UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |||||
For the fiscal year ended December 30, 2023
OR
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |||||
For the transition period from to
Commission file number 1-1183
(Exact Name of Registrant as Specified in its Charter)
| (State or Other Jurisdiction of Incorporation or Organization) | (I.R.S. Employer Identification No.) | |||||||
(Address of principal executive offices and Zip Code)
Registrant’s telephone number, including area code
Securities registered pursuant to Section 12(b) of the Securities Exchange Act of 1934:
| Title of each class | Trading Symbols | Name of each exchange on which registered | ||||||||||||
Securities registered pursuant to Section 12(g) of the Securities Exchange Act of 1934: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☒ No ¨
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes ¨ No ☒
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ¨
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
☒ | Accelerated filer | ☐ | |||||||||
Non-accelerated filer | ☐ | Smaller reporting company | |||||||||
Emerging growth company | |||||||||||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ¨
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
The aggregate market value of PepsiCo, Inc. Common Stock held by nonaffiliates of PepsiCo, Inc. (assuming for these purposes, but without conceding, that all executive officers and directors of PepsiCo, Inc. are affiliates of PepsiCo, Inc.) as of June 16, 2023, the last day of business of our most recently completed second fiscal quarter, was $255.9 billion (based on the closing sale price of PepsiCo, Inc.’s Common Stock on that date as reported on the Nasdaq Global Select Market).
The number of shares of PepsiCo, Inc. Common Stock outstanding as of February 2, 2024 was 1,374,429,271 .
Documents Incorporated by Reference
PepsiCo, Inc.
Form 10-K Annual Report
For the Fiscal Year Ended December 30, 2023
Table of Contents
| PART I | ||||||||
| Item 1. | ||||||||
| Item 1A. | ||||||||
| Item 1B. | ||||||||
| Item 1C. | ||||||||
| Item 2. | ||||||||
| Item 3. | ||||||||
| Item 4. | ||||||||
| PART II | ||||||||
| Item 5. | ||||||||
| Item 7. | ||||||||
| Item 7A. | ||||||||
| Item 8. | ||||||||
| Item 9. | ||||||||
| Item 9A. | ||||||||
| Item 9B. | ||||||||
| Item 9C. | ||||||||
| PART III | ||||||||
| Item 10. | ||||||||
| Item 11. | ||||||||
| Item 12. | ||||||||
| Item 13. | ||||||||
| Item 14. | ||||||||
| PART IV | ||||||||
| Item 15. | ||||||||
| Item 16. | ||||||||
1
Forward-Looking Statements
This Annual Report on Form 10-K contains statements reflecting our views about our future performance that constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 (Reform Act). Statements that constitute forward-looking statements within the meaning of the Reform Act are generally identified through the inclusion of words such as “aim,” “anticipate,” “believe,” “drive,” “estimate,” “expect,” “expressed confidence,” “forecast,” “future,” “goal,” “guidance,” “intend,” “may,” “objective,” “outlook,” “plan,” “position,” “potential,” “project,” “seek,” “should,” “strategy,” “target,” “will” or similar statements or variations of such words and other similar expressions. All statements addressing our future operating performance, and statements addressing events and developments that we expect or anticipate will occur in the future, are forward-looking statements within the meaning of the Reform Act. These forward-looking statements are based on currently available information, operating plans and projections about future events and trends. They inherently involve risks and uncertainties that could cause actual results to differ materially from those predicted in any such forward-looking statement. These risks and uncertainties include, but are not limited to, those described in “Item 1A. Risk Factors” and “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Our Business – Our Business Risks.” Investors are cautioned not to place undue reliance on any such forward-looking statements, which speak only as of the date they are made. We undertake no obligation to update any forward-looking statement, whether as a result of new information, future events or otherwise. The discussion of risks in this report is by no means all-inclusive but is designed to highlight what we believe are important factors to consider when evaluating our future performance.
PART I
Item 1. Business.
When used in this report, the terms “we,” “us,” “our,” “PepsiCo” and the “Company” mean PepsiCo, Inc. and its consolidated subsidiaries, collectively. Certain terms used in this Annual Report on Form 10-K are defined in the Glossary included in Item 7. of this report.
Company Overview
We were incorporated in Delaware in 1919 and reincorporated in North Carolina in 1986. We are a leading global beverage and convenient food company with a complementary portfolio of brands, including Lay’s, Doritos, Cheetos, Gatorade, Pepsi-Cola, Mountain Dew, Quaker and SodaStream. Through our operations, authorized bottlers, contract manufacturers and other third parties, we make, market, distribute and sell a wide variety of beverages and convenient foods, serving customers and consumers in more than 200 countries and territories.
Our Operations
We are organized into seven reportable segments (also referred to as divisions), as follows:
1)Frito-Lay North America (FLNA), which includes our branded convenient food businesses in the United States and Canada;
2)Quaker Foods North America (QFNA), which includes our branded convenient food businesses, such as cereal, rice, pasta and other branded food, in the United States and Canada;
3)PepsiCo Beverages North America (PBNA), which includes our beverage businesses in the United States and Canada;
4)Latin America (LatAm), which includes all of our beverage and convenient food businesses in Latin America;
5)Europe, which includes all of our beverage and convenient food businesses in Europe;
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6)Africa, Middle East and South Asia (AMESA), which includes all of our beverage and convenient food businesses in Africa, the Middle East and South Asia; and
7)Asia Pacific, Australia and New Zealand and China Region (APAC), which includes all of our beverage and convenient food businesses in Asia Pacific, Australia and New Zealand, and China region.
Frito-Lay North America
Either independently or in conjunction with third parties, FLNA makes, markets, distributes and sells branded convenient foods. These foods include branded dips, Cheetos cheese-flavored snacks, Doritos tortilla chips, Fritos corn chips, Lay’s potato chips, Ruffles potato chips and Tostitos tortilla chips. FLNA’s branded products are sold to independent distributors and retailers. In addition, FLNA’s joint venture with Strauss Group makes, markets, distributes and sells Sabra refrigerated dips and spreads.
Quaker Foods North America
Either independently or in conjunction with third parties, QFNA makes, markets, distributes and sells branded convenient foods, which include cereals, rice, pasta and other branded products. QFNA’s products include Cap’n Crunch cereal, Life cereal, Pearl Milling Company syrups and mixes, Quaker Chewy granola bars, Quaker grits, Quaker oatmeal, Quaker rice cakes, Quaker Simply Granola and Rice-A-Roni side dishes. QFNA’s branded products are sold to independent distributors and retailers.
PepsiCo Beverages North America
Either independently or in conjunction with third parties, PBNA makes, markets and sells beverage concentrates, fountain syrups and finished goods under various beverage brands including Aquafina, Bubly, Diet Mountain Dew, Diet Pepsi, Gatorade, Gatorade Zero, Mountain Dew, Pepsi and Propel. PBNA operates its own bottling plants and distribution facilities and sells branded finished goods directly to independent distributors and retailers. PBNA also sells concentrate and finished goods for our brands to authorized and independent bottlers, who in turn sell our branded finished goods to independent distributors and retailers in certain markets. PBNA also, either independently or in conjunction with third parties, makes, markets, distributes and sells ready-to-drink tea and coffee products through joint ventures with Unilever (under the Lipton brand name) and Starbucks, respectively. Further, PBNA manufactures and distributes certain brands licensed from Keurig Dr Pepper Inc., including Crush, Dr Pepper and Schweppes, and certain juice brands licensed from Dole Food Company, Inc. and Ocean Spray Cranberries, Inc. In 2022, PBNA began to distribute Hard MTN Dew, an alcoholic beverage manufactured and owned by the Boston Beer Company. In the first quarter of 2022, we sold our Tropicana, Naked and other select juice brands to PAI Partners, while retaining a 39% noncontrolling interest in a newly formed joint venture, Tropicana Brands Group (TBG), operating across North America and Europe (Juice Transaction). In the United States, PepsiCo acts as the exclusive distributor for TBG’s portfolio of brands for small-format and foodservice customers with chilled direct-store-delivery (DSD). See Note 13 to our consolidated financial statements for further information.
Latin America
Either independently or in conjunction with third parties, LatAm makes, markets, distributes and sells a number of convenient food brands including Cheetos, Doritos, Emperador, Lay’s, Marias Gamesa, Ruffles, Sabritas, Saladitas and Tostitos, as well as many Quaker-branded convenient foods. LatAm also, either independently or in conjunction with third parties, makes, markets, distributes and sells beverage concentrates, fountain syrups and finished goods under various beverage brands including 7UP, Diet 7UP, Gatorade, H2oh!, Manzanita Sol, Mirinda, Pepsi, Pepsi Black, San Carlos and Toddy. These branded products are sold to authorized and independent bottlers, independent distributors and retailers. LatAm
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also, either independently or in conjunction with third parties, makes, markets, distributes and sells ready-to-drink tea products through an international joint venture with Unilever (under the Lipton brand name).
Europe
Either independently or in conjunction with third parties, Europe makes, markets, distributes and sells a number of convenient food brands including Cheetos, Doritos, Lay’s, Ruffles and Walkers, as well as many Quaker-branded convenient foods, through consolidated businesses, as well as through noncontrolled affiliates. Europe also, either independently or in conjunction with third parties, makes, markets, distributes and sells beverage concentrates, fountain syrups and finished goods under various beverage brands including 7UP, Diet Pepsi, Lubimyj Sad, Mirinda, Pepsi and Pepsi Max. These branded products are sold to authorized and independent bottlers, independent distributors and retailers. In certain markets, however, Europe operates its own bottling plants and distribution facilities. Europe also, as part of its beverage business, manufactures and distributes SodaStream sparkling water makers and related products. Further, Europe makes, markets, distributes and sells a number of dairy products including Agusha, Chudo and Domik v Derevne. Europe also, either independently or in conjunction with third parties, makes, markets, distributes and sells ready-to-drink tea products through an international joint venture with Unilever (under the Lipton brand name). In the first quarter of 2022, we sold our Tropicana, Naked and other select juice brands to PAI Partners, while retaining a 39% noncontrolling interest in TBG, operating across North America and Europe. See Note 13 to our consolidated financial statements for further information.
Africa, Middle East and South Asia
Either independently or in conjunction with third parties, AMESA makes, markets, distributes and sells a number of convenient food brands including Cheetos, Chipsy, Doritos, Kurkure, Lay’s, Sasko, Spekko and White Star, as well as many Quaker-branded convenient foods, through consolidated businesses, as well as through noncontrolled affiliates. AMESA also makes, markets, distributes and sells beverage concentrates, fountain syrups and finished goods under various beverage brands including 7UP, Aquafina, Mirinda, Mountain Dew and Pepsi. These branded products are sold to authorized and independent bottlers, independent distributors and retailers. In certain markets, however, AMESA operates its own bottling plants and distribution facilities. AMESA also, either independently or in conjunction with third parties, makes, markets, distributes and sells ready-to-drink tea products through an international joint venture with Unilever (under the Lipton brand name).
Asia Pacific, Australia and New Zealand and China Region
Either independently or in conjunction with third parties, APAC makes, markets, distributes and sells a number of convenient food brands including BaiCaoWei, Cheetos, Doritos, Lay’s and Smith’s, as well as many Quaker-branded convenient foods, through consolidated businesses, as well as through noncontrolled affiliates. APAC also makes, markets, distributes and sells beverage concentrates, fountain syrups and finished goods under various beverage brands including 7UP, Aquafina, Mirinda, Mountain Dew, Pepsi and Sting. These branded products are sold to authorized and independent bottlers, independent distributors and retailers. APAC also, either independently or in conjunction with third parties, makes, markets, distributes and sells ready-to-drink tea products through an international joint venture with Unilever (under the Lipton brand name).
Our Distribution Network
Our products are primarily brought to market through DSD, customer warehouse and distributor networks and are also sold directly to consumers through e-commerce platforms and retailers. The distribution system used depends on customer needs, product characteristics and local trade practices.
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Direct-Store-Delivery
We, our independent bottlers and our distributors operate DSD systems that deliver beverages and convenient foods directly to retail stores where the products are merchandised by our employees or our independent bottlers. DSD enables us to merchandise with maximum visibility and appeal. DSD is especially well-suited to products that are restocked often and respond to in-store promotion and merchandising.
Customer Warehouse
Some of our products are delivered from our manufacturing plants and distribution centers, both company and third-party operated, to customer warehouses. These less costly systems generally work best for products that are less fragile and perishable, and have lower turnover.
Distributor Networks
We distribute many of our products through third-party distributors. Third-party distributors are particularly effective when greater distribution reach can be achieved by including a wide range of products on the delivery vehicles. For example, our foodservice and vending business distributes beverages and convenient foods to restaurants, businesses, schools and stadiums through third-party foodservice and vending distributors and operators.
E-commerce
Our products are also available and sold directly to consumers on a growing number of company-owned and third-party e-commerce websites and mobile commerce applications.
Ingredients and Other Supplies
The principal ingredients we use in our beverage and convenient food products are acesulfame potassium, aspartame, corn, corn sweeteners, flavorings, flour, juice concentrates, oats, potatoes, raw milk, rice, seasonings, sucralose, sugar, vegetable and essential oils, and wheat. We also use water in the manufacturing of our products. Our key packaging materials include plastic resins, including polyethylene terephthalate (PET) and polypropylene resins used for plastic beverage bottles and film packaging used for convenient foods, aluminum, glass, closures, cardboard and paperboard cartons. In addition, we continue to integrate recyclability into our product development process and support the increased use of recycled content, including recycled PET, in our packaging. Fuel, electricity and natural gas are also important commodities for our businesses due to their use in our and our business partners’ facilities and the vehicles delivering our products. We employ specialists to secure adequate supplies of many of these items and have not experienced any significant continuous shortages that would prevent us from meeting our requirements. Many of these ingredients, raw materials and commodities are purchased in the open market. The prices we pay for such items are subject to fluctuation, and we manage this risk through the use of fixed-price contracts and purchase orders, pricing agreements and derivative instruments, including swaps and futures. In addition, risk to our supply of certain raw materials is mitigated through purchases from multiple geographies and suppliers. When prices increase, we may or may not pass on such increases to our customers. In addition, we continue to make investments to improve the sustainability and resources of our agricultural supply chain, including the development of our initiative to advance sustainable farming practices by our suppliers and expanding it further globally. During 2023, we continued to experience increased commodity, packaging and other input costs and, in some instances, supply constraints related to the deadly conflict in Ukraine, the inflationary cost environment, adverse weather conditions, supply chain disruptions and labor shortages, which may continue into fiscal 2024. See Note 9 to our consolidated financial statements for further information on how we manage our exposure to commodity prices.
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We also maintain voluntary supply chain finance agreements with several participating global financial institutions, pursuant to which our suppliers, at their sole discretion, may elect to sell their accounts receivable with PepsiCo to such global financial institutions. These agreements did not have a material impact on our business or financial results. See “Our Financial Results – Our Liquidity and Capital Resources” in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Note 14 to our consolidated financial statements for further information.
Our Brands and Intellectual Property Rights
We own numerous valuable trademarks which are essential to our worldwide businesses, including Agusha, Amp Energy, Aquafina, Aquafina Flavorsplash, Arto Lifewtr, Baja Blast, BaiCaoWei, Bare, Bokomo, Bubly, Cap’n Crunch, Ceres, Cheetos, Chester’s, Chipsy, Chokis, Chudo, Cracker Jack, Crunchy, Diet Mountain Dew, Diet Mug, Diet Pepsi, Diet 7UP (outside the United States), Domik v Derevne, Doritos, Driftwell, Duyvis, Elma Chips, Emperador, Evolve, Fast Twitch, Frito-Lay, Fritos, Fruktovy Sad, G2, Gamesa, Gatorade, Gatorade Fit, Gatorade Zero, Gatorlyte, Grandma’s, H2oh!, Hard MTN Dew, Health Warrior, Imunele, J7, Kas, Kurkure, Lay’s, Life, Lifewtr, Liquifruit, Lubimyj Sad, Manzanita Sol, Marias Gamesa, Matutano, Mirinda, Miss Vickie’s, Moirs, Mother’s, Mountain Dew, Mountain Dew Code Red, Mountain Dew Game Fuel, Mountain Dew Kickstart, Mountain Dew Zero Sugar, MTN Dew Energy, Mug, Munchies, Muscle Milk, Near East, Off the Eaten Path, Paso de los Toros, Pasta Roni, Pearl Milling Company, Pepsi, Pepsi Black, Pepsi Max, Pepsi Zero Sugar, PopCorners, Pronutro, Propel, Quaker, Quaker Chewy, Quaker Simply Granola, Rice-A-Roni, Rockstar Energy, Rold Gold, Ruffles, Sabritas, Safari, Sakata, Saladitas Gamesa, San Carlos, Sandora, Santitas, Sasko, 7UP (outside the United States), 7UP Free (outside the United States), Simba, Smartfood, Smith’s, Snack a Jacks, SoBe, SodaStream, Sonric’s, Spekko, Stacy’s, Starry, Starry Zero Sugar, Sting, Stubborn Soda, SunChips, Toddy, Toddynho, Tostitos, V Water, Vesely Molochnik, Walkers, Weetbix, White Star, Ya and Yachak. We also hold long-term licenses to use valuable trademarks in connection with our products in certain markets, including Ocean Spray. We also distribute Celsius energy drinks and various Keurig Dr Pepper Inc. brands, including Dr Pepper in certain markets, Crush and Schweppes. Joint ventures in which we have an ownership interest either own or have the right to use certain trademarks, such as Lipton, Sabra and Starbucks. In addition, in the first quarter of 2022, we sold our Tropicana, Naked and other select juice brands to PAI Partners, while retaining a 39% noncontrolling interest in TBG, operating across North America and Europe. In the United States, PepsiCo acts as the exclusive distributor for TBG’s portfolio of brands for small-format and foodservice customers with chilled DSD. See Note 13 to our consolidated financial statements for further information. In 2022, we began to distribute Hard MTN Dew, an alcoholic beverage manufactured and owned by the Boston Beer Company. We have licensed the use of the Hard MTN Dew trademark to the Boston Beer Company, which has appointed us as their distributor for this product. Trademarks remain valid so long as they are used properly for identification purposes, and we emphasize correct use of our trademarks. We have authorized, through licensing arrangements, the use of many of our trademarks in such contexts as convenient food joint ventures and beverage bottling appointments. In addition, we license the use of our trademarks on merchandise that is sold at retail, which enhances brand awareness.
We either own or have licenses to use a number of patents which relate to certain of our products, their packaging, the processes for their production and the design and operation of various equipment used in our businesses. Some of these patents are licensed to others.
Seasonality
Our businesses are affected by seasonal variations. Our beverage and convenient food sales are generally highest in the third quarter due to seasonal and holiday-related patterns and generally lowest in the first quarter. However, taken as a whole, seasonality has not had a material impact on our consolidated financial results.
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Our Customers
Our customers include wholesale and other distributors, foodservice customers, grocery stores, drug stores, convenience stores, discount/dollar stores, mass merchandisers, membership stores, hard discounters, e-commerce retailers and authorized independent bottlers, among others. We normally grant our independent bottlers exclusive contracts to sell and manufacture certain beverage products bearing our trademarks within a specific geographic area. These arrangements provide us with the right to charge our independent bottlers for concentrate, finished goods and Aquafina royalties and specify the manufacturing process required for product quality. We also grant distribution rights to our independent bottlers for certain beverage products bearing our trademarks for specified geographic areas.
We rely on and provide financial incentives to our customers to assist in the distribution and promotion of our products to the consumer. For our independent distributors and retailers, these incentives include volume-based rebates, product placement fees, promotions and displays. For our independent bottlers, these incentives are referred to as bottler funding and are negotiated annually with each bottler to support a variety of trade and consumer programs, such as consumer incentives, advertising support, new product support, and vending and cooler equipment placement. Consumer incentives include pricing discounts and promotions, and other promotional offers. Advertising support is directed at advertising programs and supporting independent bottler media. New product support includes targeted consumer and retailer incentives and direct marketplace support, such as point-of-purchase materials, product placement fees, media and advertising. Vending and cooler equipment placement programs support the acquisition and placement of vending machines and cooler equipment. The nature and type of programs vary annually.
Changes to the retail landscape, including increased consolidation of retail ownership, the continued growth of sales through e-commerce websites and mobile commerce applications, including through subscription services and other direct-to-consumer businesses, the integration of physical and digital operations among retailers, as well as the international expansion of hard discounters, and the current economic environment continue to increase the importance of major customers. In 2023, sales to Walmart Inc. (Walmart) and its affiliates, including Sam’s Club (Sam’s), represented approximately 14% of our consolidated net revenue, with sales reported across all of our divisions, including concentrate sales to our independent bottlers, which were used in finished goods sold by them to Walmart. The loss of this customer would have a material adverse effect on our FLNA, QFNA and PBNA divisions.
Our Competition
Our beverage and convenient food products are in highly competitive categories and markets and compete against products of international beverage and convenient food companies that, like us, operate in multiple geographies, as well as regional, local and private label manufacturers and economy brands and other competitors, including smaller companies developing and selling micro brands directly to consumers through e-commerce platforms or through retailers focused on locally-sourced products. In many countries in which our products are sold, including the United States, The Coca-Cola Company is our primary beverage competitor. Other beverage and convenient food competitors include, but are not limited to, Campbell Soup Company, Conagra Brands, Inc., Hormel Foods Corporation, Kellanova, Keurig Dr Pepper Inc., The Kraft Heinz Company, Link Snacks, Inc., Mondelēz International, Inc., Monster Beverage Corporation, Nestlé S.A., Red Bull GmbH and Utz Brands, Inc.
Many of our convenient food products hold significant leadership positions in the convenient food industry in the United States and worldwide. In 2023, we and The Coca-Cola Company represented approximately 19% and 20%, respectively, of the U.S. liquid refreshment beverage category by estimated retail sales in measured channels, according to Information Resources, Inc. However, The Coca-Cola Company has significant carbonated soft drink (CSD) share advantage in many markets outside the United States.
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Our beverage and convenient food products compete primarily on the basis of brand recognition and loyalty, taste, price, value, quality, product variety, innovation, distribution, shelf space, advertising, marketing and promotional activity (including digital), packaging, convenience, service and the ability to anticipate and effectively respond to consumer preferences and trends, including increased consumer focus on health and wellness and sustainability and the continued acceleration of e-commerce and other methods of distributing and purchasing products. Success in this competitive environment is dependent on effective promotion of existing products, effective introduction of new products and reformulations of existing products, increased efficiency in production techniques, effective incorporation of technology and digital tools across all areas of our business, the effectiveness of our advertising campaigns, marketing programs, product packaging and pricing, new vending and dispensing equipment and brand and trademark development and protection. We believe that the strength of our brands, innovation and marketing, coupled with the quality of our products and flexibility of our distribution network, allows us to compete effectively.
Research and Development
We engage in a variety of research and development activities and invest in innovation globally with the goal of meeting the needs of our customers and consumers and accelerating growth. These activities principally involve: innovations focused on creating consumer preferred products to grow and transform our portfolio through development of new technologies, ingredients, flavors and substrates; development and improvement of our manufacturing processes, including reductions in cost and environmental footprint; implementing product improvements to our global portfolio that reduce added sugars, sodium or saturated fat; offering more products with functional ingredients and positive nutrition including legumes, whole grains, fruits and vegetables, nuts and seeds, dairy, protein (including plant-based proteins), fiber, micronutrients and hydration; development of packaging technology and new package designs, including reducing the amount of plastic in our packaging and developing recyclable, compostable, biodegradable, reusable or otherwise sustainable packaging; development of marketing, merchandising and dispensing equipment; further expanding our beyond the bottle portfolio including innovation for our SodaStream business; investments in technology and digitalization, including artificial intelligence and data analytics to enhance our consumer insights and research; continuing to strengthen our omnichannel capabilities, particularly in e-commerce; and efforts focused on reducing our impact on the environment, including reducing water use in our operations and our agricultural practices and reducing our environmental impact in our operations throughout our value chain.
Our research centers are located around the world, including in Brazil, China, India, Ireland, Mexico, Russia, South Africa, the United Kingdom and the United States, and leverage consumer insights, food science and engineering to meet our strategy to continually innovate our portfolio of beverages and convenient foods.
Regulatory Matters
The conduct of our businesses, including the production, storage, distribution, sale, display, advertising, marketing, labeling, content, quality, safety, transportation, packaging, disposal, recycling and use of our products, as well as our employment and occupational health and safety practices and protection of personal information, are subject to various laws and regulations administered by federal, state and local governmental agencies in the United States, as well as to laws and regulations administered by government entities and agencies in the more than 200 other countries and territories in which our products are made, manufactured, distributed or sold. It is our policy to abide by the laws and regulations around the world that apply to our businesses.
The U.S. laws and regulations that we are subject to include, but are not limited to: the Federal Food, Drug and Cosmetic Act and various state laws governing food safety and food labeling; the Food Safety
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Modernization Act; the Occupational Safety and Health Act and various state laws and regulations governing workplace health and safety; various federal, state and local environmental protection laws, as discussed below; the Federal Motor Carrier Safety Act; the Federal Trade Commission Act; the Lanham Act and various state law statutory and common law duties regarding false advertising; various federal and state laws and regulations governing competition and trade practices, including the Robinson-Patman Act and the Clayton Act; various federal and state laws and regulations governing our employment practices, including those related to equal employment opportunity, such as the Equal Employment Opportunity Act and the National Labor Relations Act and those related to overtime compensation, such as the Fair Labor Standards Act; various state and federal laws pertaining to sale and distribution of alcohol beverages; data privacy and personal data protection laws and regulations, including the California Consumer Privacy Act of 2018 (as modified by the California Privacy Rights Act); customs and foreign trade laws and regulations, including laws regarding the import or export of our products or ingredients used in our products and tariffs; laws regulating the sale of certain of our products in schools; laws regulating the ingredients or substances contained in, or attributes of, our products; laws regulating our supply chain, including the 2010 California Transparency in Supply Chains Act and laws relating to the payment of taxes. We are also required to comply with the Foreign Corrupt Practices Act and the Trade Sanctions Reform and Export Enhancement Act. We are also subject to various state and local statutes and regulations, including state consumer protection laws such as Proposition 65 in California, which requires that a specific warning appear on any product that contains a substance listed by the State of California as having been found to cause cancer or birth defects, unless the amount of such substance in the product is below a safe harbor level.
We are subject to numerous similar and other laws and regulations outside the United States, including but not limited to laws and regulations governing food safety, international trade and tariffs, supply chains, including the U.K. Modern Slavery Act, occupational health and safety, competition, anti-corruption and data privacy, including the European Union General Data Protection Regulation. In many jurisdictions, compliance with competition laws is of special importance to us due to our competitive position in those jurisdictions, as is compliance with anti-corruption laws, including the U.K. Bribery Act. We rely on legal and operational compliance programs, as well as in-house and outside counsel and other experts, to guide our businesses in complying with the laws and regulations around the world that apply to our businesses.
Certain jurisdictions have either imposed, or are considering imposing, new or increased taxes on the manufacture, distribution or sale of our products, ingredients or substances contained in, or attributes of, our products or commodities used in the production of our products. These taxes vary in scope and form: some apply to all beverages, including non-caloric beverages, while others apply only to beverages with a caloric sweetener (e.g., sugar). Similarly, some measures apply a single tax rate per ounce/liter on beverages containing over a certain level of added sugar (or other sweetener) while others apply a graduated tax rate depending upon the amount of added sugar (or other sweetener) in the beverage and some apply a flat tax rate on beverages containing a particular substance or ingredient, regardless of the level of such substance or ingredient.
Certain jurisdictions have either imposed, or are considering imposing, product labeling or warning requirements or other limitations on the marketing or sale of certain of our products as a result of ingredients or substances contained in such products or the audience to whom products are marketed. These types of provisions have required that we highlight perceived concerns about a product, warn consumers to avoid consumption of certain ingredients or substances present in our products, restrict the age of consumers to whom products are marketed or sold, limit the location in which our products may be available or discontinue the use of certain ingredients. It is possible that similar or more restrictive requirements may be proposed or enacted in the future.
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Certain jurisdictions have either imposed or are considering imposing regulations designed to increase recycling rates, encourage waste reduction, restrict the sale of products utilizing certain packaging or to carry warnings about the environmental impact of plastic packaging. These regulations vary in scope and form from deposit return systems designed to incentivize the return of beverage containers, to extended producer responsibility policies and even restrictions or bans on the use of certain types of packaging, including single-use plastics and packaging containing per- and polyfluoroalkyl substances (PFAS). It is possible that similar or more restrictive requirements may be proposed or enacted in the future.
We are also subject to national and local environmental laws in the United States and in foreign countries in which we do business, including laws related to water consumption and treatment, wastewater discharge and air emissions. In the United States, we are subject to the Clean Air Act, the Clean Water Act, the Comprehensive Environmental Response, Compensation and Liability Act, the Resource Conservation and Recovery Act and other federal, state and local laws and regulations regarding handling, storage, release and disposal of wastes generated onsite and sent to third-party owned and operated offsite licensed facilities. Our operations outside the United States are subject to similar laws and regulations. In addition, continuing concern over environmental, social and governance matters, including climate change, is expected to continue to result in new or increased legal and regulatory requirements (in or outside of the United States) to reduce emissions to mitigate the potential effects of greenhouse gases, to limit or impose additional costs on commercial water use due to local water scarcity concerns or to expand mandatory reporting of certain environmental, social and governance metrics. Our policy is to abide by all applicable environmental laws and regulations, and we have internal programs in place with respect to our global environmental compliance. We have made, and plan to continue making, necessary expenditures for compliance with applicable environmental laws and regulations and to achieve our sustainability goals. While these expenditures have not had a material impact on our business, financial condition or results of operations to date, changes in environmental compliance requirements, and expenditures necessary to comply with such requirements or to achieve our sustainability goals, could adversely affect our financial performance. In addition, we and our subsidiaries are subject to environmental remediation obligations arising in the normal course of business, as well as remediation and related indemnification obligations in connection with certain historical activities and contractual obligations, including those of businesses or properties acquired by us or our subsidiaries. While these environmental remediation and indemnification obligations cannot be predicted with certainty, such obligations have not had, and are not expected to have, a material impact on our capital expenditures, earnings or competitive position.
In addition to the discussion in this section, see also “Item 1A. Risk Factors.”
Human Capital
PepsiCo believes that human capital management, including attracting, developing and retaining a high quality workforce, is critical to our long-term success. Our Board of Directors (Board) and its Committees provide oversight on a broad range of human capital management topics, including corporate culture, diversity, equity and inclusion, pay equity, health and safety, training and development and compensation and benefits.
We employed approximately 318,000 people worldwide as of December 30, 2023, including approximately 134,000 people within the United States. We are party to numerous collective bargaining agreements and believe that relations with our employees are generally good.
Protecting the safety, health, and well-being of our associates around the world is PepsiCo’s top priority. We strive to achieve an injury-free work environment. We also continue to invest in emerging technologies to protect our employees from injuries, including leveraging fleet telematics and distracted driving technology, resulting in reductions in road traffic incidents, and deploying ergonomic and machine safety risk reduction solutions.
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We believe that our culture of diversity, equity and inclusion is a competitive advantage that fuels innovation, enhances our ability to attract and retain talent and strengthens our reputation. We continually strive to improve the attraction, retention, and advancement of diverse associates to ensure we sustain a high-caliber pipeline of talent that also represents the communities we serve. As of December 30, 2023, our global workforce was approximately 27% female, while management roles were approximately 45% female. As of December 30, 2023, approximately 49% of our U.S. workforce was comprised of racially/ethnically diverse individuals, of which approximately 34% of our U.S. associates in managerial roles were racially/ethnically diverse individuals. The Board has overseen appointments of current direct reports of our Chief Executive Officer, who include 7 executives globally who are racially/ethnically diverse and/or female.
We are also committed to the continued growth and development of our associates. PepsiCo supports and develops its associates through a variety of global training and development programs that build and strengthen employees’ leadership and professional skills, including career development plans, mentoring programs and in-house learning opportunities, such as PEP U Degreed, our internal global online learning resource. In 2023, PepsiCo employees completed over 1.5 million hours of training.
Available Information
We are required to file annual, quarterly and current reports, proxy statements and other information with the U.S. Securities and Exchange Commission (SEC). The SEC maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC at http://www.sec.gov.
Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, proxy statements and amendments to those documents filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (Exchange Act), are also available free of charge on our Internet site at http://www.pepsico.com as soon as reasonably practicable after such reports are electronically filed with or furnished to the SEC.
Investors should note that we currently announce material information to our investors and others using filings with the SEC, press releases, public conference calls, webcasts or our corporate website (www.pepsico.com), including news and announcements regarding our financial performance, key personnel, our brands and our business strategy. Information that we post on our corporate website could be deemed material to investors. We encourage investors, the media, our customers, consumers, business partners and others interested in us to review the information we post on these channels. We may from time to time update the list of channels we will use to communicate information that could be deemed material and will post information about any such change on www.pepsico.com. The information on our website is not, and shall not be deemed to be, a part hereof or incorporated into this or any of our other filings with the SEC.
Item 1A. Risk Factors.
The following risks, some of which have occurred and any of which may occur in the future, can have a material adverse effect on our business or financial performance, which in turn can affect the price of our publicly traded securities. These are not the only risks we face. There may be other risks we are not currently aware of or that we currently deem not to be material but that may become material in the future.
Business Risks
Risks associated with the deadly conflict in Ukraine
The deadly conflict in Ukraine and related sanctions have continued to result in worldwide geopolitical and macroeconomic uncertainty. The conflict has resulted and could continue to result in volatile commodity markets, supply chain disruptions, increased risk of cyber incidents or other disruptions to our
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information systems, reputational risk, heightened risks to employee safety, business disruptions (including labor shortages), significant volatility of the Russian ruble, limitations on access to credit markets and other corporate banking services, including working capital facilities, reduced availability and increased costs for transportation, energy, packaging and raw materials and other input costs, environmental, health and safety risks related to securing and maintaining facilities, additional sanctions, export controls and other legislation or regulations (including restrictions on the transfer of funds to and from Russia). The ongoing conflict could result in the temporary or permanent loss of assets, including the nationalization or expropriation of assets, result in additional impairment charges or significantly affect our ability to manage our operations in these markets which could result in the deconsolidation of such businesses. We cannot predict how and the extent to which the conflict will continue to affect our employees, operations, customers, consumers or business partners or our ability to achieve certain of our sustainability goals. The conflict has adversely affected and could continue to adversely affect demand for our products and our global business.
Reduction in future demand for our products would adversely affect our business.
Demand for our products depends in part on our ability to innovate and anticipate and effectively respond to shifts in consumer trends and preferences, including the types of products our consumers want and how they browse for, purchase and consume them. Consumer preferences continuously evolve due to a variety of factors, including: changes in consumer demographics, consumption patterns, diet (whether due to changes in consumer behavior and eating habits, the use of weight-loss drugs or other factors) and channel preferences (including continued increases in the e-commerce and online-to-offline channels); pricing; product quality; concerns or perceptions regarding packaging and its environmental impact (such as single-use and other plastic packaging); and concerns or perceptions regarding the nutrition profile and health effects of, or location of origin of, ingredients or substances in our products or packaging, including due to the results of third-party studies (whether or not scientifically valid). Concerns with any of the foregoing could lead consumers to reduce or publicly boycott the purchase or consumption of our products. Pandemics, epidemics or other disease outbreaks, such as COVID-19, and geopolitical events, wars and other military conflicts have also impacted and could continue to impact consumer preferences and demand for our products. Consumer preferences are also influenced by perception of our brand image or the brand images of our products, the success of our advertising and marketing campaigns, our ability to engage with our consumers in the manner they prefer, including through the use of digital media or assets, and the perception of our use of social media and our response to political and social issues, geopolitical events, wars and other military conflicts or catastrophic events. These and other factors have reduced and could continue to reduce consumers’ willingness to purchase certain of our products, including as a result of public boycotts. Any inability on our part to anticipate or react to changes in consumer preferences and trends, or make the right strategic investments to do so, including investments in data analytics to understand consumer trends, can lead to reduced demand for our products, lead to inventory write-offs or erode our competitive and financial position, thereby adversely affecting our business. In addition, our business operations, including our supply chain, are subject to disruption by geopolitical events, wars and other military conflicts, natural disasters, pandemics, epidemics or other events beyond our control that could negatively impact product availability and decrease demand for our products if our crisis management plans do not effectively mitigate these issues.
Damage to our reputation or brand image can adversely affect our business.
Maintaining a positive reputation globally is critical to selling our products. Our reputation or brand image has in the past been, and could in the future be, adversely impacted by a variety of factors, including: any failure by us, our business partners, or other actors in the supply chain to maintain high ethical, business and environmental, social and governance practices, including with respect to human rights, child labor, diversity, equity and inclusion, workplace conditions and employee health and safety; any failure, or
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perception of a failure, to achieve our environmental, social and governance goals, or any negative perception toward such goals, including with respect to the nutrition profile of our products, diversity, equity and inclusion initiatives, packaging, water use and our impact on the environment; any failure to address health or other concerns about our products, products we distribute (including alcoholic beverages), or particular ingredients in our products, including concerns regarding whether certain of our products contribute to obesity and other health conditions or an increase in public health costs; our research and development efforts; any product quality or safety issues, including the recall of any of our products; any failure to comply with laws and regulations; consumer perception of our advertising campaigns, sponsorship arrangements, marketing programs, use of social media and our response to political and social issues, geopolitical events, wars and other military conflicts or catastrophic events; or any failure to effectively respond to negative or inaccurate comments about us on social media or otherwise regarding any of the foregoing. Damage to our reputation or brand image has in the past and could in the future decrease demand for our products, thereby adversely affecting our business.
Product recalls or other issues or concerns with respect to product quality and safety can adversely affect our business.
We have recalled, and could in the future recall, products due to product quality or safety issues, including actual or alleged mislabeling, misbranding, spoilage, undeclared allergens, adulteration or contamination. Joint ventures in which we have an interest have also recalled, and could in the future recall, products for the same or other reasons. Product recalls, including the voluntary recall of certain bars and cereals in our QFNA division (Quaker Recall), have in the past and could in the future adversely affect our business by resulting in losses due to their cost, the destruction of product inventory, customer fines and returns or lost sales due to any unavailability of the product for a period of time. In addition, product quality or safety issues have in the past and could in the future also reduce consumer confidence and demand for our products, cause production and delivery disruptions, including as a result of temporary or permanent closure of manufacturing plants or facilities, and result in increased costs (including payment of fines and/or judgments, cleaning and remediation costs and legal fees, and costs associated with alternative sources of production) and damage our reputation (or the reputation of joint ventures in which we have an interest), particularly as we or our joint ventures continue to expand into new categories, all of which can adversely affect our business. Any perception or allegation (whether or not valid) of failure to maintain adequate oversight over product quality or safety can result in product recalls, litigation, government investigations or inquiries or civil or criminal proceedings, all of which may result in fines, penalties, damages or criminal liability. Our business can also be adversely affected if consumers lose confidence in product quality, safety and integrity generally, even if such loss of confidence is unrelated to products in our portfolio. In addition, while we currently maintain insurance coverage that, subject to its terms and conditions, is intended to address costs associated with certain aspects of product recalls, this insurance coverage may not, depending on the specific facts and circumstances surrounding an incident, cover all losses or all types of claims that arise from an incident, or the damage to our reputation or brands that may result from an incident.
Any inability to compete effectively can adversely affect our business.
Our products compete against products of international beverage and convenient food companies that, like us, operate in multiple geographies, as well as regional, local and private label and economy brand manufacturers and other competitors, including smaller companies developing and selling micro brands directly to consumers through e-commerce platforms or through retailers focused on locally sourced products. In many countries in which our products are sold, including the United States, The Coca-Cola Company is our primary beverage competitor. Our products compete primarily on the basis of brand recognition and loyalty, taste, price, value, quality, product variety, innovation, distribution, shelf space, advertising, marketing and promotional activity, packaging, convenience, service and the ability to
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anticipate and effectively respond to consumer preferences and trends. Our business can be adversely affected if we are unable to effectively promote or develop our existing products or introduce and effectively market new products, if we are unable to effectively adopt new technologies, including artificial intelligence and data analytics to develop new commercial insights and improve operating efficiencies, if we are unable to continuously strengthen and evolve our capabilities in digital marketing, if our competitors spend more aggressively or effectively than we do or if we are otherwise unable to effectively respond to supply disruptions, pricing pressure (including as a result of commodity inflation) or otherwise compete effectively, and we may be unable to grow or maintain sales or category share or we may need to increase capital, marketing or other expenditures.
Failure to attract, develop and maintain a highly skilled and diverse workforce or effectively manage changes in our workforce can have an adverse effect on our business.
Our business requires that we attract, develop and maintain a highly skilled and diverse workforce. Our employees are highly sought after by our competitors and other companies and our continued ability to compete effectively depends on our ability to attract, retain, develop and motivate highly skilled personnel for all areas of our organization. Our ability to do so has been and may continue to be impacted by challenges in the labor market, which has experienced and may continue to experience wage inflation, labor shortages, increased employee turnover, changes in availability of our workforce and changing worker expectations regarding flexible work models. Any unplanned turnover, sustained labor shortage or unsuccessful implementation of our succession plans to backfill current leadership positions, including the Chief Executive Officer, or failure to attract, develop and maintain a highly skilled and diverse workforce, including with key capabilities such as e-commerce and digital marketing and data analytic skills, can deplete our institutional knowledge base, erode our competitive advantage or result in increased costs due to increased competition for employees, higher employee turnover or increased employee benefit costs. In addition, failure to attract, retain and develop associates from underrepresented communities can damage our business results and our reputation. Any of the foregoing can adversely affect our business.
Water scarcity can adversely affect our business.
We and our business partners use water in the manufacturing of our products. Water is also essential to the production of the raw materials needed in our manufacturing process. Lack of available water of acceptable quality, actions by governmental and non-governmental organizations, investors, customers and consumers on water scarcity and increasing pressure to conserve and replenish water in areas of scarcity and stress, including due to the effects of climate change, can lead to: supply chain disruption; adverse effects on our operations or the operations of our business partners; higher compliance costs; increased capital expenditures (including investments in the development of technologies to enhance water efficiency and reduce consumption); higher production costs, including less favorable pricing for water; the interruption or cessation of operations at, or relocation of, our facilities or the facilities of our business partners; failure to achieve our goals relating to water use; perception of our failure to act responsibly with respect to water use or to effectively respond to legal or regulatory requirements concerning water scarcity; or damage to our reputation, any of which can adversely affect our business.
Changes in the retail landscape or in sales to any key customer can adversely affect our business.
The retail landscape continues to evolve, including continued growth in e-commerce channels and hard discounters. Our business will be adversely affected if we are unable to maintain and develop successful relationships with e-commerce retailers and hard discounters, while also maintaining relationships with our key customers operating in traditional retail channels (many of whom are also focused on increasing their e-commerce sales). Our business can be adversely affected if e-commerce channels and hard discounters take significant additional market share away from traditional retailers or we fail to find ways to create increasingly better digital tools and capabilities for our retail customers to enable them to grow
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their businesses. In addition, our business can be adversely affected if we are unable to profitably expand our own direct-to-consumer e-commerce capabilities.
The retail industry is also impacted by the actions and increasing power of retailers, including as a result of increased consolidation of ownership resulting in large retailers or buying groups with increased purchasing power, particularly in North America, Europe and Latin America. In this changing retail landscape, retailers and buying groups have impacted and may continue to impact our ability to compete in these jurisdictions by demanding lower prices or increased promotional programs, removing our products or otherwise reducing shelf space allocated to our products. The increasing power of retailers and consolidation also adversely impacts our smaller customers’ ability to compete effectively, resulting in an inability on their part to pay for our products or reduced or canceled orders of our products. Further, we must maintain mutually beneficial relationships with our key customers, including Walmart, to compete effectively. Our inability to resolve a significant dispute with any of our key customers, a change in the business condition (financial or otherwise) of any of our key customers, even if unrelated to us, a significant reduction in sales to any key customer, or the loss of any of our key customers has adversely affected and can continue to adversely affect our business.
Disruption of our manufacturing operations or supply chain, including continued increased commodity, packaging, transportation, labor and other input costs, can adversely affect our business.
We have experienced and could continue to experience disruption in our manufacturing operations and supply chain. Many of the raw materials and supplies used in the production of our products are sourced from countries experiencing war and other military conflict, acts of terrorism, civil unrest, political instability or unfavorable economic conditions. Natural disasters and extreme weather conditions also pose physical risks to our facilities, which could impair our production capabilities and disrupt our supply chain. Some raw materials and supplies, including packaging materials, are available only from a limited number of suppliers or from a sole supplier or are in short supply when seasonal demand is at its peak. There can be no assurance that we will be able to maintain favorable arrangements and relationships with suppliers or that our contingency plans will be effective to mitigate disruptions that may arise from shortages or discontinuation of any raw materials and other supplies that we use in the manufacture, production and distribution of our products or from operational or financial instability of our key suppliers. Any sustained or significant disruption in the future to the manufacturing or sourcing of products or materials could increase our costs and interrupt product supply, which can adversely impact our business.
The raw materials and other supplies, including agricultural commodities, fuel and packaging materials, such as recycled PET, transportation, labor and other supply chain inputs that we use for the manufacturing, production and distribution of our products are subject to price volatility and fluctuations in availability caused by many factors, including changes in supply and demand, supplier capacity constraints, inflation, weather conditions (including potential effects of climate change), fire, natural disasters, disease or pests (including the impact of greening disease on the citrus industry), agricultural uncertainty, health epidemics or pandemics or other contagious outbreaks (including COVID-19), labor shortages or changes in availability of our or our business partners’ workforce (including the lack of availability of truck drivers as a result of COVID-19), strikes or work stoppages (including by railway workers or other third parties involved in the manufacture, production and distribution of our products), governmental incentives and controls (including import/export restrictions, such as new or increased tariffs, sanctions, quotas or trade barriers), port congestions or delays, transport capacity constraints, cybersecurity incidents or other disruptions, loss or impairment of key manufacturing sites, political uncertainties, geopolitical events, wars and other military conflicts, acts of terrorism, governmental instability or currency exchange rates. Many of our raw materials and supplies are purchased in the open market and the prices we pay for such items are subject to fluctuation. We continued to experience
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increased commodity, packaging and transportation costs during 2023, which may continue. When input prices increase unexpectedly or significantly, we may be unwilling or unable to increase our product prices or unable to effectively hedge against price increases to offset these increased costs without suffering reduced volume, revenue, margins and operating results.
Political, social and geopolitical conditions can adversely affect our business.
Political, social and geopolitical conditions in the markets in which our products are sold have been and could continue to be difficult to predict, resulting in adverse effects on our business. The results of elections, referendums or other political conditions (including government shutdowns), geopolitical events, wars and other military conflicts (such as the ongoing conflicts in Ukraine and the Middle East) in these markets have in the past and could continue to impact how existing laws, regulations and government programs or policies are implemented or result in uncertainty as to how such laws, regulations, programs or policies may change, including with respect to tariffs, sanctions, environmental and climate change regulations, taxes, benefit programs, the movement of goods, services and people between countries, relationships between countries, customer or consumer perception of a particular country or its government and other matters, and has resulted in and could continue to result in exchange rate fluctuation, volatility in global stock markets and global economic uncertainty or adversely affect demand for our products, any of which can adversely affect our business. In addition, political and social conditions in certain cities throughout the United States as well as globally have resulted in demonstrations and protests, including in connection with political elections, civil rights and liberties and geopolitical events. Our operations or the operations of our business partners, including the distribution of our products and the ingredients or other raw materials used in the production of our products, may be disrupted if such events persist for a prolonged period of time, including due to actions taken by governmental authorities in affected cities and regions, which can adversely affect our business.
Our business can be adversely affected if we are unable to grow in developing and emerging markets.
Our success depends in part on our ability to grow our business in developing and emerging markets, including Brazil, China, Mexico, Russia and South Africa. There can be no assurance that our products will be accepted or be successful in any particular developing or emerging market, due to competition, price, cultural differences, consumer preferences, regulation, method of distribution or otherwise. Our business in these markets has been and could continue in the future to be impacted by economic, political and social conditions; geopolitical conflicts, acts of war, terrorist acts, and civil unrest, including demonstrations and protests; competition; tariffs, sanctions or other regulations restricting contact with certain countries in these markets; foreign ownership restrictions; nationalization of our assets or the assets of our business partners; government-mandated closure, or threatened closure, of our operations or the operations of our business partners; restrictions on the import or export of our products or ingredients or substances used in our products; highly inflationary economies; devaluation or fluctuation or demonetization of currency; regulations on the transfer of funds to and from foreign countries, currency controls or other currency exchange restrictions, which result in significant cash balances in foreign countries, from time to time, or can significantly affect our ability to effectively manage our operations in certain of these markets and can result in the deconsolidation of such businesses; the lack of well-established or reliable legal systems; increased costs of doing business due to compliance with complex foreign and U.S. laws and regulations that apply to our international operations, including the Foreign Corrupt Practices Act, the U.K. Bribery Act and the Trade Sanctions Reform and Export Enhancement Act; and adverse consequences, such as the assessment of fines or penalties, for any failure to comply with laws and regulations. Our business can be adversely affected if we are unable to expand our business in developing and emerging markets, effectively operate, or manage the risks associated with operating, in these markets, or achieve the return on capital we expect from our investments in these markets.
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Changes in economic conditions can adversely impact our business.
Many of the jurisdictions in which our products are sold have experienced and could continue to experience uncertain or unfavorable economic conditions, such as high inflation and adverse changes in interest rates, tax laws or tax rates, including as a result of geopolitical events. These uncertain or unfavorable economic conditions have resulted in and could continue to result in recessions or economic slowdowns; volatile commodity markets; labor shortages; highly inflationary economies, devaluation, fluctuation or demonetization of currency; contraction in the availability of credit; austerity or stimulus measures; the effects of any default by or deterioration in the creditworthiness of the countries in which our products are sold; or a decrease in the fair value of pension or post-retirement assets that could increase future employee benefit costs and/or funding requirements of our pension or post-retirement plans. In addition, we cannot predict how current or future economic conditions will affect our business partners, including financial institutions with whom we do business, and any negative impact on any of the foregoing may also have an adverse impact on our business.
Future cyber incidents and other disruptions to our information systems can adversely affect our business.
We depend on information systems and technology, including public websites and cloud-based services, for many activities important to our business, including communications within our company, interfacing with customers and consumers; ordering and managing inventory; managing and operating our facilities; protecting confidential information, including personal data we collect; maintaining accurate financial records and complying with regulatory, financial reporting, legal and tax requirements. Our business has in the past and could in the future be negatively affected by system shutdowns, degraded systems performance, systems disruptions or security incidents. These disruptions or incidents may be caused by cyberattacks and other cyber incidents, network or power outages, software, equipment or telecommunications failures, the unintentional or malicious actions of employees or contractors, natural disasters, fires or other catastrophic events. In addition, the increase in certain of our employees working remotely has resulted in increased demand on our information technology infrastructure, which can be subject to failure, disruption or unavailability, and increased vulnerability to cyberattacks and other cyber incidents.
Cyberattacks and other cyber incidents are occurring more frequently, the techniques used to gain access to information technology systems and data, disable or degrade service or sabotage systems are constantly evolving and becoming more sophisticated in nature and are being carried out by groups and individuals with a wide range of expertise and motives. In addition, the rapid evolution and increased adoption of artificial intelligence technologies may increase our cybersecurity risks, including generative artificial intelligence augmenting threat actors’ technological sophistication to enhance existing or create new malware. Cyberattacks and cyber incidents may be difficult to detect for periods of time and take many forms including cyber extortion, denial of service, social engineering, introduction of viruses or malware (such as ransomware), exploiting vulnerabilities in hardware, software or other infrastructure, hacking, website defacement or theft of passwords and other credentials, unauthorized use of computing resources for digital currency mining and business email compromise. As with other global companies, we are regularly subject to cyberattacks and other cyber incidents, including the types of attacks and incidents described above. Continued geopolitical instability has heightened the risk of cyberattacks. If we do not allocate and effectively manage the resources necessary to continue building and maintaining our information technology infrastructure, or if we fail to timely identify or appropriately respond to cyberattacks or other cyber incidents, our business has been and can continue to be adversely affected, which has resulted in and can continue to result in some or all of the following: transaction errors, processing inefficiencies, inability to access our data or systems, lost revenues or other costs resulting from disruptions or shutdowns of offices, plants, warehouses, distribution centers or other facilities,
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intellectual property or other data loss, litigation, claims, legal or regulatory proceedings, inquiries or investigations, fines or penalties, remediation costs, damage to our reputation or a negative impact on employee morale and the loss of current or potential customers. In addition, these risks also exist in acquired businesses, joint ventures or companies we invest in or partner with that use separate information systems or that have not yet been fully integrated into our information systems.
Similar risks exist with respect to our business partners and third-party providers, including suppliers, software and cloud-based service providers, that we rely upon for aspects of various business processes and activities, including procurement, supply chain, manufacturing, distribution, information technology support services and administrative functions (including payroll processing, health and benefit plan administration and certain finance and accounting functions) and the systems managed, hosted, provided and/or used by such third parties and their vendors. For example, malicious actors have employed and could continue to employ the information technology supply chain to introduce malware through software updates or compromised supplier accounts or hardware and exploit known or unknown hardware or software vulnerabilities in our systems or the systems of our vendors and third-party service providers. The need to coordinate with various third-party service providers, including with respect to timely notification and access to personnel and information concerning an incident, may complicate our efforts to address issues that arise. As a result, we are subject to the risk that the activities associated with our third-party service providers can adversely affect our business even if the attack or breach does not directly impact our systems or information.
Although the cyber incidents and other systems disruptions that we have experienced to date have not had a material effect on our business, such incidents or disruptions could have a material adverse effect on us in the future. While we believe we devote significant resources to network security, disaster recovery, employee training and other measures to secure our information technology systems and prevent unauthorized access to or loss of data, there are no guarantees that they will be adequate to safeguard against all cyber incidents, systems disruptions, system compromises or misuses of data. In addition, while we currently maintain insurance coverage that, subject to its terms and conditions, is intended to address costs associated with certain aspects of cyber incidents and information systems failures, this insurance coverage may not, depending on the specific facts and circumstances surrounding an incident, cover all losses or all types of claims that arise from an incident, or the damage to our reputation or brands that may result from an incident.
Failure to successfully complete or manage strategic transactions can adversely affect our business.
We regularly review our portfolio of businesses and evaluate potential acquisitions, joint ventures, distribution agreements, divestitures, refranchisings and other strategic transactions. The success of these transactions is dependent upon, among other things, our ability to realize the full extent of the expected returns, benefits, cost savings or synergies as a result of a transaction, within the anticipated time frame, or at all; and receipt of necessary consents, clearances and approvals. Risks associated with strategic transactions include integrating manufacturing, distribution, sales, accounting, financial reporting and administrative support activities and information technology systems with our company or difficulties separating such personnel, activities and systems in connection with divestitures; operating through new business models or in new categories or territories; motivating, recruiting and retaining executives and key employees; conforming controls (including internal control over financial reporting, disclosure controls and procedures and data protection and cybersecurity) and policies (including with respect to environmental compliance, health and safety compliance and compliance with anti-bribery laws); retaining existing customers and consumers and attracting new customers and consumers; managing tax costs or inefficiencies; maintaining good relations with divested or refranchised businesses in our supply or sales chain; inability to offset loss of revenue associated with divested brands or businesses; recognition of impairment charges in connection with potential divestitures; managing the impact of business
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decisions or other actions or omissions of our joint venture partners that may have different interests than we do; and other unanticipated problems or liabilities, such as contingent liabilities and litigation. Strategic transactions that are not successfully completed or managed effectively, or our failure to effectively manage the risks associated with such transactions, have in the past and could continue to result in adverse effects on our business.
Our reliance on third-party service providers and enterprise-wide systems can have an adverse effect on our business.
We rely on third-party service providers, including software and cloud data service providers, for certain areas of our business, including procurement, supply chain, manufacturing, distribution, information technology support services and administrative functions (such as payroll processing, health and benefit plan administration and certain finance and accounting functions). Failure by these third parties to meet their contractual, regulatory and other obligations to us, or our failure to adequately monitor their performance, has in the past and could continue to result in our inability to achieve the expected cost savings or efficiencies and result in additional costs to correct errors made by such service providers. Depending on the function involved, such errors can also lead to business disruption, systems performance degradation, processing inefficiencies or other systems disruptions, the loss of or damage to intellectual property or sensitive data through security breaches or otherwise, incorrect or adverse effects on financial reporting, litigation, claims, legal or regulatory proceedings, inquiries or investigations, fines or penalties, remediation costs, damage to our reputation or have a negative impact on employee morale, all of which can adversely affect our business.
In addition, we continue on our multi-year phased business transformation initiative to migrate certain of our systems, including our financial processing systems, to enterprise-wide systems solutions and have deployed these systems in certain countries and divisions. We have experienced and could continue to experience systems outages and operating inefficiencies following these planned implementations. In addition, if we do not allocate and effectively manage the resources necessary to build and sustain the proper information technology infrastructure, or if we fail to achieve the expected benefits from this initiative, our business could be adversely affected.
Climate change or measures to address climate change and other sustainability matters can negatively affect our business or damage our reputation.
Climate change may increase the frequency or severity of natural disasters and other extreme weather conditions, including rising temperatures and drought. Natural disasters and extreme weather conditions could pose physical risks to our facilities, impair our production capabilities, disrupt our supply chain or impact demand for our products. In addition, climate change or other weather-related disruptions to our supply chain may also have a negative effect on agricultural production resulting in decreased availability or less favorable pricing for certain commodities that are necessary for our products, such as potatoes, sugar cane, corn, wheat, rice, oats, oranges and other commodities. Also, there is an increased focus in many jurisdictions in which our products are made, manufactured, distributed or sold regarding environmental policies relating to climate change, biodiversity loss, deforestation, regulating greenhouse gas emissions, energy policies and sustainability, including single-use plastics. This increased focus may result in new or increased legal and regulatory requirements, such as potential carbon pricing programs or revised product labeling requirements or other regulatory measures, which could, along with initiatives to meet our sustainability goals, continue to result in significant increased costs and require additional investments in facilities and equipment. As a result, the effects of climate change can negatively affect our business and operations. In addition, working toward achieving our sustainability goals will require significant effort and resources from us and other stakeholders, such as our suppliers and other third parties, governmental entities, and the development of technology that may not currently exist or exist at scale. Lack of progress or failure to properly report on our goals with respect to reducing our impact on
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the environment or perception of a failure to act responsibly with respect to the environment or to effectively respond to regulatory requirements concerning climate change and other sustainability matters, including the use of single-use plastics, can lead to adverse publicity, which could result in reduced demand for our products, damage to our reputation or increase the risk of litigation, regulatory proceedings, inquiries or investigations. Any of the foregoing can adversely affect our business.
Strikes or work stoppages can cause our business to suffer.
Many of our employees and employees of third parties that are involved in the manufacturing, production or distribution of our products are covered by collective bargaining agreements, and other employees may seek to be covered by collective bargaining agreements. Strikes or work stoppages or other business interruptions have occurred and may occur in the future if we or the third parties that are involved in the manufacturing, production and distribution of our products are unable to renew, or enter into new, collective bargaining agreements on satisfactory terms and can impair manufacturing and distribution of our products, interrupt product supply, lead to a loss of sales, increase our costs or otherwise affect our ability to fully implement future operational changes to enhance our efficiency or to adapt to changing business needs or strategy, all of which can adversely affect our business.
Financial Risks
Failure to realize benefits from our productivity initiatives can adversely affect our financial performance.
Our future growth depends, in part, on our ability to continue to reduce costs and improve efficiencies, including our multi-year phased implementation of shared business service organizational models. We continue to identify and implement productivity initiatives that we believe will position our business for long-term sustainable growth by allowing us to achieve a lower cost structure, improve decision-making and operate more efficiently. Some of these measures result in unintended consequences, such as business disruptions, distraction of management and employees, reduced morale and productivity, unexpected employee attrition, an inability to attract or retain key personnel and negative publicity. If we are unable to successfully implement our productivity initiatives as planned or do not achieve expected savings as a result of these initiatives, we may not realize all or any of the anticipated benefits, resulting in adverse effects on our financial performance.
A deterioration in our estimates and underlying assumptions regarding the future performance of our business or investments can result in impairment charges that adversely affect our results of operations.
We conduct impairment tests on our goodwill and other indefinite-lived intangible assets annually or more frequently if circumstances indicate that impairment may have occurred. In addition, amortizable intangible assets, equity method investments, equity investments without readily determinable fair values, investments in available-for-sale debt securities, property, plant and equipment and other long-lived assets are evaluated for impairment upon a significant change in the operating or macroeconomic environment. Our equity method investees also perform similar impairment tests and we record our proportionate share of impairment charges recorded by them, adjusted for the impact of items such as basis differences and deferred taxes, as appropriate. A deterioration in our underlying assumptions, or those of our equity method investees, regarding the impact of competitive operating conditions, geopolitical conditions (including the ongoing conflicts in Ukraine and the Middle East), macroeconomic conditions, including the interest rate environment, or other factors used to estimate the future performance of any of our reporting units or assets, including any deterioration in the weighted-average cost of capital based on market data available at the time, as well as our ability to hold the investment until recovery of fair value to amortized cost for available-for-sale debt securities, have resulted and could in the future result in an impairment charge, thereby adversely affecting our results of operations.
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Fluctuations in exchange rates impact our financial performance.
Because our consolidated financial statements are presented in U.S. dollars, the financial statements of our subsidiaries outside the United States, where the functional currency is other than the U.S. dollar, are translated into U.S. dollars. Given our global operations, we also pay for the ingredients, raw materials and commodities used in our business in numerous currencies. Fluctuations in exchange rates, including as a result of inflation, central bank monetary policies, currency controls or other currency exchange restrictions or geopolitical instability have had, and could continue to have, an adverse impact on our financial performance.
Our borrowing costs and access to capital and credit markets can be adversely affected by a downgrade or potential downgrade of our credit ratings.
Rating agencies routinely evaluate us and their ratings are based on a number of factors, including our cash generating capability, levels of indebtedness, policies with respect to shareholder distributions and our financial strength generally, as well as factors beyond our control, such as the state of the economy and our industry. We expect to maintain Tier 1 commercial paper access, which we believe will facilitate appropriate financial flexibility and ready access to global credit markets at favorable interest rates. Any downgrade or announcement that we are under review for a potential downgrade of our credit ratings, especially any downgrade to below investment grade, can increase our future borrowing costs, impair our ability to access capital and credit markets on terms commercially acceptable to us or at all, result in a reduction in our liquidity, or impair our ability to access the commercial paper market with the same flexibility that we have experienced historically (and therefore require us to rely more heavily on more expensive types of debt financing), all of which can adversely affect our financial performance.
Legal, Tax and Regulatory Risks
Taxes aimed at our products can adversely affect our business or financial performance.
Certain jurisdictions in which our products are sold have either imposed, or are considering imposing, new or increased taxes on the manufacture, distribution or sale of certain of our products, particularly our beverages, as a result of ingredients contained in our products. These taxes vary in scope and form: some apply to all beverages, including non-caloric beverages, while others apply only to beverages with a caloric sweetener (e.g., sugar). Similarly, some measures apply a single tax rate per ounce/liter on beverages containing over a certain amount of added sugar (or other sweetener), some apply a graduated tax rate depending upon the amount of added sugar (or other sweetener) in the beverage and others apply a flat tax rate on beverages containing any amount of added sugar (or other sweetener). For example, Romania enacted a graduated tax on all non-alcoholic beverages, effective January 1, 2024, at a rate of 0.4 Romanian Leu (0.09 U.S. dollars) per liter for drinks with a sugar content between 5-8g per 100ml and 0.6 Romanian Leu (0.13 U.S. dollars) per liter for drinks with a sugar content between above 8g per 100ml. These tax measures, whatever their scope or form, have in the past and could continue to increase the cost of certain of our products, reduce overall consumption of our products or lead to negative publicity, resulting in an adverse effect on our business and financial performance.
Limitations on the marketing or sale of our products can adversely affect our business and financial performance.
Certain jurisdictions in which our products are sold have either imposed, or are considering imposing, limitations on the marketing or sale of our products as a result of ingredients or substances in our products or product packaging. These limitations require that we highlight perceived concerns about a product or product packaging, warn consumers to avoid consumption of certain ingredients or substances present in our products, restrict the age of consumers to whom products are marketed or sold, limit the location in which our products may be available or discontinue the use of certain ingredients or packaging. For
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example, Colombia enacted warning labeling requirements effective in 2023 to indicate whether a particular pre-packaged food product contains any amount of sweeteners or is considered to be high in added sugar, sodium, saturated fat or trans-fat. Certain jurisdictions have imposed or are considering imposing color-coded labeling requirements where colors such as red, yellow and green are used to indicate various levels of a particular ingredient, such as sugar, sodium or saturated fat, in products. The imposition or proposed imposition of additional limitations on the marketing or sale of our products has in the past reduced and could continue to reduce overall consumption of our products, lead to negative publicity or leave consumers with the perception that our products do not meet their health and wellness needs, resulting in an adverse effect on our business and financial performance.
Laws and regulations related to the use or disposal of plastics or other packaging materials can adversely affect our business and financial performance.
We rely on diverse packaging solutions to safely deliver products to our customers and consumers. Certain of our products are sold in packaging designed to be recyclable, commercially compostable, biodegradable or reusable. However, not all packaging is recovered, whether due to lack of infrastructure, improper disposal or otherwise, and certain of our packaging is not currently recyclable, commercially compostable, biodegradable or reusable. Packaging waste not properly disposed of that displays one or more of our brands has in the past resulted in and could continue to result in negative publicity, litigation, government investigations or other action or reduced consumer demand for our products, adversely affecting our financial performance. Many jurisdictions in which our products are sold have imposed or are considering imposing laws, regulations or policies intended to encourage the use of sustainable packaging, waste reduction, increased recycling rates or decreased use of single-use plastics or to restrict the sale of products utilizing certain packaging. These laws, regulations and policies vary in form and scope and include extended producer responsibility policies, plastic or packaging taxes, minimum recycled content requirements, restrictions on certain products and materials, requirements for bottle caps to be tethered to bottles, restrictions or bans on the use of certain types of packaging, including single-use plastics and packaging containing PFAS, restrictions on labeling related to recyclability, requirements to charge deposit fees and requirements to scale reusable or refillable packaging. For example, the European Union, Peru, South Africa and certain states in the United States, among other jurisdictions, have imposed a minimum recycled content requirement for beverage bottle packaging and similar legislation is under consideration in other jurisdictions. These laws and regulations have in the past increased and could continue to increase the cost of our products, impact demand for our products, result in negative publicity and require us and our business partners, including our independent bottlers, to increase capital expenditures to invest in reducing the amount of virgin plastic or other materials used in our packaging, to develop alternative packaging or to revise product labeling, all of which can adversely affect our business and financial performance.
Failure to comply with personal data protection and privacy laws can adversely affect our business.
We are subject to a variety of continuously evolving and developing laws and regulations in numerous jurisdictions regarding personal data protection and privacy laws. These laws and regulations may be interpreted and applied differently from country to country or, within the United States, from state to state, and can create inconsistent or conflicting requirements. Our efforts to comply with these laws and regulations, including the California Consumer Privacy Act, which was significantly modified by the California Privacy Rights Act, as well as comprehensive privacy legislation in Virginia, Colorado, Utah and Connecticut that became effective in 2023, as well as the European Union’s General Data Protection Regulation (GDPR), the U.K. General Data Protection Regulation (which implements the GDPR into U.K. law) and China’s Personal Information Protection Act, impose significant costs and challenges that are likely to continue to increase over time, particularly as additional jurisdictions continue to adopt similar regulations. Failure to comply with these laws and regulations or to otherwise protect personal data from
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unauthorized access, use or other processing, have in the past and could in the future result in litigation, claims, legal or regulatory proceedings, inquiries or investigations, damage to our reputation, fines or penalties, all of which can adversely affect our business.
Increases in income tax rates, changes in income tax laws or disagreements with tax authorities can adversely affect our financial performance.
Increases in income tax rates or other changes in tax laws, including changes in how existing tax laws are interpreted or enforced, can adversely affect our financial performance. For example, economic and political conditions in countries where we are subject to taxes, including the United States, have in the past and could continue to result in significant changes in tax legislation or regulation. For example, numerous countries have agreed to a statement in support of the Organization for Economic Co-operation and Development model (OECD) rules that propose a partial global profit reallocation and a global minimum tax rate of 15%. Certain countries, including European Union member states, have enacted or are expected to enact legislation incorporating the global minimum tax with effect as early as 2024 and widespread implementation of a global minimum tax is expected by 2025. As the legislation becomes effective in countries in which we do business, our taxes could increase and negatively impact our provision for income taxes. This increasingly complex global tax environment has in the past and could continue to increase tax uncertainty, resulting in higher compliance costs and adverse effects on our financial performance. We are also subject to regular reviews, examinations and audits by numerous taxing authorities with respect to income and non-income based taxes. Economic and political pressures to increase tax revenues in jurisdictions in which we operate, or the adoption of new or reformed tax legislation or regulation, has made and could continue to make resolving tax disputes more difficult and the final resolution of tax audits and any related litigation can differ from our historical provisions and accruals, resulting in an adverse effect on our financial performance.
If we are unable to adequately protect our intellectual property rights, or if we are found to infringe on the intellectual property rights of others, our business can be adversely affected.
We possess intellectual property rights that are important to our business, including ingredient formulas, trademarks, copyrights, patents, business processes and other trade secrets. The laws of various jurisdictions in which we operate have differing levels of protection of intellectual property. Our competitive position and the value of our products and brands can be reduced and our business adversely affected if we fail to obtain or adequately protect our intellectual property, including our ingredient formulas, or if there is a change in law that limits or removes the current legal protections afforded our intellectual property. Also, in the course of developing new products or improving the quality of existing products, we have in the past been alleged to have infringed, and could in the future infringe or be alleged to infringe, on the intellectual property rights of others. Such infringement or allegations of infringement could result in expensive litigation and damages, damage to our reputation, disruption to our operations, injunctions against development, manufacturing, use and/or sale of certain products, inventory write-offs or other limitations on our ability to introduce new products or improve the quality of existing products, resulting in an adverse effect on our business.
Failure to comply with laws and regulations applicable to our business can adversely affect our business.
The conduct of our business is subject to numerous laws and regulations relating to the production, storage, distribution, sale, display, advertising, marketing, labeling, content (including whether a product contains genetically engineered ingredients), quality, safety, transportation, supply chain, traceability, sourcing (including pesticide use), packaging, disposal, recycling and use of our products or raw materials, employment and occupational health and safety, environmental, social and governance matters and reporting (including climate change), machine learning and artificial intelligence and data privacy and
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protection. In addition, in many jurisdictions, compliance with competition and antitrust laws is of special importance to us due to our competitive position, as is compliance with anti-corruption laws. The imposition of new laws, changes in laws or regulatory requirements or changing interpretations thereof, changes in the enforcement priorities of regulators, and differing or competing regulations and standards across the markets where our products or raw materials are made, manufactured, distributed or sold, have in the past and could continue to result in higher compliance costs, capital expenditures and higher production costs, or make it necessary for us to reformulate certain of our products, resulting in adverse effects on our business. For example, increasing governmental and societal attention to environmental, social and governance matters has resulted and could continue to result in new laws or regulatory requirements, including expanded disclosure requirements that are expected to continue to expand the nature, scope and complexity of matters on which we are required to report. In addition, the entry into new markets or categories has resulted in and could continue to result in our business being subject to additional regulations resulting in higher compliance costs. If one jurisdiction imposes or proposes to impose new laws or regulations that impact the manufacture, distribution or sale of our products, other jurisdictions may follow. Failure to comply with such laws or regulations (or allegations thereof) can subject us to criminal or civil investigations or enforcement actions, including voluntary and involuntary document requests, fines, injunctions, product recalls, penalties, disgorgement of profits or activity restrictions, all of which can adversely affect our business. In addition, the results of third-party studies (whether or not scientifically valid) purporting to assess the health implications of consumption of certain ingredients or substances present in certain of our products or packaging materials have resulted in and could continue to result in our being subject to new taxes and regulations or lawsuits that can adversely affect our business.
Potential liabilities and costs from litigation, claims, legal or regulatory proceedings, inquiries or investigations can have an adverse impact on our business.
We and our subsidiaries are party to a variety of litigation, claims, legal or regulatory proceedings, inquiries and investigations, including but not limited to matters related to our advertising, marketing or commercial practices, product labels, claims and ingredients, personal injury and property damage, intellectual property rights, privacy, employment, tax and insurance matters, environmental, social and governance matters, including concerns or perceptions regarding our packaging and its environmental impact, and matters relating to our compliance with applicable laws and regulations. These matters are inherently uncertain and there is no guarantee that we will be successful in defending ourselves or that our assessment of the materiality of these matters and the likely outcome or potential losses and established reserves will be consistent with the ultimate outcome of such matters. Responding to these matters, even those that are ultimately non-meritorious, requires us to incur significant expense and devote significant resources, and may generate adverse publicity that damages our reputation or brand image. Any of the foregoing can adversely affect our business.
Item 1B. Unresolved Staff Comments.
We have received no written comments regarding our periodic or current reports from the staff of the SEC that were issued 180 days or more preceding the end of our 2023 fiscal year and that remain unresolved.
Item 1C. Cybersecurity.
Cybersecurity Risk Management and Strategy
We are regularly subject to cyberattacks and other cyber incidents. In response, we have implemented cybersecurity processes, technologies, and controls to aid in our efforts to assess, identify, and manage cybersecurity risks. Our enterprise risk management framework considers cybersecurity risk alongside other company risks as part of our overall risk assessment process. Our enterprise risk management team collaborates with our Information Security function, led by the Company’s Chief Strategy and
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Transformation Officer and the Company’s Chief Information Security Officer, to gather insights for identifying, assessing and managing cybersecurity threat risks, their severity, and potential mitigations.
We assess PepsiCo’s Information Security program using an industry-leading cybersecurity framework from the National Institute of Standards and Technology. To help assess and identify our cybersecurity risks, we maintain internal resources to perform penetration testing designed to simulate evolving tactics and techniques of real-world threat actors, engage with industry partners and law enforcement and intelligence communities and conduct tabletop exercises and periodic risk interviews across our business. We also engage an independent third party to perform internal and external penetration testing of PepsiCo’s environment periodically and engage other third parties to periodically conduct assessments of our cybersecurity capabilities. In addition, we continue to expand training and awareness practices to mitigate human risk, including mandatory computer-based training, internal communications, and regular phishing awareness campaigns that are designed to emulate real-world contemporary threats and provide immediate feedback (and, if necessary, additional training or remedial action) to employees.
Our processes also address cybersecurity risks associated with our use of third-party service providers including suppliers, software and cloud-based service providers. We proactively evaluate the cybersecurity risk of a third party by utilizing a repository of risk assessments, external monitoring sources, threat intelligence and predictive analytics to better inform PepsiCo during contracting and vendor selection processes. Additionally, when third party risks are identified, we require those third parties to agree by contract to implement appropriate security controls. Security issues are documented and tracked and periodic monitoring is conducted for third parties in order to mitigate risk.
In addition to the processes, technologies, and controls that we have in place to reduce the likelihood of a successful material cyberattack, the Company has established well-defined response procedures to address cyber events that do occur. The program provides for the coordination of various corporate functions and governance groups and serves as a framework for the execution of responsibilities across businesses and operational roles. Our incident response plan coordinates the activities we take to prepare for, detect, respond to and recover from cybersecurity incidents, which include processes to triage, assess severity for, escalate, contain, investigate, and remediate the incident, as well as to assess for potential disclosure, comply with potentially applicable legal obligations and mitigate brand and reputational damage. We also maintain insurance coverage that, subject to its terms and conditions, is intended to address costs associated with certain aspects of cyber incidents and information systems failures.
Based on the information we have as of the date of this Form 10-K, we do not believe any risks from cybersecurity threats, including as a result of any previous cybersecurity incidents, have materially affected or are reasonably likely to materially affect us, including our business strategy, results of operations or financial condition. See “Item 1A. Risk Factors” for further information about these risks.
Cybersecurity Governance
Cybersecurity is an important part of our risk management processes and an area of focus for our Board and management. Given that cybersecurity risks can impact various areas of responsibility of the Committees of the Board, the Board believes it is useful and effective for the full Board to maintain direct oversight over cybersecurity matters. In 2021, the Board amended our Corporate Governance Guidelines to specifically mention cybersecurity as an area of Board oversight to reflect this existing practice. The Board receives and provides feedback on regular updates from management, including from the Company’s Chief Strategy and Transformation Officer and the Company’s Chief Information Security Officer, regarding cybersecurity governance processes, the status of projects to strengthen internal cybersecurity, results from third-party assessments, and also discusses any significant cyber incidents, including recent incidents at other companies and the emerging threat landscape.
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Our cybersecurity risk management and strategy processes, which are discussed in greater detail above, are led by the Company’s Chief Strategy and Transformation Officer and the Company’s Chief Information Security Officer. Such individuals have significant prior work experience in various roles across multiple industries involving managing information security, developing cybersecurity strategy, implementing effective information and cybersecurity programs and managing compliance environments.
These members of management are informed about and monitor the prevention, mitigation, detection, and remediation of cybersecurity incidents through their management of, and participation in, the cybersecurity risk management and strategy processes described above, including the operation of our incident response plan.
Item 2. Properties.
Our principal executive office located in Purchase, New York and our facilities located in Plano, Texas, all of which we own, are our most significant corporate properties.
In connection with making, marketing, distributing and selling our products, each division utilizes manufacturing, processing, bottling and production plants, warehouses, distribution centers, storage facilities, offices, including division headquarters, research and development facilities and other facilities, all of which are either owned or leased.
Significant properties by division are as follows:
| Property Type | Location | Owned/ Leased | |||||||||||||||
| FLNA | Research and development facility | Plano, Texas | Owned | ||||||||||||||
| QFNA | Convenient food plant | Cedar Rapids, Iowa | Owned | ||||||||||||||
| PBNA | Research and development facility | Valhalla, New York | Owned | ||||||||||||||
| PBNA | Concentrate plant | Arlington, Texas | Owned | ||||||||||||||
| LatAm | Convenient food plant | Celaya, Mexico | Owned | ||||||||||||||
| LatAm | Two convenient food plants | Vallejo, Mexico | Owned | ||||||||||||||
| Europe | Convenient food plant | Leicester, United Kingdom | Owned (a) | ||||||||||||||
| Europe | Convenient food plant | Kashira, Russia | Owned | ||||||||||||||
| Europe | Manufacturing plant | Lehavim, Israel | Owned | ||||||||||||||
| Europe | Dairy plant | Moscow, Russia | Owned | ||||||||||||||
| AMESA | Convenient food plant | Riyadh, Saudi Arabia | Owned (a) | ||||||||||||||
| APAC | Convenient food plant | Shanghai, China | Owned (a) | ||||||||||||||
| FLNA, QFNA, PBNA, LatAm, Corporate | Shared service center | Mexico City, Mexico | Leased | ||||||||||||||
| PBNA, LatAm | Concentrate plant | Colonia, Uruguay | Owned (a) | ||||||||||||||
| PBNA, Europe, AMESA | Two concentrate plants | Cork, Ireland | Owned | ||||||||||||||
| PBNA, AMESA, APAC | Concentrate plant | Singapore | Owned (a) | ||||||||||||||
| All divisions | Shared service center | Hyderabad, India | Leased | ||||||||||||||
(a)The land on which these properties are located is leased.
Most of our plants are owned or leased on a long-term basis. In addition to company-owned or leased properties described above, we also utilize a highly distributed network of plants, warehouses and distribution centers that are owned or leased by our contract manufacturers, co-packers, strategic alliances or joint ventures in which we have an equity interest. We believe that our properties generally are in good operating condition and, taken as a whole, are suitable, adequate and of sufficient capacity for our current operations.
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Item 3. Legal Proceedings.
On November 15, 2023, the People of the State of New York filed a lawsuit against PepsiCo, Inc., Frito-Lay, Inc. and Frito-Lay North America, Inc. (the NYS Matter) asserting claims for public nuisance, deceptive acts or practices in the conduct of business, and failure to warn that our packaging was a potential source of plastic pollution, allegedly resulting in plastic pollution in the Buffalo River. This matter is pending in the Commercial Division of the New York State Supreme Court – Erie County. The lawsuit does not specify the amount of damages sought and we believe we have strong defenses to each of these claims. In addition, we and our subsidiaries are party to a variety of litigation, claims, legal or regulatory proceedings, inquiries and investigations. While the results of the NYS Matter and each such other litigation, claim, legal or regulatory proceeding, inquiry and investigation cannot be predicted with certainty, management believes that the final outcome of the foregoing will not have a material adverse effect on our financial condition, results of operations or cash flows. See also “Item 1. Business – Regulatory Matters” and “Item 1A. Risk Factors.”
Item 4. Mine Safety Disclosures.
Not applicable.
Information About Our Executive Officers
The following is a list of names, ages and backgrounds of our current executive officers:
| Name | Age | Title | ||||||||||||
| James T. Caulfield | 64 | Executive Vice President and Chief Financial Officer, PepsiCo | ||||||||||||
| David J. Flavell | 52 | Executive Vice President, General Counsel and Corporate Secretary, PepsiCo | ||||||||||||
| Marie T. Gallagher | 64 | Senior Vice President and Controller, PepsiCo | ||||||||||||
| Ram Krishnan | 53 | Chief Executive Officer, PepsiCo Beverages North America | ||||||||||||
| Ramon L. Laguarta | 60 | Chairman of the Board of Directors and Chief Executive Officer, PepsiCo | ||||||||||||
| Silviu Popovici | 56 | Chief Executive Officer, Europe | ||||||||||||
| Paula Santilli | 59 | Chief Executive Officer, Latin America | ||||||||||||
| Becky Schmitt | 50 | Executive Vice President and Chief Human Resources Officer, PepsiCo | ||||||||||||
| Eugene Willemsen | 56 | Chief Executive Officer, Africa, Middle East, South Asia and International Beverages | ||||||||||||
| Steven Williams | 58 | Chief Executive Officer, PepsiCo Foods North America | ||||||||||||
James T. Caulfield has served as Executive Vice President and Chief Financial Officer, PepsiCo, since November 2023. Prior to that, he served as Senior Vice President and Chief Financial Officer, PepsiCo Foods North America from 2019 to November 2023, as PepsiCo’s Senior Vice President, Investor Relations from 2010 to 2019, as Senior Vice President and Chief Financial Officer, PepsiCo Beverages Canada from 2010 to 2011, as Vice President, Corporate Strategy and Development from 2007 to 2010, Vice President, Investor Relations from 2005 to 2007 and as Vice President, Financial Planning and Analysis from 2000 to 2005. He also held a variety of senior finance roles in Frito-Lay North America from 1995 to 2000 and was Director, Corporate Audit from 1993 to 1995. Prior to joining PepsiCo in 1993, Mr. Caulfield was a partner at the accounting firm Coopers & Lybrand.
David J. Flavell has served as Executive Vice President, General Counsel and Corporate Secretary, PepsiCo since 2021. Mr. Flavell previously held a number of leadership roles at PepsiCo, including as Senior Vice President, Deputy General Counsel and Chief Compliance & Ethics Officer for PepsiCo from 2019 to 2021, as Senior Vice President, Deputy General Counsel & Managing Attorney from 2018 to 2019, as Senior Vice President, Deputy General Counsel & General Counsel, International and Global
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Groups from 2017 to 2018, as Senior Vice President, Deputy General Counsel & General Counsel, Latin America and Frito-Lay North America from 2016 to 2017, as Senior Vice President, General Counsel, Latin America and Frito-Lay North America from 2015 to 2016, and as Senior Vice President, General Counsel, Asia, Middle East and Africa from 2011 to 2015. Before joining PepsiCo in 2011, Mr. Flavell was general counsel for Danone S.A.’s Asia Pacific and Middle East business. Prior to that, Mr. Flavell served as senior legal counsel at Fonterra Co-operative Group Limited and was a partner at Corrs Chambers Westgarth.
Marie T. Gallagher was appointed PepsiCo’s Senior Vice President and Controller in 2011. Ms. Gallagher joined PepsiCo in 2005 as Vice President and Assistant Controller. Prior to joining PepsiCo, Ms. Gallagher was Assistant Controller at Altria Corporate Services from 1992 to 2005 and, prior to that, a senior manager at Coopers & Lybrand.
Ram Krishnan was appointed Chief Executive Officer, PepsiCo Beverages North America, effective February 2024. Prior to that, Mr. Krishnan served as Chief Executive Officer, International Beverages and Chief Commercial Officer of PepsiCo from 2022 to February 2024, as Executive Vice President and Chief Commercial Officer, PepsiCo, from 2019 to 2021, as President and Chief Executive Officer of PepsiCo’s Asia Pacific, Australia and New Zealand and China Region from 2018 to 2020, and as PepsiCo’s Senior Vice President and Chief Customer Officer for Walmart, leading PepsiCo’s global Walmart customer team, from 2016 to 2017. Mr. Krishnan joined PepsiCo in 2006 and held marketing roles of increasing responsibility from 2006 to 2016, including as Senior Vice President and Chief Marketing Officer, Frito-Lay North America from 2014 to 2016, as Senior Vice President, Marketing, Frito-Lay North America from 2012 to 2013 and as Vice President of Global Brands, Frito-Lay North America from 2011 to 2012. Prior to PepsiCo, Mr. Krishnan spent six years at General Motors Company as a marketing manager for Cadillac.
Ramon L. Laguarta has served as PepsiCo’s Chief Executive Officer and a director on the Board since 2018, and assumed the role of Chairman of the Board in 2019. Mr. Laguarta previously served as President of PepsiCo from 2017 to 2018. Prior to serving as President, Mr. Laguarta held a variety of positions of increasing responsibility in Europe, including as Commercial Vice President of PepsiCo Europe from 2006 to 2008, PepsiCo Eastern Europe Region from 2008 to 2012, President, Developing & Emerging Markets, PepsiCo Europe from 2012 to 2015, Chief Executive Officer, PepsiCo Europe in 2015, and Chief Executive Officer, Europe Sub-Saharan Africa from 2015 until 2017. From 2002 to 2006, he was General Manager for Iberia Snacks and Juices, and from 1999 to 2001, a General Manager for Greece Snacks. Prior to joining PepsiCo in 1996 as a marketing vice president for Spain Snacks, Mr. Laguarta worked for Chupa Chups, S.A., where he worked in several international assignments in Asia, Europe, the Middle East and the United States. Mr. Laguarta has served as a director of Visa Inc. since 2019.
Silviu Popovici was appointed Chief Executive Officer, Europe, effective 2019. Prior to this role, he served as Chief Executive Officer, Europe Sub-Saharan Africa in 2019 and as President, Europe Sub-Saharan Africa from 2017 to early 2019. Mr. Popovici previously served as President, Russia, Ukraine and CIS (The Commonwealth of Independent States) from 2015 to 2017, and as President, PepsiCo Russia from 2013 to 2015. Mr. Popovici joined PepsiCo in 2011 following PepsiCo’s acquisition of Wimm-Bill-Dann Foods OJSC (WBD) and served as General Manager, WBD Foods Division from 2011 until 2012. Prior to the acquisition, Mr. Popovici held senior leadership roles at WBD, running its dairy business from 2008 to 2011 and its beverages business from 2006 to 2008.
Paula Santilli was appointed Chief Executive Officer, Latin America, effective 2019. Previously, she served in various leadership positions at PepsiCo Mexico Foods, as President from 2017 to 2019, as Chief Operating Officer from 2016 to 2017 and as Vice President and General Manager from 2011 to 2016. Prior to joining PepsiCo Mexico Foods, she held a variety of roles, including leadership positions in Beverages in Mexico, as well as in Foods and Snacks in the Latin America Southern Cone region
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comprising Argentina, Uruguay and Paraguay. Ms. Santilli joined PepsiCo in 2001 following PepsiCo’s acquisition of the Quaker Oats Company. At Quaker, she held various roles of increasing responsibility from 1992 to 2001, including running the regional Quaker Foods and Gatorade businesses in Argentina, Chile and Uruguay.
Becky Schmitt was appointed Executive Vice President and Chief Human Resources Officer, PepsiCo, in June 2023. Prior to that, Ms. Schmitt served as executive vice president, chief people officer of Cognizant Technology Solutions Corp. from 2020 to 2023. Prior to joining Cognizant, Ms. Schmitt served in various executive human resources roles at Walmart, Inc., including as senior vice president, chief people officer of Sam’s Club, a division of Walmart, from 2018 to 2020, senior vice president, chief people officer of U.S. eCommerce and corporate functions from late 2016 to 2018, and vice president, human resources – technology from early 2016 to late 2016. Prior to joining Walmart, Ms. Schmitt spent over 20 years with Accenture plc in multiple senior human resources roles globally.
Eugene Willemsen was appointed Chief Executive Officer, Africa, Middle East, South Asia and International Beverages, effective February 2024. Previously he served as Chief Executive Officer, Africa, Middle East, South Asia from 2019 to February 2024, as Chief Executive Officer, Sub-Saharan Africa in 2019 and as Executive Vice President, Global Categories and Franchise Management from 2015 to 2019. Before that, he led the global Pepsi-Lipton Joint Venture as President from 2014 to 2015. Prior to such role, Mr. Willemsen served as PepsiCo’s Senior Vice President and General Manager, South East Europe from 2011 to 2013, as Senior Vice President and General Manager, Commercial, Europe from 2008 to 2011, as Senior Vice President and General Manager, Northern Europe from 2006 to 2008, as Vice President, General Manager, Benelux from 2000 to 2005 and as Commercial Director, Benelux for the snacks business from 1998 to 2000. Mr. Willemsen joined PepsiCo in 1995 as a business development manager.
Steven Williams was appointed Chief Executive Officer, PepsiCo Foods North America, effective 2019. Prior to this role, Mr. Williams served in leadership positions for Frito-Lay’s U.S. operations, as Senior Vice President, Commercial Sales and Chief Commercial Officer from 2017 to 2019 and as General Manager and Senior Vice President, East Division from 2016 to 2017. Prior to that, he served as General Manager and Senior Vice President, Customer Management for PepsiCo’s global Walmart business from 2013 to 2016, as Sales Senior Vice President, North American Nutrition from 2011 to 2013 and as Vice President, Sales, Central Division from 2009 to 2011. Mr. Williams joined PepsiCo in 2001 as a part of PepsiCo’s acquisition of the Quaker Oats Company, which he joined in 1997 and has held leadership positions of increasing responsibility in sales and customer management.
Executive officers are elected by our Board, and their terms of office continue until the next annual meeting of the Board or until their successors are elected and have qualified. There are no family relationships among our executive officers.
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PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
Stock Trading Symbol – PEP.
Stock Exchange Listings – The Nasdaq Global Select Market is the principal market for our common stock, which is also listed on the SIX Swiss Exchange.
Shareholders – As of February 2, 2024, there were approximately 94,999 shareholders of record of our common stock.
Dividends – We have paid consecutive quarterly cash dividends since 1965. The declaration and payment of future dividends are at the discretion of the Board. Dividends are usually declared in February, May, July and November and paid at the end of March, June and September and the beginning of January. On February 7, 2024, the Board declared a quarterly dividend of $1.265 per share payable April 1, 2024, to shareholders of record on March 1, 2024. For the remainder of 2024, the record dates for these dividend payments are expected to be June 7, September 6 and December 6, 2024, subject to the approval of the Board. On February 9, 2024, we announced a 7% increase in our annualized dividend to $5.42 per share from $5.06 per share, effective with the dividend expected to be paid in June 2024. We expect to return a total of approximately $8.2 billion to shareholders in 2024, comprising dividends of approximately $7.2 billion and share repurchases of approximately $1.0 billion.
For information on securities authorized for issuance under our equity compensation plans, see “Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.”
A summary of our common stock repurchases (in millions, except average price per share) during the fourth quarter of 2023 is set forth in the table below.
Issuer Purchases of Common Stock
| Period | Total Number of Shares Repurchased(a) | Average Price Paid Per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plans or Programs | |||||||||||||||||||
| 9/9/2023 | $ | 7,741 | |||||||||||||||||||||
| 9/10/2023-10/7/2023 | 0.6 | $ | 174.26 | 0.6 | (105) | ||||||||||||||||||
| 7,636 | |||||||||||||||||||||||
| 10/8/2023-11/4/2023 | 0.3 | $ | 162.20 | 0.3 | (47) | ||||||||||||||||||
| 7,589 | |||||||||||||||||||||||
| 11/5/2023-12/2/2023 | 0.3 | $ | 167.35 | 0.3 | (54) | ||||||||||||||||||
| 7,535 | |||||||||||||||||||||||
| 12/3/2023-12/30/2023 | 0.2 | $ | 168.08 | 0.2 | (35) | ||||||||||||||||||
| Total | 1.4 | $ | 169.31 | 1.4 | $ | 7,500 | |||||||||||||||||
(a)All shares were repurchased in open market transactions pursuant to the $10 billion repurchase program authorized by our Board and publicly announced on February 10, 2022, which commenced on February 11, 2022 and will expire on February 28, 2026. Shares repurchased under this program may be repurchased in open market transactions, in privately negotiated transactions, in accelerated stock repurchase transactions or otherwise.
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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
| OUR BUSINESS | |||||
| Executive Overview | |||||
| Our Operations | |||||
| Other Relationships | |||||
| Our Business Risks | |||||
| OUR FINANCIAL RESULTS | |||||
| Results of Operations – Consolidated Review | |||||
| Results of Operations – Division Review | |||||
| FLNA | |||||
| QFNA | |||||
| PBNA | |||||
| LatAm | |||||
| Europe | |||||
| AMESA | |||||
| APAC | |||||
| Non-GAAP Measures | |||||
| Items Affecting Comparability | |||||
| Our Liquidity and Capital Resources | |||||
| Changes in Line Items in Our Consolidated Financial Statements | |||||
| Return on Invested Capital | |||||
| OUR CRITICAL ACCOUNTING POLICIES AND ESTIMATES | |||||
| Revenue Recognition | |||||
| Goodwill and Other Intangible Assets | |||||
| Income Tax Expense and Accruals | |||||
| Pension and Retiree Medical Plans | |||||
| CONSOLIDATED STATEMENT OF INCOME | |||||
| CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME | |||||
| CONSOLIDATED STATEMENT OF CASH FLOWS | |||||
| CONSOLIDATED BALANCE SHEET | |||||
| CONSOLIDATED STATEMENT OF EQUITY | |||||
| NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | |||||
| Note 1 – Basis of Presentation and Our Divisions | |||||
| Note 2 – Our Significant Accounting Policies | |||||
| Note 3 – Restructuring and Impairment Charges | |||||
| Note 4 – Intangible Assets | |||||
| Note 5 – Income Taxes | |||||
| Note 6 – Share-Based Compensation | |||||
| Note 7 – Pension, Retiree Medical and Savings Plans | |||||
| Note 8 – Debt Obligations | |||||
| Note 9 – Financial Instruments | |||||
| Note 10 – Net Income Attributable to PepsiCo per Common Share | |||||
| Note 11 – Accumulated Other Comprehensive Loss Attributable to PepsiCo | |||||
| Note 12 – Leases | |||||
| Note 13 – Acquisitions and Divestitures | |||||
| Note 14 – Supply Chain Financing Arrangements | |||||
| Note 15 – Supplemental Financial Information | |||||
| REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM | |||||
| GLOSSARY | |||||
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Our discussion and analysis is intended to help the reader understand our results of operations and financial condition and is provided as an addition to, and should be read in connection with, our consolidated financial statements and the accompanying notes. Definitions of key terms can be found in the glossary. Unless otherwise noted, tabular dollars are presented in millions, except per share amounts. All per share amounts reflect common stock per share amounts, assume dilution unless otherwise noted, and are based on unrounded amounts. Percentage changes are based on unrounded amounts.
Discussion in this Form 10-K includes results of operations and financial condition for 2023 and 2022 and year-over-year comparisons between 2023 and 2022. For discussion on results of operations and financial condition pertaining to 2021 and year-over-year comparisons between 2022 and 2021, please refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2022.
OUR BUSINESS
Executive Overview
PepsiCo is a leading global convenient food and beverage company with a complementary portfolio of brands, including Lay’s, Doritos, Cheetos, Gatorade, Pepsi-Cola, Mountain Dew, Quaker and SodaStream. Through our operations, authorized bottlers, contract manufacturers and other third parties, we make, market, distribute and sell a wide variety of beverages and convenient foods, serving customers and consumers in more than 200 countries and territories.
As a global company with deep local ties, we faced many of the same challenges in 2023 as our consumers, customers, and competitors across the world, including supply chain disruptions; inflationary pressures; shifting consumer preferences and behaviors; ongoing climate issues; a highly competitive operating environment; a rapidly changing retail landscape, including growth in e-commerce; continued macroeconomic and political volatility, including the deadly conflicts in Ukraine and the Middle East; and an evolving regulatory landscape.
To meet the challenges of today – and those of tomorrow – we are driven by an approach called pep+ (PepsiCo Positive). pep+ is a strategic end-to-end transformation of our business, with sustainability at the center of how the company will strive to create growth and value, while inspiring positive change for the planet and people. pep+ guides how we are working to transform our business operations, and can be seen in such efforts as sourcing ingredients and making and selling products in a more sustainable way, to leveraging our more than one billion connections with consumers each day, to driving positive change across our value chain and inspiring people to make choices that are better for themselves and the planet.
pep+ drives action and progress across three key pillars:
Positive Agriculture: We are working to expand and share regenerative practices across seven million acres (approximately equal to the company’s agricultural footprint, sustainably source key crops and ingredients, and improve the livelihoods of more people in our agricultural supply chain. Understanding that scale and collaboration are essential to achieve these goals, in 2023, we expanded our partnership approach with new programs aimed at accelerating regenerative agriculture. This included a $120 million investment with Walmart to support regenerative agriculture on more than two million acres of farmland in the United States and Canada and a $216 million investment with three of the most well-respected farmer-facing organizations—Practical Farmers of Iowa, the Soil and Water Outcomes Fund and the Illinois Corn Growers Association—to help drive adoption of regenerative agriculture practices across the United States.
Technology is also a key enabler. Through the third year of our Positive Agriculture Outcomes Accelerator, we invested in a variety of practical advancements with farmers across the globe, including weather stations in Pakistan, on-farm water analysis in Iraq and sprinkler irrigation systems in Colombia.
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We have continued developing new solutions, such as fertilizer produced from green hydrogen through a partnership with Fertiberia in Spain, aiming to reduce emissions by 15% in potato crops. And through innovations such as Agroscout, which combines artificial intelligence and drone technology, we are able to identify crop diseases more efficiently, reducing pesticide use and improving crop yields.
Positive Value Chain: We are working to help build a circular and inclusive value chain through actions aiming to: achieve net-zero emissions by 2040; become net water positive by 2030; and introduce more sustainable packaging into the value chain. Our packaging goals include cutting virgin plastic per serving, using more recycled content in our plastic packaging, and scaling our reusable packaging offerings by 2030.
As we work to decarbonize our operations, alongside growing our use of electric and alternative low emission fuel vehicles, in 2023 we opened our first biomethane plant at our foods site in Manisa, Turkey, converting dried corn husks and potato peelings into biogas. We are also embedding pep+ into our new facilities, including our $320 million manufacturing facility in Poland.
To support our customers on their sustainability journey, we launched pep+ Partners for Tomorrow in the United States to share training and initiatives on one platform. We are focused on reducing virgin plastic through new launches of bottles made with recycled plastic in India and the United Arab Emirates, while also expanding paper options, such as our Quaker pots and Walkers multipacks in the United Kingdom. In December 2023, Walkers Sunbites announced the introduction of new packaging made with 50% recycled plastic. Through 2023, we continued to scale new business models that require little or no single-use packaging, including the iconic SodaStream, already sold in more than 40 countries. We also offer returnable bottles in Mexico and Spain and are engaged in reusable cup pilots, including in the United States.
We are also making progress on our diversity, equity and inclusion journey around the world. And we continue to empower each of our approximately 318,000 employees to make a positive impact in their communities through our global workforce volunteering program, One Smile at a Time.
Positive Choices: We continue working to evolve our portfolio of convenient food and beverage products so they continue to be positive for the planet and people, including by incorporating more diverse ingredients in both new and existing products, prioritizing legumes, plant-based proteins, whole grains and fruits and vegetables; expanding our position in the nuts and seeds category; accelerating our reduction of added sugars and sodium through the use of science-based targets across our portfolio; and cooking our food offerings with healthier oils. In 2023, we announced two new ambitious nutrition goals, which aim to further reduce sodium and purposefully deliver 145 billion portions of diverse ingredients annually by 2030.
