Document:

EX-10.21

 

Exhibit 10.21

THE MCGRAW-HILL COMPANIES, INC.

SENIOR EXECUTIVE SUPPLEMENTAL

DEATH, DISABILITY & RETIREMENT BENEFITS PLAN

(As Amended January 24, 2006)

The McGraw-Hill Companies, Inc. desires to retain the services of and provide rewards and
incentives to members of a select group of management employees who contribute to the success of
the Company.

In order to achieve this objective, the Company has adopted the following Senior Executive
Supplemental Death, Disability & Retirement Benefits Plan to provide disability or supplemental
retirement benefits for certain management employees who become Members of the Plan and
supplemental death benefits for the Beneficiaries of deceased Members.

ARTICLE I

TITLE AND EFFECTIVE DATE

     Section 1.01 This Plan shall be known as the McGraw- Hill Companies, Inc. Senior
Executive Supplemental Death, Disability & Retirement Benefits Plan (hereinafter referred to as the
“Plan”).

     Section 1.02 The Effective Date of this Plan shall be the date the Plan becomes
effective upon approval by the Board of Directors.

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ARTICLE II

DEFINITIONS

     As used herein, the following words and phrases shall have the meanings specified below unless
a different meaning is clearly required by the context:

     Section 2.01 The terms “Actuarial Equivalent” or “Actuarially Determined” shall mean
a benefit of equivalent value when computed on the basis of 7% interest compounded annually and the
1971 group mortality tables (determined separately by sex). In the event of a Change of Control,
the definitions in this Section 2.01 cannot be changed.

     Section 2.02 The term “Attained Age” shall mean the age of a Member as of his or her
last birthday.

     Section 2.03 The term “Beneficiary” shall mean the person, persons, or entity
designated by the Member to receive any benefits under this Plan. Any Beneficiary Designation
shall be made in a written instrument filed with the Company and shall become effective only when
accepted and acknowledged in writing by the Company.

     Section 2.04 The term “Board of Directors” shall mean the Board of Directors of the
Employer.

     Section 2.05 The term “Cause” shall mean the employee’s misconduct in respect of the
employee’s obligations to the Company or other acts of misconduct by the employee occurring during
the course of the employee’s employment, which in either case results in or could reasonably be
expected to result in material damage to the property, business or reputation of the Company;
provided, that in no event shall unsatisfactory job performance alone be deemed to be
“Cause”; and provided, further, that no termination of employment that is carried out at
the request of a person seeking to accomplish a Change in Control or otherwise in anticipation of a
Change in Control shall be deemed to be for “Cause”.

     Section 2.06 The term “Change of Control” shall mean: (i) An acquisition by an
individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange
Act) (a “Person”) of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the
Exchange Act) of 20% or more of either (1) the then outstanding shares of common stock of the
Corporation (the “Outstanding Corporation Common Stock”) or (2) the combined voting power of the
then outstanding voting securities of the Corporation entitled to vote generally in the election of
directors (the “Outstanding Corporation Voting Securities”); excluding, however, the following:

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     (1) any acquisition directly from the Corporation, other than an acquisition by virtue of the
exercise of a conversion privilege unless the security being so converted was itself acquired
directly from the Corporation; (2) any acquisition by the Corporation; (3) any acquisition by any
employee benefit plan (or related trust) sponsored or maintained by the Corporation or any entity
controlled by the Corporation; or (4) any acquisition pursuant to a transaction which complies with
clauses (1), (2) and (3) of subsection (iii) of this definition; or

     (ii) A change in the composition of the Board of Directors such that the individuals who, as
of the effective date of the Plan, constitute the Board of Directors (such Board of Directors shall
be hereinafter referred to as the “Incumbent Board”) cease for any reason to constitute at least a
majority of the Board of Directors; provided, however, for purposes of this
definition, that any individual who becomes a member of the Board of Directors subsequent to the
effective date of the Plan, whose election, or nomination for election by the Corporation’s
shareholders, was approved by a vote of at least a majority of those individuals who are members of
the Board of Directors and who were also members of the Incumbent Board (or deemed to be such
pursuant to this proviso) shall be considered as though such individual were a member of the
Incumbent Board; but, provided further, that any such individual whose initial assumption
of office occurs as a result of either an actual or threatened election contest (as such terms are
used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act) or other actual or
threatened solicitation of proxies or consents by or on behalf of a Person other than the Board of
Directors shall not be so considered as a member of the Incumbent Board; or

     (iii) Consummation of a reorganization, merger or consolidation or sale or other disposition
of all or substantially all of the assets of the Corporation (“Corporate Transaction”); excluding,
however, such a Corporate Transaction pursuant to which (1) all or substantially all of the
individuals and entities who are the beneficial owners, respectively, of the Outstanding
Corporation Common Stock and Outstanding Corporation Voting Securities immediately prior to such
Corporate Transaction will beneficially own, directly or indirectly, more than 50% of,
respectively, the outstanding shares of common stock, and the combined voting power of the then
outstanding voting securities entitled to vote generally in the election of directors, as the case
may be, of the corporation resulting from such Corporate Transaction (including, without
limitation, a corporation which as a result of such transaction owns the Corporation or all or
substantially all of the Corporation’s assets either directly or through one or more subsidiaries)
in substantially the same proportions as their ownership, immediately prior to such Corporate
Transaction, of the Outstanding Corporation Common Stock and Outstanding Corporation Voting
Securities, as the case may be,

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     (2) no Person (other than the Corporation, any employee benefit plan (or related trust) of
the Corporation or such corporation resulting from such Corporate Transaction) will beneficially
own, directly or indirectly, 20% or more of, respectively, the outstanding shares of common stock
of the corporation resulting from such Corporate Transaction or the combined voting power of the
outstanding voting securities of such corporation entitled to vote generally in the election of
directors except to the extent that such ownership existed prior to the Corporate Transaction, and
(3) individuals who were members of the Incumbent Board will constitute at least a majority of the
members of the board of directors of the corporation resulting from such Corporate Transaction; or

     (iv) The approval by the stockholders of the Corporation of a complete liquidation or
dissolution of the Corporation.

     Section 2.07 The term “Committee” shall mean the Compensation Committee of the Board
of Directors.

     Section 2.08 The term “Death Benefit” shall mean any benefit paid to a Beneficiary
upon the death of a Member as provided under the terms of this Plan.

     Section 2.09 The term “Disability” or “Disabled” shall mean eligibility for
disability benefits under the terms of the Employer’s Long-Term Disability Plan in effect at the
time the Member becomes disabled.

     Section 2.10 The term “Early Retirement” shall mean the date of a Member’s retirement
during the period commencing on the first day of the month coincident with or immediately following
the Member’s fiftieth (50th) birthday and ending on the Member’s Normal Retirement Date.

     Section 2.11 The term “Effective Date” shall mean the date the Plan becomes effective
upon approval by the Board of Directors.

