

   14

 

-i-

--------------------------------------------------------------------------------

TABLE OF CONTENTS

 

     Page

--------------------------------------------------------------------------------

ARTICLE IV – DEFERRAL OF COMPENSATION

   15    

4.01

  

DEFERRAL ELECTION:

   15    

4.02

  

TIME AND MANNER OF DEFERRAL ELECTION:

   16    

4.03

  

PERIOD OF DEFERRAL:

   17    

4.04

  

FORM OF DEFERRAL PAYOUT:

   18    

4.05

  

SECOND LOOK ELECTION:

   18 ARTICLE V – INTERESTS OF PARTICIPANTS    20    

5.01

  

ACCOUNTING FOR PARTICIPANTS’ INTERESTS:

   20    

5.02

  

INVESTMENT OPTIONS:

   20    

5.03

  

METHOD OF ALLOCATION:

   20    

5.04

  

VESTING OF A PARTICIPANT’S ACCOUNT:

   21    

5.05

  

RISK OF FORFEITURE SUBACCOUNTS:

   22    

5.06

  

FORFEITURE OF EARNINGS FOR PROHIBITED MISCONDUCT:

   24 ARTICLE VI – DISTRIBUTIONS    25    

6.01

  

GENERAL:

   25    

6.02

  

DISTRIBUTIONS BASED ON A SPECIFIC PAYMENT DATE:

   26    

6.03

  

DISTRIBUTIONS ON ACCOUNT OF A SEPARATION FROM SERVICE:

   27    

6.04

  

DISTRIBUTIONS ON ACCOUNT OF DEATH:

   28    

6.05

  

DISTRIBUTIONS ON ACCOUNT OF RETIREMENT:

   28    

6.06

  

DISTRIBUTIONS ON ACCOUNT OF DISABILITY:

   29    

6.07

  

DISTRIBUTIONS ON ACCOUNT OF UNFORESEEABLE EMERGENCY:

   30    

6.08

  

VALUATION:

   30    

6.09

  

SECTION 162(M) COMPLIANCE:

   31    

6.10

  

IMPACT OF SECTION 16 OF THE ACT ON DISTRIBUTIONS:

   31 ARTICLE VII – PLAN ADMINISTRATION    32    

7.01

  

PLAN ADMINISTRATOR:

   32    

7.02

  

ACTION:

   32    

7.03

  

POWERS OF THE PLAN ADMINISTRATOR:

   32    

7.04

  

COMPENSATION, INDEMNITY AND LIABILITY:

   33    

7.05

  

TAXES:

   34    

7.06

  

SECTION 16 COMPLIANCE:

   34    

7.07

  

CONFORMANCE WITH SECTION 409A:

   35 ARTICLE VIII – CLAIMS PROCEDURE    36    

8.01

  

CLAIMS FOR BENEFITS:

   36    

8.02

  

APPEALS OF DENIED CLAIMS:

   36    

8.03

  

SPECIAL CLAIMS PROCEDURES FOR DISABILITY DETERMINATIONS:

   36 ARTICLE IX – AMENDMENT AND TERMINATION    37    

9.01

  

AMENDMENT OF PLAN:

   37    

9.02

  

TERMINATION OF PLAN:

   37

 

-ii-

--------------------------------------------------------------------------------

TABLE OF CONTENTS

 

         Page

--------------------------------------------------------------------------------

ARTICLE X – MISCELLANEOUS

   39    

10.01

  

LIMITATION ON PARTICIPANT’S RIGHTS:

   39    

10.02

  

UNFUNDED OBLIGATION OF INDIVIDUAL EMPLOYER:

   39    

10.03

  

OTHER PLANS:

   39    

10.04

  

RECEIPT OR RELEASE:

   39    

10.05

  

GOVERNING LAW:

   40    

10.06

  

ADOPTION OF PLAN BY RELATED EMPLOYERS:

   40    

10.07

  

GENDER, TENSE AND EXAMPLES:

   40    

10.08

  

SUCCESSORS AND ASSIGNS; NONALIENATION OF BENEFITS:

   40    

10.09

  

FACILITY OF PAYMENT:

   41 ARTICLE XI – AUTHENTICATION    42

 

-iii-

--------------------------------------------------------------------------------

ARTICLE I – INTRODUCTION

 

PepsiCo, Inc. (the “Company”) established the PepsiCo Executive Income Deferral
Program (the “Plan”) in 1972 to permit Eligible Executives to defer certain cash
awards made under its executive compensation programs. Subsequently, the Plan
has been amended and expanded from time to time.

 

This document is effective as of January 1, 2005 (the “Effective Date”). It sets
forth the terms of the Plan that are applicable to deferrals that are subject to
Section 409A, i.e., generally, deferred amounts that are earned or vested after
December 31, 2004 (the “409A Program”). Other deferrals under the Plan shall be
governed by a separate set of documents that set forth the pre-Section 409A
terms of the Plan (the “Pre-409A Program”). Together, this document and the
documents for the Pre-409A Program describe the terms of a single plan. However,
amounts subject to the terms of this 409A Program and amounts subject to the
terms of the Pre-409A Program shall be tracked separately at all times. The
preservation of the terms of the Pre-409A Program, without material
modification, and the separation between the 409A Program amounts and the
Pre-409A Program amounts are intended to be sufficient to permit the pre-409A
Program to remain exempt from Section 409A.

 

With respect to deferrals covered by this document, this document specifies the
group of executives of the Company and certain affiliated employers that are
eligible to make deferrals, the procedures for electing to defer compensation
and the Plan’s provisions for maintaining and paying out amounts that have been
deferred.

 

The Plan is unfunded and unsecured. Amounts deferred by an executive are a
liability and an obligation of that executive’s individual employer. With
respect to his or her employer, the executive has the rights of a general
creditor.

 

1

--------------------------------------------------------------------------------

ARTICLE II – DEFINITIONS

 

When used in this Plan, the following underlined terms shall have the meanings
set forth below unless a different meaning is plainly required by the context:

 

2.01 Account:

 

The account maintained for a Participant on the books of his or her Employer to
determine, from time to time, the Participant’s interest under this Plan. The
balance in such Account shall be determined by the Recordkeeper pursuant to any
guidelines established by the Plan Administrator. Each Participant’s Account
shall consist of at least one Deferral Subaccount for each separate deferral
under Section 4.01. In accordance with Section 5.05, some or all of a separate
deferral may be held in a Risk of Forfeiture Subaccount. The Recordkeeper may
also establish such additional Deferral Subaccounts as it deems necessary for
the proper administration of the Plan. Except as provided in Section 5.05, the
Recordkeeper may also combine Deferral Subaccounts to the extent it deems
separate accounts are not needed for sound recordkeeping. Where appropriate, a
reference to a Participant’s Account shall include a reference to each
applicable Deferral Subaccount that has been established thereunder.

 

2.02 Act:

 

The Securities Exchange Act of 1934, as amended.

 

2.03 Base Compensation:

 

An Eligible Executive’s adjusted base salary, as determined by the Plan
Administrator and to the extent paid in U.S. dollars from an Employer’s U.S.
payroll. Subject to the next sentence, for any applicable payroll period, an
Eligible Executive’s adjusted base salary shall be determined after reductions
for applicable tax withholdings, tax levies, garnishments, other legally
required deductions, and Executive authorized deductions that are (i) for
charitable contributions, or (ii) made under any Code Section 401(k) or Code
Section 125 plans sponsored by the Executive’s Employer or the Company.
Notwithstanding the preceding sentence, an Eligible Executive’s Base
Compensation may be reduced by an item described in the preceding sentence only
to the extent such reduction does not violate Section 409A.

 

2.04 Beneficiary:

 

The person or persons (including a trust or trusts) properly designated by a
Participant, as determined by the Plan Administrator, to receive the amounts in
one or more of the Participant’s Deferral Subaccounts in the event of the
Participant’s death, provided such person or persons are living (or in
existence, in the case of a trust) at the Participant’s death. To be effective,
any Beneficiary designation must be in writing, signed by the Participant, and
must meet such other standards (including any requirement for spousal

 

2

--------------------------------------------------------------------------------

consent) as the Plan Administrator or the Recordkeeper shall require from time
to time. The Beneficiary designation must also be filed with the Recordkeeper
(or the Plan Administrator for periods prior to June 3, 2002) prior to the
Participant’s death. An incomplete Beneficiary designation, as determined by the
Recordkeeper or Plan Administrator, shall be void and of no effect. If some but
not all of the persons designated by a Participant to receive his or her Account
at death predecease the Participant, the Participant’s surviving Beneficiaries
shall be entitled to the portion of the Participant’s Account intended for such
pre-deceased persons in proportion to the surviving Beneficiaries’ respective
shares. If no designation is in effect at the time of a Participant’s death (as
determined by the Plan Administrator) or if all persons designated as
Beneficiaries have predeceased the Participant, then the Participant’s
Beneficiary shall be his or her estate. In determining whether a Beneficiary
designation that relates to the Plan is in effect, unrevoked designations that
were received prior to the Effective Date of the 409A Program shall be
considered. A Beneficiary designation of an individual by name remains in effect
regardless of any change in the designated individual’s relationship to the
Participant. Solely for periods prior to June 3, 2002, a Beneficiary designation
solely by relationship (for example, a designation of “spouse,” that does not
give the name of the spouse) shall designate whoever is the person in that
relationship to the Participant at his or her death. However, any Beneficiary
designation submitted to the Recordkeeper from and after June 3, 2002 that only
specifies a Beneficiary by relationship shall not be considered an effective
Beneficiary designation and shall be void and of no effect. An individual who is
otherwise a Beneficiary with respect to a Participant’s Account ceases to be a
Beneficiary when all payments have been made from the Account.

 

2.05 Bonus Compensation:

 

An Eligible Executive’s adjusted annual incentive award under his or her
Employer’s annual incentive plan or the Executive Incentive Compensation Plan,
as determined and adjusted by the Plan Administrator and to the extent paid in
U.S. dollars from an Employer’s U.S. payroll. Subject to the next sentence, an
Eligible Executive’s annual incentive awards shall be adjusted to reduce them
for applicable tax withholdings, tax levies, garnishments, other legally
required deductions, and Executive authorized deductions that are (i) for
charitable contributions, or (ii) made under any Code Section 401(k) or Code
Section 125 plans sponsored by the Executive’s Employer or the Company.
Notwithstanding the preceding sentence, (a) an Eligible Executive’s Bonus
Compensation may be reduced by an item described in the preceding sentence only
to the extent such reduction does not violate Section 409A, and (b) an Eligible
Executive’s premium bonuses (a term that will have its normal meaning under the
compensation practices of the Employer) shall not be included in the definition
of Bonus Compensation and shall not be eligible for deferral hereunder.

 

2.06 Code:

 

The Internal Revenue Code of 1986, as amended from time to time.

 

3

--------------------------------------------------------------------------------

2.07 Company:

 

PepsiCo, Inc., a corporation organized and existing under the laws of the State
of North Carolina, or its successor or successors.

 

2.08 Deferral Subaccount:

 

A subaccount of a Participant’s Account maintained to reflect his or her
interest in the Plan attributable to each deferral (or separately tracked
portion of a deferral) of Base Compensation and Bonus Compensation, and earnings
or losses credited to such subaccount in accordance with Section 5.01(b).

 

2.09 Disability:

 

A Participant shall be considered to suffer from a Disability or be Disabled
hereunder if – (i) the Participant is considered to be “disabled” under the
PepsiCo Long Term Disability Plan, and (ii) the Participant’s disability meets
the duration requirements to qualify for a distribution on account of Disability
in accordance with Section 6.06(a).