We believe these priorities will position our Company for long-term sustainable growth.
See also “Item 1A. Risk Factors” for further information about risks and uncertainties that the Company faces.
Our Operations
See “Item 1. Business” for information on our divisions and a description of our distribution network, ingredients and other supplies, brands and intellectual property rights, seasonality, customers, competition, research and development, regulatory matters and human capital. In addition, see Note 1 to our consolidated financial statements for financial information about our divisions and geographic areas.
Other Relationships
Certain members of our Board also serve on the boards of certain vendors and customers. These Board members do not participate in our vendor selection and negotiations nor in our customer negotiations. Our
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transactions with these vendors and customers are in the normal course of business and are consistent with terms negotiated with other vendors and customers. In addition, certain of our employees serve on the boards of Pepsi Bottling Ventures LLC and other affiliated companies of PepsiCo and do not receive incremental compensation for such services.
Our Business Risks
Risks Associated with Commodities and Our Supply Chain
During 2023, we continued to experience significantly higher operating costs, including on transportation, labor and commodity (including energy) costs, which may continue in 2024. Many of the commodities used in the production and transportation of our products are purchased in the open market. The prices we pay for such items are subject to fluctuation, and we manage this risk through the use of fixed-price contracts and purchase orders, pricing agreements and derivative instruments, including swaps and futures. A number of external factors, including the ongoing conflict in Ukraine, the inflationary cost environment, adverse weather conditions, supply chain disruptions (including raw material shortages) and labor shortages, have impacted and may continue to impact transportation, labor and commodity availability and costs. When prices increase, we may or may not pass on such increases to our customers without suffering reduced volume, revenue, margins and operating results.
See Note 9 to our consolidated financial statements for further information on how we manage our exposure to commodity prices.
Risks Associated with Climate Change
Certain jurisdictions in which our products are made, manufactured, distributed or sold have either imposed, or are considering imposing, new or increased legal and regulatory requirements to reduce or mitigate the potential effects of climate change, including regulation of greenhouse gas emissions and potential carbon pricing programs. These new or increased legal or regulatory requirements, along with initiatives to meet our sustainability goals, could result in significant increased costs and additional investments in facilities and equipment. However, we are unable to predict the scope, nature and timing of any new or increased environmental laws and regulations and therefore cannot predict the ultimate impact of such laws and regulations on our business or financial results. We continue to monitor existing and proposed laws and regulations in the jurisdictions in which our products are made, manufactured, distributed and sold and to consider actions we may take to potentially mitigate the unfavorable impact, if any, of such laws or regulations.
Risks Associated with International Operations
We are subject to risks in the normal course of business that are inherent to international operations. During the periods presented in this report, certain jurisdictions in which our products are made, manufactured, distributed or sold, including in certain developing and emerging markets, operated in a challenging environment, experiencing unstable economic, political and social conditions, civil unrest, geopolitical conflicts, acts of war, terrorist acts, natural disasters, debt and credit issues and currency controls or fluctuations. We continue to monitor the economic, operating and political environment in these markets closely, including risks of additional impairments or write-offs, and to identify actions to potentially mitigate any unfavorable impacts on our future results.
See Notes 1 and 4 to our consolidated financial statements for a discussion of impairment charges recognized in the years ended December 30, 2023 and December 31, 2022.
Risks Associated with the Deadly Conflict in Ukraine
In addition to the risks associated with international operations discussed above, we continue to face risks associated with the ongoing conflict in Ukraine. The conflict and related sanctions imposed on Russia by
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the United States and others has continued to result in worldwide geopolitical and macroeconomic uncertainty and has impacted our operations in Ukraine and Russia. We have suspended sales to our customers of Pepsi-Cola and certain of our other global beverage brands, our discretionary capital investments and advertising and promotional activities in Russia, which has negatively impacted and could continue to negatively impact our business. We continue to offer our other products in Russia. Our operations in Russia accounted for 4% and 5% of our consolidated net revenue for the years ended December 30, 2023 and December 31, 2022, respectively. Russia accounted for 3% and 4% of our consolidated assets and 35% and 32% of our accumulated currency translation adjustment loss as of December 30, 2023 and December 31, 2022, respectively. Our operations in Ukraine accounted for 0.3% and 0.2% of our consolidated net revenue for the years ended December 30, 2023 and December 31, 2022, respectively. Ukraine accounted for 0.1% of our consolidated assets as of December 30, 2023 and December 31, 2022.
The conflict has resulted and could continue to result in volatile commodity markets, supply chain disruptions, increased risk of cyber incidents or other disruptions to our information systems, reputational risks, heightened risks to employee safety, business disruptions (including labor shortages), significant volatility of the Russian ruble, limitations on access to credit markets and other corporate banking services, including working capital facilities, reduced availability and increased costs for transportation, energy, packaging, raw materials and other input costs, environmental, health and safety risks related to securing and maintaining facilities, additional sanctions, export controls and other legislation or regulations (including restrictions on the transfer of funds to and from Russia). The ongoing conflict could result in the temporary or permanent loss of assets, including the nationalization or expropriation of assets, result in additional impairment charges or significantly affect our ability to manage our operations in these markets which could result in the deconsolidation of such businesses. We cannot predict how and the extent to which the conflict will continue to affect our employees, customers, operations or business partners or impact our ability to achieve certain of our sustainability goals. The conflict has adversely affected and could continue to adversely affect demand for our products and our global business. See Notes 1 and 4 to our consolidated financial statements for a discussion of the Russia-Ukraine conflict charges, including impairment charges, recognized in the year ended December 31, 2022.
The extent of the impact of these tragic events on our business remains uncertain and will continue to depend on numerous evolving factors that we are not able to accurately predict, including the duration and scope of the conflict, regional instability and ongoing and additional financial and economic sanctions, export controls and other legislation imposed by governments. We will continue to monitor and assess the situation as circumstances evolve and to identify actions to potentially mitigate any unfavorable impacts on our future results.
Imposition of Taxes and Regulations on our Products
Certain jurisdictions in which our products are made, manufactured, distributed or sold have either imposed, or are considering imposing, new or increased taxes or regulations on the manufacture, distribution or sale of our products or their packaging, ingredients or substances contained in, or attributes of, our products or their packaging, commodities used in the production of our products or their packaging or the recyclability or recoverability of our packaging. These taxes and regulations vary in scope and form. For example, some taxes apply to all beverages, including non-caloric beverages, while others apply only to beverages with a caloric sweetener (e.g., sugar). Further, some regulations apply to all products using certain types of packaging (e.g., plastic), while others are designed to increase the sustainability of packaging, encourage waste reduction and increased recycling rates or facilitate the waste management process or restrict the sale of products in certain packaging.
We sell a wide variety of beverages and convenient foods in more than 200 countries and territories and the profile of the products we sell, the amount of revenue attributable to such products and the type of
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packaging used vary by jurisdiction. Because of this, we cannot predict the scope or form potential taxes, regulations or other limitations on our products or their packaging may take, and therefore cannot predict the impact of such taxes, regulations or limitations on our financial results. In addition, taxes, regulations and limitations may impact us and our competitors differently. We continue to monitor existing and proposed taxes and regulations in the jurisdictions in which our products are made, manufactured, distributed and sold and to consider actions we may take to potentially mitigate the unfavorable impact, if any, of such taxes, regulations or limitations, including advocating alternative measures with respect to the imposition, form and scope of any such taxes, regulations or limitations.
OECD Global Minimum Tax
Numerous countries have agreed to a statement in support of the OECD model rules that propose a global minimum tax rate of 15%. Certain countries, including European Union member states, have enacted or are expected to enact legislation incorporating the agreed to global minimum tax with effect as early as 2024, and widespread implementation of a global minimum tax is expected as soon as 2025. As the legislation becomes effective in countries in which we do business, our taxes could increase and negatively impact our provision for income taxes. We will continue to monitor pending legislation and implementation by individual countries and evaluate the potential impact on our business in future periods.
Retail Landscape
Our industry continues to be affected by disruption of the retail landscape, including the continued growth in sales through e-commerce websites and mobile commerce applications, including through subscription services, the integration of physical and digital operations among retailers and the international expansion of hard discounters. We have seen and expect to continue to see a further shift to e-commerce, online-to-offline and other online purchasing by consumers. We continue to monitor changes in the retail landscape and seek to identify actions we may take to build our global e-commerce and digital capabilities, such as expanding our direct-to-consumer business, and distribute our products effectively through all existing and emerging channels of trade and potentially mitigate any unfavorable impacts on our future results.
The retail industry also continues to be impacted by the actions and increasing power of retailers, including as a result consolidation of ownership resulting in large retailers or buying groups with increased purchasing power, particularly in North America, Europe and Latin America. We have seen and expect to continue to see retailers and buying groups impact our ability to compete in these jurisdictions. We continue to monitor our relationships with retailers and buying groups and seek to identify actions we may take to maintain mutually beneficial relationships and resolve any significant disputes and potentially mitigate any unfavorable impacts on our future results.
See also “Item 1A. Risk Factors,” “Executive Overview” above and “Market Risks” below for more information about these risks and the actions we have taken to address key challenges.
Risk Management Framework
The achievement of our strategic and operating objectives involves risks, many of which evolve over time. To identify, assess, prioritize, address, manage, monitor and communicate these risks across the Company’s operations and foster a corporate culture of integrity and risk awareness, we leverage an integrated risk management framework. This framework includes the following:
•PepsiCo’s Board has oversight responsibility for PepsiCo’s integrated risk management framework. One of the Board’s primary responsibilities is overseeing and interacting with senior management with respect to key aspects of the Company’s business, including risk assessment and risk mitigation of the Company’s top risks. Throughout the year, the Board and relevant Committees of the Board receive updates from management with respect to various enterprise risk
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management issues and dedicate a portion of their meetings to reviewing and discussing specific risk topics in greater detail, including risks related to cybersecurity, food safety, sustainability, human capital management (including diversity, equity and inclusion) and supply chain and commodity inflation. The Board receives and provides feedback on regular updates from management regarding the Company’s top risks, including updates from members of management responsible for overseeing impacted areas (for example, the Chief Strategy and Transformation Officer and Chief Information Security Officer), governance processes associated with managing these risks, the status of projects to strengthen the Company’s risk mitigation efforts and recent incidents impacting the industry and threat landscape. Given that cybersecurity risks can impact various areas of responsibility of the Committees of the Board, the Board believes it is useful and effective for the full Board to maintain direct oversight over cybersecurity matters. In evaluating top risks, the Board and management consider short-, medium- and long-term potential impacts on the Company’s business, financial condition and results of operations, including looking at the internal and external environment when evaluating risks, risk amplifiers and emerging trends, and considers the risk horizon as part of prioritizing the Company’s risk mitigation efforts. The Board receives updates through presentations, memos and other written materials, teleconferences and other appropriate means of communication, with numerous opportunities for discussion and feedback, and continuously evaluates its approach in addressing top risks as circumstances evolve. For example, as part of risk updates to the Board and relevant Committees during 2023, the Board or its relevant Committee were provided updates on the impact of disruptive events, such as the Russia-Ukraine conflict, supply chain disruption and commodity inflation. The Board also receives periodic updates from external experts and advisers on global macroeconomic trends and conditions that may impact the Company’s strategy and financial performance, including geopolitical conflicts, economic instability, labor market trends, changing consumer behavior, retail disruption and digitalization.
The Board has tasked designated Committees of the Board with oversight of certain categories of risk management, and the Committees report to the Board regularly on these matters.
◦The Audit Committee of the Board reviews and assesses the guidelines and policies governing PepsiCo’s risk management and oversight processes, and assists the Board’s oversight of financial, compliance and employee safety risks facing PepsiCo. The Audit Committee also assists the Board’s oversight of the Company’s compliance with legal and regulatory requirements and the Chief Compliance & Ethics Officer, who reports to the General Counsel, meets regularly with the Audit Committee, including in executive session without management present;
◦The Compensation Committee of the Board reviews PepsiCo’s employee compensation policies and practices to assess whether such policies and practices could lead to unnecessary risk-taking behavior;
◦The Nominating and Corporate Governance Committee assists the Board in its oversight of the Company’s governance structure and other corporate governance matters, including succession planning; and
◦The Sustainability, Diversity and Public Policy Committee of the Board assists the Board in its oversight of PepsiCo’s policies, programs and related risks that concern key sustainability (including climate change), diversity, equity and inclusion, and public policy matters.
•The PepsiCo Risk Committee (PRC) meets regularly to identify, assess, prioritize and address top strategic, financial, operating, compliance, safety, reputational and other risks. The PRC is also
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responsible for reporting progress on our risk mitigation efforts to the Board and designated Committees. The PRC is comprised of a cross-functional, geographically diverse, senior management group, including PepsiCo’s Chairman of the Board of Directors and Chief Executive Officer, Chief Financial Officer, General Counsel, Sector Chief Executive Officers and the heads of Corporate Affairs, Human Resources, Research & Development, Information Technology, Sustainability, Strategy, Transformation, International Beverages, Commercial, Global Operations, Marketing and Financial Planning & Analysis;
•Division and key market risk committees, comprised of cross-functional senior management teams, meet regularly to identify, assess, prioritize and address division and country-specific business risks;
•PepsiCo’s Risk Management Office, which manages the overall risk management process, provides ongoing guidance, tools and analytical support to the PRC and the division and key country risk committees, identifies and assesses potential risks and facilitates ongoing communication between the parties, as well as with PepsiCo’s Board, the Audit Committee of the Board and other Committees of the Board;
•PepsiCo’s Internal Audit Department evaluates the ongoing effectiveness of our key internal controls through periodic audit and review procedures; and
•PepsiCo’s Compliance & Ethics and Law Departments lead and coordinate our compliance policies and practices.
•PepsiCo’s Disclosure Committee, comprised of the General Counsel, Controller and heads of Internal Audit, Financial Planning & Analysis and Investor Relations, evaluates information from PepsiCo’s integrated risk management framework as part of the Disclosure Committee’s monitoring of the integrity and effectiveness of the Company’s disclosure controls and procedures. PepsiCo’s risk oversight processes and disclosure controls and procedures are designed to appropriately escalate key risks to the Board as well as to analyze potential risks for disclosure.
Market Risks
We are exposed to market risks arising from adverse changes in:
•commodity prices, affecting the cost of our raw materials and energy;
•foreign exchange rates and currency restrictions; and
•interest rates.
In the normal course of business, we manage commodity price, foreign exchange and interest rate risks through a variety of strategies, including productivity initiatives, global purchasing programs and hedging. Ongoing productivity initiatives involve the identification and effective implementation of meaningful cost-saving opportunities or efficiencies, including the use of derivatives. Our global purchasing programs include fixed-price contracts and purchase orders and pricing agreements. See “Item 1A. Risk Factors” for further discussion of our market risks.
The fair value of our derivatives fluctuates based on market rates and prices. The sensitivity of our derivatives to these market fluctuations is discussed below. See Note 9 to our consolidated financial statements for further discussion of these derivatives and our hedging policies. The fair value of our indefinite-lived intangible assets is impacted by changes in market conditions, including interest rates and inflationary, deflationary and recessionary conditions. See “Our Critical Accounting Policies and
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Estimates” for a discussion of the exposure of our goodwill and other intangible assets and pension and retiree medical plan assets and liabilities to risks related to market fluctuations.
Inflationary, deflationary and recessionary conditions impacting these market risks also impact the demand for and pricing of our products. See “Item 1A. Risk Factors” for further discussion.
Commodity Prices
Our commodity derivatives had a total notional value of $1.7 billion as of December 30, 2023 and $1.8 billion as of December 31, 2022. At the end of 2023, the potential change in fair value of commodity derivative instruments, assuming a 10% decrease in the underlying commodity price, would have increased our net unrealized losses in 2023 by $157 million, which would generally be offset by a reduction in the cost of the underlying commodity purchases.
Foreign Exchange
Our operations outside of the United States generated 43% of our consolidated net revenue in 2023, with Mexico, Canada, Russia, China, the United Kingdom, Brazil and South Africa, collectively, comprising approximately 25% of our consolidated net revenue in 2023. As a result, we are exposed to foreign exchange risks in the international markets in which our products are made, manufactured, distributed or sold. Additionally, we are exposed to foreign exchange risk from net investments in foreign subsidiaries, foreign currency purchases, foreign currency assets and liabilities created in the normal course of business. During 2023, unfavorable foreign exchange reduced net revenue growth by 2 percentage points, primarily due to declines in the Russian ruble and Egyptian pound, partially offset by an appreciation of the Mexican peso. Currency declines against the U.S. dollar which are not offset could adversely impact our future financial results.
In addition, volatile economic, political and social conditions and civil unrest in certain markets in which our products are made, manufactured, distributed or sold, including in Argentina, Brazil, China, Mexico, the Middle East, Pakistan, Russia, Turkey and Ukraine, and currency controls or fluctuations in certain of these international markets, continue to, and the threat or imposition of new or increased tariffs or sanctions or other impositions in or related to these international markets may, result in challenging operating environments.
Our foreign currency derivatives had a total notional value of $3.8 billion as of December 30, 2023 and $3.0 billion as of December 31, 2022. At the end of 2023, we estimate that an unfavorable 10% change in the underlying exchange rates would have increased our net unrealized losses in 2023 by $371 million, which would be significantly offset by an inverse change in the fair value of the underlying exposure.
The total notional amount of our debt instruments designated as net investment hedges was $3.0 billion as of December 30, 2023 and $2.9 billion as of December 31, 2022.
Interest Rates
Our interest rate derivatives had a total notional value of $1.3 billion as of December 30, 2023 and December 31, 2022. Assuming year-end 2023 investment levels and variable rate debt, a 1-percentage-point increase in interest rates would have decreased our net interest expense in 2023 by $57 million due to higher cash and cash equivalents and short-term investments levels, as compared with our variable rate debt.
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OUR FINANCIAL RESULTS
Results of Operations — Consolidated Review
Volume
Physical or unit volume is one of the key metrics management uses internally to make operating and strategic decisions, including the preparation of our annual operating plan and the evaluation of our business performance. We believe volume provides additional information to facilitate the comparison of our historical operating performance and underlying trends, and provides additional transparency on how we evaluate our business because it measures demand for our products at the consumer level. Unit volume growth adjusts for the impacts of acquisitions and divestitures. Acquisitions and divestitures, when used in this report, reflect mergers and acquisitions activity, as well as divestitures and other structural changes, including changes in ownership or control in consolidated subsidiaries and nonconsolidated equity investees. Further, our fiscal 2022 results include an additional week (53rd reporting week). Unit volume growth excludes the impact of the 53rd reporting week from 2022 results.
Beverage volume includes volume of concentrate sold to independent bottlers and volume of finished products bearing company-owned or licensed trademarks and allied brand products and joint venture trademarks sold by company-owned bottling operations. Beverage volume also includes volume of finished products bearing company-owned or licensed trademarks sold by our noncontrolled affiliates. Concentrate volume sold to independent bottlers is reported in concentrate shipments and equivalents (CSE), whereas finished beverage product volume is reported in bottler case sales (BCS). Both CSE and BCS convert all beverage volume to an 8-ounce-case metric. Typically, CSE and BCS are not equal in any given period due to seasonality, timing of product launches, product mix, bottler inventory practices and other factors. While our net revenue is not entirely based on BCS volume due to the independent bottlers in our supply chain, we believe that BCS is a better measure of the consumption of our beverage products. PBNA, LatAm, Europe, AMESA and APAC, either independently or in conjunction with third parties, make, market, distribute and sell ready-to-drink tea products through a joint venture with Unilever (under the Lipton brand name), and PBNA, either independently or in conjunction with third parties, makes, markets, distributes and sells ready-to-drink coffee products through a joint venture with Starbucks.
Convenient food volume includes volume sold by us and our noncontrolled affiliates of convenient food products bearing company-owned or licensed trademarks. Internationally, we measure convenient food product volume in kilograms, while in North America we measure convenient food product volume in pounds. FLNA makes, markets, distributes and sells Sabra refrigerated dips and spreads through a joint venture with Strauss Group.
Consolidated Net Revenue and Operating Profit
| 2023 | 2022 | Change | |||||||||||||||
| Net revenue | $ | 91,471 | $ | 86,392 | 6 | % | |||||||||||
| Operating profit | $ | 11,986 | $ | 11,512 | 4 | % | |||||||||||
| Operating margin | 13.1 | % | 13.3 | % | (0.2) | ||||||||||||
See “Results of Operations – Division Review” for a tabular presentation and discussion of key drivers of net revenue.
Operating profit grew 4% while operating margin declined 0.2 percentage points. Operating profit growth was primarily driven by effective net pricing, productivity savings, an 11-percentage-point favorable impact of prior-year charges associated with the Russia-Ukraine conflict, and a 5-percentage-point favorable impact of prior-year impairment on intangible assets, investment and property, plant and equipment and other charges as a result of management’s decision to reposition or discontinue the sale/
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distribution of certain brands and to sell an investment (brand portfolio impairment charges). These impacts were partially offset by certain operating cost increases, a 26-percentage-point unfavorable impact of the prior-year gain associated with the Juice Transaction, a 22-percentage-point impact of higher commodity costs, a decrease in organic volume and higher advertising and marketing expenses. Corporate unallocated expenses reflect an increase in expenses related to our ongoing business initiatives and higher contributions to The PepsiCo Foundation, Inc. to fund charitable and social programs. The 53rd reporting week in the prior year reduced operating profit growth by 1 percentage point.
The operating margin decline primarily reflects the unfavorable impact of the prior-year gain associated with the Juice Transaction partially offset by the prior-year charges associated with the Russia-Ukraine conflict and the brand portfolio impairment charges.
Other Consolidated Results
| 2023 | 2022 | Change | |||||||||||||||
| Other pension and retiree medical benefits income | $ | 250 | $ | 132 | $ | 118 | |||||||||||
| Net interest expense and other | $ | 819 | $ | 939 | $ | (120) | |||||||||||
| Annual tax rate | 19.8 | % | 16.1 | % | |||||||||||||
| Net income attributable to PepsiCo | $ | 9,074 | $ | 8,910 | 2 | % | |||||||||||
| Net income attributable to PepsiCo per common share – diluted | $ | 6.56 | $ | 6.42 | 2 | % | |||||||||||
Other pension and retiree medical benefits income increased $118 million, primarily reflecting prior-year settlement charges of $318 million related to U.S. defined benefit plans. In addition, the increase in other pension and retiree medical benefits income reflects lower amortization of net losses on pension obligations and a higher rate of expected return on plan assets, partially offset by higher interest cost and recognition of fixed income losses on plan assets, all driven primarily by higher interest rates.
Net interest expense and other decreased $120 million, primarily due to higher interest rates on average cash balances, gains on the market value of investments used to economically hedge a portion of our deferred compensation liability and higher average cash balances, partially offset by higher interest rates on debt and higher average debt balances.
The reported tax rate increased 3.7 percentage points, primarily reflecting the prior-year adjustment to reserves for uncertain tax positions as a result of our agreement with the Internal Revenue Service (IRS) to settle one of the issues assessed in the 2014 to 2016 audit as well as the prior-year impact of the Juice Transaction.
Results of Operations — Division Review
See “Our Business Risks,” “Non-GAAP Measures” and “Items Affecting Comparability” for a discussion of items to consider when evaluating our results and related information regarding measures not in accordance with U.S. Generally Accepted Accounting Principles (GAAP).
In the discussions of net revenue and operating profit below, “effective net pricing” reflects the year-over-year impact of discrete pricing actions, sales incentive activities and mix resulting from selling varying products in different package sizes and in different countries.
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Net Revenue and Organic Revenue Growth
Organic revenue growth is a non-GAAP financial measure. For further information on this measure, see “Non-GAAP Measures.”
| 2023 | |||||||||||||||||||||||||||||||||||||||||
| Impact of | Impact of | ||||||||||||||||||||||||||||||||||||||||
| Reported % Change, GAAP Measure | Foreign exchange translation | Acquisitions and divestitures | 53rd reporting week | Organic % Change, Non-GAAP Measure(a) | Organic volume(b) | Effective net pricing | |||||||||||||||||||||||||||||||||||
| FLNA | 7 | % | — | — | 2 | 9 | % | (1) | 10 | ||||||||||||||||||||||||||||||||
QFNA (c) | (2) | % | — | — | 2 | 1 | % | (5) | 5 | ||||||||||||||||||||||||||||||||
| PBNA | 5 | % | — | — | 1.5 | 7 | % | (5) | 12 | ||||||||||||||||||||||||||||||||
| LatAm | 19 | % | (9) | 1 | — | 11 | % | (5) | 16 | ||||||||||||||||||||||||||||||||
| Europe | 4 | % | 8 | 1 | — | 14 | % | (2) | 16 | ||||||||||||||||||||||||||||||||
| AMESA | (5) | % | 21 | 1 | — | 17 | % | (2) | 20 | ||||||||||||||||||||||||||||||||
| APAC | — | % | 4 | — | — | 4 | % | (2) | 6 | ||||||||||||||||||||||||||||||||
| Total | 6 | % | 2 | — | 1 | 9 | % | (3) | 13 | ||||||||||||||||||||||||||||||||
(a)Amounts may not sum due to rounding.
(b)Excludes the impact of acquisitions and divestitures and the 53rd reporting week. In certain instances, the impact of organic volume on net revenue growth differs from the unit volume change disclosed in the following divisional discussions due to the impacts of product mix, nonconsolidated joint venture volume, and, for our franchise-owned beverage businesses, temporary timing differences between BCS and CSE. We report net revenue from our franchise-owned beverage businesses based on CSE. The volume sold by our nonconsolidated joint ventures has no direct impact on our net revenue.
(c)Net revenue decline was impacted by product returns related to the Quaker Recall by 2 percentage points, as well as cessation of sales of products as a result of the Quaker Recall.
Operating Profit/(Loss), Operating Profit/(Loss) Adjusted for Items Affecting Comparability and Operating Profit/(Loss) Performance Adjusted for Items Affecting Comparability on a Constant Currency Basis
Operating profit/(loss) adjusted for items affecting comparability and operating profit/(loss) performance adjusted for items affecting comparability on a constant currency basis are both non-GAAP financial measures. For further information on these measures, see “Non-GAAP Measures” and “Items Affecting Comparability.”
Operating Profit/(Loss) and Operating Profit/(Loss) Adjusted for Items Affecting Comparability
| 2023 | |||||||||||||||||||||||||||||||||||||||||
Items Affecting Comparability(a) | |||||||||||||||||||||||||||||||||||||||||
| Reported, GAAP Measure | Mark-to-market net impact | Restructuring and impairment charges | Acquisition and divestiture-related charges | Impairment and other charges | Product recall-related impact | Core, Non-GAAP Measure | |||||||||||||||||||||||||||||||||||
| FLNA | $ | 6,755 | $ | — | $ | 42 | $ | — | $ | — | $ | — | $ | 6,797 | |||||||||||||||||||||||||||
| QFNA | 492 | — | — | — | — | 136 | 628 | ||||||||||||||||||||||||||||||||||
| PBNA | 2,584 | — | 41 | 16 | 321 | — | 2,962 | ||||||||||||||||||||||||||||||||||
| LatAm | 2,252 | — | 29 | — | 2 | — | 2,283 | ||||||||||||||||||||||||||||||||||
| Europe | 767 | — | 223 | (2) | 855 | — | 1,843 | ||||||||||||||||||||||||||||||||||
| AMESA | 807 | — | 15 | 2 | (7) | — | 817 | ||||||||||||||||||||||||||||||||||
| APAC | 713 | — | 8 | — | 59 | — | 780 | ||||||||||||||||||||||||||||||||||
| Corporate unallocated expenses | (2,384) | 36 | 88 | 25 | — | — | (2,235) | ||||||||||||||||||||||||||||||||||
| Total | $ | 11,986 | $ | 36 | $ | 446 | $ | 41 | $ | 1,230 | $ | 136 | $ | 13,875 | |||||||||||||||||||||||||||
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| 2022 | |||||||||||||||||||||||||||||||||||||||||
Items Affecting Comparability(a) | |||||||||||||||||||||||||||||||||||||||||
| Reported, GAAP Measure | Mark-to-market net impact | Restructuring and impairment charges | Acquisition and divestiture-related charges | Gain associated with the Juice Transaction | Impairment and other charges | Core, Non-GAAP Measure | |||||||||||||||||||||||||||||||||||
FLNA | $ | 6,135 | $ | — | $ | 46 | $ | — | $ | — | $ | 88 | $ | 6,269 | |||||||||||||||||||||||||||
QFNA | 604 | — | 7 | — | — | — | 611 | ||||||||||||||||||||||||||||||||||
PBNA | 5,426 | — | 68 | 51 | (3,029) | 160 | 2,676 | ||||||||||||||||||||||||||||||||||
LatAm | 1,627 | — | 32 | — | — | 71 | 1,730 | ||||||||||||||||||||||||||||||||||
Europe | (1,380) | — | 109 | 14 | (292) | 2,932 | 1,383 | ||||||||||||||||||||||||||||||||||
AMESA | 666 | — | 12 | 3 | — | 190 | 871 | ||||||||||||||||||||||||||||||||||
APAC | 537 | — | 16 | — | — | 177 | 730 | ||||||||||||||||||||||||||||||||||
| Corporate unallocated expenses | (2,103) | 62 | 90 | 6 | — | — | (1,945) | ||||||||||||||||||||||||||||||||||
| Total | $ | 11,512 | $ | 62 | $ | 380 | $ | 74 | $ | (3,321) | $ | 3,618 | $ | 12,325 | |||||||||||||||||||||||||||
(a)See “Items Affecting Comparability.”
Operating Profit/(Loss) Performance and Operating Profit/(Loss) Performance Adjusted for Items Affecting Comparability on a Constant Currency Basis
| 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Impact of Items Affecting Comparability(a) | Impact of | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Reported % Change, GAAP Measure | Mark-to-market net impact | Restructuring and impairment charges | Acquisition and divestiture-related charges | Gain associated with the Juice Transaction | Impairment and other charges | Product recall-related impact | Core % Change, Non-GAAP Measure(b) | Foreign exchange translation | Core Constant Currency % Change, Non-GAAP Measure(b) | ||||||||||||||||||||||||||||||||||||||||||||||||||
| FLNA | 10 | % | — | — | — | — | (2) | — | 8 | % | — | 9 | % | ||||||||||||||||||||||||||||||||||||||||||||||
| QFNA | (19) | % | — | (1) | — | — | — | 22 | 3 | % | — | 3 | % | ||||||||||||||||||||||||||||||||||||||||||||||
| PBNA | (52) | % | — | (0.5) | (1) | 61 | 3 | — | 11 | % | — | 11 | % | ||||||||||||||||||||||||||||||||||||||||||||||
| LatAm | 38 | % | — | — | — | — | (6) | — | 32 | % | (13) | 19 | % | ||||||||||||||||||||||||||||||||||||||||||||||
| Europe | n/m | — | n/m | n/m | n/m | n/m | — | 33 | % | 16 | 50 | % | |||||||||||||||||||||||||||||||||||||||||||||||
| AMESA | 21 | % | — | 0.5 | — | — | (28) | — | (6) | % | 21 | 15 | % | ||||||||||||||||||||||||||||||||||||||||||||||
| APAC | 33 | % | — | (2) | — | — | (24) | — | 7 | % | 4 | 11 | % | ||||||||||||||||||||||||||||||||||||||||||||||
| Corporate unallocated expenses | 13 | % | 5 | — | (3.5) | — | — | — | 15 | % | — | 15 | % | ||||||||||||||||||||||||||||||||||||||||||||||
| Total | 4 | % | — | 0.5 | — | 26 | (19) | 1 | 13 | % | 2 | 15 | % | ||||||||||||||||||||||||||||||||||||||||||||||
(a)See “Items Affecting Comparability.”
(b)Amounts may not sum due to rounding.
n/m - Not meaningful due to the impact of impairment and other charges, resulting in an operating loss in 2022.
FLNA
Net revenue grew 7%, primarily driven by effective net pricing, partially offset by the impact of the 53rd reporting week in the prior year, which reduced net revenue by 2 percentage points.
Unit volume decreased 1%, primarily driven by a high-single-digit decline in dips, a mid-single-digit decline in trademark Tostitos and a low-single-digit decline in trademark Lay’s, partially offset by double-digit growth in Sunchips and mid-single-digit growth in trademark Cheetos.
Operating profit increased 10%, primarily reflecting the effective net pricing, productivity savings and a 2-percentage-point favorable impact of prior-year impairment charges associated with a baked fruit convenient food brand. These impacts were partially offset by certain operating cost increases, including strategic initiatives, and a 10-percentage-point impact of higher commodity costs, primarily cooking oil, seasoning ingredients and potatoes. The 53rd reporting week in the prior year reduced operating profit growth by 2 percentage points.
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QFNA
Net revenue declined 2%, primarily driven by a decrease in organic volume and a 2-percentage-point negative impact of the 53rd reporting week in the prior year, partially offset by effective net pricing. The organic volume decline and effective net pricing collectively included a 2-percentage-point negative impact of the product returns from the Quaker Recall and was negatively impacted by cessation of sales of products as a result of the Quaker Recall.
Unit volume declined 5% primarily reflecting a high-single-digit decline in oatmeal, a double-digit decline in bars, a high-single-digit decline in rice/pasta sides and a low-single-digit decline in ready-to-eat cereals. The unit volume decline in bars and ready-to-eat cereals was negatively impacted by the Quaker Recall.
Operating profit declined 19%, reflecting a 22-percentage-point impact of product returns and charges associated with the Quaker Recall, certain operating cost increases, the decrease in organic volume, a 9-percentage-point impact of higher commodity costs, higher advertising and marketing expenses and a 2-percentage-point unfavorable impact of the 53rd reporting week in the prior year. These impacts were partially offset by effective net pricing and productivity savings.
In 2024, unit volume, net revenue and operating profit will continue to be negatively impacted by the Quaker Recall due to lower sales and additional charges.
PBNA
Net revenue increased 5%, primarily driven by effective net pricing, partially offset by a decrease in organic volume. The 53rd reporting week in the prior year reduced net revenue growth by 1.5 percentage points.
Unit volume decreased 5%, driven by a 6% decrease in non-carbonated beverage (NCB) volume and a 4% decrease in CSD volume. The NCB volume decrease primarily reflected high-single-digit decreases in Gatorade sports drinks and our overall water portfolio.
Operating profit decreased 52%, primarily reflecting the unfavorable impact of the prior-year gain of $3.0 billion associated with the Juice Transaction and the current-year impairment charges of $321 million related to our TBG investment, partially offset by the prior-year impairment and other related charges of $160 million associated with our decision to terminate the agreement with Vital Pharmaceuticals, Inc. to distribute Bang energy drinks. Operating profit also decreased due to certain operating cost increases, the decrease in organic volume, an 18-percentage-point impact of higher commodity costs, primarily sweeteners and energy, a 5-percentage-point unfavorable impact due to a prior-year gain on an asset sale and higher advertising and marketing expenses. Additionally, operating profit performance reflects a 2-percentage-point unfavorable impact of the 53rd reporting week in the prior year. These impacts were partially offset by the effective net pricing and productivity savings.
LatAm
Net revenue increased 19%, primarily reflecting effective net pricing and a 9-percentage-point impact of favorable foreign exchange, partially offset by a net organic volume decline.
Convenient foods unit volume declined 4%, primarily reflecting a double-digit decline in Colombia. Additionally, Mexico and Brazil experienced low-single-digit declines.
Beverage unit volume grew 3%, primarily reflecting low-single-digit growth in Mexico and mid-single-digit growth in Guatemala and Colombia, partially offset by a mid-single-digit decline in Argentina. Additionally, Chile experienced slight growth and Brazil experienced low-single-digit growth.
Operating profit increased 38%, primarily reflecting the effective net pricing, productivity savings, a 13-percentage-point impact of favorable foreign exchange and a 6-percentage-point favorable impact of a
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prior-year impairment and other charges associated with the sale of certain non-strategic brands. These impacts were partially offset by certain operating cost increases, the net organic volume decline, an 11-percentage-point impact of higher commodity costs, primarily potatoes, sweeteners and other ingredients and higher advertising and marketing expenses.
Europe
Net revenue increased 4%, primarily reflecting effective net pricing, partially offset by an 8-percentage-point impact of unfavorable foreign exchange and an organic volume decline.
Convenient foods unit volume decreased slightly, primarily reflecting a high-single-digit decline in the United Kingdom, a double-digit decline in Spain, a mid-single-digit decline in France and a low-single-digit decline in the Netherlands, partially offset by double-digit growth in Russia and high-single-digit growth in Turkey.
Beverage unit volume declined 3%, primarily reflecting a double-digit decline in Germany, a high-single-digit decline in France and a low-single-digit decline in Russia, partially offset by double-digit growth in Turkey. Additionally, the United Kingdom experienced a low-single-digit decline.
Operating profit improvement primarily reflects the favorable impact of prior-year charges associated with the Russia-Ukraine conflict and impairment of intangible assets related to the repositioning or discontinuation of certain juice and dairy brands in Russia (brand portfolio impairment charges) and the favorable impact of lower impairment charges related to the SodaStream business (other impairment charges), partially offset by the unfavorable impact of the prior-year gain associated with the Juice Transaction. Operating profit improvement also reflects the effective net pricing and productivity savings. These impacts were partially offset by certain operating cost increases, a 54-percentage-point impact of higher commodity costs, primarily sweeteners, packaging and potatoes, a 16-percentage-point impact of unfavorable foreign exchange, higher advertising and marketing expenses and the organic volume decline.
AMESA
Net revenue declined 5%, primarily reflecting a 21-percentage-point impact of unfavorable foreign exchange, driven primarily by the weakening of the Egyptian pound, and a net organic volume decline, partially offset by effective net pricing.
Convenient foods unit volume declined 3.5%, primarily reflecting a high-single-digit decline in South Africa, partially offset by high-single-digit growth in the Middle East and low-single-digit growth in Pakistan. Additionally, India experienced a low-single-digit decline.
Beverage unit volume grew 2%, primarily reflecting double-digit growth in India and low-single-digit growth in the Middle East, partially offset by a double-digit decline in Pakistan and a low-single-digit decline in Nigeria.
Operating profit grew 21%, primarily reflecting a 24-percentage-point favorable impact of impairment and other charges associated with our decision to sell or discontinue certain non-strategic brands and an investment in the prior year (brand portfolio impairment charges), a 4-percentage-point favorable impact of impairment charges primarily related to certain juice brands from the Pioneer Food Group Ltd. (Pioneer Foods) acquisition in the prior year (other impairment charges), the effective net pricing and productivity savings. These impacts were partially offset by a 70-percentage-point impact of higher commodity costs, primarily packaging materials, sweeteners and grains, largely driven by transaction-related foreign exchange, certain operating cost increases and a 21-percentage-point impact of unfavorable foreign exchange, primarily due to weakening of the Egyptian pound.
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APAC
Net revenue grew slightly, primarily reflecting effective net pricing, partially offset by a 4-percentage-point impact of unfavorable foreign exchange and a net organic volume decline.
Convenient foods unit volume declined 2%, primarily reflecting a double-digit decline in Thailand and a low-single-digit decline in Australia, partially offset by low-single-digit growth in China.
Beverage unit volume grew 2.5%, primarily reflecting mid-single-digit growth in China, high-single-digit growth in Thailand and low-single-digit growth in Vietnam, partially offset by a mid-single-digit decline in the Philippines.
Operating profit grew 33%, primarily reflecting a 23-percentage-point favorable impact of lower impairment charges related to the Be & Cheery brand (other impairment charges), the effective net pricing and productivity savings. These impacts were partially offset by certain operating cost increases, higher advertising and marketing expenses, the net organic volume decline, a 5-percentage-point impact of higher commodity costs and a 4-percentage-point impact of unfavorable foreign exchange.
Non-GAAP Measures
Certain financial measures contained in this Form 10-K adjust for the impact of specified items and are not in accordance with GAAP. We use non-GAAP financial measures internally to make operating and strategic decisions, including the preparation of our annual operating plan, evaluation of our overall business performance and as a factor in determining compensation for certain employees. We believe presenting non-GAAP financial measures in this Form 10-K provides additional information to facilitate comparison of our historical operating results and trends in our underlying operating results and provides additional transparency on how we evaluate our business. We also believe presenting these measures in this Form 10-K allows investors to view our performance using the same measures that we use in evaluating our financial and business performance and trends.
We consider quantitative and qualitative factors in assessing whether to adjust for the impact of items that may be significant or that could affect an understanding of our ongoing financial and business performance or trends. Examples of items for which we may make adjustments include: amounts related to mark-to-market gains or losses (non-cash); charges related to restructuring plans; charges associated with acquisitions and divestitures; gains associated with divestitures; asset impairment charges (non-cash); product recall-related impact; pension and retiree medical-related amounts, including all settlement and curtailment gains and losses; charges or adjustments related to the enactment of new laws, rules or regulations, such as tax law changes; amounts related to the resolution of tax positions; tax benefits related to reorganizations of our operations; debt redemptions, cash tender or exchange offers; and remeasurements of net monetary assets. Prior to the fourth quarter of 2021, certain immaterial pension and retiree medical-related settlement and curtailment gains and losses were not considered items affecting comparability. Pension and retiree medical-related service cost, interest cost, expected return on plan assets, and other net periodic pension costs continue to be reflected in our core results. See below and “Items Affecting Comparability” for a description of adjustments to our GAAP financial measures in this Form 10-K.
Non-GAAP information should be considered as supplemental in nature and is not meant to be considered in isolation or as a substitute for the related financial information prepared in accordance with GAAP. In addition, our non-GAAP financial measures may not be the same as or comparable to similar non-GAAP measures presented by other companies.
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The following non-GAAP financial measures contained in this Form 10-K are discussed below:
Cost of sales, gross profit, selling, general and administrative expenses, gain associated with the Juice Transaction, impairment of intangible assets, other pension and retiree medical benefits income, net interest expense and other, provision for income taxes, net income attributable to noncontrolling interests and net income attributable to PepsiCo, each adjusted for items affecting comparability, operating profit and net income attributable to PepsiCo per common share – diluted, each adjusted for items affecting comparability, and the corresponding constant currency growth rates
These measures exclude the net impact of mark-to-market gains and losses on centrally managed commodity derivatives that do not qualify for hedge accounting, restructuring and impairment charges related to our 2019 Multi-Year Productivity Plan (2019 Productivity Plan), charges associated with our acquisitions and divestitures, the gain associated with the Juice Transaction, impairment and other charges comprised of Russia-Ukraine conflict charges, brand portfolio impairment charges and other impairment charges, product recall-related impact, the impact of settlement and curtailment gains and losses related to pension and retiree medical plans, a charge related to cash tender offers, tax benefit related to the IRS audit and tax expense related to the Tax Cuts and Jobs Act (TCJ Act) (see “Items Affecting Comparability” for a detailed description of each of these items). We also evaluate performance on operating profit and net income attributable to PepsiCo per common share – diluted, each adjusted for items affecting comparability, on a constant currency basis, which measure our financial results assuming constant foreign currency exchange rates used for translation based on the rates in effect for the comparable prior-year period. In order to compute our constant currency results, we multiply or divide, as appropriate, our current-year U.S. dollar results by the current-year average foreign exchange rates and then multiply or divide, as appropriate, those amounts by the prior-year average foreign exchange rates. We believe these measures provide useful information in evaluating the results of our business because they exclude items that we believe are not indicative of our ongoing performance or that we believe impact comparability with the prior year.
Organic revenue growth
We define organic revenue growth as a measure that adjusts for the impacts of foreign exchange translation, acquisitions and divestitures, and every five or six years, the impact of the 53rd reporting week, including in our 2022 financial results. Adjusting for acquisitions and divestitures reflects mergers and acquisitions activity, as well as divestitures and other structural changes, including changes in ownership or control in consolidated subsidiaries and nonconsolidated equity investees. We believe organic revenue growth provides useful information in evaluating the results of our business because it excludes items that we believe are not indicative of ongoing performance or that we believe impact comparability with the prior year.
See “Net Revenue and Organic Revenue Growth” in “Results of Operations – Division Review” for further information.
Free cash flow
We define free cash flow as net cash from operating activities less capital spending, plus sales of property, plant and equipment. Since net capital spending is essential to our product innovation initiatives and maintaining our operational capabilities, we believe that it is a recurring and necessary use of cash. As such, we believe investors should also consider net capital spending when evaluating our cash from operating activities. Free cash flow is used by us primarily for acquisitions and financing activities, including debt repayments, dividends and share repurchases. Free cash flow is not a measure of cash available for discretionary expenditures since we have certain non-discretionary obligations such as debt service that are not deducted from the measure.
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See “Free Cash Flow” in “Our Liquidity and Capital Resources” for further information.
Return on invested capital (ROIC) and net ROIC, excluding items affecting comparability
We define ROIC as net income attributable to PepsiCo plus interest expense after-tax divided by the sum of quarterly average debt obligations and quarterly average common shareholders’ equity. Although ROIC is a common financial metric, numerous methods exist for calculating ROIC. Accordingly, the method used by management to calculate ROIC may differ from the methods other companies use to calculate their ROIC.
We believe this metric serves as a measure of how well we use our capital to generate returns. In addition, we use net ROIC, excluding items affecting comparability, to compare our performance over various reporting periods on a consistent basis because it removes from our operating results the impact of items that we believe are not indicative of our ongoing performance and reflects how management evaluates our operating results and trends. We define net ROIC, excluding items affecting comparability, as ROIC, adjusted for quarterly average cash, cash equivalents and short-term investments, after-tax interest income and items affecting comparability. We believe the calculation of ROIC and net ROIC, excluding items affecting comparability, provides useful information to investors and is an additional relevant comparison of our performance to consider when evaluating our capital allocation efficiency.
See “Return on Invested Capital” in “Our Liquidity and Capital Resources” for further information.
Items Affecting Comparability
Our reported financial results in this Form 10-K are impacted by the following items in each of the following years:
2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Cost of sales | Gross profit | Selling, general and administrative expenses | Impairment of intangible assets | Operating profit | Other pension and retiree medical benefits income | Provision for income taxes(a) | Net income attributable to noncontrolling interests | Net income attributable to PepsiCo | |||||||||||||||||||||||||||||||||||||||||||||
| Reported, GAAP Measure | $ | 41,881 | $ | 49,590 | $ | 36,677 | $ | 927 | $ | 11,986 | $ | 250 | $ | 2,262 | $ | 81 | $ | 9,074 | |||||||||||||||||||||||||||||||||||
| Items Affecting Comparability | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Mark-to-market net impact | (3) | 3 | (33) | — | 36 | — | 9 | — | 27 | ||||||||||||||||||||||||||||||||||||||||||||
| Restructuring and impairment charges | (13) | 13 | (433) | — | 446 | (1) | 96 | 1 | 348 | ||||||||||||||||||||||||||||||||||||||||||||
Acquisition and divestiture-related charges | — | — | (41) | — | 41 | — | 18 | — | 23 | ||||||||||||||||||||||||||||||||||||||||||||
| Impairment and other charges | 5 | (5) | (308) | (927) | 1,230 | — | 284 | — | 946 | ||||||||||||||||||||||||||||||||||||||||||||
| Product recall-related impact | (136) | 136 | — | — | 136 | — | 32 | — | 104 | ||||||||||||||||||||||||||||||||||||||||||||
Pension and retiree medical-related impact | — | — | — | — | — | 14 | 3 | — | 11 | ||||||||||||||||||||||||||||||||||||||||||||
| Core, Non-GAAP Measure | $ | 41,734 | $ | 49,737 | $ | 35,862 | $ | — | $ | 13,875 | $ | 263 | $ | 2,704 | $ | 82 | $ | 10,533 | |||||||||||||||||||||||||||||||||||
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2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Cost of sales | Gross profit | Selling, general and administrative expenses | Gain associated with the Juice Transaction | Impairment of intangible assets | Operating profit | Other pension and retiree medical benefits income | Provision for income taxes(a) | Net income attributable to noncontrolling interests | Net income attributable to PepsiCo | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Reported, GAAP Measure | $ | 40,576 | $ | 45,816 | $ | 34,459 | $ | (3,321) | $ | 3,166 | $ | 11,512 | $ | 132 | $ | 1,727 | $ | 68 | $ | 8,910 | |||||||||||||||||||||||||||||||||||||||
| Items Affecting Comparability | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Mark-to-market net impact | (52) | 52 | (10) | — | — | 62 | — | 14 | — | 48 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Restructuring and impairment charges | (33) | 33 | (347) | — | — | 380 | 31 | 77 | 1 | 333 | |||||||||||||||||||||||||||||||||||||||||||||||||
Acquisition and divestiture-related charges | — | — | (74) | — | — | 74 | 6 | 14 | — | 66 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Gain associated with the Juice Transaction | — | — | — | 3,321 | — | (3,321) | — | (433) | — | (2,888) | |||||||||||||||||||||||||||||||||||||||||||||||||
| Impairment and other charges | (201) | 201 | (251) | — | (3,166) | 3,618 | — | 671 | — | 2,947 | |||||||||||||||||||||||||||||||||||||||||||||||||
Pension and retiree medical-related impact | — | — | — | — | — | — | 307 | 69 | — | 238 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Tax benefit related to the IRS audit | — | — | — | — | — | — | — | 319 | — | (319) | |||||||||||||||||||||||||||||||||||||||||||||||||
| Tax expense related to the TCJ Act | — | — | — | — | — | — | — | (86) | — | 86 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Core, Non-GAAP Measure | $ | 40,290 | $ | 46,102 | $ | 33,777 | $ | — | $ | — | $ | 12,325 | $ | 476 | $ | 2,372 | $ | 69 | $ | 9,421 | |||||||||||||||||||||||||||||||||||||||
(a)Provision for income taxes is the expected tax charge/benefit on the underlying item based on the tax laws and income tax rates applicable to the underlying item in its corresponding tax jurisdiction.
| 2023 | 2022 | Change | ||||||||||||||||||
| Net income attributable to PepsiCo per common share – diluted, GAAP measure | $ | 6.56 | $ | 6.42 | 2 | % | ||||||||||||||
| Mark-to-market net impact | 0.02 | 0.03 | ||||||||||||||||||
| Restructuring and impairment charges | 0.25 | 0.24 | ||||||||||||||||||
Acquisition and divestiture-related charges | 0.02 | 0.05 | ||||||||||||||||||
| Gain associated with the Juice Transaction | — | (2.08) | ||||||||||||||||||
| Impairment and other charges | 0.68 | 2.12 | ||||||||||||||||||
| Product recall-related impact | 0.07 | — | ||||||||||||||||||
Pension and retiree medical-related impact | 0.01 | 0.17 | ||||||||||||||||||
| Tax benefit related to the IRS audit | — | (0.23) | ||||||||||||||||||
Tax expense related to the TCJ Act | — | 0.06 | ||||||||||||||||||
| Core net income attributable to PepsiCo per common share – diluted, non-GAAP measure | $ | 7.62 | (a) | $ | 6.79 | (a) | 12 | % | ||||||||||||
| Impact of foreign exchange translation | 2 | |||||||||||||||||||
| Growth in core net income attributable to PepsiCo per common share – diluted, on a constant currency basis, non-GAAP measure | 14 | % | ||||||||||||||||||
(a)Does not sum due to rounding.
Mark-to-Market Net Impact
We centrally manage commodity derivatives on behalf of our divisions. These commodity derivatives include agricultural products, energy and metals. Commodity derivatives that do not qualify for hedge accounting treatment are marked to market each period with the resulting gains and losses recorded in corporate unallocated expenses as either cost of sales or selling, general and administrative expenses, depending on the underlying commodity. These gains and losses are subsequently reflected in division results when the divisions recognize the cost of the underlying commodity in operating profit. Therefore, the divisions realize the economic effects of the derivative without experiencing any resulting mark-to-market volatility, which remains in corporate unallocated expenses.
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Restructuring and Impairment Charges
2019 Multi-Year Productivity Plan
The 2019 Productivity Plan, publicly announced on February 15, 2019, will leverage new technology and business models to further simplify, harmonize and automate processes; re-engineer our go-to-market and information systems, including deploying the right automation for each market; and simplify our organization and optimize our manufacturing and supply chain footprint. To build on the successful implementation of the 2019 Productivity Plan, in 2022, we expanded and extended the plan through the end of 2028 to take advantage of additional opportunities within the initiatives described above. As a result, we expect to incur pre-tax charges of approximately $3.65 billion, including cash expenditures of approximately $2.9 billion. Plan to date through December 30, 2023, we have incurred pre-tax charges of $1.9 billion, including cash expenditures of $1.4 billion. In our 2024 financial results, we expect to incur pre-tax charges and cash expenditures of approximately $500 million each. These charges will be funded primarily through cash from operations. We expect to incur the majority of the remaining pre-tax charges and cash expenditures through 2025, with the balance to be incurred through 2028. Charges include severance and other employee costs, asset impairments and other costs.
See Note 3 to our consolidated financial statements for further information related to our 2019 Productivity Plan. We regularly evaluate productivity initiatives beyond the productivity plan and other initiatives discussed above and in Note 3 to our consolidated financial statements.
Acquisition and Divestiture-Related Charges
Acquisition and divestiture-related charges primarily include merger and integration charges and costs associated with divestitures. Merger and integration charges include liabilities to support socioeconomic programs in South Africa, gains associated with contingent consideration, employee-related costs, contract termination costs, closing costs and other integration costs. Divestiture-related charges reflect transaction expenses, including consulting, advisory and other professional fees.
See Note 13 to our consolidated financial statements for further information.
Gain Associated with the Juice Transaction
We recognized a gain associated with the Juice Transaction in our PBNA and Europe divisions.
See Note 13 to our consolidated financial statements for further information.
Impairment and Other Charges
We recognized Russia-Ukraine conflict charges, brand portfolio impairment charges and other impairment charges as described below.
Russia-Ukraine Conflict Charges
In connection with the ongoing conflict in Ukraine, we recognized charges related to indefinite-lived intangible assets and property, plant and equipment impairment, allowance for expected credit losses, inventory write-downs and other costs. We also recognized adjustments to the charges recorded in 2022.
See Notes 1 and 4 to our consolidated financial statements for further information.
Brand Portfolio Impairment Charges
We recognized intangible asset, investment and property, plant and equipment impairments and other charges as a result of management’s decision to reposition or discontinue the sale/distribution of certain brands and to sell an investment. We also recognized adjustments to the charges recorded in 2022.
See Notes 1 and 4 to our consolidated financial statements for further information.
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Other Impairment Charges
We recognized impairment charges taken as a result of our quantitative assessments of certain of our indefinite-lived intangible assets and related to our investment in TBG.
See Notes 1, 4 and 9 to our consolidated financial statements for further information.
Product Recall-Related Impact
We recognized product returns, inventory write-offs and customer and consumer-related costs in our QFNA division associated with a voluntary recall of certain bars and cereals.
See Note 1 to our consolidated financial statements for further information.
Pension and Retiree Medical-Related Impact
Pension and retiree medical-related impact includes settlement charges related to lump sum distributions exceeding the total of annual service and interest costs, as well as curtailment gains.
See Notes 7 and 13 to our consolidated financial statements for further information.
Tax Benefit Related to the IRS Audit
We recognized a non-cash tax benefit resulting from our agreement with the IRS to settle one of the issues assessed in the 2014 through 2016 tax audit. The agreement covers tax years 2014 through 2019.
See Note 5 to our consolidated financial statements for further information.
Tax Expense Related to the TCJ Act
Tax expense related to the TCJ Act reflects adjustments to the mandatory transition tax liability under the TCJ Act.
See Note 5 to our consolidated financial statements for further information.
Charge Related to Cash Tender Offers
As a result of the cash tender offers for some of our long-term debt, we recorded a charge primarily representing the tender price paid over the carrying value of the tendered notes and loss on treasury rate locks used to mitigate the interest rate risk on the cash tender offers.
See Note 8 to our consolidated financial statements for further information.
Our Liquidity and Capital Resources
We believe that our cash generating capability and financial condition, together with our revolving credit facilities, working capital lines and other available methods of debt financing, such as commercial paper borrowings and long-term debt financing, will be adequate to meet our operating, investing and financing needs, including with respect to our net capital spending plans. Our primary sources of liquidity include cash from operations, proceeds obtained from issuances of commercial paper and long-term debt, and cash and cash equivalents. These sources of cash are available to fund cash outflows that have both a short- and long-term component, including debt repayments and related interest payments; payments for acquisitions; operating leases; purchase, marketing, and other contractual commitments, including capital expenditures and the transition tax liability under the TCJ Act. In addition, these sources of cash fund other cash outflows including anticipated dividend payments and share repurchases. We do not have guarantees or off-balance sheet financing arrangements, including variable interest entities, that we believe could have a material impact on our liquidity. See “Item 1A. Risk Factors,” “Our Business Risks” and Note 8 to our consolidated financial statements for further information.
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Our sources and uses of cash were not materially adversely impacted by the Russia-Ukraine conflict and, to date, we have not identified any material liquidity deficiencies as a result of the conflict. Based on the information currently available to us, we do not expect the impact of the Russia-Ukraine conflict to have a material impact on our future liquidity. We will continue to monitor and assess the impact the Russia-Ukraine conflict may have on our business and financial results. See “Item 1A. Risk Factors,” “Our Business Risks” and Note 1 to our consolidated financial statements for further information related to the impact of the Russia-Ukraine conflict on our business and financial results.
As of December 30, 2023, cash, cash equivalents and short-term investments in our consolidated subsidiaries subject to currency controls or currency exchange restrictions were not material.
The TCJ Act imposed a one-time mandatory transition tax on undistributed international earnings. As of December 30, 2023, our mandatory transition tax liability was $2.3 billion, which must be paid through 2026 under the provisions of the TCJ Act; we currently expect to pay approximately $579 million of this liability in 2024. Any additional guidance issued by the IRS may impact our recorded amounts for this transition tax liability. See Note 5 to our consolidated financial statements for further discussion of the TCJ Act.
Supply chain financing arrangements did not have a material impact on our liquidity or capital resources in the periods presented and we do not expect such arrangements to have a material impact on our liquidity or capital resources for the foreseeable future. See Note 14 to our consolidated financial statements for further discussion of supply chain financing arrangements.
Furthermore, our cash provided from operating activities is somewhat impacted by seasonality. Working capital needs are impacted by weekly sales, which are generally highest in the third quarter due to seasonal and holiday-related patterns and generally lowest in the first quarter. On a continuing basis, we consider various transactions to increase shareholder value and enhance our business results, including acquisitions, divestitures, joint ventures, dividends, share repurchases, productivity and other efficiency initiatives and other structural changes. These transactions may result in future cash proceeds or payments.
The table below summarizes our cash activity:
| 2023 | 2022 | ||||||||||
| Net cash provided by operating activities | $ | 13,442 | $ | 10,811 | |||||||
| Net cash used for investing activities | $ | (5,495) | $ | (2,430) | |||||||
| Net cash used for financing activities | $ | (3,009) | $ | (8,523) | |||||||
Operating Activities
In 2023, net cash provided by operating activities was $13.4 billion, compared to $10.8 billion in the prior year. The increase in operating cash flow primarily reflects favorable operating profit performance coupled with favorable working capital comparisons.
Investing Activities
In 2023, net cash used for investing activities was $5.5 billion, primarily reflecting net capital spending of $5.3 billion.
In 2022, net cash used for investing activities was $2.4 billion, primarily reflecting net capital spending of $5.0 billion and our investment in Celsius Holdings, Inc. (Celsius) convertible preferred stock and agreement to distribute Celsius energy drinks of $0.8 billion, partially offset by proceeds associated with the Juice Transaction of $3.5 billion.
See Note 1 to our consolidated financial statements for further discussion of capital spending by division; see Notes 4 and 9 to our consolidated financial statements for further discussion of our agreement with
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and investment in Celsius; and see Note 13 to our consolidated financial statements for further discussion of our acquisitions and divestitures.
We regularly review our plans with respect to net capital spending, including in light of the ongoing uncertainty caused by the Russia-Ukraine conflict on our business, and believe that we have sufficient liquidity to meet our net capital spending needs.
Financing Activities
In 2023, net cash used for financing activities was $3.0 billion, primarily reflecting the return of operating cash flow to our shareholders through dividend payments of $6.7 billion and share repurchases of $1.0 billion, as well as payments of long-term debt borrowings of $3.0 billion, partially offset by proceeds from issuances of long-term debt of $5.5 billion and net proceeds from short-term borrowings of $2.3 billion.
In 2022, net cash used for financing activities was $8.5 billion, primarily reflecting the return of operating cash flow to our shareholders through dividend payments of $6.2 billion and share repurchases of $1.5 billion, payments of long-term debt borrowings of $2.5 billion and debt redemptions/cash tender offers of $1.7 billion, partially offset by proceeds from issuances of long-term debt of $3.4 billion.
See Note 8 to our consolidated financial statements for further discussion of debt obligations.
We annually review our capital structure with our Board, including our dividend policy and share repurchase activity. On February 10, 2022, we announced a share repurchase program providing for the repurchase of up to $10.0 billion of PepsiCo common stock which commenced on February 11, 2022 and will expire on February 28, 2026. In addition, on February 9, 2024, we announced a 7% increase in our annualized dividend to $5.42 per share from $5.06 per share, effective with the dividend expected to be paid in June 2024. We expect to return a total of approximately $8.2 billion to shareholders in 2024, comprising dividends of approximately $7.2 billion and share repurchases of approximately $1.0 billion.
Free Cash Flow
The table below reconciles net cash provided by operating activities, as reflected on our cash flow statement, to our free cash flow. Free cash flow is a non-GAAP financial measure. For further information on free cash flow, see “Non-GAAP Measures.”
| 2023 | 2022 | Change | |||||||||||||||
| Net cash provided by operating activities, GAAP measure | $ | 13,442 | $ | 10,811 | 24 | % | |||||||||||
| Capital spending | (5,518) | (5,207) | |||||||||||||||
| Sales of property, plant and equipment | 198 | 251 | |||||||||||||||
| Free cash flow, non-GAAP measure | $ | 8,122 | $ | 5,855 | 39 | % | |||||||||||
We use free cash flow primarily for acquisitions and financing activities, including debt repayments, dividends and share repurchases. We expect to continue to return free cash flow to our shareholders primarily through dividends and share repurchases while maintaining Tier 1 commercial paper access, which we believe will facilitate appropriate financial flexibility and ready access to global capital and credit markets at favorable interest rates. However, see “Item 1A. Risk Factors” and “Our Business Risks” for certain factors that may impact our credit ratings or our operating cash flows.
Any downgrade of our credit ratings by a credit rating agency, especially any downgrade to below investment grade, whether or not as a result of our actions or factors which are beyond our control, could increase our future borrowing costs and impair our ability to access capital and credit markets on terms commercially acceptable to us, or at all. In addition, any downgrade of our current short-term credit ratings could impair our ability to access the commercial paper market with the same flexibility that we have experienced historically, and therefore require us to rely more heavily on more expensive types of
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debt financing. See “Item 1A. Risk Factors,” “Our Business Risks” and Note 8 to our consolidated financial statements for further information.
Changes in Line Items in Our Consolidated Financial Statements
Changes in line items in our consolidated statement of income are discussed in “Results of Operations – Consolidated Review,” “Results of Operations – Division Review” and “Items Affecting Comparability.”
Changes in line items in our consolidated statement of cash flows are discussed in “Our Liquidity and Capital Resources.”
Changes in line items in our consolidated balance sheet are discussed below:
Total Assets
As of December 30, 2023, total assets were $100.5 billion, compared to $92.2 billion as of December 31, 2022. The increase in total assets is primarily driven by the following line items:
Change(a) | Reference | ||||||||||
| Cash and cash equivalents | $ | 4.8 | Statement of Cash Flows | ||||||||
| Property, plant and equipment, net | $ | 2.7 | Note 15 | ||||||||
| Other assets | $ | 1.4 | Note 15 | ||||||||
Total Liabilities
As of December 30, 2023, total liabilities were $81.9 billion, compared to $74.9 billion as of December 31, 2022. The increase in total liabilities is primarily driven by the following line items:
Change(a) | Reference | ||||||||||
| Short-term debt obligations | $ | 3.1 | Note 8 | ||||||||
| Accounts payable and other current liabilities | $ | 1.8 | Note 15 | ||||||||
| Long-term debt obligations | $ | 1.9 | Note 8 | ||||||||
(a)In billions.
Total Equity
See our consolidated statement of equity and Notes 9 and 11 to our consolidated financial statements.
Return on Invested Capital
ROIC is a non-GAAP financial measure. For further information on ROIC, see “Non-GAAP Measures.”
| 2023 | 2022 | |||||||||||||
| Net income attributable to PepsiCo | $ | 9,074 | $ | 8,910 | ||||||||||
| Interest expense | 1,437 | 1,119 | ||||||||||||
| Tax on interest expense | (319) | (248) | ||||||||||||
| $ | 10,192 | $ | 9,781 | |||||||||||
Average debt obligations (a) | $ | 42,668 | $ | 39,595 | ||||||||||
Average common shareholders’ equity (b) | 17,837 | 17,785 | ||||||||||||
| Average invested capital | $ | 60,505 | $ | 57,380 | ||||||||||
| ROIC, non-GAAP measure | 16.8 | % | 17.0 | % | ||||||||||
(a)Includes a quarterly average of short-term and long-term debt obligations.
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(b)Includes a quarterly average of common stock, capital in excess of par value, retained earnings, accumulated other comprehensive loss and repurchased common stock.
The table below reconciles ROIC as calculated above to net ROIC, excluding items affecting comparability.
| 2023 | 2022 | |||||||||||||
| ROIC, non-GAAP measure | 16.8 | % | 17.0 | % | ||||||||||
| Impact of: | ||||||||||||||
| Average cash, cash equivalents and short-term investments | 2.5 | 2.1 | ||||||||||||
| Interest income | (1.0) | (0.3) | ||||||||||||
| Tax on interest income | 0.2 | 0.1 | ||||||||||||
| Mark-to-market net impact | — | 0.1 | ||||||||||||
| Restructuring and impairment charges | 0.4 | 0.3 | ||||||||||||
| Acquisition and divestiture-related charges | — | 0.1 | ||||||||||||
| Gain associated with the Juice Transaction | 0.9 | (3.3) | ||||||||||||
| Impairment and other charges | 0.6 | 3.7 | ||||||||||||
| Product recall-related impact | 0.2 | — | ||||||||||||
| Pension and retiree medical-related impact | — | 0.3 | ||||||||||||
| Tax benefit related to the IRS audit | 0.1 | (0.4) | ||||||||||||
| Tax expense related to the TCJ Act | (0.1) | 0.1 | ||||||||||||
| Charge related to cash tender offers | (0.2) | (0.2) | ||||||||||||
| Core Net ROIC, non-GAAP measure | 20.4 | % | 19.6 | % | ||||||||||
OUR CRITICAL ACCOUNTING POLICIES AND ESTIMATES
An appreciation of our critical accounting policies and estimates is necessary to understand our financial results. These policies may require management to make difficult and subjective judgments regarding uncertainties, including the business and economic uncertainty resulting from the ongoing conflicts in Ukraine and the Middle East and the high interest rate and inflationary cost environment, and as a result, such estimates may significantly impact our financial results. The precision of these estimates and the likelihood of future changes depend on a number of underlying variables and a range of possible outcomes. We applied our critical accounting policies and estimation methods consistently in all material respects and for all periods presented. We have discussed our critical accounting policies and estimates with our Audit Committee.
Our critical accounting policies and estimates are:
•revenue recognition;
•goodwill and other intangible assets;
•income tax expense and accruals; and
•pension and retiree medical plans.
Revenue Recognition
We recognize revenue when our performance obligation is satisfied. Our primary performance obligation (the distribution and sales of beverage and convenient food products) is satisfied upon the shipment or delivery of products to our customers, which is also when control is transferred. The transfer of control of products to our customers is typically based on written sales terms that generally do not allow for a right of return, except in the instance of a product recall or other limited circumstances that may allow for product returns. Our policy for DSD, including certain chilled products, is to remove and replace damaged and out-of-date products from store shelves to ensure that consumers receive the product quality and
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freshness they expect. Similarly, our policy for certain warehouse-distributed products is to replace damaged and out-of-date products. As a result, we record reserves, based on estimates, for product recall, anticipated damaged and out-of-date products.
Our products are sold for cash or on credit terms. Our credit terms, which are established in accordance with local and industry practices, typically require payment within 30 days of delivery in the United States, and generally within 30 to 90 days internationally, and may allow discounts for early payment.
We estimate and reserve for our expected credit loss exposure based on our experience with past due accounts and collectibility, write-off history, the aging of accounts receivable, our analysis of customer data, and forward-looking information (including the expected impact of a high interest rate and inflationary cost environment), leveraging estimates of creditworthiness and projections of default and recovery rates for certain of our customers.
Our policy is to provide customers with product when needed. In fact, our commitment to freshness and product dating serves to regulate the quantity of product shipped or delivered. In addition, DSD products are placed on the shelf by our employees with customer shelf space and storerooms limiting the quantity of product. For product delivered through other distribution networks, we monitor customer inventory levels.
As discussed in “Our Customers” in “Item 1. Business,” we offer sales incentives and discounts through various programs to customers and consumers. Total marketplace spending includes sales incentives, discounts, advertising and other marketing activities. Sales incentives and discounts are primarily accounted for as a reduction of revenue and include payments to customers for performing activities on our behalf, such as payments for in-store displays, payments to gain distribution of new products, payments for shelf space and discounts to promote lower retail prices. Sales incentives and discounts also include support provided to our independent bottlers through funding of advertising and other marketing activities.
A number of our sales incentives, such as bottler funding to independent bottlers and customer volume rebates, are based on annual targets, and accruals are established during the year, as products are delivered, for the expected payout, which may occur after year-end once reconciled and settled. These accruals are based on contract terms and our historical experience with similar programs and require management judgment with respect to estimating customer and consumer participation and performance levels. Differences between estimated expense and actual incentive costs are normally insignificant and are recognized in earnings in the period such differences are determined. In addition, certain advertising and marketing costs are also based on annual targets and recognized during the year as incurred.
See Note 2 to our consolidated financial statements for further information on our revenue recognition and related policies, including total marketplace spending.
Goodwill and Other Intangible Assets
We sell products under a number of brand names, many of which were developed by us. Brand development costs are expensed as incurred. We also purchase brands and other intangible assets in acquisitions. In a business combination, the consideration is first assigned to identifiable assets and liabilities, including brands and other intangible assets, based on estimated fair values, with any excess recorded as goodwill. Determining fair value requires significant estimates and assumptions, including those related to the ongoing conflicts in Ukraine and the Middle East and a high interest rate and inflationary cost environment, based on an evaluation of a number of factors, such as marketplace participants, product life cycles, market share, consumer awareness, brand history and future expansion expectations, amount and timing of future cash flows and the discount rate applied to the cash flows.
We believe that a brand has an indefinite life if it has a history of strong revenue and cash flow
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performance and we have the intent and ability to support the brand with marketplace spending for the foreseeable future. If these indefinite-lived brand criteria are not met, brands are amortized over their expected useful lives, which generally range from 20 to 40 years. Determining the expected life of a brand requires management judgment and is based on an evaluation of a number of factors, including market share, consumer awareness, brand history, future expansion expectations and regulatory restrictions, as well as the macroeconomic environment of the countries in which the brand is sold.
In connection with previous acquisitions, we reacquired certain franchise rights which provided the exclusive and perpetual rights to manufacture and/or distribute beverages for sale in specified territories. In determining the useful life of these franchise rights, many factors were considered, including the pre-existing perpetual bottling arrangements, the indefinite period expected for these franchise rights to contribute to our future cash flows, as well as the lack of any factors that would limit the useful life of these franchise rights to us, including legal, regulatory, contractual, competitive, economic or other factors. Therefore, certain of these franchise rights are considered as indefinite-lived. Franchise rights that are not considered indefinite-lived are amortized over the remaining contractual period of the contract in which the right was granted.
Indefinite-lived intangible assets and goodwill are not amortized and, as a result, are assessed for impairment at least annually, using either a qualitative or quantitative approach. We perform this annual assessment during our third quarter, or more frequently if circumstances indicate that the carrying value may not be recoverable. Where we use the qualitative assessment, first we determine if, based on qualitative factors, it is more likely than not that an impairment exists. Factors considered include macroeconomic conditions (including those related to the ongoing conflicts in Ukraine and the Middle East and a high interest rate and inflationary cost environment), industry and competitive conditions, legal and regulatory environment, historical financial performance and significant changes in the brand or reporting unit. If the qualitative assessment indicates that it is more likely than not that an impairment exists, then a quantitative assessment is performed.
In the quantitative assessment for indefinite-lived intangible assets and goodwill, an assessment is performed to determine the fair value of the indefinite-lived intangible asset and the reporting unit, respectively. Estimated fair value is determined using discounted cash flows and requires an analysis of several estimates including future cash flows or income consistent with management’s strategic business plans, annual sales growth rates, perpetuity growth assumptions and the selection of assumptions underlying a discount rate (weighted-average cost of capital) based on market data available at the time. Significant management judgment is necessary to estimate the impact of competitive operating, macroeconomic and other factors (including those related to the ongoing conflicts in Ukraine and the Middle East and a high interest rate and inflationary cost environment) to estimate future levels of sales, operating profit or cash flows. All assumptions used in our impairment evaluations for indefinite-lived intangible assets and goodwill, such as forecasted growth rates (including perpetuity growth assumptions) and weighted-average cost of capital, are based on the best available market information and are consistent with our internal forecasts and operating plans. A deterioration in these assumptions could adversely impact our results. These assumptions could be adversely impacted by certain of the risks described in “Item 1A. Risk Factors” and “Our Business Risks.”
In 2023, we recorded $0.6 billion ($0.4 billion after-tax or $0.32 per share) of indefinite-lived intangible asset impairment charges related to the SodaStream brand and $0.3 billion ($0.3 billion after-tax or $0.22 per share) of goodwill impairment charges related to the SodaStream reporting unit in Europe. As a result, the carrying value of the SodaStream reporting unit as of December 30, 2023 is equal to its fair value and the SodaStream reporting unit is at a heightened risk of future goodwill impairment if certain assumptions and estimates were to change. For example, a mutually exclusive 100-basis-point increase in the discount rate and a 100-basis-point decrease in the perpetuity growth rate used to estimate the fair value of the
57
SodaStream reporting unit would result in an additional estimated impairment charge of approximately $0.2 billion and $0.1 billion, respectively. We will continue to monitor the performance of the SodaStream reporting unit, as well as all of our indefinite-lived intangible assets.
Amortizable intangible assets are only evaluated for impairment upon a significant change in the operating or macroeconomic environment. If an evaluation of the undiscounted future cash flows indicates impairment, the asset is written down to its estimated fair value, which is based on its discounted future cash flows.
See Notes 2 and 4 to our consolidated financial statements for further information.
Income Tax Expense and Accruals
Our annual tax rate is based on our income, statutory tax rates and tax structure and transactions, including transfer pricing arrangements, available to us in the various jurisdictions in which we operate. Significant judgment is required in determining our annual tax rate and in evaluating our tax positions. We establish reserves when, despite our belief that our tax return positions are fully supportable, we believe that certain positions are subject to challenge and that we likely will not succeed. We adjust these reserves, as well as the related interest, in light of changing facts and circumstances, such as the progress of a tax audit, new tax laws, relevant court cases or tax authority settlements. See “Item 1A. Risk Factors” for further discussion.
An estimated annual effective tax rate is applied to our quarterly operating results. In the event there is a significant or unusual item recognized in our quarterly operating results, the tax attributable to that item is separately calculated and recorded at the same time as that item. We consider the tax adjustments from the resolution of prior-year tax matters to be among such items.
Tax law requires items to be included in our tax returns at different times than the items are reflected in our consolidated financial statements. As a result, our annual tax rate reflected in our consolidated financial statements is different than that reported in our tax returns (our cash tax rate). Some of these differences are permanent, such as expenses that are not deductible in our tax return, and some differences reverse over time, such as depreciation expense. These temporary differences create deferred tax assets and liabilities. Deferred tax assets generally represent items that can be used as a tax deduction or credit in our tax returns in future years for which we have already recorded the tax benefit on our consolidated financial statements. We establish valuation allowances for our deferred tax assets if, based on the available evidence, it is not more likely than not that some portion or all of the deferred tax assets will be realized. Deferred tax liabilities generally represent tax expense recognized in our consolidated financial statements for which payment has been deferred, or expense for which we have already taken a deduction in our tax return but have not yet recognized as expense in our consolidated financial statements.
In 2023, our annual tax rate was 19.8% compared to 16.1% in 2022. See “Other Consolidated Results” for further information.
See Note 5 to our consolidated financial statements for further information.
Pension and Retiree Medical Plans
Our pension plans cover certain employees in the United States and certain international employees. Benefits are determined based on either years of service or a combination of years of service and earnings. Certain U.S. and Canada retirees are also eligible for medical and life insurance benefits (retiree medical) if they meet age and service requirements. Generally, our share of retiree medical costs is capped at specified dollar amounts, which vary based upon years of service, with retirees contributing the remainder of the cost. In addition, we have been phasing out certain subsidies of retiree medical benefits.
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See “Items Affecting Comparability” and Note 7 to our consolidated financial statements for information about changes and settlements within our pension plans.
Our Assumptions
The determination of pension and retiree medical expenses and obligations requires the use of assumptions to estimate the amount of benefits that employees earn while working, as well as the present value of those benefits. Annual pension and retiree medical expense amounts are principally based on four components: (1) the value of benefits earned by employees for working during the year (service cost), (2) the increase in the projected benefit obligation due to the passage of time (interest cost), and (3) other gains and losses as discussed in Note 7 to our consolidated financial statements, reduced by (4) the expected return on assets for our funded plans.
Significant assumptions used to measure our annual pension and retiree medical expenses include:
•certain employee-related demographic factors, such as turnover, retirement age and mortality;
•the expected rate of return on assets in our funded plans; and
•the spot rates along the yield curve used to determine service and interest costs and the present value of liabilities.
Certain assumptions reflect our historical experience and management’s best judgment regarding future expectations. All actuarial assumptions are reviewed annually, except in the case of an interim remeasurement due to a significant event such as a curtailment or settlement. Due to the significant management judgment involved, these assumptions could have a material impact on the measurement of our pension and retiree medical expenses and obligations.
At each measurement date, the discount rates are based on interest rates for high-quality, long-term corporate debt securities with maturities comparable to those of our liabilities. Our U.S. obligation and pension and retiree medical expense is based on the discount rates determined using the Mercer Above Mean Curve. This curve includes bonds that closely match the timing and amount of our expected benefit payments and reflects the portfolio of investments we would consider to settle our liabilities.
See Note 7 to our consolidated financial statements for information about the expected rate of return on plan assets and our plans’ investment strategy. Although we review our expected long-term rates of return on an annual basis, our asset returns in a given year do not significantly influence our evaluation of long-term rates of return.
Weighted-average assumptions for pension and retiree medical expense are as follows:
| 2024 | 2023 | 2022 | |||||||||||||||
| Pension | |||||||||||||||||
Service cost discount rate (a) | 5.4 | % | 5.5 | % | 3.2 | % | |||||||||||
Interest cost discount rate (a) | 5.1 | % | 5.4 | % | 2.9 | % | |||||||||||
Expected rate of return on plan assets (a) | 7.0 | % | 7.0 | % | 6.3 | % | |||||||||||
| Retiree medical | |||||||||||||||||
| Service cost discount rate | 5.1 | % | 5.4 | % | 2.8 | % | |||||||||||
| Interest cost discount rate | 5.0 | % | 5.3 | % | 2.1 | % | |||||||||||
| Expected rate of return on plan assets | 7.1 | % | 7.1 | % | 5.7 | % | |||||||||||
(a)2022 rates reflect remeasurement of a U.S. qualified defined benefit pension plan in the second quarter of 2022.
We expect our pension and retiree medical expense to remain consistent in 2024 primarily reflecting the change in demographic experience, offset by the recognition of gains on plan assets and impact of discretionary plan contributions.
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Sensitivity of Assumptions
A decrease in each of the collective discount rates or in the expected rate of return assumptions would increase expense for our benefit plans. A 100-basis-point decrease in each of the above discount rates and expected rate of return assumptions would individually increase 2024 pre-tax pension and retiree medical expense as follows:
| Assumption | Amount | |||||||
Discount rates used in the calculation of expense | $ | 83 | ||||||
| Expected rate of return | $ | 155 | ||||||
Funding
We make contributions to pension trusts that provide plan benefits for certain pension plans. These contributions are made in accordance with applicable tax regulations that provide for current tax deductions for our contributions and taxation to the employee only upon receipt of plan benefits. Generally, we do not fund our pension plans when our contributions would not be currently tax deductible. As our retiree medical plans are not subject to regulatory funding requirements, we generally fund these plans on a pay-as-you-go basis, although we periodically review available options to make additional contributions toward these benefits.
We made a discretionary contribution of $150 million to a U.S. qualified defined benefit plan in January 2024.
Our pension and retiree medical plan contributions are subject to change as a result of many factors, such as changes in interest rates, deviations between actual and expected asset returns and changes in tax or other benefit laws. We regularly evaluate different opportunities to reduce risk and volatility associated with our pension and retiree medical plans. See Note 7 to our consolidated financial statements for our past and expected contributions and estimated future benefit payments.
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Consolidated Statement of Income
PepsiCo, Inc. and Subsidiaries
Fiscal years ended December 30, 2023, December 31, 2022 and December 25, 2021
(in millions except per share amounts)
| 2023 | 2022 | 2021 | |||||||||||||||
| Net Revenue | $ | $ | $ | ||||||||||||||
| Cost of sales | |||||||||||||||||
| Gross profit | |||||||||||||||||
| Selling, general and administrative expenses | |||||||||||||||||
| Gain associated with the Juice Transaction (see Note 13) | ( | ||||||||||||||||
| Impairment of intangible assets (see Notes 1 and 4) | |||||||||||||||||
| Operating Profit | |||||||||||||||||
| Other pension and retiree medical benefits income | |||||||||||||||||
| Net interest expense and other | ( | ( | ( | ||||||||||||||
| Income before income taxes | |||||||||||||||||
| Provision for income taxes | |||||||||||||||||
| Net income | |||||||||||||||||
| Less: Net income attributable to noncontrolling interests | |||||||||||||||||
| Net Income Attributable to PepsiCo | $ | $ | $ | ||||||||||||||
| Net Income Attributable to PepsiCo per Common Share | |||||||||||||||||
| Basic | $ | $ | $ | ||||||||||||||
| Diluted | $ | $ | $ | ||||||||||||||
| Weighted-average common shares outstanding | |||||||||||||||||
| Basic | |||||||||||||||||
| Diluted | |||||||||||||||||
See accompanying notes to the consolidated financial statements.
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Consolidated Statement of Comprehensive Income
PepsiCo, Inc. and Subsidiaries
Fiscal years ended December 30, 2023, December 31, 2022 and December 25, 2021
(in millions)
| 2023 | 2022 | 2021 | |||||||||||||||
| Net income | $ | $ | $ | ||||||||||||||
| Other comprehensive (loss)/income, net of taxes: | |||||||||||||||||
| Net currency translation adjustment | ( | ( | ( | ||||||||||||||
| Net change on cash flow hedges | ( | ( | |||||||||||||||
| Net pension and retiree medical adjustments | ( | ||||||||||||||||
| Net change on available-for-sale debt securities and other | |||||||||||||||||
| ( | ( | ||||||||||||||||
| Comprehensive income | |||||||||||||||||
| Less: Comprehensive income attributable to noncontrolling interests | |||||||||||||||||
| Comprehensive Income Attributable to PepsiCo | $ | $ | $ | ||||||||||||||
See accompanying notes to the consolidated financial statements.
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Consolidated Statement of Cash Flows
PepsiCo, Inc. and Subsidiaries
Fiscal years ended December 30, 2023, December 31, 2022 and December 25, 2021
(in millions)
| 2023 | 2022 | 2021 | |||||||||||||||
| Operating Activities | |||||||||||||||||
| Net income | $ | $ | $ | ||||||||||||||
| Depreciation and amortization | |||||||||||||||||
| Gain associated with the Juice Transaction | ( | ||||||||||||||||
| Impairment and other charges | |||||||||||||||||
| Product recall-related impact | |||||||||||||||||
| Operating lease right-of-use asset amortization | |||||||||||||||||
| Share-based compensation expense | |||||||||||||||||
| Restructuring and impairment charges | |||||||||||||||||
| Cash payments for restructuring charges | ( | ( | ( | ||||||||||||||
| Acquisition and divestiture-related charges | ( | ||||||||||||||||
| Cash payments for acquisition and divestiture-related charges | ( | ( | ( | ||||||||||||||
| Pension and retiree medical plan expenses | |||||||||||||||||
| Pension and retiree medical plan contributions | ( | ( | ( | ||||||||||||||
| Deferred income taxes and other tax charges and credits | ( | ( | |||||||||||||||
| Tax expense related to the TCJ Act | |||||||||||||||||
| Tax payments related to the TCJ Act | ( | ( | ( | ||||||||||||||
| Change in assets and liabilities: | |||||||||||||||||
| Accounts and notes receivable | ( | ( | ( | ||||||||||||||
| Inventories | ( | ( | ( | ||||||||||||||
| Prepaid expenses and other current assets | ( | ||||||||||||||||
| Accounts payable and other current liabilities | |||||||||||||||||
| Income taxes payable | |||||||||||||||||
| Other, net | ( | ||||||||||||||||
| Net Cash Provided by Operating Activities | |||||||||||||||||
| Investing Activities | |||||||||||||||||
| Capital spending | ( | ( | ( | ||||||||||||||
| Sales of property, plant and equipment | |||||||||||||||||
| Acquisitions, net of cash acquired, investments in noncontrolled affiliates and purchases of intangible and other assets | ( | ( | ( | ||||||||||||||
| Proceeds associated with the Juice Transaction | |||||||||||||||||
| Other divestitures, sales of investments in noncontrolled affiliates and other assets | |||||||||||||||||
| Short-term investments, by original maturity: | |||||||||||||||||
| More than three months - purchases | ( | ( | |||||||||||||||
| More than three months - maturities | |||||||||||||||||
| More than three months - sales | |||||||||||||||||
| Three months or less, net | ( | ||||||||||||||||
| Other investing, net | |||||||||||||||||
| Net Cash Used for Investing Activities | ( | ( | ( | ||||||||||||||
(Continued on following page)
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Consolidated Statement of Cash Flows (continued)
PepsiCo, Inc. and Subsidiaries
Fiscal years ended December 30, 2023, December 31, 2022 and December 25, 2021
(in millions)
| 2023 | 2022 | 2021 | |||||||||||||||
| Financing Activities | |||||||||||||||||
| Proceeds from issuances of long-term debt | $ | $ | $ | ||||||||||||||
| Payments of long-term debt | ( | ( | ( | ||||||||||||||
| Debt redemptions/cash tender offers | ( | ( | |||||||||||||||
| Short-term borrowings, by original maturity: | |||||||||||||||||
| More than three months - proceeds | |||||||||||||||||
| More than three months - payments | ( | ( | ( | ||||||||||||||
| Three months or less, net | ( | ( | |||||||||||||||
Payments of acquisition-related contingent consideration | ( | ||||||||||||||||
| Cash dividends paid | ( | ( | ( | ||||||||||||||
| Share repurchases - common | ( | ( | ( | ||||||||||||||
| Proceeds from exercises of stock options | |||||||||||||||||
| Withholding tax payments on restricted stock units (RSUs) and performance stock units (PSUs) converted | ( | ( | ( | ||||||||||||||
| Other financing | ( | ( | ( | ||||||||||||||
| Net Cash Used for Financing Activities | ( | ( | ( | ||||||||||||||
| Effect of exchange rate changes on cash and cash equivalents and restricted cash | ( | ( | ( | ||||||||||||||
| Net Increase/(Decrease) in Cash and Cash Equivalents and Restricted Cash | ( | ( | |||||||||||||||
| Cash and Cash Equivalents and Restricted Cash, Beginning of Year | |||||||||||||||||
| Cash and Cash Equivalents and Restricted Cash, End of Year | $ | $ | $ | ||||||||||||||
See accompanying notes to the consolidated financial statements.
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Consolidated Balance Sheet
PepsiCo, Inc. and Subsidiaries
December 30, 2023 and December 31, 2022
(in millions except per share amounts)
| 2023 | 2022 | ||||||||||
| ASSETS | |||||||||||
| Current Assets | |||||||||||
Cash and cash equivalents | $ | $ | |||||||||
Short-term investments | |||||||||||
Accounts and notes receivable, net | |||||||||||
| Inventories | |||||||||||
| Raw materials and packaging | |||||||||||
| Work-in-process | |||||||||||
| Finished goods | |||||||||||
| Prepaid expenses and other current assets | |||||||||||
Total Current Assets | |||||||||||
| Property, Plant and Equipment, net | |||||||||||
| Amortizable Intangible Assets, net | |||||||||||
| Goodwill | |||||||||||
| Other Indefinite-Lived Intangible Assets | |||||||||||
| Investments in Noncontrolled Affiliates | |||||||||||
| Deferred Income Taxes | |||||||||||
| Other Assets | |||||||||||
Total Assets | $ | $ | |||||||||
| LIABILITIES AND EQUITY | |||||||||||
| Current Liabilities | |||||||||||
Short-term debt obligations | $ | $ | |||||||||
Accounts payable and other current liabilities | |||||||||||
Total Current Liabilities | |||||||||||
| Long-Term Debt Obligations | |||||||||||
| Deferred Income Taxes | |||||||||||
| Other Liabilities | |||||||||||
Total Liabilities | |||||||||||
| Commitments and contingencies | |||||||||||
| PepsiCo Common Shareholders’ Equity | |||||||||||
Common stock, par value 12/3¢ per share (authorized | |||||||||||
Capital in excess of par value | |||||||||||
Retained earnings | |||||||||||
Accumulated other comprehensive loss | ( | ( | |||||||||
Repurchased common stock, in excess of par value ( | ( | ( | |||||||||
Total PepsiCo Common Shareholders’ Equity | |||||||||||
| Noncontrolling interests | |||||||||||
Total Equity | |||||||||||
| Total Liabilities and Equity | $ | $ | |||||||||
See accompanying notes to the consolidated financial statements.
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Consolidated Statement of Equity
PepsiCo, Inc. and Subsidiaries
Fiscal years ended December 30, 2023, December 31, 2022 and December 25, 2021
(in millions except per share amounts)
| 2023 | 2022 | 2021 | |||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | ||||||||||||||||||||||||||||||
| Common Stock | |||||||||||||||||||||||||||||||||||
| Balance, beginning of year | $ | $ | $ | ||||||||||||||||||||||||||||||||
| Change in repurchased common stock | ( | ( | |||||||||||||||||||||||||||||||||
| Balance, end of year | |||||||||||||||||||||||||||||||||||
| Capital in Excess of Par Value | |||||||||||||||||||||||||||||||||||
| Balance, beginning of year | |||||||||||||||||||||||||||||||||||
| Share-based compensation expense | |||||||||||||||||||||||||||||||||||
| Stock option exercises, RSUs and PSUs converted | ( | ( | ( | ||||||||||||||||||||||||||||||||
| Withholding tax on RSUs and PSUs converted | ( | ( | ( | ||||||||||||||||||||||||||||||||
| Other | ( | ( | ( | ||||||||||||||||||||||||||||||||
| Balance, end of year | |||||||||||||||||||||||||||||||||||
| Retained Earnings | |||||||||||||||||||||||||||||||||||
| Balance, beginning of year | |||||||||||||||||||||||||||||||||||
| Net income attributable to PepsiCo | |||||||||||||||||||||||||||||||||||
Cash dividends declared - common (a) | ( | ( | ( | ||||||||||||||||||||||||||||||||
| Balance, end of year | |||||||||||||||||||||||||||||||||||
| Accumulated Other Comprehensive Loss | |||||||||||||||||||||||||||||||||||
| Balance, beginning of year | ( | ( | ( | ||||||||||||||||||||||||||||||||
| Other comprehensive (loss)/income attributable to PepsiCo | ( | ( | |||||||||||||||||||||||||||||||||
| Balance, end of year | ( | ( | ( | ||||||||||||||||||||||||||||||||
| Repurchased Common Stock | |||||||||||||||||||||||||||||||||||
| Balance, beginning of year | ( | ( | ( | ( | ( | ( | |||||||||||||||||||||||||||||
| Share repurchases | ( | ( | ( | ( | ( | ( | |||||||||||||||||||||||||||||
| Stock option exercises, RSUs and PSUs converted | |||||||||||||||||||||||||||||||||||
| Other | |||||||||||||||||||||||||||||||||||
| Balance, end of year | ( | ( | ( | ( | ( | ( | |||||||||||||||||||||||||||||
| Total PepsiCo Common Shareholders’ Equity | |||||||||||||||||||||||||||||||||||
| Noncontrolling Interests | |||||||||||||||||||||||||||||||||||
| Balance, beginning of year | |||||||||||||||||||||||||||||||||||
| Net income attributable to noncontrolling interests | |||||||||||||||||||||||||||||||||||
| Distributions to noncontrolling interests | ( | ( | ( | ||||||||||||||||||||||||||||||||
| Acquisitions | |||||||||||||||||||||||||||||||||||
| Other, net | ( | ( | ( | ||||||||||||||||||||||||||||||||
| Balance, end of year | |||||||||||||||||||||||||||||||||||
| Total Equity | $ | $ | $ | ||||||||||||||||||||||||||||||||
(a) Cash dividends declared per common share were $4.9450 , $4.5250 and $4.2475 for 2023, 2022 and 2021, respectively.
See accompanying notes to the consolidated financial statements.
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Notes to the Consolidated Financial Statements
Note 1 — Basis of Presentation and Our Divisions
Basis of Presentation
The accompanying consolidated financial statements have been prepared in accordance with GAAP and include the consolidated accounts of PepsiCo, Inc. and the affiliates that we control. In addition, we include our share of the results of certain other affiliates using the equity method based on our economic ownership interest, our ability to exercise significant influence over the operating or financial decisions of these affiliates or our ability to direct their economic resources. We do not control these other affiliates, as our ownership in these other affiliates is generally 50 % or less. Intercompany balances and transactions are eliminated. As a result of exchange restrictions and other operating restrictions, we do not have control over our Venezuelan subsidiaries. As such, our Venezuelan subsidiaries are not included within our consolidated financial results for any period presented.
Raw materials, direct labor and plant overhead, as well as purchasing and receiving costs, costs directly related to production planning, inspection costs and raw materials handling facilities, are included in cost of sales. The costs of moving, storing and delivering finished product, including merchandising activities, are included in selling, general and administrative expenses.
The preparation of our consolidated financial statements requires us to make estimates and assumptions that affect reported amounts of assets, liabilities, revenues, expenses and disclosure of contingent assets and liabilities. Estimates are used in determining, among other items, sales incentives accruals, tax reserves, share-based compensation, pension and retiree medical accruals, amounts and useful lives for intangible assets and future cash flows associated with impairment testing for indefinite-lived intangible assets, goodwill and other long-lived assets. We evaluate our estimates on an ongoing basis using our historical experience, as well as other factors we believe appropriate under the circumstances, such as current economic conditions, and adjust or revise our estimates as circumstances change. Additionally, the business and economic uncertainty resulting from the ongoing conflicts in Ukraine and the Middle East and the high interest rate and inflationary cost environment has made such estimates and assumptions more difficult to calculate. As future events and their effect cannot be determined with precision, actual results could differ significantly from those estimates.
Our fiscal year ends on the last Saturday of each December, resulting in a 53rd reporting week every five or six years, including in our 2022 financial results. While our North America financial results are reported on a weekly calendar basis, substantially all of our international operations reported on a monthly calendar basis prior to the fourth quarter of 2021. Beginning in the fourth quarter of 2021, all of our international operations reported on a monthly calendar basis. This change did not have a material impact on our consolidated financial statements. The following chart details our quarterly reporting schedule:
| Quarter | United States and Canada | International | ||||||||||||
| First Quarter | 12 weeks | |||||||||||||
| Second Quarter | 12 weeks | |||||||||||||
| Third Quarter | 12 weeks | |||||||||||||
| Fourth Quarter | 16 weeks (17 weeks for 2022) | |||||||||||||
Unless otherwise noted, tabular dollars are in millions, except per share amounts. All per share amounts reflect common per share amounts, assume dilution unless otherwise noted, and are based on unrounded amounts. Certain reclassifications were made to the prior year’s consolidated financial statements to conform to the current year presentation.
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Our Divisions
We are organized into seven reportable segments (also referred to as divisions), as follows:
1)Frito-Lay North America (FLNA), which includes our branded convenient food businesses in the United States and Canada;
2)Quaker Foods North America (QFNA), which includes our branded convenient food businesses, such as cereal, rice, pasta and other branded food, in the United States and Canada;
3)PepsiCo Beverages North America (PBNA), which includes our beverage businesses in the United States and Canada;
4)Latin America (LatAm), which includes all of our beverage and convenient food businesses in Latin America;
5)Europe, which includes all of our beverage and convenient food businesses in Europe;
6)Africa, Middle East and South Asia (AMESA), which includes all of our beverage and convenient food businesses in Africa, the Middle East and South Asia; and
7)Asia Pacific, Australia and New Zealand and China region (APAC), which includes all of our beverage and convenient food businesses in Asia Pacific, Australia and New Zealand, and China region.
Through our operations, authorized bottlers, contract manufacturers and other third parties, we make, market, distribute and sell a wide variety of beverages and convenient foods, serving customers and consumers in more than 200 countries and territories with our largest operations in the United States, Mexico, Canada, Russia, China, the United Kingdom, Brazil and South Africa.
The accounting policies for the divisions are the same as those described in Note 2, except for the following allocation methodologies:
•share-based compensation expense;
•pension and retiree medical expense; and
•derivatives.
Share-Based Compensation Expense
Our divisions are held accountable for share-based compensation expense and, therefore, this expense is allocated to our divisions as an incremental employee compensation cost.
The allocation of share-based compensation expense of each division is as follows:
| 2023 | 2022 | 2021 | |||||||||||||||
| FLNA | % | % | % | ||||||||||||||
| QFNA | % | % | % | ||||||||||||||
| PBNA | % | % | % | ||||||||||||||
| LatAm | % | % | % | ||||||||||||||
| Europe | % | % | % | ||||||||||||||
| AMESA | % | % | % | ||||||||||||||
| APAC | % | % | % | ||||||||||||||
| Corporate unallocated expenses | % | % | % | ||||||||||||||
The expense allocated to our divisions excludes any impact of changes in our assumptions during the year which reflect market conditions over which division management has no control. Therefore, any variances between allocated expense and our actual expense are recognized in corporate unallocated expenses.
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Pension and Retiree Medical Expense
Pension and retiree medical service costs measured at fixed discount rates are reflected in division results. The variance between the fixed discount rate used to determine the service cost reflected in division results and the discount rate as disclosed in Note 7 is reflected in corporate unallocated expenses.
Derivatives
We centrally manage commodity derivatives on behalf of our divisions. These commodity derivatives include agricultural products, energy and metals. Commodity derivatives that do not qualify for hedge accounting treatment are marked to market each period with the resulting gains and losses recorded in corporate unallocated expenses as either cost of sales or selling, general and administrative expenses, depending on the underlying commodity. These gains and losses are subsequently reflected in division results when the divisions recognize the cost of the underlying commodity in operating profit. Therefore, the divisions realize the economic effects of the derivative without experiencing any resulting mark-to-market volatility, which remains in corporate unallocated expenses. These derivatives hedge underlying commodity price risk and were not entered into for trading or speculative purposes.
Net Revenue and Operating Profit/(Loss)
Net revenue and operating profit/(loss) of each division are as follows:
| Net Revenue | Operating Profit/(Loss) | ||||||||||||||||||||||||||||||||||
| 2023 | 2022 | 2021 | 2023(a) | 2022(a) | 2021 | ||||||||||||||||||||||||||||||
| FLNA | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
QFNA (b) | |||||||||||||||||||||||||||||||||||
PBNA (c) | |||||||||||||||||||||||||||||||||||
| LatAm | |||||||||||||||||||||||||||||||||||
Europe (c) | ( | ||||||||||||||||||||||||||||||||||
| AMESA | |||||||||||||||||||||||||||||||||||
| APAC | |||||||||||||||||||||||||||||||||||
| Total division | |||||||||||||||||||||||||||||||||||
| Corporate unallocated expenses | ( | ( | ( | ||||||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
(a)See below for impairment and other charges taken related to the Russia-Ukraine conflict, brand portfolio impairment and other impairment.
