EXHIBIT 10.2

PEPSICO

EXECUTIVE INCOME

DEFERRAL PROGRAM

Plan Document for the 409A Program

Amended and Restated Effective as of January 1, 2005

(with Amendments through September 11, 2008)

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

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:

   2

2.06 CODE:

   3

2.07 COMPANY:

   3

2.08 DEFERRAL SUBACCOUNT:

   3

2.09 DISABILITY:

   3

2.10 DISTRIBUTION VALUATION DATE:

   3

2.11 ELECTION FORM:

   3

2.12 ELIGIBLE EXECUTIVE:

   4

2.13 EMPLOYER:

   4

2.14 ERISA:

   4

2.15 EXECUTIVE:

   4

2.16 409A PROGRAM:

   4

2.17 KEY EMPLOYEE:

   4

2.18 NAV:

   5

2.19 PARTICIPANT:

   5

2.20 PEPSICO ORGANIZATION:

   6

2.21 PERFORMANCE PERIOD:

   6

2.22 PLAN:

   6

2.23 PLAN ADMINISTRATOR:

   6

2.24 PLAN YEAR:

   6

2.25 PRE-409A PROGRAM:

   6

2.26 PROHIBITED MISCONDUCT:

   6

2.27 RECORDKEEPER:

   8

2.28 RETIREMENT:

   8

2.29 RISK OF FORFEITURE SUBACCOUNT:

   8

2.30 SECOND LOOK ELECTION:

   8

2.31 SECTION 409A:

   8

2.32 SEPARATION FROM SERVICE:

   8

2.33 SPECIFIC PAYMENT DATE:

   9

2.34 UNFORESEEABLE EMERGENCY:

   9

2.35 U.S.:

   9

2.36 VALUATION DATE:

   9

ARTICLE III – ELIGIBILITY AND PARTICIPATION

   10

3.01 ELIGIBILITY TO PARTICIPATE:

   10

3.02 TERMINATION OF ELIGIBILITY TO DEFER:

   10

3.03 TERMINATION OF PARTICIPATION:

   11

 

-i-

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

TABLE OF CONTENTS

 

     Page

ARTICLE IV – DEFERRAL OF COMPENSATION

   12

4.01 DEFERRAL ELECTION:

   12

4.02 TIME AND MANNER OF DEFERRAL ELECTION:

   13

4.03 PERIOD OF DEFERRAL:

   15

4.04 FORM OF DEFERRAL PAYOUT:

   15

4.05 SECOND LOOK ELECTION:

   16

ARTICLE V – INTERESTS OF PARTICIPANTS

   18

5.01 ACCOUNTING FOR PARTICIPANTS’ INTERESTS:

   18

5.02 INVESTMENT OPTIONS:

   18

5.03 METHOD OF ALLOCATION:

   19

5.04 VESTING OF A PARTICIPANT’S ACCOUNT:

   20

5.05 RISK OF FORFEITURE SUBACCOUNTS:

   20

5.06 FORFEITURE OF EARNINGS FOR PROHIBITED MISCONDUCT:

   22

ARTICLE VI – DISTRIBUTIONS

   23

6.01 GENERAL:

   23

6.02 DISTRIBUTIONS BASED ON A SPECIFIC PAYMENT DATE:

   24

6.03 DISTRIBUTIONS ON ACCOUNT OF A SEPARATION FROM SERVICE:

   25

6.04 DISTRIBUTIONS ON ACCOUNT OF DEATH:

   26

6.05 DISTRIBUTIONS ON ACCOUNT OF RETIREMENT:

   27

6.06 DISTRIBUTIONS ON ACCOUNT OF DISABILITY:

   27

6.07 DISTRIBUTIONS ON ACCOUNT OF UNFORESEEABLE EMERGENCY:

   28

6.08 VALUATION:

   28

6.09 SECTION 162(M) COMPLIANCE:

   29

6.10 IMPACT OF SECTION 16 OF THE ACT ON DISTRIBUTIONS:

   29

6.11 ACTUAL PAYMENT DATE:

   29

ARTICLE VII – PLAN ADMINISTRATION

   30

7.01 PLAN ADMINISTRATOR:

   30

7.02 ACTION:

   30

7.03 POWERS OF THE PLAN ADMINISTRATOR:

   30

7.04 COMPENSATION, INDEMNITY AND LIABILITY:

   31

7.05 WITHHOLDING:

   31

7.06 SECTION 16 COMPLIANCE:

   32

7.07 CONFORMANCE WITH SECTION 409A:

   33

ARTICLE VIII – CLAIMS PROCEDURE

   34

8.01 CLAIMS FOR BENEFITS:

   34

8.02 APPEALS OF DENIED CLAIMS:

   34

8.03 SPECIAL CLAIMS PROCEDURES FOR DISABILITY DETERMINATIONS:

   34

ARTICLE IX – AMENDMENT AND TERMINATION

   35

9.01 AMENDMENT OF PLAN:

   35

9.02 TERMINATION OF PLAN:

   35

 