 

2.10 Distribution Valuation Date:

 

Each date as specified by the Plan Administrator from time to time as of which
Participant Accounts are valued for purposes of a distribution from a
Participant’s Account. The current Distribution Valuation Dates are
January 1, April 1, July 1 and October 1. Any current Distribution Valuation
Date may be changed by the Plan Administrator, provided that such change does
not result in a change in when deferrals are paid out that is impermissible
under Section 409A. Values are determined as of the close of a Distribution
Valuation Date or, if such date is not a business day, as of the close of the
following business day.

 

2.11 Election Form:

 

The form prescribed by the Plan Administrator on which a Participant specifies
the amount of his or her Base Compensation and Bonus Compensation to be deferred
and the timing and form of his or her deferral payout, pursuant to the
provisions of Article IV. An Election Form need not exist in a paper format, and
it is expressly contemplated that the Plan Administrator may make available for
use such technologies, including voice response systems and electronic forms, as
it deems appropriate from time to time.

 

2.12 Eligible Executive:

 

The term, Eligible Executive, shall have the meaning given to it in
Section 3.01(c).

 

4

--------------------------------------------------------------------------------

2.13 Employer:

 

The Company, and each division, subsidiary or affiliate of the Company (if any)
that are currently designated as an Employer by the Plan Administrator. An
entity shall be an Employer hereunder only for the period that it is (i) so
designated by the Plan Administrator, and (ii) a member of the PepsiCo
Organization.

 

2.14 ERISA:

 

Public Law 93-406, the Employee Retirement Income Security Act of 1974, as
amended from time to time.

 

2.15 Executive:

 

Any person in a salaried classification of an Employer who (i) is receiving
remuneration for personal services rendered in the employment of the Employer,
and (ii) is paid in U.S. dollars from the Employer’s U.S. payroll.
Notwithstanding the foregoing sentence, any person meeting the requirements of
the foregoing sentence who is working outside the U.S. shall not be included as
an Executive hereunder, if applicable local law of the country in which the
person is working (e.g., local law relating to the payment of compensation) does
not permit the person to defer the receipt of compensation that is eligible for
deferral hereunder.

 

2.16 409A Program:

 

The program described in this document. The term “409A Program” is used to
identify the portion of the Plan that is subject to Section 409A.

 

2.17 Key Employee:

 

The individuals identified in accordance with principles set forth in Subsection
(a), as modified by the following provisions of this Section.

 

(a) In General. Any Eligible Executive or former Eligible Executive who at any
time during the applicable year is –

 

(1) An officer of an Employer having annual compensation greater than $130,000
(as adjusted under Code Section 416(i)(1));

 

(2) A 5-percent owner of an Employer; or

 

(3) A 1-percent owner of an Employer having annual compensation of more than
$150,000.

 

5

--------------------------------------------------------------------------------

For purposes of (1) above, no more than 50 employees identified in the order of
their annual compensation (or, if lesser, the greater of 3 employees or 10
percent of the employees) shall be treated as officers. For purposes of this
Section, annual compensation means compensation as defined in Code
Section 415(c)(3). The Plan Administrator shall determine who is a Key Employee
in accordance with Code Section 416(i) and the applicable regulations and other
guidance of general applicability issued thereunder or in connection therewith
(including the provisions of Code Section 416(i)(3) that treat self employed
individuals as employees for purposes of this definition); provided, that Code
Section 416(i)(5) shall not apply in making such determination, and provided
further that the applicable year shall be determined in accordance with
Section 409A and that any modification of the foregoing definition that applies
under Section 409A shall be taken into account.

 

(b) Operating Rules for 2005. To ensure that the Company does not fail to
identify any Key Employees based on the provisions of Subsection (a), in the
case of Separation from Service distributions during the 2005 Plan Year, the
Company shall treat as Key Employees all Eligible Executives (and former
Eligible Executives) that are classified (or grandfathered) for any portion of
the 2005 Plan Year as Band IV and above.

 

(c) Operating Rules for 2006 and Later. To ensure that the Company does not fail
to identify any Key Employees based on the provisions of Subsection (a), in the
case of Separation from Service distributions from and after January 1, 2006,
the Company shall treat as Key Employees for the Plan Year of their Separation
from Service those individuals who meet the provisions of Paragraph (1) or
(2) below (or both).

 

(1) The Company shall treat as Key Employees all Eligible Executives (and former
Eligible Executives) that are classified (or grandfathered) for any portion of
the Plan Year of their Separation from Service as Band IV and above; and

 

(2) The Company shall treat as a Key Employee any Eligible Executive who would
be a Key Employee as of his or her Separation from Service date based on the
standards in this Paragraph (2). For purposes of this Paragraph (2), the Company
shall determine Key Employees under Subsection (a)(1) and (3) above based on
compensation (as defined in Code Section 415(c)(3)) that is taken into account
as follows –

 

(i) If the determination is in connection with a Separation from Service in the
first calendar quarter of a Plan Year, the determination shall be made using
compensation earned in the calendar year that is two years prior to the current
calendar year (e.g., for a determination made in the first quarter of 2006,
compensation earned in the 2004 calendar year shall be used); and

 

6

--------------------------------------------------------------------------------

(ii) If the determination is in connection with a Separation from Service in the
second, third or fourth calendar quarter of a Plan Year, the determination shall
be made using the compensation earned in the prior calendar year (e.g., for a
determination made in the second quarter of 2006, compensation earned in the
2005 calendar year shall be used).

 

In addition, a Participant shall be considered an officer for purposes of
Subsection (a)(1), a 5-percent owner for purposes of Subsection (a)(2) or a
1-percent owner for purposes of Subsection (a)(3) with respect to a Separation
from Service distribution, if the Participant was an officer, a 5-percent owner
or a 1-percent owner at some point during the calendar year that applies, in
accordance with Subparagraphs (i) and (ii) above, in determining the
Participant’s compensation for purposes of that Separation from Service.

 

2.18 NAV:

 

The net asset value of a phantom unit in one of the phantom funds offered for
investment under the Plan, determined as of any date in the same manner as
applies on that date under the actual fund that is the basis of the phantom fund
offered by the Plan.

 

2.19 Participant:

 

Any Executive who is qualified to participate in this Plan in accordance with
Section 3.01 and who has an Account. An active Participant is one who is
currently deferring under Section 4.01.

 

2.20 PepsiCo Organization:

 

The controlled group of organizations of which the Company is a part, as defined
by Code section 414(b) and (c) and the regulations issued thereunder. An entity
shall be considered a member of the PepsiCo Organization only during the period
it is one of the group of organizations described in the preceding sentence.

 

2.21 Performance Period:

 

The 52/53 week fiscal year of the Employer for which Bonus Compensation is
calculated and determined. A Performance Period shall be deemed to relate to the
Plan Year in which the Performance Period ends.

 

2.22 Plan:

 

The PepsiCo Executive Income Deferral Program, the plan set forth herein and in
the Pre-409A Program documents, as it may be amended and restated from time to
time (subject to the limitations on amendment that are applicable hereunder and
under the Pre-409A Program).

 

7

--------------------------------------------------------------------------------

2.23 Plan Administrator:

 

The Compensation Committee of the Board of Directors of the Company
(Compensation Committee) or its delegate or delegates, which shall have the
authority to administer the Plan as provided in Article VII. As of the Effective
Date, the Company’s Senior Vice President, Compensation and Benefits is
delegated the responsibility for the operational administration of the Plan. In
turn, the Senior Vice President, Compensation and Benefits has the authority to
re-delegate operational responsibilities to other persons or parties. As of the
Effective Date, the Senior Vice President, Compensation and Benefits has
re-delegated certain operational responsibilities to the Recordkeeper. However,
references in this document to the Plan Administrator shall be understood as
referring to the Compensation Committee, the Senior Vice President, Compensation
and Benefits and those delegated by the Senior Vice President, Compensation and
Benefits other than the Recordkeeper. All delegations made under the authority
granted by this Section are subject to Section 7.06.

 

2.24 Plan Year:

 

The 12-consecutive month period beginning on January 1 and ending on
December 31.

 

2.25 Pre-409A Program:

 

The portion of the Plan that governs deferrals that are not subject to
Section 409A. The terms of the Pre-409A Program are set forth in a separate set
of documents.

 

2.26 Prohibited Misconduct:

 

Any of the following activities engaged in, directly or indirectly, by a
Participant shall constitute Prohibited Misconduct –

 

(a) The Participant accepting any employment, assignment, position or
responsibility, or acquiring any ownership interest, which involves the
Participant’s participation in a business entity that markets, sells,
distributes or produces “Covered Products” (as defined below), unless such
business entity makes retail sales or consumes Covered Products without in any
way competing with the PepsiCo Organization.

 

(b) The Participant, directly or indirectly (including through someone else
acting on the Participant’s recommendation, suggestion, identification or
advice), soliciting any PepsiCo Organization employee to leave the PepsiCo
Organization’s employment or to accept any position with any other entity.

 

(c) The Participant using or disclosing to anyone any confidential information
regarding the PepsiCo Organization other than as necessary in his or her
position with the PepsiCo Organization. Such confidential information shall
include all non-public information the Participant acquired as a result of his
or her positions with the PepsiCo

 

8

--------------------------------------------------------------------------------

Organization which might be of any value to a competitor of the PepsiCo
Organization, or which might cause any economic loss or substantial
embarrassment to the PepsiCo Organization or its customers, bottlers,
distributors or suppliers if used or disclosed. Examples of such confidential
information include non-public information about the PepsiCo Organization’s
customers, suppliers, distributors and potential acquisition targets; its
business operations and structure; its product lines, formulas and pricing; its
processes, machines and inventions; its research and know-how; its financial
data; and its plans and strategies.

 

(d) The Participant engaging in any acts that are considered to be contrary to
the PepsiCo Organization’s best interests, including violating the Company’s
Code of Conduct, engaging in unlawful trading in the securities of the Company
or of any other company based on information gained as a result of his or her
employment with the PepsiCo Organization, or engaging in any other activity
which constitutes gross misconduct.

 

(e) The Participant engaging in any activity that constitutes fraud.

 

For purposes of this Section, Covered Products shall mean any produce that falls
into one or more of the following categories, so long as the PepsiCo
Organization is producing, marketing, selling or licensing such product anywhere
in the world – beverages, including carbonated soft drinks, tea, water, juice
drinks, sports drinks and coffee drinks; juices; snacks, including salty snacks,
sweet snacks and cookies; or any product or service that the Participant had
reason to know was under development by the PepsiCo Organization during the
Participant’s employment with the PepsiCo Organization.

 

2.27 Recordkeeper:

 

For any designated period of time, the party that is delegated the
responsibility, pursuant to the authority granted in the definition of Plan
Administrator, to maintain the records of Participant Accounts, process
Participant transactions and perform other duties in accordance with any
procedures and rules established by the Plan Administrator.

 

2.28 Retirement:

 

Separation from Service after attaining eligibility for retirement. A
Participant attains eligibility for retirement when he or she attains (whichever
of the following occurs earliest) while employed by a member of the PepsiCo
Organization:

 

(a) At least age 55 with 10 or more years of service,

 

(b) At least age 65 with 5 or more years of service, or

 

(c) If permissible under Section 409A, such other eligibility requirement for
special early retirement under the PepsiCo Salaried Employees Retirement Plan or
the PepsiCo Pension Equalization Plan as may apply to the Participant.

 

9

--------------------------------------------------------------------------------

For purposes of this Section, a Participant’s years of service is determined by
reference to the definition of “years of service” for purposes of vesting under
the PepsiCo Salaried Employees Retirement Plan (with such definition being
applicable whether or not the Participant is actually eligible for the PepsiCo
Salaried Employees Retirement Plan).

 

2.29 Risk of Forfeiture Subaccount:

 

The Deferral Subaccount provided for by Section 5.05 to contain the portion of
each separate deferral that is subject to forfeiture.