(b)In 2023, operating profit included a pre-tax charge of $136 million ($104 million after-tax or $0.07 per share) in cost of sales for product returns, inventory write-offs and customer and consumer-related costs associated with the Quaker Recall.
(c)In 2022, we recorded a gain of $3,029 million and $292 million in our PBNA and Europe divisions, respectively, associated with the Juice Transaction. The total after-tax amount was $2,888 million or $2.08 per share. See Note 13 for further information.
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Disaggregation of Net Revenue
Our primary performance obligation is the distribution and sales of beverage and convenient food products to our customers. The following table reflects the percentage of net revenue generated between our beverage business and our convenient food business for each of our international divisions, as well as our consolidated net revenue:
| 2023 | 2022 | 2021 | |||||||||||||||||||||||||||||||||
Beverages(a) | Convenient Foods | Beverages(a) | Convenient Foods | Beverages(a) | Convenient Foods | ||||||||||||||||||||||||||||||
| LatAm | % | % | % | % | % | % | |||||||||||||||||||||||||||||
| Europe | % | % | % | % | % | % | |||||||||||||||||||||||||||||
| AMESA | % | % | % | % | % | % | |||||||||||||||||||||||||||||
| APAC | % | % | % | % | % | % | |||||||||||||||||||||||||||||
| PepsiCo | % | % | % | % | % | % | |||||||||||||||||||||||||||||
(a)Beverage revenue from company-owned bottlers, which primarily includes our consolidated bottling operations in our PBNA and Europe divisions, is 35 %, 37 % and 40 % of our consolidated net revenue in 2023, 2022 and 2021, respectively. Generally, our finished goods beverage operations produce higher net revenue, but lower operating margins as compared to concentrate sold to authorized bottling partners for the manufacture of finished goods beverages.
Impairment and Other Charges
We recognized Russia-Ukraine conflict charges, brand portfolio impairment charges and other impairment charges as described below.
A summary of pre-tax charges taken in 2022 in our Europe division as a result of the Russia-Ukraine conflict is as follows:
| Cost of sales | Selling, general and administrative expenses | Impairment of intangible assets(a) | Total | ||||||||||||||||||||
| Impairment charges related to intangible assets | $ | $ | $ | $ | |||||||||||||||||||
| Impairment charges related to property, plant and equipment | |||||||||||||||||||||||
| Allowance for expected credit losses | |||||||||||||||||||||||
| Allowance for inventory write downs | |||||||||||||||||||||||
| Other | |||||||||||||||||||||||
| Total | $ | $ | $ | $ | |||||||||||||||||||
| After-tax amount | $ | ||||||||||||||||||||||
| Impact on net income attributable to PepsiCo per common share | $ | ( | |||||||||||||||||||||
(a)See Note 4 for further information. For information on our policies for indefinite-lived intangible assets, see Note 2.
In 2023, a pre-tax credit of $7 million ($7 million after-tax or $0.01 per share) was recorded in our Europe division, primarily in selling, general and administrative expenses, representing adjustments for changes in estimates of previously recorded amounts. In addition, a tax benefit of $68 million ($0.05 per share) was recorded in our Europe division related to the impairment of certain consolidated investments.
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A summary of pre-tax charges taken in 2022 as a result of our decision to reposition or discontinue the sale/distribution of certain brands and to sell an investment is as follows:
| Cost of sales | Selling, general and administrative expenses | Impairment of intangible assets(a) | Total | |||||||||||||||||||||||
| PBNA | $ | $ | $ | $ | Impairment and other charges associated with distribution rights and inventory due to the termination of Bang energy drinks distribution agreement | |||||||||||||||||||||
| LatAm | Loss on sale and impairment of intangible assets related to the sale of certain non-strategic brands | |||||||||||||||||||||||||
| Europe | Primarily impairment of intangible assets related to the discontinuation or repositioning of certain juice and dairy brands in Russia | |||||||||||||||||||||||||
| AMESA | Primarily impairment of investment, property, plant and equipment and intangible assets related to the sale or discontinuation of non-strategic investment and brands | |||||||||||||||||||||||||
| APAC | Impairment of property, plant and equipment related to the discontinuation of a non-strategic brand in China | |||||||||||||||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||||||||||||
| After-tax amount | $ | |||||||||||||||||||||||||
| Impact on net income attributable to PepsiCo per common share | $ | ( | ||||||||||||||||||||||||
(a)See Note 4 for further information. For information on our policies for indefinite-lived intangible assets, see Note 2.
In 2023, a pre-tax credit of $13 million ($13 million after-tax or $0.01 per share) was recorded in our AMESA division, with $9 million in selling, general and administrative expenses and $4 million in cost of sales. In addition, a pre-tax charge of $2 million ($1 million after-tax with a nominal amount per share) was recorded in our LatAm division in selling, general and administrative expenses. Both of these amounts represent adjustments for changes in estimates of previously recorded amounts.
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A summary of pre-tax impairment charges taken as a result of our quantitative assessments of certain of our indefinite-lived intangible assets and related to our investment in TBG is as follows:
| Other impairment charges | ||||||||||||||||||||||||||
| 2023 | 2022 | |||||||||||||||||||||||||
| Selling, general and administrative expenses | Impairment of intangible assets(a) | Total | Impairment of intangible assets(a) | |||||||||||||||||||||||
| FLNA | $ | $ | $ | $ | Related to a baked fruit convenient food brand | |||||||||||||||||||||
| PBNA | Includes our proportionate share of TBG’s indefinite-lived intangible assets impairment and other-than-temporary impairment of our investment in TBG | |||||||||||||||||||||||||
| Europe | Related to the SodaStream brand and goodwill | |||||||||||||||||||||||||
| AMESA | Related to brands from the Pioneer Foods acquisition | |||||||||||||||||||||||||
| APAC | Related to the Be & Cheery brand | |||||||||||||||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||||||||||||
| After-tax amount | $ | $ | ||||||||||||||||||||||||
| Impact on net income attributable to PepsiCo per common share | $ | ( | $ | ( | ||||||||||||||||||||||
(a)See Note 4 for further information. For information on our policies for indefinite-lived intangible assets, see Note 2.
COVID-19 Charges
Operating profit includes certain pre-tax charges taken as a result of the COVID-19 pandemic related to incremental employee compensation costs, such as certain leave benefits and labor costs, employee protection costs, allowances for expected credit losses and upfront payments to customers and their related adjustments for changes in estimates as conditions improve. These pre-tax charges were not significant in 2023. In 2022 and 2021, these pre-tax charges by division were as follows:
| COVID-19 charges | |||||||||||
| 2022 | 2021 | ||||||||||
| FLNA | $ | $ | |||||||||
| QFNA | |||||||||||
PBNA (a) | ( | ||||||||||
| LatAm | |||||||||||
| Europe | |||||||||||
| AMESA | |||||||||||
| APAC | |||||||||||
| Total | $ | $ | |||||||||
(a)Income amount primarily relates to adjustments for changes in estimates of allowances for expected credit losses and upfront payments to customers, due to improved projected default rates and lower at-risk balances.
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Corporate Unallocated Expenses
Corporate unallocated expenses include costs of our corporate headquarters, centrally managed initiatives such as commodity derivative gains and losses, foreign exchange transaction gains and losses, our ongoing business transformation initiatives, unallocated research and development costs, unallocated insurance and benefit programs, tax-related contingent consideration, certain acquisition and divestiture-related charges, certain gains and losses on equity investments, as well as certain other items.
Other Division Information
Total assets and capital spending of each division are as follows:
| Total Assets | Capital Spending | ||||||||||||||||||||||||||||
| 2023 | 2022 | 2023 | 2022 | 2021 | |||||||||||||||||||||||||
| FLNA | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| QFNA | |||||||||||||||||||||||||||||
| PBNA | |||||||||||||||||||||||||||||
| LatAm | |||||||||||||||||||||||||||||
| Europe | |||||||||||||||||||||||||||||
| AMESA | |||||||||||||||||||||||||||||
| APAC | |||||||||||||||||||||||||||||
| Total division | |||||||||||||||||||||||||||||
Corporate (a) | |||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
Amortization of intangible assets and depreciation and other amortization of each division are as follows:
| Amortization of Intangible Assets | Depreciation and Other Amortization | ||||||||||||||||||||||||||||||||||
| 2023 | 2022 | 2021 | 2023 | 2022 | 2021 | ||||||||||||||||||||||||||||||
| FLNA | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
| QFNA | |||||||||||||||||||||||||||||||||||
| PBNA | |||||||||||||||||||||||||||||||||||
| LatAm | |||||||||||||||||||||||||||||||||||
| Europe | |||||||||||||||||||||||||||||||||||
| AMESA | |||||||||||||||||||||||||||||||||||
| APAC | |||||||||||||||||||||||||||||||||||
| Total division | |||||||||||||||||||||||||||||||||||
| Corporate | |||||||||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
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Net revenue and long-lived assets by country are as follows:
| Net Revenue | Long-Lived Assets(a) | ||||||||||||||||||||||||||||
| 2023 | 2022 | 2021 | 2023 | 2022 | |||||||||||||||||||||||||
| United States | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Mexico | |||||||||||||||||||||||||||||
| Canada | |||||||||||||||||||||||||||||
| Russia | |||||||||||||||||||||||||||||
| China | |||||||||||||||||||||||||||||
| United Kingdom | |||||||||||||||||||||||||||||
| Brazil | |||||||||||||||||||||||||||||
| South Africa | |||||||||||||||||||||||||||||
| All other countries | |||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
(a)Long-lived assets represent property, plant and equipment, indefinite-lived intangible assets, amortizable intangible assets, investments in noncontrolled affiliates and other investments included in other assets. See Notes 2 and 15 for further information on property, plant and equipment. See Notes 2 and 4 for further information on goodwill and other intangible assets. See Notes 9 and 15 for further information on other assets. These assets are reported in the country where they are primarily used.
Note 2 — Our Significant Accounting Policies
Revenue Recognition
We recognize revenue when our performance obligation is satisfied. Our primary performance obligation (the distribution and sales of beverage and convenient food products) is satisfied upon the shipment or delivery of products to our customers, which is also when control is transferred. Merchandising activities are performed after a customer obtains control of the product, are accounted for as fulfillment of our performance obligation to ship or deliver product to our customers and are recorded in selling, general and administrative expenses. Merchandising activities are immaterial in the context of our contracts. In addition, we exclude from net revenue all sales, use, value-added and certain excise taxes assessed by government authorities on revenue producing transactions.
The transfer of control of products to our customers is typically based on written sales terms that generally do not allow for a right of return, except in the instance of a product recall or other limited circumstances that may allow for product returns. Our policy for DSD, including certain chilled products, is to remove and replace damaged and out-of-date products from store shelves to ensure that consumers receive the product quality and freshness they expect. Similarly, our policy for certain warehouse-distributed products is to replace damaged and out-of-date products. As a result, we record reserves, based on estimates, for product recall, anticipated damaged and out-of-date products.
Our products are sold for cash or on credit terms. Our credit terms, which are established in accordance with local and industry practices, typically require payment within 30 days of delivery in the United States, and generally within 30 to 90 days internationally, and may allow discounts for early payment.
We estimate and reserve for our expected credit loss exposure based on our experience with past due accounts and collectibility, write-off history, the aging of accounts receivable, our analysis of customer data, and forward-looking information (including the expected impact of a high interest rate and inflationary cost environment), leveraging estimates of creditworthiness and projections of default and recovery rates for certain of our customers.
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Total Marketplace Spending
We offer sales incentives and discounts through various programs to customers and consumers. Total marketplace spending includes sales incentives, discounts, advertising and other marketing activities. Sales incentives and discounts are primarily accounted for as a reduction of revenue and include payments to customers for performing activities on our behalf, such as payments for in-store displays, payments to gain distribution of new products, payments for shelf space and discounts to promote lower retail prices. Sales incentives and discounts also include support provided to our independent bottlers through funding of advertising and other marketing activities.
A number of our sales incentives, such as bottler funding to independent bottlers and customer volume rebates, are based on annual targets, and accruals are established during the year, as products are delivered, for the expected payout, which may occur after year-end once reconciled and settled. These accruals are based on contract terms and our historical experience with similar programs and require management judgment with respect to estimating customer and consumer participation and performance levels. Differences between estimated expense and actual incentive costs are normally insignificant and are recognized in earnings in the period such differences are determined. In addition, certain advertising and marketing costs are also based on annual targets and recognized during the year as incurred.
The terms of most of our incentive arrangements do not exceed one year and, therefore, do not require highly uncertain long-term estimates. Certain arrangements, such as fountain pouring rights, may extend beyond one year. Upfront payments to customers under these arrangements are recognized over the shorter of the economic or contractual life, primarily as a reduction of revenue, and the remaining balances of $228 million as of December 30, 2023 and $242 million as of December 31, 2022 are included in prepaid expenses and other current assets and other assets on our balance sheet.
For interim reporting, our policy is to allocate our forecasted full-year sales incentives for most of our programs to each of our interim reporting periods in the same year that benefits from the programs. The allocation methodology is based on our forecasted sales incentives for the full year and the proportion of each interim period’s actual gross revenue or volume, as applicable, to our forecasted annual gross revenue or volume, as applicable. Based on our review of the forecasts at each interim period, any changes in estimates and the related allocation of sales incentives are recognized beginning in the interim period that they are identified. In addition, we apply a similar allocation methodology for interim reporting purposes for certain advertising and other marketing activities. Our annual consolidated financial statements are not impacted by this interim allocation methodology.
Advertising and other marketing activities, reported as selling, general and administrative expenses, totaled $5.7 billion in 2023, $5.2 billion in 2022 and $5.1 billion in 2021, including advertising expenses of $3.8 billion in 2023 and $3.5
•media and personal service prepayments;
•promotional materials in inventory; and
•production costs of future media advertising.
Deferred advertising costs of $67 million and $40 million as of December 30, 2023 and December 31, 2022, respectively, are classified as prepaid expenses and other current assets on our balance sheet.
Distribution Costs
Distribution costs, including the costs of shipping and handling activities, which include certain merchandising activities, are reported as selling, general and administrative expenses. Shipping and handling expenses were $15.4 billion in 2023, $15.0 billion in 2022 and $13.7 billion in 2021.
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Software Costs
We capitalize certain computer software and software development costs incurred in connection with developing or obtaining computer software for internal use when both the preliminary project stage is completed and it is probable that the software will be used as intended. Capitalized software costs include (1) external direct costs of materials and services utilized in developing or obtaining computer software, (2) compensation and related benefits for employees who are directly associated with the software projects and (3) interest costs incurred while developing internal-use computer software. Capitalized software costs are included in property, plant and equipment on our balance sheet and amortized on a straight-line basis when placed into service over the estimated useful lives of the software, which approximate to 10 years. Software amortization totaled $159 million in 2023, $123 million in 2022 and $135 million in 2021. Net capitalized software and development costs were $1.4 billion and $1.1 billion as of December 30, 2023 and December 31, 2022, respectively.
Commitments and Contingencies
We are subject to various claims and contingencies related to lawsuits, certain taxes and environmental matters, as well as commitments under contractual and other commercial obligations. We recognize liabilities for contingencies and commitments when a loss is probable and estimable.
Research and Development
We engage in a variety of research and development activities and continue to invest to accelerate growth and to drive innovation globally. Consumer research is excluded from research and development costs and included in other marketing costs. Research and development costs were $804 million, $771 million and $752 million in 2023, 2022 and 2021, respectively, and are reported within selling, general and administrative expenses.
Goodwill and Other Intangible Assets
Indefinite-lived intangible assets and goodwill are not amortized and, as a result, are assessed for impairment at least annually, using either a qualitative or quantitative approach. We perform this annual assessment during our third quarter, or more frequently if circumstances indicate that the carrying value may not be recoverable. Where we use the qualitative assessment, first we determine if, based on qualitative factors, it is more likely than not that an impairment exists. Factors considered include macroeconomic conditions (including those related to the ongoing conflicts in Ukraine and the Middle East and a high interest rate and inflationary cost environment), industry and competitive conditions, legal and regulatory environment, historical financial performance and significant changes in the brand or reporting unit. If the qualitative assessment indicates that it is more likely than not that an impairment exists, then a quantitative assessment is performed.
In the quantitative assessment for indefinite-lived intangible assets and goodwill, an assessment is performed to determine the fair value of the indefinite-lived intangible asset and the reporting unit, respectively. Estimated fair value is determined using discounted cash flows and requires an analysis of several estimates including future cash flows or income consistent with management’s strategic business plans, annual sales growth rates, perpetuity growth assumptions and the selection of assumptions underlying a discount rate (weighted-average cost of capital) based on market data available at the time. Significant management judgment is necessary to estimate the impact of competitive operating, macroeconomic and other factors (including those related to the ongoing conflicts in Ukraine and the Middle East and a high interest rate and inflationary cost environment) to estimate future levels of sales, operating profit or cash flows. All assumptions used in our impairment evaluations for indefinite-lived intangible assets and goodwill, such as forecasted growth rates (including perpetuity growth assumptions) and weighted-average cost of capital, are based on the best available market information and are consistent
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with our internal forecasts and operating plans. A deterioration in these assumptions could adversely impact our results.
Amortizable intangible assets are only evaluated for impairment upon a significant change in the operating or macroeconomic environment. If an evaluation of the undiscounted future cash flows indicates impairment, the asset is written down to its estimated fair value, which is based on its discounted future cash flows.
Other Significant Accounting Policies
Our other significant accounting policies are disclosed as follows:
•Basis of Presentation – Note 1 includes a description of our policies regarding use of estimates, basis of presentation and consolidation.
•Income Taxes – Note 5.
•Share-Based Compensation – Note 6.
•Pension, Retiree Medical and Savings Plans – Note 7.
•Financial Instruments – Note 9.
•Cash Equivalents – Cash equivalents are highly liquid investments with original maturities of three months or less.
•Inventories – Inventories are valued at the lower of cost or net realizable value. Cost is determined using the average; first-in, first-out (FIFO); or, in limited instances, last-in, first-out (LIFO) methods. For inventories valued under the LIFO method, the differences between the LIFO and FIFO methods of valuing inventories are not material.
•Property, Plant and Equipment – Note 15. Property, plant and equipment is recorded at historical cost. Depreciation is recognized on a straight-line basis over an asset’s estimated useful life. Construction in progress is not depreciated until ready for service.
•Translation of Financial Statements of Foreign Subsidiaries – Financial statements of foreign subsidiaries are translated into U.S. dollars using period-end exchange rates for assets and liabilities and average exchange rates for revenues and expenses. Adjustments resulting from translating net assets are reported as a separate component of accumulated other comprehensive loss within common shareholders’ equity as currency translation adjustment.
Recently Issued Accounting Pronouncements
Adopted
In September 2022, the Financial Accounting Standards Board (FASB) issued guidance to enhance the transparency of supplier finance programs to allow financial statement users to understand the effect on working capital, liquidity and cash flows. The new guidance requires disclosure of key terms of the program, including a description of the payment terms, payment timing and assets pledged as security or other forms of guarantees provided to the finance provider or intermediary. Other requirements include the disclosure of the amount that remains unpaid as of the end of the reporting period, a description of where these obligations are presented in the balance sheet and a rollforward of the obligation during the annual period. We adopted the guidance in the first quarter of 2023, except for the rollforward, which is effective in fiscal year 2024 with early adoption permitted. We will adopt the rollforward guidance when effective, in our 2024 annual reporting. See Note 14 for disclosures currently required under this guidance.
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Not Yet Adopted
In December 2023, the FASB issued guidance to enhance transparency of income tax disclosures. On an annual basis, the new guidance requires a public entity to disclose: (1) specific categories in the rate reconciliation, (2) additional information for reconciling items that are equal to or greater than 5% of the amount computed by multiplying income (or loss) from continuing operations before income tax expense (or benefit) by the applicable statutory income tax rate, (3) income taxes paid (net of refunds received) disaggregated by federal (national), state, and foreign taxes, with foreign taxes disaggregated by individual jurisdictions in which income taxes paid is equal to or greater than 5% of total income taxes paid, (4) income (or loss) from continuing operations before income tax expense (or benefit) disaggregated between domestic and foreign, and (5) income tax expense (or benefit) from continuing operations disaggregated between federal (national), state and foreign. The guidance is effective for fiscal year 2025 annual reporting, with early adoption permitted, to be applied on a prospective basis, with retrospective application permitted. We will adopt the guidance when it becomes effective, in our 2025 annual reporting, on a prospective basis.
In November 2023, the FASB issued guidance to enhance disclosure of expenses of a public entity’s reportable segments. The new guidance requires a public entity to disclose: (1) on an annual and interim basis, significant segment expenses that are regularly provided to the chief operating decision maker (CODM) and included within each reported measure of segment profit or loss, (2) on an annual and interim basis, an amount for other segment items (the difference between segment revenue less the significant expenses disclosed under the significant expense principle and each reported measure of segment profit or loss), including a description of its composition, (3) on an annual and interim basis, information about a reportable segment’s profit or loss and assets previously required to be disclosed only on an annual basis, and (4) the title and position of the CODM and an explanation of how the CODM uses the reported measure(s) of segment profit or loss in assessing segment performance and how to allocate resources. The new guidance also clarifies that if the CODM uses more than one measure of a segment’s profit or loss, one or more of those measures may be reported and requires that a public entity that has a single reportable segment provide all the disclosures required by the amendments in this update and all existing segment disclosures. The guidance is effective for fiscal year 2024 annual reporting, and in the first quarter of 2025 for interim period reporting, with early adoption permitted. Upon adoption, this guidance should be applied retrospectively to all prior periods presented. We will adopt the guidance when it becomes effective, in our 2024 annual reporting.
Note 3 — Restructuring and Impairment Charges
2019 Multi-Year Productivity Plan
We publicly announced a multi-year productivity plan on February 15, 2019 that will leverage new technology and business models to further simplify, harmonize and automate processes; re-engineer our go-to-market and information systems, including deploying the right automation for each market; and simplify our organization and optimize our manufacturing and supply chain footprint. To build on the successful implementation of the 2019 Productivity Plan, in 2022, we expanded and extended the plan through the end of 2028 to take advantage of additional opportunities within the initiatives described above. As a result, we expect to incur pre-tax charges of approximately $3.65 billion, including cash expenditures of approximately $2.9 billion. These pre-tax charges are expected to consist of approximately 55 % of severance and other employee-related costs, 10 % for asset impairments (all non-cash) resulting from plant closures and related actions and 35 % for other costs associated with the implementation of our initiatives.
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The total plan pre-tax charges are expected to be incurred by division approximately as follows:
| FLNA | QFNA | PBNA | LatAm | Europe | AMESA | APAC | Corporate | ||||||||||||||||||||||||||||||||||||||||
| Expected pre-tax charges | % | % | % | % | % | % | % | % | |||||||||||||||||||||||||||||||||||||||
A summary of our 2019 Productivity Plan charges is as follows:
| 2023 | 2022 | 2021 | |||||||||||||||
| Cost of sales | $ | $ | $ | ||||||||||||||
| Selling, general and administrative expenses | |||||||||||||||||
Other pension and retiree medical benefits (income)/expense (a) | ( | ||||||||||||||||
| Total restructuring and impairment charges | $ | $ | $ | ||||||||||||||
| After-tax amount | $ | $ | $ | ||||||||||||||
| Impact on net income attributable to PepsiCo per common share | $ | ( | $ | ( | $ | ( | |||||||||||
| 2023 | 2022 | 2021 | Plan to Date through 12/30/2023 | ||||||||||||||||||||
| FLNA | $ | $ | $ | $ | |||||||||||||||||||
| QFNA | |||||||||||||||||||||||
| PBNA | |||||||||||||||||||||||
| LatAm | |||||||||||||||||||||||
| Europe | |||||||||||||||||||||||
| AMESA | |||||||||||||||||||||||
| APAC | |||||||||||||||||||||||
| Corporate | |||||||||||||||||||||||
Other pension and retiree medical benefits (income)/expense (a) | ( | ||||||||||||||||||||||
| Total | $ | $ | $ | $ | |||||||||||||||||||
(a)Income amount represents adjustments for changes in estimates of previously recorded amounts.
Plan to Date through 12/30/2023 | |||||
| Severance and other employee costs | $ | ||||
| Asset impairments | |||||
| Other costs | |||||
| Total | $ | ||||
Severance and other employee costs primarily include severance and other termination benefits, as well as voluntary separation arrangements. Other costs primarily include costs associated with the implementation of our initiatives, including consulting and other professional fees, as well as contract termination costs.
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A summary of our 2019 Productivity Plan is as follows:
| Severance and Other Employee Costs | Asset Impairments | Other Costs | Total | ||||||||||||||||||||
| Liability as of December 26, 2020 | $ | $ | $ | $ | |||||||||||||||||||
| 2021 restructuring charges | |||||||||||||||||||||||
Cash payments (a) | ( | ( | ( | ||||||||||||||||||||
| Non-cash charges and translation | ( | ( | ( | ||||||||||||||||||||
| Liability as of December 25, 2021 | |||||||||||||||||||||||
| 2022 restructuring charges | |||||||||||||||||||||||
Cash payments (a) | ( | ( | ( | ||||||||||||||||||||
| Non-cash charges and translation | ( | ( | ( | ||||||||||||||||||||
Liability as of December 31, 2022 | |||||||||||||||||||||||
| 2023 restructuring charges | |||||||||||||||||||||||
Cash payments (a) | ( | ( | ( | ||||||||||||||||||||
| Non-cash charges and translation | ( | ( | ( | ( | |||||||||||||||||||
Liability as of December 30, 2023 | $ | $ | $ | $ | |||||||||||||||||||
(a)Excludes cash expenditures of $1 million in 2023, $1 million in 2022 and $2 million in 2021, reported in the cash flow statement in pension and retiree medical plan contributions.
The majority of the restructuring accrual at December 30, 2023 is expected to be paid by the end of 2024.
Other Productivity Initiatives
There were no material charges related to other productivity and efficiency initiatives outside the scope of the 2019 Productivity Plan.
We regularly evaluate different productivity initiatives beyond the productivity plan and other initiatives described above.
For information on additional impairment charges, see Notes 1, 4 and 9 for impairment and other charges taken related to the Russia-Ukraine conflict, brand portfolio impairment charges and other impairment charges.
Note 4 — Intangible Assets
A summary of our amortizable intangible assets is as follows:
| 2023 | 2022 | 2021 | |||||||||||||||||||||||||||||||||||||||||||||
| Average Useful Life (Years) | Gross | Accumulated Amortization | Net | Gross | Accumulated Amortization | Net | |||||||||||||||||||||||||||||||||||||||||
| Acquired franchise rights | $ | $ | ( | $ | $ | $ | ( | $ | |||||||||||||||||||||||||||||||||||||||
Customer relationships | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||
| Brands | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||
| Other identifiable intangibles | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||
| Total | $ | $ | ( | $ | $ | $ | ( | $ | |||||||||||||||||||||||||||||||||||||||
| Amortization expense | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||
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Amortization is recognized on a straight-line basis over an intangible asset’s estimated useful life. Amortization of intangible assets for each of the next years, based on existing intangible assets as of December 30, 2023 and using average 2023 foreign exchange rates, is expected to be as follows:
| 2024 | 2025 | 2026 | 2027 | 2028 | |||||||||||||||||||||||||
| Five-year projected amortization | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
Depreciable and amortizable assets are evaluated for impairment upon a significant change in the operating or macroeconomic environment. In these circumstances, if an evaluation of the undiscounted cash flows indicates impairment, the asset is written down to its estimated fair value, which is based on discounted future cash flows. Useful lives are periodically evaluated to determine whether events or circumstances have occurred which indicate the need for revision.
Indefinite-Lived Intangible Assets
As discussed in Note 2, we perform our annual impairment assessment on indefinite-lived intangible assets during our third quarter. The annual impairment assessment on indefinite-lived intangible assets performed in the third quarter of 2023, based on best available market information and our internal forecasts and operating plans at the time, did not result in any material impairment charges.
In the fourth quarter of 2023, macroeconomic conditions, including higher interest rates, inflationary costs, and the ongoing conflict in the Middle East, and recent business performance indicated a deterioration of the significant inputs used to determine the fair value of our indefinite-lived intangible assets in various markets, primarily assumptions underlying the weighted-average cost of capital and the impact of economic uncertainty on current and future financial performance, and required us to perform a quantitative assessment on certain assets. The fair value of our indefinite-lived intangible assets was estimated using discounted cash flows under the income approach, which we consider to be a Level 3 measurement. We determined that the carrying value exceeded the fair value, which reflects the increase in the weighted-average cost of capital as well as our most current estimates of future sales and their contributions to operating profit and expected future cash flows (including perpetuity growth assumptions). As a result of the quantitative assessment, we recorded pre-tax impairment charges of $0.6 billion ($0.5 billion after-tax or $0.35 per share) for brands and $0.3 billion ($0.3 billion after-tax or $0.22 per share) for goodwill, both in impairment of intangible assets, primarily related to the SodaStream brand and reporting unit in our Europe division, in the year ended December 30, 2023. See Note 1 for further information.
In the first quarter of 2022, we discontinued or repositioned certain juice and dairy brands in Russia in our Europe division. As a result, we recognized pre-tax impairment charges (included in brand portfolio impairment charges) of $241 million ($193 million after-tax or $0.14 per share) in impairment of intangible assets, primarily related to indefinite-lived intangible assets in the year ended December 31, 2022. See Note 1 for further information.
In the second quarter of 2022, macroeconomic factors, sanctions and other regulations as a result of the Russia-Ukraine conflict indicated a material deterioration of the significant inputs used to determine the fair value of our indefinite-lived intangible assets in Russia, primarily assumptions underlying the weighted-average cost of capital. These factors required us to perform a quantitative assessment, despite the absence of a material adverse impact on these assets’ financial performance (e.g., sales, operating profit, cash flows). The fair value of our indefinite-lived intangible assets in Russia was estimated using discounted cash flows under the income approach, which we consider to be a Level 3 measurement. We determined that the carrying value exceeded the fair value, with the decrease in the fair value primarily attributable to a significant increase in the weighted-average cost of capital, which reflected the macroeconomic uncertainty in Russia. As a result of the quantitative assessment, we recorded pre-tax
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impairment charges of $1.2 billion ($958 million after-tax or $0.69 per share) in impairment of intangible assets, related to our juice and dairy brands in Russia in our Europe division, in the year ended December 31, 2022. See Note 1 for further information.
In the fourth quarter of 2022, macroeconomic conditions including a high interest rate and inflationary cost environment, coupled with recent business performance, indicated a deterioration of the significant inputs used to determine the fair value of our indefinite-lived intangible assets in various markets, primarily assumptions underlying the weighted-average cost of capital and the impact of economic uncertainty on current and future financial performance, and required us to perform a quantitative assessment on certain assets. The fair value of our indefinite-lived intangible assets was estimated using discounted cash flows under the income approach, which we consider to be a Level 3 measurement. We determined that the carrying value exceeded the fair value, which reflected the increase in the weighted-average cost of capital as well as our most current estimates of future sales and their contributions to operating profit and expected future cash flows (including perpetuity growth assumptions). As a result of the quantitative assessment, we recognized pre-tax impairment charges of $1.6 billion ($1.3 billion after-tax or $0.94 per share) in impairment of intangible assets, primarily related to the SodaStream brand in our Europe division, in the year ended December 31, 2022. See Note 1 for further information.
We did not not recognize any impairment charges for indefinite-lived intangible assets in the year ended December 25, 2021.
As of December 30, 2023, the estimated fair values of our indefinite-lived reacquired and acquired franchise rights recorded at PBNA exceeded their carrying values. However, there could be an impairment of the carrying value of PBNA’s reacquired and acquired franchise rights, as well as further impairment to the carrying value of the SodaStream reporting unit goodwill, if future sales and their contributions to operating profit do not achieve our expected future cash flows (including perpetuity growth assumptions) or if macroeconomic conditions result in a future increase in the weighted-average cost of capital used to estimate fair value.
For further information on our policies for indefinite-lived intangible assets, see Note 2.
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The change in the book value of indefinite-lived intangible assets is as follows:
| Balance, Beginning 2022 | Acquisitions | Impairment | Translation and Other | Balance, End of 2022 | Acquisitions | Impairment | Translation and Other | Balance, End of 2023 | |||||||||||||||||||||||||||||||||||||||||||||
| FLNA | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Goodwill | $ | $ | $ | $ | ( | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||
Brands (a) | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Total | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||
| QFNA | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Goodwill | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total | |||||||||||||||||||||||||||||||||||||||||||||||||||||
PBNA | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Goodwill | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Reacquired franchise rights | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Acquired franchise rights (b) | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||
Brands | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||
| LatAm | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Goodwill | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Brands (c) | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Europe | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Goodwill (d)(e) | ( | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Reacquired franchise rights | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||
Acquired franchise rights | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||
Brands (e) | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Total | ( | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||
| AMESA | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Goodwill | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||
Brands (f) | ( | ( | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||||||
| Total | ( | ( | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||||||
| APAC | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Goodwill | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||
Brands (g) | ( | ( | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||||||
| Total | ( | ( | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||||||
| Total goodwill | ( | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Total reacquired franchise rights | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total acquired franchise rights | ( | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Total brands | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Total | $ | $ | $ | ( | $ | ( | $ | $ | $ | ( | $ | ( | $ | ||||||||||||||||||||||||||||||||||||||||
(a)Impairment in 2022 is related to a baked fruit convenient food brand.
(b)Acquisitions in 2022 primarily reflect our agreement with Celsius to distribute Celsius energy drinks in the United States. Translation and other in 2023 primarily reflects adjustments to previously recorded amounts related to our agreement with Celsius. See Note 9 for further information.
(c)Impairment in 2022 is related to the sale of certain non-strategic brands. See Note 1 for further information.
(d)Translation and other in 2023 primarily reflects the depreciation of the Russian ruble, partially offset by appreciation of the euro and British pound.
(e)Impairment in 2022 is related to the SodaStream brand, the decrease in fair value as a result of the Russia-Ukraine conflict and the discontinuation or repositioning of certain juice and dairy brands in Russia. Impairments in 2023 are related to SodaStream goodwill and brand.
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(f)Impairment is related to brands from the Pioneer Foods acquisition.
(g)Impairment in 2022 and 2023 is related to the Be & Cheery brand.
Note 5 — Income Taxes
The components of income before income taxes are as follows:
| 2023 | 2022 | 2021 | ||||||||||||||||||
| United States | $ | $ | $ | |||||||||||||||||
| Foreign | ||||||||||||||||||||
| $ | $ | $ | ||||||||||||||||||
The provision for income taxes consisted of the following:
| 2023 | 2022 | 2021 | |||||||||||||||
| Current: | |||||||||||||||||
| U.S. Federal | $ | $ | $ | ||||||||||||||
| Foreign | |||||||||||||||||
| State | |||||||||||||||||
| Deferred: | |||||||||||||||||
| U.S. Federal | ( | ||||||||||||||||
| Foreign | ( | ( | ( | ||||||||||||||
| State | ( | ||||||||||||||||
| ( | ( | ||||||||||||||||
| $ | $ | $ | |||||||||||||||
A reconciliation of the U.S. Federal statutory tax rate to our annual tax rate is as follows:
| 2023 | 2022 | 2021 | ||||||||||||||||||
| U.S. Federal statutory tax rate | % | % | % | |||||||||||||||||
| State income tax, net of U.S. Federal tax benefit | ||||||||||||||||||||
| Lower taxes on foreign results | ( | ( | ( | |||||||||||||||||
| One-time mandatory transition tax - TCJ Act | ||||||||||||||||||||
| Juice Transaction | ( | ( | ||||||||||||||||||
| Tax settlements | ( | |||||||||||||||||||
| Other, net | ( | ( | ( | |||||||||||||||||
| Annual tax rate | % | % | % | |||||||||||||||||
Tax Cuts and Jobs Act
In 2022, we recorded $86 million ($0.06 per share) of net tax expense related to the TCJ Act as a result of correlating adjustments related to a partial audit settlement with the IRS for tax years 2014 through 2019. In 2021, we recorded $190 million ($0.14 per share) of net tax expense related to the TCJ Act as a result of adjustments related to the final assessment of the 2014 through 2016 IRS audit.
As of December 30, 2023, our mandatory transition tax liability was $2.3 billion, which must be paid through 2026 under the provisions of the TCJ Act. We reduced our liability through cash payments and application of tax overpayments by $309 million in each of 2023, 2022 and 2021. We currently expect to pay approximately $579 million of this liability in 2024.
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The TCJ Act also created a requirement that certain income earned by foreign subsidiaries, known as global intangible low-tax income (GILTI), must be included in the gross income of their U.S. shareholder. The FASB allows an accounting policy election of either recognizing deferred taxes for temporary differences expected to reverse as GILTI in future years or recognizing such taxes as a current-period expense when incurred. We elected to treat the tax effect of GILTI as a current-period expense when incurred.
Other Tax Matters
In 2021, we received a final assessment from the IRS audit for the tax years 2014 through 2016. The assessment included both agreed and unagreed issues. On October 29, 2021, we filed a formal written protest of the assessment and requested an appeals conference. As a result of the analysis of the 2014 through 2016 final assessment, we remeasured all applicable reserves for uncertain tax positions for all years open under the statute of limitations, including any correlating adjustments impacting the mandatory transition tax liability under the TCJ Act, resulting in a net non-cash tax expense of $112 million ($0.08 per share) in 2021.
In 2022, we came to an agreement with the IRS to settle one of the issues assessed in the 2014 through 2016 tax audit. The agreement covers tax years 2014 through 2019. As a result, we reduced our reserves for uncertain tax positions, including any correlating adjustments impacting the mandatory transition tax liability under the TCJ Act, resulting in a net non-cash tax benefit of $233 million ($0.17 per share) in 2022. Tax years 2014 through 2019 remain under audit for other issues.
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Deferred tax liabilities and assets are comprised of the following:
| 2023 | 2022 | ||||||||||
| Deferred tax liabilities | |||||||||||
| Debt guarantee of wholly-owned subsidiary | $ | $ | |||||||||
| Property, plant and equipment | |||||||||||
| Recapture of net operating losses | |||||||||||
| Pension liabilities | |||||||||||
| Right-of-use assets | |||||||||||
| Investment in TBG | |||||||||||
| Other | |||||||||||
| Gross deferred tax liabilities | |||||||||||
| Deferred tax assets | |||||||||||
| Net carryforwards | |||||||||||
| Intangible assets other than nondeductible goodwill | |||||||||||
| Share-based compensation | |||||||||||
| Retiree medical benefits | |||||||||||
| Other employee-related benefits | |||||||||||
| Deductible state tax and interest benefits | |||||||||||
| Lease liabilities | |||||||||||
| Capitalized research and development | |||||||||||
| Other | |||||||||||
| Gross deferred tax assets | |||||||||||
| Valuation allowances | ( | ( | |||||||||
| Deferred tax assets, net | |||||||||||
| Net deferred tax (assets)/liabilities | $ | ( | $ | ( | |||||||
A summary of our valuation allowance activity is as follows:
| 2023 | 2022 | 2021 | |||||||||||||||
| Balance, beginning of year | $ | $ | $ | ||||||||||||||
| Provision | ( | ||||||||||||||||
| Other (deductions)/additions | ( | ( | |||||||||||||||
| Balance, end of year | $ | $ | $ | ||||||||||||||
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Reserves
A number of years may elapse before a particular matter, for which we have established a reserve, is audited and finally resolved. The number of years with open tax audits varies depending on the tax jurisdiction. Our major taxing jurisdictions and the related open tax audits are as follows:
Jurisdiction | Years Open to Audit | Years Currently Under Audit | ||||||||||||
United States | 2014-2022 | 2014-2019 | ||||||||||||
Mexico | 2014-2022 | 2014-2019 | ||||||||||||
United Kingdom | 2021-2022 | None | ||||||||||||
Canada (Domestic) | 2018-2022 | 2019 | ||||||||||||
Canada (International) | 2012-2022 | 2012-2019 | ||||||||||||
Russia | 2020-2022 | None | ||||||||||||
Our annual tax rate is based on our income, statutory tax rates and tax planning strategies and transactions, including transfer pricing arrangements, available to us in the various jurisdictions in which we operate. Significant judgment is required in determining our annual tax rate and in evaluating our tax positions. We establish reserves when, despite our belief that our tax return positions are fully supportable, we believe that certain positions are subject to challenge and that we likely will not succeed. We adjust these reserves, as well as the related interest, in light of changing facts and circumstances, such as the progress of a tax audit, new tax laws, relevant court cases or tax authority settlements. Settlement of any particular issue would usually require the use of cash. Favorable resolution would be recognized as a reduction to our annual tax rate in the year of resolution.
As of December 30, 2023, the total gross amount of reserves for income taxes, reported in other liabilities, was $2.1 billion. We accrue interest related to reserves for income taxes in our provision for income taxes and any associated penalties are recorded in selling, general and administrative expenses. The gross amount of interest accrued, reported in other liabilities, was $390 million as of December 30, 2023, of which $102 million of tax expense was recognized in 2023. The gross amount of interest accrued, reported in other liabilities, was $292 million as of December 31, 2022, of which $4 million of tax benefit was recognized in 2022.
A reconciliation of unrecognized tax benefits is as follows:
| 2023 | 2022 | ||||||||||
| Balance, beginning of year | $ | $ | |||||||||
| Additions for tax positions related to the current year | |||||||||||
| Additions for tax positions from prior years | |||||||||||
| Reductions for tax positions from prior years | ( | ( | |||||||||
| Settlement payments | ( | ( | |||||||||
| Statutes of limitations expiration | ( | ( | |||||||||
| Translation and other | ( | ( | |||||||||
| Balance, end of year | $ | $ | |||||||||
Carryforwards and Allowances
Operating loss carryforwards and income tax credits totaling $34.7 billion as of December 30, 2023 are being carried forward in a number of foreign and state jurisdictions where we are permitted to use tax operating losses and income tax credits from prior periods to reduce future taxable income or income tax liabilities. These operating losses and income tax credits will expire as follows: $0.4 billion in 2024, $29.8
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billion between 2025 and 2041 and $4.5 billion may be carried forward indefinitely. We establish valuation allowances for our deferred tax assets if, based on the available evidence, it is not more likely than not that some portion or all of the deferred tax assets will be realized.
Undistributed International Earnings
As of December 30, 2023, we had approximately $7 billion of undistributed international earnings. We intend to continue to reinvest $7 billion of earnings outside the United States for the foreseeable future and while future distribution of these earnings would not be subject to U.S. federal tax expense, no deferred tax liabilities with respect to items such as certain foreign exchange gains or losses, foreign withholding taxes or state taxes have been recognized. It is not practicable for us to determine the amount of unrecognized tax expense on these reinvested international earnings.
Note 6 — Share-Based Compensation
Our share-based compensation program is designed to attract and retain employees while also aligning employees’ interests with the interests of our shareholders. PepsiCo has granted stock options, RSUs, PSUs and long-term cash awards to employees under the shareholder-approved PepsiCo, Inc. Long-Term Incentive Plan (LTIP). Executives who are awarded long-term incentives based on their performance may generally elect to receive their grant in the form of stock options or RSUs, or a combination thereof. Executives who elect stock options receive four stock options for every one RSU that would have otherwise been granted. Certain executive officers and other senior executives do not have a choice and are granted 66 % PSUs and 34 % long-term cash, each of which are subject to pre-established performance targets.
The Company may use authorized and unissued shares to meet share requirements resulting from the exercise of stock options and the vesting of RSUs and PSUs.
As of December 30, 2023, 28 million shares were available for future share-based compensation grants under the LTIP.
The following table summarizes our total share-based compensation expense, which is primarily recorded in selling, general and administrative expenses, and excess tax benefits recognized:
| 2023 | 2022 | 2021 | |||||||||||||||
| Share-based compensation expense - equity awards | $ | $ | $ | ||||||||||||||
| Share-based compensation expense - liability awards | |||||||||||||||||
| Acquisition and divestiture-related charges | |||||||||||||||||
| Restructuring charges | ( | ||||||||||||||||
| Total | $ | $ | $ | ||||||||||||||
| Income tax benefits recognized in earnings related to share-based compensation | $ | $ | $ | ||||||||||||||
Excess tax benefits related to share-based compensation | $ | $ | $ | ||||||||||||||
As of December 30, 2023, there was $441 million of total unrecognized compensation cost related to nonvested share-based compensation grants. This unrecognized compensation cost is expected to be recognized over a weighted-average period of two years .
Method of Accounting and Our Assumptions
The fair value of share-based award grants is amortized to expense over the vesting period, primarily three years . Awards to employees eligible for retirement prior to the award becoming fully vested are amortized to expense over the period through the date that the employee first becomes eligible to retire and is no
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longer required to provide service to earn the award. In addition, we use historical data to estimate forfeiture rates and record share-based compensation expense only for those awards that are expected to vest.
Stock Options
A stock option permits the holder to purchase shares of PepsiCo common stock at a specified price. We account for our employee stock options under the fair value method of accounting using a Black-Scholes valuation model to measure stock option expense at the date of grant. All stock option grants have an exercise price equal to the fair market value of our common stock on the date of grant and generally have a 10 -year term.
Our weighted-average Black-Scholes fair value assumptions are as follows:
| 2023 | 2022 | 2021 | |||||||||||||||
| Expected life | |||||||||||||||||
| Risk-free interest rate | % | % | % | ||||||||||||||
| Expected volatility | % | % | % | ||||||||||||||
| Expected dividend yield | % | % | % | ||||||||||||||
The expected life is the period over which our employee groups are expected to hold their options. It is based on our historical experience with similar grants. The risk-free interest rate is based on the expected U.S. Treasury rate over the expected life. Volatility reflects movements in our stock price over the most recent historical period equivalent to the expected life. Dividend yield is estimated over the expected life based on our stated dividend policy and forecasts of net income, share repurchases and stock price.
A summary of our stock option activity for the year ended December 30, 2023 is as follows:
Options(a) | Weighted-Average Exercise Price Per Unit | Weighted-Average Contractual Life Remaining (years) | Aggregate Intrinsic Value(a) | ||||||||||||||||||||
| Outstanding at December 31, 2022 | $ | ||||||||||||||||||||||
| Granted | $ | ||||||||||||||||||||||
| Exercised | ( | $ | |||||||||||||||||||||
| Forfeited/expired | ( | $ | |||||||||||||||||||||
| Outstanding at December 30, 2023 | $ | $ | |||||||||||||||||||||
| Exercisable at December 30, 2023 | $ | $ | |||||||||||||||||||||
| Expected to vest as of December 30, 2023 | $ | $ | |||||||||||||||||||||
(a)In thousands.
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Restricted Stock Units and Performance Stock Units
Each RSU represents our obligation to deliver to the holder one share of PepsiCo common stock when the award vests at the end of the service period. PSUs are awards pursuant to which a number of shares are delivered to the holder upon vesting at the end of the service period based on PepsiCo’s performance against specified financial performance metrics. The number of shares may be increased to the maximum or reduced to the minimum threshold based on the results of these performance metrics in accordance with the terms established at the time of the award. During the vesting period, RSUs and PSUs accrue dividend equivalents that pay out in cash (without interest) if and when the applicable RSU or PSU vests and becomes payable.
The fair value of RSUs and PSUs are measured at the market price of the Company’s stock on the date of grant.
A summary of our RSU and PSU activity for the year ended December 30, 2023 is as follows:
RSUs/PSUs(a) | Weighted-Average Grant-Date Fair Value Per Unit | Weighted-Average Contractual Life Remaining (years) | Aggregate Intrinsic Value(a) | ||||||||||||||||||||
| Outstanding at December 31, 2022 | $ | ||||||||||||||||||||||
| Granted | $ | ||||||||||||||||||||||
| Converted | ( | $ | |||||||||||||||||||||
| Forfeited | ( | $ | |||||||||||||||||||||
Outstanding at December 30, 2023 (b) | $ | $ | |||||||||||||||||||||
Expected to vest as of December 30, 2023 (c) | $ | $ | |||||||||||||||||||||
(a)In thousands. Outstanding awards are disclosed at target.
(b)The outstanding PSUs for which the vesting period has not ended as of December 30, 2023, at the threshold, target and maximum award levels were zero , 0.7 million and 1.3 million, respectively.
(c)Represents the number of outstanding awards expected to vest, including estimated performance adjustments on all outstanding PSUs as of December 30, 2023.
Long-Term Cash
Certain executive officers and other senior executives were granted long-term cash awards for which final payout is based on PepsiCo’s total shareholder return relative to a specific set of peer companies and achievement of a specified performance target over a three-year performance period.
Long-term cash awards that qualify as liability awards under share-based compensation guidance are valued through the end of the performance period on a mark-to-market basis using the Monte Carlo simulation model.
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A summary of our long-term cash activity for the year ended December 30, 2023 is as follows:
Long-Term Cash Award(a) | Balance Sheet Date Fair Value(b) | Contractual Life Remaining (years) | |||||||||||||||
| Outstanding at December 31, 2022 | $ | ||||||||||||||||
| Granted | |||||||||||||||||
| Vested | ( | ||||||||||||||||
| Forfeited | ( | ||||||||||||||||
Outstanding at December 30, 2023 (c) | $ | $ | |||||||||||||||
| Expected to vest as of December 30, 2023 | $ | $ | |||||||||||||||
(a)In thousands, disclosed at target.
(b)In thousands, based on the most recent valuation as of December 30, 2023.
(c)The outstanding awards for which the vesting period has not ended as of December 30, 2023, at the threshold, target and maximum award levels based on the achievement of its market conditions were zero , $52 million and $104 million, respectively.
Other Share-Based Compensation Data
The following is a summary of other share-based compensation data:
| 2023 | 2022 | 2021 | |||||||||||||||
| Stock Options | |||||||||||||||||
Total number of options granted (a) | |||||||||||||||||
| Weighted-average grant-date fair value per unit of options granted | $ | $ | $ | ||||||||||||||
Total intrinsic value of options exercised (a) | $ | $ | $ | ||||||||||||||
Total grant-date fair value of options vested (a) | $ | $ | $ | ||||||||||||||
| RSUs/PSUs | |||||||||||||||||
Total number of RSUs/PSUs granted (a) | |||||||||||||||||
| Weighted-average grant-date fair value per unit of RSUs/PSUs granted | $ | $ | $ | ||||||||||||||
Total intrinsic value of RSUs/PSUs converted (a) | $ | $ | $ | ||||||||||||||
Total grant-date fair value of RSUs/PSUs vested (a) | $ | $ | $ | ||||||||||||||
(a)In thousands.
As of December 30, 2023 and December 31, 2022, there were approximately 330,000 and 307,000 outstanding awards, respectively, consisting primarily of phantom stock units that were granted under the PepsiCo Director Deferral Program and will be settled in shares of PepsiCo common stock pursuant to the LTIP at the end of the applicable deferral period, not included in the tables above.
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Note 7 — Pension, Retiree Medical and Savings Plans
Effective December 31, 2022, we merged two U.S. qualified defined benefit pension plans, PepsiCo Employees Retirement Plan I (Plan I), mostly inactive participants, and PepsiCo Employees Retirement Plan A (Plan A), mostly active participants, with Plan I remaining. The accrued benefits offered to the plans’ participants were unchanged. The merger was made to provide additional flexibility in evaluating opportunities to reduce risk and volatility. Actuarial gains and losses of the merged plan will be amortized over the average remaining life expectancy of participants. There was no material impact to pre-tax pension benefits expense from this merger.
In 2022, we transferred pension and retiree medical obligations of $145 million and related assets to TBG in connection with the Juice Transaction. See Note 13 for further information.
In 2021, we adopted a change to the Canadian defined benefit plans to freeze pension accruals for salaried participants, effective January 1, 2024, and to close the hourly plan to new non-union employees hired on or after January 1, 2022. After the effective date, all salaried participants receive an employer contribution to the defined contribution plan based on age and years of service regardless of employee contribution and the opportunity to receive employer contributions to match employee contributions up to defined limits. We also adopted a change to the U.K. defined benefit plan to freeze pension accruals for all participants effective March 31, 2022. After the effective date, participants have the opportunity to receive employer contributions to match employee contributions up to defined limits. Pre-tax pension benefits expense will decrease after the effective dates, partially offset by contributions to defined contribution plans.
In 2021, we adopted a change to the U.S. qualified defined benefit plans to transfer certain participants from Plan A to Plan I, effective January 1, 2022. The accrued benefits offered to the plans’ participants were unchanged. There was no material impact to pre-tax pension benefits expense from this transaction.
In 2020, we adopted an amendment to the U.S. qualified defined benefit plans to freeze benefit accruals for salaried participants, effective December 31, 2025.
Gains and losses resulting from actual experience differing from our assumptions, including the difference between the actual and expected return on plan assets, as well as changes in our assumptions, are determined at each measurement date. These differences are recognized as a component of net gain or loss in accumulated other comprehensive loss within common shareholders’ equity. If this net accumulated gain or loss exceeds 10 % of the greater of the market-related value of plan assets or plan obligations, a portion of the net gain or loss is included in other pension and retiree medical benefits income for the following year based upon the average remaining service life for participants in PepsiCo Employees Retirement Hourly Plan (Plan H) (approximately 11 years) and retiree medical (approximately 10 years), and the remaining life expectancy for participants in Plan I (approximately 26 years).
The cost or benefit of plan changes that increase or decrease benefits for prior employee service (prior service cost/(credit)) is included in other pension and retiree medical benefits income on a straight-line basis over the average remaining service life for participants in Plan H, and the remaining life expectancy for participants in Plan I, except that prior service cost/(credit) for salaried participants subject to the benefit accruals freeze effective December 31, 2025 is amortized on a straight-line basis over the period up to the effective date of the freeze.
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Selected financial information for our pension and retiree medical plans is as follows:
| Pension | Retiree Medical | ||||||||||||||||||||||||||||||||||
| U.S. | International | ||||||||||||||||||||||||||||||||||
| 2023 | 2022 | 2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||||||||||||
| Change in projected benefit obligation | |||||||||||||||||||||||||||||||||||
| Obligation at beginning of year | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
| Service cost | |||||||||||||||||||||||||||||||||||
| Interest cost | |||||||||||||||||||||||||||||||||||
| Plan amendments | |||||||||||||||||||||||||||||||||||
| Participant contributions | |||||||||||||||||||||||||||||||||||
| Experience loss/(gain) | ( | ( | ( | ( | |||||||||||||||||||||||||||||||
| Benefit payments | ( | ( | ( | ( | ( | ( | |||||||||||||||||||||||||||||
| Settlement/curtailment | ( | ( | ( | ( | ( | ||||||||||||||||||||||||||||||
| Special termination benefits | ( | ||||||||||||||||||||||||||||||||||
| Other, including foreign currency adjustment | ( | ( | ( | ( | |||||||||||||||||||||||||||||||
| Obligation at end of year | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
| Change in fair value of plan assets | |||||||||||||||||||||||||||||||||||
| Fair value at beginning of year | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
| Actual return on plan assets | ( | ( | ( | ||||||||||||||||||||||||||||||||
| Employer contributions/funding | |||||||||||||||||||||||||||||||||||
| Participant contributions | |||||||||||||||||||||||||||||||||||
| Benefit payments | ( | ( | ( | ( | ( | ( | |||||||||||||||||||||||||||||
| Settlement | ( | ( | ( | ( | |||||||||||||||||||||||||||||||
| Other, including foreign currency adjustment | ( | ( | ( | ||||||||||||||||||||||||||||||||
| Fair value at end of year | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
| Funded status | $ | ( | $ | ( | $ | $ | $ | ( | $ | ( | |||||||||||||||||||||||||
| Amounts recognized | |||||||||||||||||||||||||||||||||||
| Other assets | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
| Other current liabilities | ( | ( | ( | ( | ( | ( | |||||||||||||||||||||||||||||
| Other liabilities | ( | ( | ( | ( | ( | ( | |||||||||||||||||||||||||||||
| Net amount recognized | $ | ( | $ | ( | $ | $ | $ | ( | $ | ( | |||||||||||||||||||||||||
| Amounts included in accumulated other comprehensive loss (pre-tax) | |||||||||||||||||||||||||||||||||||
| Net loss/(gain) | $ | $ | $ | $ | $ | ( | $ | ( | |||||||||||||||||||||||||||
| Prior service cost/(credit) | ( | ( | ( | ( | ( | ||||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | ( | $ | ( | |||||||||||||||||||||||||||
| Changes recognized in net (gain)/loss included in other comprehensive loss | |||||||||||||||||||||||||||||||||||
| Net loss/(gain) arising in current year | $ | $ | $ | $ | ( | $ | ( | $ | ( | ||||||||||||||||||||||||||
| Amortization and settlement recognition | ( | ( | ( | ( | |||||||||||||||||||||||||||||||
| Foreign currency translation loss/(gain) | ( | ||||||||||||||||||||||||||||||||||
| Total | $ | $ | ( | $ | $ | ( | $ | ( | $ | ( | |||||||||||||||||||||||||
| Accumulated benefit obligation at end of year | $ | $ | $ | $ | |||||||||||||||||||||||||||||||
The net loss arising in the current year is primarily attributable to the impact of lower discount rates, partially offset by an increase in the actual return on plan assets.
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The amount we report in operating profit as pension and retiree medical cost is service cost, which is the value of benefits earned by employees for working during the year.
The amounts we report below operating profit as pension and retiree medical cost consist of the following components:
•Interest cost is the accrued interest on the projected benefit obligation due to the passage of time.
•Expected return on plan assets is the long-term return we expect to earn on plan investments for our funded plans that will be used to settle future benefit obligations.
•Amortization of prior service cost/(credit) represents the recognition in the income statement of benefit changes resulting from plan amendments.
•Amortization of net loss/(gain) represents the recognition in the income statement of changes in the amount of plan assets and the projected benefit obligation based on changes in assumptions and actual experience.
•Settlement/curtailment loss/(gain) represents the result of actions that effectively eliminate all or a portion of related projected benefit obligations. Settlements are triggered when payouts to settle the projected benefit obligation of a plan due to lump sums or other events exceed the total of annual service and interest cost. Settlements are recognized when actions are irrevocable and we are relieved of the primary responsibility and risk for projected benefit obligations. Lump sum payouts are generally higher when interest rates are lower. Curtailments are recognized when events such as plant closures, the sale of a business, or plan changes result in a significant reduction of future service or benefits. Curtailment losses are recognized when an event is probable and estimable, while curtailment gains are recognized when an event has occurred (when the related employees terminate or an amendment is adopted).
•Special termination benefits are the additional benefits offered to employees upon departure due to actions such as restructuring.
The components of total pension and retiree medical benefit costs are as follows:
| Pension | Retiree Medical | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| U.S. | International | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2023 | 2022 | 2021 | 2023 | 2022 | 2021 | 2023 | 2022 | 2021 | |||||||||||||||||||||||||||||||||||||||||||||
| Service cost | $ | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||
| Other pension and retiree medical benefits (income)/expense: | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Interest cost | $ | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||
| Expected return on plan assets | ( | ( | ( | ( | ( | ( | ( | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||
| Amortization of prior service credits | ( | ( | ( | ( | ( | ( | ( | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||
| Amortization of net losses/(gains) | ( | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||
Settlement/curtailment losses/(gains) (a) | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Special termination benefits | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total other pension and retiree medical benefits (income)/expense | $ | ( | $ | $ | ( | $ | ( | $ | ( | $ | ( | $ | ( | $ | ( | $ | ( | ||||||||||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | ( | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||
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The following table provides the weighted-average assumptions used to determine net periodic benefit cost and projected benefit obligation for our pension and retiree medical plans:
| Pension | Retiree Medical | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| U.S. | International | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2023 | 2022 | 2021 | 2023 | 2022 | 2021 | 2023 | 2022 | 2021 | |||||||||||||||||||||||||||||||||||||||||||||
| Net Periodic Benefit Cost | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Service cost discount rate (a) | % | % | % | % | % | % | % | % | % | ||||||||||||||||||||||||||||||||||||||||||||
Interest cost discount rate (a) | % | % | % | % | % | % | % | % | % | ||||||||||||||||||||||||||||||||||||||||||||
Expected return on plan assets (a) | % | % | % | % | % | % | % | % | % | ||||||||||||||||||||||||||||||||||||||||||||
| Rate of salary increases | % | % | % | % | % | % | |||||||||||||||||||||||||||||||||||||||||||||||
| Projected Benefit Obligation | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Discount rate | % | % | % | % | % | % | % | % | % | ||||||||||||||||||||||||||||||||||||||||||||
| Rate of salary increases | % | % | % | % | % | % | |||||||||||||||||||||||||||||||||||||||||||||||
(a)2022 U.S. rates reflect remeasurement of a U.S. qualified defined benefit pension plan in the second quarter of 2022.
The following table provides selected information about plans with accumulated benefit obligation and total projected benefit obligation in excess of plan assets:
| Pension | Retiree Medical | ||||||||||||||||||||||||||||||||||
| U.S. | International | ||||||||||||||||||||||||||||||||||
| 2023 | 2022 | 2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||||||||||||
Selected information for plans with accumulated benefit obligation in excess of plan assets | |||||||||||||||||||||||||||||||||||
| Obligation for service to date | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||||||||||||||
| Fair value of plan assets | $ | $ | $ | $ | |||||||||||||||||||||||||||||||
Selected information for plans with projected benefit obligation in excess of plan assets | |||||||||||||||||||||||||||||||||||
| Benefit obligation | $ | ( | $ | ( | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||||||||||
| Fair value of plan assets | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
Of the total projected pension benefit obligation as of December 30, 2023, approximately $678 million relates to plans that we do not fund because the funding of such plans does not receive favorable tax treatment.
Future Benefit Payments
Our estimated future benefit payments are as follows:
| 2024 | 2025 | 2026 | 2027 | 2028 | 2029 - 2033 | ||||||||||||||||||||||||||||||
| Pension | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
Retiree medical (a) | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
(a)Expected future benefit payments for our retiree medical plans do not reflect any estimated subsidies expected to be received under the 2003 Medicare Act. Subsidies are expected to be approximately $1 million for each of the years from 2024 through 2028 and approximately $2 million in total for 2029 through 2033.
These future benefit payments to beneficiaries include payments from both funded and unfunded plans.
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Funding
Contributions to our pension and retiree medical plans were as follows:
| Pension | Retiree Medical | ||||||||||||||||||||||||||||||||||
| 2023 | 2022 | 2021 | 2023 | 2022 | 2021 | ||||||||||||||||||||||||||||||
Discretionary (a) | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
| Non-discretionary | |||||||||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
(a)Includes $250 million contribution in 2023, $150 million contribution in 2022 and $500 million contribution in 2021 to fund our U.S. qualified defined benefit plans.
We made a discretionary contribution of $150 million to a U.S. qualified defined benefit plan in January 2024. In addition, in 2024, we expect to make non-discretionary contributions of approximately $99 million to our U.S. and international pension benefit plans and contributions of approximately $51 million for retiree medical benefits.
We also regularly evaluate opportunities to reduce risk and volatility associated with our pension and retiree medical plans.
Plan Assets
Our pension plan investment strategy includes the use of actively managed accounts and is reviewed periodically in conjunction with plan obligations, an evaluation of market conditions, tolerance for risk and cash requirements for benefit payments. This strategy is also applicable to funds held for the retiree medical plans. Our investment objective includes ensuring that funds are available to meet the plans’ benefit obligations when they become due. Assets contributed to our pension plans are no longer controlled by us, but become the property of our individual pension plans. However, we are indirectly impacted by changes in these plan assets as compared to changes in our projected obligations. Our overall investment policy is to prudently invest plan assets in a well-diversified portfolio of equity and high-quality debt securities and real estate to achieve our long-term return expectations. Our investment policy also permits the use of derivative instruments, such as futures and forward contracts, to reduce interest rate and foreign currency risks. Futures contracts represent commitments to purchase or sell securities at a future date and at a specified price. Forward contracts consist of currency forwards.
For 2024 and 2023, our expected long-term rate of return on U.S. plan assets is 7.4
| 2024 | 2023 | ||||||||||
| Fixed income | % | % | |||||||||
| U.S. equity | % | % | |||||||||
| International equity | % | % | |||||||||
| Real estate | % | % | |||||||||
Actual investment allocations may vary from our target investment allocations due to prevailing market conditions. We regularly review our actual investment allocations and periodically rebalance our investments.
The expected return on plan assets is based on our investment strategy and our expectations for long-term rates of return by asset class, taking into account volatility and correlation among asset classes and our historical experience. We also review current levels of interest rates and inflation to assess the reasonableness of the long-term rates. We evaluate our expected return assumptions annually to ensure that they are reasonable. To calculate the expected return on plan assets, our market-related value of assets for fixed income is the actual fair value. For all other asset categories, such as equity securities, we use a
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method that recognizes investment gains or losses (the difference between the expected and actual return based on the market-related value of assets) over a -year period. This has the effect of reducing year-to-year volatility.
Plan assets measured at fair value as of year-end 2023 and 2022 are categorized consistently by Level 1 (quoted prices in active markets for identical assets), Level 2 (significant other observable inputs) and Level 3 (significant unobservable inputs) in both years and are as follows:
| Fair Value Hierarchy Level | 2023 | 2022 | |||||||||||||||
U.S. plan assets (a) | |||||||||||||||||
Equity securities, including preferred stock (b) | 1 | $ | $ | ||||||||||||||
Government securities (c) | 2 | ||||||||||||||||
Corporate bonds (c) | 2 | ||||||||||||||||
Mortgage-backed securities (c) | 2 | ||||||||||||||||
Contracts with insurance companies (d) | 3 | ||||||||||||||||
Cash and cash equivalents (e) | 1, 2 | ||||||||||||||||
| Sub-total U.S. plan assets | |||||||||||||||||
Real estate commingled funds measured at net asset value (f) | |||||||||||||||||
Dividends and interest receivable, net of payables | |||||||||||||||||
| Total U.S. plan assets | $ | $ | |||||||||||||||
| International plan assets | |||||||||||||||||
Equity securities (b) | 1 | $ | $ | ||||||||||||||
Government securities (c) | 2 | ||||||||||||||||
Corporate bonds (c) | 2 | ||||||||||||||||
Fixed income commingled funds (g) | 1 | ||||||||||||||||
Contracts with insurance companies (d) | 3 | ||||||||||||||||
| Cash and cash equivalents | 1 | ||||||||||||||||
| Sub-total international plan assets | |||||||||||||||||
Real estate commingled funds measured at net asset value (f) | |||||||||||||||||
| Dividends and interest receivable | |||||||||||||||||
| Total international plan assets | $ | $ | |||||||||||||||
(a)Includes $183 million and $196 million in 2023 and 2022, respectively, of retiree medical plan assets that are restricted for purposes of providing health benefits for U.S. retirees and their beneficiaries.
(b)Invested in U.S. and international common stock and commingled funds, and the preferred stock portfolio was invested in domestic and international corporate preferred stock investments. The common and preferred stock investments are based on quoted prices in active markets. The commingled funds are based on the published price of the fund and include one large-cap fund that represents 13 % and 10 % of total U.S. plan assets for 2023 and 2022, respectively.
(c)These investments are based on quoted bid prices for comparable securities in the marketplace and broker/dealer quotes in active markets. Corporate bonds of U.S.-based companies represents 31 % and 32 % of total U.S. plan assets for 2023 and 2022, respectively.
(d)Based on the fair value of the contracts as determined by the insurance companies using inputs that are not observable. The changes in Level 3 amounts were not significant in the years ended December 30, 2023 and December 31, 2022.
(e)Includes Level 1 assets of $3 million for 2023 and Level 2 assets of $346 million and $157 million for 2023 and 2022, respectively.
(f)The real estate commingled funds include investments in limited partnerships. These funds are based on the net asset value of the appraised value of investments owned by these funds as determined by independent third parties using inputs that are not observable. The majority of the funds are redeemable quarterly subject to availability of cash and have notice periods ranging from 45 to 90 days.
(g)Based on the published price of the fund.
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Retiree Medical Cost Trend Rates
The assumed health care cost trend rates are as follows:
| 2024 | 2023 | ||||||||||
| Average increase assumed | % | % | |||||||||
| Ultimate projected increase | % | % | |||||||||
Year of ultimate projected increase | |||||||||||
Annually, we review external data and our historical experience to estimate assumed health care cost trend rates that impact our retiree medical plan obligation and expense, however the cap on our share of retiree medical costs limits the impact.
Savings Plan
Certain U.S. employees are eligible to participate in a 401(k) savings plan, which is a voluntary defined contribution plan. The plan is designed to help employees accumulate savings for retirement and we make Company matching contributions for certain employees on a portion of employee contributions based on years of service.
Certain U.S. employees, who are either not eligible to participate in a defined benefit pension plan or whose benefit is capped, are also eligible to receive an employer contribution based on either years of service or age and years of service regardless of employee contribution.
In 2023, 2022 and 2021, our total Company contributions were $356 million, $283 million and $246 million, respectively.
Note 8 — Debt Obligations
The following table summarizes our debt obligations:
2023(a) | 2022(a) | ||||||||||
Short-term debt obligations (b) | |||||||||||
| Current maturities of long-term debt | $ | $ | |||||||||
Commercial paper ( | |||||||||||
Other borrowings ( | |||||||||||
| $ | $ | ||||||||||
Long-term debt obligations (b) | |||||||||||
Notes due 2023 ( | $ | $ | |||||||||
Notes due 2024 ( | |||||||||||
Notes due 2025 ( | |||||||||||
Notes due 2026 ( | |||||||||||
Notes due 2027 ( | |||||||||||
Notes due 2028 ( | |||||||||||
Notes due 2029-2060 ( | |||||||||||
Other, due 2023-2033 ( | |||||||||||
| Less: current maturities of long-term debt obligations | |||||||||||
| Total | $ | $ | |||||||||
(a)Amounts are shown net of unamortized net discounts of $225 million and $227 million for 2023 and 2022, respectively.
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As of December 30, 2023 and December 31, 2022, our international debt of $279 million and $304 million, respectively, was related to borrowings from external parties, including various lines of credit. These lines of credit are subject to normal banking terms and conditions and are fully committed at least to the extent of our borrowings.
In 2023, we issued the following senior notes:
| Interest Rate | Maturity Date | Principal Amount(a) | ||||||||||||
| Floating Rate | February 2026 | $ | ||||||||||||
| % | February 2026 | $ | ||||||||||||
| % | May 2028 | $ | ||||||||||||
| % | February 2033 | $ | ||||||||||||
| % | February 2053 | $ | ||||||||||||
| Floating Rate | November 2024 | $ | ||||||||||||
| % | November 2025 | $ | ||||||||||||
| % | November 2026 | $ | ||||||||||||
(a)Excludes debt issuance costs, discounts and premiums.
The net proceeds from the issuances of the above notes will be used for general corporate purposes, including the repayment of commercial paper.
In 2023, we entered into a new five-year unsecured revolving credit agreement (Five-Year Credit Agreement), which expires on May 26, 2028. The Five-Year Credit Agreement enables us and our borrowing subsidiaries to borrow up to $4.2 billion in U.S. dollars and/or euros, including a $0.75 billion swing line subfacility for euro-denominated borrowings permitted to be borrowed on a same-day basis, subject to customary terms and conditions. We may request that commitments under this agreement be increased up to $4.95 billion (or the equivalent amount in euros). Additionally, we may, once a year, request renewal of the agreement for an additional one-year period. The Five-Year Credit Agreement replaced our $3.8 billion five-year credit agreement, dated as of May 27, 2022.
Also in 2023, we entered into a new 364-day unsecured revolving credit agreement (364-Day Credit Agreement), which expires on May 24, 2024. The 364-Day Credit Agreement enables us and our borrowing subsidiaries to borrow up to $4.2 billion in U.S. dollars and/or euros, subject to customary terms and conditions. We may request that commitments under this agreement be increased up to $4.95 billion (or the equivalent amount in euros). We may request renewal of this facility for an additional 364-day period or convert any amounts outstanding into a term loan for a period of up to one year, which term loan would mature no later than the anniversary of the then effective termination date. The 364-Day Credit Agreement replaced our $3.8 billion 364-day credit agreement, dated as of May 27, 2022.
Funds borrowed under the Five-Year Credit Agreement and the 364-Day Credit Agreement may be used for general corporate purposes. Subject to certain conditions, we may borrow, prepay and reborrow amounts under these agreements. As of December 30, 2023, there were no outstanding borrowings under the Five-Year Credit Agreement or the 364-Day Credit Agreement.
In 2023, we discharged via legal defeasance $94 million outstanding principal amount of certain notes originally issued by our subsidiary, The Quaker Oats Company, following the deposit of $102 million of U.S. government securities with the Bank of New York Mellon, as trustee, in the fourth quarter of 2022.
In 2022, we paid $750 million to redeem all $750 million outstanding principal amount of our 2.25 % senior notes due May 2022, we paid $800 million to redeem all $800 million outstanding principal amount of our 3.10 % senior notes due July 2022 and we paid $154 million to redeem all $133 million outstanding
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principal amount of our subsidiary, Pepsi-Cola Metropolitan Bottling Company, Inc.’s 7.00 % senior notes due March 2029 and 5.50 % notes due May 2035.
In 2021, we completed cash tender offers to redeem $4.1 billion principal amount of certain notes, with maturity dates ranging from May 2035 to March 2060 and interest rates ranging from 3.375 % to 5.500 %, for $4.8 billion in cash. As a result of the cash tender offers, we recorded a pre-tax charge of $842 million ($677 million after-tax or $0.49 per share) to net interest expense and other, primarily representing the tender price paid over the carrying value of the tendered notes and loss on treasury rate locks used to mitigate the interest rate risk on the cash tender offers.
Also in 2021, we paid $750 million to redeem all $750 million outstanding principal amount of our 1.70 % senior notes due 2021 and terminated the associated interest rate swap with a notional amount of $250 million.
Note 9 — Financial Instruments
Derivatives and Hedging
We are exposed to market risks arising from adverse changes in:
•commodity prices, affecting the cost of our raw materials and energy;
•foreign exchange rates and currency restrictions; and
•interest rates.
In the normal course of business, we manage commodity price, foreign exchange and interest rate risks through a variety of strategies, including productivity initiatives, global purchasing programs and hedging. Ongoing productivity initiatives involve the identification and effective implementation of meaningful cost-saving opportunities or efficiencies, including the use of derivatives. We do not use derivative instruments for trading or speculative purposes. Our global purchasing programs include fixed-price contracts and purchase orders and pricing agreements.
Our hedging strategies include the use of derivatives and, in the case of our net investment hedges, debt instruments. Certain derivatives are designated as either cash flow or fair value hedges and qualify for hedge accounting treatment, while others do not qualify and are marked to market through earnings. The accounting for qualifying hedges allows changes in a hedging instrument’s fair value to offset corresponding changes in the hedged item in the same reporting period that the hedged item impacts earnings. Gains or losses on derivatives designated as cash flow hedges are recorded in accumulated other comprehensive loss within common shareholders’ equity and reclassified to our income statement when the hedged transaction affects earnings. If it becomes probable that the hedged transaction will not occur, we immediately recognize the related hedging gains or losses in earnings; there were no such gains or losses reclassified during the year ended December 30, 2023.
Cash flows from derivatives used to manage commodity price, foreign exchange or interest rate risks are classified as operating activities in the cash flow statement. We classify both the earnings and cash flow impact from these derivatives consistent with the underlying hedged item.
Credit Risk
We perform assessments of our counterparty credit risk regularly, including reviewing netting agreements, if any, and a review of credit ratings, credit default swap rates and potential nonperformance of the counterparty. Based on our most recent assessment of our counterparty credit risk, we consider this risk to be low. In addition, we enter into derivative contracts with a variety of financial institutions that we believe are creditworthy in order to reduce our concentration of credit risk.
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Certain of our agreements with our counterparties require us to post full collateral on derivative instruments in a net liability position if our credit rating is at A2 (Moody’s Investors Service, Inc.) or A (S&P Global Ratings) and we have been placed on credit watch for possible downgrade or if our credit rating falls below either of these levels. The fair value of all derivative instruments with credit-risk-related contingent features that were in a net liability position as of December 30, 2023 was $144 million. We have posted no collateral under these contracts and no credit-risk-related contingent features were triggered as of December 30, 2023.
Commodity Prices
We are subject to commodity price risk because our ability to recover increased costs through higher pricing may be limited in the competitive environment in which we operate. This risk is managed through the use of fixed-price contracts and purchase orders, pricing agreements and derivative instruments, which primarily include swaps and futures. In addition, risk to our supply of certain raw materials is mitigated through purchases from multiple geographies and suppliers. We use derivatives, with terms of no more than three years , to hedge price fluctuations related to a portion of our anticipated commodity purchases, primarily for agricultural products, energy and metals. Derivatives used to hedge commodity price risk that do not qualify for hedge accounting treatment are marked to market each period with the resulting gains and losses recorded in corporate unallocated expenses as either cost of sales or selling, general and administrative expenses, depending on the underlying commodity. These gains and losses are subsequently reflected in division results when the divisions recognize the cost of the underlying commodity in operating profit.
Our commodity derivatives had a total notional value of $1.7 billion as of December 30, 2023 and $1.8 billion as of December 31, 2022.
Foreign Exchange
We are exposed to foreign exchange risks in the international markets in which our products are made, manufactured, distributed or sold. Additionally, we are exposed to foreign exchange risk from net investments in foreign subsidiaries, foreign currency purchases and foreign currency assets and liabilities created in the normal course of business. We manage this risk through sourcing purchases from local suppliers, negotiating contracts in local currencies with foreign suppliers and through the use of derivatives, primarily forward contracts with terms of no more than two years . Exchange rate gains or losses related to foreign currency transactions are recognized as transaction gains or losses on our income statement as incurred. We also use net investment hedges to partially offset the effects of foreign currency on our investments in certain of our foreign subsidiaries.
Our foreign currency derivatives had a total notional value of $3.8 billion as of December 30, 2023 and $3.0 billion as of December 31, 2022. The total notional amount of our debt instruments designated as net investment hedges was $3.0 billion as of December 30, 2023 and $2.9 billion as of December 31, 2022. For foreign currency derivatives that do not qualify for hedge accounting treatment, gains and losses were offset by changes in the underlying hedged items, resulting in no material net impact on earnings.
Interest Rates
We centrally manage our debt and investment portfolios considering investment opportunities and risks, tax consequences and overall financing strategies. We use various interest rate derivative instruments including, but not limited to, interest rate swaps, cross-currency interest rate swaps, Treasury locks and swap locks to manage our overall interest expense and foreign exchange risk. These instruments effectively change the interest rate and currency of specific debt issuances. The notional amount, interest payment and maturity date of our cross-currency interest rate swaps match the principal, interest payment and maturity date of the related debt. Our cross-currency interest rate swaps have terms of no more than
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Our interest rate derivatives had a total notional value of $1.3
As of December 30, 2023, approximately 9 % of total debt was subject to variable rates, compared to approximately 1 %, after the impact of the related interest rate derivative instruments, as of December 31, 2022.
Debt Securities
Held-to-Maturity
Investments in debt securities that we have the positive intent and ability to hold until maturity are classified as held-to-maturity. Highly liquid debt securities with original maturities of three months or less are recorded as cash equivalents. Our held-to-maturity debt securities consist of commercial paper. As of December 30, 2023, we had $309 million of investments in commercial paper recorded in cash and cash equivalents. As of December 31, 2022, we had no investments in held-to-maturity debt securities. Held-to-maturity debt securities are recorded at amortized cost, which approximates fair value, and realized gains or losses are reported in earnings. As of December 30, 2023, gross unrecognized gains and losses and the allowance for expected credit losses were not material
Available-for-Sale
Investments in available-for-sale debt securities are reported at fair value. Changes in the fair value of available-for-sale debt securities are generally recognized in accumulated other comprehensive loss within common shareholders’ equity. Changes in the fair value of available-for-sale debt securities impact earnings only when such securities are sold, or an allowance for expected credit losses or impairment is recognized. We regularly evaluate our investment portfolio for expected credit losses and impairment. In making this judgment, we evaluate, among other things, the extent to which the fair value of a debt security is less than its amortized cost; the financial condition of the issuer, including the credit quality, and any changes thereto; and our intent to sell, or whether we will more likely than not be required to sell, the debt security before recovery of its amortized cost basis. Our assessment of whether a debt security has a credit loss or is impaired could change in the future due to new developments or changes in assumptions related to any particular debt security.
In 2022, we entered into an agreement with Celsius to distribute Celsius energy drinks in the United States (see Note 4 for further information) and invested $550 million in Series A convertible preferred shares issued by Celsius, which included certain conversion and redemption features. The preferred shares automatically convert into Celsius common shares after six years if certain market-based conditions are met, or can be redeemed after seven years. Shares underlying the transaction were priced at $75 per share, and the preferred shares are entitled to a 5 % annual dividend, payable either in cash or in-kind. Given our redemption right, we classified our investment in the convertible preferred stock as an available-for-sale debt security. As of December 31, 2022, the fair value of this investment was classified as Level 2, based primarily on the transaction price. There were no unrealized gains and losses on our investment in the year ended December 31, 2022. In the year ended December 30, 2023, we transferred $558 million from Level 2 to Level 3 as unobservable inputs to the fair value became more significant and subsequently recorded an unrealized gain of $612 million in other comprehensive income and a decrease in the investment of $14 million due to cash dividends received. There were no
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TBG Investment
In the first quarter of 2022, we sold our Tropicana, Naked and other select juice brands to PAI Partners, while retaining a 39
In 2023, we recorded our proportionate share of TBG’s earnings, which includes an impairment of TBG’s indefinite-lived intangible assets, and recorded an other-than-temporary impairment of our investment, both of which resulted in pre-tax impairment charges of $321 million ($243 million after-tax or $0.18 per share), recorded in selling, general and administrative expenses in our PBNA division. We estimated the fair value of our ownership in TBG using discounted cash flows and an option pricing model related to our liquidation preference in TBG, which we categorized as Level 3 (significant unobservable inputs) in the fair value hierarchy.
Recurring Fair Value Measurements
The fair values of our financial assets and liabilities as of December 30, 2023 and December 31, 2022 are categorized as follows:
| 2023 | 2022 | ||||||||||||||||||||||||||||
Fair Value Hierarchy Levels(a) | Assets(a) | Liabilities(a) | Assets(a) | Liabilities(a) | |||||||||||||||||||||||||
Available-for-sale debt securities (b) | 2, 3 | $ | $ | $ | $ | ||||||||||||||||||||||||
Index funds (c) | 1 | $ | $ | $ | $ | ||||||||||||||||||||||||
Prepaid forward contracts (d) | 2 | $ | $ | $ | $ | ||||||||||||||||||||||||
Deferred compensation (e) | 2 | $ | $ | $ | $ | ||||||||||||||||||||||||
Derivatives designated as cash flow hedging instruments: | |||||||||||||||||||||||||||||
Foreign exchange (f) | 2 | $ | $ | $ | $ | ||||||||||||||||||||||||
Interest rate (f) | 2 | ||||||||||||||||||||||||||||
Commodity (g) | 2 | ||||||||||||||||||||||||||||
| $ | $ | $ | $ | ||||||||||||||||||||||||||
Derivatives not designated as hedging instruments: | |||||||||||||||||||||||||||||
Foreign exchange (f) | 2 | $ | $ | $ | $ | ||||||||||||||||||||||||
Commodity (g) | 2 | ||||||||||||||||||||||||||||
| $ | $ | $ | $ | ||||||||||||||||||||||||||
Total derivatives at fair value (h) | $ | $ | $ | $ | |||||||||||||||||||||||||
| Total | $ | $ | $ | $ | |||||||||||||||||||||||||
(a)Fair value hierarchy levels are defined in Note 7. Unless otherwise noted, financial assets are classified on our balance sheet within prepaid expenses and other current assets and other assets. Financial liabilities are classified on our balance sheet within accounts payable and other current liabilities and other liabilities.
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(b)Includes Level 2 assets of $178 million and Level 3 assets of $1,156 million as of December 30, 2023, and Level 2 assets of $660 million as of December 31, 2022. As of December 30, 2023, $1,334 3 million, $104 million and $553 million were classified as cash equivalents, short-term investments and other assets, respectively. The fair values of these Level 2 investments approximate the transaction price and any accrued dividends, as well as the amortized cost. The fair value of our Level 3 investment in Celsius is estimated using probability-weighted discounted future cash flows based on a Monte Carlo simulation using significant unobservable inputs such as an 80 % probability that a certain market-based condition will be met and an average estimated discount rate of 8.1 % based on Celsius’ estimated synthetic credit rating. An increase in the probability that certain market-based conditions will be met or a decrease in the discount rate would result in a higher fair value measurement, while a decrease in the probability that certain market-based conditions will be met or an increase in the discount rate would result in a lower fair value measurement.
(c)Based on the price of index funds. These investments are classified as short-term investments and are used to manage a portion of market risk arising from our deferred compensation liability.
(d)Based primarily on the price of our common stock.
(e)Based on the fair value of investments corresponding to employees’ investment elections.
(f)Based on recently reported market transactions of spot and forward rates.
(g)Primarily based on recently reported market transactions of swap arrangements.
(h)Derivative assets and liabilities are presented on a gross basis on our balance sheet. Amounts subject to enforceable master netting arrangements or similar agreements which are not offset on our balance sheet as of December 30, 2023 and December 31, 2022 were not material . Collateral received or posted against our asset or liability positions was not material . Exchange-traded commodity futures are cash-settled on a daily basis and, therefore, not included in the table.
The carrying amounts of our cash and cash equivalents and short-term investments recorded at amortized cost approximate fair value (classified as Level 2 in the fair value hierarchy) due to their short-term maturity. The fair value of our debt obligations as of December 30, 2023 and December 31, 2022 was $41 billion and $35 billion, respectively, based upon prices of identical or similar instruments in the marketplace, which are considered Level 2 inputs.
Losses/(gains) on our cash flow and net investment hedges are categorized as follows:
| Losses/(Gains) Recognized in Accumulated Other Comprehensive Loss | Losses/(Gains) Reclassified from Accumulated Other Comprehensive Loss into Income Statement(a) | ||||||||||||||||||||||
| 2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||
| Foreign exchange | $ | $ | ( | $ | $ | ( | |||||||||||||||||
| Interest | ( | ( | |||||||||||||||||||||
| Commodity | ( | ( | |||||||||||||||||||||
| Net investment | ( | ||||||||||||||||||||||
| Total | $ | $ | ( | $ | $ | ( | |||||||||||||||||
(a)Foreign exchange derivative losses/gains are included in net revenue and cost of sales. Interest rate derivative losses/gains on cross-currency interest rate swaps are included in selling, general and administrative expenses. Commodity derivative losses/gains are included in either cost of sales or selling, general and administrative expenses, depending on the underlying commodity. See Note 11 for further information.
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Based on current market conditions, we expect to reclassify net losses of $112 million related to our cash flow hedges from accumulated other comprehensive loss within common shareholders’ equity into net income during the next 12 months.
Losses/(gains) recognized in the income statement related to our non-designated hedges are categorized as follows:
| 2023 | 2022 | ||||||||||||||||||||||||||||||||||
| Cost of Sales | Selling, general and administrative expenses | Total | Cost of Sales | Selling, general and administrative expenses | Total | ||||||||||||||||||||||||||||||
| Foreign exchange | $ | ( | $ | $ | $ | $ | ( | $ | ( | ||||||||||||||||||||||||||
| Commodity | ( | ( | ( | ||||||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | ( | $ | ( | $ | ( | ||||||||||||||||||||||||||
Note 10 — Net Income Attributable to PepsiCo per Common Share
The computations of basic and diluted net income attributable to PepsiCo per common share are as follows:
| 2023 | 2022 | 2021 | |||||||||||||||||||||||||||||||||
| Income | Shares(a) | Income | Shares(a) | Income | Shares(a) | ||||||||||||||||||||||||||||||
Basic net income attributable to PepsiCo per common share | $ | $ | $ | ||||||||||||||||||||||||||||||||
Net income available for PepsiCo common shareholders | $ | $ | $ | ||||||||||||||||||||||||||||||||
| Dilutive securities: | |||||||||||||||||||||||||||||||||||
Stock options, RSUs, PSUs and other (b) | |||||||||||||||||||||||||||||||||||
Diluted | $ | $ | $ | ||||||||||||||||||||||||||||||||
Diluted net income attributable to PepsiCo per common share | $ | $ | $ | ||||||||||||||||||||||||||||||||
(a)Weighted-average common shares outstanding (in millions).
(b)The dilutive effect of these securities is calculated using the treasury stock method.
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Note 11 — Accumulated Other Comprehensive Loss Attributable to PepsiCo
The changes in the balances of each component of accumulated other comprehensive loss attributable to PepsiCo are as follows:
| Currency Translation Adjustment | Cash Flow Hedges | Pension and Retiree Medical | Available-for-sale debt securities and other(a) | Accumulated Other Comprehensive Loss Attributable to PepsiCo | |||||||||||||||||||||||||
Balance as of December 26, 2020 (b) | $ | ( | $ | $ | ( | $ | ( | $ | ( | ||||||||||||||||||||
Other comprehensive (loss)/income before reclassifications (c) | ( | ||||||||||||||||||||||||||||
| Amounts reclassified from accumulated other comprehensive loss | ( | ||||||||||||||||||||||||||||
| Net other comprehensive (loss)/income | ( | ||||||||||||||||||||||||||||
| Tax amounts | ( | ( | ( | ( | |||||||||||||||||||||||||
Balance as of December 25, 2021 (b) | ( | ( | ( | ||||||||||||||||||||||||||
Other comprehensive (loss)/income before reclassifications (d) | ( | ( | ( | ||||||||||||||||||||||||||
| Amounts reclassified from accumulated other comprehensive loss | ( | ||||||||||||||||||||||||||||
| Net other comprehensive (loss)/income | ( | ( | ( | ||||||||||||||||||||||||||
| Tax amounts | ( | ( | ( | ( | |||||||||||||||||||||||||
Balance as of December 31, 2022 (b) | ( | ( | ( | ||||||||||||||||||||||||||
Other comprehensive (loss)/income before reclassifications (e) | ( | ( | ( | ( | |||||||||||||||||||||||||
| Amounts reclassified from accumulated other comprehensive loss | |||||||||||||||||||||||||||||
| Net other comprehensive (loss)/income | ( | Ye | ( | ( | ( | ||||||||||||||||||||||||
| Tax amounts | ( | ( | |||||||||||||||||||||||||||
Balance as of December 30, 2023 (b) | $ | ( | $ | ( | $ | ( | $ | $ | ( | ||||||||||||||||||||
(a)The changes primarily represent fair value increases in available-for-sale debt securities, including our investment in Celsius convertible preferred stock in 2023. See Note 9 for further information.
(b)Pension and retiree medical amounts are net of taxes of $1,514 million as of December 26, 2020, $1,283 million as of December 25, 2021, $1,184 million as of December 31, 2022 and $1,282 million as of December 30, 2023.
(c)Currency translation adjustment primarily reflects depreciation of the Turkish lira, Swiss franc and Mexican peso.
(d)Currency translation adjustment primarily reflects depreciation of the Egyptian pound and British pound sterling.
(e)Currency translation adjustment primarily reflects depreciation of the Russian ruble and South African rand, partially offset by the appreciation of the Mexican peso.
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The following table summarizes the reclassifications from accumulated other comprehensive loss to the income statement:
| Amount Reclassified from Accumulated Other Comprehensive Loss | Affected Line Item in the Income Statement | ||||||||||||||||||||||
| 2023 | 2022 | 2021 | |||||||||||||||||||||
| Currency translation: | |||||||||||||||||||||||
| Divestitures | $ | $ | $ | Selling, general and administrative expenses | |||||||||||||||||||
| Cash flow hedges: | |||||||||||||||||||||||
| Foreign exchange contracts | $ | ( | $ | ( | $ | Net revenue | |||||||||||||||||
| Foreign exchange contracts | ( | Cost of sales | |||||||||||||||||||||
| Interest rate derivatives | ( | ||||||||||||||||||||||
| Commodity contracts | ( | ( | Cost of sales | ||||||||||||||||||||
| Commodity contracts | ( | ( | ( | Selling, general and administrative expenses | |||||||||||||||||||
| Net losses/(gains) before tax | ( | ( | |||||||||||||||||||||
| Tax amounts | ( | ||||||||||||||||||||||
| Net losses/(gains) after tax | $ | $ | ( | $ | ( | ||||||||||||||||||
| Pension and retiree medical items: | |||||||||||||||||||||||
| Amortization of net prior service credit | $ | ( | $ | ( | $ | ( | Other pension and retiree medical benefits income | ||||||||||||||||
| Amortization of net losses | Other pension and retiree medical benefits income | ||||||||||||||||||||||
| Settlement/curtailment losses | Other pension and retiree medical benefits income | ||||||||||||||||||||||
| Net losses before tax | |||||||||||||||||||||||
| Tax amounts | ( | ( | ( | ||||||||||||||||||||
| Net losses after tax | $ | $ | $ | ||||||||||||||||||||
| Total net losses reclassified for the year, net of tax | $ | $ | $ | ||||||||||||||||||||
Note 12 — Leases
Lessee
We determine whether an arrangement is a lease at inception. We have operating leases for plants, warehouses, distribution centers, storage facilities, offices and other facilities, as well as machinery and equipment, including fleet. Our leases generally have remaining lease terms of up to 20 years, some of which include options to extend the lease term for up to five years and some of which include options to terminate the lease within one year . We consider these options in determining the lease term used to establish our right-of-use assets and lease liabilities. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants.
As most of our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments.
We have lease agreements that contain both lease and non-lease components. For real estate leases, we account for lease components together with non-lease components (e.g., common-area maintenance).
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Components of lease cost are as follows:
| 2023 | 2022 | 2021 | |||||||||||||||
Operating lease cost (a) | $ | $ | $ | ||||||||||||||
Variable lease cost (b) | $ | $ | $ | ||||||||||||||
Short-term lease cost (c) | $ | $ | $ | ||||||||||||||
(a)Includes right-of-use asset amortization of $570 million, $517 million, and $505 million in 2023, 2022, and 2021, respectively.
(b)Primarily related to adjustments for inflation, common-area maintenance and property tax.
(c)Not recorded on our balance sheet.
In 2023, 2022 and 2021, we recognized gains of $52 million, $175 million and $42 million, respectively, on sale-leaseback transactions with terms under five years.
Supplemental cash flow information and non-cash activity related to our operating leases are as follows:
| 2023 | 2022 | 2021 | |||||||||||||||
| Operating cash flow information: | |||||||||||||||||
Cash paid for amounts included in the measurement of lease liabilities | $ | $ | $ | ||||||||||||||
| Non-cash activity: | |||||||||||||||||
Right-of-use assets obtained in exchange for lease obligations | $ | $ | $ | ||||||||||||||
Supplemental balance sheet information related to our operating leases is as follows:
| Balance Sheet Classification | 2023 | 2022 | ||||||||||||||||||
Right-of-use assets | $ | $ | ||||||||||||||||||
Current lease liabilities | $ | $ | ||||||||||||||||||
Non-current lease liabilities | Other liabilities | $ | $ | |||||||||||||||||
Weighted-average remaining lease term and discount rate for our operating leases are as follows:
| 2023 | 2022 | 2021 | |||||||||||||||
| Weighted-average remaining lease term | |||||||||||||||||
| Weighted-average discount rate | % | % | % | ||||||||||||||
Maturities of lease liabilities by year for our operating leases are as follows:
| 2024 | $ | ||||
| 2025 | |||||
| 2026 | |||||
| 2027 | |||||
| 2028 | |||||
| 2029 and beyond | |||||
| Total lease payments | |||||
| Less: Imputed interest | |||||
| Present value of lease liabilities | $ | ||||
Finance leases were not material as of December 30, 2023, December 31, 2022 and December 25, 2021.
Lessor
We have various arrangements for certain foodservice and vending equipment under which we are the lessor. These leases meet the criteria for operating lease classification. Lease income associated with these leases is not material.
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Note 13 — Acquisitions and Divestitures
Juice Transaction
In the first quarter of 2022, we sold our Tropicana, Naked and other select juice brands to PAI Partners for approximately $3.5 billion in cash, subject to purchase price adjustments, and a 39 % noncontrolling interest in TBG, operating across North America and Europe. The North America portion of the transaction was completed on January 24, 2022 and the Europe portion of the transaction was completed on February 1, 2022. In the United States, PepsiCo acts as the exclusive distributor for TBG’s portfolio of brands for small-format and foodservice customers with chilled DSD. We have significant influence over our investment in TBG and account for our investment under the equity method, recognizing our proportionate share of TBG’s earnings on our income statement (recorded in selling, general and administrative expenses).
As a result of this transaction, in the year ended December 31, 2022, we recorded a gain in our PBNA and Europe divisions (see detailed income statement activity below), including $520 million related to the remeasurement of our 39 % ownership in TBG at fair value using a combination of the transaction price, discounted cash flows and an option pricing model related to our liquidation preference in TBG. In the fourth quarter of 2022, we reached an agreement on final purchase price adjustments for net working capital and net debt amounts as of the transaction close date compared to targeted amounts set forth in the purchase agreement.
A summary of income statement activity related to the Juice Transaction for the year ended December 31, 2022 is as follows:
| PBNA | Europe | Corporate | Total PepsiCo | Provision for income taxes(a) | Net income attributable to PepsiCo | Impact on net income attributable to PepsiCo per common share | ||||||||||||||||||||||||||||||||||||||
| Gain associated with the Juice Transaction | $ | ( | $ | ( | $ | $ | ( | $ | $ | ( | $ | |||||||||||||||||||||||||||||||||
| Acquisition and divestiture-related charges | ( | ( | ||||||||||||||||||||||||||||||||||||||||||
| Operating profit | $ | ( | $ | ( | $ | ( | ( | |||||||||||||||||||||||||||||||||||||
Other pension and retiree medical benefits income (b) | ( | ( | ||||||||||||||||||||||||||||||||||||||||||
| Total Juice Transaction | $ | ( | $ | $ | ( | $ | (c) | |||||||||||||||||||||||||||||||||||||
(a)Includes $186 million of deferred tax expense related to the recognition of our investment in TBG.
(b)Includes $16 million curtailment gain, partially offset by $6 million special termination benefits.
(c)Does not sum due to rounding.
In connection with the sale, we entered into a transition services agreement with PAI Partners, under which we provide certain services to TBG to help facilitate an orderly transition of the business following the sale. In return for these services, TBG is required to pay certain agreed upon fees to reimburse us for our costs without markup.
The Juice Transaction did not meet the criteria to be classified as discontinued operations. As of December 30, 2023 and December 31, 2022, there were no amounts classified as held for sale.
In the year ended December 30, 2023, we recognized impairment charges related to our TBG investment. See Notes 1 and 9 for further information.
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Acquisition and Divestiture-Related Charges
Acquisition and divestiture-related charges primarily include merger and integration charges and costs associated with divestitures. Merger and integration charges include liabilities to support socioeconomic programs in South Africa, gains associated with contingent consideration, employee-related costs, contract termination costs, closing costs and other integration costs. Divestiture-related charges reflect transaction expenses, including consulting, advisory and other professional fees.
A summary of our acquisition and divestiture-related charges is as follows:
| 2023 | 2022 | 2021 | |||||||||||||||
| FLNA | $ | $ | $ | ||||||||||||||
| PBNA | |||||||||||||||||
Europe (a) | ( | ||||||||||||||||
| AMESA | |||||||||||||||||
| APAC | |||||||||||||||||
Corporate (b) | ( | ||||||||||||||||
Total (c) | ( | ||||||||||||||||
| Other pension and retiree medical benefits expense | |||||||||||||||||
| Total acquisition and divestiture-related charges | $ | $ | $ | ( | |||||||||||||
After-tax amount (d) | $ | $ | $ | ( | |||||||||||||
| Impact on net income attributable to PepsiCo per common share | $ | ( | $ | ( | $ | ||||||||||||
(a)Income amount represents adjustments for changes in estimates of previously recorded amounts.
(b)Income amount primarily relates to the acceleration payment made in the fourth quarter of 2021 under the contingent consideration arrangement associated with our acquisition of Rockstar, which is partially offset by divestiture-related charges associated with the Juice Transaction.
(c)Primarily recorded in selling, general and administrative expenses.
(d)The amount in 2021 includes a tax benefit related to contributions to socioeconomic programs in South Africa.