     Section 2.12 The term “Employer” shall mean The McGraw-Hill Companies, Inc., its
successors, any subsidiary or affiliated organizations authorized by the Board of Directors of The
McGraw-Hill Companies, Inc. or the Committee to participate in this Plan with respect to their
Members, and subject to the provisions of Article X, any organization into which or with which the
Employer may merge or consolidate or to which all or substantially all of its assets may be
transferred.

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     Section 2.13 The term “Final Monthly Earnings” shall mean

     (i) For purposes of Article IV and Article X, (1) the sum of (x) a Member’s highest rate of
annual base salary in effect during the 36-month period immediately preceding retirement (other
than pursuant to Section 4.02), termination without Cause pursuant to Section 4.03, or termination
following Change of Control as provided in Article X, and (y) the Member’s highest 100% target
annual short-term incentive opportunity during that same 36-month period (2) divided by 12; or

     (ii) For purposes of Article VI, (1) the greater of (A) 1.5 times a Member’s annual base
salary in effect immediately preceding the date of the Member’s Disability or (B) the sum of (x)
the Member’s highest rate of annual base salary in effect during any portion of such 36-month
period occurring prior to January 1, 2005, and during which the Member participated in the Plan,
and (y) the Member’s highest 100% target annual short-term incentive opportunity during that same
portion of such 36-month period (2) divided by twelve.

     Section 2.14 The term “Good Reason” shall mean voluntary termination based on any of
the following: (1) reduction in the employee’s base salary, (2) reduction of the employee’s
incentive compensation award opportunities, (3) transfer of the employee to a principal business
location so as to increase the distance between the principal business location and such employee’s
place of residence at the time of the Change of Control by more than thirty-five miles, (4)
significant reduction in the employee’s responsibilities and status within the Company or a change
in the employee’s title or office without prior written consent, (5) involuntary discontinuation of
the employee’s participation in any life insurance, health and accident or disability plan
maintained by the Company, (6) involuntary elimination of the employee’s paid vacation or (7) for
any reason during the 30-day period following the first anniversary of a Change of Control.

     Section 2.15 The term “Member” shall mean an employee who is part of a select group
of management and has become a Member as provided in Article III hereof.

     Section 2.16 The term “Monthly Disability Income” shall mean a monthly income due a
Disabled Member as provided in Article VI hereof.

     Section 2.17 The term “Monthly Retirement Income” shall mean a monthly income due a
Retired Member which shall commence as of his Retirement Date and continue for the period provided
herein.

     Section 2.18 The term “Normal Retirement Date” shall mean the first day of the month
coincident with or immediately following the Member’s sixty-fifth (65th) birthday.

     Section 2.19 The term “Plan” shall mean the The McGraw-Hill Companies, Inc. Senior
Executive Supplemental Death, Disability & Retirement Benefits Plan.

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     Section 2.20 The term “Primary Social Security” shall mean the estimated Primary
Insurance Amount (payable monthly) available to a Member at age sixty-two (62), or his Retirement
Date, whichever is later, under the Social Security Act in effect at the Member’s Retirement Date.

     Section 2.21 The term “Qualified Plan” shall mean the Employee Retirement Plan of The
McGraw-Hill Companies, Inc. and its subsidiaries; the Retirement Plan for Employees of Standard &
Poor’s Corporation and Participating subsidiaries; the Employee Retirement Income Plan of The
McGraw-Hill Companies Broadcasting Company, Inc. and its subsidiaries, and any amendments or
successor plans thereto.

     Section 2.22 The term “Retired Member” shall mean any Member of the Plan who has
qualified for retirement and has retired, and who is eligible to receive a Monthly Retirement
Income by direction of the Committee. The term “Retired Member” shall also include any Member
terminated without Cause and who is eligible to receive a Monthly Retirement Income pursuant to
Section 4.03, and any Member for whom the Committee has approved a Monthly Retirement Income under
Section 4.02.

     Section 2.23 The term “Retirement Date” shall mean the first day of the month
coinciding with or immediately following the month the Member terminates employment due to any of
the following: (1) retirement pursuant to Sections 4.01 or 4.03, (2) termination without Cause
pursuant to Section 4.03, or (3) termination without Cause or retirement if so approved by the
Committee pursuant to Section 4.02.

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ARTICLE III

MEMBERSHIP IN THE PLAN

     Section 3.01 Eligibility for membership in this Plan shall be determined by the
Committee in its sole discretion, on an individual basis. The Committee shall also have the right
to remove a Member from the Plan at any time in its sole discretion if the Member is no longer
eligible to participate in the Plan under the terms of Section 3.04. However, a Member whose
benefits under the Plan have commenced to be paid shall not be removed from membership in the Plan
and such benefits shall not be terminated thereafter for any reason. Notwithstanding anything
contained herein to the contrary, after a Change of Control has occurred, Article X shall be
applicable to a Member who is removed from the Plan.

     Section 3.02 If a Member whose benefits under the Plan have not commenced to be paid
is removed from the Plan under Section 3.01, all future benefits payable under this Plan to the
Member or his beneficiary shall cease.

     Section 3.03 Subject to Section 10.02 hereof, the payment of benefits to the Member
or his Beneficiary under this Plan is conditioned upon the continuous employment of the Member by
the Employer (including periods of disability and authorized leaves of absence) from the date of
the Member’s participation in the Plan until the Member’s Retirement Date, Disability or Death,
whichever first occurs.

     Section 3.04 Employees who are selected to participate in the Plan shall be chosen
from those top management employees whose compensation is determined by Hay Points without regard
to salary grades.

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ARTICLE IV

MONTHLY RETIREMENT INCOME

     Section 4.01 A Member who retires on his Normal Retirement Date shall be entitled to
receive a Monthly Retirement Income under this Plan as calculated by the Committee. The amount of
a Member’s Monthly Retirement Income shall be 55% of Final Monthly Earnings reduced by the amounts
set forth in Sections 4.01(a), 4.01(b), 4.01(c) and 4.01(d).

     Section 4.01(a) One hundred percent (100%) of his monthly Primary Social Security
benefit payable at his Retirement Date under the Social Security law in effect at that time.

     Section 4.01(b) One hundred percent (100%) of the monthly income, received from the
Qualified Plan and the Excess Benefit Plan as of his Retirement Date. Such amount shall be
actuarially determined as a life annuity payable in equal monthly installments, regardless of the
actual form of payment.

     Section 4.01(c) One hundred percent (100%) of benefits received from the qualified
pension plans of any previous employers. Such amounts shall be actuarially determined as a life
annuity payable in equal monthly installments, regardless of the actual form of payment.

     Section 4.01(d) The annuity value of the hypothetical account balance maintained in
accordance with the Qualified Plan as of his Retirement Date. This amount shall be determined, in
accordance with the rules of the Qualified Plan for this determination, as a life annuity payable
in equal monthly installments. This value will be determined so as to reflect the same reduction
for early commencement as the Qualified Plan benefit in Section 4.01(b).