 

2.30 Second Look Election:

 

The term, Second Look Election, shall have the meaning given to it in
Section 4.05.

 

2.31 Section 409A:

 

Section 409A of the Code and the applicable regulations and other guidance of
general applicability that is issued thereunder.

 

2.32 Separation from Service:

 

A Participant’s separation from service with the PepsiCo Organization, within
the meaning of Section 409A(a)(2)(A)(i). The term may also be used as a verb
(i.e., “Separates from Service”) with no change in meaning. Notwithstanding the
preceding sentence, a Participant’s transfer to the Pepsi Bottling Group, Inc.
or Pepsi Americas, Inc. shall not be a Separation from Service, if Section 409A
expressly provides that a transfer to a pre-designated affiliate is not a
Separation from Service.

 

2.33 Specific Payment Date:

 

A specific date selected by an Eligible Executive that triggers a lump sum
payment of a deferral or the start of installment payments for a deferral, as
provided in Section 4.03. The Specific Payment Dates that are available to be
selected by Eligible Executives shall be determined by the Plan Administrator,
and the currently available Specific Payment Dates shall be reflected on the
Election Forms that are made available from time to time by the Plan
Administrator. In the event that an Election Form only provides for selecting a
month and a year as the Specific Payment Date, the first day of the month that
is selected shall be the Specific Payment Date.

 

2.34 Unforeseeable Emergency:

 

A severe financial hardship to the Participant resulting from –

 

(a) An illness or accident of the Participant, the Participant’s spouse or a
dependent (as defined in Code Section 152(a)) of the Participant;

 

10

--------------------------------------------------------------------------------

(b) Loss of the Participant’s property due to casualty; or

 

(c) Any other similar extraordinary and unforeseeable circumstances arising as a
result of events beyond the control of the Participant.

 

The Recordkeeper shall determine the occurrence of an Unforeseeable Emergency in
accordance with Section 409A(a)(2)(B)(ii) and any guidelines established by the
Plan Administrator.

 

2.35 Valuation Date:

 

Each business day, as determined by the Recordkeeper, as of which Participant
Accounts are valued in accordance with Plan procedures that are currently in
effect. In accordance with procedures that may be adopted by the Plan
Administrator, any current Valuation Date may be changed.

 

11

--------------------------------------------------------------------------------

ARTICLE III – ELIGIBILITY AND PARTICIPATION

 

3.01 Eligibility to Participate:

 

(a) In General.

 

(1) Subject to the special rules for 2005 in Subsection (b), an Executive shall
be eligible to defer compensation under the Plan 30 days after (i) being hired
by an Employer as an Executive classified as Band II or above (and while he or
she remains so classified or grandfathered) or (ii) being promoted by an
Employer from below Band II into a Band II or above position (and while he or
she remains so classified or grandfathered).

 

(2) Notwithstanding Paragraph (1) above, from time to time the Plan
Administrator may modify, limit or expand the class of Executives eligible to
defer hereunder, pursuant to criteria for eligibility that need not be uniform
among all or any group of Executives.

 

(b) Special Rules for 2005. The following special rules shall apply to
Executives during 2005 –

 

(1) If an Executive was an eligible executive under the Pre-409A Program
immediately prior to January 1, 2005, the Executive shall be eligible to defer
2005 Base Compensation beginning January 1, 2005 (subject to the election
requirements of Section 4.02(a)).

 

(2) If an Executive is hired into a Band II or above position or promoted from
below Band II into a Band II or above position from and after January 1, 2005
and by May 31, 2005, the Executive shall become eligible to defer 2005 Base
Compensation under Sections 4.01 and 4.02(b) beginning June 1, 2005.

 

(3) If an Executive is hired into a Band II or above position or promoted from
below Band II into a Band II or above position from and after June 1, 2005 and
before October 1, 2005, the Executive shall become eligible to defer 2005 Base
Compensation under Sections 4.01 and 4.02(b) 30 days after hire or promotion.

 

(4) If an Executive is hired into a Band II or above position or promoted from
below Band II into a Band II or above position from and after October 1, 2005,
the Executive shall not be eligible to defer 2005 Base Compensation.

 

(5) If an Executive is hired into a Band II or above position after January 1,
2005, the Executive shall not be eligible to defer any portion of 2005 Bonus
Compensation. If an Executive becomes an Eligible Executive during 2005 as a
result of a promotion from below Band II into a Band II or above position, such

 

12

--------------------------------------------------------------------------------

Eligible Executive shall not be eligible to defer 2005 Bonus Compensation,
unless he or she meets the rules under Section 4.01(b)(2) and 4.02(b) and he or
she was a bonus-eligible Executive for the entire Performance Period for which
the 2005 Bonus Compensation is paid.

 

(c) During the period an individual satisfies all of the eligibility
requirements of this Section, he or she shall be referred to as an Eligible
Executive.

 

(d) Each Eligible Executive becomes an active Participant on the date an amount
is first withheld from his or her compensation pursuant to an Election Form
submitted by the Executive to the Recordkeeper (or, if authorized, the Plan
Administrator) under Section 4.01.

 

3.02 Termination of Eligibility to Defer:

 

(a) General. Subject to Subsections (b) and (c) below, an individual’s
eligibility to participate actively by making deferrals (or a deferral election)
under Article IV shall cease upon the “Election Termination Date” (as defined
below) occurring after the earliest of:

 

(1) The date he or she ceases to be an Executive who is described in
Section 3.01(a)(1) and Section 3.01(b) above (unless a less restrictive
eligibility standard has been adopted in accordance with Section 3.01(a)(2), in
which case only Paragraph (2) below shall apply);

 

(2) The date the Executive ceases to be eligible under criteria described in
Section 3.01(a)(2) above; or

 

(3) The date that the Executive ceases to actively perform services for his or
her Employer.

 

For purposes of Paragraph (3) above, an Executive who is receiving disability
benefits from the PepsiCo Short-Term Disability Plan (or other short-term
disability plan of his or her Employer) shall be deemed to be actively
performing services for the period he or she is receiving such disability
benefits (referred to later in this Section as a “Period of STD Leave”). For
purposes of this Section 3.02(a), an individual’s Election Termination Date
shall be a date as soon as administratively practicable following the cessation
of the individual’s eligibility (or such other date as may be determined in
accordance with rules of the Plan Administrator).

 

(b) Termination of Deferral Eligibility in Cases of Severance. Notwithstanding
Subsection (a) above, an Executive’s eligibility to make deferrals and deferral
elections under Article IV shall terminate on the date that he or she begins a
period of severance. However, if an Eligible Executive made a valid deferral
election prior to the beginning of his or her period of severance pursuant to
the rules in Article IV, such valid election to defer shall apply to Base
Compensation and Bonus Compensation to be paid during the Eligible Executive’s
period of severance.

 

13

--------------------------------------------------------------------------------

(c) Eligibility to Defer in Cases of a Leave of Absence: Notwithstanding
Subsection (a) above, this Subsection (c) shall apply to Executives who begin
and end a “Leave of Absence” (as determined by the Plan Administrator for this
purpose) other than a Period of STD Leave.

 

(1) Termination of Eligibility to Defer. An Executive’s eligibility to make
deferrals and deferral elections under Article IV shall terminate on the date
that he or she begins a Leave of Absence. However, if an Eligible Executive made
a valid deferral election prior to the beginning of his or her Leave of Absence
pursuant to the rules in Article IV, such valid election to defer shall apply to
any Base Compensation and Bonus Compensation to be paid during the period of his
or her Leave of Absence.

 

(2) Eligibility to Defer Upon a Return from a Leave of Absence. Subject to the
next sentence, if an Eligible Executive returns from a Leave of Absence and
begins to actively perform services for an Employer, such Eligible Executive
shall not be eligible to defer Base Compensation or Bonus Compensation for the
Plan Year that he or she returns from a Leave of Absence. However, if the
Eligible Executive returns from a Leave of Absence and he or she made a valid
deferral election for the Plan Year of his or her return prior to beginning the
Leave of Absence, such valid deferral election will apply to any Base
Compensation and Bonus Compensation to be paid for the remainder of such Plan
Year.

 

3.03 Termination of Participation:

 

An individual, who has been an active Participant under the Plan, ceases to be a
Participant on the date his or her Account is fully paid out.

 

14

--------------------------------------------------------------------------------

ARTICLE IV – DEFERRAL OF COMPENSATION

 

4.01 Deferral Election:

 

(a) Deferrals of Base Compensation. Each Eligible Executive may make an election
to defer under the Plan any whole percentage (up to 100%) of his or her Base
Compensation in the manner described in Section 4.02. A newly Eligible Executive
may only defer the portion of his or her eligible Base Compensation that is
earned for services performed after the date of his or her election. Subject to
the foregoing sentence, any Base Compensation deferred by an Eligible Executive
for a Plan Year shall will be deducted each pay period during the Plan Year for
which he or she has Base Compensation and is an Eligible Executive.

 

(b) Deferrals of Bonus Compensation.

 

(1) General Rules. Each Eligible Executive may make an election to defer under
the Plan any whole percentage (up to 100%) of his or her Bonus Compensation in
the manner described in Section 4.02. An Eligible Executive that is hired during
a Plan Year may not defer any portion of his or her Bonus Compensation earned
for the Performance Period relating to the Plan Year in which he or she is
hired. The percentage of Bonus Compensation deferred by an Eligible Executive
for a Plan Year will be deducted from his or her payment under the applicable
compensation program at the time it would otherwise be paid, provided he or she
satisfies all conditions for payment that would apply in the absence of a
deferral. In addition, for the Plan Year in which the Participant incurs a
Separation from Service, the Participant shall be eligible to defer Bonus
Compensation paid for the Performance Period that relates to the Plan Year in
which the Participant incurred the Separation from Service, if the Participant
makes a valid and irrevocable deferral election prior to his or her Separation
from Service.

 

(2) Special Rules for Promoted Eligible Executives. An Eligible Executive that
becomes an Eligible Executive during a Plan Year as a result of a promotion from
below Band II into a position that is in Band II or above shall only be eligible
to defer Bonus Compensation earned for the Performance Period relating to the
Plan Year in which he or she is promoted, if the Eligible Executive (i) is a
bonus-eligible Executive for all of such Plan Year and (ii) is promoted by
May 15th of the Plan Year in which the promotion occurs. If a promoted Eligible
Executive does not satisfy the requirements of the previous sentence, he or she
shall not be eligible to defer Bonus Compensation earned for the Performance
Period relating to the Plan Year in which he or she is promoted.

 

(3) Performance Criteria. Notwithstanding Subsections (b)(1) and (b)(2) above,
an Eligible Executive shall not be eligible to defer Bonus Compensation for a
Plan Year unless the Bonus Compensation is contingent on the satisfaction of
organizational or individual performance criteria for the Performance Period
that relates to the Plan Year and unless such criteria have been established in
writing by not later than 90 days after the beginning of the applicable
Performance Period.

 

15

--------------------------------------------------------------------------------

(c) Election Form Rules. To be effective in deferring Base or Bonus
Compensation, an Eligible Executive’s Election Form must set forth the
percentage of Base/Bonus Compensation (whichever applies) to be deferred, the
deferral period under Section 4.03, the form of payment under Section 4.04, and
any other information that may be required by the Plan Administrator from time
to time. In addition, the Election Form must meet the requirements of
Section 4.02. It is contemplated that an Eligible Executive will specify the
investment choice under Section 5.02 (in multiples of 1%) for the Eligible
Executive’s deferral. However, this is not a condition for making an effective
election.