-ii-

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

TABLE OF CONTENTS

 

         

Page

ARTICLE X – MISCELLANEOUS

   36

10.01 LIMITATION ON PARTICIPANT’S RIGHTS:

   36

10.02 UNFUNDED OBLIGATION OF INDIVIDUAL EMPLOYER:

   36

10.03 OTHER PLANS:

   36

10.04 RECEIPT OR RELEASE:

   36

10.05 GOVERNING LAW:

   37

10.06 ADOPTION OF PLAN BY RELATED EMPLOYERS:

   37

10.07 GENDER, TENSE AND EXAMPLES:

   37

10.08 SUCCESSORS AND ASSIGNS; NONALIENATION OF BENEFITS:

   37

10.09 FACILITY OF PAYMENT:

   38

ARTICLE XI – AUTHENTICATION

   39

APPENDIX

   Appendix

APPENDIX ARTICLE A – TRANSITION PROVISIONS

   A-1

 

-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. Deferrals under the Plan
that were earned and vested on or before December 31, 2004 are governed by a
separate set of documents that set forth the pre-Section 409A terms of the Plan
(the “Pre-409A Program”). 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”) are governed by
this document. This document sets forth the 409A Program and is effective as of
January 1, 2005 (the “Effective Date”). Except as otherwise provided herein,
this document reflects the provisions in effect from and after January 1, 2005,
and the rights and benefits of individuals who are Participants in the Plan from
and after that date (and of those claiming through or on behalf of such
individuals) shall be governed by the provisions of this document in the case of
actions and events occurring on or after the Effective Date with respect to
deferrals that are subject to the 409A Program. For purposes of the preceding
sentence, the term “actions and events” shall include all distribution trigger
events and dates. The rights and benefits with respect to persons who only
participated in the Plan prior to January 1, 2005 shall be governed by the
applicable provisions of the Pre-409A Program documents that were in effect at
such time, and shall not be governed by the 409A Program documents.

Together, the documents for the 409A Program and the documents for the Pre-409A
Program describe the terms of a single plan. However, amounts subject to the
terms of the 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 permit the Pre-409A Program to remain exempt from Section 409A, and the
administration of the Plan shall be consistent with this intent.

For federal income tax purposes, the Plan is intended to be a nonqualified
deferred compensation plan that is unfunded and unsecured. For purposes of
ERISA, the Plan is intended to be a plan described in Sections 201(2), 301(a)(3)
and 401(a)(1) of ERISA providing benefits to a select group of management or
highly compensated employees.

 

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 from time to time.

2.03 Base Compensation:

An Eligible Executive’s adjusted base salary, to the extent payable in U.S.
dollars from an Employer’s U.S. payroll (as modified by the provisions of
Section 3.01(a)). 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 made under any Code Section 401(k) or
Code Section 125 plans sponsored by the Executive’s Employer or the Company.

2.04 Beneficiary:

The person or persons (including a trust or trusts) properly designated by a
Participant, as determined by the Recordkeeper (or for designations filed prior
to June 3, 2002, 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 in accordance with Section 4.02(d).

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,
to the extent payable in U.S. dollars from an Employer’s U.S. payroll (as
modified by the provisions of Section 3.01(a)). 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 made under any Code Section 401(k) or
Code Section 125 plans

 

2

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

sponsored by the Executive’s Employer or the Company. Notwithstanding the
preceding sentence, an Eligible Executive’s premium bonuses (a term that will
have its normal meaning under the compensation practices of the Executive’s
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.

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 the Participant is considered “disabled” under the PepsiCo
Disability Plan (as amended and restated from time to time). The Participant’s
disability must also meet 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 authorized that the Plan Administrator may make available for
use such technologies, including voice response systems, Internet-based forms
and any other electronic forms for use as an Election Form, as it deems
appropriate from time to time.