     Section 4.02 A Member (A) between the ages of 50-54 who elects Early Retirement or
whose employment is terminated by the Employer other than for Cause and who has ten years or more
of continuous service with the Employer, or (B) who elects Early Retirement or whose employment is
terminated by the Employer other than for Cause subsequent to attaining age 55 and less than ten
years of continuous service with the Employer, may, with the written approval of the Committee,
receive a Monthly Retirement Income, if any, in such amount and containing such terms and
conditions as may be determined by the Committee. Further, a Member for whom the Committee has
approved a Monthly Retirement Income under this Section and who is between the ages of 50-54, shall
begin to receive upon attaining age 55 such Monthly Retirement Income as described in this Section
4.02.

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If such Member dies, however, before attaining age 55 and the Member had elected a joint and
survivor annuity option at the time of such Member’s retirement or termination of employment, then
the deceased Member’s spouse, if such spouse is still surviving, shall receive reduced Monthly
Retirement Income payments hereunder at the time when the deceased Member would have attained age
55.

If a Member is approved for a Monthly Retirement Income payment under this Section 4.02, the Member
also may be entitled to receive a post-retirement Death Benefit in accordance with the provisions
of Section 5.03, provided at the time the Monthly Retirement Income payment is approved hereunder
for the Member the Committee also approves the payment of the post-retirement Death Benefit for the
Member.

     Section 4.03 A Member who has attained age 55, has ten years or more of continuous
service with the Employer and either elects Early Retirement or is terminated by the Employer other
than for Cause, shall receive a Monthly Retirement Income equal to 55% of Final Monthly Earnings
reduced by 4% for every year that the Member’s Attained Age on his Retirement Date is less than 65
to reflect the fact that such income shall begin on the first day of the first month immediately
following the month in which the Member retires or is terminated other than for Cause, as set forth
in the following table:

MONTHLY

	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	RETIREMENT
	 	 	 	 	 	 	 	 	 	 	INCOME AS A
	ATTAINED AGE	 	BENEFIT FORMULA	 	 	 	 	 	PERCENT OF
	AT RETIREMENT	 	AS A % OF FINAL	 	REDUCTION	 	FINAL MONTHLY
	OR TERMINATION	 	MONTHLY EARNINGS	 	FACTOR	 	EARNINGS
	55
	 	 	55	%	 	 	4.00	 	 	 	33.0	%
	56
	 	 	55	 	 	 	3.60	 	 	 	35.2	 
	57
	 	 	55	 	 	 	3.20	 	 	 	37.4	 
	58
	 	 	55	 	 	 	2.80	 	 	 	39.6	 
	59
	 	 	55	 	 	 	2.40	 	 	 	41.8	 
	60
	 	 	55	 	 	 	2.00	 	 	 	44.0	 
	61
	 	 	55	 	 	 	1.60	 	 	 	46.2	 
	62
	 	 	55	 	 	 	1.20	 	 	 	48.4	 
	63
	 	 	55	 	 	 	.08	 	 	 	50.6	 
	64
	 	 	55	 	 	 	.04	 	 	 	52.8	 

A Member’s Monthly Retirement Income shall be further reduced by the amounts set forth in Sections
4.03(a), 4.03(b), 4.03(c) and 4.03(d).

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     Section 4.03(a) One hundred percent (100%) of his Primary Social Security benefit
payable at his Retirement Date under the Social Security law in effect at that time. A Member who
retires prior to age 62 shall have his benefits reduced by his Primary Social Security payable at
age 62 regardless of whether it is received.

     Section 4.03(b) One hundred percent (100%) of the monthly income, calculated in the
form of a straight life annuity, that he receives from the Qualified Plan and the Excess Benefit
Plan. Such amount shall be actuarially determined as a life annuity payable in equal monthly
installments, regardless of the actual form of payment.

     Section 4.03(c) One hundred percent (100%) of benefits received from the qualified
pension plans of any previous employers. Such amounts shall be Actuarially Determined as a life
annuity payable in equal monthly installments, regardless of the actual form of payment.

     Section 4.03(d) The annuity value of the hypothetical account balance maintained in
accordance with the Qualified Plan as of his Retirement Date. This amount shall be determined, in
accordance with the rules of the Qualified Plan for this determination, as a life annuity payable
in equal monthly installments. This value will be determined so as to reflect the same reduction
for early commencement as the Qualified Plan benefit in Section 4.03(b).

     Section 4.04 A Member who has less than ten years of continuous service with the
Employer and who elects Early Retirement without the written consent of the Committee shall not be
entitled to receive a Monthly Retirement Income under the terms of this Plan.

     Section 4.05 If a Member remains in the employ of the Company subsequent to his
Normal Retirement Date, no Monthly Retirement Income shall be paid until his actual Retirement
Date. At that time he shall be entitled to receive a Monthly Retirement Income calculated as
though he had retired on his Normal Retirement Date.

     Section 4.06 The basic form of Monthly Retirement Income (to which the formula
indicated in Section 4.01 applies) shall be a monthly income commencing on the Member’s Retirement
Date and continuing for his life. Alternatively, the Member shall be entitled to receive any
actuarially equivalent payment form that is permitted under the Company’s Qualified Plan.

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ARTICLE V

DEATH BENEFITS

     Section 5.01 In the event of the death of a Member or a Disabled Member prior to his
Retirement Date, in lieu of a Monthly Retirement Income or Monthly Disability Benefit, the Member’s
Beneficiary shall be entitled to receive a lump sum Death Benefit within 60 days following the
Member’s date of death. Such pre-retirement Death Benefit shall be equal to 400% of the Member’s
annual base salary in effect at the time of his death.

     Section 5.02 In the event of the death of a Retired Member subsequent to attaining
age 55, the Member’s Beneficiary shall be entitled to receive a lump sum Death Benefit in an amount
equal to one hundred percent (100%) of the Member’s annual base salary in effect at the Member’s
Retirement Date. This Death Benefit is in addition to any Monthly Retirement Income benefits that
may be payable to a Member’s Beneficiary.

     Section 5.03 In the event of the death of a Member who has been approved for a
Monthly Retirement Income payment and for a Death Benefit under Section 4.02, the Member’s
Beneficiary shall be entitled to receive a lump sum Death Benefit in an amount equal to one hundred
percent (100%) of the Member’s annual base salary in effect at the time of the Member’s retirement
or termination of employment.

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ARTICLE VI

DISABILITY BENEFITS

     Section 6.01 If a Member is determined to be Disabled prior to his Normal Retirement
Date, the Disabled Member shall be entitled to receive a Monthly Disability Income equal to fifty
percent (50%) of the Member’s Final Monthly Earnings reduced by Sections 6.01(a), 6.01(b) and
6.01(c). Such income benefit shall be payable to the Member until the attainment of age 65 or
death, whichever first occurs.

     Section 6.01(a) One hundred percent (100%) of his monthly benefit received from the
Company’s Basic Long-Term Disability Plan, payments from Social Security, Workers’ Compensation
and/or other federal, state or employer group insurance plans.