 

4.02 Time and Manner of Deferral Election:

 

(a) Deferrals of Base Compensation. Ordinarily an Eligible Executive must make a
deferral election for a Plan Year with respect to Base Compensation no later
than December 31 of the year prior to the Plan Year in which the Base
Compensation would otherwise be paid (although the Plan Administrator may adopt
policies that encourage earlier submission of election forms). If December 31 is
not a business day, the deadline shall be the preceding day that is a business
day. However, an individual who newly becomes an Eligible Executive will have 30
days from the date the individual becomes an Eligible Executive to make a
deferral election with respect to Base Compensation that is earned for services
performed after the election is received (the 30-Day Election Period). The
30-Day Election Period may be used to make an election for Base Compensation
that otherwise would be paid in the Plan Year in which the individual becomes an
Eligible Executive. In addition, the 30-Day Election Period may be used to make
an election for Base Compensation that would otherwise be paid in the next Plan
Year (i.e., the Plan Year following when the individual becomes an Eligible
Executive), if the individual becomes an Eligible Executive not later than
December 31 of a Plan Year. Thus, if a Base Compensation deferral election for a
Plan Year is made in reliance on the 30-day rule, then the Plan Administrator
shall apply the restriction that the election may only apply to Base
Compensation earned for services performed after the date the election is
received.

 

(b) Deferrals of Bonus Compensation. An Eligible Executive must make a deferral
election with respect to his or her Bonus Compensation at least six months prior
to the end of the Performance Period for which the applicable Bonus Compensation
is paid, and this election will be the Eligible Executive’s bonus deferral
election for the Plan Year to which the Performance Period relates. This applies
to both continuing Eligible Executives and individuals who newly become Eligible
Executives. Accordingly, if an individual becomes an Eligible Executive during a
Plan Year as a result of a promotion and is eligible to defer Bonus Compensation
under Section 4.01(b) for such Plan Year, such Eligible Executive must make a
deferral election for Bonus Compensation that is earned for the Performance
Period that relates to the Plan Year in which he or she is promoted at least six
months prior to the end of the applicable Performance Period.

 

16

--------------------------------------------------------------------------------

(c) General Provisions. A separate deferral election under (a) or (b) above must
be made by an Eligible Executive for each category of a Plan Year’s compensation
that is eligible for deferral. If a properly completed and executed Election
Form is not actually received by the Recordkeeper (or, if authorized, the Plan
Administrator) by the prescribed time in (a) and (b) above, the Eligible
Executive will be deemed to have elected not to defer any Base Compensation or
Bonus Compensation, as the case may be, for the applicable Plan Year. An
election is irrevocable once received and determined by the Plan Administrator
to be properly completed. Increases or decreases in the amount or percentage a
Participant elects to defer shall not be permitted during a Plan Year.

 

(d) Beneficiaries. A Participant may designate on the Election Form (or in some
other manner authorized by the Plan Administrator) one or more Beneficiaries to
receive payment, in the event of his or her death, of the amounts credited to
his or her Account. If more than one Beneficiary is specified and the
Participant fails to indicate the respective percentage applicable to two or
more Beneficiaries, then each Beneficiary for whom a percentage is not
designated will be entitled to an equal share of the portion of the Account (if
any) for which percentages have not been designated. At any time, a Participant
may change a Beneficiary designation for his or her Account in a writing that is
signed by the Participant and filed with the Recordkeeper prior to the
Participant’s death, and that meets such other standards as the Plan
Administrator shall require from time to time.

 

4.03 Period of Deferral:

 

An Eligible Executive making a deferral election shall specify a deferral period
on his or her Election Form by designating either a Specific Payment Date or the
date he or she incurs a Separation from Service. In no event shall an Eligible
Executive’s deferral period end later than his or her 80th birthday, regardless
of whether the Participant chose a single lump sum or installments as the form
of payment. Notwithstanding an Eligible Executive’s actual election of a
Specific Payment Date, an Eligible Executive shall be deemed to have elected a
period of deferral of not less than:

 

(a) For Base Compensation, at least until six months after the end of the Plan
Year during which the Base Compensation would have been paid absent the
deferral; and

 

(b) For Bonus Compensation, at least one year after the date the Bonus
Compensation would have been paid absent the deferral.

 

In the case of a deferral to a Specific Payment Date, if an Eligible Executive’s
Election Form either fails to specify a period of deferral or specifies a period
less than the applicable minimum, the Eligible Executive shall be deemed to have
selected a Specific Payment Date equal to the minimum period of deferral as
provided in Subsections (a) and (b) above.

 

17

--------------------------------------------------------------------------------

4.04 Form of Deferral Payout:

 

An Eligible Executive making a deferral election shall specify a form of payment
on his or her Election Form by designating either a lump sum payment or
installment payments to be paid over a period of no more than 20 years, and not
later than the Executive’s 80th birthday. Any election for installment payments
shall also specify (a) the frequency for which installment payments shall be
paid, which shall be quarterly, semi-annually and annually and (b) whether the
installment payments shall be paid in a fixed dollar amount or a fixed number of
years. If an Eligible Executive elects installments for a period extending
beyond the Eligible Executive’s 80th birthday, such election shall be treated as
an election for installments over a period of whole and partial years that ends
on the Eligible Executive’s 80th birthday.

 

4.05 Second Look Election:

 

(a) In General. Subject to Subsection (b) below, a Participant who has made a
valid initial deferral in accordance with the foregoing provisions of this
Article may subsequently make another one-time election regarding the time
and/or form of payment of his or her deferral. This opportunity to modify the
Participant’s initial election is referred to as a “Second Look Election.”

 

(b) Requirements for Second Look Elections. A Second Look Election must comply
with all of the following requirements:

 

(1) If a Participant’s initial election specified payment based on a Specific
Payment Date, the Participant may only make a Second Look Election if the
election is made at least 12 months before the Participant’s original Specific
Payment Date. In addition, in this case the Participant’s Second Look Election
must delay the payment of the Participant’s deferral to a new Specific Payment
Date that is at least 5 years after the original Specific Payment Date.

 

(2) If a Participant’s initial election specified payment based on the
Participant’s Separation from Service, the Participant may only make a Second
Look Election if the election is made at least 12 months before the
Participant’s Separation from Service. In addition, in this case the
Participant’s Second Look Election must delay the payment of the Participant’s
deferral to a new Specific Payment Date that turns out to be at least 5 years
after the Participant’s Separation from Service. If the Specific Payment Date
selected in a Second Look Election turns out to be less than 5 years after the
Participant’s Separation from Service, the Second Look Election is void.

 

(3) A Separation from Service may not be specified as the payout date resulting
from a Second Look Election.

 

18

--------------------------------------------------------------------------------

(4) A Participant may make only one Second Look Election for each individual
deferral, and all Second Look Elections must comply with all of the requirements
of this Section 4.05.

 

(5) A Participant who changes the form of his or her payment election from lump
sum to installments will be subject to the provisions of the Plan regarding
installment payment elections in Section 4.04, and such installment payments
must begin no earlier than 5 years after when the lump sum payment would have
been paid based upon the Participant’s initial election. Accordingly, a
Participant may not make a Second Look Election if the election would provide
for installment payments to be made after the Participant’s 80th birthday.

 

(6) If a Participant’s initial election specified payment in the form of
installments and the Participant wants to elect installment payments over a
greater or lesser number of years or wants to elect a different frequency of
installment payments (e.g., change from annual installments to quarterly
installments), the election will be subject to the provisions of the Plan
regarding installment payment elections in Section 4.04, and the first payment
date of the new installment payment schedule must be no earlier than 5 years
after the first payment date that applied under the Participant’s initial
installment election. Accordingly, a Participant may not make a Second Look
Election if the election would provide for installment payments to be made after
the Participant’s 80th birthday.

 

(7) If a Participant’s initial election specified payment in the form of
installments and the Participant wants to elect instead payment in a lump sum,
the earliest payment date of the lump sum must be no earlier than 5 years after
the first payment date that applied under the Participant’s initial installment
election.

 

(8) For purposes of this Section, all of a Participant’s installment payments
related to a specific deferral election shall be treated as a single payment.

 

A Second Look Election will be void and payment will be made based on the
Participant’s original election under Sections 4.03 and 4.04 if all of the
provisions of the foregoing Paragraphs of this Subsection are not satisfied in
full. However, if a Participant’s Second Look Election becomes effective in
accordance with the provisions of this Subsection, the Participant’s original
election shall be superseded (including any Specific Payment Date specified
therein), and this original election shall not be taken into account with
respect to the deferral that is subject to the Second Look Election.

 

(c) Plan Administrator’s Role. Each Participant has the sole responsibility to
elect a Second Look Election by contacting the Recordkeeper (or, if authorized,
the Plan Administrator) and to comply with the requirements of this Section. The
Plan Administrator or the Recordkeeper may provide a notice of a Second Look
Election opportunity to some or all Participants, but the Recordkeeper and Plan
Administrator is under no obligation to provide such notice (or to provide it to
all Participants, in the event a notice is provided only to some Participants).
The Recordkeeper and the Plan Administrator have no discretion to waive or
otherwise modify any requirement for a Second Look Election set forth in this
Section or in Section 409A.

 

19

--------------------------------------------------------------------------------

ARTICLE V – INTERESTS OF PARTICIPANTS

 

5.01 Accounting for Participants’ Interests:

 

(a) Deferral Subaccounts. Each Participant shall have at least one separate
Deferral Subaccount for each separate deferral of Base Compensation or Bonus
Compensation made by the Participant under this Plan. A Participant’s deferral
shall be credited to his or her Account as soon as practicable following the
date the compensation would be paid in the absence of a deferral. A
Participant’s Account is a bookkeeping device to track the value of the
Participant’s deferrals (and his or her Employer’s liability therefor). No
assets shall be reserved or segregated in connection with any Account, and no
Account shall be insured or otherwise secured.

 

(b) Account Earnings or Losses. As of each Valuation Date, a Participant’s
Account shall be credited with earnings and gains (and shall be debited for
expenses and losses) determined as if the amounts credited to his or her Account
had actually been invested as directed by the Participant in accordance with
this Article (as modified by Section 5.05, if applicable). The Plan provides
only for “phantom investments,” and therefore such earnings, gains, expenses and
losses are hypothetical and not actual. However, they shall be applied to
measure the value of a Participant’s Account and the amount of his or her
Employer’s liability to make deferred payments to or on behalf of the
Participant.

 

5.02 Investment Options:

 

(a) General. Each of a Participant’s Deferral Subaccounts shall be invested on a
phantom basis in any combination of phantom investment options specified by the
Participant (or following the Participant’s death, by his or her Beneficiary)
from those offered by the Plan Administrator for this purpose from time to time.
The Plan Administrator may discontinue any phantom investment option with
respect to some or all Accounts, and it may provide rules for transferring a
Participant’s phantom investment from the discontinued option to a specified
replacement option (unless the Participant selects another replacement option in
accordance with such requirements as the Plan Administrator may apply).

 

(b) Phantom Investment Options. The basic phantom investment options offered
under the Plan are as follows:

 

(1) Phantom PepsiCo Common Stock Fund. Participant Accounts invested in this
phantom option are adjusted to reflect an investment in the PepsiCo Common Stock
Fund, which is offered under the PepsiCo 401(k) Plan for Salaried Employees. An
amount deferred or transferred into this option is converted to phantom units in
the PepsiCo Common Stock Fund by dividing such amount by the NAV of the fund on
the Valuation Date as of which the amount is treated as invested in this option
by the Plan Administrator. A Participant’s interest in the Phantom

 

20

--------------------------------------------------------------------------------

PepsiCo Common Stock Fund is valued as of a Valuation Date (or a Distribution
Valuation Date) by multiplying the number of phantom units credited to the
Participant’s Account on such date by the NAV of a unit in the PepsiCo Common
Stock Fund on such date. If shares of PepsiCo Common Stock change by reason of
any stock split, stock dividend, recapitalization, merger, consolidation,
spin-off, combination or exchange of shares or other any other corporate change
treated as subject to this provision by the Plan Administrator, such equitable
adjustment shall be made in the number and kind of phantom units credited to an
Account or subaccount as the Plan Administrator may determine to be necessary or
appropriate. In no event will shares of PepsiCo Stock actually be purchased or
held under this Plan, and no Participant shall have any rights as a shareholder
of PepsiCo Common Stock on account of an interest in this phantom option.