Note 14 — Supply Chain Financing Arrangements
As part of our evolving market practices, we work with our suppliers to optimize our terms and conditions, which include the extension of payment terms. Our current payment terms with a majority of our suppliers generally range from 60 to 90 days, which we deem to be commercially reasonable. We will continue to monitor economic conditions and market practice working with our suppliers to adjust as necessary. We also maintain voluntary supply chain finance agreements with several participating global financial institutions. Under these agreements, our suppliers, at their sole discretion, may elect to sell their accounts receivable with PepsiCo to these participating global financial institutions. Supplier participation in these financing arrangements is voluntary. Our suppliers negotiate their financing agreements directly with the respective global financial institutions and we are not a party to these agreements. These financing arrangements allow participating suppliers to leverage PepsiCo’s creditworthiness in establishing credit spreads and associated costs, which generally provides our suppliers with more favorable terms than they would be able to secure on their own. Neither PepsiCo nor any of its subsidiaries provide any guarantees to any third party in connection with these financing arrangements. We have no economic interest in our suppliers’ decision to participate in these agreements. Our obligations to our suppliers, including amounts due and scheduled payment terms, are not impacted. All outstanding amounts related to suppliers participating in such financing arrangements are recorded within accounts payable and other current liabilities in our consolidated balance sheet. As of both December 30, 2023 and December 31, 2022, $1.7
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Note 15 — Supplemental Financial Information
Balance Sheet
| 2023 | 2022 | 2021 | |||||||||||||||||||||
Accounts and notes receivable (a) | |||||||||||||||||||||||
| Trade receivables | $ | $ | |||||||||||||||||||||
| Other receivables | |||||||||||||||||||||||
| Total | |||||||||||||||||||||||
| Allowance, beginning of year | $ | ||||||||||||||||||||||
Net amounts charged to expense (b) | ( | ||||||||||||||||||||||
Deductions (c) | ( | ( | ( | ||||||||||||||||||||
Other (d) | ( | ( | ( | ||||||||||||||||||||
| Allowance, end of year | $ | ||||||||||||||||||||||
| Accounts and notes receivable, net | $ | $ | |||||||||||||||||||||
| Property, plant and equipment, net | Average Useful Life (Years) | ||||||||||||||||||||||
| Land | $ | $ | |||||||||||||||||||||
| Buildings and improvements | |||||||||||||||||||||||
| Machinery and equipment, including fleet and software | |||||||||||||||||||||||
| Construction in progress | |||||||||||||||||||||||
| Accumulated depreciation | ( | ( | |||||||||||||||||||||
Property, plant and equipment, net (e) | $ | $ | |||||||||||||||||||||
| Depreciation expense | $ | $ | $ | ||||||||||||||||||||
| Other assets | |||||||||||||||||||||||
| Noncurrent notes and accounts receivable | $ | $ | |||||||||||||||||||||
| Deferred marketplace spending | |||||||||||||||||||||||
Pension plans (f) | |||||||||||||||||||||||
Right-of-use assets (g) | |||||||||||||||||||||||
Other investments (h) | |||||||||||||||||||||||
| Other | |||||||||||||||||||||||
| Total | $ | $ | |||||||||||||||||||||
| Accounts payable and other current liabilities | |||||||||||||||||||||||
Accounts payable (i) | $ | $ | |||||||||||||||||||||
| Accrued marketplace spending | |||||||||||||||||||||||
| Accrued compensation and benefits | |||||||||||||||||||||||
| Dividends payable | |||||||||||||||||||||||
Current lease liabilities (g) | |||||||||||||||||||||||
Other current liabilities (j) | |||||||||||||||||||||||
| Total | $ | $ | |||||||||||||||||||||
(a)Increase primarily reflects strong revenue performance across much of our portfolio in 2023.
(b)2021 includes reductions in allowance for expected credit losses related to COVID-19 pandemic recorded in 2020.
(c)Includes accounts written off.
(d)Includes adjustments related primarily to currency translation and other adjustments.
(e)Change is driven by increase in capital spending, partially offset by depreciation.
(f)See Note 7 for further information.
(g)See Note 12 for further information.
(h)Increase in 2023 primarily reflects unrealized pre-tax gains on our investment in Celsius convertible preferred stock. See Note 9 for further information.
(i)Increase reflects higher capital expenditures and commodity costs in 2023.
(j)Increase primarily reflects change in income tax provision. See Note 5 for further information.
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Statement of Cash Flows
| 2023 | 2022 | 2021 | |||||||||||||||
Interest paid (a) | $ | $ | $ | ||||||||||||||
Income taxes paid, net of refunds (b) | $ | $ | $ | ||||||||||||||
(a)2022 excludes the premiums paid in accordance with the debt transactions. 2021 excludes the charge related to cash tender offers. See Note 8 for further information.
(b)In each of 2023, 2022 and 2021, includes tax payments of $309 million related to the TCJ Act.
Supplemental Non-Cash Activity
| 2023 | 2022 | 2021 | |||||||||||||||
| Debt discharged via legal defeasance | $ | $ | $ | ||||||||||||||
The following table provides a reconciliation of cash and cash equivalents and restricted cash as reported within the balance sheet to the same items as reported in the cash flow statement:
| 2023 | 2022 | ||||||||||
| Cash and cash equivalents | $ | $ | |||||||||
Restricted cash included in other assets (a) | |||||||||||
| Total cash and cash equivalents and restricted cash | $ | $ | |||||||||
(a)Primarily relates to collateral posted against certain of our derivative positions.
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Report of Independent Registered Public Accounting Firm
To the Shareholders and Board of Directors
PepsiCo, Inc.:
Opinions on the Consolidated Financial Statements and Internal Control Over Financial Reporting
We have audited the accompanying Consolidated Balance Sheet of PepsiCo, Inc. and Subsidiaries (the Company) as of December 30, 2023 and December 31, 2022, the related Consolidated Statements of Income, Comprehensive Income, Cash Flows, and Equity for each of the fiscal years in the three-year period ended December 30, 2023, and the related notes (collectively, the consolidated financial statements). We also have audited the Company’s internal control over financial reporting as of December 30, 2023, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 30, 2023 and December 31, 2022, and the results of its operations and its cash flows for each of the fiscal years in the three-year period ended December 30, 2023, in conformity with U.S. generally accepted accounting principles. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 30, 2023 based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
Basis for Opinions
The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Annual Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s consolidated financial statements and an opinion on the Company’s internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.
Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.
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Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
Sales incentive accruals
As discussed in Note 2 to the consolidated financial statements, the Company offers sales incentives and discounts through various programs to customers and consumers. A number of the sales incentives are based on annual targets, resulting in the need to accrue for the expected liability. These incentives are accrued for in the “Accounts payable and other current liabilities” line on the balance sheet. These accruals are based on sales incentive agreements, expectations regarding customer and consumer participation and performance levels, and historical experience and trends.
We identified the evaluation of certain of the Company’s sales incentive accruals as a critical audit matter. Subjective and complex auditor judgment is required in evaluating these sales incentive accruals as a result of the timing difference between when the product is delivered and when the incentive is settled. This specifically related to (1) forecasted customer and consumer participation and performance level assumptions underlying the accrual, and (2) the impact of historical experience and trends.
The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls related to the sales incentive process, including controls related to (1) the accrual methodology, (2) assumptions around forecasted customer and consumer participation, (3) performance levels, and (4) monitoring of actual sales incentives incurred compared to estimated sales incentives in respect of historical periods. To evaluate the timing and amount of certain accrued sales incentives we (1) analyzed the accrual by sales incentive type as compared to historical trends to identify specific sales incentives that may require additional testing, (2) recalculated expenses and closing accruals on a sample basis,
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based on volumes sold and terms of the sales incentives, (3) assessed the Company’s ability to accurately estimate its sales incentive accrual by comparing previously established accruals to actual settlements, and (4) tested a sample of settlements or claims that occurred after period end, and compared them to the recorded sales incentive accrual.
Carrying value of certain reacquired and acquired franchise rights and SodaStream goodwill
As discussed in Notes 2 and 4 to the consolidated financial statements, the Company performs impairment testing of its goodwill and other indefinite-lived intangible assets on an annual basis during the third quarter of each fiscal year or more frequently if events or changes in circumstances indicate that it is more likely than not that an impairment exists. The carrying value of other indefinite-lived intangible assets as of December 30, 2023 was $13.7 billion, which represents 13.7% of total assets, and includes certain PepsiCo Beverages North America’s (PBNA) reacquired and acquired franchise rights, which had a carrying value of $8.7 billion as of December 30, 2023. The carrying value of goodwill as of December 30, 2023 was $17.7 billion, which represents 17.6% of total assets, and includes goodwill related to the SodaStream reporting unit in Europe.
We identified the assessment of the carrying value of PBNA’s reacquired and acquired franchise rights and SodaStream goodwill in Europe as a critical audit matter. The impairment analysis of these indefinite-lived intangible assets required significant auditor judgment to evaluate the Company’s forecasted revenue and profitability levels, including the expected long-term growth rates and the selection of the discount rates to be applied to the projected cash flows. Significant auditor judgment was necessary to assess the subjective and uncertain impact of competitive operating and macroeconomic factors on future levels of revenue, operating profit and cash flows.
The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls related to the goodwill and other indefinite-lived intangible assets impairment process, including controls related to the development of forecasted revenue, profitability levels, expected long-term growth rates, and selection of the discount rates to be applied to the projected cash flows used to estimate the fair value of the goodwill and other indefinite-lived intangible assets. We also evaluated the sensitivity of the Company’s conclusion related to changes in assumptions, including the assessment of changes in assumptions from prior periods. To assess the Company’s ability to accurately forecast, we compared the Company’s historical forecasted results to actual results. We compared forecasted revenue and profitability levels in the cash flow projections used in the impairment tests with available external industry data and other internal information. We involved valuation professionals with specialized skills and knowledge, who assisted in evaluating (1) the long-term growth rates used in the impairment tests by comparing against economic data and information specific to the respective assets, including projected long-term nominal Gross Domestic Product growth in the respective local countries, and (2) the discount rates used in the impairment tests by comparing them against discount rates that were independently developed using publicly available market data, including that of comparable companies.
Unrecognized tax benefits
As discussed in Note 5 to the consolidated financial statements, the Company’s global operating model gives rise to income tax obligations in the United States and in certain foreign jurisdictions in which it operates. As of December 30, 2023, the Company recorded reserves for unrecognized tax benefits of $2.1 billion. The Company establishes reserves if it believes that certain positions taken in its tax returns are subject to challenge and the Company likely will not succeed, even though the Company believes the tax return position is supportable under the tax law. The Company adjusts
115
these reserves, as well as the related interest, in light of new information, such as the progress of a tax examination, new tax law, relevant court rulings or tax authority settlements.
We identified the evaluation of certain of the Company’s unrecognized tax benefits as a critical audit matter because the application of tax law and interpretation of a tax authority’s settlement history is complex and involves subjective judgment. Such judgments impact both the timing and amount of the reserves that are recognized, including judgments about re-measuring liabilities for positions taken in prior years’ tax returns in light of new information.
The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls related to the unrecognized tax benefits process, including controls to (1) identify uncertain income tax positions, (2) evaluate the tax law and tax authority’s settlement history used to estimate the unrecognized tax benefits, and (3) monitor for new information that may give rise to changes to the existing unrecognized tax benefits, such as progress of a tax examination, new tax law or tax authority settlements. We involved tax and valuation professionals with specialized skills and knowledge, who assisted in assessing the unrecognized tax benefits by (1) evaluating the Company’s tax structure and transactions, including transfer pricing arrangements, and (2) assessing the Company’s interpretation of existing tax law as well as new and amended tax laws, tax positions taken, associated external counsel opinions, information from tax examinations, relevant court rulings and tax authority settlements.
/s/ KPMG LLP
We have served as the Company’s auditor since 1990.
February 8, 2024
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GLOSSARY
Acquisitions and divestitures: mergers and acquisitions activity, as well as divestitures and other structural changes, including changes in ownership or control in consolidated subsidiaries and nonconsolidated equity investees.
Bottler Case Sales (BCS): measure of physical beverage volume shipped to retailers and independent distributors from both PepsiCo and our independent bottlers.
Bottler funding: financial incentives we give to our independent bottlers to assist in the distribution and promotion of our beverage products.
Concentrate Shipments and Equivalents (CSE): measure of our physical beverage volume shipments to independent bottlers.
Constant currency: financial results assuming constant foreign currency exchange rates used for translation based on the rates in effect for the comparable prior-year period. In order to compute our constant currency results, we multiply or divide, as appropriate, our current year U.S. dollar results by the current year average foreign exchange rates and then multiply or divide, as appropriate, those amounts by the prior year average foreign exchange rates.
Consumers: people who eat and drink our products.
CSD: carbonated soft drinks.
Customers: authorized independent bottlers, distributors and retailers.
Direct-Store-Delivery (DSD): delivery system used by us, our independent bottlers and our distributors to deliver beverages and convenient foods directly to retail stores where our products are merchandised.
Effective net pricing: reflects the year-over-year impact of discrete pricing actions, sales incentive activities and mix resulting from selling varying products in different package sizes and in different countries.
Free cash flow: net cash from operating activities less capital spending, plus sales of property, plant and equipment.
Independent bottlers: customers to whom we have granted exclusive contracts to sell and manufacture certain beverage products bearing our trademarks within a specific geographical area.
Mark-to-market net impact: change in market value for commodity derivative contracts that we purchase to mitigate the volatility in costs of energy and raw materials that we consume. The market value is determined based on prices on national exchanges and recently reported transactions in the marketplace.
NCB: non-carbonated beverage.
Organic: a measure that adjusts for the impacts of foreign exchange translation, acquisitions and divestitures, and where applicable, the impact of the 53rd reporting week. In excluding the impact of foreign exchange translation, we assume constant foreign exchange rates used for translation based on the rates in effect for the comparable prior-year period. See the definition of “Constant currency” for further information.
Total marketplace spending: includes sales incentives and discounts offered through various programs to our customers, consumers or independent bottlers, as well as advertising and other marketing activities.
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Transaction gains and losses: the impact on our consolidated financial statements of exchange rate changes arising from specific transactions.
Translation adjustment: the impact of converting our foreign affiliates’ financial statements into U.S. dollars for the purpose of consolidating our financial statements.
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Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
Included in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Our Business Risks.”
Item 8. Financial Statements and Supplementary Data.
See “Item 15. Exhibits and Financial Statement Schedules.”
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
Not applicable.
Item 9A. Controls and Procedures.
(a) Disclosure Controls and Procedures. As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures, as such term is defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the Exchange Act). Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that as of the end of the period covered by this report our disclosure controls and procedures were effective to ensure that information required to be disclosed by us in reports we file or submit under the Exchange Act is (1) recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms, and (2) accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.
(b) Management’s Annual Report on Internal Control over Financial Reporting. Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rule 13a-15(f) of the Exchange Act. Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based upon criteria established in Internal Control – Integrated Framework (2013) by the Committee of Sponsoring Organizations of the Treadway Commission. Based on that evaluation, our management concluded that our internal control over financial reporting was effective as of December 30, 2023.
Attestation Report of the Registered Public Accounting Firm. KPMG LLP, an independent registered public accounting firm, has audited the consolidated financial statements included in this Annual Report on Form 10-K and, as part of their audit, has issued their report, included herein, on the effectiveness of our internal control over financial reporting.
(c) Changes in Internal Control over Financial Reporting. During our fourth quarter of 2023, we continued migrating certain of our financial processing systems to an Enterprise Resource Planning (ERP) solution. These systems implementations are part of our ongoing global business transformation initiative, and we plan to continue implementing such systems throughout other parts of our businesses in phases over the next several years. In connection with these ERP implementations, we are updating and will continue to update our internal control over financial reporting, as necessary, to accommodate modifications to our business processes and accounting procedures. During 2023, we continued implementing these systems, resulting in changes that materially affected our internal control over financial reporting. These system implementations did not have an adverse effect, nor do we expect will have an adverse effect, on our internal control over financial reporting. In addition, in connection with our 2019 multi-year productivity plan, we continue to migrate to shared business models across our operations to further simplify, harmonize and automate processes. In connection with our 2019 multi-year
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productivity plan and resulting business process changes, we continue to enhance the design and documentation of our internal control over financial reporting processes, to maintain effective controls over our financial reporting. These business process changes have not materially affected, and we do not expect them to materially affect, our internal control over financial reporting.
Except with respect to the continued implementation of ERP systems, there have been no changes in our internal control over financial reporting during our fourth quarter of 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. We will continue to assess the impact on our internal control over financial reporting as we continue to implement our ERP solution and our 2019 multi-year productivity plan.
Item 9B. Other Information.
During the 16 weeks ended December 30, 2023, none of our directors or executive officers adopted, modified or terminated a “Rule 10b5-1 trading arrangement” or a “non-Rule 10b5-1 trading arrangement” as such terms are defined under Item 408 of Regulation S-K.
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.
Not applicable.
PART III
Item 10. Directors, Executive Officers and Corporate Governance.
Information about our directors and persons nominated to become directors is contained under the caption “Election of Directors” in our Proxy Statement for our 2024 Annual Meeting of Shareholders to be filed with the SEC within 120 days of the year ended December 30, 2023 (the 2024 Proxy Statement) and is incorporated herein by reference. Information about our executive officers is reported under the caption “Information About Our Executive Officers” in Part I of this report.
Information on beneficial ownership reporting compliance will be contained under the caption “Ownership of PepsiCo Common Stock - Delinquent Section 16(a) Reports,” if applicable, in our 2024 Proxy Statement and is incorporated herein by reference.
We have a written code of conduct that applies to all of our employees, including our Chairman of the Board of Directors and Chief Executive Officer, Chief Financial Officer and Controller, and to our Board of Directors. Our Global Code of Conduct is distributed to all employees and is available on our website at http://www.pepsico.com. A copy of our Global Code of Conduct may be obtained free of charge by writing to Investor Relations, PepsiCo, Inc., 700 Anderson Hill Road, Purchase, New York 10577. Any amendment to our Global Code of Conduct and any waiver applicable to our executive officers or senior financial officers will be posted on our website within the time period required by the SEC and applicable rules of The Nasdaq Stock Market LLC.
Information about the procedures by which security holders may recommend nominees to our Board of Directors can be found in our 2024 Proxy Statement under the caption “Board Composition and Refreshment – Shareholder Recommendations and Nominations of Director Candidates” and is incorporated herein by reference.
Information concerning the composition of the Audit Committee and our Audit Committee financial experts is contained in our 2024 Proxy Statement under the caption “Corporate Governance at PepsiCo – Committees of the Board of Directors – Audit Committee” and is incorporated herein by reference.
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Item 11. Executive Compensation.
Information about director and executive officer compensation, Compensation Committee interlocks and the Compensation Committee Report is contained in our 2024 Proxy Statement under the captions “2023 Director Compensation,” “Executive Compensation,” “Corporate Governance at PepsiCo – Committees of the Board of Directors – Compensation Committee – Compensation Committee Interlocks and Insider Participation” and “Executive Compensation – Compensation Committee Report” and is incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
Information with respect to securities authorized for issuance under equity compensation plans can be found under the caption “Executive Compensation – Securities Authorized for Issuance Under Equity Compensation Plans” in our 2024 Proxy Statement and is incorporated herein by reference.
Information on the number of shares of PepsiCo Common Stock beneficially owned by each director and named executive officer, by all directors and executive officers as a group and on each beneficial owner of more than 5% of PepsiCo Common Stock is contained under the caption “Ownership of PepsiCo Common Stock” in our 2024 Proxy Statement and is incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions, and Director Independence.
Information with respect to certain relationships and related transactions and director independence is contained under the captions “Corporate Governance at PepsiCo – Related Person Transactions” and “Corporate Governance at PepsiCo – Director Independence” in our 2024 Proxy Statement and is incorporated herein by reference.
Item 14. Principal Accounting Fees and Services.
Information on our Audit Committee’s pre-approval policy and procedures for audit and other services and information on our principal accountant fees and services is contained in our 2024 Proxy Statement under the caption “Ratification of Appointment of Independent Registered Public Accounting Firm – Audit and Other Fees” and is incorporated herein by reference.
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PART IV
Item 15. Exhibits and Financial Statement Schedules.
| (a)1. | Financial Statements | ||||
| The following consolidated financial statements of PepsiCo, Inc. and its affiliates are included herein by reference to the pages indicated on the index appearing in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations”: | |||||
Consolidated Statement of Income – Fiscal years ended December 30, 2023, December 31, 2022 and December 25, 2021 | |||||
Consolidated Statement of Comprehensive Income – Fiscal years ended December 30, 2023, December 31, 2022 and December 25, 2021 | |||||
Consolidated Statement of Cash Flows – Fiscal years ended December 30, 2023, December 31, 2022 and December 25, 2021 | |||||
Consolidated Balance Sheet – December 30, 2023 and December 31, 2022 | |||||
Consolidated Statement of Equity – Fiscal years ended December 30, 2023, December 31, 2022 and December 25, 2021 | |||||
| Notes to the Consolidated Financial Statements, and | |||||
Report of Independent Registered Public Accounting Firm (PCAOB ID: | |||||
| (a)2. | Financial Statement Schedules | ||||
| These schedules are omitted because they are not required or because the information is set forth in the financial statements or the notes thereto. | |||||
| (a)3. | Exhibits | ||||
| See Index to Exhibits. | |||||
Item 16. Form 10-K Summary.
None.
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INDEX TO EXHIBITS
ITEM 15(a)(3)
The following is a list of the exhibits filed as part of this Form 10-K. The documents incorporated by reference can be viewed on the SEC’s website at http://www.sec.gov.
EXHIBIT
| 3.1 | ||||||||
| 3.2 | ||||||||
| 4.1 | PepsiCo, Inc. agrees to furnish to the Securities and Exchange Commission, upon request, a copy of any instrument, not otherwise filed herewith, defining the rights of holders of long-term debt of PepsiCo, Inc. and its consolidated subsidiaries and for any of its unconsolidated subsidiaries for which financial statements are required to be filed with the Securities and Exchange Commission. | |||||||
| 4.2 | ||||||||
| 4.3 | ||||||||
| 4.4 | ||||||||
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| 4.9 | ||||||||
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| 4.12 | ||||||||
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| 4.13 | ||||||||
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| 4.21 | ||||||||
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| 4.29 | ||||||||
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| 4.30 | ||||||||
| 4.31 | ||||||||
| 4.32 | ||||||||
| 4.33 | ||||||||
| 4.34 | ||||||||
| 4.35 | ||||||||
| 4.36 | ||||||||
| 4.37 | ||||||||
| 4.38 | ||||||||
| 4.39 | ||||||||
| 4.40 | ||||||||
| 4.41 | ||||||||
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| 4.46 | ||||||||
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| 4.47 | ||||||||
| 4.48 | ||||||||
| 4.49 | ||||||||
| 4.50 | ||||||||
| 4.51 | ||||||||
| 4.52 | ||||||||
| 4.53 | ||||||||
| 4.54 | ||||||||
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| 4.58 | ||||||||
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| 4.60 | ||||||||
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| 4.63 | ||||||||
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| 4.64 | ||||||||
| 4.65 | ||||||||
| 4.66 | ||||||||
| 4.67 | ||||||||
| 4.68 | ||||||||
| 4.69 | ||||||||
| 4.70 | ||||||||
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| 10.1 | ||||||||
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| 10.21 | ||||||||
| 10.22 | ||||||||
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| 10.24 | ||||||||
| 21 | ||||||||
| 23 | ||||||||
| 24 | ||||||||
| 31 | ||||||||
| 32 | ||||||||
| 97 | ||||||||
| 99.1 | ||||||||
| 99.2 | ||||||||
| 101 | The following materials from PepsiCo, Inc.’s Annual Report on Form 10-K for the fiscal year ended December 30, 2023 formatted in iXBRL (Inline eXtensible Business Reporting Language): (i) the Consolidated Statements of Income, (ii) the Consolidated Statements of Comprehensive Income, (iii) the Consolidated Statements of Cash Flows, (iv) the Consolidated Balance Sheets, (v) the Consolidated Statements of Equity and (vi) Notes to the Consolidated Financial Statements. | |||||||
| 104 | The cover page from the Company’s Annual Report on Form 10-K for the fiscal year ended December 30, 2023, formatted in Inline XBRL and contained in Exhibit 101. | |||||||
*Management contracts and compensatory plans or arrangements required to be filed as exhibits pursuant to Item 15(a)(3) of this report.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, PepsiCo has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Dated: February 8, 2024
| PepsiCo, Inc. | ||||||||
| By: | /s/ Ramon L. Laguarta | |||||||
| Ramon L. Laguarta | ||||||||
| Chairman of the Board of Directors and Chief Executive Officer | ||||||||
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Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of PepsiCo and in the capacities and on the date indicated.
| SIGNATURE | TITLE | DATE | ||||||
| /s/ Ramon L. Laguarta | Chairman of the Board of Directors | February 8, 2024 | ||||||
| Ramon L. Laguarta | and Chief Executive Officer | |||||||
| /s/ James T. Caulfield | Executive Vice President | February 8, 2024 | ||||||
| James T. Caulfield | and Chief Financial Officer | |||||||
| /s/ Marie T. Gallagher | Senior Vice President and Controller | February 8, 2024 | ||||||
| Marie T. Gallagher | (Principal Accounting Officer) | |||||||
| /s/ Segun Agbaje | Director | February 8, 2024 | ||||||
| Segun Agbaje | ||||||||
| /s/ Jennifer Bailey | Director | February 8, 2024 | ||||||
| Jennifer Bailey | ||||||||
| /s/ Cesar Conde | Director | February 8, 2024 | ||||||
| Cesar Conde | ||||||||
| /s/ Ian M. Cook | Director | February 8, 2024 | ||||||
| Ian M. Cook | ||||||||
| /s/ Edith W. Cooper | Director | February 8, 2024 | ||||||
| Edith W. Cooper | ||||||||
| /s/ Susan M. Diamond | Director | February 8, 2024 | ||||||
| Susan M. Diamond | ||||||||
| /s/ Dina Dublon | Director | February 8, 2024 | ||||||
| Dina Dublon | ||||||||
| /s/ Michelle Gass | Director | February 8, 2024 | ||||||
| Michelle Gass | ||||||||
| /s/ Dave J. Lewis | Director | February 8, 2024 | ||||||
| Dave J. Lewis | ||||||||
| /s/ David C. Page | Director | February 8, 2024 | ||||||
| David C. Page | ||||||||
| /s/ Robert C. Pohlad | Director | February 8, 2024 | ||||||
| Robert C. Pohlad | ||||||||
| /s/ Daniel Vasella | Director | February 8, 2024 | ||||||
| Daniel Vasella | ||||||||
| /s/ Darren Walker | Director | February 8, 2024 | ||||||
| Darren Walker | ||||||||
| /s/ Alberto Weisser | Director | February 8, 2024 | ||||||
| Alberto Weisser | ||||||||
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Exhibit 4.70
Description of Securities
Registered Pursuant to Section 12 of the Securities Exchange Act of 1934
Registered Pursuant to Section 12 of the Securities Exchange Act of 1934
As used below, the terms “PepsiCo,” the “Company,” “we,” “us,” and “our” refer to PepsiCo, Inc., as issuer of the following securities registered pursuant to Section 12 of the Securities Exchange Act of 1934, as amended: (i) common stock, par value one and two-thirds cents (1-2/3 cents) per share (the “common stock”), (ii) 0.250% Senior Notes due 2024 (the “2024 notes”), (iii) 2.625% Senior Notes due 2026 (the “2026 notes”), (iv) 0.750% Senior Notes due 2027 (the “2027 notes”), (v) 0.500% Senior Notes due 2028 (the “May 2028 notes”), (vi) 0.875% Senior Notes due 2028 (the “July 2028 notes”), (vii) 3.200% Senior Notes due 2029 (the “2029 notes”), (viii) 1.125% Senior Notes due 2031 (the “2031 notes”), (ix) 0.400% Senior Notes due 2032 (the “2032 notes”), (x) 0.750% Senior Notes due 2033 (the “2033 notes”), (xi) 3.550% Senior Notes due 2034 (the “2034 notes,” and together with the 2029 notes, the “sterling notes”), (xii) 0.875% Senior Notes due 2039 (the “2039 notes”) and (xiii) 1.050% Senior Notes due 2050 (the “2050 notes,” and together with the 2024 notes, 2026 notes, 2027 notes, May 2028 notes, July 2028 notes, 2031 notes, 2032 notes, 2033 notes and 2039 notes, the “euro notes,” and the euro notes together with the sterling notes, the “notes”).
DESCRIPTION OF COMMON STOCK
The following description of our common stock is based upon our Amended and Restated Articles of Incorporation, effective as of May 1, 2019 (“Articles of Incorporation”), our By-Laws, as amended and restated, effective as of April 15, 2020 (“By-Laws”) and applicable provisions of law. We have summarized certain portions of the Articles of Incorporation and By-Laws below. The summary is not complete. The Articles of Incorporation and By-Laws are incorporated by reference as exhibits to the Annual Report on Form 10-K to which this exhibit is a part. You should read the Articles of Incorporation and By-Laws for the provisions that are important to you.
General
Our Articles of Incorporation authorize us to issue 3,600,000,000 shares of common stock, par value one and two-thirds cents (1-2/3 cents) per share. As of February 2, 2024, there were 1,374,429,271 shares of common stock outstanding which were held of record by 94,999 shareholders.
Voting Rights. Each holder of a share of our common stock is entitled to one vote for each share held of record on the applicable record date on each matter submitted to a vote of shareholders. Action on a matter generally requires that the votes cast in favor of the action exceed the votes cast in opposition. A plurality vote is required in an election of the Board of Directors where the number of director nominees exceeds the number of directors to be elected.
Dividend Rights. Holders of our common stock are entitled to receive dividends as may be declared from time to time by PepsiCo’s Board of Directors out of funds legally available therefor.
Rights Upon Liquidation. Holders of our common stock are entitled to share pro rata, upon any liquidation, dissolution or winding up of PepsiCo, in all remaining assets available for distribution to shareholders after payment or providing for PepsiCo’s liabilities.
Preemptive Rights. Holders of our common stock do not have the right to subscribe for, purchase or receive new or additional common stock or other securities.
Transfer Agent and Registrar
Computershare Trust Company, N.A. is the transfer agent and registrar for our common stock.
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Stock Exchange Listing
The Nasdaq Global Select Market is the principal market for our common stock, where it is listed under the symbol “PEP,” and our common stock is also listed on the SIX Swiss Exchange.
Certain Provisions of PepsiCo’s Articles of Incorporation and By-Laws; Director Indemnification Agreements
Advance Notice of Proposals and Nominations. Our By-Laws provide that shareholders must provide timely written notice to bring business before an annual meeting of shareholders or to nominate candidates for election as directors at an annual meeting of shareholders. Notice for an annual meeting is generally timely if it is received at our principal office not less than 90 days nor more than 120 days prior to the first anniversary of the preceding year’s annual meeting. However, if the date of the annual meeting is advanced by more than 30 days or delayed more than 60 days from this anniversary date, or if no annual meeting was held in the preceding year, such notice by the shareholder must be delivered not earlier than the 120th day prior to the annual meeting and not later than the close of business on the later of the 90th day prior to such annual meeting or the tenth day following the day on which public announcement of the date of such annual meeting was first made. Shareholders utilizing “proxy access” must meet separate deadlines. The By-Laws also specify the form and content of a shareholder’s notice. These provisions may prevent shareholders from bringing matters before an annual meeting of shareholders or from nominating candidates for election as directors at an annual meeting of shareholders.
Proxy Access. Our By-Laws contain “proxy access” provisions which give an eligible shareholder (or a group of up to 20 shareholders aggregating their shares) that has owned 3% or more of the outstanding common stock continuously for at least three years the right to nominate the greater of two nominees and 20% of the number of directors to be elected at the applicable annual general meeting, and to have those nominees included in our proxy materials, subject to the other terms and conditions of our By-Laws.
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Special Meetings. A special meeting of the shareholders may be called by the Chairman of the Board, by resolution of the Board or by our corporate secretary upon written request of one or more shareholders holding shares of record representing at least 20% in the aggregate of our outstanding common stock entitled to vote at such meeting. Any such special meeting called at the request of our shareholders will be held at such date, time and place (if any) as may be fixed by our Board, provided that the date of such special meeting may not be more than 90 days from the receipt of such request by the corporate secretary. The By-Laws specify the form and content of a shareholder’s request for a special meeting.
Indemnification of Directors, Officers and Employees. Our By-Laws provide that unless the Board determines otherwise, we shall indemnify, to the full extent permitted by law, any person who was or is, or who is threatened to be made, a party to an action, suit or proceeding (including appeals), whether civil, criminal, administrative, investigative or arbitrative, by reason of the fact that such person, such person’s testator or intestate, is or was one of our directors, officers or employees, or is or was serving at our request as a director, officer or employee of another enterprise, against expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with such action, suit or proceeding. Pursuant to our By-Laws this indemnification may, at the Board’s discretion, also include advancement of expenses prior to the final disposition of such action, suit or proceeding.
In addition, we have entered into indemnification agreements with each of our independent directors, pursuant to which we have agreed to indemnify and hold harmless, to the full extent permitted by law, each director against any and all liabilities and assessments (including attorneys’ fees and other costs, expenses and obligations) arising out of or related to any threatened, pending or completed action, suit, proceeding, inquiry or investigation, whether civil, criminal, administrative, or other, including, but not limited to, judgments, fines, penalties and amounts paid in settlement (whether with or without court approval), and any interest, assessments, excise taxes or other charges paid or payable in connection with or in respect of any of the foregoing, incurred by the independent director and arising out of his status as a director or
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member of a committee of our Board, or by reason of anything done or not done by the director in such capacities. After receipt of an appropriate request by an independent director, we will also advance all expenses, costs and other obligations (including attorneys’ fees) arising out of or related to such matters. We will not be liable for payment of any liability or expense incurred by an independent director on account of acts which, at the time taken, were known or believed by such director to be clearly in conflict with our best interests.
Certain Anti-Takeover Effects of North Carolina Law
The North Carolina Shareholder Protection Act generally requires the affirmative vote of 95% of a public corporation’s voting shares to approve a “business combination” with any entity that a majority of continuing directors determines beneficially owns, directly or indirectly, more than 20% of the voting shares of the corporation (or ever owned, directly or indirectly, more than 20% and is still an “affiliate” of the corporation) unless the fair price provisions and the procedural provisions of the North Carolina Shareholder Protection Act are satisfied.
“Business combination” is defined by the North Carolina Shareholder Protection Act as (i) any merger, consolidation or conversion of a corporation with or into any other entity, or (ii) any sale or lease of all or any substantial part of the corporation’s assets to any other entity, or (iii) any payment, sale or lease to the corporation or any subsidiary thereof in exchange for securities of the corporation of any assets having an aggregate fair market value equal to or greater than $5,000,000 of any other entity.
The North Carolina Shareholder Protection Act contains provisions that allowed a corporation to “opt out” of the applicability of the North Carolina Shareholder Protection Act’s voting provisions within specified time periods that generally have expired. The Act applies to PepsiCo since we did not opt out within these time periods.
This statute could discourage a third party from making a partial tender offer or otherwise attempting to obtain a substantial position in our equity securities or seeking to obtain control of us. It also might limit the price that certain investors might be willing to pay in the future for our
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shares of common stock and may have the effect of delaying or preventing a change of control of us.
DESCRIPTION OF NOTES
We have previously filed a registration statement on Form S-3 (File No. 333-177307), which was filed with the Securities and Exchange Commission (the “SEC”) on October 13, 2011 and covers the issuance of the 2026 notes, a registration statement on Form S-3 (File No. 333-197640), which was filed with the SEC on July 25, 2014 and covers the issuance of the July 2028 notes, a registration statement on Form S-3 (File No. 333-216082), which was filed with the SEC on February 15, 2017 and covers the issuance of the 2027 notes, 2031 notes and 2039 notes and a registration statement on Form S-3 (File No. 333-234767), which was filed with the SEC on November 18, 2019 and covers the issuance of the sterling notes, 2024 notes, May 2028 notes, 2032 notes, 2033 notes and 2050 notes.
The notes were issued under an indenture dated as of May 21, 2007 between us and The Bank of New York Mellon, as trustee (the “indenture”). Below we have summarized certain terms and provisions of the indenture. The summary is not complete. The indenture has been incorporated by reference as an exhibit to the Annual Report on Form 10-K to which this exhibit is a part. You should read the indenture for the provisions which may be important to you. The indenture is subject to and governed by the Trust Indenture Act of 1939, as amended.
General
Principal Amounts; Interest Payments and Record Dates; Listing. The 2024 notes were initially limited to an aggregate principal amount of €1,000,000,000. The 2024 notes bear interest, payable annually on each May 6, to the persons in whose names such notes are registered at the close of business on April 22 (whether or not a business day), immediately preceding such May 6. The 2024 notes will mature on May 6, 2024. The 2024 notes are listed on the Nasdaq Stock Market under the symbol “PEP24”.
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The 2026 notes were initially limited to an aggregate principal amount of €500,000,000. The 2026 notes bear interest, payable annually on each April 28, to the persons in whose names such notes are registered at the close of business on April 13 (whether or not a business day), immediately preceding such April 28. The 2026 notes will mature on April 28, 2026. The 2026 notes are listed on the Nasdaq Stock Market under the symbol “PEP26”.
The 2027 notes were initially limited to an aggregate principal amount of €500,000,000. The 2027 notes bear interest, payable annually on each March 18, to the persons in whose names such notes are registered at the close of business on March 3 (whether or not a business day), immediately preceding such March 18. The 2027 notes will mature on March 18, 2027. The 2027 notes are listed on the Nasdaq Stock Market under the symbol “PEP27”.
The May 2028 notes were initially limited to an aggregate principal amount of €1,000,000,000. The May 2028 notes bear interest, payable annually on each May 6, to the persons in whose names such notes are registered at the close of business on April 22 (whether or not a business day), immediately preceding such May 6. The May 2028 notes will mature on May 6, 2028. The May 2028 notes are listed on the Nasdaq Stock Market under the symbol “PEP28a”.
The July 2028 notes were initially limited to an aggregate principal amount of €750,000,000. The July 2028 notes bear interest, payable annually on each July 18, to the persons in whose names such notes are registered at the close of business on July 3 (whether or not a business day), immediately preceding such July 18. The July 2028 notes will mature on July 18, 2028. The July 2028 notes are listed on the Nasdaq Stock Market under the symbol “PEP28”.
The 2029 notes were initially limited to an aggregate principal amount of £300,000,000. The 2029 notes bear interest, payable semi-annually on each January 22 and July 22, to the persons in whose names such notes are registered at the close of business on each January 8 and July 8, as the case may be (whether or not a business day), immediately preceding such January
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22 and July 22. The 2029 notes will mature on July 22, 2029. The 2029 notes are listed on the Nasdaq Stock Market under the symbol “PEP29”.
The 2031 notes were initially limited to an aggregate principal amount of €500,000,000. The 2031 notes bear interest, payable annually on each March 18, to the persons in whose names such notes are registered at the close of business on March 3 (whether or not a business day), immediately preceding such March 18. The 2031 notes will mature on March 18, 2031. The 2031 notes are listed on the Nasdaq Stock Market under the symbol “PEP31”.
The 2032 notes were initially limited to an aggregate principal amount of €750,000,000. The 2032 notes bear interest, payable annually on each October 9 to the persons in whose names such notes are registered at the close of business on September 25 (whether or not a business day), immediately preceding such October 9. The 2032 notes will mature on October 9, 2032. The 2032 notes are listed on the Nasdaq Stock Market under the symbol “PEP32”.
The 2033 notes were initially limited to an aggregate principal amount of €1,000,000,000. The 2033 notes bear interest, payable annually on each October 14 to the persons in whose names such notes are registered at the close of business on September 30 (whether or not a business day), immediately preceding such October 14. The 2033 notes will mature on October 14, 2033. The 2033 notes are listed on the Nasdaq Stock Market under the symbol “PEP33”.
The 2034 notes were initially limited to an aggregate principal amount of £450,000,000. The 2034 notes bear interest, payable semi-annually on each January 22 and July 22, to the persons in whose names such notes are registered at the close of business on each January 8 and July 8, as the case may be (whether or not a business day), immediately preceding such January 22 and July 22. The 2034 notes will mature on July 22, 2034. The 2034 notes are listed on the Nasdaq Stock Market under the symbol “PEP34”.
The 2039 notes were initially limited to an aggregate principal amount of €500,000,000. The 2039 notes bear interest, payable annually on each October 16, to the persons in whose
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names such notes are registered at the close of business on October 1 (whether or not a business day), immediately preceding such October 16. The 2039 notes will mature on October 16, 2039. The 2039 notes are listed on the Nasdaq Stock Market under the symbol “PEP39”.
The 2050 notes were initially limited to an aggregate principal amount of €750,000,000. The 2050 notes bear interest, payable annually on each October 9 to the persons in whose names such notes are registered at the close of business on September 25 (whether or not a business day), immediately preceding such October 9. The 2050 notes will mature on October 9, 2050. The 2050 notes are listed on the Nasdaq Stock Market under the symbol “PEP50”.
Ranking. The notes rank equally and pari passu with all other unsecured and unsubordinated debt of PepsiCo.
No Sinking Fund. No series of notes is subject to any sinking fund.
Additional Notes. We may, without the consent of the existing holders of the notes of a series, issue additional notes of such series having the same terms (except issue date, date from which interest accrues and, in some cases, the first interest payment date) so that the existing notes of such series and the new notes of such series form a single series under the indenture. As of February 2, 2024, no such additional notes have been issued.
Minimum Denominations. The sterling notes were issued in minimum denominations of £100,000 and integral multiples of £1,000 in excess thereof. The euro notes were issued in minimum denominations of €100,000 and integral multiples of €1,000 in excess thereof.
Global Notes. The notes of each series are in the form of one or more global notes that we deposited with or on behalf of a common depositary for the accounts of Euroclear Bank S.A./N.V., or its successor, as operator of the Euroclear System (“Euroclear”) and Clearstream Banking, société anonyme (“Clearstream”) and are registered in the name of the nominee of the common depositary.
Paying Agent. We have initially appointed The Bank of New York Mellon, London Branch to act as paying agent and transfer agent in connection with the notes as well as to serve
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as the common depositary for the notes. The Bank of New York Mellon, London Branch is an affiliate of the trustee. The term “paying agent” shall include The Bank of New York Mellon, London Branch and any successors appointed from time to time in accordance with the provisions of the indenture.
Currency of Payment of Sterling Notes. The principal and interest payments in respect of the sterling notes, including payments made upon any redemption of any series of the sterling notes, are payable in sterling. If sterling is unavailable to us due to the imposition of exchange controls or other circumstances beyond our control or if sterling is no longer being used for settlement of transactions by public institutions of or within the international banking community, then all payments in respect of the sterling notes will be made in U.S. dollars until sterling is again available to us and so used. In such circumstances, the amount payable on any date in sterling will be converted into U.S. dollars on the basis of the then most recently available market exchange rate for sterling, as determined by us in our sole discretion. Any payment in respect of the sterling notes so made in U.S. dollars will not constitute an event of default under the sterling notes or the indenture governing the sterling notes. Neither the trustee nor the paying agent shall be responsible for any calculation or conversion in connection with the foregoing.
Currency of Payment of Euro Notes. The principal and interest payments in respect of the euro notes, including payments made upon any redemption of any series of the euro notes, are payable in euro. If the euro is unavailable to us due to the imposition of exchange controls or other circumstances beyond our control or if the euro is no longer being used by the then member states of the European Monetary Union that have adopted the euro as their currency or for the settlement of transactions by public institutions of or within the international banking community, then all payments in respect of the euro notes will be made in U.S. dollars until the euro is again available to us and so used. In such circumstances, the amount payable on any date in euro will be converted into U.S. dollars on the basis of the then most recently available market exchange rate for euro, as determined by us in our sole discretion. Any payment in respect of the euro notes so made in U.S. dollars will not constitute an event of default under the euro notes or
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the indenture governing the euro notes. Neither the trustee nor the paying agent shall have any responsibility for any calculation or conversion in connection with the foregoing.
Definition of Business Day. The term “business day” with respect to the sterling notes means any day, other than a Saturday or Sunday, (1) which is not a day on which banking institutions in the City of New York or the City of London are authorized or required by law or executive order to close and (2) on which the Trans-European Automated Real-time Gross Settlement Express Transfer system (the TARGET2 system), or any successor thereto, operates. If any interest payment date, maturity date or redemption date is not a business day, then the related payment for such interest payment date, maturity date or redemption date shall be paid on the next succeeding business day with the same force and effect as if made on such interest payment date, maturity date or redemption date, as the case may be, and no further interest shall accrue as a result of such delay.
The term “business day” with respect to the euro notes means any day, other than a Saturday or Sunday, (1) which is not a day on which banking institutions in the City of New York or the City of London are authorized or required by law or executive order to close and (2) on which the Trans-European Automated Real-time Gross Settlement Express Transfer system (the TARGET2 system), or any successor thereto, operates. If any interest payment date, maturity date or redemption date is not a business day, then the related payment for such interest payment date, maturity date or redemption date shall be paid on the next succeeding business day with the same force and effect as if made on such interest payment date, maturity date or redemption date, as the case may be, and no further interest shall accrue as a result of such delay.
Interest Payments. Each series of notes will bear interest at the per annum rate stated in its title. Interest on the notes will be computed on the basis of the actual number of days in the period for which interest is being calculated and the actual number of days from and including the date from which interest begins to accrue for the period to, but excluding, the next scheduled interest payment date. This payment convention is referred to as ACTUAL/ACTUAL (ICMA) as defined in the rulebook of the International Capital Markets Association.
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Optional Redemption
Sterling Notes
2029 Notes. The 2029 notes are redeemable as a whole or in part, at our option, at any time and from time to time prior to April 22, 2029 (three months prior to the maturity date of the 2029 notes), at a redemption price equal to the greater of (i) 100% of the principal amount of such notes and (ii) the sum of the present values of the Remaining Scheduled Payments of principal and interest thereon (exclusive of interest accrued to the date of redemption), assuming for such purpose that the 2029 notes matured on April 22, 2029 (three months prior to the maturity date of the 2029 notes), discounted to the redemption date on a semi-annual basis (ACTUAL/ACTUAL (ICMA)) at the applicable Comparable Government Bond Rate plus 20 basis points, plus, in each case, accrued and unpaid interest to the date of redemption. The 2029 notes are redeemable, as a whole or in part, at our option at any time and from time to time on or after April 22, 2029 (three months prior to the maturity date of the 2029 notes), at a redemption price equal to 100% of the principal amount of the 2029 notes being redeemed, plus accrued and unpaid interest to the date of redemption.
2034 Notes. The 2034 notes are redeemable as a whole or in part, at our option, at any time and from time to time prior to April 22, 2034 (three months prior to the maturity date of the 2034 notes), at a redemption price equal to the greater of (i) 100% of the principal amount of such notes and (ii) the sum of the present values of the Remaining Scheduled Payments of principal and interest thereon (exclusive of interest accrued to the date of redemption), assuming for such purpose that the 2034 notes matured on April 22, 2034 (three months prior to the maturity date of the 2034 notes), discounted to the redemption date on a semi-annual basis (ACTUAL/ACTUAL (ICMA)) at the applicable Comparable Government Bond Rate plus 20 basis points, plus, in each case, accrued and unpaid interest to the date of redemption. The 2034 notes are redeemable, as a whole or in part, at our option at any time and from time to time on or after April 22, 2034 (three months prior to the maturity date of the 2034 notes), at a redemption
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price equal to 100% of the principal amount of the 2034 notes being redeemed, plus accrued and unpaid interest to the date of redemption.
Definitions
“Comparable Government Bond Rate” means, with respect to any redemption date for each series of sterling notes, the price, expressed as a percentage (rounded to three decimal places, with 0.0005 being rounded upwards), at which the gross redemption yield on the sterling notes to be redeemed, if they were to be purchased at such price on the third business day prior to the date fixed for redemption, would be equal to the gross redemption yield on such business day of the Comparable Government Bond (as defined below) on the basis of the middle market price of the Comparable Government Bond prevailing at 11:00 a.m. (London time) on such business day as determined by an independent investment bank selected by us.
“Comparable Government Bond” means, with respect to each series of sterling notes, in relation to any Comparable Government Bond Rate calculation, at the discretion of an independent investment bank selected by us, a United Kingdom government bond whose maturity is closest to the maturity of the sterling notes to be redeemed, assuming for such purpose that the 2029 notes mature on April 22, 2029 (three months prior to the maturity date of the 2029 notes) and the 2034 notes mature on April 22, 2034 (three months prior to the maturity date of the 2034 notes), or if such independent investment bank in its discretion considers that such similar bond is not in issue, such other United Kingdom government bond as such independent investment bank may, with the advice of three brokers of, and/or market makers in, United Kingdom government bonds selected by us, determine to be appropriate for determining the Comparable Government Bond Rate.
“Remaining Scheduled Payments” means, with respect to each sterling note to be redeemed, the remaining scheduled payments of the principal thereof and interest thereon that would be due after the related redemption date but for such redemption, assuming for such purpose that the 2029 notes mature on April 22, 2029 (three months prior to the maturity date of the 2029 notes) and the 2034 notes mature on April 22, 2034 (three months prior to the maturity
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date of the 2034 notes); provided, however, that, if such redemption date is not an interest payment date with respect to such sterling note, the amount of the next succeeding scheduled interest payment thereon will be deemed to be reduced by the amount of interest accrued thereon to such redemption date.
Euro Notes
2024 Notes. The 2024 notes are redeemable as a whole or in part, at our option at any time and from time to time prior to April 6, 2024 (one month prior to the maturity date of the 2024 notes), at a redemption price equal to the greater of (i) 100% of the principal amount of such notes and (ii) the sum of the present values of the Remaining Scheduled Payments of principal and interest thereon (exclusive of interest accrued to the date of redemption), discounted to the redemption date on an annual basis (ACTUAL/ACTUAL (ICMA)) at the applicable Comparable Government Bond Rate plus 15 basis points, plus, in each case, accrued and unpaid interest to the date of redemption. The 2024 notes are redeemable as a whole or in part, at our option at any time and from time to time on or after April 6, 2024 (one month prior to the maturity date of the 2024 notes), at a redemption price equal to 100% of the principal amount of the 2024 notes being redeemed, plus accrued and unpaid interest to the date of redemption.
2026 Notes. The 2026 notes are redeemable as a whole or in part, at our option at any time and from time to time prior to January 28, 2026 (three months prior to the maturity date of the 2026 notes), on at least 30 days, but not more than 60 days, prior notice mailed (or otherwise transmitted in accordance with the procedures of the depositary) to the registered address of each holder of the 2026 notes, at a redemption price equal to the greater of (i) 100% of the principal amount of such notes and (ii) the sum of the present values of the Remaining Scheduled Payments of principal and interest thereon (exclusive of interest accrued to the date of redemption), discounted to the redemption date on an annual basis (ACTUAL/ACTUAL (ICMA)) at the applicable Comparable Government Bond Rate plus 17 basis points, plus, in each case, accrued and unpaid interest to the date of redemption. The 2026 notes are redeemable as a whole or in part, at our option at any time and from time to time on or after January 28, 2026 (three months prior to the maturity date of the 2026 notes), at a redemption price equal to 100%
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of the principal amount of the 2026 notes being redeemed, plus accrued and unpaid interest to the date of redemption.
2027 Notes. The 2027 notes are redeemable as a whole or in part, at our option at any time and from time to time prior to December 18, 2026 (three months prior to the maturity date of the 2027 notes), at a redemption price equal to the greater of (i) 100% of the principal amount of such notes and (ii) the sum of the present values of the Remaining Scheduled Payments of principal and interest thereon (exclusive of interest accrued to the date of redemption), discounted to the redemption date on an annual basis (ACTUAL/ACTUAL (ICMA)) at the applicable Comparable Government Bond Rate plus 15 basis points, plus, in each case, accrued and unpaid interest to the date of redemption. The 2027 notes are redeemable as a whole or in part, at our option at any time and from time to time on or after December 18, 2026 (three months prior to the maturity date of the 2027 notes), at a redemption price equal to 100% of the principal amount of the 2027 notes being redeemed, plus accrued and unpaid interest to the date of redemption.
May 2028 Notes. The May 2028 notes are redeemable as a whole or in part, at our option at any time and from time to time prior to February 6, 2028 (three months prior to the maturity date of the May 2028 notes), at a redemption price equal to the greater of (i) 100% of the principal amount of such notes and (ii) the sum of the present values of the Remaining Scheduled Payments of principal and interest thereon (exclusive of interest accrued to the date of redemption), discounted to the redemption date on an annual basis (ACTUAL/ACTUAL (ICMA)) at the applicable Comparable Government Bond Rate plus 20 basis points, plus, in each case, accrued and unpaid interest to the date of redemption. The May 2028 notes are redeemable as a whole or in part, at our option at any time and from time to time on or after February 6, 2028 (three months prior to the maturity date of the May 2028 notes), at a redemption price equal to 100% of the principal amount of the May 2028 notes being redeemed, plus accrued and unpaid interest to the date of redemption.
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July 2028 Notes. The July 2028 notes are redeemable as a whole or in part, at our option at any time and from time to time prior to April 18, 2028 (three months prior to the maturity date of the July 2028 notes), on at least 30 days, but not more than 60 days, prior notice mailed (or otherwise transmitted in accordance with the procedures of the depositary) to the registered address of each holder of notes, at a redemption price equal to the greater of (i) 100% of the principal amount of such notes and (ii) the sum of the present values of the Remaining Scheduled Payments of principal and interest thereon (exclusive of interest accrued to the date of redemption), discounted to the redemption date on an annual basis (ACTUAL/ACTUAL (ICMA)) at the applicable Comparable Government Bond Rate plus 20 basis points, plus, in each case, accrued and unpaid interest to the date of redemption. The July 2028 notes are redeemable as a whole or in part, at our option at any time and from time to time on or after April 18, 2028 (three months prior to the maturity date of the July 2028 notes), at a redemption price equal to 100% of the principal amount of the July 2028 notes being redeemed, plus accrued and unpaid interest to the date of redemption.
2031 Notes. The 2031 notes are redeemable as a whole or in part, at our option at any time and from time to time prior to December 18, 2030 (three months prior to the maturity date of the 2031 notes), at a redemption price equal to the greater of (i) 100% of the principal amount of such notes and (ii) the sum of the present values of the Remaining Scheduled Payments of principal and interest thereon (exclusive of interest accrued to the date of redemption), discounted to the redemption date on an annual basis (ACTUAL/ACTUAL (ICMA)) at the applicable Comparable Government Bond Rate plus 20 basis points, plus, in each case, accrued and unpaid interest to the date of redemption. The 2031 notes are redeemable as a whole or in part, at our option at any time and from time to time on or after December 18, 2030 (three months prior to the maturity date of the 2031 notes), at a redemption price equal to 100% of the principal amount of the 2031 notes being redeemed, plus accrued and unpaid interest to the date of redemption.
2032 Notes. The 2032 notes are redeemable as a whole or in part, at our option at any time and from time to time prior to July 9, 2032 (three months prior to the maturity date of the
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2032 notes), at a redemption price equal to the greater of (i) 100% of the principal amount of such notes and (ii) the sum of the present values of the Remaining Scheduled Payments of principal and interest thereon (exclusive of interest accrued to the date of redemption), discounted to the redemption date on an annual basis (ACTUAL/ACTUAL (ICMA)) at the applicable Comparable Government Bond Rate plus 15 basis points, plus, in each case, accrued and unpaid interest to the date of redemption. The 2032 notes are redeemable as a whole or in part, at our option at any time and from time to time on or after July 9, 2032 (three months prior to the maturity date of the 2032 notes), at a redemption price equal to 100% of the principal amount of the 2032 notes being redeemed, plus accrued and unpaid interest to the date of redemption.
2033 Notes. The 2033 notes are redeemable as a whole or in part, at our option at any time and from time to time prior to July 14, 2033 (three months prior to the maturity date of the 2033 notes), at a redemption price equal to the greater of (i) 100% of the principal amount of such notes and (ii) the sum of the present values of the Remaining Scheduled Payments of principal and interest thereon (exclusive of interest accrued to the date of redemption), discounted to the redemption date on an annual basis (ACTUAL/ACTUAL (ICMA)) at the applicable Comparable Government Bond Rate plus 15 basis points, plus, in each case, accrued and unpaid interest to the date of redemption. The 2033 notes are redeemable as a whole or in part, at our option at any time and from time to time on or after July 14, 2033 (three months prior to the maturity date of the 2033 notes), at a redemption price equal to 100% of the principal amount of the 2033 notes being redeemed, plus accrued and unpaid interest to the date of redemption.
2039 Notes. The 2039 notes are redeemable as a whole or in part, at our option at any time and from time to time prior to April 16, 2039 (six months prior to the maturity date of the 2039 notes), at a redemption price equal to the greater of (i) 100% of the principal amount of such notes and (ii) the sum of the present values of the Remaining Scheduled Payments of principal and interest thereon (exclusive of interest accrued to the date of redemption), discounted to the redemption date on an annual basis (ACTUAL/ACTUAL (ICMA)) at the
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applicable Comparable Government Bond Rate plus 20 basis points, plus, in each case, accrued and unpaid interest to the date of redemption. The 2039 notes are redeemable as a whole or in part, at our option at any time and from time to time on or after April 16, 2039 (six months prior to the maturity date of the 2039 notes), at a redemption price equal to 100% of the principal amount of the 2039 notes being redeemed, plus accrued and unpaid interest to the date of redemption.
2050 Notes. The 2050 notes are redeemable as a whole or in part, at our option at any time and from time to time prior to April 9, 2050 (six months prior to the maturity date of the 2050 notes), at a redemption price equal to the greater of (i) 100% of the principal amount of such notes and (ii) the sum of the present values of the Remaining Scheduled Payments of principal and interest thereon (exclusive of interest accrued to the date of redemption), discounted to the redemption date on an annual basis (ACTUAL/ACTUAL (ICMA)) at the applicable Comparable Government Bond Rate plus 20 basis points, plus, in each case, accrued and unpaid interest to the date of redemption. The 2050 notes are redeemable as a whole or in part, at our option at any time and from time to time on or after April 9, 2050 (six months prior to the maturity date of the 2050 notes), at a redemption price equal to 100% of the principal amount of the 2050 notes being redeemed, plus accrued and unpaid interest to the date of redemption.
Definitions
“Comparable Government Bond Rate” means, with respect to any redemption date for each series of euro notes, the price, expressed as a percentage (rounded to three decimal places, with 0.0005 being rounded upwards), at which the gross redemption yield on such euro notes to be redeemed, if they were to be purchased at such price on the third business day prior to the date fixed for redemption, would be equal to the gross redemption yield on such business day of the Comparable Government Bond (as defined below) on the basis of the middle market price of the Comparable Government Bond prevailing at 11:00 a.m. (London time) on such business day as determined by an independent investment bank selected by us.
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“Comparable Government Bond” means, with respect to each series of euro notes, in relation to any Comparable Government Bond Rate calculation, at the discretion of an independent investment bank selected by us, a German government bond whose maturity is closest to the maturity of the euro notes to be redeemed, or if such independent investment bank in its discretion considers that such similar bond is not in issue, such other German government bond as such independent investment bank may, with the advice of three brokers of, and/or market makers in, German government bonds selected by us, determine to be appropriate for determining the Comparable Government Bond Rate.
“Remaining Scheduled Payments” means, with respect to each euro note of each series to be redeemed, the remaining scheduled payments of the principal thereof and interest thereon that would be due after the related redemption date but for such redemption; provided, however, that, if such redemption date is not an interest payment date with respect to such euro note, the amount of the next succeeding scheduled interest payment thereon will be deemed to be reduced by the amount of interest accrued thereon to such redemption date.
General
On and after the applicable redemption date with respect to a series of notes, interest will cease to accrue on such notes or any portion of such notes called for redemption (unless we default in the payment of the redemption price and accrued interest). On or before the redemption date, we will deposit with the trustee or its agent money sufficient to pay the redemption price of and (unless the redemption date shall be an interest payment date) accrued and unpaid interest to the redemption date on the notes to be redeemed on such date. If less than all of the notes of a series are to be redeemed, the notes of such series to be redeemed shall be selected in accordance with applicable depositary procedures. Additionally, we may at any time repurchase notes in the open market and may hold or surrender such notes to the trustee for cancellation.
Notice of redemption will be transmitted at least 30 days (or 15 days with respect to the 2039 notes, or 10 days with respect to the 2024 notes, May 2028 notes, 2029 notes, 2032 notes, 2033 notes, 2034 notes and 2050 notes) but not more than 60 days before the applicable
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redemption date to each holder of notes to be redeemed. We will be responsible for calculating the redemption price of the notes or portions thereof called for redemption.
Payment of Additional Amounts
We will, subject to the exceptions and limitations set forth below, pay as additional interest on the notes such additional amounts as are necessary in order that the net payment by us of the principal of and interest on the notes to a holder who is not a United States person (as defined below), after withholding or deduction for any present or future tax, assessment or other governmental charge imposed by the United States or a taxing authority in the United States, will not be less than the amount provided in the notes to be then due and payable; provided, however, that the foregoing obligation to pay additional amounts shall not apply:
Sterling Notes
(1)to any tax, assessment or other governmental charge that is imposed by reason of the holder (or the beneficial owner for whose benefit such holder holds such sterling note), or a fiduciary, settlor, beneficiary, member or shareholder of the holder if the holder is an estate, trust, partnership or corporation, or a person holding a power over an estate or trust administered by a fiduciary holder, being considered as:
(a) being or having been engaged in a trade or business in the United States or having or having had a permanent establishment in the United States;
(b) having a current or former connection with the United States (other than a connection arising solely as a result of the ownership of the notes, the receipt of any payment or the enforcement of any rights hereunder), including being or having been a citizen or resident of the United States;
(c) being or having been a personal holding company, a passive foreign investment company or a controlled foreign corporation for United States federal income tax purposes or a corporation that has accumulated earnings to avoid United States federal income tax;
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(d) being or having been a “10-percent shareholder” of the Company as defined in Section 871(h)(3) of the United States Internal Revenue Code of 1986, as amended (the “Code”) or any successor provision; or
(e) being a bank receiving payments on an extension of credit made pursuant to a loan agreement entered into in the ordinary course of its trade or business;
(2)to any holder that is not the sole beneficial owner of the notes, or a portion of the notes, or that is a fiduciary, partnership or limited liability company, but only to the extent that a beneficial owner with respect to the holder, a beneficiary or settlor with respect to the fiduciary, or a beneficial owner or member of the partnership or limited liability company would not have been entitled to the payment of an additional amount had the beneficiary, settlor, beneficial owner or member received directly its beneficial or distributive share of the payment;
(3)to any tax, assessment or other governmental charge that would not have been imposed but for the failure of the holder or any other person to comply with certification, identification or information reporting requirements concerning the nationality, residence, identity or connection with the United States of the holder or beneficial owner of the notes, if compliance is required by statute, by regulation of the United States or any taxing authority therein or by an applicable income tax treaty to which the United States is a party as a precondition to exemption from such tax, assessment or other governmental charge;
(4)to any tax, assessment or other governmental charge that is imposed otherwise than by withholding by us or a paying agent from the payment;
(5)to any tax, assessment or other governmental charge that would not have been imposed but for a change in law, regulation, or administrative or judicial interpretation that becomes effective more than 15 days after the payment becomes due or is duly provided for, whichever occurs later;
(6)to any estate, inheritance, gift, sales, excise, transfer, wealth, capital gains or personal property tax or similar tax, assessment or other governmental charge;
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(7)to any tax, assessment or other governmental charge required to be withheld by any paying agent from any payment of principal of or interest on any note, if such payment can be made without such withholding by at least one other paying agent;
(8)to any tax, assessment or other governmental charge that would not have been imposed but for the presentation by the holder of any note, where presentation is required, for payment on a date more than 30 days after the date on which payment became due and payable or the date on which payment thereof is duly provided for, whichever occurs later;
(9)to any tax, assessment or other governmental charge that is imposed or withheld solely by reason of the beneficial owner being a bank (i) purchasing the notes in the ordinary course of its lending business or (ii) that is neither (A) buying the notes for investment purposes only nor (B) buying the notes for resale to a third-party that either is not a bank or holding the notes for investment purposes only;
(10)to any tax, assessment or other governmental charge imposed under Sections 1471 through 1474 of the Code (or any amended or successor provisions), any current or future regulations or official interpretations thereof, any agreement entered into pursuant to Section 1471(b) of the Code or any fiscal or regulatory legislation, rules or practices adopted pursuant to any intergovernmental agreement entered into in connection with the implementation of such sections of the Code; or
(11)in the case of any combination of items (1), (2), (3), (4), (5), (6), (7), (8), (9) and (10).
2026 Notes and July 2028 Notes
(1)to any tax, assessment or other governmental charge that is imposed by reason of the holder (or the beneficial owner for whose benefit such holder holds such note), or a fiduciary, settlor, beneficiary, member or shareholder of the holder if the holder is an estate, trust, partnership or corporation, or a person holding a power over an estate or trust administered by a fiduciary holder, being considered as:
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(a) being or having been engaged in a trade or business in the United States or having or having had a permanent establishment in the United States;
(b) having a current or former connection with the United States (other than a connection arising solely as a result of the ownership of the notes, the receipt of any payment or the enforcement of any rights hereunder), including being or having been a citizen or resident of the United States;
(c) being or having been a personal holding company, a passive foreign investment company or a controlled foreign corporation for United States federal income tax purposes or a corporation that has accumulated earnings to avoid United States federal income tax;
(d) being or having been a “10-percent shareholder” of the Company as defined in Section 871(h)(3) of the Code or any successor provision; or
(e) being a bank receiving payments on an extension of credit made pursuant to a loan agreement entered into in the ordinary course of its trade or business;
(2)to any holder that is not the sole beneficial owner of the notes, or a portion of the notes, or that is a fiduciary, partnership or limited liability company, but only to the extent that a beneficial owner with respect to the holder, a beneficiary or settlor with respect to the fiduciary, or a beneficial owner or member of the partnership or limited liability company would not have been entitled to the payment of an additional amount had the beneficiary, settlor, beneficial owner or member received directly its beneficial or distributive share of the payment;
(3)to any tax, assessment or other governmental charge that would not have been imposed but for the failure of the holder or any other person to comply with certification, identification or information reporting requirements concerning the nationality, residence, identity or connection with the United States of the holder or beneficial owner of the notes, if compliance is required by statute, by regulation of the United States or any taxing authority therein or by an applicable income tax treaty to which the United States is a party as a precondition to exemption from such tax, assessment or other governmental charge;
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(4)to any tax, assessment or other governmental charge that is imposed otherwise than by withholding by us or a paying agent from the payment;
(5)to any tax, assessment or other governmental charge that would not have been imposed but for a change in law, regulation, or administrative or judicial interpretation that becomes effective more than 15 days after the payment becomes due or is duly provided for, whichever occurs later;
(6)to any estate, inheritance, gift, sales, excise, transfer, wealth, capital gains or personal property tax or similar tax, assessment or other governmental charge;
(7)to any withholding or deduction that is imposed on a payment to an individual and that is required to be made pursuant to any law implementing or complying with, or introduced in order to conform to, any European Union Directive on the taxation of savings;
(8)to any tax, assessment or other governmental charge required to be withheld by any paying agent from any payment of principal of or interest on any note, if such payment can be made without such withholding by at least one other paying agent;
(9)to any tax, assessment or other governmental charge that would not have been imposed but for the presentation by the holder of any note, where presentation is required, for payment on a date more than 30 days after the date on which payment became due and payable or the date on which payment thereof is duly provided for, whichever occurs later;
(10)to any tax, assessment or other governmental charge that is imposed or withheld solely by reason of the beneficial owner being a bank (i) purchasing the notes in the ordinary course of its lending business or (ii) that is neither (A) buying the notes for investment purposes only nor (B) buying the notes for resale to a third-party that either is not a bank or holding the notes for investment purposes only;
(11)to any tax, assessment or other governmental charge imposed under Sections 1471 through 1474 of the Code (or any amended or successor provisions), any current or future regulations or official interpretations thereof, any agreement entered into pursuant to Section 1471(b) of the Code or any fiscal or regulatory legislation, rules
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or practices adopted pursuant to any intergovernmental agreement entered into in connection with the implementation of such sections of the Code; or
(12)in the case of any combination of items (1), (2), (3), (4), (5), (6), (7), (8), (9), (10) and (11).
2024 Notes, 2027 Notes, May 2028 Notes, 2031 Notes, 2032 Notes, 2033 Notes, 2039 Notes and 2050 Notes
(1)to any tax, assessment or other governmental charge that is imposed by reason of the holder (or the beneficial owner for whose benefit such holder holds such note), or a fiduciary, settlor, beneficiary, member or shareholder of the holder if the holder is an estate, trust, partnership or corporation, or a person holding a power over an estate or trust administered by a fiduciary holder, being considered as:
(a) being or having been engaged in a trade or business in the United States or having or having had a permanent establishment in the United States;
(b) having a current or former connection with the United States (other than a connection arising solely as a result of the ownership of the notes, the receipt of any payment or the enforcement of any rights hereunder), including being or having been a citizen or resident of the United States;
(c) being or having been a personal holding company, a passive foreign investment company or a controlled foreign corporation for United States federal income tax purposes or a corporation that has accumulated earnings to avoid United States federal income tax;
(d) being or having been a “10-percent shareholder” of the Company as defined in Section 871(h)(3) of the Code or any successor provision; or
(e) being a bank receiving payments on an extension of credit made pursuant to a loan agreement entered into in the ordinary course of its trade or business;
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(2)to any holder that is not the sole beneficial owner of the notes, or a portion of the notes, or that is a fiduciary, partnership or limited liability company, but only to the extent that a beneficial owner with respect to the holder, a beneficiary or settlor with respect to the fiduciary, or a beneficial owner or member of the partnership or limited liability company would not have been entitled to the payment of an additional amount had the beneficiary, settlor, beneficial owner or member received directly its beneficial or distributive share of the payment;
(3)to any tax, assessment or other governmental charge that would not have been imposed but for the failure of the holder or any other person to comply with certification, identification or information reporting requirements concerning the nationality, residence, identity or connection with the United States of the holder or beneficial owner of the notes, if compliance is required by statute, by regulation of the United States or any taxing authority therein or by an applicable income tax treaty to which the United States is a party as a precondition to exemption from such tax, assessment or other governmental charge;
(4)to any tax, assessment or other governmental charge that is imposed otherwise than by withholding by us or a paying agent from the payment;
(5)to any tax, assessment or other governmental charge that would not have been imposed but for a change in law, regulation, or administrative or judicial interpretation that becomes effective more than 15 days after the payment becomes due or is duly provided for, whichever occurs later;
(6)to any estate, inheritance, gift, sales, excise, transfer, wealth, capital gains or personal property tax or similar tax, assessment or other governmental charge;
(7)to any tax, assessment or other governmental charge required to be withheld by any paying agent from any payment of principal of or interest on any note, if such payment can be made without such withholding by at least one other paying agent;
(8)to any tax, assessment or other governmental charge that would not have been imposed but for the presentation by the holder of any note, where presentation is required, for payment on a date more than 30 days after the date on which payment
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became due and payable or the date on which payment thereof is duly provided for, whichever occurs later;
(9)to any tax, assessment or other governmental charge that is imposed or withheld solely by reason of the beneficial owner being a bank (i) purchasing the notes in the ordinary course of its lending business or (ii) that is neither (A) buying the notes for investment purposes only nor (B) buying the notes for resale to a third-party that either is not a bank or holding the notes for investment purposes only;
(10)to any tax, assessment or other governmental charge imposed under Sections 1471 through 1474 of the Code (or any amended or successor provisions), any current or future regulations or official interpretations thereof, any agreement entered into pursuant to Section 1471(b) of the Code or any fiscal or regulatory legislation, rules or practices adopted pursuant to any intergovernmental agreement entered into in connection with the implementation of such sections of the Code; or
(11)in the case of any combination of items (1), (2), (3), (4), (5), (6), (7), (8), (9) and (10).
The notes are subject in all cases to any tax, fiscal or other law or regulation or administrative or judicial interpretation applicable to the notes. Except as specifically provided under this heading “—Payment of Additional Amounts,” we will not be required to make any payment for any tax, assessment or other governmental charge imposed by any government or a political subdivision or taxing authority of or in any government or political subdivision.
As used under this heading “—Payment of Additional Amounts” and under the heading “—Redemption for Tax Reasons,” the term “United States” means the United States of America (including the states of the United States and the District of Columbia and any political subdivision thereof) and the term “United States person” means any individual who is a citizen or resident of the United States for U.S. federal income tax purposes, a corporation, partnership or other entity created or organized in or under the laws of the United States, any state of the United States or the District of Columbia (other than a partnership that is not treated as a United
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States person under any applicable Treasury regulations), or any estate or trust the income of which is subject to United States federal income taxation regardless of its source.
Redemption for Tax Reasons
If, as a result of any change in, or amendment to, the laws (or any regulations or rulings promulgated under the laws) of the United States (or any taxing authority in the United States), or any change in, or amendments to, an official position regarding the application or interpretation of such laws, regulations or rulings, which change or amendment is announced or becomes effective on or after the date of the prospectus supplement filed with the SEC for the applicable series of notes, we become or, based upon a written opinion of independent counsel selected by us, will become obligated to pay additional amounts as described herein under the heading “—Payment of Additional Amounts” with respect to the notes of any series, then we may at any time at our option redeem, in whole, but not in part, the outstanding notes of such series on not less than 30 nor more than 60 days’ prior notice, at a redemption price equal to 100% of their principal amount, together with accrued and unpaid interest on those notes to, but not including, the date fixed for redemption.
Certain Covenants
Limitation of Liens
We will not, and will not permit any of our restricted subsidiaries to, incur, suffer to exist or guarantee any debt secured by a lien on any principal property or on any shares of stock of (or other interests in) any of our restricted subsidiaries unless we or that first-mentioned restricted subsidiary secures or causes such restricted subsidiary to secure the notes (and any of its or such restricted subsidiary’s other debt, at its option or such restricted subsidiary’s option, as the case may be, not subordinate to the notes), equally and ratably with (or prior to) such secured debt, for as long as such secured debt will be so secured.
These restrictions will not, however, apply to debt secured by:
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(1) any liens existing prior to the issuance of such notes;
(2) any lien on property of or shares of stock of (or other interests in) or debt of any entity existing at the time such entity becomes a restricted subsidiary;
(3) any liens on property, shares of stock of (or other interests in) or debt of any entity (a) existing at the time of acquisition of such property or shares (or other interests) (including acquisition through merger or consolidation), (b) to secure the payment of all or any part of the purchase price of such property or shares (or other interests) or construction or improvement of such property or (c) to secure any debt incurred prior to, at the time of, or within 365 days after the later of the acquisition, the completion of construction or the commencement of full operation of such property or within 365 days after the acquisition of such shares (or other interests) for the purpose of financing all or any part of the purchase price of such shares (or other interests) or construction thereon;
(4) any liens in favor of us or any of our restricted subsidiaries;
(5) any liens in favor of, or required by contracts with, governmental entities; or
(6) any extension, renewal, or refunding of liens referred to in any of the preceding clauses (1) through (5).
Notwithstanding the foregoing, we or any of our restricted subsidiaries may incur, suffer to exist or guarantee any debt secured by a lien on any principal property or on any shares of stock of (or other interests in) any of our restricted subsidiaries if, after giving effect thereto, the aggregate amount of such debt does not exceed 15% of our consolidated net tangible assets.
The indenture does not restrict the transfer by us of a principal property to any of our unrestricted subsidiaries or our ability to change the designation of a subsidiary owning principal property from a restricted subsidiary to an unrestricted subsidiary and, if we were to do so, any
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such unrestricted subsidiary would not be restricted from incurring secured debt nor would we be required, upon such incurrence, to secure the notes equally and ratably with such secured debt.
Consolidation, Merger or Sale of Assets
We may consolidate or merge with or into, or convey or transfer all or substantially all of our assets to, any entity (including, without limitation, a limited partnership or a limited liability company); provided that:
• we will be the surviving corporation or, if not, that the successor will be a corporation that is organized and validly existing under the laws of any state of the United States of America or the District of Columbia and will expressly assume by a supplemental indenture our obligations under the indenture and the notes;
• immediately after giving effect to such transaction, no event of default, and no default or other event which, after notice or lapse of time, or both, would become an event of default, will have happened and be continuing; and
• we will have delivered to the trustee an opinion of counsel, stating that such consolidation, merger, conveyance or transfer complies with the indenture.
In the event of any such consolidation, merger, conveyance, transfer or lease, any such successor will succeed to and be substituted for us as obligor on the notes with the same effect as if it had been named in the indenture as obligor, and we will be released from all obligations under the indenture and under the notes.
Definitions
“Consolidated net tangible assets” means the total amount of our assets and our restricted subsidiaries’ assets minus:
• all applicable depreciation, amortization and other valuation reserves;
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• all current liabilities of ours and our restricted subsidiaries (excluding any intercompany liabilities); and
• all goodwill, trade names, trademarks, patents, unamortized debt discount and expenses and other like intangibles, all as set forth on our and our restricted subsidiaries’ latest consolidated balance sheets prepared in accordance with U.S. generally accepted accounting principles.
“Debt” means any indebtedness for borrowed money.
“Principal property” means any single manufacturing or processing plant, office building or warehouse owned or leased by us or any of our restricted subsidiaries other than a plant, warehouse, office building or portion thereof which, in the opinion of our Board of Directors, is not of material importance to the business conducted by us and our restricted subsidiaries taken as an entirety.
“Restricted subsidiary” means, at any time, any subsidiary which at the time is not an unrestricted subsidiary of ours.
“Subsidiary” means any entity, at least a majority of the outstanding voting stock of which shall at the time be owned, directly or indirectly, by us or by one or more of our subsidiaries, or both.
“Unrestricted subsidiary” means any subsidiary of ours (not at the time designated as our restricted subsidiary) (1) the major part of whose business consists of finance, banking, credit, leasing, insurance, financial services or other similar operations, or any combination thereof, (2) substantially all the assets of which consist of the capital stock of one or more subsidiaries engaged in the operations referred to in the preceding clause (1), or (3) designated as an unrestricted subsidiary by our Board of Directors.
Events of Default
An “Event of Default” under the notes of a given series means:
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(1) default in paying interest on the notes when it becomes due and the default continues for a period of 30 days or more;
(2) default in paying principal, or premium, if any, on the notes when due;
(3) default is made in the payment of any sinking or purchase fund or analogous obligation when the same becomes due, and such default continues for 30 days or more;
(4) default in the performance, or breach, of any covenant or warranty of PepsiCo in the indenture (other than defaults specified in clause (1), (2) or (3) above) and the default or breach continues for a period of 90 days or more after we receive written notice from the trustee or we and the trustee receive notice from the holders of at least 51% in aggregate principal amount of the outstanding notes of the series;
(5) certain events of bankruptcy, insolvency, reorganization, administration or similar proceedings with respect to PepsiCo have occurred; or
(6) any other Events of Default set forth in the applicable prospectus supplement.
If an Event of Default (other than an Event of Default specified in clause (5) with respect to PepsiCo) under the indenture occurs with respect to the notes of any series and is continuing, then the trustee or the holders of at least 51% in principal amount of the outstanding notes of that series may by written notice require us to repay immediately the entire principal amount of the outstanding notes of that series (or such lesser amount as may be provided in the terms of the notes), together with all accrued and unpaid interest and premium, if any.
If an Event of Default under the indenture specified in clause (5) with respect to PepsiCo occurs and is continuing, then the entire principal amount of the outstanding notes (or such lesser amount as may be provided in the terms of the notes) will automatically become due and payable immediately without any declaration or other act on the part of the trustee or any holder.
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After a declaration of acceleration, the holders of not less than 51% in aggregate principal amount of outstanding notes of any series may rescind this accelerated payment requirement if all existing Events of Default, except for nonpayment of the principal and interest on the notes of that series that has become due solely as a result of the accelerated payment requirement, have been cured or waived and if the rescission of acceleration would not conflict with any judgment or decree. The holders of a majority in principal amount of the outstanding notes of any series also have the right to waive past defaults, except a default in paying principal, premium or interest on any outstanding note, or in respect of a covenant or a provision that cannot be modified or amended without the consent of all holders of the notes of that series.
Holders of at least 51% in principal amount of the outstanding notes of a series may seek to institute a proceeding only after they have notified the trustee of a continuing Event of Default in writing and made a written request, and offered reasonable indemnity, to the trustee to institute a proceeding and the trustee has failed to do so within 60 days after it received this notice. In addition, within this 60 day period the trustee must not have received directions inconsistent with this written request by holders of a majority in principal amount of the outstanding notes of that series. These limitations do not apply, however, to a suit instituted by a holder of a note for the enforcement of the payment of principal, interest or any premium on or after the due dates for such payment.
During the existence of an Event of Default, the trustee is required to exercise the rights and powers vested in it under the indenture and use the same degree of care and skill in its exercise as a prudent man would under the circumstances in the conduct of that person’s own affairs. If an Event of Default has occurred and is continuing, the trustee is not under any obligation to exercise any of its rights or powers at the request or direction of any of the holders unless the holders have offered to the trustee reasonable security or indemnity. Subject to certain provisions, the holders of a majority in principal amount of the outstanding notes of any series have the right to direct the time, method and place of conducting any proceeding for any remedy available to the trustee, or exercising any trust, or power conferred on the trustee.
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The trustee will, within 90 days after any default occurs, give notice of the default to the holders of the notes of that series, unless the default was already cured or waived. Unless there is a default in paying principal, interest or any premium when due, the trustee can withhold giving notice to the holders if it determines in good faith that the withholding of notice is in the interest of the holders.
Modification and Waiver
The indenture may be amended or modified without the consent of any holder of notes in order to:
• evidence a succession to the trustee;
• cure ambiguities, defects or inconsistencies;
• provide for the assumption of our obligations in the case of a merger or consolidation or transfer of all or substantially all of our assets;
• make any change that would provide any additional rights or benefits to the holders of the notes of a series;
• add guarantors with respect to the notes of any series;
• secure the notes of a series;
• establish the form or forms of notes of any series;
• maintain the qualification of the indenture under the Trust Indenture Act; or
• make any change that does not adversely affect in any material respect the interests of any holder.
Other amendments and modifications of the indenture or the notes issued may be made with the consent of the holders of not less than a majority of the aggregate principal amount of the outstanding notes of each series affected by the amendment or modification. However, no
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modification or amendment may, without the consent of the holder of each outstanding note affected:
• reduce the principal amount, interest or premium payable, or extend the fixed maturity, of the notes;
• alter or waive the redemption provisions of the notes;
• change the currency in which principal, any premium or interest is paid;
• reduce the percentage in principal amount outstanding of notes of any series which must consent to an amendment, supplement or waiver or consent to take any action;
• impair the right to institute suit for the enforcement of any payment on the notes;
• waive a payment default with respect to the notes or any guarantor;
• reduce the interest rate or extend the time for payment of interest on the notes;
• adversely affect the ranking of the notes of any series; or
• release any guarantor from any of its obligations under its guarantee or the indenture, except in compliance with the terms of the indenture.
Satisfaction, Discharge and Covenant Defeasance
We may terminate our obligations under the indenture, when:
• either:
• all the notes of any series issued that have been authenticated and delivered have been delivered to the trustee for cancellation; or
• all the notes of any series issued that have not been delivered to the trustee for cancellation have become due and payable, will become due and payable within one year, or are to be called for redemption within one year and we
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have made arrangements satisfactory to the trustee for the giving of notice of redemption by such trustee in our name and at our expense, and in each case, we have irrevocably deposited or caused to be deposited with the trustee sufficient funds to pay and discharge the entire indebtedness on the series of notes to pay principal, interest and any premium; and
• we have paid or caused to be paid all other sums then due and payable under the indenture; and
• we have delivered to the trustee an officers’ certificate and an opinion of counsel, each stating that all conditions precedent under the indenture relating to the satisfaction and discharge of the indenture have been complied with.
We may elect to have our obligations under the indenture discharged with respect to the outstanding notes of any series (“legal defeasance”). Legal defeasance means that we will be deemed to have paid and discharged the entire indebtedness represented by the outstanding notes of such series under the indenture, except for:
• the rights of holders of the notes to receive principal, interest and any premium when due;
• our obligations with respect to the notes concerning issuing temporary notes, registration of transfer of the notes, mutilated, destroyed, lost or stolen notes and the maintenance of an office or agency for payment for security payments held in trust;
• the rights, powers, trusts, duties and immunities of the trustee; and
• the defeasance provisions of the indenture.
In addition, we may elect to have our obligations released with respect to certain covenants in the indenture (“covenant defeasance”). Any omission to comply with these obligations will not constitute a default or an event of default with respect to the notes of any series. In the event covenant defeasance occurs, certain events, not including non-payment,
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bankruptcy and insolvency events, described under “Events of Default” above will no longer constitute an event of default for that series.
In order to exercise either legal defeasance or covenant defeasance with respect to outstanding notes of any series:
• we must irrevocably have deposited or caused to be deposited with the trustee as trust funds for the purpose of making the following payments, specifically pledged as security for, and dedicated solely to the benefit of the holders of the notes of a series:
• money in an amount;
• U.S. government obligations (or equivalent government obligations in the case of notes denominated in other than U.S. dollars or a specified currency) that will provide, not later than one day before the due date of any payment, money in an amount; or
• a combination of money and U.S. government obligations (or equivalent government obligations, as applicable),
in each case sufficient, in the written opinion (with respect to U.S. or equivalent government obligations or a combination of money and U.S. or equivalent government obligations, as applicable) of a nationally recognized firm of independent registered public accountants, to pay and discharge, and which shall be applied by the trustee to pay and discharge, all of the principal (including mandatory sinking fund payments), interest and any premium at the due date or maturity;
• in the case of legal defeasance, we must have delivered to the trustee an opinion of counsel stating that, under then applicable federal income tax law, the holders of the notes of that series will not recognize income, gain or loss for federal income tax purposes as a result of the deposit, defeasance and discharge to be effected and will
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be subject to the same federal income tax as would be the case if the deposit, defeasance and discharge did not occur;
• in the case of covenant defeasance, we must have delivered to the trustee an opinion of counsel to the effect that the holders of the notes of that series will not recognize income, gain or loss for U.S. federal income tax purposes as a result of the deposit and covenant defeasance to be effected and will be subject to the same federal income tax as would be the case if the deposit and covenant defeasance did not occur;
• no event of default or default with respect to the outstanding notes of that series has occurred and is continuing at the time of such deposit after giving effect to the deposit or, in the case of legal defeasance, no default relating to bankruptcy or insolvency has occurred and is continuing at any time on or before the 91st day after the date of such deposit, it being understood that this condition is not deemed satisfied until after the 91st day;
• the legal defeasance or covenant defeasance will not cause the trustee to have a conflicting interest within the meaning of the Trust Indenture Act, assuming all notes of a series were in default within the meaning of such Act;
• the legal defeasance or covenant defeasance will not result in a breach or violation of, or constitute a default under, any other agreement or instrument to which we are a party;
• the legal defeasance or covenant defeasance will not result in the trust arising from such deposit constituting an investment company within the meaning of the Investment Company Act of 1940, as amended, unless the trust is registered under such Act or exempt from registration; and
• we must have delivered to the trustee an officers’ certificate and an opinion of counsel stating that all conditions precedent with respect to the legal defeasance or covenant defeasance have been complied with.
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Book-Entry, Delivery and Settlement
We have obtained the information in this section concerning Clearstream and Euroclear and their book-entry systems and procedures from sources that we believe to be reliable. We take no responsibility for an accurate portrayal of this information. In addition, the description of the clearing systems in this section reflects our understanding of the rules and procedures of Clearstream and Euroclear as they are currently in effect. Those clearing systems could change their rules and procedures at any time.
The notes of each series were initially represented by one or more fully registered global notes. Each such global note was deposited with, or on behalf of, a common depositary and registered in the name of the nominee of the common depositary for the accounts of Clearstream and Euroclear. Except as set forth below, the global notes may be transferred, in whole and not in part, only to Euroclear or Clearstream or their respective nominees. You may hold your interests in the global notes in Europe through Clearstream or Euroclear, either as a participant in such systems or indirectly through organizations which are participants in such systems. Clearstream and Euroclear will hold interests in the global notes on behalf of their respective participating organizations or customers through customers’ securities accounts in Clearstream’s or Euroclear’s names on the books of their respective depositaries. Book-entry interests in the notes and all transfers relating to the notes will be reflected in the book-entry records of Clearstream and Euroclear. The address of Clearstream is 42 Avenue JF Kennedy, L-1855 Luxembourg, Luxembourg and the address of Euroclear is 1 Boulevard Roi Albert II, B-1210 Brussels, Belgium.
The distribution of the notes was cleared through Clearstream and Euroclear. Any secondary market trading of book-entry interests in the notes will take place through Clearstream and Euroclear participants and will settle in same-day funds. Owners of book-entry interests in the notes will receive payments relating to their notes in sterling with respect to the sterling notes and euro with respect to the euro notes, except as described in the applicable prospectus supplement.
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Clearstream and Euroclear have established electronic securities and payment transfer, processing, depositary and custodial links among themselves and others, either directly or through custodians and depositaries. These links allow the notes to be issued, held and transferred among the clearing systems without the physical transfer of certificates. Special procedures to facilitate clearance and settlement have been established among these clearing systems to trade securities across borders in the secondary market.
The policies of Clearstream and Euroclear govern payments, transfers, exchanges and other matters relating to the investor’s interest in the notes held by them. We have no responsibility for any aspect of the records kept by Clearstream or Euroclear or any of their direct or indirect participants. We also do not supervise these systems in any way.
Clearstream and Euroclear and their participants perform these clearance and settlement functions under agreements they have made with one another or with their customers. You should be aware that they are not obligated to perform or continue to perform these procedures and may modify them or discontinue them at any time.
Except as provided otherwise, owners of beneficial interests in the notes will not be entitled to have the notes registered in their names, will not receive or be entitled to receive physical delivery of the notes in definitive form and will not be considered the owners or holders of the notes under the indenture, including for purposes of receiving any reports delivered by us or the trustee pursuant to the indenture. Accordingly, each person owning a beneficial interest in a note must rely on the procedures of the depositary and, if such person is not a participant, on the procedures of the participant through which such person owns its interest, in order to exercise any rights of a holder of notes.
Certificated Notes. Subject to certain conditions, the notes represented by the global notes are exchangeable for certificated notes in definitive form of like tenor in minimum denominations of £100,000 principal amount and integral multiples of £1,000 in excess thereof with respect to the sterling notes and €100,000 principal amount and integral multiples of €1,000 in excess thereof with respect to the euro notes if:
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(1) the common depositary provides notification that it is unwilling, unable or no longer qualified to continue as depositary for the global notes and a successor is not appointed within 90 days;
(2) we in our discretion at any time determine not to have all the notes of any series represented by the global note; or
(3) default entitling the holders of the applicable notes of any series to accelerate the maturity thereof has occurred and is continuing.
Any note of any series that is exchangeable as above is exchangeable for certificated notes of such series issuable in authorized denominations and registered in such names as the common depositary shall direct. Subject to the foregoing, a global note is not exchangeable, except for a global note of the same aggregate denomination to be registered in the name of the common depositary (or its nominee).
Same-day Payment. Payments (including principal, interest and any additional amounts) and transfers with respect to notes of any series in certificated form may be executed at the office or agency maintained for such purpose within the City of London (initially the office of the paying agent maintained for such purpose) or, at our option, by check mailed to the holders thereof at the respective addresses set forth in the register of holders of the applicable notes of such series, provided that all payments (including principal, interest and any additional amounts) on notes in certificated form, for which the holders thereof have given wire transfer instructions, will be required to be made by wire transfer of immediately available funds to the accounts specified by the holders thereof. No service charge will be made for any registration of transfer, but payment of a sum sufficient to cover any tax or governmental charge payable in connection with that registration may be required.
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Exhibit 10.6
THE PEPSICO INTERNATIONAL RETIREMENT PLAN
DEFINED BENEFIT PROGRAM
(PIRP-DB)
As Amended and Restated
Effective as of January 1, 2023
TABLE OF CONTENTS
ARTICLE I - HISTORY AND GENERAL INFORMATION | 1 | ||||
ARTICLE II - DEFINITIONS AND CONSTRUCTION | 3 | ||||
2.01 Definitions. | 3 | ||||
2.02 Construction. | 8 | ||||
ARTICLE III - MEMBERSHIP | 9 | ||||
3.01 Eligibility for Membership. | 9 | ||||
3.02 Admission to Membership. | 9 | ||||
ARTICLE IV - REQUIREMENTS FOR BENEFITS | 10 | ||||
4.01 Normal Retirement Pension. | 10 | ||||
4.02 Early Retirement Pension. | 10 | ||||
4.03 Special Early Retirement Pension. | 10 | ||||
4.04 Deferred Vested Pension. | 10 | ||||
4.05 Late Retirement Pension. | 11 | ||||
4.06 Vesting. | 11 | ||||
4.07 Special Vesting for Approved Transfers and Status Changes. | 12 | ||||
4.08 Accruals After Benefit Commencement. | 12 | ||||
ARTICLE V - DISTRIBUTION OPTIONS | 13 | ||||
5.01 Distribution Options. | 13 | ||||
5.02 Normal Forms of Payment. | 13 | ||||
5.03 Optional Forms of Payment. | 13 | ||||
5.04 Applicability of Certain Options. | 16 | ||||
5.05 Cashout of Small Benefits. | 16 | ||||
5.06 Designation of Dependant. | 17 | ||||
ARTICLE VI - DEATH BENEFITS | 18 | ||||
6.01 Active and Retirement-Eligible Members. | 18 | ||||
6.02 Deferred Vested Members. | 18 | ||||
6.03 Form and Time of Payment of Death Benefits. | 18 | ||||
6.04 Disposition of Death Benefits. | 19 | ||||
ARTICLE VII - ADMINISTRATION | 20 | ||||
7.01 Authority to Administer Plan. | 20 | ||||
7.02 Facility of Payment. | 20 | ||||
7.03 Claims Procedure. | 20 | ||||
7.04 Limitations on Actions. | 21 | ||||
7.05 Restriction of Venue. | 22 | ||||
7.06 Effect of Specific References. | 22 | ||||
| 22 | |||||
ARTICLE VIII - AMENDMENT AND TERMINATION | 24 | ||||
8.01 Continuation of the Plan. | 24 | ||||
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8.02 Amendment. | 24 | ||||
8.03 Termination. | 24 | ||||
ARTICLE IX - MISCELLANEOUS | 25 | ||||
9.01 Unfunded Plan. | 25 | ||||
9.02 Costs of the Plan. | 25 | ||||
9.03 Temporary Absence of Member. | 25 | ||||
9.04 Taxes, Etc. | 25 | ||||
9.05 Nonguarantee of Employment. | 25 | ||||
9.06 No Right to Benefits. | 25 | ||||
9.07 Charges on Benefits and Recovery of Excess Payments. | 26 | ||||
9.08 Termination for Cause; Prohibited Misconduct. | 26 | ||||
9.09 Notices. | 28 | ||||
9.10 Plan Documentation. | 29 | ||||
9.11 Currency of Payment. | 29 | ||||
9.12 Governing Law. | 29 | ||||
9.13 Exemption from ERISA. | 29 | ||||
9.14 Exemption from Section 409A. | 29 | ||||
ARTICLE X - SIGNATURE | 30 | ||||
TABLE A - CALCULATION OF PENSIONS | 31 | ||||
APPENDIX ERW - EARLY RETIREMENT WINDOWS | 35 | ||||
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ARTICLE I - HISTORY AND GENERAL INFORMATION
The Plan came into operation on and took effect from September 1, 1980, and was comprised of the “PepsiCo International Retirement Plan Trust Indenture” and the “Plan Rules”, and was later amended and restated in its entirety, effective September 2, 1982.
The Plan was further amended and restated in its entirety, effective October 1, 2003, whereupon the Plan Rules became the “Plan A Rules” (applicable to benefits funded by the Corporation’s contributions to the trust established by the PepsiCo International Retirement Plan Trust Indenture) and the “Plan B Rules” (applicable to benefits funded by the Corporation as they arise) took effect.
The Plan was further amended effective January 1, 2005, so that no person subject to taxation in the United States of America may in any way have their right to a benefit from the Plan come into existence, increase or in any way be enhanced, but instead will be determined as if they had left the Corporation and any Associated Company permanently before becoming subject to U.S. taxation.
Effective January 1, 2010, the Plan A Rules and Plan B Rules were amended and restated in their entirety to form a single governing legal document, as set forth herein. The terms of the Plan set forth in this amended and restated governing legal document are known as the “DB Program” (also known as “PIRP-DB”). This amended and restated governing legal document shall apply to Members who are in Membership from and after January 1, 2010, as well as any others who claim rights from and after January 1, 2010 that are derived from current or former Membership, including former Members and the Dependants and Eligible Spouses of Members and former Members. Notwithstanding any other provision of this Plan, the amendment and restatement of this Plan, the supersession of the prior documents by this Plan, and the prior existence of separate Plan A and Plan B Rules shall not at any time result in any duplication of benefits (nor shall duplication of benefits result from any other factor or circumstance related to this Plan or any prior version of this Plan).
Effective January 1, 2011, the Corporation established a new defined contribution structure (the “DC Program”) to benefit selected international employees for whom it has been determined to be appropriate (i.e., employees on assignments outside of their home countries for whom it is judged to be impracticable to have them participate in their home country retirement plans and employees who are among a selected group of senior globalists on United States tax equalized packages). The terms of the DC Program are set forth in a separate governing legal document. Together, the DC Program and the DB Program set forth the terms of a single Plan.
The DB Program was previously amended and restated, effective January 1, 2016. The DB Program was again amended and restated, effective January 1, 2019. The DB Program’s most recent prior restatement was effective January 1, 2021 and provided for freezing the DB Program effective as of the end of the day on December 31, 2025. As a result, effective on and after January 1, 2026, all accruals under the DB Program, as well as all Pensionable Service, Salary and other compensation that are recognized under the Plan, are treated as ending no later than at the end of the day on December 31, 2025, and where the DB Program requires that Salary or other compensation be averaged over a period of service, service after December 31, 2025 is not taken into account. Notwithstanding the foregoing, in accordance with the DB Program’s usual rules that would apply in the absence of the DB Program freeze, a Member shall continue to earn Service (for purposes of determining whether the Member has a vested right to a Pension) and entitlement Service (for purposes of applying more favorable early retirement factors under the DB Program) and shall be permitted to meet any related age threshold relevant to qualify for such early retirement factors while still an Employee, even after December 31, 2025. In
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addition, the portion of the formula that requires projecting and prorating a Member’s benefit, the denominator of the applicable fraction is projected to include service after December 31, 2025 as if the DB Program were not going to freeze while the numerator of the fraction is calculated taking into account the December 31, 2025 freeze, and then the resulting fraction is frozen as of December 31, 2025; a Member shall continue to earn Service and shall be permitted to meet any related age threshold while still an Employee that would result in the inapplicability of the projecting and prorating formula even after December 31, 2025.
The current restatement of the Plan is effective as of January 1, 2023 (the “Restatement Date”). Effective as of the Restatement Date, the Plan’s definition of Eligible Employee is revised to narrow the group that may initially qualify or continue to qualify as Eligible Employees.
At all times, the Plan is unfunded and unsecured for purposes of the United States Internal Revenue Code and Employee Retirement Income Security Act of 1974, as amended (“ERISA”). The benefits of an executive are an obligation of that executive’s individual employer. With respect to his employer, the executive has the rights of an unsecured general creditor. The Plan is also intended to be exempt from ERISA as a plan maintained outside of the United States primarily for the benefit of persons substantially all of whom are nonresident aliens of the United States.
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ARTICLE II - DEFINITIONS AND CONSTRUCTION
2.01 Definitions.
Where the following words and phrases appear in this governing legal document for the DB Program, they shall have the meaning set forth below, unless a different meaning is plainly required by the context:
(a) "Active Member" means a who is currently eligible to accrue Pensionable Service under the DB Program; accordingly, it refers to a Member who has been admitted or re-admitted to Membership pursuant to Article III, but who has not retired on Pension, withdrawn from or otherwise ceased to be (or to be deemed to be) in Service as an Eligible Employee, or for any other reason ceased to be eligible to accrue Pensionable Service for the purpose of the DB Program.