 

3

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

2.12 Eligible Executive:

The term, Eligible Executive, shall have the meaning given to it in
Section 3.01(a)(1).

2.13 Employer:

The Company and each division, subsidiary or affiliate of the Company (if any)
that is currently designated as an Employer for purposes of this Plan 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:

As modified by the Appendix, the individuals identified in accordance with the
principles set forth below.

(a) General. Any Participant who at any time during the applicable year is:

 

 

(1)

An officer of any member of the PepsiCo Organization having annual compensation
greater than $130,000 (as adjusted for the applicable year under Code
Section 416(i)(1));

 

 

(2)

A 5-percent owner of any member of the PepsiCo Organization ; or

 

4

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

 

(3)

A 1-percent owner of any member of the PepsiCo Organization having annual
compensation of more than $150,000.

For purposes of (1) above, no more than 50 employees identified in the order of
their annual compensation shall be treated as officers. For purposes of this
Section, annual compensation means compensation as defined in Treas. Reg.
§1.415(c)-2(a), without regard to Treas. Reg. §§1.415(c)-2(d), 1.415(c)-2(e),
and 1.415(c)-2(g). 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
(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) Applicable Year. Effective from and after January 1, 2008, the Plan
Administrator shall determine Key Employees effective as of the last day of each
calendar year, based on compensation for such year, and such designation shall
be effective for purposes of this Plan for the twelve month period commencing on
April 1st of the next following calendar year (e.g., the Key Employees
determined by the Plan Administrator as of December 31, 2008 shall apply to the
period from April 1, 2009 to March 31, 2010).

(c) Rule of Administrative Convenience. Effective from and after January 1,
2008, in addition to the foregoing, the Plan Administrator shall treat all other
employees classified as Band IV and above on the applicable determination date
prescribed in subsection (b) (i.e., the last day of each calendar year) as a Key
Employee for purposes of the Plan for the twelve month period commencing on
April 1st of the next following calendar year; provided that if this would
result in counting more than 200 individuals as Key Employees as of any such
determination date, then the number treated as Key Employees will be reduced to
200 by eliminating from consideration those employees otherwise added by this
subsection (c) in order by their base compensation, from the lowest to the
highest.

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.

 

5

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

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).

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:

 

6

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

(a) The Participant accepting any employment, assignment, position or
responsibility, or acquiring any ownership interest, which involves the
Participant’s “Participation” (as defined below) 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 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 product 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 without limitation carbonated soft drinks,
tea, water, juice drinks, sports drinks, coffee drinks and value-added dairy
drinks; juices and juice products; snacks, including salty snacks, sweet snacks,
meat snacks, granola and cereal bars, and cookies; hot cereals; pancake mixes;
value-added rice products; pancake syrups; value-added pasta products;
ready-to-eat cereals; dry pasta products ; 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.

For purposes of this Section, “Participation” shall be construed broadly to
include: (i) serving as a director, officer, employee, consultant or contractor
with respect to such a business entity; (ii) providing input, advice, guidance
or suggestions to such a business entity; or (iii) providing a recommendation or
testimonial on behalf of such a business entity or one or more products it
produces.

 

7

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

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:

A Participant’s Separation from Service after attaining (whichever of the
following occurs earlier): (a) at least age 55 with 10 or more years of service,
or (b) at least age 65 with 5 or more years of service. As modified by the
Appendix, effective from and after January 1, 2008, a Participant’s “years of
service” (for purposes of this Section) shall be equal to the sum of the
following – (a) all periods of time a Participant was employed by a member of
the PepsiCo Organization, plus (b) if a Participant is employed by a member of
the PepsiCo Organization, the Participant’s employment terminates with all
members of the PepsiCo Organization and then the Participant is rehired by a
member of the PepsiCo Organization thereafter, the period of time during which
the Participant was not employed by a member of the PepsiCo Organization.
Notwithstanding the foregoing, the period of time prior to a Participant being
first employed by a member of the PepsiCo Organization shall not be counted as
part of a Participant’s “years of service,” and the period of time after a
Participant terminates employment with all members of the PepsiCo Organization
shall not be counted, unless the Participant is rehired by a member of the
PepsiCo Organization thereafter (and then only upon his/her rehire date).

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 are issued thereunder.