     Section 6.01(b) One hundred percent (100%) of his monthly income paid from the
Qualified Plan. Such amount shall be actuarially determined as a life annuity payable in equal
monthly installments, regardless of the actual form of payment.

     Section 6.01(c) One hundred percent (100%) of benefits received from the qualified
pension plans of any previous employers. Such amounts shall be actuarially determined as a life
annuity payable in equal monthly installments, regardless of the actual form of payment.

     Section 6.02 Upon attaining age 65, the Disabled Member shall be entitled to receive
a Monthly Retirement Income under Section 4.01.

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ARTICLE VII

PLAN ADMINISTRATION

     Section 7.01 The Compensation Committee shall administer the Plan and keep records of
individual Member benefits.

     Section 7.02 The Committee shall have the authority to interpret the Plan, to adopt
and review rules relating to the Plan and to make any other determinations for the administration
of the Plan.

     Subject to the terms of the Plan, the Committee shall have exclusive jurisdiction (i) to
select the employees eligible to become Members, (ii) to determine the eligibility for, and form
and method of any benefit payments, (iii) to establish the timing of benefit distributions, (iv) to
settle claims according to the provisions in Article VIII and (v) to remove Members from
participation in the Plan.

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ARTICLE VIII

NAMED FIDUCIARY AND CLAIMS PROCEDURE

     Section 8.01 The Named Fiduciary of the Plan and for purposes of the claims procedure
under this Plan is the Chief Human Resources Officer of the Employer.

     Section 8.01(a) The business address and telephone number of the Named Fiduciary
under this Plan is:

The McGraw-Hill Companies, Inc.

1221 Avenue of the Americas

New York, NY 10020

(212) 512-2000

     Section 8.01(b) The Employer shall have the right to change the Named Fiduciary of
the Plan created under this Plan. The Employer shall also have the right to change the address and
telephone number of the Named Fiduciary. The Employer shall give the Members written notice of any
change of the Named Fiduciary, or any change in the address and telephone number of the Named
Fiduciary.

     Section 8.02 Benefits shall be paid in accordance with the provisions of this Plan.
The Member, or his Beneficiary or Contingent Beneficiary (hereinafter collectively referred to as
the “Claimant”) shall make a written request for the benefits provided under this Plan. This
written claim shall be mailed or delivered to the Named Fiduciary by registered mail.

     Section 8.03 If the claim is denied, either wholly or partially, notice of the
decision shall be sent by registered mail to the Claimant within a reasonable time period. This
time period shall not exceed 90 days after receipt of the claim by the Named Fiduciary.

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ARTICLE IX

MISCELLANEOUS

     Section 9.01 Subject to Section 10.02 hereof, nothing contained in this Plan shall be
deemed to give any Member or employee the right to be retained in the service of the Employer or to
interfere with the right of the Employer to discharge any Member or employee at any time regardless
of the effect which such discharge shall have upon him as a Member of the Plan.

     Section 9.02 The rights of the Member, the Beneficiary of the Member, or any other
person claiming through the Member under this Plan, shall be solely those of an unsecured general
creditor of the Employer.

     Section 9.03 The Plan does not involve a reduction in salary for the Member or the
foregoing of an increase in future salary by the Member.

     Section 9.04 A Retired Member shall not be considered an employee for any purpose
under the law.

     Section 9.05 If no Beneficiary has been designated or survives a Member, any amounts
to be paid to the Member’s Beneficiary shall be paid to the Member’s estate.

     Section 9.06 Except insofar as this provision may be contrary to applicable law, no
sale, transfer, alienation, assignment, pledge, collateralization, or attachment of any benefits
under this Plan shall be valid or recognized by the Committee.

     Section 9.07 Subject to Section 10.01 hereof the Employer reserves the right at any
time and from time to time, by action of the Committee or its Board of Directors to terminate,
modify or amend, in whole or in part, any or all of the provisions of the Plan, including
specifically the right to make any such amendments effective retroactively; provided that no such
action shall reduce the benefits or rights of any Disabled or Retired Member or his Beneficiary.
In addition, the Employer may amend or modify any provision of this Plan as to any particular
Member by agreement with such Member, provided that such agreement is in writing, is executed by
both the Employer and the Member, and is filed with the Plan records. The provisions of any
amendment or modification made by agreement between a Member and the Employer shall apply only to
the Member so agreeing and no other.

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     Section 9.08 A Member shall have the right to change his designated Beneficiary by
notifying the Committee of such in writing. Such change shall become effective upon written
acknowledgment of same by the Employer. Any payments made by the Employer to a Beneficiary in good
faith and under the terms of the Plan shall fully discharge the Employer from all further
obligations with respect to such payments.

     Section 9.09 This Plan shall be binding upon and inure to the benefit of the
Employer, its successors and each Member and his heirs, executors, administrators and legal
representatives.

     Section 9.10 This Plan shall be governed by the laws of New York. This Plan is
solely between the Employer and the Member. The Member, his Beneficiary or other persons claiming
through the Member shall only have recourse against the Employer for enforcement of the Plan.

     Section 9.11 Any words herein used in the masculine shall be read and construed in
the feminine where they would so apply. Words in the singular shall be read and construed as though
used in the plural in all cases where they would so apply.

     Section 9.12 The obligations of the Employer under this Plan shall be subject to all
applicable laws, rules and regulations, and such approvals by governmental agencies as may be
required or as the Employer deems advisable.

     Section 9.13 The Plan is intended to satisfy the requirements of Section 409A of the
Code, and shall be interpreted and administered consistent with such intent. If, in the good faith
judgment of the Committee, any provision of the Plan could cause any person to be subject to the
interest and penalties imposed under Section 409A of the Code, such provision shall be modified by
the Committee in its sole discretion to maintain, to the maximum extent practicable, the original
intent of the applicable provision without violating the requirements of Section 409A of the Code,
and, notwithstanding any provision in the Plan to the contrary, the Committee shall have broad
authority to amend or to modify the Plan, without advance notice to or consent by any person, to
the extent necessary or desirable to ensure that no Member be subject to tax under Section 409A of
the Code. Any determinations made by the Committee under this Section 9.13 shall be final,
conclusive and binding on all persons.

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ARTICLE X

SPECIAL RULES IN THE EVENT OF A CHANGE OF CONTROL

     Section 10.01 Notwithstanding anything to the contrary in any other section of this
Plan, in the event a Change of Control shall occur as defined in Section 2.06, neither the Employer
nor its Board of Directors or the Committee shall thereafter terminate, modify or amend, in whole
or in part, any or all of the provisions of this Plan.