(b) “Actuarial Equivalent” means Actuarial Equivalent as defined in paragraph (2) (Standard Actuarial Factors) of Section 2.1 of Part B of the PepsiCo Employees Retirement Plan A, subject to paragraphs (3) (Applicability of the Standard Actuarial Factors) and (5) (Additional Defined Terms and Special Rules) thereof.
(c) "Actuary" means the individual actuary or firm of actuaries selected by the Vice President to provide actuarial services in connection with the administration of the DB Program.
(d) "Annuity Starting Date" means the first day of the first month for which a Pension is payable as an annuity or in any other form.
(e) “Approved Transfer” means any of the following that are initiated or approved by the Corporation or (with the approval of the Corporation) by a Member’s Employer –
(1) The Member’s transfer to employment based in the United States or its territories;
(2) The Member’s secondment to a work location in the United States or its territories;
(3) Any other change in the Member’s employment circumstances that will cause the Member to become a U.S. Person.
(f) "Associated Company" means any company or undertaking which – (i) is directly or indirectly controlled by or associated in business with the Corporation, and (ii) which has agreed, subject to the ongoing consent of the Vice President, to perform and observe the conditions, stipulations and provisions of the DB Program and to be included among the Employers under the DB Program. "Associated Companies" means all such companies or undertakings.
(g) "Corporation" means PepsiCo, Inc., a corporation organized and existing under the laws of the State of North Carolina, or its successor or successors.
(h) "Dependant" means the person who shall receive any amounts with respect to a Member’s Pension payable upon the Member’s death, in such cases where the
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Member’s Pension is payable in one of the forms of payment under Sections 5.02 and 5.03 that include a survivor option.
(i) “DB Program” means the portion of the Plan that provides a program of defined benefits and that is described in the governing legal document entitled “The PepsiCo International Retirement Plan Defined Benefit Program (PIRP-DB),” as it may be amended from time to time. The DB Program is also sometimes referred to as “PIRP-DB.”
(j) “DC Program” means the portion of the Plan that provides a program of defined contributions and that is described in the governing legal document entitled “The PepsiCo International Retirement Plan Defined Contribution Program (PIRP-DC),” as it may be amended from time to time. The DC Program is also sometimes referred to as “PIRP-DC.”
(k) “Eligible Domestic Partner” means, solely with respect to a Member who is actively employed by, or on an Authorized Leave of Absence from, a member of the PepsiCo Organization on or after January 1, 2019, an individual who is of the same sex or opposite sex as the Member and who satisfies paragraph (1), (2) or (3), subject to the additional rules set forth in paragraph (4), as determined by the Vice President.
(1)Civil Union. If the Member has entered into a civil union or similar government-recognized status that is valid on the applicable date under the law of the location that is determined by the Vice President to be the Member’s principal residence, the Participant’s Domestic Partner (if any) is the individual with whom the Participant has entered into such status, provided that such individual submits a claim for benefits within 60 days of Member’s date of death (and if no such claim is submitted, the individual shall not be a Domestic Partner under this paragraph (1)).
(2)Benefits Enrollment. If the Member does not have a Domestic Partner pursuant to subsection (1) above, the Member’s Eligible Domestic Partner (if any) is the individual who, on the applicable date, was enrolled, as the Member’s domestic partner, in the Cigna International Health Program (or its successor) sponsored by the Corporation.
(3)Other Acceptable Evidence of Partnership. If the Member does not have a Domestic Partner under paragraph (1) or (2) above, such Member’s Domestic Partner, if any, is the individual who, as of the applicable date, satisfies such criteria of domestic partnership as the Vice President has specified in writing, provided that such individual submits a claim for benefits within 60 days of the Member’s date of death (and if no such claim is submitted, the individual shall not be a Domestic Partner under this paragraph (3)).
(4)Additional Rules. For purposes of this definition, “applicable date” means the earlier of the Member’s Annuity Starting Date or the date of the Member’s death. The term “Eligible Domestic Partner” does not apply to a Member’s Eligible Spouse. A Member is not permitted to have more than one Eligible Domestic Partner at any point in time, and a Member who has an Eligible Spouse is not permitted to have an Eligible Domestic Partner.
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(l) "Eligible Employee" means an individual who the Vice President has determined – (i) is a full-time salaried Third Country National employed exclusively outside of the United States of America on the regular staff of an Approved Employer, and (ii) is not currently designated by the Vice President as in a position that can make him eligible to earn “pay credits” under the DC Program. The Vice President shall have the discretion to designate as an Eligible Employee a part-time employee who, but for his part-time status, otherwise satisfies the requirements of the preceding sentence. As of the Effective Date, an individual who otherwise qualifies under the preceding provisions of this definition shall not become or continue as an Eligible Employee unless (A) he was an Eligible Employee prior to the Effective Date, and he is currently designated by the Vice President as being in a period of grandfathered status with respect to qualification as an Eligible Employee, or (B) he is currently designated by the Vice President as qualifying as an Eligible Employee following an assignment to work in the United States (including Puerto Rico).
(m) "Eligible Spouse" means the individual to whom the Member is married on the earlier of the Member’s Annuity Starting Date or the date of the Member’s death. The determination of whether a Member is married shall be made by the Vice President based on the law of the Member’s principal residence; provided, however, that for purposes of the DB Program, a Member shall have only one Eligible Spouse.
(n) "Employers" means the Corporation and any and every Associated Company or such one or more of any of them as the context shall determine or the circumstances require. "Employer" in relation to any person means whichever it is of the Employers in whose employment that person is or was at the relevant time or those Employers (if more than one) in whose employment he had been during the relevant period. An “Approved Employer” means an Employer that, as of the time in question, has been approved by the Vice President (and remains approved) to have its Eligible Employees become and continue as Active Members under the DB Program.
(o) "Entry Date" means September 1, 1980 and the first day of each subsequent month.
(p) "Members" means all Eligible Employees who have been admitted to Membership pursuant to Article III and who remain entitled to a benefit under the DB Program. In relation to each of the Employers, any reference to Members means those Members in or formerly in its employment. References to "Membership" are references to the status of being a Member.
(q) "Normal Retirement Age" means age 65 or, if later, the age at which a Member first has five (5) years of Service.
(r) "Normal Retirement Date" means in relation to a Member the first day of the month coincident with or immediately following the Member’s Normal Retirement Age.
(s) "Pension" means a series of level monthly payments or single lump sum payment payable to a person who is entitled to receive benefits under the DB Program.
(t) "Pensionable Service" means in relation to a Member the period, or where appropriate the aggregate of periods, of a Member’s Service as an Eligible Employee of an Approved Employer, which is counted for purposes of determining the amount of benefits under the DB Program payable to, or on behalf of, a Member. Pensionable Service shall also include any other period of employment with a member of the PepsiCo Organization or any Employer for which the Vice President determines to give credit
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under the DB Program to the Member. Absent special circumstances, as determined by the Vice President, such other period of such prior period of employment will only be counted as Pensionable Service if such Employer maintained a retirement plan to which it made contributions on behalf of eligible employees.
(u) "Plan" means the PepsiCo International Retirement Plan, which consists of the DB Program and DC Program.
(v) "PepsiCo Organization" means the controlled group of organizations of which the Corporation is a part, as defined by U.S. Internal Revenue Code section 414 and regulations issued thereunder. An entity shall only be considered a member of the PepsiCo Organization during the period it is one of the group of organizations described in the preceding sentence.
(w) "PepsiCo Salaried Plan" means the program of pension benefits set forth in Part B of the PSERP Component of both the PepsiCo Employees Retirement Plan A (“PERP-A”) and the PepsiCo Employees Retirement Plan I (“PERP-I”), as it may be amended from time to time, and as it was set forth prior to January 1, 2017 in predecessor plans to PERP-A and PERP-I.
(x) "Salary" means in relation to a Member his calendar year base pay, plus overtime pay, commission payments and amounts paid pursuant to the incentive compensation plans (annual bonus plans) of an Employer, but shall exclude –
(1) Any pay that would ordinarily qualify as Salary as described above to the extent it is earned by the Member – (i) while working for the PepsiCo Organization or any Employer in the United States, (ii) while participating in the PepsiCo Salaried Plan, and/or (iii) while a U.S. Person, and
(2) All other amounts taxable as remuneration for personal services, including amounts received or deemed received under any other pension or welfare plan maintained by a member of the PepsiCo Organization or any Employer, premium bonuses, sign-on bonus or other one-time payments, income from stock option exercises and any special allowances (whether given in respect of residence, cost of living, education, transfer or otherwise).
If a Member has Salary in accordance with the prior sentence and then ceases to be employed by an Employer (but the Member remains employed by a member of the PepsiCo Organization), compensation while employed by the member of the PepsiCo Organization that otherwise would qualify as Salary hereunder shall be considered Salary for purposes of the DB Program. In the event a Member’s Salary is either (i) paid in currency other than United States dollars or (ii) paid in United States dollars but not tied to the United States salary ranges established by the Corporation, as updated from time to time, such currency shall be converted to United States dollars according to procedures established by the Global Mobility Team, or if no so such procedures exist as of the time in question, as reasonably determined by the Vice President. Notwithstanding the foregoing provisions of this definition, the Vice President may exercise his discretion to determine a Member's Salary based on an alternative definition that is different than that set forth above.
(y) "Service" means in relation to a Third Country National (or other employee deemed an Eligible Employee by the Vice President) only the period during which such Third Country National (or such other employee) was continuously in employment (including all permissible periods of authorized leave of absence) with any Approved
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Employer. A permissible period of authorized leave of absence is a period of absence of not more than 12 months, unless a longer period is individually authorized in writing by the Vice President. A break in service of less than 12 months shall not be considered to have broken the continuity of a Member's Service. Other breaks in service (including a break in service of at least 12 months and a break in service before an individual has become a Member) shall break the continuity of an individual’s Service, and employment before the break in service will only be counted as Service if it would otherwise qualify under this subsection and the Vice President approves its being counted (which approval may provide for such pre-break employment being counted as vesting Service, entitlement Service, or both). Vesting Service means Service that is taken into account solely in determining vesting, and entitlement Service means Service that is taken into account solely in determining entitlement for Early Retirement, Normal Retirement and Late Retirement.
For an individual who transfers from employment with an Employer as an ineligible Employee to the status of an Eligible Employee of an Employer, his pre-transfer period of employment with an Employer may be counted as Service only with the approval of the Vice President (which approval may provide for such pre-transfer employment being counted as vesting Service, entitlement Service, or both).
Except as otherwise provided by the Vice President, Service shall not include an individual’s periods of employment with any company or undertaking prior to it becoming an Employer or a member of the PepsiCo Organization.
No determination of an individual’s Service shall result in any duplication, and all of the DB Program’s provisions shall at all times be interpreted consistently with the terms of this subsection.
(z) “Status Change” means any change in a Member’s circumstances (other than a change in circumstances that constitutes an Approved Transfer) that will cause the Member to become a U.S. Person.
(aa) "Third Country National" means any individual who is not: (1) a U.S. Person, (2) employed in his home country, (3) employed in his hire country, except as permitted by the Vice President, nor (4) accruing benefits under a retirement plan sponsored by his Employer in his home country while abroad. An individual’s home or hire country as of any time shall be the country that is designated at that time as the individual’s home or hire country, respectively, on the records of the applicable entity (which shall be the Global Mobility Team, its successor (if any) or such other group within the PepsiCo Organization that is designated for this purpose by the Vice President), or is so designated in accordance with such rules as the applicable entity shall choose to apply from time to time. The records described in the preceding sentence are intended to be maintained outside the United States of America.
(bb) "U.S. Person" means: (1) a citizen of the United States of America; (2) a person lawfully admitted for permanent residence in the United States of America at any time during the calendar year, or who has applied for such permanent residence (within the meaning of United States Internal Revenue Code section 7701(b)(1)(A)); or (3) any other person who is a resident alien of the United States of America under United States Internal Revenue Code section 7701(b)(1)(A) because, for example, the person satisfies the substantial presence test under United States Internal Revenue Code section 7701(b)(3) or makes an election to be treated as a United States resident under United States Internal Revenue Code section 7701(b)(4). In addition, a person shall be considered a U.S. Person for purposes of Section 9.14 in any year for which the person is
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required by the United States Internal Revenue Code to file an individual income tax return, unless the Vice President determines that it is clear that the person has no U.S. source earned income from a member of the PepsiCo Organization for such year.
(cc) "Vice President" means the Vice President, Global Benefits & Wellness of PepsiCo, Inc. but if such position is vacant or eliminated it shall be the person who is acting to fulfill the majority of the duties of the position (or plurality of the duties, if no one is fulfilling a majority), as such duties existed immediately prior to the vacancy or the position elimination.
2.02 Construction.
(a) Gender and Number: In this document for the DB Program where the context does not otherwise determine, words importing the masculine gender shall include the feminine gender and words importing the singular number shall include the plural number and vice versa.
(b) Determining Periods of Years: For the purposes of the DB Program, any period of 365 consecutive days (or of 366 consecutive days, if the period includes 29th February) shall be deemed to constitute a year, but not so that in the calculation of a number of years any day is counted more than once. Where the amount of a benefit depends upon the calculation of a number of years or months without expressly requiring that these should be complete years or months, a proportionate amount (i.e., a number of days) may be given for any part of a year or month which would not otherwise be included in the calculation. Where the this document makes reference to months or parts of a year, or to any other period of time except a day, week or year the Vice President may authorize the period to be counted in days or complete calendar months with each calendar month counted as 1/12th of a year.
(c) Compounds of the Word “Here”: The words “hereof” and “hereunder” and other similar compounds of the word “here” shall mean and refer to the entire DB Program, not to any particular provision or section.
(d) Examples: 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 passages of the document 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).
(e) Subdivisions of This Document: This document is divided and subdivided using the following progression: articles, sections, subsections, paragraphs, subparagraphs and clauses. Articles are designated by capital roman numerals. Sections are designated by Arabic numerals containing a decimal point. Subsections are designated by lower-case letters in parentheses. Paragraphs are designated by Arabic numerals in parentheses. Subparagraphs are designated by lower-case roman numerals in parentheses. Clauses are designated by upper-case letters in parentheses. Any reference in a section to a subsection (with no accompanying section reference) shall be read as a reference to the subsection with the specified designation contained in that same section. A similar rule shall apply with respect to paragraph references within a subsection and subparagraph references within a paragraph.
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ARTICLE III - MEMBERSHIP
3.01 Eligibility for Membership.
Every person who the Vice President determines is an Eligible Employee shall be eligible for Membership.
3.02 Admission to Membership.
(a) Every person who was an Active Member of the DB Program immediately prior to January 1, 2021 shall continue as an Active Member of the DB Program from and after January 1, 2021, to the extent such Active Membership is and remains consistent with the provisions of the DB Program, as amended and in effect on and after January 1, 2021 (and thereafter, as amended and in effect on and after the Restatement Date). In addition, every person who was a Member but not an Active Member immediately prior to January 1, 2021 shall continue as a Member of the DB Program from and after the Restatement Date, to the extent such Membership is and remains consistent with the provisions of the DB Program, as amended and in effect on and after January 1, 2021 (and thereafter, as amended and in effect on and after the Restatement Date).
(b) Every person who is not a Member and who the Vice President determines is an Eligible Employee shall, following the approval of his Membership by the Vice President, be admitted to Membership, effective as of the Entry Date coinciding with or immediately following the date on which his Service commences or he becomes an Eligible Employee (as determined by the Vice President), whichever is later. No Eligible Employee or any other person shall be admitted to or continue in Membership without the approval of the Vice President.
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ARTICLE IV - REQUIREMENTS FOR BENEFITS
4.01 Normal Retirement Pension.
A Member shall be entitled to a Normal Retirement Pension if his employment with both his Employer and the PepsiCo Organization terminates on his Normal Retirement Age. The Member’s Annuity Starting Date shall be the first day of the month coincident with or immediately following the day the Member terminates employment with both his Employer and the PepsiCo Organization. The Member’s Pension shall be paid in the normal form of payment applicable to the Member under Section 5.02 unless the Member elects an optional form of payment under Section 5.03. The Member’s Pension shall be calculated in accordance with Table A.
4.02 Early Retirement Pension.
A Member shall be entitled to an Early Retirement Pension if his employment with both his Employer and the PepsiCo Organization terminates on or after age 55 but before his Normal Retirement Age, and after he has completed 10 or more years of Service. The Member’s Annuity Starting Date ordinarily shall be his Normal Retirement Date. The Member may, however, by filing a written election with the Vice President, direct that his Annuity Starting Date shall be the first day of any month after the Member terminates employment with both his Employer and the PepsiCo Organization but before the Member's Normal Retirement Date. The amount of such Pension shall be computed in accordance with Table A as if the Member retired at his Normal Retirement Date, but on the basis of the Member’s Highest Average Monthly Salary (as defined in Table A) and Pensionable Service as of his employment termination date; provided, however, that, in the case of a Member electing to receive his Pension prior to attaining his Normal Retirement Date, the amount of his Pension shall be reduced by 4/12 of 1 percent for each month by which the day on which the Pension commences precedes the date on which the Member would have attained age 62.
4.03 Special Early Retirement Pension.
A Member may be entitled to receive a Special Early Retirement Pension if his employment with both his Employer and the PepsiCo Organization terminates on or after age 50 but before age 55 and after completion of not less than 10 years of Service and only if such Special Early Retirement Pension payments have been authorized by the Vice President. The Annuity Starting Date of such Special Early Retirement Pension shall be the first day of the month after the Vice President authorizes such Special Early Retirement Pension. The amount of such Pension shall be computed in accordance with Table A, as if the Member retired at his Normal Retirement Date, but on the basis of the Member's Highest Average Monthly Salary (as defined in Table A) and Pensionable Service as of his employment termination date; provided, however, that the amount of such Member's Pension so determined shall be reduced by 4/12 of 1 percent for each month by which the day on which the Pension commences precedes the date on which the Member would have attained age 62.
4.04 Deferred Vested Pension.
(a) This Section 4.04 applies to a Member who terminates employment with both his Employer and the PepsiCo Organization before becoming eligible for a Normal Retirement Pension, Early Retirement Pension or Special Early Retirement Pension.
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(b) A Member described in (a) above who has met one of the requirement to be vested in Sections 4.06 and 4.07 shall be entitled to receive a Pension (hereinafter referred to as a “Deferred Vested Pension”). The amount of such Deferred Vested Pension shall be determined in accordance with Table A; provided, however, that in the case of a Member who remains in the employment of the PepsiCo Organization or any Employer after ceasing to be an Active Member, the amount of such Member’s Deferred Vested Pension shall be determined in accordance with Table A by reference to (i) the Member’s Highest Average Monthly Salary at the date the Member terminates employment with both his Employer and the PepsiCo Organization (but only to the extent permitted under Sections 9.13 and 9.14), and (ii) the Member’s Pensionable Service as of his termination of employment date.
(c) A Member’s Deferred Vested Pension shall commence at the later of (i) the Member’s termination of employment with both his Employer and the PepsiCo Organization, or (ii) the Member’s Normal Retirement Date. However, a Member may elect, by filing a written election with the Vice President to have his Deferred Vested Pension commence as of the first day of any month after the date he attains age 55 (or the date of his termination of employment with both his Employer and the PepsiCo Organization, if later). In the case of a Member electing to receive his Deferred Vested Pension prior to attaining his Normal Retirement Date, the amount of his Pension shall be reduced in accordance with the reduction factors applicable to early commencement of a “Vested Pension” under the PepsiCo Salaried Plan, not the percentage factors which apply to an Early and Special Early Retirement Pension as described in Sections 4.02 and 4.03.
(d) If Member becomes entitled to a Deferred Vested Pension under subsection (a) above and once again becomes an Eligible Employee, he shall be re-admitted to Active Membership in accordance with the provisions of Article III. His Service and Pensionable Service from his earlier period as an Active Member shall be aggregated with his subsequent period of Service and Pensionable Service for purposes of calculating his Pension upon his later retirement or other termination of employment with both his Employer and the PepsiCo Organization, but only if his Pension with respect to his earlier period of Pensionable Service was not previously cashed out under Section 5.05.
4.05 Late Retirement Pension.
A Member who continues employment with the PepsiCo Organization or any Employer after his Normal Retirement Age shall be entitled to a Late Retirement Pension. The Member’s Annuity Starting Date shall be the first day of the month coincident with or immediately following the day the Member terminates employment with both his Employer and the PepsiCo Organization. The Member shall be credited with his Salary and Pensionable Service after his Normal Retirement Date, unless otherwise prospectively determined by the Vice President.
4.06 Vesting.
Subject to Sections 9.14 and 9.08 and to Table A (I)(c), a Member shall be fully vested in, and have a nonforfeitable right to, his Pension upon completing 5 years of Service, or if earlier, upon the death or disability of the Member while employed by the Employer or PepsiCo Organization. The determination of whether a Member has become disabled for this purpose shall be made by the Vice President in accordance with such standards that the Vice President deems to be appropriate as of the time in question.
The accrual of a Pension benefit pursuant to this Plan shall not in any way exempt the Pension benefit from the full application of the Company’s clawback and other forfeiture and
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recovery policies (“Clawback Policies”), as they are in effect from time to time. Accordingly, a Member’s Pension benefit shall be subject to forfeiture (and if paid out, to recovery) to the extent determined to be appropriate by the Vice President to give full effect to these Clawback Policies. Section 9.08 shall not be construed to reduce or impair the forfeiture and recovery rights provided by this Section 4.06.
4.07 Special Vesting for Approved Transfers and Status Changes.
(a) Automatic Special Vesting for Approved Transfers. Notwithstanding Section 4.06 above, in the case of an Active Member who will have an Approved Transfer during a Plan Year, the Active Member shall automatically have special vesting apply as of the last business day before the earlier of – (a) the Active Member’s Approved Transfer, or (b) the day the Active Member would become a U.S. Person in connection with the Approved Transfer.
(b) Special Vesting for Status Changes. Also notwithstanding Section 4.06 above, in the case of an Active Member who will have a Status Change, the Active Member may request that the Vice President apply special vesting to him as of the last business day before the Active Member’s Status Change. In order for special vesting related to a Status Change to be valid and effective under the DB Program, the Active Member’s request and the Vice President’s approval of the request must both be completely final and in place prior to the date that the special vesting applies.
Subject to the next sentence, the effect of special vesting applying to a Member in accordance with either subsection (a) or (b) above is that the Member will become vested, to the same extent as could apply under Section 4.06 if the Member vested under that Section, as of the date that the special vesting applies. Notwithstanding the preceding provisions of this Section 4.07, rights under this Section 4.07 are subject to the overriding requirement that benefits and other rights under the Plan must remain entirely exempt from Section 409A of the United States Internal Revenue Code, and this Section 4.07 shall not apply to the extent inconsistent with this requirement.
4.08 Accruals After Benefit Commencement.
This section applies to a Member who earns Service and Pensionable Service for a period that is after his Annuity Starting Date under the preceding Sections of this Article IV (other than an Annuity Starting Date related to a cashout distribution under Section 5.05). Any prior benefits that have been suspended, and any additional benefits accrued by Member after his prior benefit commencement, shall be paid at his subsequent Annuity Starting Date. The suspension or continuation of a Member’s prior benefits, any adjustments to the Member’s benefits that are payable upon his subsequent Annuity Starting Date, and the election of a time and form of payment for benefits payable at the subsequent Annuity Starting Date, shall be subject to rules established by the Vice President for this purpose. Such rules shall be based upon the PepsiCo Salaried Plan’s rules for benefits accrued after the benefit commencement date of a participant in that plan, unless the Vice President determines that a modification of those rules is appropriate.
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ARTICLE V - DISTRIBUTION OPTIONS
5.01 Distribution Options.
(a) Section 5.02 sets forth the normal forms of payment for married and unmarried Members. For purposes of Section 5.02, a Member is considered married if he is married on his Annuity Starting Date.
(b) Section 5.03 sets forth the optional forms of payment that may be available to married and unmarried Members who elect not to receive benefits in the normal form. For purposes of Section 5.03, a Member will also be considered married if he is married on the date he elects an optional form of payment.
(c) A distribution is only available under this Article V to the extent a Member has met the requirements for benefits under Article IV.
5.02 Normal Forms of Payment.
(a) Single Life Annuity for Unmarried Members: An unmarried Member shall be paid his Pension in the form of a Single Life Annuity unless he elects otherwise in accordance with Section 5.03. The Single Life Annuity provides monthly payments beginning at the Member's Annuity Starting Date and ending with the last monthly payment due prior to the Member's death.
(b) 50 Percent Survivor Annuity for Married Members: A married Member shall be paid his Pension in the form of a 50 Percent Survivor Annuity, as described herein, unless he elects otherwise in accordance with Section 5.03. The 50 Percent Survivor Annuity provides reduced monthly payments beginning at the Member’s Annuity Starting Date and ending with the last monthly payment due prior to the Member’s death, with a 50 percent contingent survivor annuity for the benefit of his Eligible Spouse beginning on the first day of the month following the Member’s death and ending with the last monthly payment due prior to the death of the Eligible Spouse. For Annuity Starting Dates on or After January 1, 2019, the amount of the Member’s Pension, determined in accordance with Table A, shall be reduced to its Actuarial Equivalent to reflect the survivor benefit payable. For earlier Annuity Starting Dates, subject to Section 5.03(f), the amount of the Member’s Pension, determined in accordance with Table A, shall be reduced by 10 percent. In the case of a Member who became entitled to a Pension under Section IV of the Plan, as in effect prior to January 1, 1990, the Member’s Pension accrued as of such date shall not be subject to this reduction to the extent provided under the Plan’s terms as of such date.
5.03 Optional Forms of Payment.
(a) Optional Forms Available to Married Members: A married Member who elects not to receive benefits in the normal form may receive his Pension in the form of the Single Life Annuity described in Section 5.02(a) above or the 75 Percent Survivor Annuity described in (b)(2) below, regardless of whether he is eligible for the optional forms of payment described in (b), (c) and (d) below.
(b) Survivor Options: A married or unmarried Member who elects not to receive benefits in the normal form may elect to receive payment of his Pension in accordance with one of the survivor options listed below. Such election shall be made on such form and during such period prior to commencement of the Member’s Pension as may be
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required by the Vice President. The Member also may designate, prior to commencement, a Dependant to receive the survivor portion of his elected survivor option on such form as may be required by the Vice President; provided, however, that (1) the approval of the Vice President shall be necessary if the Member designates a Dependant other than the Member’s Eligible Spouse; and (2) if a married Member elects an option described in this subsection (b) and names a Dependant other than his Eligible Spouse, he must submit written evidence of the Eligible Spouse’s consent to such option and designation of a Dependant. A Member may not change his form of benefit or Dependant after his Pension has commenced.
(1) 100 Percent Survivor Option: The Member shall receive a reduced Pension payable for his life and payments in the same reduced amount shall continue after the Member's death to his Dependant for life. The amount of the Member's reduced Pension shall be the Actuarial Equivalent (as defined in Section 2.01) of the Member’s Single Life Annuity benefit determined in accordance with Table A (or for Annuity Starting Dates before January 1, 2019, the Table A amount reduced by 20 percent, subject to subsection (f) below). In the case of a Member who became entitled to a Pension under the Plan as in effect prior to January 1, 1990, the above Pension reduction may be subject to a subsidy, as determined by the Vice President.
(2) 75 Percent Survivor Option: The Member shall receive a reduced Pension payable for his life and payments in the amount of 75 percent of such reduced Pension shall continue after the Mem’er's death to his Dependant for life. The amount of the Mem’er's reduced Pension shall be the Actuarial Equivalent (as defined in Section 2.01) of the Member’s Single Life Annuity benefit determined in accordance with Table A (or for Annuity Starting Dates before January 1, 2019, the Table A amount reduced by 15 percent, subject to subsection (f) below). In the case of a Member who became entitled to a Pension under the Plan as in effect prior to January 1, 1990, the above Pension reduction may be subject to a subsidy, as determined by the Vice President.
(3) 50 Percent Survivor Option: The Member shall receive a reduced Pension payable for his life and payments in the amount of 50 percent of such reduced Pension shall continue after the Mem’er's death to his Dependant for life. The amount of the Mem’er's reduced Pension shall be the Actuarial Equivalent (as defined in Section 2.01) of the Member’s Single Life Annuity benefit determined in accordance with Table A (or for Annuity Starting Dates before January 1, 2019, the Table A amount reduced by 10 percent, subject to subsection (f) below). In the case of a Member who became entitled to a Pension under the Plan as in effect prior to January 1, 1990, his Pension shall not be subject to this reduction.
(4) Ten-Year Certain and Life Option: Subject to Section 5.04, a Member may elect to receive a reduced Pension payable monthly for his lifetime but for not less than 120 months. If the Member dies before 120 payments have been made, the monthly Pension amount shall be paid for the remainder of the 120-month period to the Member's primary Dependant (if the primary Dependant has predeceased the Member, to the Member's contingent Dependant; and if there is no contingent Dependant, to the Member’s estate). If post-death payments commence to a Member’s primary or contingent Dependant and such Dependant dies before all remaining payments due have been made, then the remaining payments shall be paid to such Dependant’s estate. Effective as of January 1, 2010, the Member’s Dependant or estate (as applicable) may elect by following the procedures set forth by the Vice President for this purpose, instead to receive a
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single lump sum payment that is the actuarial equivalent of the remaining payments due to such Dependant or estate (but computed without reduction for mortality), determined as of the date on which the lump sum payment is processed by the Vice President. The amount of the Member's reduced Pension shall be the Actuarial Equivalent (as defined in Section 2.01) of the Member's Single Life Annuity benefit determined in accordance with Table A (or for Annuity Starting Dates before January 1, 2019, the Table A amount reduced by 5 percent, subject to subsection (f) below).
(c) Lump Sum Payment: Subject to Section 5.04, a Member who elects not to receive benefits in the normal form may elect to receive payment of his Pension in the form of a single lump sum payment. The amount of the single lump sum payment shall be the actuarial equivalent of the Single Life Annuity, determined in accordance with Table A, utilizing the lump sum equivalent factors applicable to lump sum distributions under the PepsiCo Salaried Plan (disregarding transition factors), calculated as of the date payments would have commenced under the normal form of benefit or other optional benefit. The lump sum payment shall be made in one taxable year of the Member and shall be paid as soon as practicable after the date specified by the Member in his written election. Effective for lump sum payments due to be paid on or after January 1, 2010, interest will be added to late lump sum payments in accordance with the administrative practices of the PepsiCo Salaried Plan. No interest shall be payable on such sum during any such deferred period specified by the Member.
(d) Combination Lump Sum/Monthly Benefit: Subject to Section 5.04, a married or unmarried Member who elects not to receive his Pension in the normal form may elect to receive payment of his Pension in the form of a combination lump sum/monthly benefit option. If elected, the Member shall receive a portion of his benefit in the form of a lump sum payment, and the remaining portion in the form of one of the monthly benefits described in Sections 5.02 and 5.03. The benefit shall be divided between the two forms of payment based on the whole number percentages designated by the Member on a form provided for this purpose. To be effective, the two percentages designated by the Member must add to 100 percent(1) The amount of the benefit paid in the form of a lump sum is determined by multiplying: (A) the amount determined under Section 5.03(c) by (B) the percentage that the Member has designated for receipt in the form of a lump sum.
(2) The amount of the benefit paid in the form of a monthly benefit is determined by multiplying: (A) the amount of the monthly benefit elected by the Member, determined in accordance with Sections 5.03(a) or (b), by (B) the percentage that the Member has designated for receipt in the form of a monthly benefit.
(e) Death Prior to Pension Becoming Payable: If a Member who is entitled to an immediate Pension under Article IV elects an optional form of payment under this Section 5.03, if such election meets all requirements to be effective (other than the Member’s survival, but including the time for making the election and any necessary Eligible Spouse’s consent), and thereafter the Member dies after leaving employment but before such Pension becomes payable, then on the first day of the month next following his death such optional form of payment shall be deemed to be in effect. Such deemed effectiveness may only apply once and only to the initial election made by a Member (except as permitted by a decision of the Vice President that is made prior to the Member’s submission of a subsequent purported election). Notwithstanding the foregoing, in the case of the option under Section 5.03(b), if the Member’s specified
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Dependant has died or shall die before the date on which the first installment of the Member’s Pension was prospectively payable in accordance with the optional form of payment elected by the Member, the Member’s election of such optional form shall not be given effect.
(f) Reduction for Certain Younger Dependants: Notwithstanding the reduction factors specified in Sections 5.02(b) and 5.03, in the case of Annuity Starting Dates before January 1, 2019, a Member electing a form of payment that includes a survivor option shall have his Pension reduced in accordance with this subsection (f) in the event the Dependant under such survivor option is more than 10 years younger than the Member.
(1) Not More than 20 Years Younger: In the event the Dependant is more than 10 years younger than the Member, but not more than 20 years younger, the percentage reduction that otherwise would apply shall be increased by 5 percentage points.
(2) More than 20 Years Younger: In the event the Dependant is more than 20 years younger than the Member, the 5 percentage point increase in the reduction provided in (1) above shall be further increased by an additional 0.2 percent for each full year over 20.
5.04 Applicability of Certain Options.
Notwithstanding the preceding provisions of this Article V, the availability of certain distribution options shall be restricted in accordance with the terms of this Section 5.04.
(a) Pre-1990 Distributions: The form of payment described in Section 5.03(d) above shall not be available unless the Member's Annuity Starting Date is after 1989.
(b) Deferred Vested Pensions: Deferred Vested Pensions under Section 4.04 shall be eligible for payment only under the Single Life Annuity, the 50 Percent Survivor Option or the 75 Percent Survivor Option, except as provided in the next sentence. Effective as of January 1, 2015, Deferred Vested Pensions under Section 4.04 shall also be eligible for the Lump Sum Payment option, but only to the limited extent that such option is available on an on-going basis with respect to deferred vested pensions under the PepsiCo Salaried Plan (except that unlike participants in the PepsiCo Salaried Plan, participants in this Plan with a benefit under the PepsiCo Pension Equalization Plan shall not be excluded from the Lump Sum Payment option).
(c) Simplified Actuarial Factors: In the case of a Member who became entitled to a Pension prior to January 1, 1990, the actuarial equivalencies described in the preceding provisions of this Article V shall be adjusted as provided by the Vice President from time to time to reflect the value of any subsidized survivor benefit to which the Member is entitled under the last sentence of Section 5.02(b) (regarding the availability on favorable terms of the survivor benefit described in Section 5.02(b)).
5.05 Cashout of Certain Benefits.
(a) Cashout of Small Benefits. Where the total Pension payable to any person under the DB Program is, in the opinion of the Vice President, of an amount that is relatively trivial (when considered by itself or in relation to the potential administrative burden of continuing to keep track of such Pension under the DB Program), he may commute the whole of such Pension to a lump sum payable following (i) the relevant
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Member’s termination of employment from both his Employer and the PepsiCo Organization, or (ii) a Member’s transfer within the PepsiCo Organization that results in the Member ceasing to actively accrue all benefits under the DB Program, on a date determined in the discretion of the Vice President, without the consent of the Member.
(b) Discretionary Cashout After Benefit Commencement. Effective January 1, 2019, the Vice President shall have the discretion to make a lump-sum payment to any Member whose benefit payments have commenced (in a form other than a lump-sum), if the present value of the Member’s remaining stream of payments is less than on equal to $75,000 on the payment date. The amount of the lump sum payment shall be the actuarial equivalent of the Member’s remaining stream of payments, determined utilizing the lump sum equivalent factors specified in Section 5.03(c) calculated as of the a payment date determined in the discretion of the Vice President.
5.06 Designation of Dependant.
A Member who has elected to receive all or part of his pension in a form of payment that includes a survivor option shall designate a Dependant who will be entitled to any amounts payable on his death. A Member shall have the right to change or revoke his Dependant designation at any time prior to the effective date of his election. If the Member is married at the time he designates a Dependant, any designation under this section of a Dependant who is not the Member’s Eligible Spouse shall require the written consent of the Member’s Eligible Spouse. A revocation of a Dependant does not require consent by the Member’s Eligible Spouse. The designation of any Dependant, and any change or revocation thereof, and any written consent of a Member’s Eligible Spouse required by this Section shall be made in accordance with rules adopted by the Vice President, shall be made in writing on forms provided by the Vice President, and shall not be effective unless and until filed with the Vice President. In the case of the survivor option described in Section 5.03(b)(4), the following shall apply: (i) the Member shall be entitled to name both a primary Dependant and a contingent Dependant, and (ii) if no Dependant is properly designated, then a Member’s election of such option will not be given effect.
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ARTICLE VI - DEATH BENEFITS
The surviving Eligible Spouse or Eligible Domestic Partner, as applicable, of a Member who dies shall be entitled to certain survivor benefits if the requirements of this Article VI are satisfied. Except as provided in Sections 6.02 and 6.03, the amount of any such benefit shall be determined in accordance with Section II of Table A.
6.01 Active and Retirement-Eligible Members.
In the event of the death of an Active Member, a Member in Service after his Normal Retirement Date who had at his death completed at least 5 years of Service, or a Member entitled to an Early Retirement Pension under Section 4.02 or Special Early Retirement Pension under Section 4.03, if such Member is survived by an Eligible Spouse or an Eligible Domestic Partner and is not entitled at the time of death to the protection provided by Section 5.03(e), there shall be a Pre-Retirement Spouse’s Pension or Pre-Retirement Domestic Partner’s Pension payable to the Member’s surviving Eligible Spouse or Eligible Domestic Partner (as applicable), calculated in accordance with the provisions of Section II of Table A.
6.02 Vested Members.
In the event of the death of a Member who is not described in Section 6.01 above, who is vested under Section 4.06 or Section 4.07 and who has not yet commenced or received the Member’s Pension, if such Member is survived by an Eligible Spouse or an Eligible Domestic Partner and is not entitled at the time of death to the protections provided by Section 5.03(e), there shall be payable a Pre-Retirement Spouse’s Pension or Pre-Retirement Domestic Partner’s Pension (as applicable), which shall be calculated based on the Member’s Salary and Pensionable Service as of the earlier of the Member’s death or termination of employment. The benefit shall be calculated as if the Member lived until the earliest date the Member’s vested benefit could have started, after having elected to start his benefit at that time in the form of a 50 Percent Survivor Annuity, and died that same day.
Coverage for this Pre-Retirement Spouse’s Pension or Pre-Retirement Domestic Partner’s Pension shall be paid for with a reduction to the monthly benefit otherwise payable to the Member. The reduction charged to the Member’s benefit shall be calculated in accordance with the methodology, and based on the same factors, provided for under the PepsiCo Salaried Plan, as in effect from time to time. The Member may only waive this Pre-Retirement Spouse’s Pension coverage or Pre-Retirement Domestic Partner’s Coverage (as applicable) with the approval of the Vice President.
6.03 Form and Time of Payment of Death Benefits.
(a) Form of Payment: Any Pension payable pursuant to this Article VI shall be payable for the surviving Eligible Spouse’s or surviving Domestic Partner’s life only; however, in the case of a Pension payable to a surviving Eligible Spouse or surviving Domestic Partner where the Member was eligible for a Normal, Early or Special Early Retirement Pension at death, the Eligible Spouse or Eligible Domestic Partner may elect to receive the Pension in the form of a single lump sum payment in lieu of the annuity payment.
(b) Time of Payment: Subject to Section 6.04, any Pension payable to the Eligible Spouse or Eligible Domestic Partner under this Article VI shall commence on the first day of the month coinciding with or next following the Member’s death, or if later, the date on which the Member would have attained age 55. In the event a Pension
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payable to a Member’s Eligible Spouse commences before the Member would have reached Normal Retirement Age, the benefit will be reduced as set forth in Section 4.02, 4.03 or 4.04, as applicable based on the Pension to which the Member was entitled, to reflect early commencement.
6.04 Disposition of Death Benefits.
Any benefit expressed to be subject to disposition in accordance with the provision of this Article VI shall be held by the Vice President with power to pay or apply the same to or for the benefit of such one or more of the Member’s Dependants, as the Vice President shall think fit and if more than one in such shares as they shall likewise think fit. Notwithstanding any other provision of the DC Program, the Vice President may direct that such benefit shall commence or be paid in a lump sum as soon as practicable after the Member’s date of death.
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ARTICLE VII - ADMINISTRATION
7.01 Authority to Administer Plan.
(a) Administration by the Vice President: The Plan shall be administered by the Vice President, who shall have the authority to interpret the Plan and issue such regulations as he deems appropriate. All actions by the Vice President hereunder may be taken in his sole discretion, and all interpretations, determinations and regulations made or issued by the Vice President shall be final and binding on all persons and parties concerned.
(b) Authority to Delegate: The Vice President may delegate any of his responsibilities under the Plan to other persons or entities, or designate or employ other persons to carry out any of his duties, responsibilities or other functions under the Plan. Any reference in the Plan to an action by the Vice President shall, to the extent applicable, refer to such action by the Vice President’s delegate or other designated person.
7.02 Facility of Payment.
Whenever, in the opinion of the Vice President, a person entitled to receive any payment of a benefit or installment thereof hereunder is under a legal disability or is incapacitated in any way so as to be unable to manage his financial affairs, the Vice President may direct that payments from the Plan be made to such person’s legal representative for his benefit, or that the payment be applied for the benefit of such person in such manner as the Vice President considers advisable. Any payment of a benefit or installment thereof in accordance with the provisions of this section shall be a complete discharge of any liability for the making of such payment under the provisions of the Plan.
7.03 Claims Procedure.
The Vice President shall have the exclusive discretionary authority to construe and to interpret the Plan, to decide all questions of eligibility for benefits and to determine the amount of such benefits, and his decisions on such matters are final and conclusive. As a result, benefits under this Plan will be paid only if the Vice President decides in his discretion that the person claiming such benefits is entitled to them. This discretionary authority is intended to be absolute, and in any case where the extent of this discretion is in question, the Vice President is to be accorded the maximum discretion possible. Any exercise of this discretionary authority shall be reviewed by a court, arbitrator or other tribunal under the arbitrary and capricious standard (i.e., the abuse of discretion standard). All decisions and determinations made by the Vice President shall be final, conclusive, and binding on all parties. The Vice President may consider the intent of the Corporation with respect to a Plan provision in making any determination with respect to the provision, notwithstanding the provisions set forth in any document that arguably do not contemplate considering such intent.
If, pursuant to this discretionary authority, an assertion of any right to a benefit or any other right related to the Plan (a “claim”), by or on behalf of a Member, putative Member, Dependant or putative Dependant (a “claimant”), is wholly or partially denied, the Vice President, or a party designated by the Vice President, will provide such claimant the claims procedure described in this section. The Vice President has the discretionary authority to modify the claims procedure described in this Section in any manner so long as the claims review process, as modified, includes the basic steps described in this Section. In the event of a claim by a claimant, the Vice
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President or the designated party shall provide the claimant within the 90-day period following the receipt of the claim by the Vice President, a comprehensible written notice setting forth:
(1) The specific reason or reasons for such denial;
(2) Specific reference to pertinent Plan provisions on which the denial is based;
(3) A description of any additional material or information necessary for the claimant to submit to perfect the claim and an explanation of why such material or information is necessary; and
(4) A description of the Plan’s claim review procedure (including the time limits applicable to such process).
If the Vice President determines that special circumstances require an extension of time for processing the claim he may extend the response period from 90 to 180 days. If this occurs, the Vice President will notify the claimant before the end of the initial 90-day period, indicating the special circumstances requiring the extension and the date by which the Vice President expects to make the final decision. Upon review, the Vice President shall provide the claimant a full and fair review of the claim, including the opportunity to submit to the Vice President comments, document, records and other information relevant to the claim and the Vice President’s review shall take into account such comments, documents, records and information regardless of whether it was submitted or considered at the initial determination. The decision on review will be made within 60 days after receipt of the request for review, unless circumstances warrant an extension of time not to exceed an additional 60 days. If this occurs, notice of the extension will be furnished to the claimant before the end of the initial 60-day period, indicating the special circumstances requiring the extension and the date by which the Vice President expects to make the final decision. The final decision shall be in writing and drafted in a manner calculated to be understood by the claimant; include specific reasons for the decision with references to the specific Plan provisions on which the decision is based; and provide that the claimant is entitled to receive, upon request and free of charge, copies of, all documents, records, and other information relevant to his or her claim for benefits.
Any claim under the Plan that is reviewed by a court, arbitrator or any other tribunal shall be reviewed solely on the basis of the record before the Vice President at the time it made its determination. In addition, any such review shall be conditioned on the claimant’s having fully exhausted all rights under this section and in accordance with Section 7.07.
7.04 Limitations on Actions.
Any claim filed under Article VII and any action filed in any court or other tribunal by or on behalf of a former or current Employee, Member, Dependant or any other individual, person or entity (collectively, a “Petitioner”) for the alleged wrongful denial of Plan benefits must be brought within two years of the date the Petitioner’s cause of action first accrues. For purposes of this subsection, a cause of action with respect to a Petitioner’s benefits under the Plan shall be deemed to accrue not later than earlier of (i) when the Petitioner has received the calculation of the benefits that are the subject of the claim or legal action; (ii) the date identified to the Petitioner by the Vice President on which payments shall commence; or (iii) when he has actual or constructive knowledge of the facts that are the basis of his claim. Failure to bring any such claim or cause of action within this two-year time frame shall preclude a Petitioner, or any representative of the Petitioner, from filing the claim or cause of action. Correspondence or other communications following the mandatory appeals process described above shall have no effect on this two-year time frame.
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7.05 Restriction of Venue.
Any claim or action filed in court or any other tribunal in connection with the Plan by or on behalf of a Petitioner shall only be brought or filed in the state or federal courts of New York, specifically the state or federal court, whichever applies, located nearest the Corporation’s headquarters.
7.06 Effect of Specific References.
Specific references in the Plan to the Vice President’s discretion shall create no inference that the Vice President’s discretion in any other respect, or in connection with any other provision, is less complete or broad.
7.07 Claimant Must Exhaust the Plan’s Claims Procedures Before Filing in Court.
Before filing any Claim (as defined below in this Section), including a suit or other action, in a court or in another tribunal, a Claimant (as defined below in this Section) must first fully exhaust all of the Claimant’s rights under the claims procedure in Section 7.03.
(a) Upon review by any court or other tribunal, the exhaustion requirement of this Section 7.06 is intended to be interpreted to require exhaustion in as many circumstances as possible (and any steps necessary to clarify or effect this intent may be taken). For example, exhaustion may not be excused (i) for failure to respond to a Claim unless the purported Claimant took sufficient steps to make it reasonably clear to the Vice President that the purported Claimant was submitting a Claim with respect to the Plan, or (ii) for failure to fulfill a request for documents unless (A) this Plan or applicable law requires the documents to be provided in response to the request, (B) the Claimant requests such documents in a writing that is addressed to and actually received by the Vice President, (C) the Vice President fails to provide the requested documents within 6 months after the date the request is received, or within such longer period as may be reasonable under the facts and circumstances, and (D) the requestor took sufficient steps to make it reasonably clear to the Vice President that the requestor was asserting a legal right to the documents. Accordingly, without limitation, a purported Claimant or requestor who was not treated as a Member shall not be deemed to have taken sufficient steps for purposes of the prior sentence unless he makes it reasonably clear to the Vice President that he is claiming to have been entitled to be a Member.
(b) The exhaustion requirement of this Section 7.06 shall apply: (i) regardless of whether other Disputes (as defined below in this Section) that are not Claims (including those that a court or other tribunal might consider at the same time) are of greater significance or relevance, (ii) to any rights the Vice President may choose to provide in connection with novel Disputes or in particular situations, (iii) regardless of whether the rights are actual or potential, and (iv) even if the Vice President has not previously defined or established specific claims procedures that directly apply to the submission and consideration of such Claim (in which case the Vice President, upon notice of the Claim) shall either promptly establish such claims procedures or shall apply (or act by analogy to) the claims procedures of Section 7.03 that apply to claims for benefits).
(c) The Vice President may make special arrangements to consider a Claim on a class basis or to address unusual conflicts concerns, and such minimum arrangements in these respects shall be made as are necessary to maximize the extent to which exhaustion is required.
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(e) For purposes of this Section 7.06, the following definitions apply.
(1) A “Dispute” is any claim, dispute, issue, assertion, action or other matter.
(2) A “Claim” is any Dispute that implicates in whole or in part any one or more of the following –
(A) The interpretation of the Plan;
(B) The interpretation of any term or condition of the Plan;
(C) The interpretation of the Plan (or any of its terms or conditions) in light of applicable law;
(D) Whether the Plan or any term or condition under the Plan has been validly adopted or put into effect;
(E) The administration of the Plan;
(F) Whether the Plan, in whole or in part, has violated any terms, conditions or requirements of applicable law or regulation, regardless of whether such terms, conditions or requirements are, in whole or in part, incorporated into the terms, conditions or requirements of the Plan;
(G) A request for Plan benefits or an attempt to recover Plan benefits;
(H) An assertion that any entity or individual has breached any legal duty; or
(I) Any Claim that: (i) is deemed similar to any of the foregoing by the Vice President, or (ii) relates to the Plan in any way.
It is the Vice President’s intent to interpret and operate the Plan in good faith and at all times consistently with any requirements of applicable law. Therefore, as a condition for any right or recovery related to the Plan, the Plan imposes a contractual obligation for complete exhaustion under this Section with respect to any Claim (as defined above) in order to allow for the efficient and uniform resolution of such Claims and to protect the Plan from potentially substantial and unnecessary litigation expenses that exhaustion could obviate.
(3) A “Claimant” is any actual or putative Eligible Employee, former Eligible Employee, Member, former Member, Dependant (or the spouse, former spouse, estate, heir or representative of any of the foregoing individuals), or any other individual, person, entity with a relationship to any of the foregoing individuals or the Plan, as well as any group of one or more of the foregoing, who has a Claim.
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ARTICLE VIII - AMENDMENT AND TERMINATION
8.01 Continuation of the Plan.
While the Corporation intends to continue the Plan indefinitely, it assumes no contractual obligation as to its continuance. The Corporation hereby reserves the right, in its sole discretion, to amend, terminate, or partially terminate the Plan at any time provided, however, that no such amendment or termination shall adversely affect the amount of benefit to which a Member or his Dependant is entitled under the Plan on the date of such amendment or termination, unless the Member becomes entitled to an amount equal to such benefit under another plan or practice adopted by the Corporation. Specific forms of payment are not protected under the preceding sentence.
8.02 Amendment.
The Corporation may, in its sole discretion, make any amendment or amendments to the Plan from time to time, with or without retroactive effect, subject to Section 8.01. An Employer (other than the Corporation) shall not have the right to amend the Plan.
8.03 Termination.
The Corporation may terminate the Plan, either as to its participation or as to the participation of one or more Employers. If the Plan is terminated with respect to fewer than all of the Employers, the Plan shall continue in effect for the benefit of the employees of the remaining Employers.
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ARTICLE IX - MISCELLANEOUS
9.01 Unfunded Plan.
The Employers’ obligations under the Plan shall not be funded, but shall constitute liabilities by the Employer payable when due out of the Employer’s general funds. To the extent a Member or any other person acquires a right to receive benefits under this Plan, such right shall be no greater than the rights of any unsecured general creditor of the Employer.
9.02 Costs of the Plan.
Unless otherwise agreed by the Corporation, all costs, charges and expenses of or incidental to the administration and management of the Plan shall be the costs, charges and expenses of the Employers and shall be paid by each Employer based on the proportion of Members who are employed by such Employer as compared to the total number of Members at the time the cost or expense is incurred.
9.03 Temporary Absence of Member.
If a Member is absent from duty by reason other than death, discharge, retirement or quitting (e.g., sickness, accident, layoff, vacation), he shall be deemed to have terminated employment on the date that is 12 months after the date on which he is absent, unless the Vice President determines otherwise. If the Member’s absence from duty is by reason of his service as a full-time member of the armed forces of any country or of any organization engaged in national service of any such country, he shall not be deemed to have terminated employment so long as he is regarded by the Employer as remaining in employment or until he shall resign permanently from employment, whichever shall first occur.
9.04 Taxes, Etc.
In the event any tax or assessment or other duty is determined by the Vice President to be owing in respect of any benefit payable from the Plan, the Plan shall be entitled to withhold an amount not exceeding the amount of any such tax or assessment or other duty from the benefit payable and shall apply the same in satisfaction of said tax or assessment or other duty.
9.05 Nonguarantee of Employment.
Nothing in the Plan shall be construed as a contract of employment between an Employer and any of its employees, or as a right of any such employee to continue in the employment of the Employer, or as a limitation of the right of an Employer to discharge any of its employees, with or without cause.
9.06 No Right to Benefits.
No person, whether or not being a Member, shall have any claim, right or interest under the Plan except as provided by the terms of the Plan. In the event of a Member’s termination of employment by an Employer, the resulting cessation of his Active Membership shall not be grounds for any damages or any increase in damages in any action brought against the Employer or any member of the PepsiCo Organization with respect to such termination.
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9.07 Charges on Benefits and Recovery of Excess Payments.
All benefits in respect of a Member under the Plan shall stand charged with and be subject to deductions therefrom of all sums in respect of losses to a member of the PepsiCo Organization or Employer or otherwise caused by misdemeanor of the Member and on production by the member of the PepsiCo Organization or Employer of proof satisfactory to the Vice President that any such loss ought to be made good by a Member. The relevant amount shall be deductible from the Member’s benefits and be payable to the Employer or member of the PepsiCo Organization whose receipt shall be a valid discharge for the same.
Payments to, for or in connection with a Member that are made (as of a point in time and to any person or entity) may not exceed the exact amount of payments that are due as of such time and to such person, as provided by the terms of the Plan that specify the amounts that are payable, the time as of which they are payable, and the person to whom they are payable. Accordingly, any such excess payment or any other overpayment, premature payment or misdirected payment (one or more of which are hereafter referred to as an “Excess Payment”) may not be retained by the party receiving it, but must be restored promptly to the Plan. In exchange for Member or Dependant status hereunder (or for having any other direct or indirect right or claim of right from the Plan, or solely as a result of having received an Excess Payment), any party receiving an Excess Payment grants to the Plan the following nonexclusive rights –
(1) A constructive trust and first priority equitable lien on any payment that is received directly or indirectly from the Plan and that is, in whole or part, an Excess Payment (such trust and lien shall be equal to the amount of the Excess Payment increased by appropriate interest) or upon the proceeds or substitutes for such payment, and any transfer shall be subject to such constructive trust and equitable lien (including a transfer to a person, trust fund or entity).
(2) The right to offset (as necessary to recover the Excess Payment with appropriate interest) other payments that are properly payable by the Plan to the recipient of the Excess Payment; however, reliance on this right is in the discretion of the Vice President, and the existence of an opportunity to apply it shall not diminish the Plan’s rights under paragraph (1) above.
(3) The right to bring any equitable or legal action or proceeding with respect to the enforcement of any rights in this Section in any court of competent jurisdiction as the Plan may elect, and following receipt of an Excess Payment the Member hereby submits to each such jurisdiction, waiving any and all rights that may correspond to such party’s present or future residence.
Any party receiving an Excess Payment shall promptly take all actions requested by the Vice President that are in furtherance of the Plan’s recovery of the Excess Payment with appropriate interest. In all cases, this subsection shall maximize the rights of the Plan to recover improper payments and shall not restrict the rights of the Plan in any way, including with respect to any improper payment that is not addressed above.
9.08 Termination for Cause; Prohibited Misconduct.
(a) Notwithstanding any other provision of this Plan to the contrary, if the Vice President determines that a Member has been terminated for cause or engaged in Prohibited Misconduct at any time prior to the second anniversary of the date his or her employment with the PepsiCo Organization terminates, the Member shall forfeit his Pension (whether paid previously, being paid currently or payable in the future), and his or her Pension shall be adjusted to reflect such forfeiture and any previously paid Pension payments shall be recovered. Section 4.06 shall not be construed to reduce or impair the
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forfeiture rights provided by this Section 9.08, but the Vice President shall have the authority to reduce the forfeitures that would apply under this Section to the extent necessary to avoid an inappropriate duplication (determined in the Vice President’s sole discretion) of the forfeitures applicable under Section 4.06. As a condition to Membership in this Plan, each Member agrees to this, and each Member agrees to repay PepsiCo the amounts it seeks to recover under this Section 9.08.
(b) Any of the following activities engaged in, directly or indirectly, by a Member shall constitute Prohibited Misconduct:
(1) The Member accepting any employment, assignment, position or responsibility, or acquiring any ownership interest, which involves the Member’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.
(2) The Member, directly or indirectly (including through someone else acting on the Member’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.
(3) The Member 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 Member 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.
(4) The Member engaging in any acts that are considered to be contrary to the PepsiCo Organization’s best interests, including violating the Corporation’s Code of Conduct, engaging in unlawful trading in the securities of the Corporation 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.
(5) The Member engaging in any activity that constitutes fraud.
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Notwithstanding anything contained in the Plan or in any other confidentiality provision to which the Participant may be subject as a result of the Participant’s employment with the Company, nothing shall prohibit the Member, without notice to the Company, communicating with government agencies, providing information to government agencies, participating in government agency investigations, filing a complaint with government agencies, or testifying in government agency proceedings concerning any possible legal violations or from receiving any monetary award for information provided to a government agency.. The Corporation nonetheless asserts and does not waive its attorney-client privilege over any information appropriately protected by the privilege. Further, notwithstanding any confidentiality provision to which the Participant may be subject, pursuant to the Defend Trade Secrets Act, an individual shall not be held criminally or civilly liable under any federal or state trade secret law for the disclosure of a trade secret that (A) is made (i) in confidence to a federal, state, or local government official, either directly or indirectly, or to an attorney; and (ii) solely for the purpose of reporting or investigating a suspected violation of law; or (B) is made in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal. An individual who files a lawsuit for retaliation by an employer for reporting a suspected violation of law may disclose the trade secret to the attorney of the individual and use the trade secret information in the court proceeding, if the individual (A) files any document containing the trade secret under seal; and (B) does not disclose the trade secret, except pursuant to court order.
For purposes of this subsection, “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. For purposes of this subsection, “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 – in-home and commercial beverage systems, carbon dioxide gas cylinders, carbon dioxide gas refills, consumables, and ready-to-drink beverages, including without limitation, carbonated soft drinks, tea, water, juices, juice drinks, juice products sports drinks, coffee drinks, alcoholic beverages, and energy drinks; dairy products; snacks, including salty snacks, fruit and vegetable snacks, dips and spreads, sweet snacks, meat snacks, granola, nutrition and cereal bars, and cookies; hot cereals and ready-to-eat cereals; pancake mixes and pancake syrup; grain-based food products; pasta products; sports performance nutrition products, including without limitation, energy, protein, carbohydrate, nutrition and meal replacement chews, bars, powders, gels, drinks or drink mixes; or any product or service that the Member had reason to know was under development by the PepsiCo Organization during the Member’s employment with the PepsiCo Organization.
9.09 Notices.
Any notice which under the Plan is required to be given to or served upon the Plan shall be deemed to be sufficiently given to or served upon the Plan if it is in writing and delivered to the Vice President. In any case where under the Plan any notice shall be required to be given to Members, it shall be sufficient if such notice is delivered to the Member’s last known address on file in the records of the Employer or delivered to the Member pursuant to any other method (e.g., electronically) that the Vice President determines is reasonably available to the Member.
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9.10 Plan Documentation.
Every Member shall on demand be entitled to a copy of the governing legal document for the DB Program.
9.11 Currency of Payment.
Payment of benefits under the Plan shall be made in United States dollars, or other "eligible currency," as approved by the Vice President. For both annuity and lump sum payments, the amount otherwise payable in United States dollars would be converted to the selected currency using the exchange rate, based on the methodology approved by the Vice President from time to time.
9.12 Governing Law.
The Plan shall in all respects be governed by and interpreted according to the laws of the State of New York.
9.13 Exemption from ERISA.
The Plan is intended to be exempt from the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), as a plan maintained outside of the United States primarily for the benefit of persons substantially all of whom are nonresident aliens of the United States. In order to preserve this exemption from ERISA, both Active Membership in the Plan and the opportunity to increase Highest Average Monthly Earnings after ceasing to be an Active Member, in accordance with Section 4.04(b), shall be limited to individuals who are nonresident aliens of the United States and whose assigned work locations are outside the United States, and it is intended that all permanent records and documentation relating to the administration of the Plan shall be kept at a location that is outside of the United States.
9.14 Exemption from Section 409A.
In order to permit this Plan to be completely exempt from United States Internal Revenue Code section 409A (“Section 409A”), this Plan shall be subject to the special operating rules and limitations in this Section 9.14, effective for any period to which Section 409A applies. It is the intent of the Plan that no Member who is a U.S. Person may in any way have their benefit from the Plan vest, increase or in any way be enhanced (collectively, a “Benefit Enhancement”) as a result of their compensation or service while a U.S. Person. Accordingly, no Member shall become entitled to a Benefit Enhancement with respect to a calendar year until it is determined, following the close of such year, that the Member was not a U.S. Person with respect to such year. Notwithstanding the preceding sentence, in the calendar year a Member’s benefit under this Plan is scheduled to commence, the Vice President may authorize a Benefit Enhancement for the calendar year of benefit commencement to the extent the Vice President determines satisfactorily that the Member will not be a U.S. Person for such year. In other cases, the Member’s benefit will commence under this Plan without any Benefit Enhancement related to the calendar year of commencement, and appropriate adjustments will be made to the Member’s benefit in the following year if it is determined that the Member was not a U.S. Person in such calendar year of commencement. This Section 9.14 shall at all times be interpreted and applied in accordance with the overriding requirement that benefits and any other rights under the Plan must remain entirely exempt from Section 409A, and the Vice President shall have such unrestricted authority as is necessary to ensure that it is applied in accordance with this requirement.
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ARTICLE X - SIGNATURE
The PepsiCo International Retirement Plan, DB Program document, as amended and restated, is hereby adopted as of this 11th day of December, 2023, to be effective as of January 1, 2023 or as otherwise stated herein.
PEPSICO, INC.
By: /s/ Becky Schmitt
Becky Schmitt
Executive Vice President and
Chief Human Resources Officer
Date: December 11, 2023
Law Department Approval
By: /s/ Jeffrey Arnold
Jeffrey Arnold
Legal Director, Employee Benefits Counsel
Date: December 11, 2023
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TABLE A - CALCULATION OF PENSIONS
This section sets forth the formulas for calculating the Pension payable to a Member under Article IV or the Death Benefit payable to a Member’s Eligible Spouse or Eligible Domestic Partner, as applicable, under Article VI, but subject in all cases to the freeze of the Plan described in Article I. Any benefits accrued under the DB Program by a Member while a part-time employee, following such Member’s designation by the Vice President as an Eligible Employee pursuant to the last sentence of the definition of Eligible Employee in Section 2.01, shall be prorated as determined by the Vice President to reflect the approximate ratio of the Member’s level of services during such part-time status to the level required for full-time status at the Member’s work location.
(I) Member’s Pension
(a) The Pension payable (as a Single Life Annuity benefit) on retirement at Normal Retirement Date for Members who became members of the Plan before January 1, 1976 shall be the larger of the Pension calculated under this paragraph (a) or under paragraph (b) below. The Pension under this paragraph (a) shall be the greater of (1) or (2) below:
(1) 1.5 percent of the Member’s Highest Average Monthly Salary (as hereinafter defined) multiplied by the number of years of Pensionable Service; or
(2) 3 percent of the Member’s Highest Average Monthly Salary, multiplied by the number of years of his Pensionable Service but not exceeding 15 years.
(b) The Pension payable (as a Single Life Annuity benefit) on retirement at Normal Retirement Date (i) for Members who became members of the Plan on or after January 1, 1976, and (ii) for persons (other than those in (i)) who became Members on or after September 1, 1980, and (iii) for persons (other than in (i) or (ii)) who became Members after November 12, 1998, shall be the Pension calculated under this paragraph (b). The pension calculated under this paragraph (b) shall be the aggregate of:
(1) For up to the first 10 years of Pensionable Service, the product of (i) 3 percent of the Member’s Highest Average Monthly Salary, multiplied by (ii) the number of years of Pensionable Service, but not exceeding 10 such years; plus
(2) For any years of Pensionable Service in excess of 10, the product of (i) 1 percent of the Member’s Highest Average Monthly Salary, multiplied by (ii) the number of years of Pensionable Service in excess of 10.
(c) At the discretion of the Vice President, the Pension calculated as provided in paragraphs (a) and (b) above shall be reduced by some or all of the following:
(1) All state pension and social security benefits receivable by the Member attributable to Service other than those derived from unmatched and unreimbursed voluntary contributions made by the Member;
(2) The annuity equivalent of a like portion of all capital sum benefits receivable by the Member on or by reason of his retirement either from a state source or from the Employer in consequence of a requirement of local legislation, including, but not limited to, termination indemnities;
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(3) Any benefits payable to the Member (or in respect of him) from other retirement benefit plans (or cash allowance received in lieu of Employer contributions to a retirement benefit plan) of the Employers in respect of any period of employment which qualifies as Pensionable Service both under the DB Program and under such other retirement benefit plans of the Employers;
(4) Any other payment made by the Employer at the time of termination of the Member that arises from any severance agreement made between the Employer and Member, for whatsoever reason;
(5) The value (as determined in accordance with methodology approved by the Vice President) of any benefits paid to the Member prior to his retirement from any plan in respect of any period of employment which qualifies as Pensionable Service both under the DB Program and under such other retirement benefit plans of the Employers;
(6) Any deductions, reductions or forfeiture of a Member's benefits resulting from a Member's misdemeanor, misconduct or discharge for cause pursuant to Section 9.08 hereof.
No such deduction shall be made in respect of any such benefits as are derived from unmatched and unreimbursed voluntary contributions made by the Member. The value of all such deductions shall be subject to adjustment to reflect the form and timing of payment. All deductions set out in this paragraph (c) shall be calculated as of the Member’s termination date and in accordance with methodology approved by the Vice President from time to time.
(d) If the Pension payable to or on behalf of a Member is reduced under paragraph (c) above, an alternative calculation of the Pension for such Member shall apply unless the Vice President determines that the alternative calculation would be unnecessary or impractical or would not serve the purposes of the DB Program. Under this alternative calculation, only the Member’s Pensionable Service under this DB Program, which does not include any employment that is taken into account in determining benefits under paragraph (c)(1) - (5), shall be considered, and the reductions under paragraph (c)(1) - (5) shall be disregarded (however, the reduction under paragraph (c)(6) shall be taken into account). If this alternative calculation applies, the Pension payable under this alternative calculation shall be compared to the Pension payable under paragraphs (a), (b) and (c) above, and whichever provides the greater Pension amount will be payable to or on behalf of the Member, subject to the remaining provisions of this paragraph (d). The alternative calculation set forth in this paragraph (d) is intended to provide a calculation methodology that replicates the effect of the “extended wearaway” calculation methodology, as it is in effect from time to time under the PepsiCo Salaried Plan. Notwithstanding the foregoing terms of this paragraph (d), any benefit increase provided as a result of this paragraph (d) will be limited so that in the judgment of the Vice President it is not in excess of what should be available given the intent described in the preceding sentence.
(e) For purposes of this Table A, "Highest Average Monthly Salary" means one twelfth of the yearly average of the Member’s Salary over any 5 consecutive calendar years of Service in which such Salary was highest (or over such lesser period as the Member has been in Service). For purposes of determining a Member's Highest Average Monthly Salary, the following shall apply:
(1) A calendar year with no Salary shall be disregarded, and the calendar years preceding and following such calendar year (or years) shall be considered consecutive.
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(2) If in a calendar year there is an unpaid authorised leave of absence, or other absence from paid service, that results in less than a complete year of Salary, such calendar year shall be disregarded and the next preceding or succeeding year or years shall be taken into account if it results in a higher average.
(f) In determining the amount of a Deferred Vested Pension for the purposes of Section 4.04, the Pension shall be equal to the greatest of the amounts determined under subsection (1), (2) or (3) below:
(1) The Pension calculated as provided in (b) above, but based on the Pensionable Service the Member would have earned had he remained an Active Member until his Normal Retirement Age (subject to a maximum of 35 years) and Highest Average Monthly Salary as of September 30, 2003, reduced by a fraction, the numerator of which is the Member’s actual years of Pensionable Service prior to October 1, 2003 (subject to a maximum of 35 years) and the denominator of which is the years of Pensionable Service he would have earned had he remained an Active Member until his Normal Retirement Age.
(2) The aggregate of:
(i) The Pension calculated as provided in (b) above, but based on the Pensionable Service the Member would have earned had he remained an Active Member until his Normal Retirement Date and Highest Average Monthly Salary as of September 30, 2003, reduced by a fraction, the numerator of which is the Member’s actual years of Pensionable Service prior to October 1, 2003 and the denominator of which is the years of Pensionable Service he would have earned had he remained an Active Member until his Normal Retirement Date; and
(ii) The Pension calculated as provided in (b) above, but based on the Pensionable Service the Member would have earned had he remained an Active Member until his Normal Retirement Date and the Highest Average Monthly Salary at the date the Member ceases to be in Service, reduced by a fraction, the numerator of which is the Member’s actual years of Pensionable Service after September 30, 2003 and the denominator of which is the years of Pensionable Service he would have earned had he remained an Active Member until his Normal Retirement Date.
(3) The Pension calculated as provided in (b) above, but based on the Pensionable Service the Member would have earned had he remained an Active Member until his Normal Retirement Date and the Highest Average Monthly Salary at the date the Member ceases to be in Service, reduced by a fraction, the numerator of which is the Member’s actual years of Pensionable Service and the denominator of which is the years of Pensionable Service he would have earned had he remained an Active Member until his Normal Retirement Date.
For Members who became Members of the Plan before January 1, 1976, the Deferred Vested Pension shall be the larger of 1½ percent of the Member’s Highest Average Monthly Salary multiplied by the Member’s number of years of Pensionable Service at termination or the amount determined by the Vice President based on actuarial information provided to the Vice President.
All deductions set out in (c) above that are applicable to a Member entitled to a Deferred Vested Pension shall be calculated as of the time such Member ceases to be in Service and in accordance with methodology approved by the Vice President.
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(II) Pre-Retirement Spouse’s Pension or Pre-Retirement Domestic Partner’s Pension
If a Member covered by Section 6.01 dies after the date he would have been entitled to retire early under Section 4.02, the Pre-Retirement Spouse’s Pension or Pre-Retirement Domestic Partner’s Pension, as applicable, shall be 50 percent of the Pension to which the Member would have been entitled if he had retired on the day preceding his death (having elected a 50 Percent Survivor Annuity calculated in accordance with Section 5.02(b)) and reduced in accordance with Section 4.02 if the Eligible Spouse or Eligible Domestic Partner commences the Pre-Retirement Souse’s Pension or Pre-Retirement Domestic Partner’s Pension, as applicable, prior to the date the Member would have attained age 62. If a Member covered by Section 6.01 dies before the date he would have been entitled to retire early under Section 4.02, the Pre-Retirement Spouse’s Pension or Pre-Retirement Domestic Partner’s Pension, as applicable, shall be 50 percent of the Pension to which the Member would have been entitled if he had attained the right to receive a 50 Percent Survivor Annuity calculated in accordance with Section 5.02(b)), payable as of the first of the month following the later of death or the date the Member would have attained age 55, and reduced in accordance with Section 4.04(c) if the Eligible Spouse or Eligible Domestic Partner commences the Pre-Retirement Souse’s Pension or Pre-Retirement Domestic Partner’s Pension, as applicable, prior to the date the Member would have attained age 65.
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APPENDIX ERW - EARLY RETIREMENT WINDOWS
ERW.1 Scope.
This Appendix ERW supplements the main portion of the DB Program with respect to the rights and benefits of Covered Employees.
ERW.2 Definitions and Program Specific Rules.
This section provides definitions for the following words or phrases in boldface and underlined. Where they appear in this Appendix ERW with initial capitals they shall have the meaning set forth below. Except as otherwise provided in this Appendix ERW, all defined terms shall have the meaning given to them in Section 2.01 of the DB Program.
(a)Appendix ERW: This Appendix ERW to the DB Program.
(b)Covered Employee: An Active Member who:
(1) Is an Eligible Employee of an Employer at the time his employment is terminated involuntarily pursuant to the Reorganization;
(2)
(i) For purposes of the 2007/2008 Restructuring, has his last day of active employment between the Effective Date and December 31, 2008 (inclusive) and has a Severance Date pursuant to paragraph (1) above that occurs on or after the Effective Date but no later than December 31, 2009; and
(ii) For purposes of the 2008/2009 Restructuring, has his last day of active employment between the Effective Date and August 31, 2009 (inclusive) and has a Severance Date pursuant to paragraph (1) above that occurs on or after the Effective Date but no later than December 26, 2009;
(3) Is entitled to receive enhanced severance pay under the Severance Program as part of the Reorganization, or is entitled to receive severance pay pursuant to an agreement described in (5) below;
(4) Is authorized in writing by the Vice President to receive the benefits under this Appendix ERW; and
(5) Signs, submits and does not revoke a qualifying severance agreement releasing the Corporation and the Associated Companies and each of their employees, agents and affiliates from liability, subject to the Corporation’s determination that (i) such severance agreement meets all substance, form and timing requirements that the Corporation applies and (ii) such severance agreement is entered into under the Severance Program as part of the Reorganization.
Any Active Member who does not meet all of the foregoing requirements is not a “Covered Employee” and is not eligible for the benefits under this Appendix ERW.
(c)Reorganization: The reorganization, plant closing, or other event that triggered the applicable Severance Program.
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(d)Severance Date: An Active Member’s final day of employment with the Employer pursuant to the Reorganization.
(e)Severance Program and Effective Date: The Terms Severance Program and Effective Date are defined as follows, separately for each Severance Program:
(1) 2007/2008 Restructuring. For purposes of the 2007/2008 Restructuring, Severance Program means both the “PepsiCo Transition Severance Program for the 2007 Restructuring for Salaried Employees Below Band 1” and the “PepsiCo Transition Severance Program for the Equipment & Service Management Restructuring for Salaried Employees below Band 1” and Effective Date means February 4, 2008 (that is, the first date an Active Member would be able to retire under this paragraph (1)).
(2)2008/2009 Restructuring. For purposes of the 2008/2009 Restructuring, Severance Program means both the “PepsiCo Transition Severance Program for the 2008/2009 Restructuring for Salaried Employees Below Band I” and the “PepsiCo Transition Severance Program for the 2008/2009 Restructuring for Salaried Employees Band I” and Effective Date means April 3, 2009 (that is, the first date an Active Member would be able to retire under this paragraph (2)).
ERW.3 Special Early Retirement.
Any Covered Employee who meets the eligibility requirements of subsection (a) below shall be treated as eligible for a Special Early Retirement Pension under Section 4.03.
(a) Eligibility requirements: To be eligible under this section, an individual must:
(1) Be a Covered Employee on his Severance Date,
(2) For purposes of the 2007/2008 Restructuring only:
(i) have attained at least age 50 (but not age 55) by his Severance Date, and
(ii) be credited with at least 10 years of Vesting Service as of his Severance Date
(3) For purposes of the 2008/2009 Restructuring only:
(i) have attained at least age 50 (but not age 55) by his “Pension Termination Date” (which means the earlier of the Covered Member’s Severance Date or the date that is 52 weeks after the Covered Member’s last day of active employment pursuant to the Reorganization);
(ii) be credited with at least 10 years of Vesting Service as of his Severance Date. For purposes of determining whether the Covered Member has met the age and service requirements, the Covered Member’s age and years of Vesting Service are rounded up to the nearest whole year,
(iii) not return to employment with an Employer before his Pension Termination Date, and
(iv) not be otherwise eligible for Normal or Early Retirement Pension.
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(b) Amount of Reduction: In determining the amount of the Special Early Retirement Pension provided under this Appendix ERW, the 4/12ths of 1 percent per month early commencement reduction of Section 4.03 shall apply. The Special Early Retirement Pension provided under this section is otherwise subject to all the usual limitations set forth in the DB Program.
(c) Non-Duplication of Benefits: For the avoidance of doubt, the Special Early Retirement Pension made available pursuant to this Appendix ERW shall be in lieu of the Special Early Retirement Pension pursuant to Rule 4.03 of the DB Program. Covered Employees shall not be entitled to, and shall not receive, a Special Early Retirement Pension pursuant to Section 4.03 of the DB Program. In addition, the Special Early Retirement Pension under this Appendix ERW shall not be available to any individual who is eligible for special early retirement under the PepsiCo Salaried Plan (or who claims such special early retirement, unless a release of such claim acceptable to the Corporations is provided). By accepting benefits pursuant to this Appendix ERW, a Covered Employee is conclusively presumed to have waived irrevocably any and all right to a Special Early Retirement Pension under Section 4.03 or to special early retirement benefits under the PepsiCo Salaried Plan (or any other plan maintained or contributed to by the Corporation or an Associated Company).
(d) LTIP Awards: Any Covered Employee who is treated as eligible for an Early Retirement Pension pursuant to this Rule ERW shall also be deemed to qualify for “Retirement” for purposes of such Covered Employee’s outstanding stock option and restricted stock unit awards under the PepsiCo Inc. Long-Term Incentive Plan, the PepsiCo, Inc. 2003 Long-Term Incentive Plan, the PepsiCo, Inc. 1994 Long-Term Incentive Plan, the PepsiCo, Inc. 1995 Stock Option Incentive Plan and the PepsiCo SharePower Stock Option Plan.
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Exhibit 10.7
THE PEPSICO INTERNATIONAL RETIREMENT PLAN
DEFINED CONTRIBUTION PROGRAM
(PIRP-DC)
As Amended and Restated
Effective as of January 1, 2023
Effective as of January 1, 2023
TABLE OF CONTENTS
ARTICLE I – HISTORY AND GENERAL INFORMATION | 1 | ||||
ARTICLE II – DEFINITIONS AND CONSTRUCTION | 3 | ||||
2.01 Definitions. | 3 | ||||
2.02 Construction. | 7 | ||||
ARTICLE III – MEMBERSHIP | 9 | ||||
3.01 Eligibility for Membership. | 9 | ||||
3.02 Admission to Membership. | 9 | ||||
3.03 Active and Inactive Membership. | 9 | ||||
ARTICLE IV – CONTRIBUTIONS | 10 | ||||
4.01 Contributions. | 10 | ||||
4.02 Offsets. | 11 | ||||
ARTICLE V – MEMBER ACCOUNTS | 12 | ||||
5.01 Accounting for Members’ Interests. | 12 | ||||
5.02 Vesting. | 12 | ||||
5.03 Special Vesting for Approved Transfers and Status Changes. | 12 | ||||
ARTICLE VI – DISTRIBUTION OF BENEFITS | 14 | ||||
6.01 Distribution Rules Generally. | 14 | ||||
6.02 Distributions Upon Termination of Employment. | 14 | ||||
6.03 Distributions Upon Death. | 14 | ||||
6.04 Valuation. | 14 | ||||
6.05 Designation of Dependant. | 14 | ||||
ARTICLE VII – ADMINISTRATION | 15 | ||||
7.01 Authority to Administer Plan. | 15 | ||||
7.02 Facility of Payment. | 15 | ||||
7.03 Claims Procedure. | 15 | ||||
7.04 Limitations on Actions. | 16 | ||||
7.05 Restriction of Venue. | 17 | ||||
7.06 Effect of Specific References. | 17 | ||||
7.07 Claimant Must Exhaust the Plan’s Claims Procedures Before Filing in Court. | 17 | ||||
ARTICLE VIII – AMENDMENT AND TERMINATION | 19 | ||||
8.01 Continuation of the Plan. | 19 | ||||
8.02 Amendment. | 19 | ||||
8.03 Termination. | 19 | ||||
ARTICLE IX – MISCELLANEOUS | 20 | ||||
9.01 Unfunded Plan. | 20 | ||||
9.02 Costs of the Plan. | 20 | ||||
9.03 Temporary Absence of Member. | 20 | ||||
9.04 Taxes, Etc. | 20 | ||||
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9.05 Nonguarantee of Employment. | 20 | ||||
9.06 No Right to Benefits. | 20 | ||||
9.07 Charges on Benefits and Recovery of Excess Payments. | 20 | ||||
9.08 Prohibited Misconduct. | 21 | ||||
9.09 Notices. | 23 | ||||
9.10 Plan Documentation. | 24 | ||||
9.11 Currency of Payment. | 24 | ||||
9.12 Governing Law. | 24 | ||||
9.13 Exemption from ERISA. | 24 | ||||
9.14 Exemption from Section 409A. | 24 | ||||
9.15 Electronic Signature. | 25 | ||||
ARTICLE X – SIGNATURE | 26 | ||||
APPENDIX | 27 | ||||
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ARTICLE I – HISTORY AND GENERAL INFORMATION
PepsiCo, Inc. (the “Corporation”) first established the PepsiCo International Retirement Plan effective as of September 1, 1980. The Plan at that time was comprised of the “PepsiCo International Retirement Plan Trust Indenture” and the “Plan Rules.” The Plan was amended and restated in its entirety, effective September 2, 1982.
The Plan was again amended and restated effective October 1, 2003, whereupon the Plan Rules became the “Plan A Rules” (applicable to benefits funded by the Corporation’s contributions to the trust established by the PepsiCo International Retirement Plan Trust Indenture) and the “Plan B Rules” (applicable to benefits funded by the Corporation as they arise) took effect.
The Plan was further amended effective January 1, 2005, to provide that no person subject to taxation in the United States of America may in any way have their right to a benefit from the Plan come into existence, increase or in any way be enhanced, but instead will be determined as if they had left the Corporation and any Associated Company permanently before becoming subject to U.S. taxation.
Effective January 1, 2010, the Plan A Rules and Plan B Rules were amended and restated in their entirety to form one Plan document. The amendment and restatement referred to in the prior sentence remains in effect, and it sets forth the terms of the “DB Program.”
Effective January 1, 2011, the Corporation established a new defined contribution structure (the “DC Program”) to benefit selected international employees for whom it has been determined to be appropriate (i.e., employees on assignments outside of their home countries for whom it is judged to be impractical to have them participate in their home country retirement plans, and employees who are among a selected group of senior globalists on United States tax equalized packages). The terms of the DC Program are set forth in this document, which is the governing legal document for the DC Program. Together, the DC Program and the DB Program set forth the terms of a single Plan. The DC Program is also sometimes referred to in employee communications as the PepsiCo International Pension Plan or “PIPP.”
The DC Program was previously amended and restated, effective as of January 1, 2016. As part of that amendment and restatement, the Corporation modified the DC Program to also benefit selected employees: (i) who are localized to a country outside of their home country, (ii) were participating in a defined benefit or defined contribution retirement program sponsored immediately prior to their localization and (iii) for whom no company-provided retirement program is available.
The DC Program was again amended and restated effective as of January 1, 2019. As part of that amendment and restatement, the Corporation modified the DC Program to recognize same-sex and opposite-sex domestic partners for certain purposes for Members actively employed or on authorized leave of absence on and after January 1, 2019. The DC Program was again amended and restated effective as of January 1, 2021.
The DC Program is now hereby amended and restated effective as of January 1, 2023.
At all times, the Plan is unfunded and unsecured for purposes of the United States Internal Revenue Code and Employee Retirement Income Security Act of 1974, as amended (“ERISA”). The benefits of an executive are an obligation of that executive’s individual employer. With respect to his employer, the executive has the rights of an unsecured general creditor. The Plan is also intended to be exempt from ERISA as a plan maintained outside of the
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United States primarily for the benefit of persons substantially all of whom are nonresident aliens of the United States.
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ARTICLE II – DEFINITIONS AND CONSTRUCTION
2.01 Definitions.
Where the following words and phrases appear in this governing document for the DC Program, they shall have the meaning set forth below, unless a different meaning is plainly required by the context:
(a) “Approved Transfer” means any of the following that are initiated or approved by the Corporation or (with the approval of the Corporation) by a Member’s Employer –
(1) The Member’s transfer to employment based in the United States or its territories;
(2) The Member’s secondment to a work location in the United States or its territories;
(3) Any other change in the Member’s employment circumstances that will cause the Member to become a U.S. Person.
(b) “Associated Company” means any company or undertaking which (i) is directly or indirectly controlled by or associated in business with the Corporation, and (ii) which has agreed, subject to the ongoing consent of the Vice President, to perform and observe the conditions, stipulations and provisions of the DC Program and to be included among the Employers under the DC Program. “Associated Companies” means all such companies or undertakings.
(c) “Corporation” means PepsiCo, Inc., a corporation organized and existing under the laws of the State of North Carolina, or its successor or successors.
(d) “Dependant” means the person who shall receive the balance of a Member’s PIRP-DC Account upon the Member’s death.
(e) “DB Program” means the portion of the Plan that provides a program of defined benefits and that is described in the governing legal document entitled “The PepsiCo International Retirement Plan Defined Benefit Program (PIRP DB), as it may be amended from time to time. The DB Program is also sometimes referred to as “PIRP-DB”.
(f) “DC Program” means the portion of the Plan that provides a program of defined contributions and that is described in the governing legal document entitled “The PepsiCo International Retirement Plan Defined Contribution Program (PIRP-DC), as it may be amended from time to time. The DC Program is also sometimes referred to as “PIRP-DC.”
(g) “Distribution Valuation Date” means the date as specified by the Vice President from time to time as of which PIRP-DC Accounts are valued for purposes of distributions under Article VI. Currently, the Distribution Valuation Date for a Member is the month end that occurs just after the event specified in Article VI that triggers the Member’s distribution. Accordingly, if the trigger event occurs on December 30 of a year, the current Distribution Valuation Date is December 31 of that year, and if the
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trigger event occurs on December 31 of a year, the current Distribution Valuation Date is January 31 of the following year. The Vice President may change any current Distribution Valuation Date. 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 preceding business day.
(h) “Effective Date” means the date as of which the DC Program is effective, January 1, 2011.
(i) “Eligible Domestic Partner” means, solely with respect to a Member who is actively employed by, or on an Authorized Leave of Absence from, a member of the PepsiCo Organization on or after January 1, 2019, an individual who is of the same sex or opposite sex as the Member and who satisfies paragraph (1), (2) or (3), subject to the additional rules set forth in paragraph (4), as determined by the Vice President.
(1)Civil Union. If the Member has entered into a civil union or similar government-recognized status that is valid at the Member’s death under the law of the location that is determined by the Vice President to be the Member’s principal residence, the Member’s Domestic Partner (if any) is the individual with whom the Member has entered into such status, provided that such individual submits a claim for benefits within 60 days of Member’s date of death (and if no such claim is submitted, the individual shall not be a Domestic Partner under this Section 2.01(i)(1)).
(2)Benefits Enrollment. If the Member does not have a Domestic Partner pursuant to subsection (1) above, the Member’s Eligible Domestic Partner (if any) is the individual who, on the applicable date, was enrolled, as the Member’s domestic partner, in the Cigna International Health Program (or its successor) sponsored by the Corporation.
(3)Other Acceptable Evidence of Partnership. If the Member does not have a Domestic Partner under paragraph (1) or (2) above, such Member’s Domestic Partner, if any, is the individual who satisfies such criteria of domestic partnership as the Vice President has specified in writing, provided that such individual submits a claim for benefits within 60 days of the Member’s date of death (and if no such claim is submitted, the individual shall not be a Domestic Partner under this Section 2.01(i)(3)).
(4)Additional Rules. The term “Eligible Domestic Partner” does not apply to a Member’s Eligible Spouse. A Member is not permitted to have more than one Eligible Domestic Partner at any point in time, and a Member who has an Eligible Spouse is not permitted to have an Eligible Domestic Partner.
(j) “Eligible Employee” means an individual who the Vice President has determined (i) is employed exclusively outside of the United States on the regular staff of an Approved Employer on a full-time salaried basis, (ii) is neither actively accruing benefits that are derived from service under the DB Program nor is designated as being eligible to accrue such benefits, and (iii) is described in at least one of the following paragraphs
(1) The individual is on an assignment outside of his home country and it is judged to be impractical to have him participate in the retirement plan(s) sponsored by the Corporation (or an Affiliated Company) in his home country;
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(2) The individual is on his second (or more) consecutive assignment outside of his home country (effective as of January 1, 2021, the first assignment outside of his home country), and the retirement plan(s) available to the individual in his home country do not include a retirement plan that is sponsored by the Corporation or an Affiliated Company (e.g., a case where only a statutory plan is available to the individual);
(3) The individual is among a selected group of senior globalists on United States tax equalized packages whose positions and employment terms are among those that the Vice President has determined make them eligible to be considered for membership in the DC Program; or
(4) The individual is localized to a country outside of his home country, was actively participating in a retirement program sponsored by a member of the PepsiCo Organization immediately prior to his localization that will not provide for his continued active participation after his localization, and the local country employer does not sponsor a retirement plan.
The Vice President shall have the discretion to designate as an Eligible Employee any individual employed by an Approved Employer on a part-time basis who, but for his part-time status, otherwise satisfies the requirements of this subsection.
(k) “Eligible Spouse” means the individual to whom the Member is married, or to whom the Member was married on the date of his death. The determination of whether a Member is married shall be made by the Vice President based on the law of the location that is determined by the Vice President to be the Member’s principal residence; provided, however, that for purposes of the DC Program, a Member shall have only one Eligible Spouse.
(l) “Employers” means the Corporation and any and every Associated Company or such one or more of any of them as the context shall determine or the circumstances require. “Employer” in relation to any person means whichever it is of the Employers in whose employment that person is or was at the relevant time or those Employers (if more than one) in whose employment he had been during the relevant period. An “Approved Employer” means an Employer that, as of the time in question, has been approved by the Vice President (and remains approved) to have its Eligible Employees become and continue as Active Members hereunder.
(m) “Entry Date” means the date as of which an Eligible Employee becomes a Member, which shall be the date that the Vice President specifies for the Eligible Employee’s admission to Membership.
(n) “Interest Credit” means the credit made annually to a Member’s PIRP-DC Account pursuant to Section 4.01(b).
(o) “Interest Rate” means the annualized rate of interest used to determine a Member’s Interest Credit. As of the Effective Date, the Interest Rate is the rate of interest on 30-year Treasury securities as prescribed by the Commissioner of the United States Internal Revenue Service for the month of September immediately preceding the first day of the Plan Year to which an Interest Credit relates. The Vice President shall have the discretion to change from time to time the basis for determining the Interest Rate as necessary to ensure that the Interest Rate is readily determinable and administrable, and that it can be reasonably expected to provide substantially a market rate of interest
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over time. At all times the Interest Rate shall not exceed a level that may be considered to constitute earnings under Treasury Regulation § 1.409A-1(o).
(p) “Member” means an Eligible Employee who has been admitted to Membership in the DC Program pursuant to Article III and who remains entitled to a benefit under the DC Program. In relation to each of the Employers, any reference to a Member means a Member in or formerly in its employment. References to “Membership” are references to the status of being a Member. The terms “Active Member” and “Inactive Member” shall have the respective meanings stated for these terms in Section 3.03.
(q) “Pay Credit” means the credit made to an Active Member’s PIRP-DC Account pursuant to Section 4.01(a).
(r) “Plan” means the PepsiCo International Retirement Plan, which consists of the DC Program and DB Program.
(s) “Plan Year” means the 12-consecutive month period beginning on January 1 and ending on the following December 31 of the same calendar year.
(t) “PepsiCo Organization” means the controlled group of organizations of which the Corporation is a part, as defined by United States Internal Revenue Code section 414 and regulations issued thereunder. An entity shall only be considered a member of the PepsiCo Organization during the period it is one of the group of organizations described in the preceding sentence.
(u) “PIRP-DC Account” means the unfunded, notional account maintained for a Member on the books of the Member’s Employer that indicates the dollar amount that, as of any time, is credited under the DC Program for the benefit of the Member. The balance in such account shall be determined in accordance with interpretive principles and decisions applied by the Vice President.
(v) “Salary” means (i) home notional base salary in the case of an Eligible Employee who is not paid on a United States payroll, and (ii) base salary plus annual bonus in the case of an Eligible Employee who is paid on a United States payroll. Notwithstanding the foregoing, Salary shall include home notional base salary plus annual bonus for Eligible Employees not paid on a United States payroll who become an Active Member on or after January 1, 2021. In the case of an Eligible Employee who is employed in a country other than the United States, the Vice President may authorize the Eligible Employee’s Salary to be increased to reflect an amount of notional bonus that is paid to such Eligible Employee. The determination of an Eligible Employee’s Salary in accordance with the preceding three sentences shall be made by the Vice President and shall be conclusive and binding on all Eligible Employees.
(w) “Service” means the period during which an Eligible Employee is in employment with an Approved Employer, including employment with an Approved Employer before a break in service. Employment during a break in Service will only be counted as Service if the break lasts no more than 12 months. In the case of an individual who transfers from employment with an Employer that is not an Approved Employer to a position as an Eligible Employee of an Approved Employer, his pre-transfer period of employment with an Employer may be counted as Service only with the approval of the Vice President. Similarly, in the case of an individual who transfers from employment with an Eligible Employee of an Approved Employer to other employment with an Employer, his post-transfer period of employment with an Employer may be counted as
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Service only with the approval of the Vice President. Except as otherwise expressly provided in this subsection or as approved by the Vice President, Service shall not include an individual’s periods of employment with any company or undertaking prior to it becoming an Employer or a member of the PepsiCo Organization.
(x) “Status Change” means any change in a Member’s circumstances (other than a change in circumstances that constitutes an Approved Transfer) that will cause the Member to become a U.S. Person.
(y) “U.S. Person” means: (1) a citizen of the United States of America; (2) a person lawfully admitted for permanent residence in the United States of America at any time during the calendar year, or who has applied for such permanent residence (within the meaning of United States Internal Revenue Code section 7701(b)(1)(A)); or (3) any other person who is a resident alien of the United States of America under United States Internal Revenue Code section 7701(b)(1)(A) because, for example, the person satisfies the substantial presence test under United States Internal Revenue Code section 7701(b)(3) or makes an election to be treated as a United States resident under United States Internal Revenue Code section 7701(b)(4). In addition, a person shall be considered a U.S. Person for purposes of Section 9.14 in any year for which the person is required by the United States Internal Revenue Code to file an individual income tax return, unless the Vice President determines that it is clear that the person has no U.S. source earned income from a member of the PepsiCo Organization for such year.
(z) “Valuation date” means each business day, as determined by the Vice President, as of which Members’ PIRP-DC Accounts are valued (for purposes other than distributions under Article VI) in accordance with DC Program procedures that are then currently in effect. As of the Effective Date, the DC Program shall have a Valuation Date for all Members as of the last day of each Plan Year. In addition, to the extent provided in Section 4.02, the DC Program shall have a special Valuation Date prior to the end of a Plan Year for Active Members who have an Approved Transfer (and for certain Active Members who have a Status Change) as described in Section 4.02. In accordance with procedures that may be adopted by the Vice President, any current Valuation Date may be changed (but in such case adjustments shall apply in the operation of the DC Program as necessary to prevent duplicate or disproportionate benefits, as determined by the Vice President). Values are determined as of the close of a Valuation Date or, if such date is not a business day, as of the close of the preceding business day.
(aa) “Vice President” means the Vice President, Global Benefits & Wellness of PepsiCo, Inc., but if such position is vacant or eliminated it shall be the person who is acting to fulfill the majority of the duties of the position (or plurality of the duties, if no one is fulfilling a majority), as such duties existed immediately prior to the vacancy or the position elimination.
2.02 Construction.
(a) Gender and Number: Unless the context clearly indicates to the contrary, (i) a reference to one or more genders shall include a reference to all the other genders, and (ii) the singular may include the plural, and the plural may include the singular..
(b) Determining Periods of Years: For the purposes of the DC Program, any period of 365 consecutive days (or of 366 consecutive days, if the period includes 29th February) shall be deemed to constitute a year, but not so that in the calculation of a number of years any day is counted more than once. Where the amount of a benefit depends upon the calculation of a number of years or months without expressly requiring that these should be complete years or months, a proportionate amount (i.e., a number of
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days) may be given for any part of a year or month which would not otherwise be included in the calculation. Where this document makes reference to months or parts of a year, or to any other period of time except a day, week or year the Vice President may authorize the period to be counted in days or complete calendar months with each calendar month counted as 1/12th of a year.
(c) Compounds of the Word “Here”: The words “hereof” and “hereunder” and other similar compounds of the word “here” shall mean and refer to the entire DC Program, not to any particular provision or section.
(d) Examples: 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 passages of the document 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).
(e) Subdivisions of this Document: This document is divided and subdivided using the following progression: articles, sections, subsections, paragraphs, subparagraphs and clauses. Articles are designated by capital roman numerals. Sections are designated by Arabic numerals containing a decimal point. Subsections are designated by lower-case letters in parentheses. Paragraphs are designated by Arabic numerals in parentheses. Subparagraphs are designated by lower-case roman numerals in parentheses. Clauses are designated by upper-case letters in parentheses. Any reference in a section to a subsection (with no accompanying section reference) shall be read as a reference to the subsection with the specified designation contained in that same section. A similar rule shall apply with respect to paragraph references within a subsection and subparagraph references within a paragraph.
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ARTICLE III – MEMBERSHIP
3.01 Eligibility for Membership.
Every person who the Vice President determines is an Eligible Employee shall be eligible for Membership.
3.02 Admission to Membership.
Every person who the Vice President determines is an Eligible Employee, and who is not during the relevant time a U.S. Person, shall, following the approval of his Membership by the Vice President, be admitted to Membership effective as of his Entry Date. For this purpose, the relevant time includes a sufficient period before the Eligible Employee’s Proposed Entry Date as is necessary to avoid PIRP-DC Accounts being considered deferred compensation that is subject to Section 409A of the United States Internal Revenue Code. No Eligible Employee or any other person shall be admitted to Membership without the approval of the Vice President.
3.03 Active and Inactive Membership.
A Member shall be an Active Member during the period that he is – (a) employed as an Eligible Employee, (b) not a U.S. Person, and (c) currently approved for status as an Active Member by the Vice President. A Member shall be an Inactive Member during any period that he does not currently meet all of the requirements to be an Active Member.
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ARTICLE IV – CONTRIBUTIONS
4.01 Contributions.
To the extent provided in subsections (a) and (b) below, the Employer shall allocate Pay Credits and Interest Credits to a Member’s PIRP-DC Account, each determined by the Vice President as follows –
(a) Pay Credit. To receive a Pay Credit for a Plan Year, an individual must be an Active Member during such year. The amount of an Active Member’s Pay Credit for a Plan Year shall be determined by multiplying the Active Member’s annualized Salary in effect as of that year’s Valuation Date by the Active Member’s applicable percentage, which shall be one of the following: 5%, 8%, 10%, 12% or 18%.
Effective for any Eligible Employee who becomes an Active Member on or after January 1, 2021 and who does not have any Service completed while a U.S. Person, the amount of the Active Member’s Pay Credits shall be determined by the number of “points” attributed to the Active Member in accordance with the following:
| Points | Amount of Pay Credit | ||||
| Less than 35 | 5% of Eligible Pay | ||||
| 35-39 | 6% of Eligible Pay | ||||
| 40-44 | 7% of Eligible Pay | ||||
| 45-49 | 8% of Eligible Pay | ||||
| 50-54 | 9% of Eligible Pay | ||||
| 55-59 | 10% of Eligible Pay | ||||
| 60-64 | 11% of Eligible Pay | ||||
| 65 or more | 12% of Eligible Pay | ||||
Such an Active Member’s points shall be determined by the sum of the Active Member’s age and years of Service, with each expressed in whole years and days.
Otherwise, the Vice President shall specify the Active Member’s applicable percentage as of the Active Member’s Entry Date (or, if the Member ceases to be an Active Member, and then becomes an Active Member again, as of the date the Member again becomes an Active Member). For each subsequent Plan Year that the individual is an Active Member, the Vice President may specify a new applicable percentage that shall apply to the Active Member for such Plan Year. An Active Member shall cease receiving Pay Credits during any Plan Year as necessary to ensure that there is ongoing compliance with limitations set forth in Section 9.14. Specifications of an applicable percentage by the Vice President are made in the Vice President’s sole discretion, and at no time does an Eligible Employee have a legally binding right to be assigned any initial or increased applicable percentage.
An Active Member’s Pay Credits with respect to Plan Years beginning on or after January 1, 2023 shall not be limited by the Code section 401(a)(17) limit. For Plan Years beginning prior to January 1, 2023, an Active Member’s Pay Credits were limited to ensure that the Active Member’s Pay Credits do not exceed the Internal Revenue Code Section 401(a)(17) limit in effect for such Plan Year.