2.32 Separation from Service:

A Participant’s separation from service as defined in Section 409A; provided
that for purposes of determining whether a Separation from Service has occurred,
the Plan has determined, based upon legitimate business criteria, to use the
twenty percent (20%) test described in Treas. Reg. §1.409A-1(h)(3). In the event
a Participant also provides services other than as an Executive for the Company
and its affiliates, as determined under the prior sentence, such other services
shall not be taken into account in determining when a Separation from Service
occurs to the extent permitted under Treas. Reg. § 1.409A-1(h)(5). The term may
also be used as a verb (i.e., “Separates from Service”) with no change in
meaning.

 

8

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

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 or a calendar quarter and a year as the Specific Payment Date, the first
day of the month or the first day of the calendar quarter 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, the Participant’s
Beneficiary or the Participant’s dependent (as defined in Code Section 152(a),
without regard to Code Sections 152(b)(1), 152(b)(2) and 152(d)(1)(B)); (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 Treas. Reg.
§1.409A-3(i)(3) and any guidelines established by the Plan Administrator.

2.35 U.S.:

The United States, comprised of its 50 states, the District of Columbia, and its
possessions (other than Puerto Rico).

2.36 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.

 

9

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

ARTICLE III – ELIGIBILITY AND PARTICIPATION

3.01 Eligibility to Participate:

(a) In General.

 

 

(1)

Subject to Paragraphs (2) and (3) below, the election timing rules of Article IV
and the provisions of the Appendix, 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 (ii) being promoted by an Employer from below Band II into a Band
II or above position. However, an Eligible Executive who makes an irrevocable
election to participate for a Plan Year shall remain an Eligible Executive for
the remainder of the Plan Year (i) regardless of whether such Executive is
subsequently classified in a salary band below Band II or (ii) regardless of
whether such Executive subsequently is paid in non-U.S. dollars or is paid from
a non-U.S. payroll; provided that the occurrence of such events shall cut off
any election that has been made that has not yet required to become irrevocable
in order to be timely in accordance with Section 409A. Any individual who
becomes an Eligible Executive during a Plan Year (including an individual who
previously was an Eligible Executive under the Plan, or who had similar status
under another elective account balance plan of the Employer) may only be treated
as an Eligible Executive for such Plan Year by satisfying the initial
eligibility requirements of Treas. Reg. 1.409A-2(a)(7)(ii).

 

 

(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; provided that the Plan Administrator may remove an
Executive from eligibility to participate effective only as of the end of a Plan
Year.

(b) 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.

(c) 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:

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:

(a) Subject to Section 4.01(b), the date he or she Separates from Service; or

 

10

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

(b) The date that the Executive ceases to be eligible under criteria described
in Section 3.01(a).

An individual’s “Election Termination Date” shall be a date as soon as
administratively practicable following the date in subsection (a) or (b) (or
such other date as may be determined in accordance with rules of the Plan
Administrator) ; provided that an Election Termination Date shall not affect any
election already made that otherwise has become irrevocable in accordance with
the rules of this Plan. However, the occurrence of an Election Termination Date
shall terminate any election that has been made that is not yet required to
become irrevocable in order to be timely in accordance with Section 409A.

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; provided, however,
even if a Participant’s Account is fully paid out, participation shall continue
under the Plan if there is an expectation that the Participant shall be entitled
to future benefits under the Plan or that a deferral will be credited to the
Participant’s Account in the future (e.g., a deferral of Bonus Compensation that
is paid in a future year).

 

11

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

ARTICLE IV – DEFERRAL OF COMPENSATION

4.01 Deferral Election:

(a) Deferrals of Base Compensation. Except as modified by the Appendix,
effective for Base Compensation that is paid from and after January 1, 2009,
each Eligible Executive may make an election to defer under the Plan any whole
percentage up to 85% 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 be deducted
each pay period during the Plan Year for which he or she has Base Compensation
and is an Eligible Executive. Base Compensation paid after the end of a Plan
Year for services performed during the final payroll period of the preceding
Plan Year shall be treated as Base Compensation for services in the subsequent
Plan Year.

(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 (i) the Bonus Compensation is contingent on the satisfaction of

 

12

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

 

organizational or individual performance criteria for the Performance Period
that relates to the Plan Year, (ii) such criteria have been established in
writing by not later than 90 days after the beginning of the applicable
Performance Period, and (iii) the Bonus Compensation otherwise satisfies the
requirements for performance-based compensation under Section 409A.