 

(2) Phantom Prime Rate Fund. Participant Accounts invested in this phantom
option accrue a return based upon the prime rate of interest as reported from
time to time by The Wall Street Journal (or another source designated by the
Plan Administrator from time to time). Returns accrue for each month based on
the prime rate in effect on the first business day of each month and are
compounded annually. An amount deferred or transferred into this option is
credited with the applicable rate of return beginning with the date as of which
the amount is treated as invested in this option by the Plan Administrator.

 

(3) Other Funds. From time to time, the Plan Administrator shall designate which
(if any) other investment options shall be available as phantom investment
options under this Plan. These phantom investment options shall be described in
materials provided to Participants from time to time. Any of these phantom
investment options shall be administered under procedures implemented from time
to time by the Plan Administrator. Unless otherwise specified in these materials
or procedures, in the case of any such phantom investment option that is based
on a unitized fund, an amount deferred or transferred into such option is
converted to phantom units in the applicable fund of equivalent value by
dividing such amount by the NAV of a unit in such fund on the Valuation Date as
of which the amount is treated as invested in this option by the Plan
Administrator. Thereafter, a Participant’s interest in each such phantom option
is valued as of a Valuation Date (or a Distribution Valuation Date) by
multiplying the number of phantom units credited to his or her Account on such
date by the NAV of a unit in such fund on such date.

 

5.03 Method of Allocation:

 

With respect to any deferral election by a Participant, the Participant may use
his or her Election Form to allocate the deferral in 1 percent increments among
the phantom investment options then offered by the Plan Administrator.
Thereafter, a Participant may reallocate previously deferred amounts in a
Deferral Subaccount by properly completing and submitting a fund transfer form
provided by the Plan Administrator or Recordkeeper and specifying, in 1 percent
increments, the reallocation of his or her Deferral Subaccount among

 

21

--------------------------------------------------------------------------------

the phantom investment options then offered by the Plan Administrator for this
purpose. If an Election Form related to an original deferral election specifies
phantom investment options for less than 100% of the Participant’s deferral, the
Recordkeeper shall allocate the Participant’s deferrals to the Phantom Prime
Rate Fund to the extent necessary to provide for investment of 100% of the
Participant’s deferral. If an Election Form related to an original deferral
election specifies phantom investment options for more than 100% of the
Participant’s deferral, the Recordkeeper shall prorate all of the Participant’s
investment allocations to the extent necessary to reduce (after rounding to
whole percents) the Participant’s aggregate investment percentages to 100%. If a
fund transfer form provides for investing less than or more than 100% of the
Participant’s Account, it will be void and disregarded. Any transfer form that
is not void under the preceding sentence shall be effective as of the Valuation
Date next occurring after its receipt by the Recordkeeper, but the Plan
Administrator or Recordkeeper may also specify a minimum number of days in
advance of which such transfer form must be received in order for the form to
become effective as of such next Valuation Date. Notwithstanding the preceding
provisions of this Section, the Plan Administrator may at any time alter the
effective date of any allocation pursuant to Section 7.03(j) (relating to
safeguards against insider trading). If more than one transfer form is received
on a timely basis for a Deferral Subaccount, the transfer form that the Plan
Administrator or Recordkeeper determines to be the most recent shall be
followed. In the case of a Participant who is determined by the Plan
Administrator to be subject to Section 16 of the Act, the reallocation of any
Subaccount of the Participant will be delayed to the extent the Plan
Administrator determines it is necessary to satisfy Rule 16b-3(f) promulgated
under the Act. The preceding sentence shall apply notwithstanding any provision
of the Plan to the contrary except Section 7.07 (relating to compliance with
Section 409A).

 

5.04 Vesting of a Participant’s Account:

 

Except as provided in Section 5.05, a Participant’s interest in the value of his
or her Account shall at all times be 100 percent vested, which means that it
will not forfeit as a result of his or her Separation from Service.

 

5.05 Risk of Forfeiture Subaccounts:

 

(a) In the case of compensation earned on or after the Effective Date, a
Participant may no longer elect to defer Base Compensation or Bonus Compensation
to a Risk of Forfeiture Subaccount. However, if a Participant had, as of
December 31, 2004, a deferred compensation subaccount maintained under a
forfeiture agreement (as defined below), and the Participant has not yet
attained eligibility for Retirement or terminated as of December 31, 2004, then
the amounts in such subaccount shall be held in a Risk of Forfeiture Subaccount
under this 409A Program. (A “forfeiture agreement” is an agreement with any
Employer, or one of their predecessors providing that the subaccount would be
forfeited if the Participant terminated employment voluntarily or on account of
misconduct prior to Retirement. “Misconduct” solely for purposes of this Section
shall have the definition provided for this term in the forfeiture agreement or
other written document

 

22

--------------------------------------------------------------------------------

applicable for this purpose as determined by the Plan Administrator.) A
Participant who meets these requirements may continue to invest (his or her
compensation that was earned prior to the Effective Date) in his or her Risk of
Forfeiture Subaccount and this Subaccount will be maintained in accordance with
the terms of this Section. However, such Participant shall not be eligible to
transfer into or contribute to his or her Risk of Forfeiture Subaccount any
compensation earned on or after the Effective Date. (The date when a Participant
attains eligibility for Retirement is specified in the definition of
“Retirement.”)

 

(b) A Risk of Forfeiture Subaccount will be terminated and forfeited in the
event that the Participant has a Separation from Service that is voluntary or
because of his or her misconduct prior to the earliest of:

 

(1) The end of the deferral period designated in his or her Election Form for
such deferral (or if later, the end of such minimum period as may be required
under Section 4.03);

 

(2) The date the Participant attains eligibility for Retirement; or

 

(3) The date indicated on his or her Election Form as the end of the risk of
forfeiture condition (but not before completing the minimum risk of forfeiture
period required by the Plan Administrator from time to time).

 

(c) A Risk of Forfeiture Subaccount shall become fully vested (and shall cease
to be a Risk of Forfeiture Subaccount) when:

 

(1) The Participant reaches any of the dates in Subsection (b) above while still
employed by the Company or one of its affiliates (as defined by the Plan
Administrator for this purpose), or

 

(2) On the date the Participant terminates involuntarily from his or her
Employer, including death and termination because of the Participant’s
disability (whether or not this constitutes a Disability), provided that such
termination is not for his or her misconduct.

 

(d) No amounts credited to a Risk of Forfeiture Subaccount may be transferred to
a Subaccount of the Participant that is not a Risk of Forfeiture Subaccount. No
amounts credited to a Subaccount of the Participant that is not a Risk of
Forfeiture Subaccount may be transferred to a Risk of Forfeiture Subaccount.

 

(e) A Participant may reallocate his or her Risk of Forfeiture Subaccount to any
of the phantom investment options under the Plan that are currently available
for such direction or reallocation. During the period before a Risk of
Forfeiture Subaccount ceases to be a Risk of Forfeiture Subaccount, the return
under any such phantom investment option shall be supplemented as follows:

 

(1) In the case of the Phantom PepsiCo Common Stock Fund, the Participant’s
interest in the Phantom PepsiCo Common Stock Fund shall be increased in value by
2% as of the end of the Plan Year. If the Participant’s Subaccount was not a
Risk of Forfeiture Subaccount for the entire year (or if the Participant
reallocated amounts to the Phantom PepsiCo Common Stock Fund after the beginning
of the year), the above additional investment return for the year will be
prorated down appropriately, as determined by the Plan Administrator.

 

23

--------------------------------------------------------------------------------

(2) In the case of any other available phantom investment option for the Plan
Year, the return on each such option shall be supplemented with an additional 2%
annual return for the period that it is held within a Risk of Forfeiture
Subaccount (but prorated for periods of such investment of less than a year).

 

(f) Any deferrals allocated to a Risk of Forfeiture Subaccount as of
December 31, 2004, will be subject to the requirements of Section 409A.

 

5.06 Forfeiture of Earnings for Prohibited Misconduct:

 

Effective beginning with deferrals for Bonus Compensation for the 2006 Plan Year
and deferrals for Base Compensation for the 2007 Plan Year, and notwithstanding
any other provision of this Plan to the contrary, if the Plan Administrator
determines that a Participant has engaged in Prohibited Misconduct, the
Participant shall forfeit all current and future net earnings and gains that
have been or will be credited to his or her Account under the provisions of
Sections 5.01(b) and/or 6.08, and his or her Account balance shall be adjusted
to reflect such forfeiture. Accordingly, a Participant who has engaged in
Prohibited Misconduct shall only be eligible to receive a distribution of the
lesser of: (a) the aggregate amount of his or her Base Compensation and Bonus
Compensation deferrals under this Plan that relate to elections made for and
after the 2006 Plan Year for Bonus Compensation and the 2007 Plan Year for Base
Compensation (the “Affected Deferrals”), or (b) the net value of the
Participant’s Affected Deferrals as of the date the Plan Administrator
determines that the Participant has engaged in Prohibited Misconduct.

 

24

--------------------------------------------------------------------------------

ARTICLE VI – DISTRIBUTIONS

 

6.01 General:

 

A Participant’s Deferral Subaccount(s) that are governed by the terms of this
409A Program shall be distributed as provided in this Article, subject in all
cases to Section 7.03(j) (relating to safeguards against insider trading) and
Section 7.06 (relating to compliance with Section 16 of the Act). All Deferral
Subaccount balances (including those hypothetically invested in the Phantom
PepsiCo Common Stock Fund) shall be distributed in cash. In no event shall any
portion of a Participant’s Account be distributed earlier or later than is
allowed under Section 409A.

 

The following general rules shall apply for purposes of interpreting the
provisions of this Article VI.

 

(a) Section 6.02 (Distributions Based on a Specific Payment Date) applies when a
Participant has elected to defer until a Specific Payment Date and the Specific
Payment Date is reached before the Participant’s – (i) Separation from Service
(other than for Retirement), (ii) Disability, or (iii) death. However, if such a
Participant Separates from Service (other than for Retirement or death) prior to
the Specific Payment Date (or prior to processing of the first installment or
Second Look Election payment due in connection with the Specific Payment Date),
Section 6.03 shall apply. If such a Participant dies prior to the Specific
Payment Date, Section 6.04 shall apply to the extent it would result in an
earlier distribution of all or part of a Participant’s Account. If such a
Participant becomes Disabled prior to the Specific Payment Date, Section 6.06
shall apply to the extent it would result in an earlier distribution of all or
part of a Participant’s Account.

 

(b) Section 6.03 (Distributions on Account of a Separation from Service) applies
– (i) when a Participant has elected to defer until a Separation from Service
and then the Participant Separates from Service (other than for Retirement or
death), or (ii) when applicable under Subsection (a) above.

 

(c) Section 6.04 (Distributions on Account of Death) applies when the
Participant dies. If a Participant is entitled to receive or is receiving a
distribution under Section 6.02, 6.03 or 6.05 (see below) at the time of his
death, Section 6.04 shall take precedence over those sections to the extent
Section 6.04 would result in an earlier distribution of all or part of a
Participant’s Account.

 

(d) Section 6.05 (Distributions on Account of Retirement) applies when a
Participant has elected to defer until a Separation from Service and then the
Participant Separates from Service on account of his or her Retirement.
Subsections (c) and (e) of this Section provide for when Section 6.04 or 6.06
take precedence over Section 6.05.