     Section 10.02 If the employment of a Member is terminated voluntarily for Good Reason
within 24 months after a Change of Control has occurred or involuntarily terminated (except for
Cause) at any time after a Change of Control has occurred, said Member shall receive an immediate,
lump sum distribution computed as of his date of termination of the Actuarial Equivalent of the
monthly benefit he would have received under this Plan as if (1) he had continued as an employee of
the Employer until the later of age 50 or his date of termination, and he had then elected to
receive payments under this Plan; (2) he had at least 10 years of continuous service with the
Employer as of the date of the Change of Control; and (3) he was granted written consent for Early
Retirement under this Plan by the Committee. The lump sum Actuarial Equivalent of the monthly
benefit he would have received shall be determined by assuming that he had continued in the
employment of the Employer until the later of age 50 or his date of termination, and if under age
50 by assuming that he received the Final Monthly Earnings that he was receiving on the date of his
termination until age 50. The amount shall be determined by computing the amounts set forth in
Sections 10.02(a) through 10.02(e), and then subtracting the sum of the amounts in 10.02(b),
10.02(c), 10.02(d), and 10.02(e) from the amount in 10.02(a).

     Section 10.02(a) The lump sum Actuarial Equivalent computed as of his date of
termination of a benefit payable monthly for life in the amount of a percentage, as specified in
the schedule below, of the Member’s Final Monthly Earnings that he was receiving on his date of
termination, assuming payments commence on the later of his date of termination or his fifty-fifth
birthday.

17

 

	 	 	 	 	 	 
	 	 	 	 	BENEFIT AMOUNT
	 	ATTAINED AGE	 	 	AS A % OF FINAL
	 	AT TERMINATION	 	 	MONTHLY EARNINGS
	 	Age 60 and below     
	 	 	44.0	%
	 	61
	 	 	46.2	 
	 	62
	 	 	48.4	 
	 	63
	 	 	50.6	 
	 	64
	 	 	52.8	 
	 	65
	 	 	55.0	 

In addition, a Member shall receive an immediate lump sum distribution of the Actuarial Equivalent
of the post retirement lump sum death benefit described in Sections 5.02 and 5.03 hereof, with the
Actuarial Equivalent computed as of the Member’s date of termination, and for a Member under age
50, assuming that the death benefit would be payable only if death occurred after attainment of age
50.

The payments pursuant to this Section 10.02 shall be in lieu of payments to be made pursuant to
Articles IV and V hereof.

     Section 10.02(b) The lump sum Actuarial Equivalent computed as of his date of
termination of 100% of the monthly Primary Social Security benefit payable commencing at the later
of his age at his date of termination or age 62. If, as of his date of termination, the Member is
not yet age 50, then the monthly Primary Social Security benefit will be calculated by assuming
that he had continued in the employment of the Employer until age 50 and by assuming that he
received the same Final Monthly Earnings until that date. For all Members, the Primary Social
Security benefit will be computed assuming he received no earnings after the later of age 50 or his
date of termination until age 62.

     Section 10.02(c) The lump sum Actuarial Equivalent computed as of his date of
termination of 100% of his monthly income calculated in the form of a straight life annuity under
the Qualified Plan, commencing as of the earliest date (but not before his termination date) that
the Member would be eligible to begin to receive monthly benefits from the Qualified Plan. If as
of his date of termination the Member has not reached age 50 then the benefit to be received from
the Qualified Plan will be calculated by assuming he had continued in the employment of the
Employer until age 50, and by assuming that he received the same Final Monthly Earnings that he was
receiving as of his date of termination until age 50, and assuming that he had continued to accrue
a benefit under the Qualified Plan until age 50. The benefit from the Qualified Plan payable as of
the earliest date that the Member could elect to receive a benefit under the Qualified Plan (or
date of termination, if later) shall be reduced for early
commencement (if any) according to the provisions of the Qualified Plan in effect as of the
date of the Change of Control.

18

 

     Section 10.02(d) The balance of the hypothetical account maintained in accordance
with the Qualified Plan, reflecting hypothetical Member and Employer contributions, and the assumed
investment return, accumulated to the later of the date of termination or the Member’s 50th
birthday.

     Section 10.02(e) The lump sum Actuarial Equivalent of the benefits, if any, the
Member is eligible to receive from qualified plans of any previous employers, determined as of the
date of termination assumed to be payable as of the earliest date that the Member could elect to
have the benefit payable, or his age as of his date of termination, if later.

     Section 10.03 In the event of a Change of Control, the Committee shall elect either
to:

     (i) provide each Retired Member with an immediate lump sum distribution of the Actuarial
Equivalent of his Monthly Retirement Income computed as of the date of the Change of Control; in
addition, provide each Retired Member with an immediate lump sum distribution of the Actuarial
Equivalent of the post retirement lump sum death benefit described in Sections 5.02 and 5.03 hereof
computed as of the date of the Change of Control; or

     (ii) provide sufficient funds to the existing “rabbi trust” for which The Bank of New York has
been designated as trustee (or to any successor trustee), or in lieu of The Bank of New York, as
trustees, to any similar legal entity selected by the Committee), to protect the Monthly Retirement
Income and the post retirement lump sum death benefits which shall be payable to each Retired
Member pursuant to Articles 4 and 5 hereof. In the event the Committee does not elect to comply
with (i) or (ii) above within 30 days after a Change of Control has occurred, it shall be deemed as
if the Committee had elected to comply with (i) above, and the lump sum payments referred to in (i)
shall be made to Retired Members within 15 days thereafter. The payments pursuant to Section
10.03(i) shall be in lieu of any further benefits under the Plan.

     Section 10.04 The provisions of this Article X shall supersede and take precedence
over the provisions of any of the other Sections of this Plan.

     Section 10.05 The reasonable legal fees incurred by any Member (or former Member who
was a Member when the Change of Control occurred) or Retired Member to enforce his/her valid rights
under this Article X shall be paid by the Employer to the Member or Retired Member in addition to
sums otherwise due under this Plan, whether or not the Member or Retired Member is successful in
enforcing his/her rights or whether or not the matter is settled.

19EX-10.31

 

Exhibit 10.31

THE PBG DIRECTORS’ STOCK PLAN

As Amended and Restated as of February 2, 2006)

1. Purposes

     The principal purposes of The PBG Directors’ Stock Plan (the “Plan”) are to provide
compensation to those members of the Board of Directors of The Pepsi Bottling Group, Inc. (“PBG”)
who are not also employees of PBG, to assist PBG in attracting and retaining outside directors with
experience and ability on a basis competitive with industry practices, and to associate more fully
the interests of such directors with those of PBG’s shareholders.

2. Effective Date

     The Plan was unanimously approved by the Board of Directors of PBG, conditional on shareholder
approval, and became effective on May 23, 2001, superseding The PBG Directors’ Stock Plan of 1999.
The Plan was amended on January 23, 2003. This amendment and restatement of the Plan is effective
as of February 2, 2006, and it shall apply to awards made on and after that date.