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(b) Interest Credit. To receive an Interest Credit for a Plan Year, an individual must be either an Active Member or Inactive Member during such year, and the individual must have had a balance in his PIRP-DC Account as of the prior Plan Year’s Valuation Date. The amount of a Member’s Interest Credit shall be determined by the Vice President by multiplying the Interest Rate for the period since the last Valuation Date by the balance of the Member’s PIRP-DC Account as of such last Valuation Date.
A Member’s Pay Credit and Interest Credit shall be determined by the Vice President as soon as administratively practicable after each Valuation Date. If a Member has less than one full year of Active Membership since such last Valuation Date (e.g., as may apply in the Member’s first and last year of Membership), the Member’s Pay Credit as otherwise determined under subsection (a) above shall be prorated for such period based upon the Member’s fractional year of Active Membership. If a Member has less than one full year of Membership since such last Valuation Date, any Interest Credit as otherwise available and determined under subsection (b) above shall be prorated for such period based upon the Member’s fractional year of Membership (e.g., as may apply in the Member’s last year of Membership). A fractional year shall be computed by dividing the Member’s days of Membership or Active Membership (as applicable) during the Plan Year by the total number of days in such Plan Year. A period of paid leave of absence during a Plan Year shall be considered a period of Active Membership for purposes of determining a Member’s Pay Credit for the Plan Year in accordance with the prior sentence. However, a period of unpaid leave of absence during a Plan Year shall not be considered a period of Active Membership for purposes of determining a Member’s Pay Credit for the Plan Year in accordance with the prior sentence (and as a result, the Pay Credit for the Plan Year containing the unpaid leave shall be prorated, or there shall be no Pay Credit, all as necessary to limit Pay Credits to the Member’s period of Active Membership during the Plan Year). In the event a prorated Pay Credit and Interest Credit relate to the Member’s final year of Membership, the Pay Credit and Interest Credit shall be determined as of the Member’s Distribution Valuation Date (with proration based upon the Member’s fractional final year of Membership). The calculation of the Pay Credit and Interest Credit by the Vice President shall be conclusive and binding on all Members (and their Dependants).
4.02 Offsets.
Notwithstanding Section 4.01, the Corporation may reduce the amount of any payment or benefit that is or would become payable to or on behalf of a Member by the amount of any obligation of the Member to the Corporation or by the amount of –
(a) Any material benefits accrued by the Member under a retirement plan sponsored by the Corporation or by any country, state, province or other political subdivision or locality, to the extent the Vice President determines that the benefit amount under such retirement plan is for Service or Salary that is taken into account in providing Pay Credits under the DC Program, and
(b) Any termination indemnity or other payment to the Member by the Employer or PepsiCo Organization related to the Member’s termination of employment, to the extent the Vice President determines that the payment is reasonably related to Service that is taken into account in providing Pay Credits under the DC Program.
Consistent with the foregoing, appropriate reductions may be made in the Pay Credits and Interest Credits that otherwise would be provided to the Member under Sections 4.01 and 4.02, the balance in the Member’s PIRP-DC Account under Article V, or the Member’s distributions under Article VI. The determination of whether a benefit is material and all other aspects of the application of this Section 4.02 is solely in the independent discretion of the Vice President.
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ARTICLE V – MEMBER ACCOUNTS
5.01 Accounting for Members’ Interests.
Pay Credits and Interest Credits shall be credited to a Member’s PIRP-DC Account as of the Valuation Date to which such credits relate (or, in the case of Pay Credits and Interest Credits that relate to the Member’s final year of Membership, as of the Member’s Distribution Valuation Date) or as soon as administratively practicable thereafter. A Member’s PIRP-DC Account is a bookkeeping device to track the notional value of the Member’s Pay Credits and Interest Credits (and his Employer’s liability for such credits). No assets shall be reserved or segregated in connection with any PIRP-DC Account, and no PIRP-DC Account shall be funded, insured or otherwise secured.
5.02 Vesting.
Subject to Sections 4.02, 9.08, and 9.14, a Member shall be fully vested in, and have a nonforfeitable right to, his PIRP-DC Account upon completing 3 years of Service, or if earlier, upon the death or disability of the Member while employed by the Employer or PepsiCo Organization. The determination of whether a Member has become disabled for this purpose shall be made by the Vice President in accordance with such standards as the Vice President deems to be appropriate as of the time in question.
The crediting of Pay Credits pursuant to this Plan (including the crediting of related earnings on such credits) shall not in any way exempt the Pay Credits and related earnings from the full application of the Company’s clawback and other forfeiture and recovery policies (“Clawback Policies”), as they are in effect from time to time. Accordingly, a Member’s Account shall be subject to forfeiture (and if paid out, to recovery) to the extent determined to be appropriate by the Vice President to give full effect to these Clawback Policies. Section 9.08 shall not be construed to reduce or impair the forfeiture and recovery rights provided by this Section 5.02.
5.03 Special Vesting for Approved Transfers and Status Changes.
(a) Automatic Special Vesting for Approved Transfers. Notwithstanding Section 5.02 above, in the case of an Active Member who will have an Approved Transfer during a Plan Year, the Active Member shall automatically have special vesting apply as of the last business day before the earlier of – (a) the Active Member’s Approved Transfer, or (b) the day the Active Member would become a U.S. Person in connection with the Approved Transfer.
(b) Special Vesting for Status Changes. Also notwithstanding Section 5.02 above, in the case of an Active Member who will have a Status Change, the Active Member may request that the Vice President apply special vesting to him as of the last business day before the Active Member’s Status Change. In order for special vesting related to a Status Change to be valid and effective under the DC Program, the Active Member’s request and the Vice President’s approval of the request must both be completely final and in place prior to the date that the special vesting applies.
Subject to the next sentence, the effect of special vesting applying to a Member in accordance with either subsection (a) or (b) above is that the Member will become vested, to the same extent as could apply under Section 5.02 if the Member vested under that Section, as of the date that the special vesting applies. Notwithstanding the preceding provisions of this Section 5.03, rights under this Section 5.03 are subject to the overriding requirement that allocations, benefits and
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other rights under the Plan must remain entirely exempt from Section 409A of the United States Internal Revenue Code, and this Section 5.03 shall not apply to the extent inconsistent with this requirement.
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ARTICLE VI – DISTRIBUTION OF BENEFITS
6.01 Distribution Rules Generally.
A Member’s PIRP-DC Account shall be distributed based upon first to occur of the Member’s termination of employment with the PepsiCo Organization or death, as provided in Sections 6.02 and 6.03 respectively, subject to Section 4.06 (vesting). All distributions shall be made in cash.
6.02 Distributions Upon Termination of Employment.
If a Member’s PIRP-DC Account becomes distributable based upon his termination of employment with the PepsiCo Organization, such distribution shall be made in a single lump sum payment on the first of the month that immediately follows the Member’s Distribution Valuation Date. In the case of a Member whose termination of employment with the PepsiCo Organization occurs as a result of the Member becoming disabled, for purposes of this Section, the determination of whether such Member is disabled and the date on which such Member’s termination of employment is considered to occur shall be made by the Vice President.
6.03 Distributions Upon Death.
If a Member’s PIRP-DC Account becomes distributable based upon his death, such distribution shall be made in a single lump sum payment on the first day of the month that immediately follows the Member’s Distribution Valuation Date. Amounts paid following a Member’s death shall be paid to the Member’s Dependant; provided, however, that if no Dependant designation is in effect at the time of the Member’s death (as determined by the Vice President), or if all persons designated as Dependants have predeceased the Member, then the payments to be made pursuant to this Section shall be distributed to the Member’s Eligible Spouse or Eligible Domestic Partner, as applicable, or, if the Member does not have an Eligible Spouse or an Eligible Domestic Partner at the time of his death, to his estate.
6.04 Valuation.
In determining the amount of any individual distribution pursuant to this Article, the Member’s PIRP-DC Account shall continue to be credited with Interest Credits (and debited for expenses) as specified in Article V until the Member’s Distribution Valuation Date.
6.05 Designation of Dependant.
A Member shall designate one or more Dependants who will be entitled to any amounts payable on his death. A Member shall have the right to change or revoke his Dependant designation at any time prior to the effective date of such election. If the Member is married at the time he or she designates a Dependant(s), any designation under this section of a Dependant(s) who is not the Member’s Eligible Spouse shall require the written consent of the Member’s Eligible Spouse. A revocation of a Dependant(s) does not require consent by the Member’s Eligible Spouse. The designation of any Dependant(s), and any change or revocation thereof, and any written consent of a Member’s Eligible Spouse required by this Section shall be made in accordance with rules adopted by the Vice President, shall be made in writing on forms provided by the Vice President, and shall not be effective unless and until filed with the Vice President.
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ARTICLE VII – ADMINISTRATION
7.01 Authority to Administer Plan.
(a) Administration by the Vice President: The Plan shall be administered by the Vice President, who shall have the authority to interpret the Plan and issue such regulations as he deems appropriate. All actions by the Vice President hereunder may be taken in his sole discretion, and all interpretations, determinations and regulations made or issued by the Vice President shall be final and binding on all persons and parties concerned.
(b) Authority to Delegate: The Vice President may delegate any of his responsibilities under the Plan to other persons or entities, or designate or employ other persons to carry out any of his duties, responsibilities or other functions under the Plan. Any reference in the Plan to an action by the Vice President shall, to the extent applicable, refer to such action by the Vice President’s delegate or other designated person.
7.02 Facility of Payment.
Whenever, in the opinion of the Vice President, a person entitled to receive any payment of a benefit hereunder is under a legal disability or is incapacitated in any way so as to be unable to manage his financial affairs, the Vice President may direct that payments from the Plan be made to such person’s legal representative for his benefit, or that the payment be applied for the benefit of such person in such manner as the Vice President considers advisable. Any payment of a benefit in accordance with the provisions of this section shall be a complete discharge of any liability for the making of such payment under the provisions of the Plan.
7.03 Claims Procedure.
The Vice President shall have the exclusive discretionary authority to construe and to interpret the Plan, to decide all questions of eligibility for benefits and to determine the amount of such benefits, and his decisions on such matters are final and conclusive. As a result, benefits under this Plan will be paid only if the Vice President decides in his discretion that the person claiming such benefits is entitled to them. Any decisions or determinations hereunder shall be made in the absolute and unrestricted discretion of the Vice President, even if (i) such discretion is not expressly granted by the Plan provisions in question, or (ii) a decision or determination is not expressly called for by the Plan provisions in question, and even though other Plan provisions expressly grant discretion or expressly call for a decision or determination. This discretionary authority is intended to be absolute, and in any case where the extent of this discretion is in question, the Vice President is to be accorded the maximum discretion possible. Any exercise of this discretionary authority shall be reviewed by a court, arbitrator or other tribunal under the arbitrary and capricious standard (i.e., the abuse of discretion standard). All decisions and determinations made by the Vice President shall be final, conclusive, and binding on all parties. The Vice President may consider the intent of the Corporation with respect to a Plan provision in making any determination with respect to the provision, notwithstanding the provisions set forth in any document that arguably do not contemplate considering such intent.
If, pursuant to this discretionary authority, an assertion of any right to a benefit or any other right related to the Plan (a “claim”), by or on behalf of a Member, putative Member, Dependant or putative Dependant (a “claimant”), is wholly or partially denied, the Vice President, or a party designated by the Vice President, will provide such claimant the claims procedure described in this section. The Vice President has the discretionary authority to modify
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the claims procedure described in this Section in any manner so long as the claims review process, as modified, includes the basic steps described in this Section. In the event of a claim by a claimant, the Vice President or the designated party shall provide the claimant within the 90-day period following the receipt of the claim by the Vice President, a comprehensible written notice setting forth:
(1) The specific reason or reasons for such denial;
(2) Specific reference to pertinent Plan provisions on which the denial is based;
(3) A description of any additional material or information necessary for the claimant to submit to perfect the claim and an explanation of why such material or information is necessary; and
(4) A description of the Plan’s claim review procedure (including the time limits applicable to such process).
If the Vice President determines that special circumstances require an extension of time for processing the claim he may extend the response period from 90 to 180 days. If this occurs, the Vice President will notify the claimant before the end of the initial 90-day period, indicating the special circumstances requiring the extension and the date by which the Vice President expects to make the final decision. Upon review, the Vice President shall provide the claimant a full and fair review of the claim, including the opportunity to submit to the Vice President comments, document, records and other information relevant to the claim and the Vice President’s review shall take into account such comments, documents, records and information regardless of whether it was submitted or considered at the initial determination. The decision on review will be made within 60 days after receipt of the request for review, unless circumstances warrant an extension of time not to exceed an additional 60 days. If this occurs, notice of the extension will be furnished to the claimant before the end of the initial 60-day period, indicating the special circumstances requiring the extension and the date by which the Vice President expects to make the final decision. The final decision shall be in writing and drafted in a manner calculated to be understood by the claimant; include specific reasons for the decision with references to the specific Plan provisions on which the decision is based; and provide that the claimant is entitled to receive, upon request and free of charge, copies of, all documents, records, and other information relevant to his or her claim for benefits.
Any claim under the Plan that is reviewed by a court, arbitrator or any other tribunal shall be reviewed solely on the basis of the record before the Vice President at the time it made its determination. In addition, any such review shall be conditioned on the claimant’s having fully exhausted all rights under this section and in accordance with Section 7.07.
7.04 Limitations on Actions.
Any claim filed under Article VII and any action filed in any court or other tribunal by or on behalf of a former or current Employee, Member, Dependant or any other individual, person or entity (collectively, a “Petitioner”) for the alleged wrongful denial of Plan benefits must be brought within two years of the date the Petitioner’s cause of action first accrues. For purposes of this subsection, a cause of action with respect to a Petitioner’s benefits under the Plan shall be deemed to accrue not later than earlier of (i) when the Petitioner has received the calculation of the benefits that are the subject of the claim or legal action; (ii) the date identified to the Petitioner by the Vice President on which payments shall commence; or (iii) when he has actual or constructive knowledge of the facts that are the basis of his claim. Failure to bring any such claim or cause of action within this two-year time frame shall preclude a Petitioner, or any representative of the Petitioner, from filing the claim or cause of action. Correspondence or
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other communications following the mandatory appeals process described above shall have no effect on this two-year time frame.
7.05 Restriction of Venue.
Any claim or action filed in court or any other tribunal in connection with the Plan by or on behalf of a Petitioner shall only be brought or filed in the state or federal courts of New York, specifically the state or federal court, whichever applies, located nearest the Corporation’s headquarters.
7.06 Effect of Specific References.
Specific references in the Plan to the Vice President’s discretion shall create no inference that the Vice President’s discretion in any other respect, or in connection with any other provision, is less complete or broad.
7.07 Claimant Must Exhaust the Plan’s Claims Procedures Before Filing in Court.
Before filing any Claim (as defined below in this Section), including a suit or other action, in a court or in another tribunal, a Claimant (as defined below in this Section) must first fully exhaust all of the Claimant’s rights under the claims procedure in Section 7.03.
(a) Upon review by any court or other tribunal, the exhaustion requirement of this Section 7.07 is intended to be interpreted to require exhaustion in as many circumstances as possible (and any steps necessary to clarify or effect this intent may be taken). For example, exhaustion may not be excused (i) for failure to respond to a Claim unless the purported Claimant took sufficient steps to make it reasonably clear to the Vice President that the purported Claimant was submitting a Claim with respect to the Plan, or (ii) for failure to fulfill a request for documents unless (A) this Plan or applicable law requires the documents to be provided in response to the request, (B) the Claimant requests such documents in a writing that is addressed to and actually received by the Vice President, (C) the Vice President fails to provide the requested documents within 6 months after the date the request is received, or within such longer period as may be reasonable under the facts and circumstances, and (D) the requestor took sufficient steps to make it reasonably clear to the Vice President that the requestor was asserting a legal right to the documents. Accordingly, without limitation, a purported Claimant or requestor who was not treated as a Member shall not be deemed to have taken sufficient steps for purposes of the prior sentence unless he makes it reasonably clear to the Vice President that he is claiming to have been entitled to be a Member.
(b) The exhaustion requirement of this Section 7.06 shall apply: (i) regardless of whether other Disputes (as defined below in this Section) that are not Claims (including those that a court or other tribunal might consider at the same time) are of greater significance or relevance, (ii) to any rights the Vice President may choose to provide in connection with novel Disputes or in particular situations, (iii) regardless of whether the rights are actual or potential, and (iv) even if the Vice President has not previously defined or established specific claims procedures that directly apply to the submission and consideration of such Claim (in which case the Vice President, upon notice of the Claim) shall either promptly establish such claims procedures or shall apply (or act by analogy to) the claims procedures of Section 7.03 that apply to claims for benefits).
(c) The Vice President may make special arrangements to consider a Claim on a class basis or to address unusual conflicts concerns, and such minimum arrangements in
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these respects shall be made as are necessary to maximize the extent to which exhaustion is required.
(d) For purposes of this Section 7.07, the following definitions apply.
(1) A “Dispute” is any claim, dispute, issue, assertion, action or other matter.
(2) A “Claim” is any Dispute that implicates in whole or in part any one or more of the following –
(A) The interpretation of the Plan;
(B) The interpretation of any term or condition of the Plan;
(C) The interpretation of the Plan (or any of its terms or conditions) in light of applicable law;
(D) Whether the Plan or any term or condition under the Plan has been validly adopted or put into effect;
(E) The administration of the Plan;
(F) Whether the Plan, in whole or in part, has violated any terms, conditions or requirements of applicable law or regulation, regardless of whether such terms, conditions or requirements are, in whole or in part, incorporated into the terms, conditions or requirements of the Plan;
(G) A request for Plan benefits or an attempt to recover Plan benefits;
(H) An assertion that any entity or individual has breached any legal duty; or
(I) Any Claim that: (i) is deemed similar to any of the foregoing by the Vice President, or (ii) relates to the Plan in any way.
It is the Vice President’s intent to interpret and operate the Plan in good faith and at all times consistently with any requirements of applicable law. Therefore, as a condition for any right or recovery related to the Plan, the Plan imposes a contractual obligation for complete exhaustion under this Section with respect to any Claim (as defined above) in order to allow for the efficient and uniform resolution of such Claims and to protect the Plan from potentially substantial and unnecessary litigation expenses that exhaustion could obviate.
(3) A “Claimant” is any actual or putative Eligible Employee, former Eligible Employee, Member, former Member, Dependant (or the spouse, former spouse, estate, heir or representative of any of the foregoing individuals), or any other individual, person, entity with a relationship to any of the foregoing individuals or the Plan, as well as any group of one or more of the foregoing, who has a Claim.
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ARTICLE VIII – AMENDMENT AND TERMINATION
8.01 Continuation of the Plan.
While the Corporation intends to continue the Plan indefinitely, it assumes no contractual obligation as to its continuance. The Corporation hereby reserves the right, in its sole discretion, to amend, terminate, or partially terminate the Plan at any time provided, however, that no such amendment or termination shall reduce the balance (determined as of the date of such amendment or termination) in the Plan account maintained for the benefit of a Member or his Dependant, except to the extent the Member becomes entitled to an amount under another plan or practice maintained by an Employer. Specific forms (including times) of payment are not protected under the preceding sentence. The Corporation’s rights under this Article VIII shall be as broad as permissible under applicable law.
8.02 Amendment.
The Corporation may, in its sole discretion, make any amendment or amendments to this Plan from time to time, with or without retroactive effect, subject to Section 8.01. An Employer (other than the Corporation) shall not have the right to amend the Plan.
8.03 Termination.
The Corporation may terminate the Plan, either as to its participation or as to the participation of one or more Employers. If the Plan is terminated with respect to fewer than all of the Employers, the Plan shall continue in effect for the benefit of the employees of the remaining Employers.
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ARTICLE IX – MISCELLANEOUS
9.01 Unfunded Plan.
The Employers’ obligations under the Plan shall not be funded, but shall constitute liabilities by the Employer payable when due out of the Employer’s general funds. To the extent a Member or any other person acquires a right to receive benefits under this Plan, such right shall be no greater than the rights of any unsecured general creditor of the Employer.
9.02 Costs of the Plan.
Unless otherwise agreed by the Corporation, all costs, charges and expenses of or incidental to the administration and management of the Plan shall be the costs, charges and expenses of the Employers and shall be paid by each Employer based on the proportion of Members who are employed by such Employer as compared to the total number of Members at the time the cost or expense is incurred.
9.03 Temporary Absence of Member.
If a Member is absent from duty by reason other than death, discharge, retirement or quitting (e.g., sickness, accident, layoff, vacation), he shall be deemed to have terminated employment on the date that is 12 months after the date on which he is absent, unless the Vice President determines otherwise. If the Member’s absence from duty is by reason of his service as a full-time member of the armed forces of any country or of any organization engaged in national service of any such country, he shall not be deemed to have terminated employment so long as he is regarded by the Employer as remaining in employment or until he shall resign permanently from employment, whichever shall first occur.
9.04 Taxes, Etc.
In the event any tax or assessment or other duty is determined by the Vice President to be owing in respect of any benefit payable from the Plan, the Plan shall be entitled to withhold an amount not exceeding the amount of any such tax or assessment or other duty from the benefit payable and shall apply the same in satisfaction of said tax or assessment or other duty.
9.05 Nonguarantee of Employment.
Nothing in the Plan shall be construed as a contract of employment between an Employer and any of its employees, or as a right of any such employee to continue in the employment of the Employer, or as a limitation of the right of an Employer to discharge any of its employees, with or without cause.
9.06 No Right to Benefits.
No person, whether or not being a Member, shall have any claim, right or interest under the Plan except as provided by the terms of the Plan. In the event of a Member’s termination of employment by an Employer, the resulting cessation of his Membership shall not be grounds for any damages or any increase in damages in any action brought against the Employer or any member of the PepsiCo Organization with respect to such termination.
9.07 Charges on Benefits and Recovery of Excess Payments.
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All benefits in respect of a Member under the Plan shall stand charged with and be subject to deductions therefrom of all sums in respect of losses to a member of the PepsiCo Organization or Employer or otherwise caused by misdemeanor of the Member and on production by the member of the PepsiCo Organization or Employer of proof satisfactory to the Vice President that any such loss ought to be made good by a Member. The relevant amount shall be deductible from the Member’s benefits and be payable to the Employer or member of the PepsiCo Organization whose receipt shall be a valid discharge for the same.
Payments to, for or in connection with a Member that are made (as of a point in time and to any person or entity) may not exceed the exact amount of payments that are due as of such time and to such person, as provided by the terms of the Plan that specify the amounts that are payable, the time as of which they are payable, and the person to whom they are payable. Accordingly, any such excess payment or any other overpayment, premature payment or misdirected payment (one or more of which are hereafter referred to as an “Excess Payment”) may not be retained by the party receiving it, but must be restored promptly to the Plan. In exchange for Member or beneficiary status hereunder (or for having any other direct or indirect right or claim of right from the Plan, or solely as a result of having received an Excess Payment), any party receiving an Excess Payment grants to the Plan the following nonexclusive rights –
(1) A constructive trust and first priority equitable lien on any payment that is received directly or indirectly from the Plan and that is, in whole or part, an Excess Payment (such trust and lien shall be equal to the amount of the Excess Payment increased by appropriate interest) or upon the proceeds or substitutes for such payment, and any transfer shall be subject to such constructive trust and equitable lien (including a transfer to a person, trust fund or entity).
(2) The right to offset (as necessary to recover the Excess Payment with appropriate interest) other payments that are properly payable by the Plan to the recipient of the Excess Payment; however, reliance on this right is in the discretion of the Vice President, and the existence of an opportunity to apply it shall not diminish the Plan’s rights under paragraph (1) above.
(3) The right to bring any equitable or legal action or proceeding with respect to the enforcement of any rights in this Section in any court of competent jurisdiction as the Plan may elect, and following receipt of an Excess Payment the Member hereby submits to each such jurisdiction, waiving any and all rights that may correspond to such party’s present or future residence.
Any party receiving an Excess Payment shall promptly take all actions requested by the Vice President that are in furtherance of the Plan’s recovery of the Excess Payment with appropriate interest. In all cases, this subsection shall maximize the rights of the Plan to recover improper payments and shall not restrict the rights of the Plan in any way, including with respect to any improper payment that is not addressed above.
9.08 Prohibited Misconduct.
(a) Notwithstanding any other provision of this Plan to the contrary, if the Vice President determines that a Member has engaged in Prohibited Misconduct at any time prior to the second anniversary of his termination of employment with the PepsiCo Organization, the Member shall forfeit all Pay Credits and Interest Credits (whether paid previously, being paid currently or payable in the future), and his PIRP-DC Account shall be adjusted to reflect such forfeiture and previously paid Pay Credits and Interest Credits shall be recovered. Section 5.02 shall not be construed to reduce or impair the forfeiture rights provided by this Section 9.08, but the Vice President shall have the authority to
21
reduce the forfeitures that would apply under this Section to the extent necessary to avoid an inappropriate duplication (determined in the Vice President’s sole discretion) of the forfeitures applicable under Section 5.02. As a condition to Membership in this Plan, each Member agrees to this and each Member agrees to repay PepsiCo the amounts it seeks to recover under this Section 9.08.
(b) Any of the following activities engaged in, directly or indirectly, by a Member shall constitute Prohibited Misconduct:
(1) The Member accepting any employment, assignment, position or responsibility, or acquiring any ownership interest, which involves the Member’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.
(2) The Member, directly or indirectly (including through someone else acting on the Member’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.
(3) The Member using or disclosing to anyone any confidential information regarding the PepsiCo Organization other than as necessary in his position with the PepsiCo Organization. Such confidential information shall include all non-public information the Member acquired as a result of his 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.
(4) The Member engaging in any acts that are considered to be contrary to the PepsiCo Organization’s best interests, including violating the Corporation’s Code of Conduct, engaging in unlawful trading in the securities of the Corporation or of any other company based on information gained as a result of his employment with the PepsiCo Organization, or engaging in any other activity which constitutes gross misconduct.
(5) The Member engaging in any activity that constitutes fraud.
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Notwithstanding anything contained in the Plan or in any other confidentiality provision to which the Participant may be subject as a result of the Member’s employment with the Company, nothing shall prohibit the Member from, without notice to the Company, communicating with government agencies, providing information to government agencies, participating in government agency investigations, filing a complaint with government agencies, or testifying in government agency proceedings concerning any possible legal violations or from receiving any monetary award for information provided to a government agency. The Corporation nonetheless asserts and does not waive its attorney-client privilege over any information appropriately protected by the privilege. Further, notwithstanding any confidentiality provision to which the Participant may be subject, pursuant to the Defend Trade Secrets Act, an individual shall not be held criminally or civilly liable under any federal or state trade secret law for the disclosure of a trade secret that (A) is made (i) in confidence to a federal, state, or local government official, either directly or indirectly, or to an attorney; and (ii) solely for the purpose of reporting or investigating a suspected violation of law; or (B) is made in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal. An individual who files a lawsuit for retaliation by an employer for reporting a suspected violation of law may disclose the trade secret to the attorney of the individual and use the trade secret information in the court proceeding, if the individual (A) files any document containing the trade secret under seal; and (B) does not disclose the trade secret, except pursuant to court order.
For purposes of this subsection, “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. For purposes of this subsection, “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 – in-home and commercial beverage systems, carbon dioxide gas cylinders, carbon dioxide gas refills, consumables, and ready-to-drink beverages, including without limitation, carbonated soft drinks, tea, water, juices, juice drinks, juice products sports drinks, coffee drinks, alcoholic beverages, and energy drinks; dairy products; snacks, including salty snacks, fruit and vegetable snacks, dips and spreads, sweet snacks, meat snacks, granola, nutrition and cereal bars, and cookies; hot cereals and ready-to-eat cereals; pancake mixes and pancake syrup; grain-based food products; pasta products; sports performance nutrition products, including without limitation, energy, protein, carbohydrate, nutrition and meal replacement chews, bars, powders, gels, drinks or drink mixes; or any product or service that the Member had reason to know was under development by the PepsiCo Organization during the Member’s employment with the PepsiCo Organization.
9.09 Notices.
Any notice which under the Plan is required to be given to or served upon the Plan shall be deemed to be sufficiently given to or served upon the Plan if it is in writing and delivered to the Vice President. In any case where under the Plan any notice shall be required to be given to Members, it shall be sufficient if such notice is delivered to the Member’s last known address on file in the records of the Employer or delivered to the Member pursuant to any other method (e.g., electronically) that the Vice President determines is reasonably available to the Member.
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9.10 Plan Documentation.
Every Member shall on demand be entitled to a copy of the Plan.
9.11 Currency of Payment.
Payment of benefits under the Plan shall be made in United States dollars, or other "eligible currency," as approved by the Vice President. The amount otherwise payable in United States dollars would be converted to the selected currency using the exchange rate, based on the methodology approved by the Vice President from time to time.
9.12 Governing Law.
The Plan shall in all respects be governed by and interpreted according to the laws of the State of New York and any applicable federal law as would be applied in cases that arise in the United States District Courts that sit in the State of New York.
9.13 Exemption from ERISA.
The Plan is intended to be exempt from the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), as a plan maintained outside of the United States primarily for the benefit of persons substantially all of whom are nonresident aliens of the United States. In order to preserve this exemption from ERISA, Active Membership in the Plan shall be limited to individuals who are nonresident aliens of the United States and whose assigned work locations are outside the United States, and it is intended that all permanent records and documentation relating to the administration of the Plan shall be kept at a location that is outside of the United States.
9.14 Exemption from Section 409A.
In order to permit this Plan to be completely exempt from United States Internal Revenue Code section 409A (“Section 409A”), this Plan shall be subject to the special operating rules and limitations in this Section 9.14, effective for any period to which Section 409A applies. It is the intent of the Plan that no Member who is a U.S. Person may in any way have their benefit from the Plan vest, increase or in any way be enhanced (collectively, a “Benefit Enhancement”) as a result of their compensation or service while a U.S. Person. However, Interest Credits may be provided on the PIRP-DC Account of a Member who is a U.S. Person, but only to the extent the balance in the PIRP-DC Account is derived from Pay Credits that relate to Service completed while the Member was not a U.S. Person (and Interest Credits on such Pay Credits). Accordingly, no Member shall become entitled to a Benefit Enhancement with respect to a calendar year until it is determined, following the close of such year, that the Member was not a U.S. Person with respect to such year. Notwithstanding the preceding sentence, in the calendar year a Member’s benefit under this Plan is scheduled to commence, the Vice President may authorize a Benefit Enhancement for the calendar year of benefit commencement to the extent the Vice President determines satisfactorily that the Member will not be a U.S. Person for such year. In other cases, the Member’s benefit will commence under this Plan without any Benefit Enhancement related to the calendar year of commencement, and appropriate adjustments will be made to the Member’s benefit in the following year if it is determined that the Member was not a U.S. Person in such calendar year of commencement. This Section 9.14 shall at all times be interpreted and applied in accordance with the overriding requirement that allocations, benefits and rights under the Plan must remain entirely exempt from Section 409A, and the Vice President shall have such unrestricted authority as is necessary to ensure that it is applied in accordance with this requirement. Further, to ensure the continuation of such exemption from
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Section 409A, the preceding sentence shall be applied and given overriding effect notwithstanding any other provision or language in this Plan.
9.15 Electronic Signatures.
The words “signed,” “signature,” and words of like import in or related to this Plan or any other document or record to be signed in connection with or related to this Plan by the Corporation Vice President, Eligible Employee, Dependant, or any other individual shall be deemed to include electronic signatures and the keeping of records in electronic form, each of which shall be of the same legal effect, validity and enforceability as a manually executed signature or the use of a paper-based recordkeeping system, as the case may be, to the fullest extent permissible under applicable law.
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ARTICLE X – SIGNATURE
The PepsiCo International Retirement Plan, DC Program document, as amended and restated, is hereby adopted as of this 11th day of December, 2023, to be effective as of January 1, 2023 or as otherwise stated herein.
PEPSICO, INC.
By: /s/ Becky Schmitt
Becky Schmitt
Executive Vice President and
Chief Human Resources Officer
Date: December 11, 2023
Law Department Approval
By: /s/ Jeffrey A. Arnold
Jeffrey A. Arnold
Legal Director, Employee Benefits Counsel
Date: December 11, 2023
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APPENDIX
Effective January 1, 2013, the Vice President, in his or her sole discretion, may establish Pay Credit Schedules other than those provided for in Section 4.01 of the DC Program to apply in the case of a Member (or Members) specifically designated by the Vice President for this purposes, provided that each such arrangement otherwise meets all applicable requirements of the Plan.
27
Exhibit 10.10
PEPSICO
PENSION EQUALIZATION PLAN
(PEP)
Plan Document for the Section 409A Program
January 1, 2023 Restatement
January 1, 2023 Restatement
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PepsiCo Pension Equalization Plan –409A Program
PEPSICO PENSION EQUALIZATION PLAN
Table of Contents
Page No.
ARTICLE I Foreword | 1 | ||||
ARTICLE II Definitions and Construction | 4 | ||||
2.1 Definitions | 4 | ||||
| Accrued Benefit | 4 | ||||
| Actuarial Equivalent | 4 | ||||
| Annuity | 7 | ||||
| Annuity Starting Date | 7 | ||||
| Cashout Limit | 7 | ||||
| Code | 7 | ||||
| Company | 7 | ||||
| Covered Compensation | 7 | ||||
| Credited Service | 7 | ||||
| Disability Retirement Pension | 8 | ||||
| Early 409A Retirement Pension | 8 | ||||
| Elapsed Time Service | 8 | ||||
| Eligible Domestic Partner | 8 | ||||
| Eligible Spouse | 10 | ||||
| Employee | 10 | ||||
| Employer | 10 | ||||
| ERISA | 10 | ||||
| FICA Amount | 10 | ||||
| 409A Program | 11 | ||||
| Guiding Principles Regarding Benefit Plan Fiduciary Committee Appointments | 11 | ||||
| Highest Average Monthly Earnings | 11 | ||||
| Key Employee | 11 | ||||
| Late 409A Retirement Pension | 16 | ||||
| Late Retirement Date | 16 | ||||
| Normal 409A Retirement Pension | 16 | ||||
| Normal Retirement Age | 16 | ||||
| Normal Retirement Date | 16 | ||||
| Participant | 16 | ||||
| Pension | 16 | ||||
| PepsiCo Administration Committee or PAC | 17 | ||||
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PepsiCo Pension Equalization Plan –409A Program
| PepsiCo Organization | 17 | ||||
| Plan | 18 | ||||
| Plan Administrator | 18 | ||||
| Plan Year | 18 | ||||
| Pre-409A Program | 19 | ||||
| Pre-Retirement Domestic Partner’s Pension | 19 | ||||
| Pre-Retirement Spouse’s Pension | 19 | ||||
| Primary Social Security Amount | 19 | ||||
| Prohibited Misconduct | 20 | ||||
| Qualified Joint and Survivor Annuity: | 23 | ||||
| Retirement | 24 | ||||
| Retirement Date | 24 | ||||
| Retirement Pension | 24 | ||||
| Salaried Plan | 24 | ||||
| Section 409A | 24 | ||||
| Separation from Service | 25 | ||||
| Service | 26 | ||||
| Single Life Annuity | 27 | ||||
| Single Lump Sum | 27 | ||||
| Social Security Act | 27 | ||||
| Taxable Wage Base | 27 | ||||
| Vested Pension | 27 | ||||
2.2 Construction | 28 | ||||
ARTICLE III Participation and Service | 32 | ||||
3.1 Participation | 30 | ||||
3.2 Service | 30 | ||||
3.3 Credited Service | 31 | ||||
ARTICLE IV Requirements for Benefits | 32 | ||||
4.1 Normal 409A Retirement Pension | 32 | ||||
4.2 Early 409A Retirement Pension | 32 | ||||
4.3 409A Vested Pension | 32 | ||||
4.4 Late 409A Retirement Pension | 32 | ||||
4.5 409A Disability Pension | 33 | ||||
4.6 Pre-Retirement Spouse’s 409A Pension | 33 | ||||
4.7 Vesting | 35 | ||||
4.8 Time of Payment | 35 | ||||
4.9 Cashout Distributions | 39 | ||||
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PepsiCo Pension Equalization Plan –409A Program
4.10 Reemployment of Certain Participants | 39 | ||||
4.11 Forfeiture of Benefits | 39 | ||||
4.12 Pre-Retirement Domestic Partner’s 409A Pension | 40 | ||||
ARTICLE V Amount of Retirement Pension | 42 | ||||
5.1 Participant’s 409A Pension | 42 | ||||
5.2 PEP Guarantee | 44 | ||||
5.3 Amount of Pre-Retirement Spouse’s 409A Pension | 50 | ||||
5.4 Certain Adjustments | 56 | ||||
5.5 Excludable Employment | 55 | ||||
5.6 Pre-409A Pension | 55 | ||||
5.7 Offset | 55 | ||||
5.8 Amount of Pre-Retirement Domestic Partner’s Pension | 56 | ||||
ARTICLE VI Distribution of Benefits | 60 | ||||
6.1 Form and Timing of Distributions | 60 | ||||
6.2 Available Forms of Payment | 63 | ||||
6.3 Procedures for Elections | 66 | ||||
6.4 Special Rules for Survivor Options | 68 | ||||
6.5 Designation of Beneficiary | 69 | ||||
6.6 Required Delay for Key Employees | 70 | ||||
6.7 Payment of FICA and Related Income Taxes | 72 | ||||
ARTICLE VII Administration | 74 | ||||
7.1 Authority to Administer Plan | 74 | ||||
7.2 Facility of Payment | 74 | ||||
7.3 Claims Procedure | 74 | ||||
7.4 Effect of Specific References | 77 | ||||
7.5 Claimant Must Exhaust the Plan’s Claims Procedures Before Filing in Court | 78 | ||||
7.6 Limitations on Actions | 82 | ||||
7.7 Restriction on Venue | 83 | ||||
ARTICLE VIII Miscellaneous | 84 | ||||
8.1 Nonguarantee of Employment | 84 | ||||
8.2 Nonalienation of Benefits | 84 | ||||
8.3 Unfunded Plan | 84 | ||||
8.4 Action by the Company | 84 | ||||
8.5 Indemnification | 85 | ||||
8.6 Compliance with Section 409A | 85 | ||||
8.7 Section 457A | 86 | ||||
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PepsiCo Pension Equalization Plan –409A Program
8.8 Authorized Transfers | 87 | ||||
8.9 Electronic Signatures | 87 | ||||
ARTICLE IX Amendment and Termination | 89 | ||||
9.1 Continuation of the Plan | 89 | ||||
9.2 Amendments | 89 | ||||
9.3 Termination | 89 | ||||
9.4 Change in Control | 90 | ||||
ARTICLE X ERISA Plan Structure | 93 | ||||
ARTICLE XI Applicable Law | 94 | ||||
ARTICLE XII Signature | 94 | ||||
| APPENDIX | 95 | ||||
| APPENDIX ARTICLE A - Transition Provisions | 96 | ||||
| APPENDIX ARTICLE B - Computation of Earnings and Service During Certain Severance Windows | 111 | ||||
| APPENDIX ARTICLE C - International and PIRP Transfer Participants | 114 | ||||
| APPENDIX ARTICLE D - Band 4 or Higher Rehired Yum Participants | 122 | ||||
| APPENDIX ARTICLE E - Time and Form of Payment for Benefits Paid During Severance Windows | 123 | ||||
| APPENDIX ARTICLE F - U.K. Supplementary Appendix Participants with U.S. Service | 129 | ||||
APPENDIX ARTICLE G - Delay Election For Certain Pre-2018 Terminees | 134 | ||||
| APPENDIX ARTICLE H - Definitions of Eligible Domestic Partner Applicable Prior to January 1, 2019 | 136 | ||||
| APPENDIX ARTICLE I - 409A PEP Makeup for Certain Pre-409A Benefits | 139 | ||||
APPENDIX ARTICLE J - Certain International Employees Who Are U.S. Persons | 143 | ||||
| APPENDIX ARTICLE K - Termination of 409A Program with Respect to Participants Affected by the Tiger Transaction | 148 | ||||
| APPENDIX ARTICLE PBG | 151 | ||||
ARTICLE I TO APPENDIX ARTICLE PBG - HISTORY AND PURPOSE | 151 | ||||
ARTICLE II TO APPENDIX ARTICLE PBG - DEFINITIONS AND CONSTRUCTION | 153 | ||||
ARTICLE III TO APPENDIX ARTICLE PBG - PARTICIPATION | 162 | ||||
ARTICLE IV TO APPENDIX ARTICLE PBG - AMOUNT OF RETIREMENT PENSION | 163 | ||||
ARTICLE V TO APPENDIX ARTICLE PBG - DEATH BENEFITS | 174 | ||||
ARTICLE VI TO APPENDIX ARTICLE PBG - DISTRIBUTIONS | 174 | ||||
| APPENDIX TO ARTICLE PBG | 180 | ||||
| APPENDIX ARTICLE PAC - Guiding Principles Regarding Benefit Plan Fiduciary Committee Appointments | 184 | ||||
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PepsiCo Pension Equalization Plan –409A Program
ARTICLE I
Foreword
Foreword
The PepsiCo Pension Equalization Plan (“PEP” or “Plan”) has been established by PepsiCo for the benefit of salaried employees of the PepsiCo Organization who participate in the Salaried Plan. PEP provides benefits for eligible employees whose pension benefits under the Salaried Plan are limited by the provisions of the Internal Revenue Code of 1986, as amended. In addition, PEP provides benefits for certain eligible employees based on the pre-1989 Salaried Plan formula (see, for example, Part B thereof).
1989 Restatement. The Plan was amended and restated in its entirety in 1989.
409A Program Document 2005 Restatement. The Plan was last amended and restated in its entirety effective as of January 1, 2005. The 2005 restatement sets forth the terms of the Plan that are applicable to benefits that are subject to Section 409A, i.e., generally, benefits that are earned or vested after December 31, 2004 or materially modified within the meaning of Treas. Reg. § 1.409A-6(a)(4) (the “409A Program”).
Amendments to the 2005 Restatement. The 2005 restatement was amended to reflect the merger into this Plan of the PBG Pension Equalization Plan (“PBG PEP”), effective at the end of the day on December 31, 2011. The PBG PEP document that was in effect on April 1, 2009, as amended through January 1, 2011 (the “409A PBG PEP Document”) is attached hereto as Appendix Article PBG 409A and shall continue to govern PBG PEP benefits that were subject to the 409A PBG PEP Document prior to the Plan merger, except for certain administrative provisions that are now governed by the main portion of the 409A PepsiCo PEP Document as is explained in Appendix Article PBG 409A. There has been no change to the time or form of payment of benefits that are subject to Internal Revenue Code Section 409A (“Section 409A”)
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PepsiCo Pension Equalization Plan –409A Program
under either the PepsiCo PEP or PBG PEP Documents as a result of the merger or the revisions to the 409A PepsiCo PEP Document and 409A PBG PEP Document.
2017, 2019, 2021, 2022 and 2023 Restatements. This restatement of the 409A Program Document is effective as of January 1, 2023. Before this restatement, the 409A Program Document was most recently restated effective as of January 1, 2022, and prior to that, effective as of January 1, 2022, January 1, 2019, and January 1, 2017.
Interplay of this 409A Program and Pre-409A Program. All benefits under the Plan that are not subject to the 409A Program (i.e., generally, benefits that are earned or vested before January 1, 2005 and not materially modified thereafter within the meaning of Treas. Reg. § 1.409A-6(a)(4)) shall be governed by the Plan Document for the Pre-Section 409 Program (the “Pre-409A Program”). Together, this document and the document for the Pre-409A Program describe the terms of a single plan. However, amounts subject to the terms of this 409A Program and amounts subject to the terms of the Pre-409A Program shall be tracked separately at all times. The preservation of the terms of the Pre-409A Program, without material modification, and the separation between the 409A Program amounts and the Pre-409A Program amounts are intended to be sufficient to permit the pre-409A Program to remain exempt from Section 409A as grandfathered benefits.
Freeze of the Salaried Plan. In general, the Plan provides benefits that make up for benefits that would accrue under the Salaried Plan but for certain Code limitations on benefits and compensation that apply to the Salaried Plan. As a result, a Participant’s accrual of Plan benefits and a Participant’s growing into certain benefit enhancements (such as more favorable early commencement factors) are generally tied to the Participant’s accrual of benefits and growing into benefit enhancements under the Salaried Plan. For certain
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PepsiCo Pension Equalization Plan –409A Program
Participants, there are special provisions in Section 5.2 (the “PEP Guarantee”) or the Appendix that provide a benefit accrual opportunity that goes beyond providing a make up for the application of certain Code limitations to the Salaried Plan. Regardless, however, the freeze on accruals under the Salaried Plan that is effective as of the end of the day on December 31, 2025 also freezes all accruals under this Plan effective as of that time. In addition, the Salaried Plan’s operational rules with respect to the ability to grow into benefit enhancements after December 31, 2025 govern the ability to grow into benefit enhancements after December 31, 2025 under this Plan.
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PepsiCo Pension Equalization Plan –409A Program
ARTICLE II
Definitions and Construction
Definitions and Construction
2.1 Definitions: This section provides definitions for certain words and phrases listed below. Where the following words and phrases, in boldface and underlined, appear in this Plan document (including the Foreword) with initial capitals they shall have the meaning set forth below, unless a different meaning is plainly required by the context.
Accrued Benefit: The Pension payable at Normal Retirement Date determined in accordance with Article V, based on the Participant’s Highest Average Monthly Earnings and Credited Service at the date of determination.
Actuarial Equivalent: Except as otherwise specifically set forth in the Plan or any Appendix to the Plan with respect to a specific benefit determination, a benefit of equivalent value computed on the basis of the factors set forth below. The application of the following assumptions to the computation of benefits payable under the Plan shall be done in a uniform and consistent manner. In the event the Plan is amended to provide new rights, features or benefits, the following actuarial factors shall not apply to these new elements unless specifically adopted by the amendment.
(1) Annuities and Inflation Protection: To determine the amount of a Pension payable in the form of a Qualified Joint and Survivor Annuity or optional form of survivor annuity, as an annuity with inflation protection, or as a period certain and life annuity, the Plan Administrator shall select the factors that are to be used. Effective January 1, 2009, the factors selected by the Plan Administrator are set forth in Schedule 1, below (prior factors appear in the Appendix). Thereafter, the Plan Administrator shall review
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such factors for forms of payment (including for annuities and lump sums) from time to time and shall amend such factors in its discretion. In general, a Participant shall have no right to have any of the actuarial factors specified for forms of payment under the Plan from time to time applied to his benefit (or any portion thereof), except to the extent that a particular factor is currently in effect at the time it is to be applied under the Plan. For the avoidance of doubt, it is expressly intended and binding upon Participants that any actuarial factors for forms of payment selected by the Plan Administrator from time-to-time may be applied retroactively to already accrued benefits, and without regard to the actuarial factors that may have applied previously for such purpose. However, in adjusting benefits under the Plan using those factors in Schedule 1 (below) that become effective for Annuity Starting Dates on or after January 1, 2019, the right to receive a benefit that is not less than would have applied under the prior basis for this adjustment shall apply to the same extent (and in the same manner) as applies under the Salaried Plan with respect to the 2019 Salaried Plan Factors. For this purpose, the phrase “2019 Salaried Plan Factors” refers to the new factors that appear in the Salaried Plan’s definition of “Actuarial Equivalent” effective for annuity starting dates (as defined under the Salaried Plan) on or after January 1, 2019. Effective for Annuity Starting Dates on or after January 1, 2019, if a Participant elects a survivor, period certain annuity or other death benefit annuity with inflation protection, Schedule 1(b) shall apply to adjust the Single Life Annuity for the survivor benefit, period certain or other death benefit, and Schedule 1(c) or (d) shall apply solely to adjust for the
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elected inflation protection (for this purpose and as applies generally when determining an Actuarial Equivalent, the adjustment resulting from applying these factors from separate Schedules shall be determined using an actuarial computation method that is reasonable and applied consistently to similarly situated participants).
SCHEDULE 1
Date | Mortality Table Factors | Interest Rate Factor | ||||||
Annuity Starting Dates from 1/1/2009 until 12/31/2018 | GAR 94 | 5% | ||||||
Annuity Starting Dates on or After 1/1/2019 Except for Inflation Protection | The 2019 mortality table* | 5% | ||||||
Annuity Starting Dates on or After 1/1/2019 for 5% Inflation Protection | The 2019 mortality table* | 4.2% | ||||||
Annuity Starting Dates on or After 1/1/2019 for 7% Inflation Protection | The 2019 mortality table* | 4.6% | ||||||
*As this term is defined in the Salaried Plan’s definition of “Actuarial Equivalent”
(2) Lump Sums: To determine the lump sum value of a Pension, a Pre-Retirement Spouse’s Pension under Section 4.6, or a Pre-Retirement Domestic Partner’s Pension under Section 4.12, the lump sum equivalent factors currently applicable to lump sum distributions under the Salaried Plan shall apply (disregarding transition factors). These factors are subject to change in accordance with paragraph (1) above.
(3) Other Cases: To determine the adjustment to be made in the Pension payable to or on behalf of a Participant in other cases, the factors are those applicable for such purpose under the Salaried Plan. In this respect, the 2019 Salaried Plan Factors shall be effective hereunder for Annuity Starting
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Dates (as defined under this Plan) on or after January 1, 2019. These factors are subject to change in accordance with paragraph (1) above.
Annuity: A Pension payable as a series of monthly payments for at least the life of the Participant.
Annuity Starting Date: The Annuity Starting Date shall be the first day of the first period for which an amount is payable under this Plan as an annuity or in any other form. A Participant who: (1) is reemployed after his initial Annuity Starting Date, and (2) is entitled to benefits hereunder after his reemployment, shall have a subsequent Annuity Starting Date for such benefits only to the extent provided in Section 6.3(b).
Cashout Limit: The annual dollar limit on elective deferrals under Code section 402(g)(1)(B), as in effect from time to time.
Code: The Internal Revenue Code of 1986, as amended from time to time. All references herein to particular Code Sections shall also refer to any successor provisions and shall include all related regulations, interpretations and other guidance.
Company: PepsiCo, Inc., a corporation organized and existing under the laws of the State of North Carolina or its successor or successors.
Covered Compensation: “Covered Compensation” as that term is defined in Part B of the Salaried Plan.
Credited Service: The period of a Participant’s employment, calculated in accordance with Section 3.3, which is counted for purposes of determining the amount of benefits payable to, or on behalf of, the Participant.
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Disability Retirement Pension: The Retirement Pension available to a Participant under Section 4.5.
Early 409A Retirement Pension: The 409A Retirement Pension available to a Participant under Section 4.2.
Elapsed Time Service: The period of time beginning with a Participant’s first date of employment with the PepsiCo Organization and ending with the Participant’s Final Separation from Service, irrespective of any breaks in service between those two dates. By way of illustration, if a Participant began employment with the PepsiCo Organization on January 1, 2000, left the employment of the PepsiCo Organization from January 1, 2001 until December 31, 2004, and was then reemployed by the PepsiCo Organization on January 1, 2005 until he had a Final Separation from Service on December 31, 2008, the Participant would have eight years of Elapsed Time Service as of his Final Separation from Service.
Eligible Domestic Partner. The definition in this Section 2.1 is effective for applicable dates on and after January 1, 2019, and applies solely to a Participant who is actively employed by, or on an Authorized Leave of Absence from, a member of the PepsiCo Organization on or after January 1, 2019. For other dates or Participants, see Appendix Article H.
(1)Definition. For applicable dates on or after January 1, 2019, “Eligible Domestic Partner” means an individual who is of the same sex or opposite sex as the Participant and who satisfies paragraph (a), (b) or (c), subject to the additional rules set forth in paragraph (e).
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(a)Civil Union. If on the applicable date the Participant has entered into a civil union that is valid on the applicable date in the state in which it was entered into, the Participant’s Eligible Domestic Partner (if any) is the individual with whom the Participant has entered into such a civil union.
(b)Enrollment in Health Benefits. If the Participant does not have an Eligible Domestic Partner pursuant to paragraph (a) above, the Participant’s Eligible Domestic Partner (if any) is the individual who, on the applicable date, is enrolled in any of the Company’s health benefit options as the Participant’s domestic partner.
(c)Other Acceptable Evidence of Partnership. If on the applicable date a Participant does not have an Eligible Domestic Partner under paragraph (a) or (b) above, such Participant’s Eligible Domestic Partner (if any) is the individual who satisfies such criteria of domestic partnership as the Plan Administrator has specified in writing.
(d)No Eligible Domestic Partner Except as Described Above. If on the applicable date a Participant does not have an Eligible Domestic Partner under paragraph (a), (b), or (c) above, such Participant is not eligible to have an Eligible Domestic Partner.
(e)Additional Rules. The term “Eligible Domestic Partner” does not apply to a Participant’s Eligible Spouse. A Participant is not permitted to have more than one Eligible Domestic Partner at any point in
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time, and a Participant who has an Eligible Spouse is not permitted to have an Eligible Domestic Partner.
(2)Terms Used in this Definition. For purposes of the definition of “Eligible Domestic Partner” in this Section 2.1, the following definitions apply: “applicable date” means the earlier of the Participant’s Annuity Starting Date and date of death, and “state” means any domestic or foreign jurisdiction having the legal authority to sanction civil unions.
Eligible Spouse: The spouse of a Participant to whom the Participant is considered lawfully married for purposes of Federal tax law on the earlier of the Participant’s Annuity Starting Date or the date of the Participant’s death and who, solely for periods before September 16, 2013, is of the opposite sex.
Employee: An individual who qualifies as an “Employee” as that term is defined in Part B of the Salaried Plan.
Employer: An entity that qualifies as an “Employer” as that term is defined in Part B of the Salaried Plan.
ERISA: Public Law No. 93-406, the Employee Retirement Income Security Act of 1974, including any amendments thereto, any similar subsequent federal laws, and any rules and regulations from time to time in effect under any of such laws.
FICA Amount: The Participant’s share of the Federal Insurance Contributions Act (FICA) tax imposed on the 409A Pension and Pre-409A Pension of the Participant under Code Sections 3101, 3121(a) and 3121(v)(2).
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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.
Guiding Principles Regarding Benefit Plan Committee Appointments: The guiding principles as set forth in Common Appendix Article PAC to be applied by the Chair of the PAC when selecting the members of the PAC.
Highest Average Monthly Earnings: “Highest Average Monthly Earnings” as that term is defined in the Part B of the Salaried Plan, but without regard to the limitation imposed by section 401(a)(17) of the Code (as such limitation is interpreted and applied under the Salaried Plan). Notwithstanding the foregoing, to the extent that a Participant receives, during an authorized leave of absence related to a Company severance program or agreement, earnings that would be counted as Highest Average Monthly Earnings if they were received during a period of active service, but that will be received after the Participant’s Separation from Service, the Plan Administrator may provide for determining the Participant’s 409A Pension at Separation from Service by projecting the benefit the Participant would have if all such earnings were taken into account under the Plan (any such determination shall divide the projected earnings between Plan Years as determined by the Plan Administrator, in order to avoid any bunching of the earnings in a Plan Year).
Key Employee:
The individuals identified in accordance with the following paragraphs.
(1) In General. Any Participant who at any time during the applicable year is:
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(i) An officer of any member of the PepsiCo Organization having annual compensation greater than $215,000 (as adjusted for the applicable year under Code Section 416(i)(1));
(ii) A 5-percent owner of any member of the PepsiCo Organization; or
(iii) A 1-percent owner of any member of the PepsiCo Organization having annual compensation of more than $150,000.
For purposes of subparagraph (i) 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) (provided, that Code Section 416(i)(5) shall not apply in making such determination), and provided further than 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.
(2) Applicable Year. Effective from and after December 31, 2007, the Plan Administrator shall identify Key Employees 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
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Employee identification by the Plan Administrator as of December 31, 2008 shall be effective for the period from April 1, 2009 to March 31, 2010).
(3) Rule of Administrative Convenience. Effective beginning with the December 31, 2017 identification date, in addition to the foregoing, the Plan Administrator shall treat all other employees classified as Leadership Group 6 and above on the applicable identification date prescribed in paragraph (2) as Key Employees effective for the twelve-month period commencing on April 1st of the next following calendar year (however, from the April 1, 2008 effective date through February 25, 2010, Band IV and above applied in lieu of Leadership Group 6 and above); 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 paragraph (3) in order by their base compensation, from the lowest to the highest.
(4) Identification of Key Employees Between February 26, 2010 and March 31, 2010. For the period between February 26, 2010 and March 31, 2010, Key Employees shall be identified by combining the lists of Key Employees of all members of the PepsiCo Organization as in effect immediately prior to February 26, 2010. The foregoing method of identifying Key Employees is intended to comply with Treas. Reg. § 1.409A-1(i)(6)(i), which authorizes the use of an alternative method of identifying specified employees that complies with Treas. Reg. §§ 1.409A-1(i)(5) and -1(i)(8) and Section VII.C.4.d of the
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Preamble to the Final Regulations under Section 409A of the Code, which permits “service recipients to simply combine the pre-transaction separate lists of specified employees where it is determined that such treatment would be administratively less burdensome.”
(5) Identification of Key Employees from April 1, 2010 to March 31, 2018. Notwithstanding the foregoing, for the 12-month periods beginning on the April 1, 2010 effective date through March 31, 2018, Key Employees shall be identified as follows:
(i) For the period that begins on April 1, 2010, and ends on March 31, 2011, an employee shall be a Key Employee (subject to subparagraph (iii) below) if he was classified as at least a Band IV or its equivalent on December 31, 2009. For this purpose, an employee shall be considered to be at least a Band IV or its equivalent as of a date if the employee is classified as one of the following types of employees in the PepsiCo Organization on that date: (i) a Band IV employee or above in a PepsiCo Business, (ii) a Level E7 employee or above in a PBG Business, or (iii) a Salary Grade 19 employee or above at a PAS Business.
(ii) For the twelve-month period that begins on April 1, 2011, and for each twelve-month period that begins on April 1 in subsequent years through March 31, 2017, an employee shall be a Key Employee (subject to subparagraph (iii) below) if the employee was an employee of the PepsiCo Organization who was classified as Band IV or above on the December 31 that immediately precedes such April 1.
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(iii) For the period covered by this paragraph (5) notwithstanding the rule of administrative convenience in paragraph (3) above, an employee shall be a Key Employee for the 12-month period that begins on any April 1, if as of the preceding December 31 the employee would be a specified employee, within the meaning of Treasury Regulation 1.409A-1(i), or any successor, by applying as of such December 31 the default rules that apply under such regulation for determining the minimum number of a service recipient’s specified employees. If the preceding sentence and the methods for identifying Key Employees set forth in subparagraph (i) or (ii) above, taken together, would result in more than 200 individuals being counted as Key Employees as of any December 31 determination date, then the number of individuals treated as Key Employees pursuant to subparagraph (i) or (ii), who are not described in the first sentence of this subparagraph (iii), shall be reduced to 200 by eliminating from consideration those employees otherwise added by such subparagraph in order of their base compensation, from the lowest base compensation to the highest.
(iv) For purposes of this paragraph (5), “PAS Business” means each employer, division of an employer or other organizational subdivision of an employer that the Company classifies as part of the PAS business; “PBG Business” means each employer, division of an employer or other organizational subdivision of an employer that the Company classifies as part of the PBG business; and “PepsiCo Business” means each
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employer, division of an employer or other organizational subdivision of an employer that the Company classifies as part of the PepsiCo business.
The method for identifying Key Employees set forth in this definition is intended as an alternative method of identifying Key Employees under Treas. Reg. § 1.409A-1(i)(5), and is adopted herein and shall be interpreted and applied consistently with the rules applicable to such alternative arrangements.
Late 409A Retirement Pension: The 409A Retirement Pension available to a Participant under Section 4.4.
Late Retirement Date: The Late Retirement Date shall be the first day of the month coincident with or immediately following a Participant’s actual Retirement Date occurring after his Normal Retirement Age.
Normal 409A Retirement Pension: The Retirement Pension available to a Participant under Section 4.1.
Normal Retirement Age: The Normal Retirement Age under the Plan is age 65 or, if later, the age at which a Participant first has 5 Years of Elapsed Time Service.
Normal Retirement Date: A Participant’s Normal Retirement Date shall be the first day of the month coincident with or immediately following a Participant’s Normal Retirement Age.
Participant: An Employee participating in the Plan in accordance with the provisions of Section 3.1.
Pension: One or more payments that are payable by the Plan to a person who is entitled to receive benefits under the Plan. The term “409A Pension” shall be
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used to refer to the portion of a Pension that is derived from the 409A Program. The term “Pre-409A Pension” shall be used to refer to the portion of a Pension that is derived from the Pre-409A Program.
PepsiCo Administration Committee or PAC: The committee that has the responsibility for the administration and operation of the Plan, as set forth in the Plan, as well as any other duties set forth therein. As of any time, the Chair of the PAC shall be the person who is then the Company’s Senior Vice President, Total Rewards, but if such position is vacant or eliminated, the Chair shall be the person who is acting to fulfill the majority of the duties of the position (or plurality of the duties, if no one is fulfilling a majority), as such duties existed immediately prior to the vacancy or the position elimination. The Chair shall appoint the other members of the PAC, applying the principles set forth in the Guiding Principles Regarding Benefit Plan Committee Appointments and acting promptly from time to time to ensure that there are four other members of the PAC, each of whom shall have experience and expertise relevant to the responsibilities of the PAC. At least two times each year, the PAC shall prepare a written report of its significant activities that shall be available to any U.S.-based executive of the Company who is at least a senior vice president.
PepsiCo Organization: The controlled group of organizations of which the Company is a part, as defined by Code section 414 and 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.
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Plan: The PepsiCo Pension Equalization Plan, the Plan set forth herein and in the Pre-409A Program document(s), as the Plan may be amended from time to time (subject to the limitations on amendment that are applicable hereunder and under the Pre-409A Program). The Plan is also sometimes referred to as PEP, or as the PepsiCo Pension Benefit Equalization Plan.
Plan Administrator: The PAC, or its delegate or delegates. The Plan Administrator shall have authority to administer the Plan as provided in Article VII.
Plan Year: The 12-month period commencing on January 1 and ending on December 31.
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 document (or separate set of documents).
Pre-Retirement Domestic Partner’s Pension: The Pension available to an Eligible Domestic Partner under the Plan. The term “Pre-Retirement Domestic Partner’s 409A Pension” shall be used to refer to the Pension available to an Eligible Domestic Partner under Section 4.12 of this document.
Pre-Retirement Spouse’s Pension: The Pension available to an Eligible Spouse under the Plan. The term “Pre-Retirement Spouse’s 409A Pension” shall be used to refer to the Pension available to an Eligible Spouse under Section 4.6 of this document.
Primary Social Security Amount: In determining Pension amounts, Primary Social Security Amount shall mean:
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(1) For purposes of determining the amount of a Retirement, Vested, Pre-Retirement Spouse’s Pension or Pre-Retirement Domestic Partner’s Pension, the Primary Social Security Amount shall be the estimated monthly amount that may be payable to a Participant commencing at age 65 as an old-age insurance benefit under the provisions of Title II of the Social Security Act, as amended. Such estimates of the old-age insurance benefit to which a Participant would be entitled at age 65 shall be based upon the following assumptions:
(i) That the Participant’s social security wages in any year prior to Retirement or Separation from Service are equal to the Taxable Wage Base in such year, and
(ii) That he will not receive any social security wages after Retirement or Separation from Service.
However, in computing a Vested Pension under Formula A of Section 5.2, the estimate of the old-age insurance benefit to which a Participant would be entitled at age 65 shall be based upon the assumption that he continued to receive social security wages until age 65 at the same rate as the Taxable Wage Base in effect at his Separation from Service. For purposes of this subsection, “social security wages” shall mean wages within the meaning of the Social Security Act.
(2) For purposes of determining the amount of a Disability Pension, the Primary Social Security Amount shall be (except as provided in the next sentence) the initial monthly amount actually received by the disabled
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Participant as a disability insurance benefit under the provisions of Title II of the Social Security Act, as amended and in effect at the time of the Participant’s Retirement due to disability. Notwithstanding the preceding sentence, for any period that a Participant receives a Disability Pension before receiving a disability insurance benefit under the provisions of Title II of the Social Security Act, then the Participant’s Primary Social Security Amount for such period shall be determined pursuant to paragraph (1) above.
(3) For purposes of paragraphs (1) and (2), the Primary Social Security Amount shall exclude amounts that may be available because of the spouse or any dependent of the Participant or any amounts payable on account of the Participant’s death. Estimates of Primary Social Security Amounts shall be made on the basis of the Social Security Act as in effect at the Participant’s Separation from Service, without regard to any increases in the social security wage base or benefit levels provided by such Act which take effect thereafter.
Prohibited Misconduct: Any of the following activities engaged in, directly or indirectly, by a Participant shall constitute Prohibited Misconduct:
(1) 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.
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(2) 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.
(3) 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.
(4) 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
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result of his or her employment with the PepsiCo Organization, or engaging in any other activity which constitutes gross misconduct.
(5) The Participant engaging in any activity that constitutes fraud.
Notwithstanding anything contained in the Plan or in any other confidentiality provision to which the Participant may be subject as a result of the Participant’s employment with the Company, nothing shall prohibit the Participant from , without notice to the Company, communicating with government agencies, providing information to government agencies, participating in government agency investigations, filing a complaint with government agencies, or testifying in government agency proceedings concerning any possible legal violations or from receiving any monetary award for information provided to a government agency. The Company nonetheless asserts and does not waive its attorney-client privilege over any information appropriately protected by the privilege. Further, notwithstanding any confidentiality provision to which the Participant may be subject, pursuant to the Defend Trade Secrets Act, an individual shall not be held criminally or civilly liable under any federal or state trade secret law for the disclosure of a trade secret that (A) is made (i) in confidence to a federal, state, or local government official, either directly or indirectly, or to an attorney; and (ii) solely for the purpose of reporting or investigating a suspected violation of law; or (B) is made in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal. An individual who files a lawsuit for retaliation by an employer for reporting a suspected violation of law may disclose the trade secret to the attorney of the individual and use the trade secret information in the court proceeding,
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if the individual (A) files any document containing the trade secret under seal; and (B) does not disclose the trade secret, except pursuant to court order.
For purposes of this subsection, “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. For purposes of this subsection, “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 – in-home and commercial beverage systems, carbon dioxide gas cylinders, carbon dioxide gas refills, consumables, and ready-to-drink beverages, including without limitation, carbonated soft drinks, tea, water, juices, juice drinks, juice products sports drinks, coffee drinks, alcoholic beverages, and energy drinks; dairy products; snacks, including salty snacks, fruit and vegetable snacks, dips and spreads, sweet snacks, meat snacks, granola, nutrition and cereal bars, and cookies; hot cereals and ready-to-eat cereals; pancake mixes and pancake syrup; grain-based food products; pasta products; sports performance nutrition products, including without limitation, energy, protein, carbohydrate, nutrition and meal replacement chews, bars, powders, gels, drinks or drink mixes; 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.
Qualified Joint and Survivor Annuity: An Annuity which is payable to the Participant for life with 50 percent of the amount of such Annuity payable after the
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Participant’s death to his surviving Eligible Spouse or Eligible Domestic Partner for life. If the Eligible Spouse or Eligible Domestic Partner (as applicable) predeceases the Participant, no survivor benefit under a Qualified Joint and Survivor Annuity shall be payable to any person. The amount of a Participant’s monthly payment under a Qualified Joint and Survivor Annuity shall be reduced to the extent provided in Sections 5.1 and 5.2, as applicable.
Retirement: Separation from Service for reasons other than death after a Participant has fulfilled the requirements for either a Normal, Early, Late, or Disability Retirement Pension under Article IV.
Retirement Date: The date immediately following the Participant’s Retirement.
Retirement Pension: The Pension payable to a Participant upon Retirement under the Plan. The term “409A Retirement Pension” shall be used to refer to the portion of a Retirement Pension that is derived from the 409A Program. The term “Pre-409A Retirement Pension” shall be used to refer to the portion of a Retirement Pension that is derived from the Pre-409A Program.
Salaried Plan: The program of pension benefits set forth in Part B of the PSERP Component of the PepsiCo Employees Retirement Plan A (“PERP-A”), the PepsiCo Employees Retirement Plan I (“PERP-I”), and the PepsiCo Employees Retirement Plan H (“PERP-H”) and successor plans to the foregoing, as such program of benefits may be amended from time to time, and as it was set forth prior to January 1, 2017 in predecessor plans to PERP-A and PERP-I.
Section 409A: Section 409A of the Code.
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Separation from Service: A Participant’s separation from service with the PepsiCo Organization, within the meaning of Section 409A(a)(2)(A)(i). The term may also be used as a verb (i.e., “Separates from Service”) with no change in meaning. Notwithstanding the preceding sentence, a Participant’s transfer to an entity owned 20% or more by the Company will not constitute a Separation of Service to the extent permitted by Section 409A. A Participant’s “Final Separation from Service” is the date of his Separation from Service that most recently precedes his Annuity Starting Date; provided, however, that to the extent a Participant is reemployed after an Annuity Starting Date, he will have a new Final Separation from Service with respect to any benefits to which he becomes entitled as a result of his reemployment. The following principles shall generally apply in determining when a Separation from Service occurs:
(1) A Participant separates from service with the Company if the Employee dies, retires, or otherwise has a termination of employment with the Company. Whether a termination of employment has occurred is determined based on whether the facts and circumstance indicate that the Company and the Employee reasonably anticipated that no further services would be performed after a certain date or that the level of bona fide services the Employee would perform after such date (as an employee or independent contractor) would permanently decrease to no more than 20 percent of the average level of bona fide services performed over the immediately preceding 36-month period (or the full period in which the Employee provided services to the Company if the Employee has been providing services for less than 36 months).
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(2) An Employee will not be deemed to have experienced a Separation from Service if such Employee is on military leave, sick leave, or other bona fide leave of absence, to the extent such leave does not exceed a period of six months or, if longer, such longer period of time during which a right to re-employment is protected by either statute or contract. If the period of leave exceeds six months and the individual does not retain a right to re-employment under an applicable statute or by contract, the employment relationship is deemed to terminate on the first date immediately following such six-month period. Notwithstanding the foregoing, where a leave of absence is due to any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than six months, where such impairment causes the Employee to be unable to perform the duties of his or her position of employment or any substantially similar position of employment, a 29-month period of absence may be substituted for such six-month period.
(3) If an Employee provides services both an as employee and as a member of the Board of Directors of the Company, the services provided as a Director are generally not taken into account in determining whether the Employee has Separated from Service as an Employee for purposes of the Plan, in accordance with final regulations under Section 409A.
Service: The period of a Participant’s employment calculated in accordance with Section 3.2 for purposes of determining his entitlement to benefits under the Plan.
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PepsiCo Pension Equalization Plan –409A Program
Single Life Annuity: A level monthly Annuity payable to a Participant for his life only, with no survivor benefits to his Eligible Spouse or any other person.
Single Lump Sum: The distribution of a Participant’s total 409A Pension in the form of a single payment, which payment shall be the Actuarial Equivalent of the Participant’s 409A Pension as of the Participant’s Normal Retirement Date (or Late Retirement Date, if applicable), but not less than the Actuarial Equivalent of the Participant’s 409A Pension as of the Participant’s Early Retirement Date, in the case of a Participant who is entitled to an immediate Early 409A Retirement Pension.
Social Security Act: The Social Security Act of the United States, as amended, an enactment providing governmental benefits in connection with events such as old age, death and disability. Any reference herein to the Social Security Act (or any of the benefits provided thereunder) shall be taken as a reference to any comparable governmental program of another country, as determined by the Plan Administrator, but only to the extent the Plan Administrator judges the computation of those benefits to be administratively feasible.
Taxable Wage Base: The contribution and benefit base (as determined under section 230 of the Social Security Act) in effect for the Plan Year.
Vested Pension: The Pension available to a Participant under Section 4.3. The term “409A Vested Pension” shall be used to refer to the portion of a Vested Pension that is derived from the 409A Program. The term “Pre-409A Vested Pension” shall be used to refer to the portion of a Vested Pension that is derived from the Pre-409A Program.
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PepsiCo Pension Equalization Plan –409A Program
2.2 Construction: The terms of the Plan shall be construed in accordance with this section.
(a) Gender and Number: Unless the context clearly indicates to the contrary, (i) a reference to one or more genders shall include a reference to all the other genders, and (ii) the singular may include the plural, and the plural may include the singular.
(b) Compounds of the Word “Here”: The words “hereof”, “hereunder” and other similar compounds of the word “here” shall mean and refer to the entire Plan, not to any particular provision or section.
(c) Examples: 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 passages 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 limits on its breadth of application).
(d) Subdivisions of the Plan Document: This Plan document is divided and subdivided using the following progression: articles, sections, subsections, paragraphs, subparagraphs, clauses, and sub-clauses. Articles are designated by capital roman numerals. Sections are designated by Arabic numerals containing a decimal point. Subsections are designated by lower-case letters in parentheses. Paragraphs are designated by Arabic numerals in parentheses. Subparagraphs are designated by lower-case roman numerals in parentheses. Clauses are designated by upper-case letters in parentheses. Sub-clauses are designated by upper-case roman numerals in parentheses. Any reference in a section to a subsection (with no accompanying section
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PepsiCo Pension Equalization Plan –409A Program
reference) shall be read as a reference to the subsection with the specified designation contained in that same section. A similar rule shall apply with respect to paragraph references within a subsection and subparagraph references within a paragraph.
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PepsiCo Pension Equalization Plan –409A Program
ARTICLE III
Participation and Service
Participation and Service
3.1 Participation: An Employee shall be a Participant in the Plan during the period:
(a) When he would be currently entitled to receive a Pension under the Plan if his employment terminated at such time, or
(b) When he would be so entitled but for the vesting requirement of Section 4.7.
It is expressly contemplated that an Employee, who is entitled to receive a Pension under the Plan as of a particular time, may subsequently cease to be entitled to receive a Pension under the Plan. An individual’s entitlement to receive a Pension under the Plan is subject to all exclusions from eligibility that apply under the Salaried Plan and, therefore, all such exclusions shall be given effect in determining eligibility under the Plan.
3.2 Service: A Participant’s entitlement to a Pension or, in the event the Participant dies before commencing a benefit hereunder, either a Pre-Retirement Spouse’s Pension for his Eligible Spouse or a Pre-Retirement Domestic Partner’s Pension for his Eligible Domestic Partner, shall be determined under Article IV based upon his period of Service. A Participant’s period of Service shall be determined under Article III of Part B of the Salaried Plan, except as provided in (a) below.
(a) Inpats. Any Salaried Plan provision which results in disregarding for certain purposes the pre-transfer Service of certain inpats who transfer to the United States, shall not
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PepsiCo Pension Equalization Plan –409A Program
apply to this Plan before January 1, 2015, unless such earlier application avoids duplication of benefits.
(b) Leaves of Absence. If a Participant’s period of Service (as so determined) would extend beyond the Participant’s Separation from Service date because of an authorized leave of absence related to a Company severance program or agreement, the Plan Administrator may provide for determining the Participant’s 409A Pension at Separation from Service by projecting the benefit the Participant would have if all such Service were taken into account under the Plan.
3.3 Credited Service: Subject to the next two sentences, the amount of a Participant’s Pension, Pre-Retirement Spouse’s Pension or Pre-Retirement Domestic Partner’s Pension shall be based upon the Participant’s period of Credited Service, as determined under Article III of Part B of the Salaried Plan.
(a) Inpats. Any provision in Section 3.5 of Part B of the Salaried Plan which resulted in disregarding the pre-transfer Credited Service of certain inpats who transferred to the United States shall not apply under this Plan in the case of such inpats who transfer to the United States before October 1, 2014, unless such earlier application avoids duplication of benefits under the Salaried Plan.
(b) Leaves of Absence. If a Participant’s period of Credited Service (as so determined) would extend beyond the Participant’s Separation from Service date because of an authorized leave of absence related to a Company severance program or agreement, the Plan Administrator may provide for determining the Participant’s 409A Pension at Separation from Service by projecting the benefit the Participant would have if all such Service were taken into account under the Plan.
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PepsiCo Pension Equalization Plan –409A Program
ARTICLE IV
Requirements for Benefits
Requirements for Benefits
A Participant shall be eligible to receive a Pension and a surviving Eligible Spouse or surviving Eligible Domestic Partner, as applicable, shall be eligible for certain survivor benefits as provided in this Article. The amount of any such Pension or survivor benefit shall be determined in accordance with Article V.
4.1 Normal 409A Retirement Pension: A Participant shall be eligible for a Normal 409A Retirement Pension if he Separates from Service after attaining Normal Retirement Age.
4.2 Early 409A Retirement Pension: A Participant shall be eligible for an Early 409A Retirement Pension if he Separates from Service prior to attaining Normal Retirement Age but after attaining at least age 55 and completing 10 or more years of Elapsed Time Service.
4.3 409A Vested Pension: A Participant who is vested under Section 4.7 shall be eligible to receive a 409A Vested Pension if he Separates from Service before he is eligible for a Normal 409A Retirement Pension or an Early 409A Retirement Pension. A Participant who terminates employment prior to satisfying the vesting requirement in Section 4.7 shall not be eligible to receive a Pension under this Plan.
4.4 Late 409A Retirement Pension: A Participant who continues without a Separation from Service after his Normal Retirement Age shall not receive a Pension until his Late Retirement Date. Thereafter, a Participant shall be eligible for a Late Retirement Pension determined in accordance with Section 4.4 of Part B of the Salaried Plan (but without regard to
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any requirement for notice of suspension under ERISA section 203(a)(3)(B) or any adjustment as under Section 5.7(d) of Part B of the Salaried Plan).
4.5 409A Disability Pension: A Participant shall be eligible for a 409A Disability Pension if he meets the requirements for a Disability Pension under Part B of the Salaried Plan. A Participant’s 409A Disability Pension, if any, shall generally be comprised of two parts. The first part shall represent the benefits with respect to a disabled Participant’s Credited Service through the day of the Participant’s Separation from Service (i.e., the Participant’s “Pre-Separation Accruals”). In the event the disabled Participant continues to receive Credited Service related to the disability after such Separation from Service, the Participant’s 409A Disability Pension shall have a second part, which shall represent all benefits accrued with respect to Credited Service from the date immediately following the Participant’s Separation from Service until the earliest of the Participant’s (i) attainment of age 65, (ii) benefit commencement date under Part B of the Salaried Plan or (iii) recovery from the disability (i.e., the Participant’s “Post-LTD Accruals”).
4.6 Pre-Retirement Spouse’s 409A Pension: A Pre-Retirement Spouse’s 409A Pension is payable under this section only in the event the Participant dies prior to his Annuity Starting Date. Any Pre-Retirement Spouse’s 409A Pension payable on behalf of a Participant shall commence as of the first day of the month following the later of (i) the Participant’s death and, (ii) the date the Participant attains or would have attained age 55. Subject to Section 4.9, any Pre-Retirement Spouse’s 409A Pension shall continue monthly for the life of the Eligible Spouse.
(a) Active, Disabled and Retired Employees: A Pre-Retirement Spouse’s 409A Pension shall be payable under this subsection to a Participant’s Eligible
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PepsiCo Pension Equalization Plan –409A Program
Spouse (if any) who is entitled under Part B of the Salaried Plan to the pre-retirement spouse’s pension for survivors of active, disabled and retired employees. The amount (if any) of such Pension shall be determined in accordance with the provisions of Section 5.3 (with the 409A Pension, if any, determined after application of Section 5.6).
(b) Vested Employees: A Pre-Retirement Spouse’s 409A Pension shall be payable under this subsection to a Participant’s Eligible Spouse (if any) who is entitled under Part B the Salaried Plan to the pre-retirement spouse’s pension for survivors of vested terminated Employees. The amount (if any) of such Pension shall be determined in accordance with the provisions of Section 5.3 (with the 409A Pension, if any, determined after application of Section 5.6). If pursuant to this Section 4.6(b) a Participant has Pre-Retirement Spouse’s coverage in effect for his Eligible Spouse, any Pension calculated for the Participant under Section 5.2(b) shall be reduced for each year such coverage is in effect by the applicable percentage set forth below (based on the Participant’s age at the time the coverage is in effect) with a pro rata reduction for any portion of a year. No reduction shall be made for coverage in effect within the 90-day period following a Participant’s termination of employment.
| Attained Age | Annual Charge | ||||
| Up to 35 | .0% | ||||
| 35 – 39 | .075% | ||||
| 40 – 44 | .1% | ||||
| 45 – 49 | .175% | ||||
| 50 – 54 | .3% | ||||
| 55 – 59 | .5% | ||||
| 60 – 64 | .5% | ||||
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PepsiCo Pension Equalization Plan –409A Program
4.7 Vesting: Subject to Sections 4.11 and 8.7 (Section 457A), a Participant shall be fully vested in, and have a nonforfeitable right to, his Accrued Benefit at the time he becomes fully vested in his accrued benefit under Part B of the Salaried Plan.
The accrual of an Accrued Benefit pursuant to this Plan shall not in any way exempt the Accrued Benefit from the full application of the Company’s clawback and other forfeiture and recovery policies (“Clawback Policies”), as they are in effect from time to time. Accordingly, a Participant’s Accrued Benefit shall be subject to forfeiture (and if paid out, to recovery) to the extent determined to be appropriate by the Plan Administrator to give full effect to these Clawback Policies. Section 4.11 shall not be construed to reduce or impair the forfeiture and recovery rights provided by this Section 4.7.
4.8 Time of Payment: The distribution of a Participant’s 409A Pension shall commence as of the time specified in Section 6.1, subject to Section 6.6. Any increase in a Participant’s 409A Pension or Pre-409A Pension for interest due to a delay in payment, by application of Section 3.1(e) of Part A of the Salaried Plan (delay in payment) when calculating either portion of the Participant’s Pension, shall accrue entirely under the 409A Program and be paid (subject to the last sentence of this Section) at the same time and in the same form that the Participant’s 409A Pension is paid. Accordingly, if a Participant is entitled to an interest adjustment for a delay in payment of his Pre-409A Pension, such interest adjustment shall be limited to that which may be paid as part of the Participant’s 409A Pension, consistent with 409A’ s payment rules and the limitation in the next sentence. Notwithstanding any provision of the Salaried Plan to the contrary, including such Section 3.1(e) of Part A, a Participant shall not receive interest for any delay in payment of his 409A Pension or Pre-409A Pension to the extent the delay is caused by the Participant or interest is prohibited by the terms of an Internal Revenue Service correction program regarding compliance with Code section 409A.
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PepsiCo Pension Equalization Plan –409A Program
4.9 Cashout Distributions: Notwithstanding the availability or applicability of a different form of payment under Article VI, the following rules shall apply in the case of certain small benefit Annuity payments:
(a) Distribution of Participant’s 409A Pension: If at a Participant’s Annuity Starting Date the Actuarial Equivalent lump sum value of the Participant’s 409A Pension is equal to or less than the Cashout Limit, the Plan Administrator shall distribute to the Participant such lump sum value of the Participant’s 409A Pension. Notwithstanding the preceding sentence, for Annuity Starting Dates prior to December 1, 2012, a Participant shall be cashed out under this subsection if, at the Participant’s Annuity Starting Date, the Actuarial Equivalent lump sum value of the Participant’s PEP Pension is equal to or less than $15,000.
(b) Distribution of Pre-Retirement Spouse’s 409A Pension: If at the time payments are to commence to an Eligible Spouse under Section 4.6, the Actuarial Equivalent lump sum value of the PEP Pre-Retirement Spouse’s 409A Pension to be paid is equal to or less than the Cashout Limit, the Plan Administrator shall distribute to the Eligible Spouse such lump sum value of the PEP Pre-Retirement Spouse’s Pension that is subject to Section 409A. Notwithstanding the preceding sentence, for Annuity Starting Dates prior to December 1, 2012, an Eligible Spouse shall be cashed out under this subsection if the Actuarial Equivalent lump sum value of the Eligible Spouse’s PEP Pre-Retirement Spouse’s Pension is equal to or less than $15,000.
(c) Special Cashout of 409A Vested Pensions: Notwithstanding subsection (a) above, the Plan Administrator shall have discretion under this subsection
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PepsiCo Pension Equalization Plan –409A Program
to cash out a 409A Vested Pension in a single lump sum prior to the date that would apply under subsection (a).
(1) The Plan Administrator shall have discretion under this subsection to cash out in a single lump sum any 409A Vested Pension that, as of December 1, 2012 – (i) has not otherwise had its Annuity Starting Date occur, (ii) has an Actuarial Equivalent lump sum value that is equal to or less than the Cashout Limit as of such date, and (iii) is practicable to calculate and distribute (as determined pursuant to the exercise of the Plan Administrator’s discretion), with such cashout being made on December 1, 2012.
(2) The Plan Administrator shall also have discretion under this subsection to cash out in a single lump sum any 409A Vested Pension that, as of the first day of any month in 2013 or a later year specified by the Plan Administrator pursuant to the exercise of its discretion – (i) has not otherwise had its Annuity Starting Date occur, (ii) has an Actuarial Equivalent lump sum value that is equal to or less than the Cashout Limit as of such date, and (iii) is practicable to calculate and distribute (as determined pursuant to the exercise of the Plan Administrator’s discretion), with such cashout being made on the first day of the month specified.
Not later than November 30, the Plan Administrator shall memorialize in writing the exercise of its discretion under this subsection to select Vested Pensions for cashout on December 1, 2012, through the creation of a written list (in either hard copy or electronic form) of Participants with 409A Vested Pensions who will be cashed out. In addition, not later than the day before the date specified pursuant to paragraph (2)
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PepsiCo Pension Equalization Plan –409A Program
above, the Plan Administrator shall memorialize in writing the exercise of its discretion under this subsection to select Vested Pensions for cashout on the specified date, through the creation of a written list (in either hard copy or electronic form) of Participants with 409A Vested Pensions who will be cashed out.
(d) Distribution of Pre-Retirement Domestic Partner’s 409A Pension. If at the time payments are to commence to an Eligible Domestic Partner under Section 4.12, the Actuarial Equivalent lump sum value of the Pre-Retirement Domestic Partner’s 409A Pension to be paid is equal to or less than the Cashout Limit, the Plan Administrator shall distribute to the Eligible Domestic Partner such Actuarial Equivalent lump sum value of the Pre-Retirement Domestic Partner’s Pension that is subject to Section 409A.
(e) Exceptions to the Availability of Cashout. Effective January 1, 2018, a cashout shall not be available with respect to a Participant who is eligible for either a “PEP Kicker” or a “Qualified Kicker” under a “Severance Program”. For purposes of this Section 4.9, the quoted terms in the prior sentence shall have the meanings that they are assigned in Appendix Article E.
Any lump sum distributed under this section shall be in lieu of the Pension that otherwise would be distributable to the Participant, Eligible Spouse or Eligible Domestic Partner hereunder. The cashout provisions described in subsections (a) through (d) above are intended to be “limited cashout” features within the meaning of Treasury Regulation § 1.409A-3(j)(4)(v), and they shall be interpreted and applied consistently with this regulation. Accordingly, in determining if an applicable dollar limit is satisfied, a Participant’s entire benefit under this Plan that is subject to Section 409A and all benefits subject to Section 409A under all other
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PepsiCo Pension Equalization Plan –409A Program
nonaccount balance plans (within the meaning of Treasury Regulation § 1.409A-1(c)(2)(i)(C)) shall be taken into account (the “accountable benefit”), and a Participant’s entire accountable benefit must be cashed out as of the time in question as a condition to any payout under this Section. In addition, a cashout under this Section shall not cause an accountable benefit to be paid out before completing any applicable six-month delay (see, e.g., Section 6.6). No Participant, Eligible Spouse or Eligible Domestic Partner shall be given a direct or indirect election with respect to whether the Participant’s Vested Pension, Pre-Retirement Spouse’s 409A Pension or Pre-Retirement Eligible Domestic Partner’s 409A Pension will be cashed out under this section.
4.10 Reemployment of Certain Participants: In the case of a current or former Participant who is receiving his Pension as an Annuity under Section 6.1(b), and who is reemployed and is eligible to re-participate in Part B of the Salaried Plan after his Annuity Starting Date, payment of his 409A Pension will continue to be paid in the same form as it was paid prior to his reemployment. Any additional 409A Pension that is earned by the Participant shall be paid based on the Separation from Service that follows the Participant’s re-employment.
4.11 Forfeiture of Benefits: Effective beginning with benefits accrued after December 31, 2008 (“Post-2008 Accruals”), 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 Post-2008 Accruals (whether paid previously, being paid currently or payable in the future), and his or her 409A Pension shall be adjusted to reflect such forfeiture and previously paid Post-2008 Accruals shall be recovered. Section 4.7 shall not be
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PepsiCo Pension Equalization Plan –409A Program
construed to reduce or impair the forfeiture rights provided by this Section 4.11, but the Plan Administrator shall have the authority to reduce the forfeitures that would apply under this Section to the extent necessary to avoid an inappropriate duplication (determined in the Plan Administrator’s sole discretion) of the forfeitures applicable under Section 4.7.
4.12 Pre-Retirement Domestic Partner’s 409A Pension: A Pre-Retirement Domestic Partner’s 409A Pension is payable under this section only in the event the Participant dies prior to his Annuity Starting Date under either the 409A Program or the Pre-409A Program. Any Pre-Retirement Domestic Partner’s 409A Pension payable on behalf of a Participant shall commence on the first day of the month following the later of (i) the Participant’s death and, (ii) the date the Participant attains or would have attained age 55. Subject to Section 4.9, any Pre-Retirement Domestic Partner’s 409A Pension shall continue monthly for the life of the Eligible Domestic Partner.
(a) Active, Disabled and Retired Employees: A Pre-Retirement Domestic Partner’s 409A Pension shall be payable under this subsection to a Participant’s Eligible Domestic Partner (if any) who is entitled under Part B of the Salaried Plan to the pre-retirement domestic partner’s pension for survivors of active, disabled and retired employees. The amount (if any) of such Pension shall be determined in accordance with the provisions of Section 5.8 (with the 409A Pension, if any, determined after application of Section 5.6).
(b) Vested Employees: A Pre-Retirement Domestic Partner’s 409A Pension shall be payable under this subsection to a Participant’s Eligible Domestic Partner (if any) who is entitled under Part B of the Salaried Plan to the pre-retirement domestic partner’s pension for survivors of vested terminated Employees. The amount
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PepsiCo Pension Equalization Plan –409A Program
(if any) of such Pension shall be determined in accordance with the provisions of Section 5.8 (with the 409A Pension, if any, determined after application of Section 5.6). If, pursuant to this Section 4.12(b), a Participant has Pre-Retirement Domestic Partner’s Pension coverage in effect for his Eligible Domestic Partner, any Pension calculated for the Participant under Section 5.2(b) shall be reduced for each year such coverage is in effect by the applicable percentage set forth below (based on the Participant’s age at the time the coverage is in effect) with a pro rata reduction for any portion of a year. No reduction shall be made for coverage in effect within the 180-day period following a Participant’s termination of employment.
| Attained Age | Annual Charge | ||||
| Up to 35 | .0% | ||||
35-39 | .075% | ||||
40-44 | .1% | ||||
45-49 | .175% | ||||
50-54 | .3% | ||||
55-59 | .5% | ||||
60-64 | .5% | ||||
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PepsiCo Pension Equalization Plan –409A Program
ARTICLE V
Amount of Retirement Pension
Amount of Retirement Pension
When a 409A Pension becomes payable to or on behalf of a Participant under this Plan, the amount of such 409A Pension shall be determined under Section 5.1 or 5.3 (whichever is applicable), subject to any adjustments required under Sections 4.6(b) and 5.4 and subject to the freeze of the Plan described in Article I.
5.1 Participant’s 409A Pension: Subject to Section 8.7 (Section 457A), a Participant’s 409A Pension shall be determined as follows –
(a) Calculating the 409A Pension: A Participant’s 409A Pension shall be calculated as follows (on the basis specified in subsection (b) below and using the definitions appearing in subsection (c) below):
(1) His Total Pension, reduced by
(2) His Salaried Plan Pension, and then further reduced by (but not below zero)
(3) His Pre-409A Pension.
(b) Basis for Determining: The 409A Pension amount in subsection (a) above shall be determined on a basis that (i) takes into account applicable reductions for early or late commencement as of the Annuity Starting Date of the 409A Pension, (ii) reflects, if applicable and customary, the relative value of forms of payment, and (iii) otherwise adjusts the reductions in (a)(2) and (3) above to their Actuarial Equivalent, in each such respect as appropriate and customary under the circumstances and in accordance with rules authorized by the Plan Administrator, including to take account the time and form of any prior payments and to eliminate all duplication of benefits as
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PepsiCo Pension Equalization Plan –409A Program
determined by the Plan Administrator, and (iii) effective for Annuity Starting Dates after December 31, 2018, allows a Participant’s 409A Pension to provide a makeup (as appropriate under the circumstances under rules authorized by the Plan Administrator) for the application of early commencement reduction factors to the Participant’s Pre-409A Pension that apply a greater early commencement reduction to such Pre-409A Pension than would apply under the 2019 Salaried Plan Factors (including with respect to any portion of the Participant’s Pre-409A Pension that is derived from the PEP Guarantee).
(c) Definitions: The following definitions apply for purposes of this section.
(1) A Participant’s “Total Pension” means the greater of:
(i) The amount of the Participant’s pension determined under the terms of Part B of the Salaried Plan, but without regard to: (A) the limitations imposed by sections 401(a)(17) and 415 of the Code (as such limitations are interpreted and applied under the Salaried Plan), and (B) the actuarial adjustment under Section 5.7(d) of Part B of the Salaried Plan (relating to benefits that are deferred beyond the Participant’s Normal Retirement Date); or
(ii) The amount (if any) of the Participant’s PEP Guarantee determined under Section 5.2.
As necessary to ensure the Participant’s receipt of a “greater of” benefit, the foregoing comparison shall be made by reflecting, as applicable, the relative value of forms of payment.
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PepsiCo Pension Equalization Plan –409A Program
(2) A Participant’s “Salaried Plan Pension” means the amount of the Participant’s pension determined under the terms of Part B of the Salaried Plan.
(3) A Participant’s “Pre-409A Pension” means the amount of the Participant’s pension determined under Section 5.6.
5.2 PEP Guarantee: A Participant who is eligible under subsection (a) below shall be entitled to a PEP Guarantee benefit determined under subsection (b) below. In the case of other Participants, the PEP Guarantee shall not apply.
(a) Eligibility: A Participant shall be covered by this section if the Participant has 1988 pensionable earnings from an Employer of at least $75,000. For purposes of this section, “1988 pensionable earnings” means the Participant’s remuneration for the 1988 calendar year, within the meaning of the Salaried Plan as in effect in 1988. “1988 pensionable earnings” does not include remuneration from an entity attributable to any period when that entity was not an Employer.
(b) PEP Guarantee Formula: The amount of a Participant’s PEP Guarantee shall be determined under the applicable formula in paragraph (1), subject to the special rules in paragraph (2).
(1) Formulas: The amount of a Participant’s Pension under this paragraph shall be determined in accordance with subparagraph (i) below. However, if the Participant was actively employed by the PepsiCo Organization in a classification eligible for the Salaried Plan prior to July 1, 1975, the amount of his Pension under this paragraph shall be the greater of the amounts
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PepsiCo Pension Equalization Plan –409A Program
determined under subparagraphs (i) and (ii), provided that subparagraph (ii)(B) shall not apply in determining the amount of a Vested Pension.
(i) Formula A: The Pension amount under this subparagraph shall be:
(A) 3 percent of the Participant’s Highest Average Monthly Earnings for the first 10 years of Credited Service, plus
(B) 1 percent of the Participant’s Highest Average Monthly Earnings for each year of Credited Service in excess of 10 years, less
(C) 1-2/3 percent of the Participant’s Primary Social Security Amount multiplied by years of Credited Service not in excess of 30 years.
In determining the amount of a Vested Pension under this Formula A, the Pension shall first be calculated on the basis of (I) the Credited Service the Participant would have earned had he remained in the employ of the Employer until his Normal Retirement Age, and (II) his Highest Average Monthly Earnings and Primary Social Security Amount at his Separation from Service, and then shall be reduced by multiplying the resulting amount by a fraction, the numerator of which is the Participant’s actual years of Credited Service on his Separation from Service and the denominator of which is the years of Credited Service he would have
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PepsiCo Pension Equalization Plan –409A Program
earned had he remained in the employ of an Employer until his Normal Retirement Age.
(ii) Formula B: The Pension amount under this subparagraph shall be the greater of (A) or (B) below:
(A) 1-1/2 percent of Highest Average Monthly Earnings times the number of years of Credited Service, less 50 percent of the Participant’s Primary Social Security Amount, or
(B) 3 percent of Highest Average Monthly Earnings times the number of years of Credited Service up to 15 years, less 50 percent of the Participant’s Primary Social Security Amount.
In determining the amount of a Disability Pension under Formula A or B above, the Pension shall be calculated on the basis of the Participant’s Credited Service (determined in accordance with Section 3.3(c)(3) of Part B of the Salaried Plan), and his Highest Average Monthly Earnings and Primary Social Security Amount at the date of disability.
(2) Calculation: The amount of the PEP Guarantee shall be determined pursuant to paragraph (1) above, subject to the following special rules:
(i) Surviving Eligible Spouse’s or Eligible Domestic Partner’s Annuity: Subject to subparagraph (iii) below and the last sentence of this subparagraph, if the Participant has an Eligible Spouse or Eligible Domestic Partner, the Participant’s Eligible Spouse or Eligible
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PepsiCo Pension Equalization Plan –409A Program
Domestic Partner shall be entitled to receive a survivor annuity equal to 50 percent of the Participant’s Annuity under this section, with no corresponding reduction in such Annuity for the Participant. Annuity payments to a surviving Eligible Spouse or Eligible Domestic Partner shall begin on the first day of the month coincident with or following the Participant’s death and shall end with the last monthly payment due prior to the Eligible Spouse’s or Eligible Domestic Partner’s death. If the Eligible Spouse or Eligible Domestic Partner is more than 10 years younger than the Participant, the survivor benefit payable under this subparagraph shall be adjusted as provided below.
(A) For each full year more than 10 but less than 21 that the surviving Eligible Spouse or Eligible Domestic Partner is younger than the Participant, the survivor benefit payable to such Eligible Spouse or Eligible Domestic Partner shall be reduced by 0.8 percent.
(B) For each full year more than 20 that the surviving Eligible Spouse or Eligible Domestic Partner is younger than the Participant, the survivor benefit payable to such Eligible Spouse or Eligible Domestic Partner shall be reduced by an additional 0.4 percent.
(ii) Reductions: The following reductions shall apply in determining a Participant’s PEP Guarantee.
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(A) If the Participant will receive an Early Retirement Pension, the payment amount shall be reduced by 3/12ths of 1 percent for each month by which the benefit commencement date precedes the date the Participant would attain his Normal Retirement Date.
(B) If the Participant is entitled to a Vested Pension, the payment amount shall be reduced to the actuarial equivalent of the amount payable at his Normal Retirement Date (if payment commences before such date), and the Section 4.6(b) reductions for any Pre Retirement Spouse’s coverage and Section 4.12(b) reductions for any Pre-Retirement Domestic Partner’s coverage shall apply.
(C) This clause applies if the Participant will receive his Pension in a form that provides an Eligible Spouse or Eligible Domestic Partner benefit, continuing for the life of the surviving Eligible Spouse or surviving Eligible Domestic Partner, that is greater than that provided under subparagraph (i). In this instance, the Participant’s Pension under this section shall be reduced so that the total value of the benefit payable on the Participant’s behalf is the actuarial equivalent of the Pension otherwise payable under the foregoing provisions of this section.
(D) This clause applies if the Participant will receive his Pension in a form that provides a survivor annuity for a
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beneficiary who is not his Eligible Spouse or Eligible Domestic Partner. In this instance, the Participant’s Pension under this section shall be reduced so that the total value of the benefit payable on the Participant’s behalf is the actuarial equivalent of a Single Life Annuity for the Participant’s life.
(E) This clause applies if the Participant will receive his Pension in an Annuity form that includes inflation protection described in Section 6.2(b). In this instance, the Participant’s Pension under this section shall be reduced so that the total value of the benefit payable on the Participant’s behalf is the actuarial equivalent of the elected Annuity without such protection.
(iii) Lump Sum Conversion: The amount of the Retirement Pension determined under this section for a Participant whose Retirement Pension will be distributed in the form of a lump sum shall be the actuarial equivalent of the Participant’s PEP Guarantee determined under this section, taking into account the value of any survivor benefit under subparagraph (i) above and any early retirement reductions under subparagraph (ii)(A) above.