 

25

--------------------------------------------------------------------------------

(e) Section 6.06 (Distributions on Account of Disability) applies when the
Participant becomes Disabled. If a Participant who becomes Disabled dies,
Section 6.04 shall take precedence over Section 6.06 to the extent it would
result in an earlier distribution of all or part of a Participant’s Account. If
a Participant is entitled to receive or is receiving a distribution under
Section 6.02, 6.03 or 6.05 at the time of his Disability, Section 6.06 shall
take precedence over those sections to the extent Section 6.06 would result in
an earlier distribution of all or part of a Participant’s Account.

 

(f) Section 6.07 (Distributions on Account of Unforeseeable Emergency) applies
when the Participant incurs an Unforeseeable Emergency prior to when a
Participant’s Account is distributed under Sections 6.02 through 6.06. In this
case, the provisions of Section 6.07 shall take precedence over Sections 6.02
through 6.06 to the extent Section 6.07 would result in an earlier distribution
of all or part of the Participant’s Account.

 

6.02 Distributions Based on a Specific Payment Date:

 

This Section shall apply to distributions that are to be made upon the
occurrence of a Specific Payment Date. In the event a Participant’s Specific
Payment Date for a Deferral Subaccount is reached before (i) the Participant’s
Disability, (ii) the Participant’s Separation from Service (other than for
Retirement), or (iii) the Participant’s death, such Deferral Subaccount shall be
distributed based on the occurrence of such Specific Payment Date in accordance
with the following terms and conditions:

 

(a) If a Participant’s Deferral Subaccount is to be paid in the form of a lump
sum pursuant to Section 4.04 or 4.05, whichever is applicable, the Deferral
Subaccount shall be valued as of the last Distribution Valuation Date that
occurs on or immediately precedes the Participant’s Specific Payment Date, and
the resulting amount shall be paid in a single lump sum as soon as
administratively practicable after the Specific Payment Date.

 

(b) If a Participant’s Deferral Subaccount is to be paid in the form of
installments pursuant to Section 4.04 or 4.05, whichever is applicable, the
Participant’s first installment payment shall be paid as soon as
administratively practicable following the Specific Payment Date. Thereafter,
installment payments shall continue in accordance with the schedule elected by
the Participant, except as provided in Sections 6.04, 6.06 and 6.07 (relating to
distributions upon death, Disability or Unforeseeable Emergency). The amount of
each installment shall be determined under Section 6.08. Notwithstanding the
preceding provisions of this Subsection, if before the date the first
installment distribution is processed for payment the Participant Separates from
Service (other than for Retirement) or the Participant would be entitled to a
distribution in accordance with Section 6.04 or 6.06 (relating to distributions
on account of death or Disability), the Participant’s Deferral Subaccounts that
would otherwise be distributed based on such Specific Payment Date shall instead
be distributed in accordance with Section 6.03, 6.04 or 6.06 (relating to
distributions on account of Separation from Service, death or Disability),
whichever applies, but only to the extent it would result in an earlier
distribution of the Participant’s Subaccounts in the case of Section 6.04 or
Section 6.06.

 

26

--------------------------------------------------------------------------------

6.03 Distributions on Account of a Separation from Service:

 

A Participant’s total Account shall be distributed upon the occurrence of a
Participant’s Separation from Service (other than for Retirement, Disability or
death) in accordance with the terms and conditions of this Section. When used in
this Section, the phrase “Separation from Service” shall only refer to a
Separation from Service that is not for Retirement, Disability or death.

 

(a) Subject to Subsections (c) and (d), for those Deferral Subaccounts that have
a Specific Payment Date that is after the Participant’s Separation from Service,
such Deferral Subaccounts shall be distributed in a single lump sum payment as
soon as administratively practicable following the first day of the calendar
quarter that follows the Participant’s Separation from Service.

 

(b) Subject to Subsections (c) and (d), if the Participant’s Separation from
Service is on or after the Specific Payment Date applicable to a Participant’s
Deferral Subaccount and the Participant has selected installment payments as the
form of distribution for the Deferral Subaccount, then such Deferral Subaccount
shall be distributed as follows:

 

(1) If the first installment payment has been processed prior to the
Participant’s Separation from Service, then installment payments will continue
(subject to acceleration under Sections 6.04, 6.06 and 6.07 relating to
distributions on account of death, Disability and Unforeseeable Emergency) based
upon the Participant’s installment payment election; and

 

(2) If the first installment payment has not yet been processed prior to the
Participant’s Separation from Service, then the Participant’s installment
payment election shall be void and the Participant shall be paid a single lump
sum distribution for the Deferral Subaccount based upon the provisions of
Subsection (a) above.

 

(c) If the Participant incurs a Separation from Service after making a valid
Second Look Election (and before the first payment has been processed in
accordance with such Second Look Election), each Deferral Subaccount to which
the Second Look Election applies shall be distributed in a single lump sum
payment as soon as administratively practicable following the latest of the
following: (1) the first day of the calendar quarter beginning on or after the
fifth anniversary of the payment date selected in the Participant’s original
deferral election under Section 4.03, (2) the first day of the calendar quarter
following the Separation from Service, or (3) the date applicable under
Subsection (d). However, if the Plan Administrator determines that Section 409A
would permit a lump sum payment to be made earlier than the date specified in
clause (1) of the preceding sentence, then the preceding sentence shall be
applied by substituting the earliest date permissible under Section 409A for the
date in clause (1). If the Participant’s Separation from Service occurs on or
after the date the

 

27

--------------------------------------------------------------------------------

first payment is processed, payment will be made in accordance with the Second
Look Election (but subject to acceleration under Sections 6.04, 6.06 and 6.07
relating to distributions on account of death, Disability and Unforeseeable
Emergency).

 

(d) If the Participant is classified as a Key Employee at the time of the
Participant’s Separation from Service (or at such other time for determining Key
Employee status as may apply under Section 409A), then such Participant’s
Account shall not be paid, as a result of the Participant’s Separation from
Service, earlier than as soon as administratively practicable following the
first day of the calendar quarter that is at least 6 months after the
Participant’s Separation from Service.

 

6.04 Distributions on Account of Death:

 

(a) Upon a Participant’s death, the value of the Participant’s Account under the
Plan shall be distributed in a single lump sum payment as soon as
administratively practicable following the first day of the calendar quarter
beginning after the first anniversary of the Participant’s death. If the
Participant is receiving installment payments at the time of the Participant’s
death, such installment payments shall continue in accordance with the terms of
the applicable deferral election that governs such payments until the time that
the lump sum payment is due to be paid under the preceding sentence of this
Subsection. Immediately prior to the time that such lump sum payment is
scheduled to be paid, all installment payments shall cease and the remaining
balance of the Participant’s Account shall be distributed at such scheduled
payment time in a single lump sum. Amounts paid following a Participant’s death,
whether a lump sum or continued installments, shall be paid to the Participant’s
Beneficiary.

 

(b) Prior to the time the value of the Participant’s Account is distributed
under Subsection (a), the Participant’s Beneficiary may apply for a distribution
under Section 6.07 (relating to a distribution on account of an Unforeseeable
Emergency).

 

(c) Any claim to be paid any amounts standing to the credit of a Participant in
connection with the Participant’s death must be received by the Recordkeeper or
the Plan Administrator at least 14 days before any such amount is paid out by
the Recordkeeper. Any claim received thereafter is untimely, and it shall be
unenforceable against the Plan, the Company, the Plan Administrator, the
Recordkeeper or any other party acting for one or more of them.

 

6.05 Distributions on Account of Retirement:

 

If a Participant incurs a Separation from Service on account of his or her
Retirement, the Participant’s Account shall be distributed in accordance with
the terms and conditions of this Section.

 

(a) If the Participant’s Retirement is prior to the Specific Payment Date that
is applicable to a Deferral Subaccount, the Participant’s deferral election
pursuant to Sections 4.03, 4.04 or 4.05 (i.e., time and form of payment) shall
continue to be given effect,

 

28

--------------------------------------------------------------------------------

and the Deferral Subaccount shall be distributed based upon the provisions of
Subsections (a) and (b) under Section 6.02, whichever applies (relating to
distributions based on a Specific Payment Date).

 

(b) If the Participant has selected payment of his or her deferral on account of
Separation from Service, distribution of the related Deferral Subaccount shall
commence as soon as administratively practicable after the first day of the
calendar quarter following Retirement. Such distribution shall be made in either
a single lump sum payment or in installment payments depending upon the
Participant’s deferral election under Sections 4.04 or 4.05. If the Participant
is entitled to installment payments, such payments shall be made in accordance
with the Participant’s installment election (but subject to acceleration under
Sections 6.04, 6.06 and 6.07 relating to distributions on account of death,
Disability and Unforeseeable Emergency) and with the installment payment amounts
determined under Section 6.08. However, if the Participant is classified as a
Key Employee at the time of the Participant’s Retirement (or at such other time
for determining Key Employee status as may apply under Section 409A), then such
Participant’s Account shall not be paid, as a result of the Participant’s
Retirement, earlier than as soon as administratively practicable following the
first day of the calendar quarter that is at least 6 months after the
Participant’s Retirement.

 

(c) If the Participant is receiving installment payments in accordance with
Section 6.02 (relating to distributions on account of a Specific Payment Date)
for one or more Deferral Subaccounts at the time of his or her Retirement, such
installment payments shall continue to be paid based upon the Participant’s
deferral election (but subject to acceleration under Sections 6.04, 6.06 and
6.07 relating to distributions on account of death, Disability and Unforeseeable
Emergency).

 

6.06 Distributions on Account of Disability:

 

If a Participant incurs a Disability, the Participant’s Account shall be
distributed in accordance with the terms and conditions of this Section.

 

(a) The value of the Participant’s Account under the Plan as of the most recent
Distribution Valuation Date shall be distributed in a single lump sum payment as
soon as administratively practicable following the first date – (i) on which the
Participant is Disabled (determined without regard the duration requirement of
the next clause), (ii) that is at least 12 months following the first date the
Participant was Disabled from the cause of the current Disability, and
(iii) that is after the Participant has received payments from a PepsiCo
disability plan (including the PepsiCo Short Term Disability Plan and the
PepsiCo Long Term Disability Plan) for 12-months for the current cause of
Disability (determined without regard the duration requirement of this clause).

 

(b) If the Participant is receiving installment payments at the time of the
Participant’s Disability, such installment payments shall continue to be paid in
accordance with the provisions of the Participant’s applicable deferral election
until the time that the lump sum payment is due to be paid under the provisions
of Subsection (a). Immediately prior to the time

 

29

--------------------------------------------------------------------------------

that such lump sum payment is scheduled to be paid, all installment payments
shall cease and the remaining balance of the Participant’s Account shall be
distributed at the time specified in Subsection (a) in a single lump sum.

 

6.07 Distributions on Account of Unforeseeable Emergency:

 

Prior to the time that an amount would become distributable under Sections 6.02
through 6.06, a Participant or Beneficiary may file a written request with the
Recordkeeper for accelerated payment of all or a portion of the amount credited
to the Participant’s Account based upon an Unforeseeable Emergency. After an
individual has filed a written request pursuant to this Section, along with all
supporting material that may be required by the Recordkeeper from time to time,
the Recordkeeper shall determine within 60 days (or such other number of days
that is necessary if special circumstances warrant additional time) whether the
individual meets the criteria for an Unforeseeable Emergency. If the
Recordkeeper determines that an Unforeseeable Emergency has occurred, the
Participant or Beneficiary shall receive a distribution from his or her Account
as soon as administratively practicable. However, such distribution shall not
exceed the dollar amount necessary to satisfy the Unforeseeable Emergency (plus
amounts necessary to pay taxes reasonably anticipated as a result of the
distribution) after taking into account the extent to which the Unforeseeable
Emergency is or may be relieved through reimbursement or compensation by
insurance or otherwise or by liquidation of the Participant’s assets (to the
extent the liquidation of such assets would not itself cause severe financial
hardship).