3. Administration

     The Plan shall be administered and interpreted by the Board of Directors of PBG (the “Board”).
The Board shall have full power and authority to administer and interpret the Plan and to adopt
such rules, regulations, guidelines and instruments for the administration of the Plan and for the
conduct of its business as the Board deems necessary or advisable. The Board’s interpretations of
the Plan, and all actions taken and determinations made by the Board pursuant to the powers vested
in them hereunder, shall be conclusive and binding on all parties concerned, including PBG, its
directors and shareholders and any employee of PBG. The costs and expenses of administering the
Plan shall be borne by PBG and not charged against any award or to any award recipient.

4. Eligibility

     Directors of PBG who are not employees of PBG (“Non-Employee Directors”) are eligible to
receive awards under the Plan. Directors of PBG who are employees of PBG are not eligible to
participate in the Plan, but shall be eligible to participate in other PBG benefit and compensation
plans.

5. Initial Award

     Under the Plan, each Non-Employee Director shall, on the first day of the month after
commencing service as a Non-Employee Director of PBG, receive a formula grant of restricted stock
(“Restricted Stock”). The number of shares of Restricted Stock to be included in each such award
shall be determined by dividing $25,000 by the Fair Market Value (as defined below) of a share of
PBG Common Stock on the date of grant (the “Stock Grant Date”), or if such day is not a trading day
on the New York Stock Exchange (“NYSE”), on the immediately preceding trading day. The number of
shares so determined shall be rounded to the nearest number of whole shares. If the recipient of
the Restricted Stock continuously remains a director of PBG, the Restricted Stock granted hereunder
shall

 

 

vest and any restrictions thereon shall lapse on the first anniversary of the Stock Grant
Date; provided, however, that, in the event of a Non-Employee Director’s death or
Disability (as defined in Section 6(c)), the Restricted Stock granted to such Non-Employee Director
shall vest and any restrictions thereon shall lapse immediately. Notwithstanding the foregoing, a
Non-Employee Director may not sell or otherwise transfer any Restricted Stock granted to him or her
prior to the date such Non-Employee Director ceases to serve as a director for any reason. The
Non-Employee Director shall have all of the rights of a stockholder with respect to such Restricted
Stock, including the right to receive all dividends or other distributions paid or made with
respect to the stock. Any dividends or distributions that are paid or made in PBG Common Stock
shall be subject to the same restrictions as the Restricted Stock in respect of which such
dividends or distributions were paid or made. However, any dividends or distributions paid or made
in cash shall not be subject to the restrictions. Each Restricted Stock award shall be evidenced by
an agreement setting forth the terms and conditions thereof, which terms and conditions shall not
be inconsistent with those set forth in this Plan.

6. Annual Stock Option Award

     (a) Under the Plan, each Non-Employee Director shall receive an annual formula grant of
options to purchase shares of PBG Common Stock (“Options”) at a fixed price (the “Exercise Price”).
Such grant shall be made annually on April 1 (the “Option Grant Date”); provided,
however, that each individual who commences services as a Non-Employee Director after April
1 of a year shall receive a pro-rated annual formula grant of options (a “Pro-Rated Grant”) with
respect to his or her first year of service, on the first day of the month following the date he or
she commences service (the “Pro-Rated Option Grant Date”). To receive a grant of Options, a
Non-Employee Director must be actively serving as a director of PBG on the Option Grant Date or the
Pro-Rated Option Grant Date, as applicable.

     (b) The number of Options to be included in each annual option award shall be determined by
dividing the Grant Amount (as defined below) by the Fair Market Value (as defined below) of a share
of PBG Common Stock on the Option Grant Date or Pro-Rated Option Grant Date, as applicable, or if
such day is not a trading day on the NYSE, on the immediately preceding trading day. Grant Amount
shall mean $180,000, except that, in the case of a Pro-Rated Grant, Grant Amount shall mean the
following: (i) $135,000 in the case of an individual who commences service as a Non-Employee
Director of PBG on or after April 2 and on or before June 30; (ii) $90,000 in the case of an
individual who commences service as a Non-Employee Director of PBG on or after July 1 and on or
before September 30; (iii) $45,000 in the case of an individual who commences service as a
Non-Employee Director of PBG on or after October 1 and on or before December 31. No Pro-Rated
Grant shall be made in the case of an individual who commences service as a Non-Employee Director
of PBG on or after January 1 and on or before April 1. The number of Options so determined shall
be rounded up (if necessary) to the nearest number of whole Options. “Fair Market Value” shall
mean the average of the high and low per share sale prices for PBG Common Stock on the composite
tape for securities listed on the NYSE for the day in question, except that such average price
shall be rounded up (if necessary) to the nearest cent.

     (c) Options shall vest and become immediately exercisable on the Option Grant Date or
Pro-Rated Option Grant Date, as applicable. Each Option shall have an Exercise Price equal to the
Fair Market Value of PBG Common Stock on the Option Grant Date or Pro-Rated Option Grant Date, as
applicable, or if such day is not a trading day on the NYSE, on the immediately preceding trading
day. Each Option shall have a term of ten years; provided, however, in the event
the holder thereof shall cease to be a director of PBG, or its successor, for a reason other than
death or Disability (as defined below), such Options shall terminate and expire upon the earlier of
(i) the expiration of the

2

 

original term, or (ii) five years from the date the holder ceased to be a
director. A Non-Employee Director has a “Disability” if he or she is totally disabled as
determined using the standards PBG applies under its long term disability program.

     (d) Non-Employee Directors may exercise their Options by giving an exercise notice to PBG in
the manner specified from time to time by the Board. Options may be exercised by using either a
standard cash exercise procedure or a cashless exercise procedure. From time to time, the Board
may change or adopt procedures relating to Option exercises. If, at any time, a Non-Employee
Director suffers a Disability or is otherwise incapable of exercising his or her Options before the
expiration thereof, the Board may take any steps it deems appropriate to prevent such Options from
lapsing prior to being exercised.

     (e) Each Option award shall be evidenced by a written agreement setting forth the terms and
conditions thereof, which terms and conditions shall not be inconsistent with those set forth in
this Plan.

7. Annual Restricted Stock Unit Award

     (a) Under the Plan, each Non-Employee Director shall receive an annual formula grant of
restricted stock units (“RSUs”). When a Non-Employee Director’s RSUs become payable, they shall be
settled in shares of PBG Common Stock with the Non-Employee Director receiving one share of PBG
Common Stock for each RSU. The grant of RSUs shall be made annually on April 1 (the “RSU Grant
Date”); provided, however, that each individual who commences service as a
Non-Employee Director after April 1 of a year shall receive a pro-rated annual formula grant of
RSUs (a “Pro-Rated RSU Grant”) with respect to his or her first year of service on the first day of
the month following the date he or she commences service (the “Pro-Rated RSU Grant Date”). To
receive a grant of RSUs, a Non-Employee Director must be actively serving as a director of PBG on
the RSU Grant Date or the Pro-Rated RSU Grant Date, as applicable.