(c) Election Form Rules. To be effective in deferring Base Compensation or Bonus
Compensation, an Eligible Executive’s Election Form must set forth the
percentage of Base Compensation or 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. 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. Notwithstanding the prior sentence, the Plan
Administrator may adopt policies and procedures that encourage or require
earlier submission of Election Forms , but in which case any requirement for the
earlier submission of an Election Form may be waived (but not beyond the date
specified by the first sentence of this subsection) by the Plan Administrator to
prevent undue hardship for one or more Eligible Executives. 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

 

13

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

to the Plan Year in which he or she is promoted at least six months prior to the
end of the applicable Performance Period. Notwithstanding the first sentence of
this subsection, the Plan Administrator may adopt policies and procedures that
encourage or require earlier submission of Election Forms for Bonus
Compensation, but in which case any requirement for the earlier submission of an
Election Form may be waived (but not beyond the date specified by the first
sentence of this subsection) by the Plan Administrator to prevent undue hardship
for one or more Eligible Executives.

(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. Except as
provided in the next sentence, an election is irrevocable once received and
determined by the Plan Administrator to be properly completed (and such
determination shall be made not later than the last date for making the election
in question). Increases or decreases in the amount or percentage a Participant
elects to defer shall not be permitted during a Plan Year. Notwithstanding the
foregoing, effective as of January 1, 2008, if a Participant receives a hardship
distribution under a cash or deferred profit sharing plan that is sponsored by a
member of the PepsiCo Organization and such plan requires that deferrals under
such plan be suspended for a period of time following the hardship distribution,
the Plan Administrator may cancel the Participant’s deferral election under this
Plan so that no deferrals shall be made during such suspension period. If an
election is cancelled because of a hardship distribution in accordance with the
prior sentence, such cancellation shall permanently apply to the deferral
election or elections for any Plan Year covered by such suspension period and
the Participant will only be eligible to make a new deferral election for the
Plan Year that begins after the end of the suspension period pursuant to the
rules in Sections 4.01 and 4.02.

(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; provided that, 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 consent) as the Plan
Administrator or 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. In determining whether a
Beneficiary designation that relates to the Plan is in effect, unrevoked
designations that were received under the Pre-409A Program or prior to the
Effective Date 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

 

14

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

no effect. 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. 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.

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. Except as modified by the Appendix, 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 that is paid from and after January 1, 2008, at least
twelve (12) 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 that is paid from and after January 1, 2008, at least
eighteen (18) months 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.

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. Installment elections for a fixed dollar amount shall be paid based on
the selected frequency and the selected amount until the applicable Deferral
Subaccount is exhausted, but shall not be paid for a period of more than 20
years and not later than the Executive’s 80th birthday. If an Eligible Executive
elects installments for a period extending beyond the Eligible Executive’s 80th
birthday(or for purposes of a fixed dollar amount installment election, the
installments would continue beyond the Executive’s 80th birthday or beyond 20
years), such election shall be treated

 

15

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

as an election for installments over a period of whole and partial years that
ends on the Eligible Executive’s 80th birthday or at the end of 20 years;
provided that the amounts to be distributed in connection with the installments
prior to the Eligible Executive’s 80th birthday or prior to the end of 20 years
shall be determined in accordance with Section 6.08 and his or her election by
assuming that the installments shall continue for the full number of
installments or the elected fixed dollar amount, with the entire remaining
amount of the relevant Deferral Subaccount distributed on the Eligible
Executive’s 80th birthday or at the end of 20 years.

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.

 

 

(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.

 

16

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

 

(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.

 

17

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

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 as of the date of the deferral to his or her Account as soon
as administratively 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 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,

 

18

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

 

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
Common 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 AFR Fund: This fund is established effective from and after December 29,
2006. Participant Accounts invested in this phantom option accrue a return based
upon an interest rate that is 120% of the applicable Federal long-term rate
(pursuant to Code Section 1274(d) or any successor provision) applicable for
annual compounding, as published by the U.S. Internal Revenue Service from time
to time. Returns accrue for each month based upon 120% of the applicable Federal
long-term rate (applicable for annual compounding) 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:

(a) Deferral Elections. With respect to any deferral election by a Participant,
the Participant may use his or her Election Form to allocate the deferral in one
percent increments among the phantom investment options then offered by the Plan
Administrator. 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 AFR 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%.