 

6.08 Valuation:

 

In determining the amount of any individual distribution pursuant to this
Article, the Participant’s Deferral Subaccount shall continue to be credited
with earnings and gains (and debited for expenses and losses) as specified in
Article V until the Distribution Valuation Date that is used in determining the
amount of the distribution under this Article. If a particular Section in this
Article does not specify a Distribution Valuation Date to be used in calculating
the distribution, the Participant’s Deferral Subaccount shall continue to be
credited with earnings and gains (and debited for expenses and losses) as
specified in Article V until the Distribution Valuation Date that precedes such
distribution. In determining the value of a Participant’s remaining Deferral
Subaccount following an installment distribution from the Deferral Subaccount
(or a partial distribution under Section 6.07 relating to a distribution on
account of an Unforeseeable Emergency), such distribution shall reduce the value
of the Participant’s Deferral Subaccount as of the close of the Distribution
Valuation Date preceding the payment date for such installment (or partial
distribution). The amount to be distributed in connection with any installment
payment shall be determined by dividing the value of a Participant’s Deferral
Subaccount as of such preceding Distribution Valuation Date (determined before
reduction of the Deferral Subaccount as of such Distribution Valuation Date in
accordance with the preceding sentence) by the remaining number of installments
to be paid with respect to the Deferral Subaccount.

 

30

--------------------------------------------------------------------------------

6.09 Section 162(m) Compliance:

 

If a Participant has elected to defer income, which would qualify as
performance-based compensation under Code Section 162(m), into a Risk of
Forfeiture Subaccount, then such Deferral Subaccount may not be paid out at any
time while the Participant is a covered employee under Code Section 162(m)(3),
to the extent it would result in compensation being paid to the Participant in
such year that would not be deductible under Code Section 162(m). The payout of
any such amount shall be deferred until a year when its payout will not result
in the payment of non-performance-based compensation that exceeds the $1 million
cap in Code Section 162(m)(1) (and then only such portion that will not exceed
such cap shall be paid out in the year). However, the total amount (1) which
stands to the credit of the Participant in Risk of Forfeiture Subaccounts, and
(2) which would be currently or previously distributed from the Plan but for
this Section, shall be paid out in the first year when the Participant is no
longer a Code Section 162(m) covered employee. This Section shall apply
notwithstanding the fact that a Participant would otherwise be entitled to an
earlier distribution under the foregoing provisions of this Article, except that
a Participant may receive an earlier distribution with respect to deferrals
subject to this Section to the extent the Participant qualifies for such an
earlier distribution under Section 6.07.

 

6.10 Impact of Section 16 of the Act on Distributions:

 

The provisions of Section 7.06 shall apply in determining whether a
Participant’s distribution shall be delayed beyond the date applicable under the
preceding provisions of this Article VI.

 

31

--------------------------------------------------------------------------------

ARTICLE VII – PLAN ADMINISTRATION

 

7.01 Plan Administrator:

 

The Plan Administrator is responsible for the administration of the Plan. The
Plan Administrator has the authority to name one or more delegates to carry out
certain responsibilities hereunder, as specified in the definition of Plan
Administrator. Any such delegation shall state the scope of responsibilities
being delegated and is subject to Section 7.06 below.

 

7.02 Action:

 

Action by the Plan Administrator may be taken in accordance with procedures that
the Plan Administrator adopts from time to time or that the Company’s Law
Department determines are legally permissible.

 

7.03 Powers of the Plan Administrator:

 

The Plan Administrator shall administer and manage the Plan and shall have (and
shall be permitted to delegate) all powers necessary to accomplish that purpose,
including the following:

 

(a) To exercise its discretionary authority to construe, interpret, and
administer this Plan;

 

(b) To exercise its discretionary authority to make all decisions regarding
eligibility, participation and deferrals, to make allocations and determinations
required by this Plan, and to maintain records regarding Participants’ Accounts;

 

(c) To compute and certify to the Employers the amount and kinds of payments to
Participants or their Beneficiaries, and to determine the time and manner in
which such payments are to be paid;

 

(d) To authorize all disbursements by the Employer pursuant to this Plan;

 

(e) To maintain (or cause to be maintained) all the necessary records for
administration of this Plan;

 

(f) To make and publish such rules for the regulation of this Plan as are not
inconsistent with the terms hereof;

 

(g) To delegate to other individuals or entities from time to time the
performance of any of its duties or responsibilities hereunder;

 

32

--------------------------------------------------------------------------------

(h) To establish or to change the phantom investment options or arrangements
under Article V;

 

(i) To hire agents, accountants, actuaries, consultants and legal counsel to
assist in operating and administering the Plan; and

 

(j) Notwithstanding any other provision of this Plan except Section 7.07
(relating to compliance with Section 409A), the Plan Administrator or the
Recordkeeper may take any action the Plan Administrator deems is necessary to
assure compliance with any policy of the Company respecting insider trading as
may be in effect from time to time. Such actions may include altering the
effective date of intra-fund transfers or the distribution date of Deferral
Subaccounts. Any such actions shall alter the normal operation of the Plan to
the minimum extent necessary.

 

The Plan Administrator has the exclusive and discretionary authority to construe
and to interpret the Plan, to decide all questions of eligibility for benefits,
to determine the amount and manner of payment of such benefits and to make any
determinations that are contemplated by (or permissible under) the terms of this
Plan, and its decisions on such matters will be final and conclusive on all
parties. Any such decision or determination shall be made in the absolute and
unrestricted discretion of the Plan Administrator, even if (1) such discretion
is not expressly granted by the Plan provisions in question, or (2) a
determination is not expressly called for by the Plan provisions in question,
and even though other Plan provisions expressly grant discretion or call for a
determination. As a result, benefits under this Plan will be paid only if the
Plan Administrator decides in its discretion that the applicant is entitled to
them. In the event of a review by a court, arbitrator or any other tribunal, any
exercise of the Plan Administrator’s discretionary authority shall not be
disturbed unless it is clearly shown to be arbitrary and capricious.

 

7.04 Compensation, Indemnity and Liability:

 

The Plan Administrator will serve without bond and without compensation for
services hereunder. All expenses of the Plan and the Plan Administrator will be
paid by the Employers. To the extent deemed appropriate by the Plan
Administrator, any such expense may be charged against specific Participant
Accounts, thereby reducing the obligation of the Employers. No member of the
Committee (which serves as the Plan Administrator), and no individual acting as
the delegate of the Committee, shall be liable for any act or omission of any
other member or individual, nor for any act or omission on his or her own part,
excepting his or her own willful misconduct. The Employers (other than the
Company) will indemnify and hold harmless each member of the Committee and any
employee of the Company (or a Company affiliate, if recognized as an affiliate
for this purpose by the Plan Administrator) acting as the delegate of the
Committee against any and all expenses and liabilities, including reasonable
legal fees and expenses, arising in connection with this Plan out of his or her
membership on the Committee (or his or her serving as the delegate of the
Committee), excepting only expenses and liabilities arising out of his or her
own willful misconduct or bad faith.

 

33

--------------------------------------------------------------------------------

7.05 Taxes:

 

If the whole or any part of any Participant’s Account becomes liable for the
payment of any estate, inheritance, income, employment, or other tax which the
Company may be required to pay or withhold, the Company will have the full power
and authority to withhold and pay such tax out of any moneys or other property
in its hand for the account of the Participant. To the extent practicable, the
Company will provide the Participant notice of such withholding. Prior to making
any payment, the Company may require such releases or other documents from any
lawful taxing authority as it shall deem necessary. In addition, pursuant to
Section 409A amounts deferred under this Plan shall be reported on the
Participants’ Forms W-2. Also, any amounts that become taxable hereunder shall
be reported as taxable wages on a Participant’s Form W-2.

 

7.06 Section 16 Compliance:

 

(a) In General. This Plan is intended to be a formula plan for purposes of
Section 16 of the Act. Accordingly, in the case of a deferral or other action
under the Plan that constitutes a transaction that could be covered by Rule
16b-3(d) or (e), if it were approved by the Company’s Board or Compensation
Committee (“Board Approval”), it is intended that the Plan shall be administered
by delegates of the Compensation Committee, in the case of a Participant who is
subject to Section 16 of the Act, in a manner that will permit the Board
Approval of the Plan to avoid any additional Board Approval of specific
transactions to the maximum possible extent.

 

(b) Approval of Distributions: This Subsection shall govern the distribution of
a deferral that (i) is wholly or partly invested in the Phantom PepsiCo Common
Stock Fund at the time the deferral would be valued to determine the amount of
cash to be distributed to a Participant, (ii) either was the subject of a Second
Look Election or was not covered by an agreement, made at the time of the
Participant’s original deferral election, that any investments in the Phantom
PepsiCo Common Stock Fund would, once made, remain in that fund until
distribution of the deferral, and (iii) is made to a Participant who is subject
to Section 16 of the Act at the time the interest in the Phantom PepsiCo Common
Stock Fund would be liquidated in connection with the distribution (“Covered
Distributions”). In the case of a Covered Distribution, if the liquidation of
the Participant’s interest in the Phantom PepsiCo Common Stock Fund in
connection with the distribution has not received Board Approval by the time the
distribution would be made if it were not a Covered Distribution, then the
actual distribution to the Participant shall be delayed until a date that is as
soon as practicable after the earlier of:

 

(1) Board Approval of the liquidation of the Participant’s interest in the
Phantom PepsiCo Common Stock Fund in connection with the distribution, and

 

(2) The date the distribution is no longer a Covered Distribution, i.e., when
the Participant is no longer subject to Section 16 of the Act or when the
Deferral Subaccount related to the distribution is no longer invested in the
Phantom PepsiCo Common Stock Fund.

 

34

--------------------------------------------------------------------------------

7.07 Conformance with Section 409A:

 

At all times during each Plan Year, this Plan shall be operated (i) in
accordance with the requirements of Section 409A, and (ii) to preserve the
status of deferrals under the Pre-409A Program as being exempt from
Section 409A, i.e., to preserve the grandfathered status of the Pre-409A
Program. Any action that may be taken (and, to the extent possible, any action
actually taken) by the Plan Administrator, the Recordkeeper or the Company shall
not be taken (or shall be void and without effect), if such action violates the
requirements of Section 409A or if such action would adversely affect the
grandfather of the Pre-409A Program. If the failure to take an action under the
Plan would violate Section 409A, then to the extent it is possible thereby to
avoid a violation of section 409A, the rights and effects under the Plan shall
be altered to avoid such violation. A corresponding rule shall apply with
respect to a failure to take an action that would adversely affect the
grandfather of the Pre-409A Program. Any provision in this Plan document that is
determined to violate the requirements of Section 409A or to adversely affect
the grandfather of the Pre-409A Program shall be void and without effect. In
addition, any provision that is required to appear in this Plan document to
satisfy the requirements of Section 409A, but that is not expressly set forth,
shall be deemed to be set forth herein, and the Plan shall be administered in
all respects as if such provision were expressly set forth. A corresponding rule
shall apply with respect to a provision that is required to preserve the
grandfather of the Pre-409A Program. In all cases, the provisions of this
Section shall apply notwithstanding any contrary provision of the Plan that is
not contained in this Section.