     (b) The number of RSUs to be included in each annual RSU award shall be determined by dividing
the RSU Grant Amount (as defined below) by the Fair Market Value of a share of PBG Common Stock on
the RSU Grant Date or Pro-Rated RSU Grant Date, as applicable, or if such day is not a trading day
on the NYSE, on the immediately preceding trading day. RSU Grant Amount shall mean $60,000, except
that, in the case of a Pro-Rated RSU Grant, RSU Grant Amount shall mean the following: (i) $45,000
in the case of an individual who commences service as a Non-Employee Director on or after April 2
and on or before June 30; (ii) $30,000 in the case of an individual who commences service as a
Non-Employee Director on or after July 1 and on or before September 30; (iii) $15,000 in the case
of an individual who commences service as a Non-Employee Director on or after October 1 and on or
before December 31. No Pro-Rated RSU Grant shall be made in the case of an individual who
commences service as a Non-Employee Director on or after January 1 and on or before April 1. The
number of RSUs so determined shall be rounded up (if necessary) to the nearest number of whole
RSUs.

     (c) RSUs shall vest on the RSU Grant Date or Pro-Rated RSU Grant Date, as applicable. RSUs
granted in 2006 become payable on the first anniversary of the RSU Grant Date or Pro-Rated RSU
Grant Date, as applicable. A Non-Employee Director who receives a 2006 RSU grant on April 1, 2006
may make a one-time election to defer the payment date of his or her 2006 RSUs no later than
September 30, 2006, and such election to defer the payment date of his or her 2006 RSU grant must
specify a future payment date (the beginning of any calendar quarter) that will result in a minimum
deferral period of at least one year. A Non-Employee Director who receives a 2006 Pro-Rated RSU

3

 

Grant may make a one-time election to defer the payment date of his or her 2006 Pro-Rated RSU Grant
at least one day prior to the Pro-Rated Grant Date of the award
and such election must specify a future payment date (the beginning of any calendar quarter) that
will result in a minimum deferral period of at least two years.

     (d) RSUs granted in 2007 and later years shall be payable on the RSU Grant Date or Pro-Rated
RSU Grant Date, as applicable, unless the Non-Employee Director timely elects to defer the payment
of such RSUs. In general, any such deferral election with respect to RSUs must be made in the
calendar year preceding the year of the grant; provided, however, that any such
deferral election with respect to Pro-Rated RSU Grants must be made at least one day
prior to the Pro-Rata RSU Grant. Any such election to defer the payment date of an RSU Grant or a
Pro-Rata RSU Grant must specify a future payment date (the beginning of any calendar quarter) that
will result in a minimum deferral period of at least two years.

     (e) Rather than deferring to a specified future payment date, a Non-Employee Director may
instead defer payment until his or her separation from service as a director of PBG, and any such
deferral shall be paid as of the beginning of the calendar quarter following such separation from
service. Alternatively, a Non-Employee Director may elect to defer until the earlier of (i)
separation from service as a director of PBG, or (ii) a specified future payment date determined in
accordance with Section 7(c) or (d) above, whichever applies. The determination of when a
Non-Employee Director separates from service as a director of PBG shall be made in accordance with
Section 409A(a)(2)(A)(i) of the Internal Revenue Code of 1986, as amended (“Code”), and no minimum
deferral period shall apply to the extent the deferral is until separation from service as a
director of PBG.

     (f) Notwithstanding the preceding provisions of this Section 7, a Non-Employee Director’s RSUs
shall be immediately paid out in the event of the Non-Employee Director’s Permanent Disability (as
defined below), Separation from Service as a director of PBG or death. For this purpose, a Non-Employee Director is considered to have a
Permanent Disability as of the date the Non-Employee Director would be considered disabled within
the meaning of Section 409A(a)(2)(C) of the Code.

     (g) During any period that the payment of RSUs is deferred (either by election or
automatically), the Non-Employee Director whose RSUs are deferred shall be entitled to be credited
with dividend equivalents. Dividend equivalents shall equal the dividends actually paid with
respect to a corresponding amount of PBG Common Stock during the deferral period, while the RSUs
remain unpaid, and shall be credited on the date such dividends are actually paid. Upon crediting,
a Non-Employee Director’s dividend equivalents shall be immediately converted to additional RSUs
(whole and/or fractional, as appropriate) by dividing the aggregate amount of dividend equivalents
credited to the Non-Employee Director on a day by the Fair Market Value of a share of PBG Common
Stock on such day, or if such day is not a trading day on the NYSE, on the immediately preceding
trading day. Additional RSUs credited under this Section 7(g) are in turn entitled to be credited
with dividend equivalents, and a Non-Employee Director’s aggregate additional RSUs shall be paid
out at the same time as the underlying RSUs to which they relate. Any cumulative fractional RSU
remaining at such time shall be rounded up to a whole RSU prior to its settlement in PBG Common
Stock.

     (h) Each RSU award shall be evidenced by a written agreement setting forth the terms and
conditions thereof, which terms and conditions shall not be inconsistent with those set forth in
this Plan.

4

 

8. Shares of Stock Subject to the Plan

     The shares that may be delivered under this Plan shall not exceed an aggregate of 300,000
shares of PBG Common Stock, adjusted, if appropriate, in accordance with Section 10 below; provided
that any shares authorized but not delivered under the Prior Plan (as hereinafter defined) shall be
available for delivery under this Plan in addition to the above mentioned 300,000 shares. The
shares granted or delivered under the Plan may be newly issued shares of Common Stock or treasury
shares.

9. Deferral of Initial Awards

     (a) Non-Employee Directors may make an advance, one-time election to defer into PBG phantom
stock units all of the shares of Restricted Stock otherwise granted under Section 5. Any such
election shall be made at least one day prior to the grant date of such Restricted Stock. The
deferral period shall equal the Non-Employee Director’s period of
service as a director of PBG (i.e., such deferral period shall end on the date the Non-Employee
Director has a separation from service as a director of PBG for purposes of Code section
409A(a)(2)(A)(i)). Non-Employee Directors who elect to defer receipt of such shares shall be
credited on the grant date with a number of phantom stock units equal to that number of shares of
Restricted Stock which they would have received had they not elected to defer. During the deferral
period, the value of the phantom stock units will fluctuate based on the market value of PBG Common
Stock. At the end of the deferral period, all payments of deferred awards shall be made in shares
of PBG Common Stock (one share of PBG Common Stock for each PBG phantom stock unit), unless the
Board in its discretion decides to make the distribution in cash or in a combination of cash and
shares of PBG Common Stock. To the extent that a distribution is made in cash, in whole or in
part, the Non-Employee Directors will receive the aggregate value of the PBG phantom stock units
credited to them which are to be paid in cash. The value of PBG phantom stock units will be
determined by multiplying the number of PBG phantom stock units which are to be paid in cash by the
Fair Market Value of PBG Common Stock on the last NYSE trading day of the deferral period.