 

19

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

(b) Fund Transfers. 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 one
percent increments, the reallocation of his or her Deferral Subaccount among the
phantom investment options then offered by the Plan Administrator for this
purpose. (The rules relating to non-paper formats for Election Forms shall also
apply to the fund transfer form.) If a fund transfer form provides for investing
less than or more than 100% of the Participant’s Deferral Subaccount, 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. If more than one fund transfer form is received on a timely basis, the
form that the Plan Administrator or Recordkeeper determines to be the most
recent shall be followed.

(c) Phantom PepsiCo Common Stock Fund Restrictions. Notwithstanding the
preceding provisions of this Section, the Plan Administrator may at any time
alter the effective date of any investment or allocation involving the Phantom
PepsiCo Common Stock Fund pursuant to Section 7.03(j) (relating to safeguards
against insider trading). The Plan Administrator may also, to the extent
necessary to ensure compliance with Rule 16b-3(f) of the Act, arrange for
tracking of any such transaction defined in Rule 16b-3(b)(1) of the Act and bar
any such transaction to the extent it would not be exempt under Rule 16b-3(f).
The Company may also impose blackout periods pursuant to the requirements of the
Sarbanes-Oxley Act of 2002 whenever the Company determines that circumstances
warrant. Further, the Company may impose quarterly blackout periods on insider
trading in the Phantom PepsiCo Common Stock Fund as needed (as determined by the
Company), timed to coincide with the release of the Company’s quarterly earnings
reports. The commencement and termination of these blackout periods in each
quarter, the parties to which they apply and the activities they restrict shall
be as set forth in the official insider trading policy promulgated by the
Company from time to time. These provisions 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:

Subject to 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 January 1, 2005, 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

 

20

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

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
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 January 1, 2005) 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 January 1, 2005. (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:

 

21

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

 

(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.

 

 

(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 at any time
prior to the second anniversary of his or her Separation from Service, 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 during such period 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.

 

22

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

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.

(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

 

23

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

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 on the Specific Payment
Date.

(b) This subsection shall be effective for Specific Payment Dates and
Separations from Service occurring from and after January 1, 2009 (with
additional rules contained in the Appendix). 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 on the Specific Payment Date. Thereafter, installment payments shall
continue in accordance with the schedule elected by the Participant (subject to
the provisions of this Plan that constrain such elections), except as provided
in Sections 6.03, 6.04, 6.06 and 6.07 (relating to distributions upon Separation
from Service (other than Retirement), 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 last installment distribution is processed for payment the
Participant Separates from Service (other than 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 remaining
balance of 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 (other than Retirement), 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.

 

24

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

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. The
rules of this Section shall be effective for Specific Payment Dates and
Separations from Service occurring from and after January 1, 2009 (with
additional rules contained in the Appendix).

(a) Subject to Subsection (c), 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 on
the first day of the calendar quarter that follows the Participant’s Separation
from Service.

(b) Subject to Subsection (c), if the Participant’s Separation from Service is
on or after the Specific Payment Date (including a Specific Payment Date
resulting from a Second Look Election) 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 the Participant’s installment payment election
shall be void and the Participant shall be paid a single lump sum distribution
for the remaining balance of the Deferral Subaccount based upon the provisions
of Subsection (a) above; 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 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 the first day of the calendar quarter that is at least 6
months after the Participant’s Separation from Service.

(d) If a Participant has Separated from Service, the Participant’s entire
Account balance has been distributed under this Article VI as a result of such
Separation from Service, and later the Participant’s Account is credited with a
deferral of compensation that was not available for credit before the time the
Participant’s Account was previously paid out (e.g., Bonus Compensation), then
the new balance of such Participant’s Account shall be distributed as a result
of such prior Separation from Service and the distribution shall be made in a
single lump sum payment on the first day of the calendar quarter that follows
the date that the deferral was credited to the Participant’s Account, subject
however to the rules of subsection (c).

 

25

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

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 on 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. 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.

(b) Effective for deaths occurring from and after January 1, 2009, 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 payments to be made pursuant to this
Section shall be distributed as follows:

 

 

(1)

If the Participant is married at the time of his/her death, all payments made
pursuant to this Section shall be paid to the Participant’s spouse; and

 

 

(2)

If the Participant is not married at the time of his/her death, all payments
made pursuant to this Section shall be paid to the Participant’s estate.

The Plan Administrator shall determine whether a Participant is “married” and
shall determine a Participant’s “spouse” based on the state or local law where
the Participant has his/her primary residence at the time of death. The Plan
Administrator is authorized to make any applicable inquires and to request any
documents, certificates or other information that it deems necessary or
appropriate in order to make the above determinations.