 

35

--------------------------------------------------------------------------------

ARTICLE VIII – CLAIMS PROCEDURE

 

8.01 Claims for Benefits:

 

If a Participant, Beneficiary or other person (hereafter, “Claimant”) does not
receive timely payment of any benefits which he or she believes are due and
payable under the Plan, he or she may make a claim for benefits to the Plan
Administrator. The claim for benefits must be in writing and addressed to the
Plan Administrator. If the claim for benefits is denied, the Plan Administrator
will notify the Claimant within 90 days after the Plan Administrator initially
received the benefit claim. However, if special circumstances require an
extension of time for processing the claim, the Plan Administrator will furnish
notice of the extension to the Claimant prior to the termination of the initial
90-day period and such extension may not exceed one additional, consecutive
90-day period. Any notice of a denial of benefits shall advise the Claimant of
the basis for the denial, any additional material or information necessary for
the Claimant to perfect his or her claim, and the steps which the Claimant must
take to appeal his or her claim for benefits.

 

8.02 Appeals of Denied Claims:

 

Each Claimant whose claim for benefits has been denied may file a written appeal
for a review of his or her claim by the Plan Administrator. The request for
review must be filed by the Claimant within 60 days after he or she received the
notice denying his or her claim. The decision of the Plan Administrator will be
communicated to the Claimant within 60 days after receipt of a request for
appeal. The notice shall set forth the basis for the Plan Administrator’s
decision. However, if special circumstances require an extension of time for
processing the appeal, the Plan Administrator will furnish notice of the
extension to the Claimant prior to the termination of the initial 60-day period
and such extension may not exceed one additional, consecutive 60-day period. In
no event shall the Plan Administrator’s decision be rendered later than 120 days
after receipt of a request for appeal.

 

8.03 Special Claims Procedures for Disability Determinations:

 

Notwithstanding Sections 8.01 and 8.02, if the claim or appeal of the Claimant
relates to Disability benefits, such claim or appeal shall be processed pursuant
to the applicable provisions of Department of Labor Regulation
Section 2560.503-1 relating to Disability benefits, including Sections
2560.503-1(d), 2560.503-1(f)(3), 2560.503-1(h)(4) and 2560.503-1(i)(3).

 

36

--------------------------------------------------------------------------------

ARTICLE IX – AMENDMENT AND TERMINATION

 

9.01 Amendment of Plan:

 

The Compensation Committee of the Board of Directors of the Company has the
right in its sole discretion to amend this Plan in whole or in part at any time
and in any manner, including the manner of making deferral elections, the terms
on which distributions are made, and the form and timing of distributions.
However, except for mere clarifying amendments necessary to avoid an
inappropriate windfall, no Plan amendment shall reduce the amount credited to
the Account of any Participant as of the date such amendment is adopted. Any
amendment shall be in writing and adopted by the Committee. All Participants and
Beneficiaries shall be bound by such amendment. Any amendments made to the Plan
shall be subject to any restrictions on amendment that are applicable to ensure
continued compliance under Section 409A.

 

9.02 Termination of Plan:

 

(a) The Company expects to continue this Plan, but does not obligate itself to
do so. The Company, acting by the Compensation Committee of the Board of
Directors, or through its entire Board of Directors, reserves the right to
discontinue and terminate the Plan at any time, in whole or in part, for any
reason (including a change, or an impending change, in the tax laws of the
United States or any State). Termination of the Plan will be binding on all
Participants (and a partial termination shall be binding upon all affected
Participants) and their Beneficiaries, but in no event may such termination
reduce the amounts credited at that time to any Participant’s Account. If this
Plan is terminated (in whole or in part), the termination resolution shall
provide for how amounts theretofore credited to affected Participants’ Accounts
will be distributed.

 

(b) This Section is subject to the same restrictions related to compliance with
Section 409A that apply to Section 9.01. In accordance with these restrictions,
the Company intends to have the maximum discretionary authority to terminate the
Plan and make distributions in connection with a Change in Control (as defined
in Section 409A), and the maximum flexibility with respect to how and to what
extent to carry this out following a Change in Control (as defined in
Section 409A) as is permissible under Section 409A. The previous sentence
contains the exclusive terms under which a distribution may be made in
connection with any change in control with respect to deferrals made under this
409A Program. No distributions shall be made under this 409A Program for any
change in control unless the distribution satisfies the provisions of a Change
in Control (as defined in Section 409A), and no distributions shall be made
under this 409A Program with respect to a “Non-Qualifying Change in Control.”

 

(c) For purposes of this Section, a “Non-Qualifying Change in Control” shall
include any of the following –

 

(1) A change in the ownership or effective control of the Company,

 

37

--------------------------------------------------------------------------------

(2) A change in the ownership of a substantial portion of the assets of the
Company,

 

(3) Company shareholders approve a merger or consolidation of the Company with
another entity and the Company is not the surviving entity, or if after such
transaction, the other entity owns, directly or indirectly, 50% or more of the
outstanding voting securities of the Company,

 

(4) Company shareholders approve a plan of complete liquidation of the Company
or the sale or disposition of all or substantially all of the Company’s assets,
and

 

(5) Any other event, circumstance, offer or proposal occurs or is made which is
intended to effect a change in the control of the Company and which results in
the occurrence of one or more of the events listed in paragraphs (1) through
(4) above.

 

38

--------------------------------------------------------------------------------

ARTICLE X – MISCELLANEOUS

 

10.01 Limitation on Participant’s Rights:

 

Participation in this Plan does not give any Participant the right to be
retained in the Employer’s employ (or any right or interest in this Plan or any
assets of the Employer other than as herein provided). The Employer reserves the
right to terminate the employment of any Participant without any liability for
any claim against the Employer under this Plan, except for a claim for payment
of deferrals as provided herein.

 

10.02 Unfunded Obligation of Individual Employer:

 

The benefits provided by this Plan are unfunded. All amounts payable under this
Plan to Participants are paid from the general assets of the Participant’s
individual Employer. Nothing contained in this Plan requires an Employer to set
aside or hold in trust any amounts or assets for the purpose of paying benefits
to Participants. Neither a Participant, Beneficiary, nor any other person shall
have any property interest, legal or equitable, in any specific Employer asset.
This Plan creates only a contractual obligation on the part of a Participant’s
individual Employer, and the Participant has the status of a general unsecured
creditor of this Employer with respect to amounts of compensation deferred
hereunder. Such a Participant shall not have any preference or priority over,
the rights of any other unsecured general creditor of the Employer. No other
Employer guarantees or shares such obligation, and no other Employer shall have
any liability to the Participant or his or her Beneficiary. In the event, a
Participant transfers from the employment of one Employer to another, the former
Employer shall transfer the liability for deferrals made while the Participant
was employed by that Employer to the new Employer (and the books of both
Employers shall be adjusted appropriately).

 

10.03 Other Plans:

 

This Plan shall not affect the right of any Eligible Executive or Participant to
participate in and receive benefits under and in accordance with the provisions
of any other employee benefit plans which are now or hereafter maintained by any
Employer, unless the terms of such other employee benefit plan or plans
specifically provide otherwise or it would cause such other plan to violate a
requirement for tax favored treatment.

 

10.04 Receipt or Release:

 

Any payment to a Participant in accordance with the provisions of this Plan
shall, to the extent thereof, be in full satisfaction of all claims against the
Plan Administrator, the Recordkeeper, the Company, and all Employers, and the
Plan Administrator may require such Participant, as a condition precedent to
such payment, to execute a receipt and release to such effect.

 

39

--------------------------------------------------------------------------------

10.05 Governing Law:

 

This Plan shall be construed, administered, and governed in all respects in
accordance with applicable federal law and, to the extent not preempted by
federal law, in accordance with the laws of the State of North Carolina. If any
provisions of this instrument shall be held by a court of competent jurisdiction
to be invalid or unenforceable, the remaining provisions hereof shall continue
to be fully effective.

 

10.06 Adoption of Plan by Related Employers:

 

The Plan Administrator may select as an Employer (other than the Company, which
is automatically an Employer hereunder) any division of the Company, as well as
any subsidiary or affiliate related to the Company by ownership (and that is a
member of the PepsiCo Organization), and permit or cause such division,
subsidiary or affiliate to adopt the Plan. The selection by the Plan
Administrator shall govern the effective date of the adoption of the Plan by
such related Employer. The requirements for Plan adoption are entirely within
the discretion of the Plan Administrator and, in any case where the status of an
entity as an Employer is at issue, the determination of the Plan Administrator
shall be absolutely conclusive.

 

10.07 Gender, Tense and Examples:

 

In this Plan, whenever the context so indicates, the singular or plural number
and the masculine, feminine, or neuter gender shall be deemed to include the
other. Whenever an example is provided or the text uses the term “including”
followed by a specific item or items, or there is a passage having a similar
effect, such passage of the Plan shall be construed as if the phrase “without
limitation” followed such example or term (or otherwise applied to such passage
in a manner that avoids limitation on its breadth of application).

 

10.08 Successors and Assigns; Nonalienation of Benefits:

 

This Plan inures to the benefit of and is binding upon the parties hereto and
their successors, heirs and assigns; provided, however, that the amounts
credited to the Account of a Participant are not (except as provided in Sections
5.06 and 7.05) subject in any manner to anticipation, alienation, sale,
transfer, assignment, pledge, encumbrance, charge, garnishment, execution or
levy of any kind, either voluntary or involuntary, and any attempt to
anticipate, alienate, sell, transfer, assign, pledge, encumber, charge or
otherwise dispose of any right to any benefits payable hereunder, including,
without limitation, any assignment or alienation in connection with a
separation, divorce, child support or similar arrangement, will be null and void
and not binding on the Plan or the Company or any Employer. Notwithstanding the
foregoing, the Plan Administrator reserves the right to make payments in
accordance with a divorce decree, judgment or other court order as and when cash
payments are made in accordance with the terms of this Plan from the Deferral
Subaccount of a Participant. Any such payment shall be charged against and
reduce the Participant’s Account.

 

40

--------------------------------------------------------------------------------

10.09 Facility of Payment:

 

Whenever, in the Plan Administrator’s opinion, a Participant or Beneficiary
entitled to receive any payment hereunder is under a legal disability or is
incapacitated in any way so as to be unable to manage his or her financial
affairs, the Plan Administrator may direct the Employer to make payments to such
person or to the legal representative of such person for his or her benefit, or
to apply the payment for the benefit of such person in such manner as the Plan
Administrator considers advisable. Any payment in accordance with the provisions
of this Section shall be a complete discharge of any liability for the making of
such payment to the Participant or Beneficiary under the Plan.

 

41

--------------------------------------------------------------------------------

ARTICLE XI – AUTHENTICATION

 

This 409A Program document has been authorized, adopted and approved to be
effective as stated herein by the Compensation Committee of the Company’s Board
of Directors at the Compensation Committee’s duly authorized meeting on
November 18, 2005.

 

42

--------------------------------------------------------------------------------

APPENDIX

 

This Appendix modifies particular terms of the Plan as it may apply to certain
groups and situations. Except as specifically modified in this Appendix, the
foregoing main provisions of the Plan shall fully apply in determining the
rights and benefits of Participants. In the event of a conflict between this
Appendix and the foregoing main provisions of the Plan, the Appendix shall
govern.

 

Pursuant to Q&A-20(a) of IRS Notice 2005-1, each Eligible Executive shall have
the right to cancel his or her election to defer 2005 Base Compensation and each
Eligible Executive whose 2004 Bonus Compensation is subject to Section 409A
shall have the right to cancel his or her election to defer such 2004 Bonus
Compensation. Such election to cancel must be filed with the Plan Administrator
pursuant to the procedures and timing requirements established by the Plan
Administrator for this purpose (such procedures and timing requirements to be
consistent with the requirements of Q&A-20(a)). Any Eligible Executive who makes
an election to cancel such deferral election shall have the 2005 Base
Compensation and/or the 2004 Bonus Compensation related to such deferral
election paid to him or her (plus any applicable earnings or minus any
applicable losses) and such amount shall be reported as taxable income to the
Eligible Executive for the 2005 calendar year.

 

43