     (b) During the deferral period, the Non-Employee Director whose Restricted Stock is deferred
as phantom stock units shall be entitled to be credited with dividend equivalents. Dividend
equivalents shall equal the dividends actually paid with respect to a corresponding amount of PBG
Common Stock during the deferral period and shall be credited on the date such dividends are
actually paid. Upon crediting, a Non-Employee Director’s dividend equivalents shall be immediately
converted to additional phantom stock units (whole and/or fractional, as appropriate) by dividing
the aggregate amount of dividend equivalents credited to the Non-Employee Director on a day by the
Fair Market Value of a share of PBG Common Stock on such day, or if such day is not a trading day
on the NYSE, on the immediately preceding trading day. Additional phantom stock units credited
under this Section 9(b) are in turn entitled to be credited with dividend equivalents, and a
Non-Employee Director’s aggregate additional phantom stock units shall be paid out at the same time
as the underlying phantom stock units to which they relate. Any fractional phantom stock unit
remaining at such time shall be rounded up to a whole phantom stock unit prior to its settlement in
PBG Common Stock.

10. Dilution and Other Adjustments

     The number and kind of shares of PBG Common Stock issuable under the Plan, or which may or
have been awarded to any Non-Employee Director, may be adjusted proportionately by the Board to
reflect stock dividends, stock splits, recapitalizations, mergers, consolidations, combinations or
exchanges of shares, any spin off or other distribution of assets of the Company to its
shareholders,

5

 

any partial or complete liquidation, or other similar corporate changes. Such
adjustment shall be conclusive and binding for all purposes of the Plan.

11. Effect of Misconduct

     Notwithstanding anything to the contrary herein, if a Non-Employee Director commits
“Misconduct,” he or she shall forfeit all rights to any unexercised Options, any RSUs and
Restricted Stock, as well as any phantom stock units credited to him or her under Section 9. For
purposes of this Plan, Misconduct occurs if a majority of the Board determines that a Non-Employee
Director has: (a) engaged in any act which is considered to be contrary to the Company’s best
interests; (b) violated the Company’s Code of Conduct or engaged in any other activity which
constitutes gross misconduct; (c) engaged in unlawful trading in the securities of PBG or of any
other company based on information gained as a result of his or her
service as a director of PBG; or (d) disclosed to an unauthorized person or misused confidential
information or trade secrets of the Company.

12. Withholding Taxes and Section 409A

     (a) Except
to the extent other arrangements are made by a Non-Employee Director
that are satisfactory to the Company, the Company shall withhold a
number of shares of PBG Common Stock otherwise deliverable having a
Fair Market Value sufficient to satisfy the minimum withholding taxes required by
federal, state, local or foreign law in respect of any award.

     (b) At all times, this Plan shall be interpreted and operated (i) in accordance with the
requirements of Section 409A with respect to Plan deferred compensation that is subject to Code
Section 409A, (ii) to maintain the exemption from Code Section 409A of stock option awards and
undeferred Restricted Stock (collectively, “Excepted Awards”), and (iii) to preserve the status of
deferrals made prior to the effective date of Code Section 409A (“Prior Deferrals”) as exempt from
Section 409A, i.e., to preserve the grandfathered status of Prior Deferrals. Thus, for example, a
Non-Employee Director’s ability to defer a Pro-Rated RSU Grant is conditioned on the Non-Employee
Director not having been previously eligible for a PBG deferral plan of the same type. In
addition, if a Non-Employee Director is determined to be a specified employee (within the meaning
of Code Section 409A(a)(2)(B)(i)), any payment made based on separation from service as a director
of PBG shall not be made until the beginning of the calendar quarter that occurs at least six
months after the separation from service. Similarly, any election that must be made at least one
day prior to a specified date must be considered effectively made and irrevocable, under the
applicable requirements of Code Section 409A, by the day preceding such specified date.

     (c) Any action that may be taken (and, to the extent possible, any action actually taken)
under the Plan shall not be taken (or shall be void and without effect), if such action violates
the requirements of Code Section 409A or if such action would adversely affect the exemption of
Excepted Awards or the grandfather of Prior Deferrals. If the failure to take an action under the
Plan would violate Code Section 409A, then to the extent it is possible thereby to avoid a
violation of Code 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 exemption of Excepted Awards or the grandfather of Prior Deferrals. Any
provision in this Plan document that is determined to violate the requirements of Code Section 409A
or to adversely affect the exemption of Excepted Awards or the grandfather of the Prior Deferrals
shall be void and without effect. In addition, any provision that is required to appear in this
Plan document to satisfy the requirements of Code 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 exemption

6

 

of Excepted Awards or the grandfather of the
Prior Deferrals. In all cases, the provisions of this Section shall apply notwithstanding any
contrary provision of the Plan that is not contained in this Section.

13. Resale Restrictions, Assignment and Transfer

     Options (unless the Board of Directors specifically determines otherwise), RSUs, Restricted
Stock and PBG phantom stock units may not be sold, transferred or assigned, except in the event of
the Non-Employee Director’s death, in which case his or her Options, Restricted Stock or PBG
phantom stock units may be transferred by will or by the laws of descent and distribution. All
restrictions on Restricted Stock granted to a Non-Employee Director shall lapse upon his or her
death. Options may be exercised by the decedent’s personal
representative, or by whomever inherits the Options, at any time, through and including their
original expiration date.

     Once awarded, the shares of PBG Common Stock received by Non-Employee Directors may be freely
transferred, assigned, pledged or otherwise subjected to lien, subject to restrictions imposed by
the Securities Act of 1933, as amended, and subject to the trading restrictions imposed by Section
16 of the Securities Exchange Act of 1934, as amended. PBG phantom stock units may not be
transferred or assigned except by will or the laws of descent and distribution.

14. Funding

     The Plan shall be unfunded. PBG shall not be required to establish any special or separate
fund or to make any other segregation of assets to assure the payment of any award under the Plan.

15. Supersession of Prior Plan

     This Plan superseded The PBG Directors’ Stock Plan of 1999 (the “Prior Plan”) when
shareholders approved this Plan on May 23, 2001. As of that date, all awards granted under the
Prior Plan became subject to the terms of this Plan and all shares that were authorized but not
delivered under the Prior Plan became available for delivery under this Plan, in addition to those
shares authorized for issuance pursuant to Section 8 of this Plan. No awards were made under the
Prior Plan after May 23, 2001.

16. Duration, Amendments and Terminations

     The Board of Directors may terminate or amend the Plan in whole or in part; provided,
however, that the Plan may not be amended more than once every six (6) months, other than
to comport with changes in the Internal Revenue Code or the rules and regulations thereunder;
provided further, however, that no such action shall have a material adverse effect
on any rights or obligations with respect to any awards theretofore granted under the Plan, unless
consented to by the recipients of such awards (unless the amendment is required to comply with Code
Section 409A in which case, the amendment shall be effective without consent of the recipient
unless the recipient expressly denies consent to such amendment in writing); and provided
further, however, that any amendment and the termination of the Plan shall neither
violate Code Section 409A nor adversely affect the exemption of Excepted Awards or the grandfather
of the Prior Deferrals. The Plan shall continue until terminated.

7

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