(c) 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).

(d) 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.

 

26

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

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, 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 on 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 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 on
the first date (i) on which the Participant is Disabled (determined without
regard to 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 Disability Plan)
for the current cause of Disability (determined without regard to the duration
requirement of this clause).

 

27

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

(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 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 of the day the Recordkeeper finalizes the determination. 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 (other than a fixed amount elected under Section 4.04) 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. The amount distributed in connection with a
fixed dollar amount installment election shall be equal to the dollar amount
elected and subject to the rules in Section 4.04.

 

28

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

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 Sections 5.03(c) and 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.

6.11 Actual Payment Date:

An amount payable on a date specified in this Article VI shall be paid no later
than the later of (a) the end of the calendar year in which the specified date
occurs, or (b) the 15th day of the third calendar month following such specified
date. In addition, the Participant (or Beneficiary) is not permitted to
designate the taxable year of the payment.

 

29

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

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;

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

 

30

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

(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.

7.05 Withholding:

The Employer shall withhold from amounts due under this Plan, any amount
necessary to enable the Employer to remit to the appropriate government entity
or entities on behalf of the Participant as may be required by the federal
income tax provisions of the Code, by an applicable

 

31

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

state’s income tax provisions, and by an applicable city, county or
municipality’s earnings or income tax provisions. Further, the Employer shall
withhold from the payroll of, or collect from, a Participant the amount
necessary to remit on behalf of the Participant any Social Security or Medicare
taxes which may be required with respect to amounts deferred or accrued by a
Participant hereunder, as determined by the Employer. In addition, to the extent
required by Section 409A, amounts deferred under this Plan shall be reported on
each Participant’s Form W-2 for the applicable tax year, and any amounts that
become taxable hereunder shall be reported as taxable wages on the Participant’s
Form W-2 for the applicable tax year. All such reporting shall be performed
based on the rules and procedures of Section 409A.

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, (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, and (iv) if
paid at the time the distribution would be made without regard to this
subsection, could result in a violation of Section 16 of the Act because there
is an opposite way transaction that would be matched with the liquidation of the
Participant’s interest in the PepsiCo Common Stock Fund (either as a
“discretionary transaction,” within the meaning of Rule 16b-3(b)(1), or as a
regular transaction, as applicable) (a “Covered Distribution”). 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, or if it is a discretionary transaction, then the
actual distribution to the Participant shall be delayed only until the earlier
of:

 

 

(1)

In the case of a transaction that is not a discretionary transaction, 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 would no longer violate Section 16 of the Act, e.g.,
when the Participant is no longer subject to Section 16 of the Act, when the
Deferral Subaccount related to the distribution is no longer invested in the
Phantom PepsiCo Common Stock Fund or when the time between the liquidation and
an opposite way transaction is sufficient.

 

32

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

7.07 Conformance with Section 409A:

Effective from and after January 1, 2009, 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. In all cases, the provisions of this Section
shall apply notwithstanding any contrary provision of the Plan that is not
contained in this Section.

 

33

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

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).

 

34

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

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.

 

35

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

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:

(a) 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).

(b) Notwithstanding the provisions of Subsection (a), for purposes of this
Section an “Employer” shall only refer to those entities which are part of the
PepsiCo Organization. If a Participant transfers to an entity that is not part
of the PepsiCo Organization, the liability for deferrals made while the
Participant was employed by the PepsiCo Organization shall remain with his or
her last Employer that was part of the PepsiCo Organization.

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.

 

36

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

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.

 

37

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

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.

 

38

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

ARTICLE XI – AUTHENTICATION

The 409A Program was first adopted and approved by the Compensation Committee of
the Company’s Board of Directors at the Compensation Committee’s duly authorized
meeting on November 18, 2005. This 409A Program document as amended and restated
is hereby adopted and approved effective as stated herein by the Compensation
Committee at the Compensation Committee’s duly authorized meeting on
September 11, 2008.

 

39

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

APPENDIX

The following Appendix articles modify particular terms of the Plan. Except as
specifically modified in the Appendix, the foregoing main provisions of the Plan
shall fully apply in determining the rights and benefits of Eligible Executives,
Participants and Beneficiaries (and of any other individual claiming a benefit
through or under the foregoing). In the event of a conflict between the Appendix
and the foregoing main provisions of the Plan, the Appendix shall govern.

 

Appendix

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

APPENDIX ARTICLE A – TRANSITION PROVISIONS

A.1 Scope.