For purposes of this paragraph (2), actuarial equivalence shall be determined taking into account the PEP Guarantee’s purpose to preserve substantially the value of a benefit under the pre-1989 terms of the Plan and the 409A Plan’s design that offers alternative annuities that are considered actuarial equivalent
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for purposes of Section 409A (taking into account, without limitation, the special rule for subsidized joint and survivor annuities in Treasury Regulation § 1.409A-3(b)(ii)(C)).
5.3 Amount of Pre-Retirement Spouse’s 409A Pension: The monthly amount of the Pre-Retirement Spouse’s 409A Pension payable to a surviving Eligible Spouse under Section 4.6 shall be determined under subsection (a) below.
(a) Calculation: An Eligible Spouse’s Pre-Retirement Spouse’s 409A Pension shall be equal to:
(1) The Eligible Spouse’s Total Pre-Retirement Spouse’s Pension, reduced by
(2) The Eligible Spouse’s Salaried Plan Pre-Retirement Spouse’s Pension, and then further reduced by (but not below zero)
(3) The Eligible Spouse’s Pre-Retirement Spouse’s Pension derived from the Pre-409A Program.
(b) Basis for Determining: The Pre-Retirement Spouse’s 409A Pension amount in subsection (a) above shall be determined on a basis (i) that takes into account applicable reductions for early or late commencement, and (ii) otherwise adjusts the reductions in (a)(2) and (3) above to their Actuarial Equivalent as appropriate under the circumstances and pursuant to rules of the Plan Administrator, including to take account the time and form of any prior payments.
(c) Definitions: The following definitions apply for purposes of this section.
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(1) An Eligible Spouse’s “Total Pre-Retirement Spouse’s Pension” means the greater of:
(i) The amount of the Eligible Spouse’s pre-retirement spouse’s pension determined under the terms of Part B of the Salaried Plan, but without regard to: (A) the limitations imposed by sections 401(a)(17) and 415 of the Code (as such limitations are interpreted and applied under the Salaried Plan), and (B) the actuarial adjustment under Section 5.7(d) of Part B of the Salaried Plan; or
(ii) The amount (if any) of the Eligible Spouse’s PEP Guarantee Pre-Retirement Spouse’s Pension determined under subsection (c).
In making this comparison, the benefits in subparagraphs (i) and (ii) above shall be calculated as if payable as of what would be the Normal Retirement Date of the Participant related to the Eligible Spouse. The greater benefit determined under the prior sentence shall then be reduced/increased for commencement before/after, as applicable, such Normal Retirement Date.
(2) An “Eligible Spouse’s Salaried Plan Pre-Retirement Spouse’s Pension” means the amount of the Eligible Spouse’s Pre-Retirement Spouse’s Pension determined under the terms of the Salaried Plan.
(3) An “Eligible Spouse’s Pre-Retirement Spouse’s Pension derived from the Pre-409A Program” means the amount of the Eligible Spouse’s Pre-Retirement Spouse’s Pension determined under the terms of the Pre-409A Program.
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(c) PEP Guarantee Pre-Retirement Spouse’s Pension: An Eligible Spouse’s PEP Guarantee Pre-Retirement Spouse’s Pension shall be determined in accordance with paragraph (1) or (2) below, whichever is applicable, with reference to the PEP Guarantee (if any) that would have been available to the Participant under
Section 5.2.
Section 5.2.
(1) Normal Rule: The Pre-Retirement Spouse’s Pension payable under this paragraph shall be equal to the amount that would be payable as a survivor annuity, under a Qualified Joint and Survivor Annuity, if the Participant had:
(i) Separated from Service on the date of death (or, if earlier, his actual Separation from Service);
(ii) Commenced a Qualified Joint and Survivor Annuity on the same date payments of the Qualified Pre-Retirement Spouse’s Pension are to commence; and
(iii) Died on the day immediately following such commencement.
(2) Special Rule for Active and Disabled Employees: Notwithstanding paragraph (1) above, the Pre-Retirement Spouse’s Pension paid on behalf of a Participant described in Section 4.6(a) shall not be less than an amount equal to 25 percent of such Participant’s PEP Guarantee determined under Section 5.2. For this purpose, Credited Service shall be determined as provided in Section 3.3(c)(2) of Part B the Salaried Plan, and the deceased Participant’s Highest Average Monthly Earnings, Primary Social Security Amount
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and Covered Compensation shall be determined as of his date of death. A Pre-Retirement Spouse’s Pension under this paragraph is not reduced for early commencement.
Principles similar to those applicable under – (i) Section 5.1(b), and (ii) the last sentence of Section 5.2(b)(2) shall apply in determining the Pre-Retirement Spouse’s 409A Pension under this section.
5.4 Certain Adjustments: Pensions determined under the foregoing sections of this Article are subject to adjustment as provided in this section. For purposes of this section, “specified plan” shall mean the Salaried Plan or a nonqualified pension plan similar to this Plan. A nonqualified pension plan is similar to this Plan if it is sponsored by a member of the PepsiCo Organization and if its benefits are not based on participant pay deferrals.
(a) Adjustments for Rehired Participants: This subsection shall apply to a current or former Participant who is reemployed after his Annuity Starting Date and whose benefit under the Salaried Plan is recalculated based on an additional period of Credited Service. In the event of any such recalculation, the Participant’s PEP Pension shall also be recalculated hereunder to the maximum extent permissible under Section 409A. For this purpose and to the maximum extent permissible under Section 409A, the PEP Guarantee under Section 5.2 is adjusted for in-service distributions and prior distributions in the same manner as benefits are adjusted under the Salaried Plan, but by taking into account benefits under this Plan and any specified plans.
(b) Adjustment for Increased Pension Under Other Plans: If the benefit paid under a specified plan on behalf of a Participant is increased after PEP benefits on his behalf have been determined (whether the increase is by order of a
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court, by agreement of the plan administrator of the specified plan, or otherwise), then the PEP benefit for the Participant shall be recalculated to the maximum extent permissible under Section 409A. If the recalculation identifies an overpayment hereunder, the Plan Administrator shall take such steps as it deems advisable to recover the overpayment. It is specifically intended that there shall be no duplication of payments under this Plan and any specified plans to the maximum extent permissible under Section 409A.
(c) No Benefit Offsets That Would Violate Section 409A. Effective as of January 1, 2009, if a Participant has earned a benefit under a plan maintained by a member of the PepsiCo Organization that is a “qualifying plan” for purposes of the “Non-Duplication” rule in Section 3.8 of Part A of the Salaried Plan and the “Transfers and Non-Duplication” rule in Section 3.5 of Part B of the Salaried Plan, such Transfers and Non-Duplication rules shall apply when calculating the Participant’s Total Pension under Section 5.1(c)(1) above only to the extent the application of such rule to the Participant’s 409A Pension will not result in a change in the time or form of payment of such pension that is prohibited by Section 409A. For purposes of the limit on offsets in the preceding sentence, it is the Company’s intent to undertake to make special arrangements with respect to the payment of the benefit under the qualifying plan that are legally permissible under the qualifying plan and compliant with Section 409A, in order to avoid such a change in time or form of payment to the maximum extent possible; to the extent that Section 409A compliant special arrangements are timely put into effect in a particular situation, the limit on offsets in the prior sentence will not apply.
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5.5 Excludable Employment: An executive who has signed a written agreement with the Company pursuant to which the individual either (i) waives eligibility under the Plan (even if the individual otherwise meets the definition of Employee under the Plan), or (ii) agrees not to participate in the Plan, shall not thereafter become entitled to a benefit or to any increase in benefits in connection with such employment (whichever applies). Written agreements may be entered into either before or after the executive becomes eligible for or begins participation in the Plan, and such written agreement may take any form that is deemed effective by the Company. This Section 5.5 shall apply with respect to agreements that are entered into on or after January 1, 2009.
5.6 Pre-409A Pension: A Participant’s Pre-409A Pension is the portion of the Participant’s Pension that is grandfathered under Treasury Regulation § 1.409A-6(a)(3)(i) and (iv). Principles similar to those applicable under – (i) Section 5.1(b), and (ii) the last sentence of Section 5.2(b)(2) shall apply in determining the Pre-409A Pension under this section.
5.7 Offsets: Notwithstanding any other provision of the Plan, the Company may reduce the amount of any payment or benefit that is or would be payable to or on behalf of a Participant by the amount of any obligation of the Participant to the Company that is or becomes due and payable, provided that (1) the obligation of the Participant to the Company was incurred during the employment relationship, (2) the reduction during any Plan Year may not exceed the amount allowed under Code Section 409A and (3) the reduction is made at the same time and in the same amount as the obligation otherwise would have been due and collectable from the Participant. In addition, in the event a Participant has earned a 409A Benefit (a “Prior 409A Benefit”) that was paid before, or will become payable either before or under different payment terms than, an additional 409A Benefit for the Participant, the
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PepsiCo Pension Equalization Plan –409A Program
calculation of the Participant’s additional 409A Benefit shall include an offset for the Prior 409A Benefit. This offset shall be determined as of the Annuity Starting Date of the additional 409A Benefit on a basis that (i) takes into account applicable reductions for early or late commencement as of the Annuity Starting Date of the additional 409A Pension, (ii) reflects, if applicable and customary, the relative value of forms of payment, and (iii) otherwise adjusts the offset to its Actuarial Equivalent, in each such respect as appropriate and customary under the circumstances and in accordance with rules authorized by the Plan Administrator. Therefore, by way of example, but not by way of limitation, when pursuant to Section 4.5 a Participant is entitled to Post-Disability Accruals after having become entitled to Pre-Separation Accruals, such an offset of the Pre-Separation Accruals will apply in determining the Post-Disability Accruals.
5.8 Amount of Pre-Retirement Domestic Partner’s Pension: The monthly amount of the Pre-Retirement Domestic Partner’s 409A Pension payable to a surviving Eligible Domestic Partner under Section 4.12 shall be determined under subsection (a) below.
(a) Calculation: An Eligible Domestic Partner’s Pre-Retirement Domestic Partner’s 409A Pension shall be equal to:
(1) The Eligible Domestic Partner’s Total Pre-Retirement Domestic Partner’s Pension, reduced by
(2) The Eligible Domestic Partner’s Salaried Plan Pre-Retirement Domestic Partner’s Pension, and then further reduced by (but not below zero)
(3) The Eligible Domestic Partner’s Pre-Retirement Domestic Partner’s Pension derived from the Pre-409A Program.
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(b) Basis for Determining: The Pre-Retirement Domestic Partner’s 409A Pension amount in subsection (a) above shall be determined on a basis (i) that takes into account applicable reductions for early or late commencement, and (ii) otherwise adjusts the reductions in (a)(2) and (3) above to their Actuarial Equivalent as appropriate under the circumstances and pursuant to rules of the Plan Administrator, including to take account the time and form of any prior payments.
(c) Definitions: The following definitions apply for purposes of this section:
(1) An Eligible Domestic Partner’s “Total Pre-Retirement Domestic Partner’s Pension” means the greater of:
(i) The amount of the Eligible Domestic Partner’s pre-retirement domestic partner’s pension determined under the terms of the Salaried Plan, but without regard to: (A) the limitations imposed by sections 401(a)(17) and 415 of the Code (as such limitations are interpreted and applied under the Salaried Plan), and (B) the actuarial adjustment under Section 5.7(d) of Part B of the Salaried Plan, or
(ii) The amount (if any) of the Eligible Domestic Partner’s PEP Guarantee Pre-Retirement Domestic Partner’s 409A Pension determined under subsection (c).
In making this comparison, the benefits in subparagraphs (i) and (ii) above shall be calculated as if payable as of what would be the Normal Retirement Date of the Participant related to the Eligible Domestic Partner. The greater benefit
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determined under the prior sentence shall then be reduced/increased for commencement before/after, as applicable, such Normal Retirement Date.
(2) An “Eligible Domestic Partner’s Salaried Plan Pre- Retirement Domestic Partner’s Pension” means the amount of the Eligible Domestic Partner’s Pre-Retirement Domestic Partner’s Pension determined under the terms of the Salaried Plan.
(3) An “Eligible Domestic Partner’s Pre-Retirement Domestic Partner’s Pension derived from the Pre-409A Program” means the amount of the Eligible Domestic Partner’s Pre-Retirement Domestic Partner’s Pension determined under the terms of the Pre-409A Program
(c) PEP Guarantee Pre-Retirement Domestic Partner’s Pension: An Eligible Domestic Partner’s PEP Guarantee Pre-Retirement Domestic Partner’s 409A Pension shall be determined in accordance with paragraph (1) or (2) below, whichever is applicable, with reference to the PEP Guarantee (if any) that would have been available to the Participant under Section 5.2.
(1) Normal Rule: The Pre-Retirement Domestic Partner’s 409A Pension payable under this paragraph shall be equal to the amount that would be payable as a survivor annuity, under a Qualified Joint and Survivor Annuity, if the Participant had:
(i) Separated from Service on the date of death (or, if earlier, his actual Separation from Service);
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(ii) Commenced a Qualified Joint and Survivor Annuity on the same date payments of the Qualified Pre Retirement Domestic Partner’s Pension are to commence; and
(iii) Died on the day immediately following such commencement.
(2) Special Rule for Active and Disabled Employees: Notwithstanding paragraph (1) above, the Pre-Retirement Domestic Partner’s 409A Pension paid on behalf of a Participant described in Section 4.6(a) shall not be less than an amount equal to 25 percent of such Participant’s PEP Guarantee determined under Section 5.2. For this purpose, Credited Service shall be determined as provided in Section 3.3(c)(2) of the Salaried Plan, and the deceased Participant’s Highest Average Monthly Earnings, Primary Social Security Amount and Covered Compensation shall be determined as of his date of death. A Pre-Retirement Domestic Partner’s 409A Pension under this paragraph is not reduced for early commencement.
Principles similar to those applicable under (i) Section 5.1(b), and (ii) the last sentence of Section 5.2(b)(2) shall apply in determining the Pre-Retirement Domestic Partner’s 409A Pension under this section.
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ARTICLE VI
Distribution of Benefits
Distribution of Benefits
The terms of this Article govern (i) the distribution of benefits to a Participant who becomes entitled to a 409A Pension, and (ii) the continuation of benefits (if any) to such Participant’s beneficiary following the Participant’s death. A Pre-Retirement Spouse’s Pension or Pre-Retirement Domestic Partner’s Pension derived from the 409A Program shall be payable as an Annuity for the life of the Eligible Spouse or Eligible Domestic Partner, as applicable, in all cases, subject to Section 4.9 (cashout distributions). The distribution of a Pre-409A Pension is governed by the terms of the Pre-409A Program.
6.1 Form and Timing of Distributions: Benefits under the 409A Program shall be distributed as follows:
(a) 409A Retirement Pension: The following rules govern the distribution of a Participant’s 409A Retirement Pension:
(1) Generally: A Participant’s 409A Retirement Pension shall be distributed as a Single Lump Sum on the first day of the month that is coincident with or next follows the Participant’s Retirement Date, subject to paragraph (2) and Section 6.6 (delay for Key Employees).
(2) Prior Payment Election: Notwithstanding paragraph (1), a Participant who is entitled to a 409A Retirement Pension and who made an election (i) up to and including December 31, 2007, and (ii) at least six months prior to and in a calendar year prior to the Participant’s Annuity Starting Date shall receive his benefit in accordance with such payment election. A payment election allowed a Participant to choose either (i) to receive a distribution of his
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PepsiCo Pension Equalization Plan –409A Program
benefit in an Annuity form, (ii) to commence distribution of his benefit at a time other than as provided in paragraph 6.1(a)(1), or both (i) and (ii). A payment election made by a Participant who is only eligible to receive a Vested Pension on his Separation from Service shall be disregarded. Subject to Section 4.9 (cashouts), a Participant who has validly elected to receive an Annuity shall receive his benefit as a Qualified Joint and Survivor Annuity if he is married or as a Single Life Annuity if he is unmarried, unless he elects one of the optional forms of payment described in Section 6.2 in accordance with the election procedures in Section 6.3(a). A Participant shall be considered married if he is married on his Annuity Starting Date (with such Annuity Starting Date determined taking into account any election applicable under this subsection). To the extent a Participant’s benefit commences later than it would under paragraph 6.1(a)(1) as a result of an election under this paragraph 6.1(a)(2), the Participant’s benefit will be increased for earnings at the interest rate used to compute the Actuarial Equivalent lump sum value through the date the check for payment is prepared, which interest shall be paid at the time elected by the Participant under this paragraph 6.1(a)(2).
(b) 409A Vested Pension: Subject to Section 4.9, Section 6.6 and subsection (c) below, a Participant’s 409A Vested Pension shall be distributed in accordance with paragraph (1) or (2) below, unless, in the case of a Participant who is married (as determined under the standards in paragraph 6.1(a)(2), above) or has an Eligible Domestic Partner on his Annuity Starting Date, he elects one of the optional
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forms of payment distributions in Section 6.2 in accordance with the election procedures in Section 6.3(a):
(1) Separation Prior to Age 55: In the case of a Participant who Separates from Service with at least five years of Service prior to attaining age 55, the Participant’s 409A Vested Pension shall be distributed as an Annuity commencing on the first of the month that is coincident with or immediately follows the date he attains age 55, which shall be the Annuity Starting Date of his 409A Vested Pension. A distribution under this subsection shall be in the form of a Qualified Joint and Survivor Annuity if the Participant is married or as a Single Life Annuity if he is not married; provided that an unmarried Participant who has an Eligible Domestic Partner may elect a 50% Survivor Annuity or 75% Survivor Annuity with his Eligible Domestic Partner as his beneficiary as provided in Section 6.2. A Participant shall be considered married or to have an Eligible Domestic Partner for purposes of this paragraph if he is married or has an Eligible Domestic Partner on the Annuity Starting Date of his 409A Vested Pension.
(2) Separation at Ages 55 Through 64: In the case of a Participant who Separates from Service with at least five years but less than ten years of Service and on or after attaining age 55 but prior to attaining age 65, the Participant’s 409A Vested Pension shall be distributed as an Annuity (as provided in paragraph (1) above) commencing on the first of the month that follows his Separation from Service.
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PepsiCo Pension Equalization Plan –409A Program
(c) Disability Pension: The portion of a Participant’s 409A Disability Pension representing Pre-Separation Accruals shall be paid on the first day of the month following the later of (i) the Participant’s attainment of age 55 and (ii) the Participant’s Separation from Service. The available forms of payment for the portion of a Participant’s 409A Disability Pension representing Pre-Separation Accruals (as defined in Section 4.5) shall be those forms available to a Participant who is entitled to a Vested Pension or a Retirement Pension, as set forth in Section 6.2, below (including, to the extent applicable, the different forms available to a married Participant / Participant with a domestic partner versus a single Participant). The portion of a Participant’s 409A Disability Pension representing Post-LTD Accruals shall be paid on the first day of the month following the Participant’s attainment of age 65 in a lump sum.
6.2 Available Forms of Payment: This section sets forth the payment options available to a Participant who is entitled to a Retirement Pension under paragraph 6.1(a)(2) above or a Vested Pension under subsection 6.1(b) above.
(a) Basic Forms: A Participant who is entitled to a Retirement Pension may choose one of the following optional forms of payment by making a valid election in accordance with the election procedures in Section 6.3(a). A Participant who is entitled to a Vested Pension and who is married on his Annuity Starting Date may choose one of the optional forms of payment available under paragraph (1), (2)(ii) or (2)(iii) below with his Eligible Spouse as his beneficiary (and no other optional form of payment available under this subsection (a) shall be permitted to such a Participant). A Participant who is entitled to a Vested Pension, who is not married and who has an Eligible Domestic Partner on his Annuity Starting Date may choose one of the optional
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PepsiCo Pension Equalization Plan –409A Program
forms available under paragraph (2)(ii) or (2)(iii) below with his Eligible Domestic Partner as his beneficiary (and no other optional forms of payment available under this subsection shall be permitted to such a Participant). A Participant who is entitled to a Vested Pension and who is not married and does not have an Eligible Domestic Partner on his Annuity Starting Date shall receive a Single Life Annuity. Each optional annuity is the actuarial equivalent of the Single Life Annuity:
(1) Single Life Annuity Option: A Participant may receive his 409A Pension in the form of a Single Life Annuity, which provides monthly payments ending with the last payment due prior to his death.
(2) Survivor Options: A Participant may receive his 409A Pension in accordance with one of the following survivor options:
(i) 100 Percent Survivor Option: The Participant shall receive a reduced 409A Pension payable for life, ending with the last monthly payment due prior to his death. Payments in the same reduced amount shall continue after the Participant’s death to his beneficiary for life, beginning on the first day of the month coincident with or following the Participant’s death and ending with the last monthly payment due prior to the beneficiary’s death.
(ii) 75 Percent Survivor Option: The Participant shall receive a reduced 409A Pension payable for life, ending with the last monthly payment due prior to his death. Payments in the amount of 75 percent of such reduced 409A Pension shall be continued after the Participant’s death to his beneficiary for life, beginning on the first day of
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PepsiCo Pension Equalization Plan –409A Program
the month coincident with or following the Participant’s death and ending with the last monthly payment due prior to the beneficiary’s death.
(iii) 50 Percent Survivor Option: The Participant shall receive a reduced 409A Pension payable for life, ending with the last monthly payment due prior to his death. Payments in the amount of 50 percent of such reduced 409A Pension shall be continued after the Participant’s death to his beneficiary for life, beginning on the first day of the month coincident with or following the Participant’s death and ending with the last monthly payment due prior to the beneficiary’s death. A 50 percent survivor option under this paragraph shall be a Qualified Joint and Survivor Annuity if the Participant’s beneficiary is his Eligible Spouse.
(iv) Ten Years Certain and Life Option: The Participant shall receive a reduced 409A Pension which shall be payable monthly for his lifetime but for not less than 120 months. If the retired Participant dies before 120 payments have been made, the monthly 409A Pension amount shall be paid for the remainder of the 120 month period to the Participant’s primary beneficiary (or if the primary beneficiary has predeceased the Participant, the Participant’s contingent beneficiary).
(b) Inflation Protection: The following levels of inflation protection may be provided to any Participant who elects to receive all or a part of his 409A Retirement Pension as an Annuity:
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PepsiCo Pension Equalization Plan –409A Program
(1) 5 Percent Inflation Protection: A Participant’s monthly benefit shall be initially reduced, but thereafter shall be increased if inflation in the prior year exceeds 5 percent. The amount of the increase shall be the difference between inflation in the prior year and 5 percent.
(2) 7 Percent Inflation Protection: A Participant’s monthly benefit shall be initially reduced, but thereafter shall be increased if inflation in the prior year exceeds 7 percent. The amount of the increase shall be the difference between inflation in the prior year and 7 percent.
Benefits shall be subject to increase in accordance with this subsection each January 1, beginning with the second January 1 following the Participant’s Annuity Starting Date. The amount of inflation in the prior year shall be determined based on inflation in the 12-month period ending on September 30 of such year, with inflation measured in the same manner as applies on the Effective Date for adjusting Social Security benefits for changes in the cost of living. Inflation protection that is in effect shall carry over to any survivor benefit payable on behalf of a Participant, and shall increase the otherwise applicable survivor benefit as provided above. Any election by a Participant to receive inflation protection shall be irrevocable by such Participant or his surviving beneficiary.
6.3 Procedures for Elections: This section sets forth the procedures for making Annuity Starting Date elections (i.e., elections under Section 6.2). Subsection (a) sets forth the procedures for making a valid election of an optional form of payment under Section 6.2 and subsection (b) includes special rules for Participants with multiple Annuity Starting Dates. An election under this Article VI shall be treated as received on a particular day if it is: (i) postmarked that day, or (ii) actually received by the Plan Administrator on that day.
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Receipt under (ii) must occur by the close of business on the date in question, which time is to be determined by the Plan Administrator. Spousal consent is not required for an election to be valid.
(a) Election of an Optional Form of Payment: To be valid, an election of an optional form of Annuity under Section 6.2, for (i) a Participant’s 409A Retirement Pension (if a proper election was made under paragraph 6.1(a)(2)) or (ii) a Participant’s 409A Vested Terminated Pension, must be in writing, signed by the Participant, and received by the Plan Administrator at least one day prior to the Annuity Starting Date that applies to the Participant’s Pension in accordance with Section 6.1. In addition, an election under this subsection must specify one of the optional forms of payment available under Section 6.2 and a beneficiary, if applicable, in accordance with Section 6.5 below. To the extent permitted by the Plan Administrator, an election made through electronic media shall be considered to satisfy the requirement for a written election, and an electronic affirmation of such an election shall be considered to satisfy the requirement for a signed election.
(b) Multiple Annuity Starting Dates: When amounts become payable to a Participant in accordance with Article IV, they shall be payable as of the Participant’s Annuity Starting Date and the election procedures (in this section and Sections 6.1 and 6.5) shall apply to all of the Participant’s unpaid accruals as of such Annuity Starting Date, with the following exception. In the case of a Participant who is rehired after his initial Annuity Starting Date and who (i) is currently receiving an Annuity that remained in pay status upon rehire, or (ii) was previously paid a lump sum distribution (other than a cashout distribution described in Section 4.9(a)), the
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Participant’s subsequent Annuity Starting Date (as a result of his subsequent Separation from Service), and the election procedures at such subsequent Annuity Starting Date, shall apply only to the portion of his benefit that accrues after his rehire. Any prior accruals that remain to be paid as of the Participant’s subsequent Annuity Starting Date shall continue to be payable in accordance with the elections made at his initial Annuity Starting Date.
(c) Determination of Marital Status. Effective January 1, 2014, in any case in which the form of payment of a Participant’s 409A Pension is determined by his marital status on his Annuity Starting Date, the Plan Administrator shall assume the Participant is unmarried on his Annuity Starting Date unless the Participant provides notice to the Plan prior to his Annuity Starting Date, which is deemed sufficient and satisfactory by the Plan Administrator, that he is married. The Participant shall give such notification to the Plan Administrator when he makes the election described in subsection (a) above or in accordance with such other procedures that are established by the Plan Administrator for this purpose (if any). Notwithstanding the two prior sentences, the Plan Administrator may adopt rules that provide for a different outcome than specified above.
6.4 Special Rules for Survivor Options: The following special rules shall apply for the survivor options available under Section 6.2.
(a) Effect of Certain Deaths: If a Participant makes an election under Section 6.3(a) to receive his 409A Retirement Pension in the form of an optional Annuity that includes a benefit for a surviving beneficiary under Section 6.2 and the Participant or his beneficiary (beneficiaries in the case of the optional form of payment in Section
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6.2(a)(2)(iv)) dies prior to the Annuity Starting Date of such Annuity, the election shall be disregarded. If the Participant dies after this Annuity Starting Date but before his 409A Retirement Pension actually commences, the election shall be given effect and the amount payable to his surviving Eligible Spouse, Eligible Domestic Partner or other beneficiary (as applicable) shall commence on the first day of the month following his death (any back payments due the Participant shall be payable to his estate). In the case of a Participant who has elected the form of payment described in Section 6.2(a)(2)(iv), if such Participant: (i) dies after his Annuity Starting Date, (ii) without a surviving primary or contingent beneficiary, and (iii) before receiving 120 payments under the form of payment, then the remaining payments due under such form of payment shall be paid to the Participant’s estate. If payments have commenced under such form of payment to a Participant’s primary or contingent beneficiary and such beneficiary dies before payments are completed, then the remaining payments due under such form of payment shall be paid to such beneficiary’s estate.
(b) Beneficiary Who Is Not an Eligible Spouse or Eligible Domestic Partner: If a Participant’s beneficiary is not his Eligible Spouse or Eligible Domestic Partner, he may not elect:
(1) The 100 percent survivor option described in Section 6.2(a)(2)(i) if his beneficiary is more than 10 years younger than he is, or
(2) The 75 percent survivor option described in Section 6.2(a)(2)(ii) if his beneficiary is more than 19 years younger than he is.
6.5 Designation of Beneficiary: A Participant who has elected under Section 6.2 to receive all or part of his Retirement Pension in a form of payment that includes a survivor
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option shall designate a beneficiary who will be entitled to any amounts payable on his death. Such designation shall be made on the election form used to choose such optional form of payment or an approved election form filed under the Salaried Plan, whichever is applicable. In the case of the survivor option described in Section 6.2(a)(2)(iv), the Participant shall be entitled to name both a primary beneficiary and a contingent beneficiary. A Participant (whether active or former) shall have the right to change or revoke his beneficiary designation at any time prior to his Annuity Starting Date. The designation of any beneficiary, and any change or revocation thereof, shall be made in accordance with rules adopted by the Plan Administrator. A beneficiary designation shall not be effective unless and until filed with the Plan Administrator. If no beneficiary is properly designated and a Participant’s elects a survivor’s option described in Section 6.2(a)(2), the Participant’s beneficiary shall be his Eligible Spouse or Eligible Domestic Partner, as applicable. A Participant entitled to a Vested Pension does not have the right or ability to name a beneficiary; if the Participant is permitted under Section 6.2 to elect an optional form of payment, then his beneficiary shall be his Eligible Spouse or Eligible Domestic Partner, as applicable, on his Annuity Starting Date.
6.6 Required Delay for Key Employees: Notwithstanding Section 6.1 above, if a Participant is classified as a Key Employee upon his Separation from Service (or at such other time for determining Key Employee status as may apply under Section 409A), then distributions to the Participant shall commence as follows:
(a) Distribution of a Retirement Pension: In the case of a Key Employee Participant who is entitled to a 409A Retirement Pension, distributions shall commence on the earliest first of the month that is at least six months after the date the Participant Separates from Service (or, if earlier, the Participant’s death). For periods
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before 2009, commencement of distributions, however, shall not be delayed under the preceding sentence if the Participant’s 409A Retirement Pension commences at the same time as his pension under the Salaried Plan in accordance with Section 6.1(b)(3)(i).
(b) Distribution of a Vested Pension. In the case of a Participant who is entitled to a 409A Vested Pension, distributions shall commence as provided in Section 6.1(b), or if later, on the earliest first of the month that is at least six months after the Participant’s Separation from Service (or, if earlier, the Participant’s death). For periods before 2009, commencement of distributions, however, shall not be delayed under the preceding sentence if the Participant’s 409A Vested Pension commences at the same time as his pension under the Salaried Plan in accordance with Section 6.1(b)(3)(i).
(c) Interest Paid for Delay. Any payments to the Participant that are delayed in accordance with the provisions of this Section 6.6 shall be increased for earnings at the interest rate used to compute the Actuarial Equivalent lump sum value through the date the check for payment is prepared, with such delayed payment and accumulated interest paid as a lump sum payment to the Participant on the date payment occurs in accordance with subsection (a) or (b) above, whichever is applicable. If a Participant’s beneficiary or estate is paid under subsection (a) or (b) above as a result of his death, then any payments that would have been made to the Participant and that were delayed in accordance with the provisions of this Section 6.6 shall be paid as otherwise provided in the Plan, with interest at the rate specified in the preceding sentence through the date the check for payment is prepared.
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6.7 Payment of FICA and Related Income Taxes: As provided in subsections (a) through (c) below, a portion of a Participant’s 409A Pension shall be paid as a single lump sum and remitted directly to the Internal Revenue Service (“IRS”) in satisfaction of the Participant’s FICA Amount and the related withholding of income tax at source on wages (imposed under Code Section 3401 or the corresponding withholding provisions of the applicable state, local or foreign tax laws as a result of the payment of the FICA Amount) and the additional withholding of income tax at source on wages that is attributable to the pyramiding of wages and taxes.
(a) Timing of Payment: As of the date that the Participant’s FICA Amount and related income tax withholding are due to be deposited with the IRS, a lump sum payment equal to the Participant’s FICA Amount and any related income tax withholding shall be paid from the Participant’s 409A Pension and remitted to the IRS (or other applicable tax authority) in satisfaction of such FICA Amount and income tax withholding related to such FICA Amount. The classification of a Participant as a Key Employee (as defined in Section 2.1) shall have no effect on the timing of the lump sum payment under this subsection (a).
(b) Reduction of 409A Pension. To reflect the payment of a Participant’s FICA Amount and any related income tax liability, the Participant’s 409A Pension shall be reduced, effective as of the date for payment of the lump sum in accordance with subsection (a) above, with such reduction being the Actuarial Equivalent of the lump sum payment used to satisfy the Participant’s FICA Amount and related income tax withholding. It is expressly contemplated that this reduction may
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occur effective as of a date that is after the date payment of a Participant’s 409A Pension commences.
(A) No Effect on Commencement of 409A Pension. The Participant’s 409A Pension shall commence in accordance with the terms of this Plan. The lump sum payment to satisfy the Participant’s FICA Amount and related income tax withholding shall not affect the time of payment of the Participant’s actuarially reduced 409A Pension, including not affecting any required delay in payment to a Participant who is classified as a Key Employee.
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ARTICLE VII
Administration
Administration
7.1 Authority to Administer Plan: The Plan shall be administered by the Plan Administrator, which shall have the authority to interpret the Plan and issue such regulations as it deems appropriate. The Plan Administrator shall maintain Plan records and make benefit calculations, and may rely upon information furnished it by the Participant in writing, including the Participant’s current mailing address, age and marital status. The Plan Administrator’s interpretations, determinations, regulations and calculations shall be final and binding on all persons and parties concerned. Neither the Company nor the Plan Administrator shall be a fiduciary of the Plan, and any restrictions that might apply to a party in interest under section 406 of ERISA shall not apply under the Plan, including with respect to the Company or the Plan Administrator.
7.2 Facility of Payment: Whenever, in the Plan Administrator’s opinion, a person entitled to receive any payment of a benefit or installment thereof hereunder is under a legal disability or is incapacitated in any way so as to be unable to manage his financial affairs, the Plan Administrator may make payments to such person or to the legal representative of such person for his benefit, or the Plan Administrator may apply the payment for the benefit of such person in such manner as it considers advisable. Any payment of a benefit or installment thereof in accordance with the provisions of this section shall be a complete discharge of any liability for the making of such payment under the provisions of the Plan.
7.3 Claims Procedure: The Plan Administrator, or a party designated by the Plan Administrator, shall have the exclusive discretionary authority to construe and to interpret
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the Plan, to decide all questions of eligibility for benefits and to determine the amount of such benefits. As a result, benefits under this Plan will be paid only if the Plan Administrator decides in its discretion that the Participant (or other applicant) is entitled to them. Any decisions or determinations hereunder shall be made in the absolute and unrestricted discretion of the Plan Administrator, even if (i) such discretion is not expressly granted by the Plan provisions in question, or (ii) a decision or determination is not expressly called for by the Plan provisions in question, and even though other Plan provisions expressly grant discretion or expressly call for a decision or determination. All decisions and determinations made by the Plan Administrator will be final, conclusive, and binding on all parties. The Plan Administrator may consider the intent of the Company with respect to a Plan provision in making any determination with respect to the provision, notwithstanding the provisions set forth in any document that arguably do not contemplate considering such intent. The Plan Administrator’s discretion is absolute, and in any case where the breadth of the Plan Administrator’s discretion is at issue, it is expressly intended that the Plan Administrator (or its delegate) be accorded the maximum possible discretion. Any exercise by the Plan Administrator of its discretionary authority shall be reviewed by a court under the arbitrary and capricious standard (i.e., abuse of discretion). If, pursuant to this discretionary authority, an assertion of any right to a benefit by or on behalf of a Participant or beneficiary (a “claimant”) is wholly or partially denied, the Plan Administrator, or a party designated by the Plan Administrator, will provide such claimant the claims review process described in this Section. The Plan Administrator has the discretionary right to modify the claims process described in this Section in any manner so long as the claims review process, as modified, includes the steps described below. A claim shall be made in writing or in such other form as is acceptable to the Plan Administrator. Within a 90-day response period
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following the receipt of the claim by the Plan Administrator, the Plan Administrator will notify the claimant of:
(a) The specific reason or reasons for such denial;
(b) Specific reference to pertinent Plan provisions on which the denial is based;
(c) A description of any additional material or information necessary for the claimant to submit to perfect the claim and an explanation of why such material or information is necessary; and
(d) A description of the Plan’s claim review procedure (including the time limits applicable to such process and a statement of the claimant’s right to bring a civil action under ERISA following a further denial on review).
If the Plan Administrator determines that special circumstances require an extension of time for processing the claim it may extend the response period from 90 to 180 days. If this occurs, the Plan Administrator will notify the claimant before the end of the initial 90-day period, indicating the special circumstances requiring the extension and the date by which the Plan Committee expects to make the final decision. The claim review procedure is available upon written request by the claimant to the Plan Administrator, or the designated party, within 60 days after receipt by the claimant of written notice of the denial of the claim. Upon review, the Plan Administrator shall provide the claimant a full and fair review of the claim, including the opportunity to submit to the Plan Administrator comments, document, records and other information relevant to the claim, and the Plan Administrator’s review shall take into account such comments, documents, records and information regardless of whether it was submitted or considered at the initial determination. The decision on review will be made within 60 days
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after receipt of the request for review, unless circumstances warrant an extension of time not to exceed an additional 60 days. If this occurs, notice of the extension will be furnished to the claimant before the end of the initial 60-day period, indicating the special circumstances requiring the extension and the date by which the Plan Administrator expects to make the final decision. The final decision shall be in writing and drafted in a manner calculated to be understood by the claimant; include specific reasons for the decision with references to the specific Plan provisions on which the decision is based; and provide that the claimant is entitled to receive, upon request ad free of charge, reasonable access to, and copies of, all documents, records, and other information relevant to his or her claim for benefits. Any special extension, which is required by ERISA and applies to one or more deadlines applicable under this claims procedure, shall apply under this Plan to the same extent that special extension applies under the Salaried Plan.
Any claim under the Plan that is reviewed by a court, arbitrator or any other tribunal shall be reviewed solely on the basis of the record before the Plan Administrator at the time it made its determination. In addition, any such review shall be conditioned on the claimant’s having fully exhausted all rights under this section as is more fully explained in Section 7.5. Any notice or other notification that is required to be sent to a claimant under this section may be sent pursuant to any method approved under Department of Labor Regulation Section 2520.104b-1 or other applicable guidance.
7.4 Effect of Specific References: Specific references in the Plan to the Plan Administrator’s discretion shall create no inference that the Plan Administrator’s discretion in any other respect, or in connection with any other provision, is less complete or broad.
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7.5 Claimant Must Exhaust the Plan’s Claims Procedures Before Filing in Court : Before filing any Claim (including a suit or other action) in court or in another tribunal, a Claimant must first fully exhaust all of the Claimant’s rights under the claims procedures of Section 7.3.
(a) Upon review by any court or other tribunal, the exhaustion requirement of this Section 7.5 is intended to be interpreted to require exhaustion in as many circumstances as possible (and any steps necessary to clarify or effect this intent may be taken). For example, exhaustion may not be excused (i) for failure to respond to a Claim unless the purported claimant took sufficient steps to make it reasonably clear to the Plan Administrator that the purported claimant was submitting a Claim with respect to the Plan, or (ii) for failure to fulfill a request for documents unless (A) ERISA requires the documents to be provided in response to the request, (B) the Claimant requests such documents in a writing that is addressed to and actually received by the Plan Administrator, (C) the Plan Administrator fails to provide the requested documents within 6 months after the date the request is received, or within such longer period as may be reasonable under the facts and circumstances, and (D) the requestor took sufficient steps to make it reasonably clear to the Plan Administrator that the requestor was asserting an ERISA right to the documents. Accordingly, but without limitation, a purported claimant or requestor who was not treated as a Participant shall not be deemed to have taken sufficient steps for purposes of the prior sentence unless he makes it reasonably clear to the Plan Administrator that he is claiming to have been entitled to be a Participant.
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(b) In any action or consideration of a Claim in court or in another tribunal following exhaustion of the Plan’s claims procedure as described in this Section 7.5, the subsequent action or consideration shall be limited, to the maximum extent permissible, to the record that was before Plan Administrator in the claims procedure.
(c) The exhaustion requirement of this Section 7.5 shall apply: (i) regardless of whether other Disputes that are not Claims (including those that a court might consider at the same time) are of greater significance or relevance, (ii) to any rights the Plan Administrator may choose to provide in connection with novel Disputes or in particular situations, (iii) regardless of whether the rights are actual or potential and (iv) even if the Plan Administrator has not previously defined or established specific claims procedures that directly apply to the submission and consideration of such Claim (in which case the Plan Administrator (upon notice of the Claim) shall either promptly establish such claims procedures or shall apply (or act by analogy to) the claims procedures of Section 7.3 that apply to claims for benefits).
(d) The Plan Administrator may make special arrangements to consider a Claim on a class basis or to address unusual conflicts concerns, and such minimum arrangements in these respects shall be made as are necessary to maximize the extent to which exhaustion is required.
(e) For example, exhaustion may not be excused (i) for failure to respond to a claim unless the purported Claimant took steps that were sufficient to make it reasonably clear to the Plan Administrator that the purported Claimant was submitting a claim with respect to the Plan, or (ii) for failure to fulfill a request for documents unless (A) the Claimant is lawfully entitled to receive a copy of the requested
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document from the Plan Administrator at the time and in the form requested, (B) the Claimant requests such documents in a writing that is addressed to and actually received by the Plan Administrator, (C) the Plan Administrator fails to provide the requested documents within 6 months after the date the request is received, or within such longer period as may be reasonable under the facts and circumstances, (D) the Claimant took steps that were sufficient to make it reasonably clear to the Plan Administrator that the requestor was actually entitled to receive the requested documents at the time and in the form requested (i.e., generally the Claimant must provide sufficient information to place the Plan Administrator on notice of a colorable claim for benefits), and (E) the documents requested and not provided are material to the determination of one or more colorable claims of which the Claimant has informed the Plan Administrator.
(f) For purposes of this Section 7.5, the following definitions apply.
(i) A “Dispute” is any claim, dispute, issue, assertion, action or other matter.
(ii) A “Claim” is any Dispute that implicates in whole or in part any one or more of the following –
(A) The interpretation of the Plan
(B) The interpretation of any term or condition of the Plan
(C) The interpretation of the Plan (or any of its terms or conditions) in light of applicable law;
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(D) Whether the Plan or any term or condition under the Plan has been validly adopted or put into effect;
(E) The administration of the Plan;
(F) Whether the Plan, in whole or in part, has violated any terms, conditions or requirements of ERISA or other applicable law or regulation, regardless of whether such terms, conditions or requirements are, in whole or in part, incorporated into the terms, conditions or requirements of the Plan;
(G) A request for Plan benefits or an attempt to recover Plan benefits;
(H) An assertion that any entity or individual has breached any fiduciary duty; or
(I) Any Claim that: (i) is deemed similar to any of the foregoing by the Plan Administrator, or (ii) relates to the Plan in any way.
It is the Plan Administrator’s intent to interpret and operate the Plan in good faith and at all times consistently with ERISA. Therefore, as a condition for any right or recovery related to the Plan, the Plan imposes a contractual obligation for complete exhaustion under this Section with respect to any Claim (as defined above) in order to allow for the efficient and uniform resolution of such Claims and to protect the Plan from potentially substantial and unnecessary litigation expenses that exhaustion could obviate.
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(iii) A “Claimant” is any actual or putative Employee, former Employee, Participant, former Participant, beneficiary (or the spouse, former spouse, domestic partner, estate, heir or representative of any of the foregoing individuals), or any other individual, person, entity with a relationship to any of the foregoing individuals or the Plan, as well as any group of one or more of the foregoing, who has a Claim.
7.6 Limitations on Actions: Any claim filed under section 7.3 and any action filed in state or federal court by or on behalf of a former or current Employee, Participant, beneficiary or any other individual, person or entity (collectively, a “Petitioner”) for the alleged wrongful denial of Plan benefits or for the alleged interference with or violation of ERISA-protected rights must be brought within two years of the date the Petitioner’s cause of action first accrues.
(a) For purposes of this subsection, a cause of action with respect to a Petitioner’s benefits under the Plan shall be deemed to accrue not later than the earliest of (i) when the Petitioner has received the calculation of the benefits that are the subject of the claim or legal action, (ii) the date identified to the Petitioner by the Plan Administrator on which payments shall commence, (iii) when the Petitioner has actual or constructive knowledge of the acts or failures to act (or the other facts) that are the basis of his claim, or (iv) the date when the benefit was first paid, provided, or denied.
(b) For purposes of this subsection, a cause of action with respect to the alleged interference with ERISA-protected rights shall be deemed to accrue when the claimant has actual or constructive knowledge of the acts or failures to act (or the other facts) that are alleged to constitute interference with ERISA-protected rights.
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(c) For purposes of this subsection, a cause of action with respect to any other claim, action or suit not covered by subsection (a) or (b) above must be brought within two years of the date when the claimant has actual or constructive knowledge of the acts or failures to act (or the other facts) that are alleged to give rise to the claim, action or suit.
Failure to bring any such claim or cause of action within this two-year time frame shall preclude a Petitioner, or any representative of the Petitioner, from filing the claim or cause of action. Correspondence or other communications pursuant to or following the mandatory appeals process described in Section 7.3 shall have no effect on this two-year time frame.
7.7 Restriction on Venue: Any claim or action filed in court or any other tribunal in connection with the Plan by or on behalf of a Petitioner (as defined in Section 7.6 above) shall only be brought or filed in the United States District Court for the Southern District of New York, effective for claims or actions filed on or after January 1, 2011.
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ARTICLE VIII
Miscellaneous
Miscellaneous
8.1 Nonguarantee of Employment: Nothing contained in this Plan shall be construed as a contract of employment between an Employer and any Employee, or as a right of any Employee to be continued in the employment of an Employer, or as a limitation of the right of an Employer to discharge any of its Employees, with or without cause.
8.2 Nonalienation of Benefits: Benefits payable under the Plan or the right to receive future benefits under the Plan shall not be 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 benefits payable hereunder, including any assignment or alienation in connection with a divorce, separation, child support or similar arrangement, shall be null and void and not binding on the Company. The Company shall not in any manner be liable for, or subject to, the debts, contracts, liabilities, engagements or torts of any person entitled to benefits hereunder.
8.3 Unfunded Plan: The Company’s obligations under the Plan shall not be funded, but shall constitute liabilities by the Company payable when due out of the Company’s general funds. To the extent the Participant or any other person acquires a right to receive benefits under this Plan, such right shall be no greater than the rights of any unsecured general creditor of the Company.
8.4 Action by the Company: Any action by the Company under this Plan may be made by the Board of Directors of the Company or by the Compensation Committee of the
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Board of Directors, with a report of any actions taken by it to the Board of Directors. In addition, such action may be made by any other person or persons duly authorized by resolution of said Board to take such action.
8.5 Indemnification: Unless the Board of Directors of the Company shall determine otherwise, the Company shall indemnify, to the full extent permitted by law, any employee acting in good faith within the scope of his employment in carrying out the administration of the Plan.
8.6 Compliance with Section 409A:
(a) General: It is the intention of the Company that the Plan shall be construed in accordance with the applicable requirements of Section 409A. Further, in the event that the Plan shall be deemed not to comply with Section 409A, then neither the Company, the Board of Directors, the Plan Administrator nor its or their designees or agents shall be liable to any Participant or other person for actions, decisions or determinations made in good faith.
(b) Non-duplication of benefits: In the interest of clarity, and to determine benefits in compliance with the requirements of Section 409A, provisions have been included in this 409A Document describing the calculation of benefits under certain specific circumstances, for example, provisions relating to the inclusion of salary continuation during certain window severance programs in the calculation of Highest Average Monthly Earnings, as specified in Appendix B. Notwithstanding this or any similar provision, no duplication of benefits may at any time occur under the Plan. Therefore, to the extent that a specific provision of the Plan provides for recognizing a benefit determining element (such as pensionable earnings or service) and this same
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element is or could be recognized in some other way under the Plan, the specific provision of the Plan shall govern and there shall be absolutely no duplicate recognition of such element under any other provision of the Plan, or pursuant to the Plan’s integration with the Salaried Plan. This provision shall govern over any contrary provision of the Plan that might be interpreted to support duplication of benefits.
8.7 Section 457A: To avoid the application of Code section 457A (“Section 457A”) to a Participant’s Pension, the following shall apply to a Participant who transfers to a work location outside of the United States to provide services to a member of the PepsiCo Organization that is neither a United States corporation nor a pass-through entity that is wholly owned by a United States corporation (“Covered Transfer”):
(a) The Participant shall automatically vest in his or her Pension as of the last business day before the Covered Transfer;
(b) From and after the Covered Transfer, any benefit accruals or other increases or enhancements to the Participant’s Pension relating to –
(1) Service, or
(2) The attainment of a specified age while in the employment of the PepsiCo Organization (“age attainment”),
(collectively, “Benefit Enhancement”) will not be credited to the Participant until the last day of the Plan Year in which the Participant renders the Service or has the age attainment that results in such Benefit Enhancement, and then only to the extent permissible under subsection (c) below at that time; and
(c) The Participant shall have no legal right to (and the Participant shall not receive) any Benefit Enhancement that relates to Service or age attainment
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from and after the Covered Transfer to the extent such Benefit Enhancement would constitute compensation that is includable in income under Section 457A.
Notwithstanding the foregoing, subsection (a) above shall not apply to a Participant who has a Covered Transfer if, prior to the Covered Transfer, the Company provides a written communication (either to the Participant individually, to a group of similar Participants, to Participants generally, or in any other way that causes the communication to apply to the Participant – i.e., an “applicable communication”) that these subsections do not apply to the Covered Transfer in question. Subsection (b) shall cease to apply as of the earlier of – (i) the date the Participant returns to service for a member of the PepsiCo Organization that is a United States corporation or a pass-through entity that is wholly owned by a United States corporation, or (ii) the effective date for such cessation that is stated in an applicable communication.
8.8 Authorized Transfers: If a Participant transfers to an entity that is not part of the PepsiCo Organization, the liability for any benefits accrued while the Participant was employed by the PepsiCo Organization shall remain with the Company, except as otherwise expressly provided by an agreement between the Company and the Participant’s new employer.
8.9 Electronic Signatures: The words “signed,” “signature,” and words of like import in or related to this Plan or any other document or record to be signed in connection with or related to this Plan by the Company, Plan Administrator, Employee or other individual shall be deemed to include electronic signatures and the keeping of records in electronic form, each of which shall be of the same legal effect, validity and enforceability as a manually
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executed signature or the use of a paper-based recordkeeping system, as the case may be, to the fullest extent permissible under applicable law.
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ARTICLE IX
Amendment and Termination
Amendment and Termination
This Article governs the Company’s right to amend and or terminate the Plan. The Company’s amendment and termination powers under this Article shall be subject, in all cases, to the restrictions on amendment and termination in Section 409A and shall be exercised in accordance with such restrictions to ensure continued compliance with Section 409A. The Company’s rights under this Article IX shall be as broad as permissible under applicable law.
9.1 Continuation of the Plan: While the Company and the Employers intend to continue the Plan indefinitely, they assume no contractual obligation as to its continuance. In accordance with Section 8.4, the Company hereby reserves the right, in its sole discretion, to amend, terminate, or partially terminate the Plan at any time provided, however, that no such amendment or termination shall adversely affect the amount of benefit to which a Participant or his beneficiary is entitled under Article IV on the date of such amendment or termination, unless the Participant becomes entitled to an amount equal to such benefit under another plan or practice adopted by the Company (except as necessary to comply with Section 409A). Specific forms of payment are not protected under the preceding sentence.
9.2 Amendments: The Company may, in its sole discretion, make any amendment or amendments to this Plan from time to time, with or without retroactive effect, including any amendment necessary to ensure continued compliance with Section 409A. An Employer (other than the Company) shall not have the right to amend the Plan.
9.3 Termination: The Company may terminate the Plan, (i) either as to its participation or as to the participation of one or more Employers, (ii) with respect to a group of
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Employees who experience a change in control in accordance with Treasury Regulation §1.409A-3(j)(4)(ix)(B), or (iii) as otherwise permitted under Code Section 409A. If the Plan is terminated with respect to fewer than all of the Employers, the Plan shall continue in effect for the benefit of the Employees of the remaining Employers. Upon termination, the distribution of Participants’ 409A Pensions shall be subject to restrictions applicable under Section 409A.
9.4 Change in Control: The Company intends to have the maximum discretionary authority to terminate the Plan and make distributions in connection with a Change in Control (defined as provided 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 is permissible under Section 409A. The previous sentence contains the exclusive terms under which a distribution shall be made in connection with any Change in Control in the case of benefits that are derived from this 409A Program.
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ARTICLE X
ERISA Plan Structure
ERISA Plan Structure
This Plan document in conjunction with the plan document(s) for the Pre-409A Program encompasses three separate plans within the meaning of ERISA, as are set forth in subsections (a), (b) and (c). This division into separate plans became effective as of July 1, 1996; previously the plans set forth in subsections (b) and (c) were a single plan within the meaning of ERISA.
(a) Excess Benefit Plan: An excess benefit plan within the meaning of section 3(36) of ERISA, maintained solely for the purpose of providing benefits for Salaried Plan participants in excess of the limitations on benefits imposed by section 415 of the Code.
(b) Excess Compensation Top Hat Plan: A plan maintained by the Company primarily for the purpose of providing deferred compensation for a select group of management or highly compensated employees within the meaning of sections 201(2) and 401(a)(1) of ERISA. The plan provides benefits for Salaried Plan participants in excess of the limitations imposed by section 401(a)(17) of the Code on benefits under the Salaried Plan (after taking into account any benefits under the Excess Benefit Plan). For ERISA reporting purposes, this portion of PEP may be referred to as the PepsiCo Pension Equalization Plan I.
(c) Preservation Top Hat Plan: A plan maintained by the Company primarily for the purpose of providing deferred compensation for a select group of management or highly compensated employees within the meaning of sections 201(2) and 401(a)(1) of ERISA. The plan provides preserves benefits for those Salaried Plan
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participants described in section 5.2(a) hereof, by preserving for them the pre-1989 level of benefit accrual that was in effect before the Salaried Plan’s amendment effective January 1, 1989 (after taking into account any benefits under the Excess Benefit Plan and Excess Compensation Top Hat Plan). For ERISA reporting purposes, this portion of PEP shall be referred to as the PepsiCo Pension Equalization Plan II.
Benefits under this Plan shall be allocated first to the Excess Benefit Plan, to the extent of benefits paid for the purpose indicated in (a) above; then any remaining benefits shall be allocated to the Excess Compensation Top Hat Plan, to the extent of benefits paid for the purpose indicated in (b) above; then any remaining benefits shall be allocated to the Preservation Top Hat Plan. These three plans are severable for any and all purposes as directed by the Company.
In addition to the above, to the extent that lump sum termination benefits are paid under this Plan in connection with a severed employee’s Special Early Retirement (as defined in Appendix Article D) under a temporary severance program sponsored by the Company, this portion of the Plan shall be a component of the Company’s unfunded severance plan that includes the temporary program of severance benefits in question. As a component of a severance plan, the lump sum termination benefits are welfare benefits, and this portion is part of a “welfare benefit plan” under ERISA section 3(1). This severance plan component shall exist solely (i) for the duration of the temporary severance program in question, and (ii) for the purpose of paying severance benefits. As a portion of an ERISA welfare plan, any such temporary severance benefits hereunder shall not be subject to the reporting requirements for top hat plans under ERISA or any of the ERISA requirements for pension plans.
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ARTICLE XI
Applicable Law
Applicable Law
The provisions of this Plan shall be construed and administered according to, and its validity and enforceability shall be governed by, enforced in accordance with, and determined under (1) ERISA and any other applicable federal law as would be applied in cases that arise in the United States District Court for the Southern District of New York, and (2) to the extent ERISA does not preempt state law, the internal laws of the state of New York.
If any provision of this Plan is, or is hereafter declared to be, void, voidable, invalid or otherwise unlawful, the remainder of the Plan shall not be affected thereby.
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ARTICLE XII
Signature
Signature
The PepsiCo Pension Equalization Plan, 409A Program, as amended and restated, is hereby adopted as of this 11th day of December, 2023, to be effective as of January 1, 2023 or as otherwise stated herein.
PEPSICO, INC.
By: /s/ Becky Schmitt
Becky Schmitt
Executive Vice President and
Chief Human Resources Officer
Date: December 11, 2023
APPROVED
By: /s/ Jeffrey Arnold
Jeffrey Arnold
Legal Director, Employee Benefits Counsel
Law Department
Date: December 6, 2023
By: /s/ Christine Griff
Christine Griff
Vice President, Tax Counsel
Tax Department
Christine Griff
Vice President, Tax Counsel
Tax Department
Date: December 6, 2023
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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 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 provision of the Plan, the Appendix shall govern.
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#746897-1
APPENDIX ARTICLE A -
Transition Provisions
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 “Transition Period”). The time period during which each provision in this Article A was effective is set forth below.
A.2 Transition Rules for Article II (Definitions).
(a) Actuarial Equivalent. In addition to the provisions provided in Article II for determining actuarial equivalence under the Plan, for the duration of the Transition Period, to determine the amount of a Pension payable in the form of a Qualified Joint and Survivor Annuity or optional form of survivor annuity, as an annuity with inflation protection, or as a Single Life Annuity, the Plan Administrator used the actuarial factors under the Salaried Plan.
(b) 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 did not fail to identify any Key Employees, in the case of Separation from Service distributions during the 2005 Plan Year, the Company treated as Key Employees all Participants (and former Participants) classified (or grandfathered) for any portion of the 2005 Plan Year as Band IV and above.
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(2) Operating Rules for 2006 and 2007. To ensure that the Company did 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 treated as Key Employees for such applicable Plan Year of their Separation from Service those individuals who met the provisions of (3) or (4) below (or both).
(3) The Company shall treat as Key Employees all Participants (and former Participants) who are classified (or grandfathered) as Band IV and above for any portion of the Plan Year prior to the Plan Year of their Separation from Service; and
(4) The Company shall treat as a Key Employee any Participant who would be a Key Employee as of his or her Separation from Service date based on the standards in this paragraph (4). For purposes of this paragraph (4), the Company shall determine Key Employees based on compensation (as defined in Code Section 415(c)(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
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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.3 Transition Rules for Article VI (Distributions):
409A Pensions that would have been paid out during the Transition Period under the provisions set forth in the main body of the Plan (but for the application of permissible transition rules under Section 409A) shall be paid out on March 1, 2009.
A.4 Transition Rules for Article VII (Administration):
Effective during the Transition Period, the language of Section 8.6(a) shall be replaced in its entirety with the following language:
“8.6(a) Compliance 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 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
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document that is determined to violate the requirements of Section 409A or to adversely affect the grandfather of the Pre-409A Program shall be void and without effect. In addition, any provision that is required to appear in this Plan document to satisfy the requirements of Section 409A, but that is not expressly set forth, shall be deemed to be set forth herein, and the Plan shall be administered in all respects as if such provision were expressly set forth. A corresponding rule shall apply with respect to a provision that is required to preserve the grandfather of the Pre-409A Program. In all cases, the provisions of this Section shall apply notwithstanding any contrary provision of the Plan that is not contained in this Section.”
A.5 Transition Rules for Severance Benefits.
Effective during the Transition Period, the following provisions shall apply according to their specified terms.
(a) Definitions:
(1) Where the following words and phrases, in boldface and underlined, appear in this Section A.5 with initial capitals they shall have the meaning set forth below, unless a different meaning is plainly required by the context. Any terms used in this Article A of the Appendix with initial capitals and not defined herein shall have the same meaning as in the main Plan, unless a different meaning is plainly required by the context.
(2) “Special Early Retirement” shall mean the Participant’s attainment of at least age 50 but less than age 55 with 10 years of Elapsed Time Service as of the date of his Retirement, provided, however, that with respect to the 2008 Severance at Section A.5(d), for purposes of determining whether a
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Participant has met the age and service requirements, a Participant’s age and years of Elapsed Time Service are rounded up to the nearest whole year.
(b) 2005 Severance:
(1) Non-Retirement Eligible Employees: With respect to any Participant who terminated in 2005 as a result of a severance window program and who was not eligible for Retirement as of the date of his Separation from Service, the Participant’s 409A Pension shall be paid as a Vested Pension under Section 6.1(b) of the Plan document, provided, however, that the Participant’s 409A Pension will be paid at the same time as his Salaried Plan benefit. The available forms of payment shall be those forms available to a Participant who is entitled to a Vested Pension, as set forth in Section 6.2 of the Plan document.
(2) Non-Retirement Eligible Employees with Payments in 2007: With respect to any Participant who terminated in 2005 as a result of a severance window program, who was not eligible for Retirement as of the date of his Separation from Service, and whose 409A Pension Payment would otherwise be paid during 2007, the Participant’s 409A Pension shall be paid as a Vested Pension under Section 6.1(b) of the Plan document, provided, however, that the Participant’s 409A Pension will be paid at the later of (i) January 1, 2007 or (ii) when the Participant attained age 55. The available forms of payment shall be those forms available to a Participant who is entitled to a Vested Pension, as set forth in Section 6.2 of the Plan document.
(3) Retirement Eligible Employees: With respect to any Participant who terminated in 2005 as a result of a severance window program and who
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fulfilled the requirements for either a Normal or Early Retirement Pension under Article IV of the Plan document as of February 5, 2006, the Participant’s 409A Pension shall be paid on the first day of the month following the Participant’s Separation from Service in a lump sum.
(4) Retirement Eligible Employees (With Credit): With respect to any Participant who terminated in 2005 as a result of a severance window program and who fulfilled the requirements for either a Normal or Early Retirement Pension under Article IV of the Plan document as of his Separation from Service as a result of being provided additional Credited Service time by the Company, the Participant’s 409A Pension shall be paid on the first day of the month following the Participant’s Separation from Service in a lump sum.
(5) Special Early Retirement Eligible: With respect to any Participant who terminated in 2005 as a result of a severance window program and who fulfilled the requirements to be eligible for Special Early Retirement as of his Separation from Service, the Participant’s 409A Pension shall be paid on the first day of the month following the Participant’s Separation from Service in a lump sum.
(c) 2007 Severance:
(1) Non-Retirement Eligible Employees: With respect to any Participant who terminated in 2007 as a result of a severance window program and who was not eligible for Retirement as of the date of his Separation from Service, the Participant’s 409A Pension shall be paid as a Vested Pension under Section 6.1(b) of the Plan document. The available forms of payment shall be
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those forms available to a Participant who is entitled to a Vested Pension, as set forth in Section 6.2 of the Plan document.
(2) Retirement Eligible Employees: With respect to any Participant who terminated in 2007 as a result of a severance window program and who fulfilled the requirements for either a Normal or Early Retirement Pension under Article IV of the Plan document as of his Separation from Service, the Participant’s 409A Pension shall be paid on the first day of the month following the Participant’s Separation from Service in a lump sum; provided, however, that if a Participant made a valid Prior Payment Election under Section 6.1(a)(2) of the Plan document, his 409A Pension shall be paid according to such election.
(3) Employee Who Become Retirement Eligible:
(i) 409A Pension: With respect to any Participant who terminated in 2007 as a result of a severance window program and who fulfilled the requirements for either a Normal or Early Retirement Pension under Article IV of the Plan document between his Separation from Service and the last day of his paid leave of absence (if any), the Participant’s 409A Pension shall be paid on the first day of the month following the later of (i) Participant’s attainment of age 55 and (ii) his Separation from Service; the 409A Pension shall be paid as a Vested Pension under Section 6.1(b) of the Plan document. The available forms of payment shall be those forms available to a Participant who is entitled to a Vested Pension, as set forth in Section 6.2 of the Plan document.
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(ii) PEP Kicker: Any amount paid to a Participant otherwise described under this paragraph (3) as a replacement for benefits that the Participant could have earned under the Plan but for his Separation from Service shall be paid as a single lump sum, provided, however, that if a Participant made a valid Prior Payment Election under Section 6.1(a)(2) of the Plan document, the amounts described in this subparagraph (ii) shall be paid according to such election. All amounts to be paid shall be paid on the first day of the month following the later of (i) the Participant’s attainment of age 55 or (ii) the Participant’s Separation from Service.
(4) Special Retirement Eligible Employees:
(i) 409A Pension: With respect to any Participant who terminated in 2007 as a result of a severance window program and who fulfilled the requirements to be eligible for Special Early Retirement as of his Separation from Service, the Participant’s 409A Pension shall be paid on the first day of the month following the Participant’s attainment of age 55 as a Vested Pension under Section 6.1(b) of the Plan document. The available forms of payment shall be those forms available to a Participant who is entitled to a Vested Pension, as set forth in Section 6.2 of the Plan document.
(ii) PEP Kicker: Any amount paid to a Participant otherwise described under this paragraph (4) as a replacement for benefits that the Participant could have earned under the Plan but for his Separation from Service shall be paid as a single lump sum, provided, however, that if a
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Participant made a valid Prior Payment Election under Section 6.1(a)(2) of the Plan document, the amounts described in this subparagraph (ii) shall be paid according to such election. All amounts to be paid shall be paid on the first day of the month following the Participant’s attainment of age 55.
(5) Employees Who Become Special Retirement Eligible:
(i) 409A Pension: With respect to any Participant who terminated in 2007 as a result of a severance window program and who fulfilled the requirements to be eligible for Special Early Retirement during the period between his Separation from Service and the last day of his paid leave of absence (if any), the Participant’s 409A Pension shall be paid on the first day of the month following the Participant’s attainment of age 55 as a Vested Pension under Section 6.1(b) of the Plan document. The available forms of payment shall be those forms available to a Participant who is entitled to a Vested Pension, as set forth in Section 6.2 of the Plan document.
(ii) PEP Kicker: Any amount paid to a Participant otherwise described under this paragraph (5) as a replacement for benefits that the Participant could have earned under the Plan but for his Separation from Service shall be paid as a single lump sum, provided, however, that if a Participant made a valid Prior Payment Election under Section 6.1(a)(2) of the Plan document, the amounts described in this subparagraph (ii) shall be paid according to such election. All amounts to be paid shall be paid
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on the first day of the month following the Participant’s attainment of age 55.
(d) 2008 Severance:
(1) Non-Retirement Eligible Employees: With respect to any Participant who terminated in 2008 as a result of a severance window program and who was not eligible for Retirement as of the date of his Separation from Service, the Participant’s 409A Pension shall be paid as a Vested Pension under Section 6.1(b) of the Plan document. The available forms of payment shall be those forms available to a Participant who is entitled to a Vested Pension, as set forth in Section 6.2 of the Plan document.
(2) Retirement Eligible Employees: With respect to any Participant who terminated in 2008 as a result of a severance window program and who fulfilled the requirements for either a Normal or Early Retirement Pension under Article IV of the Plan document as of his Separation from Service, the Participant’s 409A Pension shall be paid on the first day of the month following the Participant’s Separation from Service in a lump sum; provided, however, that if a Participant made a valid Prior Payment Election under Section 6.1(a)(2) of the Plan document, his 409A Pension shall be paid according to such election.
(3) Employee Who Become Retirement Eligible:
(i) 409A Pension: With respect to any Participant who terminated in 2008 as a result of a severance window program and who fulfilled the requirements for either a Normal or Early Retirement Pension under Article IV of the Plan document between his Separation
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from Service and the last day of his paid leave of absence (if any), the Participant’s 409A Pension shall be paid on the first day of the month following the later of (i) Participant’s attainment of age 55 and (ii) his Separation from Service; the 409A Pension shall be paid as a Vested Pension under Section 6.1(b) of the Plan document. The available forms of payment shall be those forms available to a Participant who is entitled to a Vested Pension, as set forth in Section 6.2 of the Plan document.
(ii) PEP Kicker: Any amount paid to a Participant otherwise described under this paragraph (3) as a replacement for benefits that the Participant could have earned under the Plan but for his Separation from Service shall be paid as a single lump sum, provided, however, that if a Participant made a valid Prior Payment Election under Section 6.1(a)(2) of the Plan document, the amounts described in this subparagraph (ii) shall be paid according to such election. All amounts to be paid shall be paid on the first day of the month following the later of (i) Participant’s attainment of age 55 or (ii) the Participant’s Separation from Service.
(4) Employees Who Are or Become Special Retirement Eligible:
(i) 409A Pension: With respect to any Participant who terminated in 2008 as a result of a severance window program and who fulfilled the requirements to be eligible for Special Early Retirement as of his Separation from Service or during the period between his Separation from Service and the last day of his paid leave of absence (if any), the Participant’s 409A Pension shall be paid on the first day of the month
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following the Participant’s attainment of age 55 as a Vested Pension under Section 6.1(b) of the Plan document. The available forms of payment shall be those forms available to a Participant who is entitled to a Vested Pension, as set forth in Section 6.2 of the Plan document.
(ii) PEP Kicker: Any amount paid to a Participant otherwise described under this paragraph (4) as a replacement for benefits that the Participant could have earned under the Plan but for his Separation from Service shall be paid as a single lump sum, provided, however, that if a Participant made a valid Prior Payment Election under Section 6.1(a)(2) of the Plan document, the amounts described in this subparagraph (ii) shall be paid according to such election. All amounts to be paid shall be paid on the first day of the month following the Participant’s attainment of age 55.
(e) Delay for Key Employees: To the extent that a Participant is a Key Employee (as defined in Section A.2(b), above) with respect to any payment provided under this Section A.5, and to the extent that payment of his 409A Pension is on account of his Separation from Service, his 409A Pension shall be subject to the delay in payment provided under Section 6.6 of the main Plan document.
(f) Compliance with 19(c): All payments that are to be made under this Section A.5 were scheduled to made during the calendar year in which the Participant terminated employment, with payments to be made as provided herein. All elections made by the Company with respect to such payments were made in compliance with Notice 2005-1 and other provisions of Code Section 409A.
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A.6 Certain Participants
The following transition rules shall apply only with respect to the following described Participants:
(a) A Participant’s PEP Credited Service shall be deemed to be five years if the Participant terminates employment in 2005 while classified as Band VI (or equivalent), and his employment with an Employer was for a limited duration assignment of less than five years. A Participant shall be deemed to be vested for purposes of this Plan if the Participant terminates employment in 2005 while classified as Band VI (or equivalent), and his employment with an Employer was for a limited duration assignment of less than five years.
(b) In the case of a Participant who on October 9, 2007 selects an Annuity Starting Date of November 1, 2007 for the Participant’s Pension under the Salaried Plan which is payable in a single lump sum (after taking into account the special rule in Section 6.3(a)(2), if necessary), the portion of the Participant’s benefit under the Plan that is not subject to Section 409A of the Code shall be paid in a single lump sum six months after the Participant’s Annuity Starting Date under the Salaried Plan.
(c) In the case of a Participant who on September 3, 2004 selects a fixed date of payment of February 1, 2005 for the Participant’s Pension under the Plan, the following provisions shall apply:
(1) Such fixed date shall be the commencement date for the Participant’s benefit under the Plan, and
(2) The calculation of the Participant’s benefit under the Plan shall be made taking into account service to be performed during any period for which
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the Participant is to provide consulting services to the Company, even if such services are to be performed after the payment date specified in paragraph (1).
A.7 Transition Rules for Article VI (409A Disability Pension Pre-Separation Accruals):
(a) Distribution: The portion of a Participant’s 409A Disability Pension representing Pre-Separation Accruals that would have been paid out during the Transition Period under the provisions set forth in the main body of the Plan (but for the application of permissible transition rules under Section 409A) shall commence on March 1, 2009. The available forms of payment of a Participant’s 409A Disability Pension representing Pre-Separation Accruals shall be those forms available to a Participant who is entitled to a Vested Pension, as set forth in Section 6.2 of the Plan (including the different forms available to a married versus an unmarried Participant).
(b) Additional Benefit: If a Participant who is paid the Pre-Separation Accruals of his 409A Disability Pension under the provisions of subsection A.7(a) of this Appendix Article A dies prior to his expected mortality date (based on the mortality table specified by Schedule 1 of Section 2.1(b) (Actuarial Equivalent) of the Plan document as of January 1, 2009), his beneficiary shall be paid the lump sum actuarial equivalent of the annuity payments that would have been made from the date of the Participant’s death until his expected mortality date (had the Participant not died). The payment to the beneficiary shall be made within 30 days following the Participant’s death. Notwithstanding anything else in Section 6.5 of the Plan, a Participant subject to this subsection shall be permitted to name a beneficiary (in a form and manner acceptable to the Plan Administrator) for purposes of receiving the additional benefit described in this subsection. If the Participant fails to name a beneficiary for this
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purpose, his beneficiary shall be the beneficiary selected under Section 6.5 of the Plan, or if none, then his Eligible Spouse or Eligible Domestic Partner (as applicable). If the Participant does not have an Eligible Spouse or Eligible Domestic Partner as of the date of his death, then his beneficiary shall be his estate.
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APPENDIX ARTICLE B -
Computation of Earnings and Service During Certain Severance Windows
Computation of Earnings and Service During Certain Severance Windows
B.1 Definitions:
Where the following words and phrases, in boldface and underlined, appear in this Appendix B with initial capitals they shall have the meaning set forth below, unless a different meaning is plainly required by the context. Any terms used in this Article B of the Appendix with initial capitals and not defined herein shall have the same meaning as in the main Plan, unless a different meaning is plainly required by the context.
(a) “Severance Program” shall mean a program providing certain severance benefits that are paid while the program’s participants are on a severance leave of absence that is determined by the Plan Administrator to qualify for recognition as Service under Section B.3 and Credited Service under Section B.4 of Article B.
(b) “Eligible Bonus” shall mean an annual incentive payment that is payable to the Participant under the Severance Program and that is identified under the terms of the Severance Program as eligible for inclusion in determining the Participant’s Highest Average Monthly Earnings.
B.2 Inclusion of Salary and Eligible Bonus:
The Plan Administrator may specify that, pursuant to a Participant’s participation in a severance window program provided by the Company, if a Participant receives a severance benefit pursuant to a Severance Program, all salary continuation and any Eligible Bonus that is payable during the first 12 months of a leave of absence period provided to the Participant under such Severance Program will be counted toward the Participant’s Highest Average Monthly Earnings, even if such salary or other earnings are to be received after a Participant’s
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Separation from Service. In particular, if payment of a Participant’s 409A Pension is to be made at Separation from Service and prior to the Participant’s receipt of all of the salary continuation or Eligible Bonus that is payable to the Participant from the Severance Program, the Participant’s Highest Average Monthly Earnings shall be determined by taking into account the full salary continuation and eligible bonus that is projected to be payable to the Participant during the first 12 months of a period of leave of absence that is granted to the Participant under the Severance Program. This determination shall divide the projected earnings between Plan Years as determined by the Plan Administrator, in order to avoid any bunching of the earnings in a Plan Year.
B.3 Inclusion of Credited Service:
The Plan Administrator may specify that, pursuant to a Participant’s participation in a severance window program provided by the Company, if a Participant receives a severance benefit under a Severance Program, all Credited Service earned or to be earned during the first 12 months of the period of severance will be counted toward the Participant’s Credited Service for purposes of determining the Participant’s Pension and a Pre-Retirement Spouse’s Pension or Pre-Retirement Eligible Domestic Partner’s Pension, even if the period of time counted as Credited Service under the Severance Program occurs after a Participant’s Separation from Service.
B.4 Inclusion of Service:
The Plan Administrator may specify that, pursuant to a Participant’s participation in a severance window program provided by the Company, if a Participant receives a severance benefit under a Severance Program, all Service earned or to be earned during the first 12 months of the period of severance will be counted toward the Participant’s Service for purposes
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of determining the Participant’s Pension and a Pre-Retirement Spouse’s Pension or Pre-Retirement Eligible Domestic Partner’s Pension, even if the period of time counted as Service under the Severance Program occurs after a Participant’s Separation from Service.
B.5 Reduction to Reflect Early Payment:
If the Participant receives either (1) additional Credited Service or (2) additional earnings that are included in Highest Average Monthly Earnings under Sections B.2 or B.3 of this Article B, as a result of a severance benefit provided under a Severance Program and such additional Credited Service or earnings are included in the calculation of the Participant’s Pension prior to the time that the Credited Service is actually performed by the Participant, or the earnings are actually paid to the Participant, the Pension paid to the Participant shall be adjusted actuarially to reflect the receipt of the portion of the Pension attributable to such Credited Service or earnings received on account of the Severance Program prior to the time such Credited Service is performed or such earnings are actually paid to the Participant. For purposes of determining the adjustment to be made, the Plan shall use the rate provided under the Salaried Plan for early payment of benefits.
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APPENDIX ARTICLE C
International and PIRP Transfer Participants
C.1 Scope:
This Article provides special rules for calculating the benefit of an individual who is either an “International Transfer Participant” under Section C.2 below or a “PIRP Transfer Participant” under Section C.4 below. The benefit of an International Transfer Participant shall be determined under Section C.3 below, subject to Section C.6 below. The benefit of a PIRP Transfer Participant shall be determined under Section C.5 below. Once a benefit is determined for an International Transfer Participant or a PIRP Transfer Participant under this Article, such benefit shall be subject to the Plan’s normal conditions and shall be paid in accordance with the Plan’s normal terms. All benefits paid under this Article are subject to Code section 409A, including any accrued prior to January 1, 2005. The provisions of this Article relating to International Transfer Participants are effective April 1, 2007. The provisions of this Article relating to PIRP Transfer Participants are effective January 1, 2016 (but they may take into account years that precede January 1, 2016).
C.2 International Transfer Participants:
An “International Transfer Participant” is a Participant who is:
(a) General Rule: An individual who, following a transfer to an April 2007 Foreign Subsidiary (as defined in paragraph (5) of the Employer definition in Section 2.1 of Part B of the Salaried Plan, as in effect on January 1, 2014)), would qualify as an Employee within the meaning of paragraph (2)(vi) of the Employee definition in Section 2.1 of Part B of the Salaried Plan, as in effect on January 1, 2014 (U.S. citizen or resident alien on qualifying temporary international assignment) but for the fact that his
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assignment with the April 2007 Foreign Subsidiary is in a position of employment that is classified as Band 4 (or its equivalent) or higher; or
(b) Special Rule for Certain Permanent Assignments to Mexico: Notwithstanding subsection (a) above, an International Transfer Participant also includes an individual who was transferred to an April 2007 Foreign Subsidiary based in Mexico, and who would qualify as an Employee within the meaning of paragraph (2)(vi) of the Employee definition in Section 2.1 of Part B of the Salaried Plan, as in effect on January 1, 2014 (U.S. citizen or resident alien on qualifying temporary international assignment) but for the fact that:
(1) His assignment with the April 2007 Foreign Subsidiary is in a position that is classified as Band 4 (or its equivalent) or higher;
(2) Mexico is his home country on the records of the Expat Centre for Excellence group or its successor (in accordance with such paragraph (2)(vi)); and
(3) The duration of his assignment with the April 2007 Foreign Subsidiary in Mexico is not limited to 5 years or less.
An individual described in subsection (a) or (b) above may still qualify as an International Transfer Participant if his transfer to an April 2007 Foreign Subsidiary occurred prior to April 1, 2007 (the effective date of this Article), provided he satisfied the terms of subsection (a) or (b) above on the date of his transfer.
C.3 Benefit Formula for International Transfer Participants:
Except as provided in this Section C.3, an International Transfer Participant’s benefit under the Plan shall be determined using a calculation methodology that is substantially similar to that which applies under Section 5.1 of the Plan.
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(a) Total Pension for International Transfer Participant: Notwithstanding the preceding sentence, an International Transfer Participant’s “Total Pension” (as defined in Section 5.1(c)(1) of the Plan) shall be calculated as if he continued to receive Credited Service and Earnings under the Salaried Plan while working for the April 2007 Foreign Subsidiary to which he transferred following his employment with an Employer based in the United States, without regard to the actual date on which he ceased receiving Credited Service and Earnings under the Salaried Plan. However, the Total Pension of an International Transfer Participant whose transfer to an April 2007 Foreign Subsidiary occurred prior to 1992 shall not take into account Credited Service and Earnings for employment with the April 2007 Foreign Subsidiary prior to 1992.
(b) Calculation of International Transfer Participant’s Benefit: The International Transfer Participant’s benefit under the Plan shall be calculated by reducing his Total Pension as determined under subsection (a) above (expressed as a lump sum as of his benefit commencement date under the Plan) by the following amounts:
(1) The amount of his actual benefit under the Salaried Plan (expressed as a lump sum amount on his benefit commencement date), and
(2) Any amounts paid to him from a “qualifying plan” as that term is defined under Section 3.5(c)(4) of Part B of the Salaried Plan (Transfers and Non-Duplication) with respect to his assignment with the April 2007 Foreign Subsidiary (with such amounts expressed as a lump sum on his benefit commencement date under this Plan).
C.4 Definitions Related to PIRP Transfer Participants:
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The following definitions apply for purposes of Sections C.1, C.4 and C.5 of this Article.
(a) “Accrued Benefit” is the benefit payable to a PIRP Transfer Participant, under PIRP-DB or this Plan, in the form of a single-life annuity and payable on the first of the month that is coincident with or next following the PIRP Transfer Participant’s 65th birthday.
(b) “PIRP-DB” is the portion of the PepsiCo International Retirement Program that provides a program of defined benefits.
(c) “PIRP-DB Employer” is the Company or an affiliate of the Company that is an “Employer” under the terms of PIRP-DB.
(d) “PIRP-DB Pensionable Service” is service that qualifies as “Pensionable Service” under the terms of PIRP-DB.
(e) “PIRP-DB Salary” is compensation that qualifies as “Salary” under the terms of PIRP-DB.
(f) A “PIRP Transfer Participant” is an individual who is described in paragraph (1) or (2) below.
(1) Incoming PIRP Transfer Participant: An individual – (i) who is employed during a year (including a year preceding 2016) by a PIRP-DB Employer in a position that is eligible to accrue benefits under PIRP-DB (or would be eligible if Section 9.14 of PIRP-DB did not apply), (ii) who is then transferred by the Company during the year from such position to a position that is eligible to accrue benefits under the Salaried Plan, (iii) whose PIRP-DB accrual for the Year of Transfer is blocked by Section 9.14 of PIRP-DB, (iv) who would otherwise be entitled to a PIRP-DB benefit enhancement for the Year of Transfer that relates
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to PIRP-DB Salary or PIRP-DB-Pensionable Service for the year of the transfer, and (v) whose PIRP-DB benefit was not already paid out by December 1, 2016 (but disregarding any such paid-out PIRP-DB benefit for this purpose that the PIRP-DB Vice President determines should be treated under this clause as if it had not been paid out).
(2) Outgoing PIRP Transfer Participant: An individual – (i) who is employed during a year (including a year preceding 2016) by an Employer in a position that is eligible to accrue benefits under the Salaried Plan, (ii) who is then transferred by the Company during the year from such position to a position that is eligible to accrue benefits under PIRP-DB (or would be eligible if Section 9.14 of PIRP-DB did not apply), (iii) whose PIRP-DB accrual for the Year of Transfer is blocked by Section 9.14 of PIRP-DB, (iv) who would otherwise be entitled to a PIRP-DB benefit enhancement for the Year of Transfer that relates to PIRP-DB Salary or PIRP-DB Pensionable Service for the year of the transfer, and (v) whose PIRP-DB benefit was not already paid out by December 1, 2016 (but disregarding any such paid-out PIRP-DB benefit for this purpose that the PIRP-DB Vice President determines should be treated under this clause as if it had not been paid out).
(g) The “PIRP-DB Vice President” is the Company executive who has the role of the “Vice President” under the terms of PIRP-DB.
(h) A “U.S. Person” is an individual who is classified as a “U.S. Person” under the terms of PIRP-DB.
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(i) “Year of Transfer” is the year in which a transfer described in subsection (f) above occurs.
C.5 Benefit Formula for PIRP Transfer Participants:
Except as provided in this Section C.5, a PIRP Transfer Participant’s benefit under the Plan shall be determined using a calculation methodology that is substantially similar to that which applies under Section 5.1 of the Plan.
(a) Total Pension for PIRP Transfer Participant: Notwithstanding the preceding sentence, a PIRP Transfer Participant’s “Total Pension” (as defined in Section 5.1(c)(1) of the Plan) shall be calculated as provided in paragraphs (1) and (2) below.
(1) First, a PIRP Transfer Participant’s Total Pension shall be calculated as if he were an eligible employee under the Salaried Plan for the entire Year of Transfer, and as if he received Credited Service and Earnings under the Salaried Plan for the Year of Transfer equal to – (i) his actual Credited Service and Earnings under the Salaried Plan for the Year of Transfer, increased by (ii) any other compensation and service for the Year of Transfer that would have been recognized as PIRP-DB Salary and PIRP DB Pensionable Service, if Section 9.14 of PIRP-DB did not apply for the Year of Transfer.
(2) If (during a year a PIRP Transfer Participant is otherwise accruing benefits under this Plan) the PIRP Transfer Participant would be credited with PIRP-DB Salary that cannot be recognized under PIRP as a result of Section 9.14 of PIRP-DB, and if this PIRP-DB Salary would be considered for accrual purposes under PIRP-DB in connection with PIRP-DB Pensionable Service that is not recognized under this Plan, the increase in the PIRP Transfer Participant’s
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Accrued Benefit under PIRP that is related to this PIRP-DB Pensionable Service and that is blocked by Section 9.14 of PIRP-DB shall be added to the PIRP Transfer Participant’s Accrued Benefit under this Plan. In the case of a PIRP Transfer Participant who has a Separation from Service on or after January 1, 2017, this increase in the PIRP Transfers Participant’s Accrued Benefit under this Plan shall result in an appropriate increase, determined in the Company’s discretion, in the Total Pension determined under paragraph (1) above. Notwithstanding the foregoing, in determining Credited Service and Earnings under this subsection (a), no compensation or service shall be taken into account more than once, and a PIRP Transfer Participant’s Total Pension shall be determined in a way that avoids any duplication of benefits that will be provided to or on behalf of the PIRP Transfer Participant under PIRP-DB (after applying Section 9.14 of PIRP-DB) or another plan maintained or contributed to by the Company or an affiliate, but without applying any offset that would violate Code Section 409A.
(b) Calculation of PIRP Transfer Participant’s Benefit: The PIRP Transfer Participant’s benefit under the Plan shall be calculated by reducing his Total Pension as determined under subsection (a) above by the reductions that are normally applicable under Article V. In addition, in the case of a PIRP Transfer Participant who has a Separation from Service on or after January 1, 2017, if (during a year a PIRP Transfer Participant is otherwise accruing benefits under this Plan) the value of the PIRP Transfer Participant’s benefit under PIRP-DB would increase (if Section 9.14 of PIRP-DB did not apply) as a result of the PIRP Transfer Participant becoming eligible for early retirement
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under PIRP-DB, then the projected increase in value of the PIRP-DB benefit at the PIRP Transfer Participant’s retirement under PIRP-DB, which will be blocked by Section 9.14 of PIRP, shall result in an appropriate increase, determined in the Company’s discretion, in the Participant’s benefit under this Plan that is payable at the time and in the form applicable under this Plan. The appropriate increase shall be determined net of any expected increase in the value of the benefit under this Plan related to becoming eligible for Early Retirement under this Plan. In addition, a PIRP Transfer Participant’s appropriate increase shall be determined in a way that avoids any duplication of benefits that will be provided to or on behalf of the PIRP Transfer Participant under PIRP-DB (after applying Section 9.14 of PIRP-DB) or another plan maintained or contributed to by the Company or an affiliate, but without applying any offset that would violate Code Section 409A.
C.6 Alternative Arrangements Permitted:
Notwithstanding any provision of this Article or the Plan to the contrary, the Company and a Participant who would qualify as an International Transfer Participant under Section C.2 above may agree in writing to disregard the provisions of this Article in favor of another mutually agreed upon benefit arrangement under the Plan that complies with Code Section 409A, in which case this Article shall not apply.
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APPENDIX ARTICLE D
Band 4 or Higher Rehired Yum Participants
Band 4 or Higher Rehired Yum Participants
D.1 Scope:
Effective May 1, 2009, this Article provides special rules for calculating the benefit of a transferred Participant whose transfer would be an Eligible Transfer under Section TRI.2(e) of the Part B of the Salaried Plan but for the fact that such individual is reemployed by the Company on or after May 1, 2009, into a position that is classified as Band 4 (or its equivalent) or higher. For purposes of determining such Participant’s Total Pension within the meaning of Section 5.1(c)(1), but not for purposes of determining such Participant’s Salaried Plan Pension within the meaning of Section 5.1(c)(2), such Participant’s position on reemployment will be deemed to be classified as below Band 4 (or its equivalent), so that the Participant’s transfer is eligible to be treated as an Eligible Transfer (subject to the other conditions thereof) and the Participant is eligible for the imputed service provisions of Section TRI.4(b) and (c). Such Participant’s benefit otherwise shall be subject to the Plan’s usual conditions and shall be paid in accordance with the Plan’s usual terms. All benefits paid under this Article are subject to Code section 409A.
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APPENDIX ARTICLE E -
Time and Form of Payment for Benefits Paid During Severance Windows
Time and Form of Payment for Benefits Paid During Severance Windows
E.1 Scope.
This Article E sets forth the time and form of payment provisions that apply to benefits under the Plan that are paid to a Covered Participant (as defined in Section E.2 below). This Article is effective for Participants who are terminated in a Severance Program or under circumstances that qualify them for an Individual Severance Agreement (each as defined in Section E.2 below) on or after January 1, 2009 (or in the case of Participants covered by Appendix Article PBG, on or after January 1, 2012). Nothing in this Article E shall make any of the additional benefits that are made available under the Plan in any Severance Program or pursuant to any Individual Severance Agreement a permanent feature of the Plan.
E.2 Definitions:
Where the following words and phrases appear in this Appendix E with initial capitals, they shall have the meaning set forth below unless a different meaning is plainly required by the context. Any terms used in this Article E of the Appendix with initial capitals and not defined herein shall have the same meaning as in the main Plan, unless a different meaning is plainly required by the context.
(a) “Applicable Summary Plan Description” means the summary plan description that sets forth the terms and conditions of a particular Severance Program.
(b) “Covered Participant” means a Participant whose employment with the Company is terminated and who is eligible for Special Early Retirement either (i) under a Severance Program and pursuant to the terms of the Applicable Summary Plan Description, or (ii) pursuant to the terms of an Individual Severance Agreement.
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(c) “Individual Severance Agreement” means an agreement between the Company and a Covered Participant that – (i) sets forth the terms and conditions of the Covered Participant’s termination of employment and (ii) expressly either (A) provides that the termination qualifies the Covered Participant for Special Early Retirement under PEP, or (B) describes the pension benefits the Covered Participant will receive in connection with the termination of employment.
(d) “Kicker” means the Special Early Retirement benefit that is provided to a Covered Participant pursuant to the terms of an Applicable Summary Plan Description or an Individual Severance Agreement and that is equal to the following: (i) the Participant’s benefit under the Salaried Plan and this Plan as of his Termination Date, determined based on the benefit formulas and early retirement reduction factors for Early Retirement Pensions under each plan, minus (ii) the Participant’s Vested Pension under the Salaried Plan and this Plan as of the Termination Date, determined based on the benefit formulas and reduction factors for Vested Pensions under each plan. The Kicker shall be divided into the following components:
(1) The “PEP Kicker,” which is the portion of the Kicker paid under the Plan as a replacement for benefits that the Participant could have earned under the Plan but for his Separation from Service (either in a Severance Program or pursuant to the terms of an Individual Severance Agreement) prior to attaining Normal or Early Retirement under the Plan; and
(2) The “Qualified Kicker,” which is the portion of the Kicker paid under the Plan as a replacement for benefits that the Participant could have earned under the Salaried Plan but for his termination of employment (either in
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a Severance Program or pursuant to the terms of an Individual Severance Agreement) prior to attaining Normal or Early Retirement under the Salaried Plan.
In determining the early retirement reduction factors for ages before 55, the monthly rate of reduction applicable between age 56 and age 55 shall apply unless (i) in the case of a Participant who is eligible for Special Early Retirement under a Severance Program, a different factor is used in the Salaried Plan for employees covered by the same Severance Program in which case such other factor shall be used, and (ii) in the case of a Participant who is eligible for Special Early Retirement pursuant to the terms of an Individual Severance Agreement, a different factor is called for therein, in which case such other factor shall be used.
(e) “Severance Program” has the same meaning that applies to that term under Appendix Section ERW.2(f) of Part B of the Salaried Plan (legacy PepsiCo Appendix).
(f) “Special Early Retirement” means a retirement from the Company that either – (i) satisfies all of the conditions for receiving special early retirement benefits that are set forth in an Applicable Summary Plan Description, or (ii) is expressly recognized as qualifying for special early retirement benefits pursuant to the terms of an Individual Severance Agreement.
(g) “Termination Date” means the later of – (i) the Covered Participant’s Separation from Service, or (ii) date as of which the Covered Participant’s authorized severance leave of absence (if any) is projected to terminate under the terms of the Applicable Summary Plan Description or the Individual Severance Agreement, as
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applicable. If clause (ii) of the preceding sentence applies, then a Participant’s Termination Date shall be determined as of the date of the Participant’s Separation from Service using the formulas for calculating the severance leave of absence, as such formulas are in effect under the Applicable Summary Plan Description or the Individual Severance Agreement when the legally binding right to special early retirement benefits arises in connection with the Severance Program or pursuant to the Individual Severance Agreement (or if special early retirement benefits do not apply to the Covered Participant, as of the date determined by the Plan Administrator). Except as otherwise expressly provided in the Applicable Summary Plan Description or the Individual Severance Agreement, a Participant’s Termination Date, once set in accordance with the prior two sentences, shall not change based on any circumstances or events that follow the date of the Participant’s Separation from Service.
E.3 Time and Form of Payment for 409A Pension:
A Covered Participant’s 409A Pension (calculated without regard to the Kicker for purposes of this Section E.3) shall be paid as follows:
(a) Non-Retirement Eligible Participants: If a Covered Participant is not eligible for Retirement as of his Separation from Service, the Participant’s 409A Pension shall be paid as a Vested Pension under Section 6.1(b) according to the form of payment provisions applicable to Vested Pensions under Section 6.2.
(b) Retirement Eligible Participants:
(1) If the Covered Participant is eligible for a Normal, Early or Late Retirement Pension under Article IV as of his Separation from Service, the Participant’s 409A Pension shall be paid as a Retirement Pension under Section
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6.1(a)(1); provided, however, that if the Participant made a valid prior payment election under Section 6.1(a)(2), his 409A Pension shall be paid as a Retirement Pension in accordance with such election.
(2) If the Covered Participant becomes eligible for a Normal or Early Retirement Pension after his Separation from Service, including during the period between his Separation from Service and the last day of his paid leave of absence (if any), the Participant’s 409A Pension shall be paid as a Vested Pension under Section 6.1(b) according to the form of payment provisions applicable to Vested Pensions under Section 6.2.
(c) Special Early Retirement Eligible Participants: If a Covered Participant is eligible for Special Early Retirement as of his Separation from Service or becomes so eligible during the period between his Separation from Service and the last day of his paid leave of absence (if any), the Participant’s 409A Pension shall be paid as a Vested Pension under Section 6.1(b) according to the form of payment provisions applicable to Vested Pensions under Section 6.2.
E.4 Time and Form of Payment of Kicker Benefits:
A Covered Participant’s PEP Kicker and Qualified Kicker shall be paid as follows:
(a) PEP Kicker: A Participant’s PEP Kicker shall be paid as a single lump sum on the first day of the month following the later of (i) the Participant’s 55th birthday, or (ii) the Participant’s Separation from Service; provided, however, that if the Participant made a valid Prior Payment Election under Section 6.1(a)(2), the Participant’s PEP Kicker shall be paid according to such election (even in cases where the Participant’s 409A Pension is paid according to Section E.3(b)(2) above). In the event the Participant dies
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after meeting the requirements for a PEP Kicker but before it is paid, the PEP Kicker shall be paid to his Surviving Spouse or surviving Eligible Domestic Partner in a single lump sum 60 days following his death, and if there is no Surviving Spouse or surviving Eligible Domestic Partner, then to the Participant’s estate.
(b) Qualified Kicker: A Participant’s Qualified Kicker shall be paid based on his Separation from Service as a single lump sum on the first day of the month coincident or next following his Termination Date; provided, however, that if the Applicable Summary Plan Description or Individual Severance Agreement that creates the Participant’s legally binding right to the Qualified Kicker expressly provides for a different time and/or form of payment, the provisions of this subsection (b) shall not apply, and the Participant’s Qualified Kicker shall be paid as provided in the Applicable Summary Plan Description or Individual Severance Agreement, as applicable. In the event the Participant dies after meeting the requirements for a Qualified Kicker but before it is paid, the Qualified Kicker shall be paid to his Surviving Spouse or surviving Eligible Domestic Partner in a single lump sum 60 days following his death, and if there is no Surviving Spouse or surviving Eligible Domestic Partner, then to the Participant’s estate.
E.5 Delay for Key Employees:
Notwithstanding any provision of this Appendix E to the contrary, if a Participant is determined to be a Key Employee, any payment under this Article E that is made on account of his Separation from Service shall be subject to the required delay in payment for Key Employees under Section 6.6, except to the extent that the payment qualifies for an exemption from the application of Section 409A.
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APPENDIX ARTICLE F -
U.K. Supplementary Appendix Participants with U.S. Service
U.K. Supplementary Appendix Participants with U.S. Service
F.1 Scope:
This Article applies to “Covered U.K. Employees” as defined in Section F.2 below. The benefit of a Covered U.K. Employee shall be determined as provided in Section F.3 below. Once a benefit is determined for a Covered U.K. Employee under this Article, it shall be paid in accordance with the Plan’s normal terms regarding the time and form of payment. All benefits payable under this Article are subject to Code section 409A. This Article has been restated effective January 1, 2016 (the original version of this Article was effective January 1, 2011, and it applied, in accordance with its prior terms, to periods of service before January 1, 2016).
F.2 “Covered U.K. Employee” Defined:
A “Covered U.K. Employee” is a participant in the PepsiCo U.K. Pension Plan (“U.K. Participant”) who – (i) becomes subject to United States income taxes, e.g., by transferring to a position with the Company in the United States or otherwise (hereinafter referenced as “Engages in U.S. Service”), (ii) continues to accrue benefits under the PepsiCo U.K. Pension Plan after he Engages in U.S. Service, (iii) would have also accrued a benefit under the U.K. Supplementary Pension Appendix for such period following when he Engages in U.S. Service (except for the unavailability of accruals under such Appendix for the period a U.K. Participant Engages in U.S. Service), (iv) subsequently either – (A) is localized in the United States as an employee of the PepsiCo Organization, or (B) terminates employment with the PepsiCo Organization (provided this occurs before the date the U.K. Participant commences an assignment with the PepsiCo Organization that is located outside the United States, as defined in the Code), and (v) only after fully satisfying all of the preceding clauses, is then designated by
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the Company (in its completely unfettered discretion) as a Covered U.K. Employee and thereby granted a legally binding right to a benefit under this Article F at the time of the designation. The period that a U.K. Participant Engages in U.S. Service shall begin on the first day that he becomes subject to United States income taxes (his “U.S. Commencement Date”), and it shall end on the date he is no longer subject to U.S. income taxes or, if earlier, the date his Plan benefits under this Article F commence (his “U.S. Cessation Date”).
F.3 Benefit for Covered U.K. Employees:
A Covered U.K. Employee’s benefit under the Plan shall be determined by calculating, as of his Modified U.S. Cessation Date, his “Total U.K. Supplementary Benefit” and then subtracting from this amount his “Frozen U.K. Supplementary Benefit.” For this purpose, a Covered U.K. Employee’s—
(a) “Modified U.S. Cessation Date” is the earliest of the following – (i) the date he is no longer subject to U.S. income taxes, (ii) the date he first satisfies clause (iv) of Section F.2, (iii) the date he commences an assignment with the PepsiCo Organization that is located outside the United States (as defined in the Code), or (iv) the date his Plan benefits under this Article F commence.
(b) “Total U.K. Supplementary Benefit” is equal to the total benefit that he would have under the terms of the U.K. Supplementary Pension Appendix, calculated based on all service and compensation with the Company through his Modified U.S. Cessation Date that is counted in the calculation of his benefit under the PepsiCo U.K. Pension Plan (or that would be counted but for a limitation applicable to the plan under U.K. law), and with such total benefit expressed in the form of a single lump sum that is payable as of the date his benefits under this Article F commence, and
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(c) “Frozen U.K. Supplementary Benefit” is equal to the total benefit that he had under the terms of the U.K. Supplementary Pension Appendix as of immediately before his U.S. Commencement Date, and with such total benefit expressed in the form of a single lump sum that is payable as of the date his benefits under this Article F commence.
The calculation provided for in the preceding sentence shall be made in accordance with the operating rules set forth in Section F.4 below.