This Article A provides the transition rules for the Plan that were effective at
some time during the period beginning January 1, 2005 and ending December 31,
2008. The time period during which each provision in this Article A was
effective shall be provided herein.

A.2 Transition Rules for Article II (Definitions).

(a) Key Employee. In addition to the provisions provided in Article II for
identifying Key Employees. The following operating rules were in effect for the
indicated time periods –

 

 

(1)

Operating Rules for 2005. To ensure that the Company does not fail to identify
any Key Employees, 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.

 

 

(2)

Operating Rules for 2006 and 2007. To ensure that the Company does not fail to
identify any Key Employees, in the case of Separation from Service distributions
during the 2006 Plan Year and 2007 Plan Year, the Company shall treat as Key
Employees for such applicable Plan Year of their Separation from Service those
individuals who meet the provisions of subparagraph (i) or (ii) below (or both).

 

 

(i)

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

 

 

(ii)

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 subparagraph (ii). For purposes of this subparagraph (ii), the
Company shall determine Key Employees based on compensation (as defined in Code
Section 415I(3)) that is taken into account as follows –

 

 

(A)

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

 

 

(B)

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).

 

A-1

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

(b) Retirement. In addition to the provisions in Article II, for the period
beginning from and after January 1, 2005 and ending on December 31, 2007, a
Participant’s “years of service” (used in determining whether a “Retirement” has
occurred) shall be 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 or is a participant in the PepsiCo Salaried Employees
Retirement Plan).

A.3 Transition Rules for Article III (Eligibility):

Notwithstanding the provisions of Section 3.01, the following special rules
shall apply to Executives during the 2005 Plan Year –

 

 

(a)

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)).

 

 

(b)

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.

 

 

(c)

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.

 

 

(d)

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.

 

 

(e)

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
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.

A.4 Transition Rules for Article IV (Deferral of Compensation):

(a) Base Compensation Deferrals. Notwithstanding the first sentence of
Section 4.01(a), for Base Compensation that is paid from and after January 1,
2005 and on or before

 

A-2

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

December 31, 2008, 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.

(b) Period of Deferral. Notwithstanding the provisions of Section 4.03 and 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
–

 

 

(1)

For Base Compensation that is paid from and after January 1, 2005 and on or
before December 31, 2007, at least six (6) months after the end of the Plan Year
during which the Base Compensation would have been paid absent the deferral; and

 

 

(2)

For Bonus Compensation that is paid from and after January 1, 2005 and on or
before December 31, 2007, at least twelve (12) months after the date the Bonus
Compensation would have been paid absent the deferral.

A.5 Transition Rules for Article V (Investments):

(a) Investment Options. Notwithstanding Section 5.02(b)(2), effective for
periods from and after January 1, 2005 and ending on December 28, 2006, the Plan
shall have the Phantom Prime Rate Fund as a phantom investment option.
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. Any Participant Accounts invested in the
Phantom Prime Rate Fund as of December 28, 2006 were transferred into the
Phantom AFR Fund effective as of December 29, 2006.

(b) Investment Elections. Notwithstanding the provisions of Section 5.03, for
periods from and after January 1, 2005 and ending on December 28, 2006, the
Phantom Prime Rate Fund was the “default” fund to the extent a default fund was
needed in order to make certain a Participant’s Account was 100% invested.

A.6 Transition Rules for Article VI (Distributions):

(a) Distributions on Account of a Specific Payment Date. For Specific Payment
Dates and Separations from Service that occur from and after January 1, 2005 and
on or before December 31, 2008, the language in Section 6.02(b) shall be
replaced in its entirety with the following language:

 

 

“(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 on 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

 

A-3

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

 

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 (as modified by Article A), 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.”

(b) Distributions on Account of a Separation from Service. For Specific Payment
Dates and Separations from Service that occur from and after January 1, 2005 and
on or before December 31, 2008, the language of Section 6.03 shall be replaced
in its entirety with the following language:

“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 on
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.

 

A-4

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

 

(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
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 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 the date following the first day of the calendar quarter
that is at least 6 months after the Participant’s Separation from Service.”

A.7 Transition Rules for Article VII (Administration):

For periods effective from and after January 1, 2005 and on or before
December 31, 2008, the language of Section 7.07 shall be replaced in its
entirety with the following language:

“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

 

A-5

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

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.”

A.8 Certain Transition Rules:

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.

 

A-6