F.4 Operating Rules:
The following operating rules apply to the calculation in Section F.3. above.
(a) In general, accruals under the PepsiCo U.K. Pension Plan for the period after a Covered U.K. Employee’s U.S. Cessation Date shall not reduce the benefit under this Article F determined under Section F.3. Notwithstanding the prior sentence and anything in Section F.3 to the contrary, to the extent a Covered U.K. Employee’s accruals under the PepsiCo U.K. Pension Plan for the period after a Covered U.K. Employee’s U.S. Cessation Date have more than fully offset the Covered U.K. Employee’s accruals under the U.K. Supplementary Pension Appendix (and the excess would have been offset against the benefit under this Article F had such benefit accrued under the U.K. Supplementary Appendix), then any such excess as of the date benefits under this Article F commence (expressed as a lump sum as of such date) shall be offset against the benefits under this Article F to the extent such offset would not violate Code Section 409A.
(b) In determining the value of a lump sum under this Article F, the actuarial assumptions that are used shall be actuarial assumptions that comply with Section
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417(e) of the Code and, specifically, are the Code Section 417(e) assumptions that would be used under the Salaried Plan to pay a retirement lump sum as of the date applicable that the lump sum in question is to be determined under this Article F.
(c) A Covered U.K. Employee’s Frozen U.K. Supplementary Benefit shall be determined on the basis of assuming that the Covered U.K. employee voluntarily terminated employment and any other service relationship with the PepsiCo Organization as of immediately before his U.S. Commencement Date.
(d) This subsection applies if the terms of the PepsiCo U.K. Pension Plan or the U.K. Supplementary Pension Appendix are amended during a year in a way that would change the results under the Section F.3 calculation, and such amendment otherwise applies earlier than the immediately following year. In this case, to the extent that doing is necessary to comply with Code Section 409A, the calculation in Section F.3 shall be made by delaying the application of the amendment so that it is prospectively effective starting with the immediately following year.
(e) In the event a Covered U.K. Employee (i) has earned a benefit under this Article F, (ii) has reached his U.S. Cessation Date, and (iii) then again Engages in U.S. Service and meets all of the requirements to be a Covered U.K. Employee when he again Engages in U.S. Service, the foregoing terms shall be applied again to determine if he earns a benefit for the new period that he Engages in U.S. Service, except that any resulting benefit from this new period shall be reduced by the lump sum value of any prior benefit under this Article F (as necessary to completely avoid any duplication of benefits).
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(f) In the event a Covered U.K. Employee (i) has earned a benefit under this Article F, (ii) has reached his U.S. Cessation Date, and (iii) then is employed by the PepsiCo Organization in a classification that would be eligible for an accrual under the provisions of the Plan other than this Article F (the “Other Provisions”), then the Other Provisions shall be applied to determine if he earns a benefit under the Other Provisions for the new period of service, except that any resulting benefit from this new period of service shall be reduced by the lump sum value of any prior benefit under this Article F (as necessary to completely avoid any duplication of benefits).
F.5 No Other Benefits:
A Covered U.K. Employee shall not be entitled to any other benefits under this Plan or the Salaried Plan while he is a Covered U.K. Employee (or while he would be a Covered U.K. Employee if clauses (iv) and (v) of Section F.2. were not included in the definition of Covered U.K. Employee). In addition, prior to the time that an individual has satisfied all of the requirements to be considered a Covered U.K. Employee, the individual has no legally binding right to a benefit under this Article F. Accordingly, for the avoidance of doubt, at any point before such time, the Company may take action that prevents the individual from becoming entitled to a benefit under this Article F (e.g., by deciding that it will not designate the individual as a Covered U.K. Employee, in an unfettered exercise of the Company’s discretion), regardless of the services performed or other actions taken by the individual through this point in time, and regardless of any other factor.
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APPENDIX ARTICLE G -
Delay Election For Certain Pre-2018 Terminees
Delay Election For Certain Pre-2018 Terminees
G.1 Scope:
This Article provides an opportunity for certain Participants, who Separated from Service before January 1, 2018 and who are eligible to receive a 409A Vested Pension, to make a one-time election to delay the distribution of their 409A Vested Pension as permitted by Code section 409A(a)(4)(C). This opportunity is referred to in this Appendix G as a Delay Election. This Article is effective as of January 1, 2018.
G.2 Eligibility for Making a Delay Election.
To be eligible to make a Delay Election, a Participant must:
(a) Have Separated from Service before January 1, 2018,
(b) Be eligible for a 409A Vested Pension for which the scheduled payment date under the regular terms of the Plan, as determined by the Plan Administrator, (the “Scheduled Payment Date”) is at least 12 months after the date the Participant will make the election, and
(c) Be selected and notified by the Company, in its sole discretion, for the opportunity to make a Delay Election.
G.3 Requirements for Making a Delay Election
To be effective, a request for a Delay Election must:
(a) Become fully effective and irrevocable at least 12 months in advance of the Scheduled Payment Date that was previously in effect, and
(b) Specify a new scheduled date for payment commencement that is at least 5 years later than the Participant’s Scheduled Payment Date (but that is not later
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than the first of the month coincident with or immediately following the Participant’s 65th birthday) (the “New Scheduled Payment Date”).
G.4 No Change in Form
A Participant is not permitted to use a Delay Election to change the form of payment of his or her distribution, except that:
(a) The Participant’s marital status as of the New Scheduled Payment Date shall determine the form of annuity payable under the Delay Election (with such marital status determined as of the New Scheduled Payment Date in accordance with Section 6.3(c) (“Determination of Marital Status”)), and
(b) Any reduction for early commencement (as applicable under Section 5.1(b) (“Basis for Determining”)) of the benefit, which is subject to the Delay Election, shall be determined with reference to the New Scheduled Payment Date.
G.5 Cashout Provisions Not Superseded.
A benefit to which an effective Delay Election applies remains subject to the cashout distribution provisions in Section 4.9.
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APPENDIX ARTICLE H –
Definitions of Eligible Domestic Partner Applicable Prior to January 1, 2019
H.1 Scope.
This Article H provides the definition of Eligible Domestic Partner for periods prior to January 1, 2019.
H.2 Definition of Eligible Domestic Partner.
Paragraphs a, b, c and d are effective for the dates indicated in the paragraph. Paragraph e sets forth general rules. Paragraph f sets forth defined terms.
a)January 1, 2016 through December 31, 2018 Provisions For applicable dates from January 1, 2016 through December 31, 2018, “Eligible Domestic Partner” status is not recognized under the Plan, in light of the Supreme Court’s 2015 decision that the Constitution guarantees the right to same-sex marriage.
1.Limited Exception for 2016 Plan Year. Notwithstanding the foregoing, and solely for applicable dates in 2016, in the case of a Participant who (i) has a relationship with an individual on December 31, 2015 that is recognized as an eligible domestic partner or civil union relationship under paragraph (2) below and (ii) on any date during the 2015 Plan Year, is either an Employee who is actively employed or on an Authorized Leave of Absence from the PepsiCo Organization or a Participant, Eligible Domestic Partner means the individual with whom the Participant has entered into such an arrangement that was valid on the applicable date.
b)June 26, 2013 through December 31, 2015 Provisions.
1.Civil Unions. If on the applicable date the Participant resides in a state that does not permit same-sex marriage and the Participant has entered
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into a same-sex civil union that is valid on the applicable date in the state in which it was entered into, the Participant’s Eligible Domestic Partner (if any) is the individual with whom the Participant has entered into such a same-sex civil union. If a Participant resides in a state that does not permit same-sex marriage but does permit same-sex civil unions, the Participant is not eligible to have an Eligible Domestic Partner unless the Participant is in a valid same-sex civil union.
2.State of Residence Allows Neither Civil Unions Nor Marriage. If the Participant does not have an Eligible Domestic Partner (and is not eligible to have one) pursuant to subsection (a) above, the Participant’s Eligible Domestic Partner (if any) is the individual with whom the Participant has executed a legally binding same-sex domestic partner agreement that meets the requirements set forth in writing by the Company with respect to eligibility for domestic partner benefits that is in effect on the applicable date. If such Participant has not entered into such an agreement, the Participant is not eligible to have an “Eligible Domestic Partner.
c)January 1, 2013 through June 25, 2013 Provisions. For applicable dates from January 1, 2013 through June 25, 2013, Eligible Domestic Partner means an individual described in paragraph (3) above, and also includes the following: If on the applicable date the Participant has entered into a same-sex marriage that is valid on the applicable date in the state in which it was entered into, the Participant’s Eligible Domestic Partner (if any) is the Participant’s spouse pursuant to
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such same-sex marriage. If the Participant resides in a state that permits same-sex marriage, the Participant is not eligible to have an Eligible Domestic Partner unless either (a) the Participant is in a valid same-sex marriage or (b) such state did not start to permit same-sex marriages until less than 12 months before the applicable date.
d)Pre-2013 Provisions. For applicable dates before January 1, 2013, “Eligible Domestic Partner” status was not available in the Plan.
e)Additional Rules. This paragraph (5) applies to the definition of Eligible Domestic Partner for the applicable dates covered by this H notwithstanding any provisions in paragraphs (1), (2),(3) or (4) to the contrary. The term “Eligible Domestic Partner does not apply to an individual who is of the opposite sex of the Participant. A Participant who lives in a state that permits same-sex marriage is not permitted to have an Eligible Domestic Partner. In the case of applicable dates prior to January 1, 2016, if the Participant’s state started to permit same-sex marriage or same-sex civil unions less than 12 months before the applicable date, the Participant is treated as residing in a state that does not permit same-sex marriage or same-sex civil unions, as the case may be, for purposes of this definition of Eligible Domestic Partner.
f)Defined Terms. For purposes of the definition of “Eligible Domestic Partner” in this Article H, the following definitions apply: “applicable date” means the earlier of the Participant’s Annuity Starting Date and date of death, and “state” means any domestic or foreign jurisdiction having the legal authority to sanction marriages or civil unions.
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APPENDIX ARTICLE I –
409A PEP Makeup for Certain Pre-409A Benefits
I.1 Scope:
To ensure there will be no “material modification” of the Pre-409A Program, this Article provides a makeup benefit under the 409A Program that applies to certain participants in the Pre-409A Program (“Pre-409A Participants”) in lieu of updating the Pre-409A Program’s actuarial factors for early commencement of Vested Pensions to be consistent with the “2019 Salaried Program Factors” (as that term is defined in the definition of Actuarial Equivalent). In the case of participants in the Pre-409A Program who are also Participants in the 409A Program (without regard to this Article), this makeup relating to the early commencement reduction of Vested Pensions payable as annuities is provided under the main text of the Plan. However, this makeup is provided under this Article in the case of affected Pre-409A Participants who are otherwise not entitled to a benefit under the 409A Program.
I.2 Eligibility Under This Article:
To be eligible under this Article, an individual must be a Pre-409A Participant:
(a) Who is paid a Pre-409A Pension that is (i) a “Vested Pension” under the Pre-409A Program, and (ii) paid in the form of an annuity commencing as of a date prior to the Pre-409A Participant’s Normal Retirement Date but as of on or after January 1, 2019;
(b) Whose Pre-409A Pension annuity under subsection (a) above is reduced for early commencement under the terms of the Pre-409A Program by more
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than it would be if the early commencement reduction were calculated using the 2019 Salaried Plan Factors; and
(c) Who otherwise would not have a 409A Pension that is payable effective as of January 1, 2019 or later because, except as provided in this Article, the only PEP Pension to which the individual is entitled is a Pre-409A Pension, or because his otherwise applicable 409A Pension commenced payment as of prior to January 1, 2019.
An individual who satisfies all of the foregoing eligibility requirements shall be referred to as an “Eligible Person” for purposes of this Article.
I.3 Benefit Amount Under This Article:
The benefit amount for an Eligible Person under this Article shall be the single lump sum that is the Actuarial Equivalent of the difference between:
(a) The Single Life Annuity that would be payable to the Eligible Person under the Pre-409A Program as of the Eligible Person’s Annuity Starting Date under the Pre-409A Program if the 2019 Salaried Program Factors for early commencement applied in calculating such Single Life Annuity (including with respect to any portion of the Participant’s Pre-409A Pension that is derived from the PEP Guarantee), and
(b) The Single Life Annuity that is actually applicable to the Eligible Person under the Pre-409A Program as of the Eligible Person’s Annuity Starting Date under the Pre-409A Program, because of the early commencement factors that
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are actually applicable in calculating such Single Life Annuity (including with respect to any portion of the Participant’s Pre-409A Pension that is derived from the PEP Guarantee).
Such Actuarial Equivalent lump sum shall be calculated as of the applicable commencement date specified in Section I.4 below; however, if the applicable commencement date is the Section I.4(b) date (i.e. December 1, 2019) and the Eligible Person’s actual Annuity Starting Date under the Pre-409A Program precedes December 1, 2019, then the Actuarial Equivalent lump sum shall be determined as of such actual Annuity Starting Date and then brought forward with Actuarial Equivalent interest to December 1, 2019. For purposes of subsection (a) above, the 2019 Salaried Program Factors shall be solely the new factors applicable under the Salaried Program as of January 1, 2019 (and no alternative calculation using the factors in effect before January 1, 2019 shall apply).
I.4 Time of Payment Under This Article:
The lump sum benefit calculated under this Appendix shall be payable as of the Eligible Person’s applicable commencement date, which is the latest of the following:
(a) The first of the month following the Eligible Person’s Separation from Service,
(b) December 1, 2019, or
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(c) The first of the month following the Eligible Person’s attainment of age 55 (except that this subsection (c) shall not apply to the extent that the Eligible Person’s benefit is derived from Article PBG of this Appendix).
In the event that the Eligible Person’s applicable commencement date is the date in subsection (a) above, then the date of actual payment of the benefit shall be delayed to the extent provided by Section 6.6(a) of the main text of the Plan, and in the case of such a delay, the benefit determined as of such applicable commencement date shall be increased by interest for the period of delay as provided in Section 6.6(c) of the main text of the Plan.
I.5 Non-Duplication of Benefits:
The foregoing Sections of this Article are intended to provide a make-up benefit under the 409A Program for applying an early commencement reduction under the Pre-409A Program using factors that predate the 2019 Salaried Plan Factors, with respect to a Pre-409A Pension that is paid in the form of an annuity and that has an Annuity Starting Date of January 1, 2019 or later. However, no duplication of benefits may occur at any time under the Plan. Therefore, to the extent an Eligible Person has received or will receive a 409A Pension that, without regard to this Article, effectively provides some or all of such makeup (e.g., because the Eligible Person’s 409A Pension was reduced for early commencement using Early Retirement reduction factors), or to the extent that the Plan Administrator concludes that providing the makeup under this Article would otherwise result in a duplication of benefits, the makeup benefit under this Article shall be reduced (but not below zero) as the Plan Administrator deems appropriate to eliminate all
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duplication of benefits. This provision shall govern over any contrary provision of this Article or the Plan that might be interpreted to support a duplication of benefits.
APPENDIX ARTICLE J -
Certain International Employees Who Are U.S. Persons
Certain International Employees Who Are U.S. Persons
J.1 Scope:
This Article applies to “Covered International Employees” as defined in Section J.2 below. The benefit of a Covered International Employee shall be determined as provided in Section J.3 below. A benefit determined for a Covered International Employee under this Article shall be distributed as provided in Section J.4 below.
J.2 Definitions:
Where the following words and phrases appear in this Article J with initial capital letters, they shall have the meaning set forth below, unless a different meaning is plainly required by the context:
(a) A “Covered International Employee” is an employee of a Designated PepsiCo Affiliate, who—
(1) Is ineligible to participate in PERP,
(2) Would be barred from earning a benefit under PIRP-DB by Section 9.14 of PIRP-DB (based on the employee’s status as a U.S. Person),
(3) Is initially selected by the Vice President as eligible to be a Covered International Employee based on the existence of special circumstances regarding his ability to receive retirement benefits, and
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(4) Is subsequently determined by the Vice President to be entitled to status as a Covered International Employee.
The selection in paragraph (3) above and the determination in paragraph (4) above shall be made in the unfettered discretion of the Vice President. In addition, the determination in paragraph (4) shall be made in conjunction with a Selected International Employee’s Retirement (or, as authorized by the Vice President, a Selected International Employee’s termination of employment), but not before the year of a Selected International Employee’s distribution date under Section J.4. Prior to the time of the determination in paragraph (4) above, a Selected International Employee shall not have a legally binding right (within the meaning of Code Sections 409A and 457A) to a Pension or any distribution under this Article J.
(b) A “Designated PepsiCo Affiliate” is an employing entity that (i) is organized under the laws of a country other than the United States, and (ii) has been designated by the Vice President as eligible to have its employees covered by this Article J.
(c) “PERP” means the PepsiCo Employees Retirement Plan A, PepsiCo Employees Retirement Plan I, PepsiCo Employees Retirement Plan H or any predecessor or successor plan to one or more of the foregoing.
(d) “PIRP-DB” means the PepsiCo International Retirement Plan (DB Program).
(e) A “Selected International Employee” is an employee of a Designated PepsiCo Affiliate who satisfies paragraphs (1), (2) and (3) of subsection (a) above, but
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who has not yet been determined to be entitled under paragraph (4) of subsection (a) above.
(e) A “U.S. Person” is an individual who is classified as a “U.S. Person” under the terms of PIRP-DB.
(f) The “Vice President” is the Company executive who has the role of the “Vice President” under the terms of PIRP-DB.
J.3 Benefit for Covered International Employees:
A Covered International Employee’s benefit under the Plan shall be determined by calculating the Pension to which he would be entitled under the main part of the Plan (which shall include treating the Covered International Employee as a Plan Participant and reflecting the differences in the calculation of a Participant’s Pension that is a Vested Pension versus a Retirement Pension), but giving effect to the following modifications.
(a) References in the main part of the Plan to any benefit determining factors that are determined in accordance with the provisions of the Salaried Plan shall be applied as if the Covered International Employee were eligible for the Salaried Plan at all times during his employment by a Designated PepsiCo Affiliate or a member of the PepsiCo Organization (except as modified by giving effect to any applicable modifications in the following subsections).
(b) The reductions to the Covered International Employee’s Total Pension that ordinarily apply under Section 5.1(a)(2) and (3) (i.e., the offsets for the Salaried Pension Plan and Pre-409A Pension Plan) shall not apply, unless a “Reduction Amount” is indicated in the “Benefit Information Table” below for the Covered International Employee, and in that case the amount of reduction that is applied shall equal the
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Reduction Amount. Notwithstanding the prior sentence, the nonduplication rules in the last four sentences of this Section J.3 shall apply in all cases.
(c) The PEP Guarantee formula of Section 5.2 shall not apply with respect to a Covered International Employee.
(d) If a “Service Start Date” is indicated in the Benefit Information Table below, such Service Start Date shall be used to determine the Covered International Employee’s Pension rather than the Covered International Employee’s actual service commencement date. Accordingly, in such a case, any service by the Covered International Employee before the indicated Service Start Date shall be disregarded in calculating the Covered International Employee’s Pension under this Appendix J.
(e) If an “Earnings Start Date” is indicated in the Benefit Information Table below, such Earnings Start Date shall be used to determine the Covered International Employee’s Pension rather than the Covered International Employee’s actual earnings commencement date. Accordingly, in such a case, any earnings by the Covered International Employee before the indicated Earnings Start Date shall be disregarded in calculating the Covered International Employee’s Pension under this Appendix J.
(f) If a “Minimum Lump Sum” is indicated in the Benefit Information Table below, the Covered International Employee’s Pension, when converted to a Single Lump Sum, shall not be less than the indicated Minimum Lump Sum.
Benefit Information Table
| GPID | Reduction Amount | Service Start Date | Earnings Start Date | Minimum Lump Sum | ||||||||||
| 01170077 | N/A | N/A | N/A | $1,126,465 | ||||||||||
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Finally, for the avoidance of doubt, and as an absolute condition to providing the special benefit determined under this Section J.3, such benefit must not duplicate any other benefits provided to a Covered International Employee by any member of the PepsiCo Organization or any other entity that is determined by the Vice President to be a PepsiCo affiliate. Accordingly, all of the provisions of this Plan and the Salaried Plan that relate to avoiding duplication of benefits shall apply in determining the special benefit under this Section J.3. In addition, however, the Vice President shall also have the unfettered discretion to modify the calculation of the special benefit that would otherwise apply under this Section J.3 as the Vice President deems appropriate in order to avoid what the Vice President deems to be benefit duplication. The exercise or waiver of such discretion is a precondition to there being a valid determination with respect to entitlement under Section J.2(b)(4). Accordingly, there shall not be a valid determination under Section J.2(b)(4) (and therefore no legally binding right) until the Vice President has expressly exercised such discretion or has expressly waived exercising such discretion.
J.4 Time and Form of Distributions:
A Covered International Employee’s Pension under this Appendix J shall be distributed as a Single Lump Sum on the first day of the month that is coincident with or next follows the Participant’s Separation from Service, subject to Section 6.6 of the main part of the Plan (delay for Key Employees).
J.5 Operating Rules:
The following operating rules apply to the calculation of a Covered International Employee’s Pension under this Appendix J.
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(a) In determining the value of a Single Lump Sum under this Article J, the actuarial assumptions that are used shall be actuarial assumptions that comply with Section 417(e) of the Code and, specifically, are the Code Section 417(e) assumptions that would be used under the Salaried Plan to pay a retirement lump sum as of the date when the Single Lump Sum in question is to be determined under this Article J.
(b) A Covered International Employee’s Pension is subject in all respects to the freeze of the Salaried Plan that is effective December 31, 2025, and accruals of (and rights and benefits with respect to) a Covered International Employee’s Pension under this Appendix J shall be frozen fully and in all respects to the same extent that Salaried Plan accruals, rights and benefits are frozen as of that date.
J.6 No Other Benefits:
A Designated/Covered International Employee shall not be entitled to any other benefits under this Plan, the Salaried Plan, PIRP-DB or a termination indemnity arrangement while he is a Designated International Employee or a Covered International Employee.
APPENDIX ARTICLE K -
Termination of 409A Program with Respect to Participants Affected by the Tiger Transaction
Termination of 409A Program with Respect to Participants Affected by the Tiger Transaction
K.1 Scope.
This Article K provides for the termination and liquidation, in accordance with Treasury Regulation § 1.409A-3(j)(4)(ix)(B), of the portion of the 409A Program that relates to certain Participants who are affected by the “Closing” of the “Tiger Transaction” (as those terms are defined below). This Article is effective as of the Closing.
K.2 Definitions.
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Where the following words and phrases appear in this Appendix Article K with initial capitals, they shall have the meaning set forth below unless a different meaning is plainly required by the context. Any terms used in this Appendix Article K with initial capitals and not defined herein shall have the same meaning as in the main Plan, unless a different meaning is plainly required by the context.
(a) “Affected Participant” means a Participant who experiences, within the meaning of Treasury Regulation § 1.409A-3(j)(4)(ix)(B), the change in control event that results from the Closing of the Tiger Transaction.
(b) “Agreement” means that certain Unit Purchase Agreement dated as of August 2, 2021, and entered into by and between PepsiCo, Inc., Bengal Beverages LP, a Delaware limited partnership, Bengal Debt Merger Sub, LLC, a Delaware limited liability company and wholly owned Subsidiary of the Buyer, and Naked Juice Co., a Pennsylvania corporation.
(c) “Closing” means the consummation of the Tiger Transaction as specified in Section 2.3 of the Agreement.
(d) “Related Amendments” means other amendments that provide for the termination and liquidation of certain Code Section 409A nonqualified deferred compensation arrangements, i.e., arrangements that are treated, pursuant to Treasury Regulation § 1.409A-3(c)(2), as providing compensation that is considered deferred under a single plan along with the deferred compensation provided by this 409A Program.
(e) “Tiger Transaction” means the set of transactions contemplated by the Agreement that result in a change in control, within the meaning of Treasury Regulation
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§ 1.409A-3(i)(5), with respect to certain businesses that were part of the PepsiCo Organization prior to the change in control.
K.3 The Termination.
Contingent only upon the occurrence of the Closing, the 409A Program is hereby irrevocably terminated with respect to all Affected Participants. Therefore, the adoption of this Article and the Related Amendments by the Plan sponsor constitutes, as of the Closing, the irrevocable taking of all necessary action to accomplish the termination and liquidation of the Affected Participant’s entire interest under the 409A Program pursuant to Treasury Regulation § 1.409A-3(j)(4)(ix)(B). Accordingly, to carry out the liquidation of the Affected Participants’ entire interests, each Affected Participant will be paid the Participant’s entire interest under the 409A Program as a single lump sum within 12 months of the Closing (and in all other respects in full conformity with Treasury Regulation § 1.409A-3(j)(4)(ix)(B)). An Affected Participant’s interest will be determined by treating the Affected Participant as having a Separation from Service as of the Closing and calculating each Affected Participant’s single lump sum as of the specific distribution date during the 12-month period following the Closing that the Plan Administrator, in its discretion, selects for this purpose in conformance with Treasury Regulation § 1.409A-3(j)(4)(ix)(B).
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APPENDIX ARTICLE PBG
Effective as of the end of the day on December 31, 2011, the PBG PEP is hereby merged with and into the PepsiCo PEP, with the PepsiCo PEP as the surviving plan after the merger. The following Appendix Article PBG governs PBG PEP benefits that were subject to the 409A PBG PEP Document prior to the merger, except as follows: (i) Articles VII (Administration), VIII (Miscellaneous), IX (Amendment and Termination), X (ERISA Plan Structure) and XI (Applicable Law) of the main section of this document shall govern PBG PEP benefits that were subject to the 409A PBG PEP Document, and (ii) effective for Annuity Starting Dates on or after January 1, 2019, if a Participant elects a survivor, period certain annuity or other death benefit annuity (or an annuity with other optional features), the adjustment of the Single Life Annuity to Actuarial Equivalent optional annuity shall be determined under the provisions of the main section of this document. There shall be no change to the time or form of payment of benefits that are subject to Code section 409A under either the PepsiCo PEP or PBG PEP Document as a result of the plan merger or the revisions made to the 409A PBG PEP Document when it was incorporated into this Appendix.
ARTICLE I TO APPENDIX ARTICLE PBG - HISTORY AND PURPOSE
1.1 History of Plan. The Pepsi Bottling Group, Inc. (“PBG”) established the PBG Pension Equalization Plan (“PEP” or “Plan”) effective April 6, 1999 for the benefit of salaried employees of the PBG Organization who participate in the PBG Salaried Employees Retirement Plan (“Salaried Plan”). The Plan was initially established as a successor plan to the PepsiCo Pension Equalization Plan, due to PBG’s April 6, 1999 initial public offering, and the Plan included historical PepsiCo provisions which are relevant for eligibility and benefit determinations under the Plan. The Plan provides benefits for eligible employees whose pension benefits under the
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Salaried Plan are limited by the provisions of the Internal Revenue Code of 1986, as amended. In addition, the Plan provides benefits for certain eligible employees based on the pre-1989 Salaried Plan formula. Effective April 1, 2009, the Plan also provides benefits for employees whose eligible pay under the Salaried Plan is reduced due to the employees’ elective deferrals under the PBG Executive Income Deferral Program and for certain executives who would be “Grandfathered Participants” under the Salaried Plan but for their classification as salary band E3-E8 or MP (or its equivalent, for periods on and after the Effective Time). The Plan is intended as a nonqualified unfunded deferred compensation plan for federal income tax purposes. For purposes of the Employee Retirement Income Security Act of 1974 (“ERISA”), the Plan is structured as two plans. The portion of the Plan that provides benefits based on limitations imposed by Section 415 of the Internal Revenue Code (the “Code”) is intended to be an “excess benefit plan” as described in Section 4(b)(5) of ERISA. The remainder of 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.
The Plan has been amended from time to time, most recently in the form of an amendment and complete restatement effective as of April 1, 2009 (“2009 Restatement”). PBG further amended the Plan as a result of the merger of PBG with and into Pepsi-Cola Metropolitan Bottling Company, Inc., a wholly-owned subsidiary of PepsiCo, Inc. (the “Company”), pursuant to the Agreement and Plan of Merger dated as of August 3, 2009 among PBG, the Company and Pepsi-Cola Metropolitan Company, Inc., and to facilitate the Company’s assumption of PBG’s role as the Plan’s sponsor.
1.2 Effect of Amendment and Restatement. The Plan as in effect on October 3, 2004 is referred to herein as the Prior Plan.
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Except as otherwise explicitly provided in Section 6.1(b)(3) of this Plan, a Participant’s benefit (including death benefits), determined under the terms of the Plan as in effect on October 3, 2004 as if the Participant had terminated employment on December 31, 2004, without regard to any compensation paid or services rendered after 2004, or any other events affecting the amount of or the entitlement to benefits (other than the Participant’s survival or the Participant’s election under the terms of the Plan with respect to the time or form of benefit) (the “Grandfathered Benefit”) shall be paid at the time and in the form provided by the terms of the Plan as in effect on October 3, 2004.
The benefit of a Participant accrued under this Plan based on all compensation and services taken into account by the Prior Plan and this Plan, less the Participant’s Grandfathered Benefit, shall be paid in the times and in the form as provided in this Plan. Except as otherwise explicitly provided in this Plan, this Plan superseded the Prior Plan effective January 1, 2009, with respect to amounts accrued and vested after 2004 by Participants who had not commenced receiving benefits as of January 1, 2009. The Plan was administered in accordance with a good faith interpretation of Section 409A of the Internal Revenue Code and IRS regulations and guidance thereunder from January 1, 2005 through December 31, 2008. Amounts accrued under this Plan after 2004 shall be treated as payable under a separate Plan for purposes of Section 409A of the Internal Revenue Code.
ARTICLE II TO APPENDIX ARTICLE PBG - DEFINITIONS AND CONSTRUCTION
2.1 Definitions. The following words and phrases, when used in this Plan, shall have the meaning set forth below unless the context clearly indicates otherwise. Unless otherwise expressly qualified by the terms or the context of this Plan, the terms used in this Plan shall have the same meaning as those terms in the Salaried Plan.
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(a) Actuarial Equivalent. Except as otherwise specifically set forth in the Plan or any Appendix to the Plan with respect to a specific benefit determination, a benefit of equivalent value computed on the basis of the factors applicable for such purposes under the Salaried Plan.
(b) Annuity. A Pension payable as a series of monthly payments for at least the life of the Participant.
(c) Code. The Internal Revenue Code of 1986, as amended from time to time.
(d) Company. PepsiCo, Inc., a corporation organized and existing under the laws of the State of North Carolina or its successor or successors. For periods prior to the Effective Time, “Company” means The Pepsi Bottling Group, Inc.”.
(e) Compensation Limitation. Benefits not payable under the Salaried Plan because of the limitations on the maximum amount of compensation which may be considered in determining the annual benefit of the Salaried Plan Participant under Section 401(a)(17) of the Code.
(f) Effective Date. The date upon which this Plan was effective, which is April 6, 1999 (except as otherwise provided herein).
(g) Effective Time. February 26, 2010. .
(h) EID. The PBG Executive Income Deferral Program, as amended from time to time.
(i) [Reserved]
(j) Employee. An individual who qualifies as an “Employee” as that term is defined in the Salaried Plan.
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(k) Employer. An entity that qualifies as an “Employer” as that term is defined in the Salaried Plan.
(l) ERISA. Public Law No. 93-406, the Employee Retirement Income Security Act of 1974, as amended from time to time.
(m) Participant. An Employee participating in the Plan in accordance with the provisions of Section 3.1.
(n) PepsiCo/PBG Organization. The controlled group of organizations of which the Company is a part, as defined by Section 414 of the Code and the regulations issued thereunder. An entity shall be considered a member of the PepsiCo/PBG Organization only during the period it is one of the group of organizations described in the preceding sentence. The application of this definition for periods prior to the Effective Time shall take into account the different definition of “Company” that applies before the Effective Time.
(o) PEP Pension. One or more payments that are payable to a person who is entitled to receive benefits under the Plan. The term “Grandfather Benefit” shall be used to refer to the portion of a PEP Pension that is payable in accordance with the Plan as in effect October 3, 2004 and is not subject to Section 409A.
(p) PepsiCo Prior Plan. The PepsiCo Pension Equalization Plan.
(q) Plan. Effective January 1, 2012, Appendix Article PBG to the PepsiCo Pension Equalization Plan, as set forth herein, and as amended from time to time. Prior to January 1, 2012, the PBG Pension Equalization Plan, as amended from time to time. In these documents, the Plan is also sometimes referred to as PEP. For periods before April 6, 1999, references to the Plan refer to the PepsiCo Prior Plan.
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(r) Plan Administrator. The PepsiCo Administration Committee (PAC), which shall have authority to administer the Plan as provided in Article VII of the main portion of the document.
(s) Plan Year. The 12-month period ending on each December 31st.
(t) Primary Social Security Amount. In determining Pension amounts, Primary Social Security Amount shall mean:
(1) For purposes of determining the amount of a Retirement, Vested, Pre-Retirement Spouse’s Pension, or Pre-Retirement Domestic Partner’s Pension, the Primary Social Security Amount shall be the estimated monthly amount that may be payable to a Participant commencing at age 65 as an old-age insurance benefit under the provisions of Title II of the Social Security Act, as amended. Such estimates of the old-age insurance benefit to which a Participant would be entitled at age 65 shall be based upon the following assumptions:
(i) That the Participant’s social security wages in any year prior to Retirement or severance are equal to the Taxable Wage Base in such year, and
(ii) That he will not receive any social security wages after Retirement or severance.
However, in computing a Vested Pension under Section 4.2, the estimate of the old-age insurance benefit to which a Participant would be entitled at age 65 shall be based upon the assumption that he continued to receive social security wages until age 65 at the same rate as the Taxable Wage Base in effect at the earlier of his severance from employment or the date such participant
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ceased to accrue benefits under both the Salaried Plan and this Plan. For purposes of this subsection, “social security wages” shall mean wages within the meaning of the Social Security Act.
(2) For purposes of paragraph (1), the Primary Social Security Amount shall exclude amounts that may be available because of the spouse or any dependent of the Participant or any amounts payable on account of the Participant’s death. Estimates of Primary Social Security Amounts shall be made on the basis of the Social Security Act as in effect at the Participant’s Severance from Service Date, without regard to any increases in the social security wage base or benefit levels provided by such Act which take effect thereafter.
(u) Salaried Plan. The PepsiCo Salaried Employees Retirement Plan; as it may be amended from time to time; provided that a Participant’s benefit under this Plan shall be determined solely by reference to Part C of the Salaried Plan.
(v) Salaried Plan Participant. An Employee who is a participant in the Salaried Plan.
(w) Section 409A. Section 409A of the Code and the applicable regulations and other guidance issued thereunder.
(x) Section 415 Limitation. Benefits not payable under the Salaried Plan because of the limitations imposed on the annual benefit of a Salaried Plan Participant by Section 415 of the Code.
(y) Separation from Service. A Participant’s separation from service as defined in Section 409A.
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(z) Single Lump Sum. The distribution of a Participant’s total PEP Pension in excess of the Participant’s Grandfathered Benefit in the form of a single payment.
(aa) Specified Employee. The individuals identified in accordance with principles set forth below.
(1) General. Any Participant who at any time during the applicable year is:
(i) An officer of any member of the PBG Organization having annual compensation greater than $130,000 (as adjusted under Section 416(i)(1) of the Code);
(ii) A 5-percent owner of any member of the PBG Organization; or
(iii) A 1-percent owner of any member of the PBG Organization having annual compensation of more than $150,000.
For purposes of (i) 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 Treasury 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 Specified Employee in accordance with Section 416(i) of the Code and the applicable regulations and other guidance of general applicability issued thereunder or in connection therewith, 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.
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(2) Applicable Year. Except as otherwise required by Section 409A, the Plan Administrator shall determine Specified Employees 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.
(3) Rule of Administrative Convenience. In addition to the foregoing, the Plan Administrator shall treat all other Employees classified as E5 and above on the applicable determination date prescribed in subsection (2) (i.e., the last day of each calendar year) as a Specified Employee for purposes of the Plan for the twelve-month period commencing of the applicable April 1st date. However, if there are at least 200 Specified Employees without regard to this provision, then it shall not apply. If there are less than 200 Specified Employees without regard to this provision, but full application of this provision would cause there to be more than 200 Specified Employees, then (to the extent necessary to avoid exceeding 200 Specified Employees) those Employees classified as E5 and above who have the lowest base salaries on such applicable determination date shall not be Specified Employees.
(4) Identification of Specified Employees Between February 26, 2010 and March 31, 2010. Notwithstanding the foregoing, for the period between February 26, 2010 and March 31, 2010, Specified Employees shall be identified by combining the lists of Specified Employees of all Employers as in effect immediately prior to the Effective Time. The foregoing method of identifying Specified Employees is intended to comply with Treas. Reg. § 1.409A-1(i)(6)(i),
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which authorizes the use of an alternative method of identifying Specified Employees that complies with Treas. Reg. §§ 1.409A-1(i)(5) and -1(i)(8) and Section VII.C.4.d of the Preamble to the Final Regulations under Section 409A of the Code, which permits “service recipients to simply combine the pre-transaction separate lists of specified employees where it is determined that such treatment would be administratively less burdensome.”
(5) Identification of Specified Employees on and After April 1, 2010. Notwithstanding the foregoing, for the periods on after April 1, 2010, Key Employees shall be identified as follows:
(i) For the period that begins on April 1, 2010, and ends on March 31, 2011, an employee shall be a Specified Employee (subject to subparagraph (iii) below) if he was classified as at least a Band IV or its equivalent on December 31, 2009. For this purpose, an employee shall be considered to be at least a Band IV or its equivalent as of a date if the employee is classified as one of the following types of employees in the PepsiCo Organization on that date: (i) a Band IV employee or above in a PepsiCo Business, (ii) a Level E7 employee or above in a PBG Business, or (iii) a Salary Grade 19 employee or above at a PAS Business.
(ii) For the twelve-month period that begins on April 1, 2011, and for each twelve-month period that begins on April 1 in subsequent years, an employee shall be a Specified Employee (subject to subparagraph (iii) below) if the employee was an employee of the PepsiCo Organization who was classified as Band IV or above on the December 31 that immediately precedes such April 1.
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(iii) Notwithstanding the rule of administrative convenience in paragraph (3) above, an employee shall be a Specified Employee for the 12-month period that begins on any April 1, if as of the preceding December 31 the employee would be a specified employee, within the meaning of Treasury Regulation 1.409A-1(i), or any successor, by applying as of such December 31 the default rules that apply under such regulation for determining the minimum number of a service recipient’s specified employees. If the preceding sentence and the methods for identifying Specified Employees set forth in subparagraph (i) or (ii) above, taken together, would result in more than 200 individuals being counted as Specified Employees as of any December 31 determination date, then the number of individuals treated as Specified Employees pursuant to subparagraph (i) or (ii), who are not described in the first sentence of this subparagraph (iii), shall be reduced to 200 by eliminating from consideration those employees otherwise added by such subparagraph in order of their base compensation, from the lowest base compensation to the highest.
(iv) For purposes of this paragraph (5), “PAS Business” means each employer, division of an employer or other organizational subdivision of an employer that the Company classifies as part of the PAS business; “PBG Business” means each employer, division of an employer or other organizational subdivision of an employer that the Company classifies as part of the PBG business; and “PepsiCo Business” means each employer, division of an employer or other organizational subdivision of an employer that the Company classifies as part of the PepsiCo business.
The method for identifying Specified Employees set forth in this definition is intended as an alternative method of identifying Specified Employees under Treas. Reg. § 1.409A-1(i)(5),
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and is adopted herein and shall be interpreted and applied consistently with the rules applicable to such alternative arrangements.
(bb) Vested Pension. The PEP Pension available to a Participant who has a vested PEP Pension and is not eligible for a Retirement Pension.
2.2 Construction. The terms of the Plan shall be construed in accordance with this section.
(a) Gender and Number. The masculine gender, where appearing in the Plan, shall be deemed to include the feminine gender, and the singular may include the plural, unless the context clearly indicates to the contrary.
(b) Compounds of the Word “Here”. The words “hereof”, “hereunder” and other similar compounds of the word “here” shall mean and refer to the entire Plan, not to any particular provision or section.
ARTICLE III TO APPENDIX ARTICLE PBG - PARTICIPATION
3.1 Each Salaried Plan Participant whose benefit under the Salaried Plan is curtailed by the Compensation Limitation or the Section 415 Limitation, or both, and each other Salaried Plan Participant (i) who is a Grandfathered Employee as defined in Section 3.7 of the Salaried Plan and who made elective deferrals to the EID on or after April 1, 2009 and before January 1, 2011 (inclusively); (ii) who would have been considered a Grandfathered Participant as defined in Section 3.7 of the Salaried Plan during the period April 1, 2009 through December 31, 2010 if the Participant had not been classified by the Employer as salary band E3-E8 or MP on March 31, 2009; or (iii) whose 1988 pensionable “earnings” under the Salaried Plan, as described in Section 4.2(a), were $75,000 or more, shall participate in this Plan.
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ARTICLE IV TO APPENDIX ARTICLE PBG - AMOUNT OF RETIREMENT PENSION
4.1 PEP Pension. Subject to Sections 4.5 and 8.7, a Participant’s PEP Pension shall equal the amount determined under (a) or (b) of this Section 4.1, whichever is applicable. Such amount shall be determined as of the date of the Participant’s Separation from Service.
(a) Same Form as Salaried Plan. If a Participant’s PEP Pension will be paid in the same form and will commence as of the same time as his pension under the Salaried Plan, then his monthly PEP Pension shall be equal to the excess of:
(1) The greater of:
(i) the monthly pension benefit which would have been payable to such Participant under the Salaried Plan without regard to (I) the Compensation Limitation; (II) the Section 415 Limitation; (III) the exclusion from Earnings of amounts deferred at the election of the Participant under the EID on or after April 1, 2009 and before January 1, 2011; and (IV) the April 1, 2009 through December 31, 2010 exclusion from the Salaried Plan definition of a Grandfathered Participant of a Participant who, as of March 31, 2009, was classified as salary band E3-E8 or MP and had attained age 50 and completed five years of Service or whose sum of his age and years of Service was at least 65; and
(ii) if applicable, the amount determined in accordance with Section 4.2, expressed in such form and payable as of such time; over
(2) The amount of the monthly pension benefit that is in fact payable to such Salaried Plan Participant under the Salaried Plan, expressed in such form and payable as of such time.
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The amount of the monthly pension benefit so determined, less the portion of such benefit that is the Participant’s Grandfathered Benefit, shall be payable as provided in Section 6.2.
(b) Different Form than Salaried Plan. If a Participant’s PEP Pension will be paid in a different form (whether in whole or in part) or will commence as of a different time than his pension benefit under the Salaried Plan, his PEP Pension shall be the product of:
(1) The greater of:
(i) the monthly pension benefit which would have been payable to such Participant under the Salaried Plan without regard to (I) the Compensation Limitation; (II) the Section 415 Limitation; (III) the exclusion from Earnings of amounts deferred at the election of the Participant under the EID on or after April 1, 2009 and before January 1, 2011; and (IV) the March 31, 2009 through December 31, 2010 exclusion from the Salaried Plan definition of a Grandfathered Participant of a Participant who, as of such date, was classified as salary band E3-E8 or MP and had attained age 50 and completed five years of Service or whose sum of his age and years of Service was at least 65; and
(ii) if applicable, the amount determined in accordance with Section 4.2, expressed in the form and payable as of such time as applies to his PEP Pension under this Plan, multiplied by
(2) A fraction, the numerator of which is the value of the amount determined in Section 4.1(b)(1), reduced by the value of his pension under the
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Salaried Plan, and the denominator of which is the value of the amount determined in Section 4.1(b)(1) (with value determined on a reasonable and consistent basis, in the discretion of the Plan Administrator, with respect to similarly situated employees).
The amount of the monthly pension benefit so determined, less the portion of such benefit that is the Participant’s Grandfathered Benefit, shall be payable as provided in Section 6.2.
Notwithstanding the above, in the event any portion of the accrued benefit of a Participant under this Plan or the Salaried Plan is awarded to an alternate payee pursuant to a qualified domestic relations order, as such terms are defined in Section 414(p) of the Code, the Participant’s total PEP Pension shall be adjusted, as the Plan Administrator shall determine, so that the combined benefit payable to the Participant and the alternate payee from this Plan and the Salaried Plan is the amount determined pursuant to subsections 4.1(a) and (b) above, as applicable.
4.2 PEP Guarantee. Subject to Section 8.7, a Participant who is eligible under subsection (a) below shall be entitled to a PEP Guarantee benefit determined under subsection (b) below, if any.
(a) Eligibility. A Participant shall be covered by this section if the Participant has 1988 pensionable earnings from an Employer of at least $75,000. For purposes of this section, “1988 pensionable earnings” means the Participant’s remuneration for the 1988 calendar year that was recognized for benefit accrual received under the Salaried Plan as in effect in 1988. “1988 pensionable earnings” does not include remuneration from an entity attributable to any period when that entity was not an Employer.
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(b) PEP Guarantee Formula. The amount of a Participant’s PEP Guarantee shall be determined under paragraph (1), subject to the special rules in paragraph (2).
(1) Formula. The amount of a Participant’s PEP Guarantee under this paragraph shall be determined as follows:
(i) Three percent of the Participant’s Highest Average Monthly Earnings for the first 10 years of Credited Service, plus
(ii) One percent of the Participant’s Highest Average Monthly Earnings for each year of Credited Service in excess of 10 years, less
(iii) One and two-thirds percent of the Participant’s Primary Social Security Amount multiplied by years of Credited Service not in excess of 30 years.
In determining the amount of a Vested Pension, the PEP Guarantee shall first be calculated on the basis of (I) the Credited Service the Participant would have earned had he continued to accrue Credited Service until his Normal Retirement Age, and (II) his Highest Average Monthly Earnings and Primary Social Security Amount at the earlier of his Severance from Service Date or the date such Participant ceased to accrue additional benefits under both the Salaried Plan and this Plan, and then shall be reduced by multiplying the resulting amount by a fraction, the numerator of which is the Participant’s actual years of Credited Service on the earlier of his Severance from Service Date or the date such Participant ceased to accrue additional benefits under both the Salaried Plan and this Plan and the denominator of which is the years of Credited Service
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he would have earned had he continued to accrue Credited Service until his Normal Retirement Age.
(2) Calculation. The amount of the PEP Guarantee shall be determined pursuant to paragraph (1) above, subject to the following special rules:
(i) Surviving Eligible Spouse’s or Eligible Domestic Partner’s Annuity: Subject to subparagraph (iii) below and the last sentence of this subparagraph, if the Participant has an Eligible Spouse or Eligible Domestic Partner and has commenced receipt of an Annuity under this section, the Participant’s Eligible Spouse or Eligible Domestic Partner shall be entitled to receive a survivor annuity equal to 50 percent of the Participant’s Annuity under this section, with no corresponding reduction in such Annuity for the Participant. Annuity payments to a surviving Eligible Spouse or Eligible Domestic Partner shall begin on the first day of the month coincident with or following the Participant’s death and shall end with the last monthly payment due prior to the Eligible Spouse’s or Eligible Domestic Partner’s death. If the Eligible Spouse or Eligible Domestic Partner is more than 10 years younger than the Participant, the survivor benefit payable under this subparagraph shall be adjusted as provided below.
(A) For each full year more than 10 but less than 21 that the surviving Eligible Spouse or Eligible Domestic Partner is younger than the Participant, the survivor benefit payable to such
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Eligible Spouse or Eligible Domestic Partner shall be reduced by 0.8 percent.
(B) For each full year more than 20 that the surviving Eligible Spouse or Eligible Domestic Partner is younger than the Participant, the survivor benefit payable to such Eligible Spouse or Eligible Domestic Partner shall be reduced by an additional 0.4 percent.
This subparagraph applies only to a Participant who retires on or after his Early Retirement Date.
(ii) Reductions. The following reductions shall apply in determining a Participant’s PEP Guarantee.
(A) If the Participant will receive an Early Retirement Pension, the payment amount shall be reduced by 3/12ths of 1 percent for each month by which the benefit commencement date precedes the date the Participant would attain his Normal Retirement Date.
(B) If the Participant is entitled to a Vested Pension, the payment amount shall be reduced to the Actuarial Equivalent of the amount payable at his Normal Retirement Date (if payment commences before such date), and the reductions set forth in the Salaried Plan for any Pre-Retirement Spouse’s coverage or Pre-Retirement Domestic Partner’s coverage shall apply.
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(C) This clause applies if the Participant will receive his PEP Guarantee in a form that provides an Eligible Spouse or Eligible Domestic Partner benefit, continuing for the life of the surviving spouse or surviving domestic partner, that is greater than that provided under subparagraph (i). In this instance, the Participant’s PEP Guarantee under this section shall be reduced so that the total value of the benefit payable on the Participant’s behalf is the Actuarial Equivalent of the PEP Guarantee otherwise payable under the foregoing provisions of this section.
(D) This clause applies if the Participant will receive his PEP Guarantee in a form that provides a survivor annuity for a beneficiary who is not his Eligible Spouse or Eligible Domestic Partner. In this instance, the Participant’s PEP Guarantee under this section shall be reduced so that the total value of the benefit payable on the Participant’s behalf is the Actuarial Equivalent of a Single Life Annuity for the Participant’s life.
(E) This clause applies if the Participant will receive his PEP Guarantee in an Annuity form that includes inflation protection described in the Salaried Plan. In this instance, the Participant’s PEP Guarantee under this section shall be reduced so that the total value of the benefit payable on the Participant’s behalf is the Actuarial Equivalent of the elected Annuity without such protection.
(iii) Lump Sum Conversion. The amount of the PEP Guarantee determined under this section for a Participant whose Retirement Pension will
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be distributed in the form of a lump sum shall be the Actuarial Equivalent of the Participant’s PEP Guarantee determined under this section, taking into account the value of any survivor benefit under subparagraph (i) above and any early retirement reductions under subparagraph (ii)(A) above.
(iv) April 1, 2009 Salaried Plan Changes.
(A) The amount of the PEP Guarantee determined under this section for a Participant who, as of March 31, 2009, was classified as salary band E3-E8 or MP and who had attained age 50 and completed five years of Service or (inclusively) whose sum of his age and years of Service was at least 65 shall be determined as if such Participant were a Grandfathered Participant in the Salaried Plan on April 1, 2009 (so that Earnings and Credited Service were not frozen as of March 31, 2009 for the period April 1, 2009 through December 31, 2010).
(B) Highest Average Monthly Earnings shall be determined without regard to the exclusion from Earnings under the Salaried Plan of amounts deferred at the election of the Participant under the EID on or after April 1, 2009 and before January 1, 2011.
4.3 Certain Adjustments. Pensions determined under the foregoing sections of this Article are subject to adjustment as provided in this section. For purposes of this section, “specified plan” shall mean the Salaried Plan or a nonqualified pension plan similar to this Plan. A nonqualified pension plan is similar to this Plan if it is sponsored by a member of the PBG Organization and if its benefits are not based on participant pay deferrals (this category of similar plans includes the PepsiCo Prior Plan).
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(a) Adjustments for Rehired Participants. This subsection shall apply to a current or former Participant who is reemployed after his Annuity Starting Date and (i) whose benefit under the Salaried Plan is recalculated based on an additional period of Credited Service, or (ii) whose benefit under the Salaried Plan would have been recalculated, based on an additional period of Credited Service if the Participant would have been considered a Grandfathered Participant as defined in Section 3.7 of the Salaried Plan if the Participant was not classified by the Employer as salary band E3-E8 or MP. In such event, the Participant’s PEP Pension shall be recalculated hereunder. For this purpose, the PEP Guarantee under Section 4.2 is adjusted for in-service distributions and prior distributions in the same manner as benefits are adjusted under the Salaried Plan, but by taking into account benefits under this Plan and any specified plans.
(b) Adjustment for Increased Pension Under Other Plans. If the benefit paid under a specified plan on behalf of a Participant is increased after PEP benefits on his behalf have been determined (whether the increase is by order of a court, by agreement of the plan administrator of the specified plan, or otherwise), the PEP benefit for the Participant shall be recalculated. If the recalculation identifies an overpayment hereunder, the Plan Administrator shall take such steps as it deems advisable to recover the overpayment. It is specifically intended that there shall be no duplication of payments under this Plan and any specified plans.
(c) No Benefit Offsets That Would Violate Section 409A. If a Participant has earned a benefit under a plan maintained by a member of the PepsiCo/PBG Organization that is a “qualifying plan” for purposes of the “Non-Duplication” rule in Section 3.8 of Part A of the Salaried Plan and the “Transfers and Non-Duplication” rule in
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Section 3.6 of Part C of the Salaried Plan, such Transfers and Non-Duplication rules shall apply when calculating the amount determined under Section 4.1(a)(1) or 4.1(b)(1) above (as applicable) only to the extent the application of such rule will not result in a change in the time or form of payment of such pension that is prohibited by Section 409A. For purposes of the limit on offsets in the preceding sentence, it is the Company’s intent to undertake to make special arrangements with respect to the payment of the benefit under the qualifying plan that are legally permissible under the qualifying plan, and compliant with Section 409A, in order to avoid such a change in time or form of payment to the maximum extent possible; to the extent that Section 409A compliant special arrangements are timely put into effect in a particular situation, the limit on offsets in the prior sentence will not apply.
4.4 Reemployment of Certain Participants. In the case of a current or former Participant who is reemployed and is eligible to reparticipate in the Salaried Plan after his Annuity Starting Date, payment of his non-Grandfathered PEP Pension will not be suspended. If such Participant accrues an additional PEP Pension for service after such reemployment, his PEP Pension on his subsequent Separation from Service shall be reduced by the present value of PEP benefits previously distributed to such Participant, as determined by the Plan Administrator.
4.5 Vesting; Misconduct. Subject to Section 8.7, a Participant shall be fully vested in his Accrued Benefit at the time he becomes fully vested in his accrued benefit under the Salaried Plan. Notwithstanding the preceding, or any other provision of the Plan to the contrary, a Participant shall forfeit his or her entire PEP Pension if the Plan Administrator determines that such Participant has engaged in “Misconduct” as defined below, determined
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without regard to whether the Misconduct occurred before or after the Participant’s Severance from Service. The Plan Administrator may, in its sole discretion, require the Participant to pay to the Employer any PEP Pension paid to the Participant within the twelve month period immediately preceding a date on which the Participant has engaged in such Misconduct, as determined by the Plan Administrator.
“Misconduct” means any of the following, as determined by the Plan Administrator in good faith: (i) violation of any agreement between the Company or Employer and the Participant, including but not limited to a violation relating to the disclosure of confidential information or trade secrets, the solicitation of employees, customers, suppliers, licensors or contractors, or the performance of competitive services, (ii) violation of any duty to the Company or Employer, including but not limited to violation of the Company’s Code of Conduct; (iii) making, or causing or attempting to cause any other person to make, any statement (whether written, oral or electronic), or conveying any information about the Company or Employer which is disparaging or which in any way reflects negatively upon the Company or Employer unless required by law or pursuant to a Company or Employer policy; (iv) improperly disclosing or otherwise misusing any confidential information regarding the Company or Employer; (v) unlawful trading in the securities of the Company or of another company based on information garnered as a result of that Participant’s employment or other relationship with the Company; (vi) engaging in any act which is considered to be contrary to the best interests of the Company or Employer, including but not limited to recruiting or soliciting employees of the Employer; or (vii) commission of a felony or other serious crime or engaging in any activity which constitutes gross misconduct. Notwithstanding the foregoing and for the avoidance of doubt, nothing in this Plan shall prohibit the Participant from communicating with government
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authorities concerning any possible legal violations. The Company nonetheless asserts and does not waive its attorney-client privilege over any information appropriately protected by the privilege.
ARTICLE V TO APPENDIX ARTICLE PBG - DEATH BENEFITS
5.1 Death Benefits. Each Participant entitled to a PEP Pension under this Plan who dies before his Annuity Starting Date shall be entitled to a death benefit equal in amount to the additional death benefit to which the Participant would have been entitled under the Salaried Plan if the PEP Pension as determined under Article IV was payable under the Salaried Plan instead of this Plan. The death benefit with respect to a Participant’s PEP Pension in excess of the Grandfathered Benefit shall become payable on the Participant’s date of death in a Single Lump Sum payment.
Payment of any death benefit of a Participant who dies before his Annuity Starting Date under the Plan shall be made to the persons and in the proportions to which any death benefit under the Salaried Plan is or would be paid (including to a Participant’s Eligible Domestic Partner to whom pre-retirement death benefits are payable under the Salaried Plan, if any, with respect to deaths occurring on or after January 1, 2013).
ARTICLE VI TO APPENDIX ARTICLE PBG - DISTRIBUTIONS
The terms of this Article govern the distribution of benefits to a Participant who becomes entitled to payment of a PEP Pension under the Plan.
6.1 Form and Timing of Distributions. Subject to Section 6.5, this Section shall govern the form and timing of PEP Pensions.
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(a) Time and Form of Payment of Grandfathered Benefit. The Grandfathered Benefit of a Participant shall be paid in the form and at the time or times provided by the terms of the Plan as in effect on October 3, 2004.
(b) Time and Form of Payment of Non-Grandfathered Benefit. Except as provided below, the PEP Pension payable to a Participant in excess of the Grandfathered Benefit shall be become payable in a Single Lump Sum on the Separation from Service of the Participant.
(1) Certain Vested Pensions. A Participant (i) who incurred a Separation from Service during the period January 1, 2005 through December 31, 2008 (other than a Participant described in (3) below); and (ii) whose Annuity Starting Date has not occurred as of January 1, 2009, shall receive his PEP Pension in excess of his Grandfathered Benefit in a Single Lump Sum which shall become payable on January 1, 2009.
(2) Annuity Election. A Participant who (i) attained age 50 on or before January 1, 2009, (ii) on or before December 31, 2008 irrevocably elected to receive a Single Life Annuity, a 50%, 75% or 100% Joint and Survivor Annuity, or a 10 Year Certain and Life Annuity; and (iii) incurs a Termination of Employment on or after July 1, 2009 after either attainment of age 55 and the tenth anniversary of the Participant’s initial employment date or attainment of age 65 and the fifth anniversary of the Participant’s initial employment date, shall receive his PEP Pension in excess of his Grandfathered Benefit in the form elected commencing on the first day of the month coincident with or next following his Separation from Service. If such Participant Separates from Service
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prior to July 1, 2009 or prior to attainment of age 55 and the tenth anniversary of the Participant’s employment date, or prior to attainment of age 65 and the fifth anniversary of the Participant’s employment, the Participant’s PEP Pension in excess of his Grandfathered Pension shall be payable in a Single Lump Sum on the Participant’s Separation from Service.
(3) 2008 Reorganization. The entire PEP Pension of a Participant who (i) was involuntarily Separated from Service on or after November 1, 2008 and on or before December 19, 2008; (ii) at the time of Separation from Service had attained age 50 and had not attained age 55, and had 10 or more years of Service; and (iii) is eligible for special retirement benefits as described in the letter agreement executed and not revoked by the Participant, shall become payable in a Single Lump Sum on the last day of the Participant’s “Transition Period” as defined in the letter agreement.
(4) Specified Employees. If a Participant is classified as a Specified Employee at the time of the Participant’s Separation from Service (or at such other time for determining Specified Employee status as may apply under Section 409A), then no amount shall be payable pursuant to this Section 6.1(b) until at least six (6) months after such a Separation from Service. Any payment otherwise due in such six month period shall be suspended and become payable at the end of such six month period, with interest at the applicable interest rates used for computing a Single Lump Sum payment on the date of Separation from Service.
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(5) Actual Date of Payment. An amount payable on a date specified in this Article VI or in Article V shall be paid as soon as administratively feasible after such date; but 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 and the Participant (or beneficiary) is not permitted to designate the taxable year of the payment. The payment date may be postponed further if calculation of the amount of the payment is not administratively practicable due to events beyond the control of the Participant (or beneficiary), and the payment is made in the first calendar year in which the calculation of the amount of the payment is administratively practicable.
6.2 Special Rules for Survivor Options.
(a) Effect of Certain Deaths. If a Participant makes an Annuity election described in Section 6.1(b)(2) and the Participant dies before his Separation from Service, the election shall be disregarded. Such a Participant may change his coannuitant of a Joint and Survivor Annuity at any time prior to his Separation from Service, and may change his beneficiary of a Ten Years Certain and Life Annuity at any time. If the Participant dies after such election becomes effective but before his non-Grandfathered PEP Pension actually commences, the election shall be given effect and the amount payable to his surviving Eligible Spouse, surviving Eligible Domestic Partner or other beneficiary shall commence on the first day of the month following his death (any back payments due the Participant shall be payable to his estate). In the case of a Participant who elected a 10 Year Certain and Life Annuity, if such Participant
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dies: (i) after benefits have commenced; (ii) without a surviving primary or contingent beneficiary, and (iii) before receiving 120 payments under the form of payment, then the remaining payments due under such form of payment shall be paid to the Participant’s estate. If payments have commenced under such form of payment to a Participant’s primary or contingent beneficiary and such beneficiary dies before payments are completed, then the remaining payments due under such form of payment shall be paid to such beneficiary’s estate.
(b) Beneficiary Other Than Eligible Spouse or Eligible Domestic Partner. If a Participant’s beneficiary is not his Eligible Spouse or Eligible Domestic Partner, he may not elect:
(1) The 100 percent survivor option described in Section 6.1(b)(2) with a beneficiary more than 10 years younger than he is, or
(2) The 75 percent survivor option described in Section 6.1(b)(2) with a beneficiary more than 19 years younger than he is.
6.3 Designation of Beneficiary. A Participant who has elected to receive all or part of his pension in a form of payment that includes a survivor option shall designate a beneficiary who will be entitled to any amounts payable on his death. Such designation shall be made on a PEP Election Form. A Participant shall have the right to change or revoke his beneficiary designation at any time prior to when his election is finally effective. The designation of any beneficiary, and any change or revocation thereof, shall be made in accordance with rules adopted by the Plan Administrator. A beneficiary designation shall not be effective unless and until filed with the Plan Administrator
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6.4 Determination of Single Lump Sum Amounts. Except as otherwise provided below, a Single Lump Sum payable under Article V or Section 6.1 shall be determined in the same manner as the single lump sum payment option prescribed in Section 6.1(b)(3) of the Salaried Plan.
(a) Vested Pensions. If on the date of Separation from Service of a Participant such Participant is not entitled to retire with an immediate pension under the Salaried Plan, the Single Lump Sum payable to the Participant under Section 6.1 shall be determined in the same manner as the single lump sum payment option prescribed in Section 6.1(b)(3) of the Salaried Plan but substituting (for Plan Years beginning before 2012) the applicable segment rates for the blended 30 year Treasury and segment rates that would otherwise be applicable.
(b) 2008 Reorganization. Notwithstanding subsection (a) above, the Single Lump Sum payment for a Participant whose employment was involuntarily terminated as a result of the 2008 Reorganization on or after November 1, 2008 and on or before December 19, 2008 shall be determined based on the applicable interest rates and mortality used by the Salaried Plan for optional lump sum distributions in December 2008, provided that in no event shall such Single Lump Sum payment be less than the Single Lump Sum determined based on the applicable interest rates and mortality used by the Salaried Plan for lump sum distributions for the month in which the Single Lump Sum is distributed to the Participant.
6.5 Section 162(m) Postponement. Notwithstanding any other provision of this Plan to the contrary, no PEP Pension shall be paid to any Participant prior to the earliest date on which the Company’s federal income tax deduction for such payment is not precluded by
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Section 162(m) of the Code. In the event any payment is delayed solely as a result of the preceding restriction, such payment shall be made as soon as administratively feasible following the first date as of which Section 162(m) of the Code no longer precludes the deduction by the Company of such payment. Amounts deferred because of the Section 162(m) deduction limitation shall be increased by simple interest for the period of delay at the annual rate of six percent (6%).
APPENDIX TO ARTICLE PBG
Foreword
Foreword
This Appendix sets forth additional provisions applicable to individuals specified in the Articles of this Appendix. In any case where there is a conflict between the Appendix and the main text of the Plan, the Appendix shall govern.
Article A (Article IPO) – Transferred and Transition Individuals
IPO.1 Scope. This Article supplements the main portion of the Plan document with respect to the rights and benefits of Transferred and Transition Individuals following the spinoff of this Plan from the PepsiCo Prior Plan.
IPO.2 Definitions. This section provides definitions for the following words or phrases in boldface and underlined. Where they appear in this Article with initial capitals they shall have the meaning set forth below. Except as otherwise provided in this Article, all defined terms shall have the meaning given to them in Section 2.1 of the Plan.
(a) Agreement. The 1999 Employee Programs Agreement between PepsiCo, Inc. and The Pepsi Bottling Group, Inc.
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(b) Close of the Distribution Date. This term shall take the definition given it in the Agreement.
(c) Transferred Individual. This term shall take the definition given it in the Agreement.
(d) Transition Individual. This term shall take the definition given it in the Agreement.
IPO.3 Rights of Transferred and Transition Individuals. All Transferred Individuals who participated in the PepsiCo Prior Plan immediately prior to the Effective Date shall be Participants in this Plan as of the Effective Date. The spinoff of this Plan from the PepsiCo Prior Plan shall not result in a break in the Service or Credited Service of Transferred Individuals or Transition Individuals. Notwithstanding anything in the Plan to the contrary, and as provided in Section 2.04 of the Agreement, all service, all compensation, and all other benefit-affecting determinations for Transferred Individuals that, as of the Close of the Distribution Date, were recognized under the PepsiCo Prior Plan for periods immediately before such date, shall as of the Effective Date continue to receive full recognition, credit and validity and shall be taken into account under this Plan as if such items occurred under this Plan, except to the extent that duplication of benefits would result. Similarly, notwithstanding anything to the contrary in the Plan, the benefits of Transition Individuals shall be determined in accordance with section 8.02 of the Agreement.
Article B – Special Cases
B.1 This Article B of the Appendix supplements the main portion of the Plan document and is effective as of January 28, 2002.
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B.2 This Article shall apply to certain highly compensated management individuals who were (i) hired as a Band IV on or about January 28, 2002 and (ii) designated by the Senior Vice President of Human Resources as eligible to receive a supplemental retirement benefit (the “Participant”).
B.3 Notwithstanding Article IV of the Plan, the amount of the total PEP Pension under this Plan shall be equal to the excess of (1) the monthly pension benefit which would have been payable to such individual under the Salaried Plan without regard to the Compensation Limitation and the Section 415 Limitation, determined as if such individual’s employment commencement date with the Company were September 10, 1990; (2) the sum of (i) the amount of the monthly pension benefit that is in fact payable under the Salaried Plan; and (ii) the monthly amount of such individual’s deferred, vested benefit under any qualified or nonqualified defined benefit pension plan maintained by PepsiCo., Inc. or any affiliate of PepsiCo., Inc., Tricon or YUM!, as determined by the administrator using reasonable assumptions to adjust for different commencement dates so that the total benefit of such individual does not exceed the amount described in (1) above.
B.4 In the event of the death of such individual while employed by the Company, the individual’s beneficiary shall be entitled to a death benefit as provided in Article V, determined based on the formula for the total benefit described above, and reduced by the survivor benefits payable by the Salaried Plan and the other plans described above. The net amount so determined shall be payable in a Single Lump Sum as prescribed in Article V.
B.5 The Plan Administrator shall, in its sole discretion, adjust any benefit determined pursuant to this Article B to the extent necessary or appropriate to ensure that such individual’s benefit in the aggregate does not exceed the Company’s intent to ensure overall pension
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benefits equal to the benefits that would be applicable if such individual had been continuously employed by the Company for the period commencing September 10, 1990 to the date of Separation from Service.
Article C – Transfers From/To PepsiCo, Inc.
The provisions of this Article C shall only apply to transfers that occur before February 26, 2010 and shall not apply to any transfer to PepsiCo, Inc. or from PepsiCo, Inc. that occurs on or after such date.
C.1 This Article supplements and overrides the main portion of the Plan with respect to Participants who (i) transfer from the Company to PepsiCo, Inc.; and (ii) transfer from PepsiCo, Inc. to the Company.
C.2 Notwithstanding Article IV of the Plan, the PEP Pension of a Participant who (i) transfers from the Company to PepsiCo., Inc. or (ii) transfers to PepsiCo, Inc. from the Company shall be determined as set forth below.
C.3 Transfers to PepsiCo, Inc. The PEP Pension of a Participant who transfers to PepsiCo, Inc. shall be determined as of the date of such transfer in the manner described in Article IV, including the Salaried Plan offset regardless of whether such benefit under the Salaried Plan is transferred to a qualified plan of PepsiCo, Inc. On such Participant’s Separation from Service, the PEP Pension so determined shall become payable in accordance with Article VI.
C.4 Transfers from PepsiCo., Inc. The PEP Pension of a Participant who transfers from PepsiCo, Inc. shall be determined as of the date of the Participant’s Separation from Service in the manner described in Article IV and shall be reduced by any benefit accrued by the
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Participant under any qualified or nonqualified plan maintained by PepsiCo, Inc. that is based on credited service included in the determination of the Participant’s benefit under this Plan so that the total benefit from all plans does not exceed the benefit the Participant would have received had the Participant been solely employed by the Company. Notwithstanding the preceding, effective for transfers on or after January 1, 2005, in no event shall such benefit be less than the benefit the Participant would have received based solely on the Participant’s employment by the Company. The Plan Administrator shall make such adjustments as the Plan Administrator deems appropriate to effectuate the intent of this Section C.4.
APPENDIX ARTICLE PAC
Guiding Principles Regarding Benefit Plan Committee Appointments
Guiding Principles Regarding Benefit Plan Committee Appointments
PAC.1 Scope. This Article PAC supplements the PepsiCo Pension Equalization Plan document with respect to the appointment of the members of the PAC.
PAC.2 General Guidelines. To be a member of the PAC, an individual must:
(a) Be an employee of the PepsiCo Organization at a Leadership Group 1 or above level,
(b) Be able to give adequate time to committee duties, and
(c) Have the character and temperament to act prudently and diligently in the exclusive interest of the Plan’s participants and beneficiaries.
PAC.3 PAC Guidelines. In addition to satisfying the requirements set forth in Section PAC.2, the following guidelines will also apply to the PAC membership:
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(a) Each member of the PAC should have experience with benefit plan administration or other experience that can readily translate to a role concerning ERISA plan administration,
(b) The membership of the PAC as a whole should have experience and expertise with respect to the administration of ERISA health and welfare and retirement plans, and
(c) Each member of the PAC should be capable of prudently evaluating the reasonableness of expenses that are charged to the Plan.
PAC.4 Additional Information. The Chair of the PAC may seek information from Company personnel, including the Controller, CFO and CHRO, in connection with his identification of well qualified candidates for committee membership.
PAC.5 Role of the Guidelines. The foregoing guidelines in this Article PAC are intended to guide the Chair of the PAC in the selection of committee members; however, they neither diminish nor enlarge the legal standard applicable under ERISA.
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Exhibit 10.11
PEPSICO
AUTOMATIC RETIREMENT
CONTRIBUTION EQUALIZATION PLAN
Amended and Restated as of January 1, 2023
PepsiCo Automatic Retirement Contribution Equalization Plan
Table of Contents
Table of Contents
ARTICLE I – FOREWORD | 1 | ||||
ARTICLE II – DEFINITIONS | 2 | ||||
| ARC EQUALIZATION ACCOUNT; ACCOUNT | 2 | ||||
| BENEFICIARY | 2 | ||||
| CODE | 2 | ||||
| COMPANY | 2 | ||||
| DISTRIBUTION VALUATION DATE | 2 | ||||
| EID PROGRAM | 3 | ||||
| ELIGIBLE EMPLOYEE | 3 | ||||
| EMPLOYEE | 3 | ||||
| EMPLOYER | 3 | ||||
| ERISA | 3 | ||||
| EQUALIZED AUTOMATIC RETIREMENT CONTRIBUTION | 4 | ||||
| GUIDING PRINCIPLES REGARDING BENEFIT PLAN COMMITTEE APPOINTMENTS | 4 | ||||
| KEY EMPLOYEE | 4 | ||||
| PARTICIPANT | 6 | ||||
| PEPSICO ADMINISTRATION COMMITTEE OR PAC | 6 | ||||
| PEPSICO INVESTMENT COMMITTEE OR PIC | 7 | ||||
| PEPSICO ORGANIZATION | 7 | ||||
| PLAN | 8 | ||||
| PLAN ADMINISTRATOR | 8 | ||||
| PLAN YEAR | 8 | ||||
| RECORDKEEPER | 8 | ||||
| SAVINGS PLAN | 8 | ||||
| SECTION 409A | 8 | ||||
| SEPARATION FROM SERVICE | 8 | ||||
| UNITED STATES | 10 | ||||
| VALUATION DATE | 10 | ||||
ARTICLE III – ELIGIBILITY AND PARTICIPATION | 11 | ||||
3.1 ELIGIBILITY TO PARTICIPATE | 11 | ||||
3.2 COMMENCEMENT OF PARTICIPATION | 11 | ||||
3.3 TERMINATION OF PARTICIPATION | 11 | ||||
3.4 AGREEMENTS NOT TO PARTICIPATE | 11 | ||||
ARTICLE IV – CONTRIBUTIONS | 12 | ||||
4.1 EQUALIZED AUTOMATIC RETIREMENT CONTRIBUTIONS | 12 | ||||
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4.2 MAXIMUM EQUALIZED AUTOMATIC RETIREMENT CONTRIBUTIONS | 12 | ||||
4.3 OFFSETS | 13 | ||||
ARTICLE V – PARTICIPANT ACCOUNTS | 14 | ||||
5.1 ACCOUNTING FOR PARTICIPANTS’ INTERESTS | 14 | ||||
5.2 INVESTMENT EARNINGS AND LOSSES | 14 | ||||
5.3 INVESTMENT OF ACCOUNTS | 14 | ||||
5.4 VESTING | 16 | ||||
5.5 PROHIBITED MISCONDUCT | 16 | ||||
ARTICLE VI – PAYMENT OF BENEFITS | 20 | ||||
6.1 DISTRIBUTION RULES GENERALLY | 20 | ||||
6.2 DISTRIBUTIONS UPON SEPARATION FROM SERVICE | 20 | ||||
6.3 DISTRIBUTIONS UPON DEATH | 20 | ||||
6.4 DELAY FOR KEY EMPLOYEES | 22 | ||||
6.5 VALUATION | 22 | ||||
6.6 ACTUAL PAYMENT DATE | 22 | ||||
ARTICLE VII – PLAN ADMINISTRATION | 24 | ||||
7.1 PLAN ADMINISTRATOR | 24 | ||||
7.2 ACTION | 24 | ||||
7.3 POWERS OF THE PLAN ADMINISTRATOR | 24 | ||||
7.4 COMPENSATION, INDEMNITY AND LIABILITY | 26 | ||||
7.5 WITHHOLDING | 26 | ||||
7.6 CONFORMANCE WITH SECTION 409A | 27 | ||||
ARTICLE VIII – CLAIMS PROCEDURE | 28 | ||||
8.1 CLAIMS FOR BENEFITS | 28 | ||||
8.2 APPEALS OF DENIED CLAIMS | 28 | ||||
8.3 LIMITATIONS ON ACTIONS | 29 | ||||
8.4 RESTRICTION ON VENUE | 29 | ||||
ARTICLE IX – AMENDMENT AND TERMINATION | 30 | ||||
9.1 AMENDMENT TO THE PLAN | 30 | ||||
9.2 TERMINATION OF PLAN | 31 | ||||
ARTICLE X – MISCELLANEOUS | 32 | ||||
10.1 LIMITATION ON PARTICIPANT RIGHTS | 32 | ||||
10.2 UNFUNDED OBLIGATION OF INDIVIDUAL EMPLOYER | 32 | ||||
10.3 OTHER BENEFIT PLANS | 32 | ||||
10.4 RECEIPT OR RELEASE | 33 | ||||
10.5 GOVERNING LAWS | 33 | ||||
10.6 ADOPTION OF PLAN BY RELATED EMPLOYERS | 33 | ||||
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10.7 RULES OF CONSTRUCTION | 33 | ||||
10.8 SUCCESSORS AND ASSIGNS; NONALIENATION OF BENEFITS | 35 | ||||
10.9 FACILITY OF PAYMENT | 35 | ||||
ARTICLE XI – ERISA PLAN STRUCTURE | 36 | ||||
11.1 EXCESS BENEFIT PLAN | 36 | ||||
11.2 EXCESS COMPENSATION TOP HAT PLAN | 36 | ||||
11.3 ALLOCATION OF BENEFITS AMONG PLANS | 36 | ||||
ARTICLE XII – SIGNATURE | 37 | ||||
APPENDIX A – MERGER OF PBG SUPPLEMENTAL SAVINGS PLAN | 38 | ||||
A.1 SCOPE | 38 | ||||
A.2 PROVISIONS APPLICABLE TO AMOUNTS EARNED UNDER PBG PLAN | 38 | ||||
APPENDIX B – GUIDING PRINCIPLES REGARDING BENEFIT PLAN | 42 | ||||
COMMITTEE APPOINTMENTS | 42 | ||||
B.1 SCOPE | 42 | ||||
B.2 GENERAL GUIDELINES | 42 | ||||
B.3 PAC GUIDELINES | 42 | ||||
B.4 PIC GUIDELINES | 43 | ||||
B.5 ADDITIONAL INFORMATION | 43 | ||||
B.6 ROLE OF THE GUIDELINES | 43 | ||||
APPENDIX ARTICLE C - PIRP TRANSFER PARTICIPANTS | 44 | ||||
C.1 SCOPE | 44 | ||||
C.2 DEFINITIONS RELATED TO PIRP TRANSFER PARTICIPANTS | 44 | ||||
C.3 BENEFIT FORMULA FOR PIRP TRANSFER PARTICIPANTS | 46 | ||||
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ARTICLE I – FOREWORD
PepsiCo, Inc. (the “Company”) established the PepsiCo Automatic Retirement Contribution Equalization Plan (the “Plan”) for the benefit of employees of the PepsiCo Organization who receive Automatic Retirement Contributions under the PepsiCo Savings Plan (the “Savings Plan”), and whose Automatic Retirement Contributions are affected by certain Code limitations. In particular, the Plan is designed to benefit eligible employees whose Automatic Retirement Contributions under the Savings Plan are curtailed by the limitation on compensation under Code section 401(a)(17) or the limitation on annual additions under Code section 415, or who have any other reductions in Automatic Retirement Contributions as a result of the employee’s deferrals under the PepsiCo Executive Income Deferral Program (the “EID Program).
The Plan was originally effective as of January 1, 2011. Also as of the beginning of the day on this date, the PBG Supplemental Savings Plan (the “PBG Plan”) merged with and into this Plan. Appendix A of this Plan sets forth special provision applicable to amounts that were earned under the PBG Plan.
The Plan is amended and restated effective as of January 1, 2023.
At all times, the Plan is unfunded and unsecured for purposes of the Code and ERISA. The benefits of an executive are an obligation of that executive’s individual employer. With respect to his or her employer, the executive has the rights of an unsecured general creditor.
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ARTICLE II – DEFINITIONS
When used in this Plan, the following boldface terms shall have the meanings set forth below unless a different meaning is plainly required by the context:
ARC Equalization Account; Account.
The unfunded, notional account maintained for a Participant on the books of the Participant’s Employer that indicates the dollar amount that, as of any time, is credited under the Plan for the benefit of the Participant. The balance in such account shall be determined by the Plan Administrator. The Plan Administrator may establish one or more subaccounts as it deems necessary for the proper administration of the Plan, and may also combine one or more subaccounts to the extent it deems separate subaccounts are not then needed for sound recordkeeping. Where appropriate, a reference to a Participant’s Account shall include a reference to each applicable subaccount that has been established thereunder.
Beneficiary.
The person or persons (including a trust or trusts) properly designated by a Participant, as determined by the Recordkeeper, to receive the amounts credited to the Participant’s ARC Equalization Account in the event of the Participant’s death in accordance with Section 6.3(c).
Code.
The Internal Revenue Code of 1986, as amended from time to time.
Company.
PepsiCo, Inc., a corporation organized and existing under the laws of the State of North Carolina, or its successor or successors.
Distribution Valuation Date.
The date as specified by the Plan Administrator from time to time as of which Participant ARC Equalization Accounts are valued for purposes of a distribution from a Participant’s Account. Currently, the Distribution Valuation Date for a Participant is the month end
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that occurs just after the event specified in Article VI that triggers the Participant’s distribution. Accordingly, if the trigger event occurs on December 30 of a year, the current Distribution Valuation Date is December 31 of that year, and if the trigger event occurs on December 31 of a year, the current Distribution Valuation Date is January 31 of the following year. 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 preceding business day.
EID Program.
The PepsiCo Executive Income Deferral Program.
Eligible Employee.
An Employee who is eligible to participate actively in the Plan in accordance with Section 3.1. An Employee’s status as an Eligible Employee shall be determined separately with respect to each payroll date.
Employee.
An individual who qualifies as an “Employee” as that term is defined in the Savings Plan.
Employer.
An entity that qualifies as an “Employer” as that term is defined in the Savings Plan.
ERISA.
Public Law No. 93-406, the Employee Retirement Income Security Act of 1974, as amended from time to time.
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Equalized Automatic Retirement Contribution.
The contributions made to the Plan pursuant to Section 4.1.
Guiding Principles Regarding Benefit Plan Committee Appointments.
The guiding principles as set forth in Appendix B to be applied by the Chairs of the PAC and PIC when selecting the members of the PAC and PIC.
Key Employee.
The individuals identified in accordance with the following paragraphs.
(a)In 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 $215,000 (as adjusted for the applicable year under Code Section 416(i)(1));
(2)A five-percent owner of any member of the PepsiCo Organization; or
(3)A one-percent owner of any member of the PepsiCo Organization having annual compensation of more than $150,000.
For purposes of subsection (a) 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 Treasury Regulation section 1.415(c)-2(a), without regard to Treasury Regulation sections 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) (provided, that Code section 416(i)(5) shall not apply in making such determination), and provided further than the applicable year shall be determined in accordance with Section 409A and that any modification or clarification of the foregoing definition that applies under Section 409A shall be taken into account (determined in accordance with Treasury Regulation section 1.419A-1(i), and giving effect to the default rules that apply under such regulation for determining the minimum number of a service recipient’s specified employees).
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(b)Applicable Year. 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 Employee determination by the Plan Administrator as of December 31, 2010 shall apply to the period from April 1, 2011 to March 31, 2012).
(c)Rule of Administrative Convenience. Notwithstanding the foregoing, the Plan Administrator shall apply the following rule of administrative convenience for determining Key Employees for purposes of complying with the six-month payment delay that is required under Section 409A of the Code with respect to such employees:
(1)From January 1, 2011 until March 31, 2011, an employee shall be a Key Employee (subject to paragraph (3) below) if he was classified as at least a Band 4 or its equivalent on December 31, 2009. For this purpose, an employee shall be considered to be at least a Band 4 or its equivalent as of a date if the employee is classified as one of the following types of employees in the PepsiCo Organization on that date: (i) a Band 4 employee or above in a PepsiCo Business, (ii) a Level E7 employee or above in a PBG Business, or (iii) a Salary Grade 19 employee or above at a PAS Business. For purposes of this paragraph, “PAS Business” means each employer, division of an employer or other organizational subdivision of an employer that the Company classifies as part of the PAS business; “PBG Business” means each employer, division of an employer or other organizational subdivision of an employer that the Company classifies as part of the PBG business; and “PepsiCo Business” means
each employer, division of an employer or other organizational subdivision of an employer that the Company classifies as part of the PepsiCo business.
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(2)For the twelve-month period that begins on April 1, 2011, and for each twelve-month period that begins on April 1 in subsequent years, an employee shall be a Key Employee (subject to paragraph (3) below) if the employee was an employee of the PepsiCo Organization who was classified as Band 4 (or Leadership Group 6) or above on the December 31 that immediately precedes such April 1.
(3)Notwithstanding paragraphs (1) and (2) above, an employee shall be a Key Employee for the 12-month period that begins on any April 1, if as of the preceding December 31 the employee would be a Key Employee under the provisions of subsection (a) above. If the preceding sentence and the methods for identifying Key Employees set forth in paragraph (1) or (2) above, taken together, would result in more than 200 individuals being counted as Key Employees as of any December 31 determination date, then the number of individuals treated as Key Employees pursuant to paragraph (1) or (2), who are not described in the first sentence of this paragraph (3), shall be reduced to 200 by eliminating from consideration those employees otherwise added by such subparagraph in order of their base compensation, from the lowest base compensation to the highest.
Participant.
An Employee (or former Employee) participating in the Plan in accordance with the provisions of Article III.
PepsiCo Administration Committee or PAC.
The committee that has the responsibility for the administration and operation of the Plan, as set forth in the Plan, as well as any other duties set forth therein (except that the PAC is not responsible for selecting or changing the phantom investment options available under the Plan which are the responsibility of the PIC). As of any time, the Chair of the PAC shall be the person who is then the Company’s Senior Vice President, Total Rewards, but if such position is vacant or eliminated, the Chair shall be the person who is acting to fulfill the majority of the duties of the position (or plurality of the duties, if no one is
6
fulfilling a majority), as such duties existed immediately prior to the vacancy or the position elimination. The Chair shall appoint the other members of the PAC, applying the principles set forth in Appendix B and acting promptly from time to time to ensure that there are four other members of the PAC, each of whom shall have experience and expertise relevant to the responsibilities of the PAC. At least two times each year, the PAC shall prepare a written report of its significant activities that shall be available to any U.S.-based executive of the Company who is at least a senior vice president.
PepsiCo Investment Committee or PIC.
The committee that has the responsibility to select or change phantom investment options available under the Plan. As of any time, the Chair of the PIC shall be the person who is then the Company’s Senior Vice President, Finance and Treasurer, but if such position is vacant or eliminated, the Chair shall be the person who is acting to fulfill the majority of the duties of the position (or plurality of the duties, if no one is fulfilling a majority), as such duties existed immediately prior to the vacancy or the position elimination. The Chair shall appoint the other members of the PIC, applying the principles set forth in Appendix B and acting promptly from time to time to ensure that there are four other members of the PIC, each of whom shall have experience relevant to the responsibilities of the PIC. At least two times each year, the PIC shall prepare a written report of its significant activities that shall be available to any U.S.-based executive of the Company who is at least a senior vice president.
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.
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Plan.
The PepsiCo Automatic Retirement Contribution Equalization Plan, the plan set forth herein, as it may be amended and restated from time to time.
Plan Administrator.
The PAC, or its delegate or delegates. The Plan Administrator shall have authority to administer the Plan as provided in Article VII, except that the PIC shall have the authority under Section 7.3(h) to select or change phantom investment options available under the Plan.
Plan Year.
The 12-consecutive month period beginning on January 1 and ending on the following December 31 of the same calendar year.
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.
Savings Plan.
The PepsiCo Savings Plan, as it may be amended from time to time.
Section 409A.
Section 409A of the Code.
Separation from Service.
A Participant’s separation from service with the PepsiCo Organization, within the meaning of Section 409A(a)(2)(A)(i). The term may also be used as a verb (i.e., “Separates from Service”) with no change in meaning. Notwithstanding the preceding sentence, a Participant’s transfer to an entity owned 20% or more by the Company will not constitute a Separation of Service to the extent permitted by Section 409A. The
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following principles shall generally apply in determining when a Separation from Service occurs:
(a)A Participant separates from service with the Company if the Employee has a termination of employment with the Company other than for death. Whether a termination of employment has occurred is determined based on whether the facts and circumstances indicate that the Company and the Employee reasonably anticipated that no further services would be performed after a certain date or that the level of bona fide services the Employee would perform after such date (as an employee or independent contractor) would permanently decrease to no more than 20 percent of the average level of bona fide services performed over the immediately preceding 36-month period (or the full period in which the Employee provided services to the Company if the Employee has been providing services for less than 36 months).
(b)An Employee will not be deemed to have experienced a Separation from Service if such Employee is on military leave, sick leave, or other bona fide leave of absence, to the extent such leave does not exceed a period of six months or, if longer, such longer period of time during which a right to re-employment is protected by either statute or contract. If the period of leave exceeds six months and the individual does not retain a right to re-employment under an applicable statute or by contract, the employment relationship is deemed to terminate on the first date immediately following such six-month period. Notwithstanding the foregoing, where a leave of absence is due to any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than six months, where such impairment causes the Employee to be unable to perform the duties of his or her position of employment or any substantially similar position of employment, a 29-month period of absence shall be substituted for such six-month period. In the case of such a disability leave of absence, a Separation from Service shall occur on the earlier of the date that the Participant has reached 29 continuous months of
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disability leave of absence or the date that the Participant formally resigns his employment with the Employer and the PepsiCo Organization.
(c)If an Employee provides services both an as employee and as a member of the Board of Directors of the Company, the services provided as a Director are generally not taken into account in determining whether the Employee has Separated from Service as an Employee for purposes of the Plan, in accordance with final regulations under Section 409A.
United States.
Any of the 50 states, the District of Columbia, and the U.S. Virgin Islands.
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.
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ARTICLE III – ELIGIBILITY AND PARTICIPATION
3.1Eligibility to Participate.
Subject to Section 3.4, an Employee shall be eligible to participate actively in the Plan as of any payroll date if he or she is an ARC Eligible Employee under the Savings Plan and his or her Automatic Retirement Contributions for such payroll date under the Savings Plan are: (i) reduced by application of a limitation set forth in either Code section 401(a)(17) or 415; (ii) otherwise reduced as a result of the Employee’s deferrals under the EID Program; or (iii) affected as described in both (i) and (ii).
3.2Commencement of Participation.
An Eligible Employee shall become a Participant in this Plan as of the first payroll date an Equalized Automatic Retirement Contribution is allocated to his or her Account as provided in Section 5.1.
3.3Termination of Participation.
An Employee who becomes a Participant under the Plan shall cease to be a Participant on the date his or her Account is fully distributed as provided in Article VI.
3.4Agreements Not to Participate.
The eligibility provisions of this Article III will be subject to any other documents that constitute part of an agreement between the Company and an Employee that limits or bars the Employee’s participation in this Plan. An agreement that is otherwise described in the preceding sentence shall not limit or bar an Employee’s participation in this Plan for the period before the earliest date such agreement may apply without violating the restrictions on elections under Section 409A.
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ARTICLE IV – CONTRIBUTIONS
4.1Equalized Automatic Retirement Contributions.
As of each payroll date for which an Employee is an Eligible Employee, the Employer shall make an Equalized Automatic Retirement Contribution to the ARC Equalization Account of such Eligible Employee. Subject to Section 4.2 below, the amount of each Equalized Automatic Retirement Contribution shall equal –
(a)The Eligible Employee’s Total Automatic Retirement Contribution for such payroll date, reduced by
(b)The amount of the Automatic Retirement Contribution to which the Eligible Employee is entitled under the Savings Plan for the same payroll date.
An Eligible Employee’s “Total Automatic Retirement Contribution” is determined in the same way the Eligible Employee’s Automatic Retirement Contribution is required to be determined as of such payroll date under the Savings Plan, but with the following modifications: (i) the limitation on compensation imposed by Code section 401(a)(17), as otherwise applied by the terms of the Savings Plan, shall be disregarded, (ii) the limitation on annual additions imposed by Code section 415, as otherwise applied by the terms of the Savings Plan, shall be disregarded, and (iii) any exclusion, which is then in effect of amounts deferred by the Eligible Employee under the EID Program from his or her Eligible Pay under the Savings Plan shall be disregarded. The three modifications in the preceding sentence shall be applied so that they do not result in any duplication (e.g., the provisions of (iii) above shall not result in an amount of Total Automatic Retirement Contribution to the extent such amount is provided by (ii) above).
4.2Maximum Equalized Automatic Retirement Contributions.
(a) An Eligible Employee’s Equalized Automatic Retirement Contributions with respect to Plan Years beginning on or after January 1, 2023 shall not be limited by the Code section 401(a)(17) limit.
(b) For Plan Years beginning prior to January 1, 2023, an Eligible Employee ceased having Equalized Automatic Retirement Contributions made to his or her ARC Equalization Account during any Plan Year as necessary to ensure that the sum of
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his or her Equalized Automatic Retirement Contributions under this Plan and Automatic Retirement Contributions under the Savings Plan (collectively, the “Aggregate Employer Contributions”) equal or do not exceed the Code section 401(a)(17) limit in effect for such Plan Year. An Eligible Employee’s Equalized Automatic Retirement Contribution for a payroll date were reduced to comply with this Section by taking into account all Aggregate Employer Contributions, payable for all prior payroll dates in the Plan Year, and Automatic Retirement Contributions under the Savings Plan payable for the current payroll date.
4.3Offsets.
Notwithstanding an Eligible Employee’s rights under Section 4.1 (or a Participant’s rights under Articles V and VI), the Company may reduce the amount of any payment or benefit that is or would become payable to or on behalf of an Eligible Employee or Participant by the amount of any obligation of the Eligible Employee or Participant to the Company that is or becomes due and payable, provided that (a) the obligation of the Eligible Employee or Participant to the Company was incurred during the employment relationship, (b) the reduction may not exceed the amount allowed under Section 409A and Treasury Regulation section 1.409A-3(j)(4)(xiii), and (c) the reduction is made at the same time and in the same amount as the obligation otherwise would have been due and collectable from the Employee or Participant. Consistent with this, appropriate reductions may be made in (i) the Equalized Automatic Retirement Contributions that otherwise would be provided to the Eligible Employee under Section 4.1, (ii) the balance in the Participant’s Account under Article V, or (iii) the Participant’s distributions under Article VI. The application of this Section 4.2 is solely in the independent discretion of the Company.
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ARTICLE V – PARTICIPANT ACCOUNTS
5.1Accounting for Participants’ Interests.
Equalized Automatic Retirement Contributions shall be credited to a Participant’s ARC Equalization Account at the same time that the Participant’s Automatic Retirement Contributions under the Savings Plan are required to be allocated to the Participant’s Profit-Sharing Account under the Savings Plan (or as soon as administratively practicable thereafter). A Participant’s ARC Equalization Account is a bookkeeping device to track the notional value of the Participant’s Equalized Automatic Retirement Contributions (and his or her Employer’s liability therefor). No assets shall be reserved or segregated in connection with any ARC Equalization Account, and no ARC Equalization Account shall be funded, insured or otherwise secured.
5.2Investment Earnings and Losses.
As of each Valuation Date, a Participant’s ARC Equalization 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 ARC Equalization Account had actually been invested as directed by the Participant in accordance with this Article. 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 ARC Equalization Account and the amount of his or her Employer’s liability to make deferred payments to or on behalf of the Participant.
5.3Investment of Accounts.
(a)In General. A Participant’s Equalized Automatic Retirement Contributions shall be invested on a phantom basis among the investment options that are available for Automatic Retirement Contributions under the Savings Plan from time to time, unless otherwise determined by the PIC. The PIC 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
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selects another replacement option in accordance with procedures established by the Plan Administrator for this purpose).
(b)Investment and Reinvestment Elections. The Participant’s Equalized Automatic Retirement Contribution for a payroll date shall be invested on a phantom basis in the investment options and in the proportions specified by the Participant in accordance with rules applied by the Plan Administrator. Such rules shall be based on those that apply for purposes of Automatic Retirement Contributions under the Savings Plan as of such payroll date, except as otherwise provided for by the Plan Administrator. To the extent a Participant does not specify an investment option for an Equalized Automatic Retirement Contribution, the rules for default investments that are in effect under the Savings Plan as of such payment date shall apply. In addition, a Participant shall have the same right to change the investment of the Participant’s future Equalized Automatic Retirement Contributions and to reinvest the balance of his or her ARC Equalization Account as the Participant has for his or her Automatic Retirement Contributions and the account or subaccount that holds such contributions under the Savings Plan, except as otherwise provided for by the Plan Administrator.
(c)Phantom Investment Options. The Plan’s 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
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number of phantom units credited to his or her ARC Equalization Account on such date by the NAV of a unit in such fund on such date.
5.4Vesting.
A Participant shall be fully vested in, and have a nonforfeitable right to, the Participant’s ARC Equalization Account at the time the Participant becomes fully vested in his or her ARC Account under the Savings Plan. Notwithstanding the prior sentence, the following special rules shall apply:
(a)The crediting of Equalized Automatic Retirement Contributions pursuant to this Plan (including the crediting of related earnings on such credits) shall not in any way exempt the Equalized Automatic Retirement Contributions and related earnings from the full application of the Company’s clawback and other forfeiture and recovery policies (“Clawback Policies”), as they are in effect from time to time. Accordingly, a Participant’s Account shall be subject to forfeiture (and if paid out, to recovery) to the extent determined to be appropriate by the Plan Administrator to give full effect to these Clawback Policies. Section 5.5 shall not be construed to reduce or impair the forfeiture and recovery rights provided by this Section 5.4.
(b)If a Participant’s period of Service (as determined under the Savings Plan for purposes of vesting) would extend beyond the Participant’s Separation from Service date because of a leave of absence, the Plan Administrator may provide for determining the Participant’s nonforfeitable right to his or her ARC Equalization Account by projecting the Participant’s total period of Plan Service to include some or all of the Participant’s leave of absence period.
5.5Prohibited Misconduct.
(a)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 Equalized Automatic Retirement Contributions and any net earnings or gains (whether paid
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previously, being paid currently or payable in the future), and his or her ARC Equalization Account shall be adjusted to reflect such forfeiture and previously paid Equalized Automatic Retirement Contributions and net earnings or gains shall be recovered. Section 5.4 shall not be construed to reduce or impair the forfeiture rights provided by this Section 5.5, but the Plan Administrator shall have the authority to reduce the forfeitures that would apply under this Section to the extent necessary to avoid an inappropriate duplication (determined in the Plan Administrator’s sole discretion) of the forfeitures applicable under Section 5.4(a).
(b)Any of the following activities engaged in, directly or indirectly, by a Participant shall constitute Prohibited Misconduct:
(1)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.
(2)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.
(3)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
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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.
(4)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.
(5)The Participant engaging in any activity that constitutes fraud.
Notwithstanding anything contained in the Plan or in any other confidentiality provision to which the Participant may be subject as a result of the Participant’s employment with the Company, nothing shall prohibit the Participant from, without notice to the Company, communicating with government agencies, providing information to government agencies, participating in government agency investigations, filing a complaint with government agencies, or testifying in government agency proceedings concerning any possible legal violations or from receiving any monetary award for information provided to a government agency.. The Company nonetheless asserts and does not waive its attorney-client privilege over any information appropriately protected by the privilege. Further, notwithstanding any confidentiality provision to which the Participant may be subject, pursuant to the Defend Trade Secrets Act, an individual shall not be held criminally or civilly liable under any federal or state trade secret law for the disclosure of a trade secret that (A) is made (i) in confidence to a federal, state, or local government official, either directly or indirectly, or to an attorney; and (ii)
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solely for the purpose of reporting or investigating a suspected violation of law; or (B) is made in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal. An individual who files a lawsuit for retaliation by an employer for reporting a suspected violation of law may disclose the trade secret to the attorney of the individual and use the trade secret information in the court proceeding, if the individual (A) files any document containing the trade secret under seal; and (B) does not disclose the trade secret, except pursuant to court order.
For purposes of this subsection, “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. For purposes of this subsection, “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: in-home and commercial beverage systems, carbon dioxide gas cylinders, carbon dioxide gas refills, consumables, and ready-to-drink beverages, including without limitation, carbonated soft drinks, tea, water, juices, juice drinks, juice products sports drinks, coffee drinks, alcoholic beverages, and energy drinks; dairy products; snacks, including salty snacks, fruit and vegetable snacks, dips and spreads, sweet snacks, meat snacks, granola, nutrition and cereal bars, and cookies; hot cereals and ready-to-eat cereals; pancake mixes and pancake syrup; grain-based food products; pasta products; sports performance nutrition products, including without limitation, energy, protein, carbohydrate, nutrition and meal replacement chews, bars, powders, gels, drinks or drink mixes; 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.
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ARTICLE VI – PAYMENT OF BENEFITS
6.1Distribution Rules Generally.
A Participant’s ARC Equalization Account shall be distributed based upon first to occur of a Participant’s Separation from Service or death, as provided in Sections 6.2 and 6.3, respectively. If a Participant becomes re-employed and entitled to another distribution after the occurrence of one of the foregoing distribution events, the rules of this Article shall apply separately to the balance in the Participant’s ARC Equalization Account that relates to the later period of employment. In no event shall any portion of a Participant’s ARC Equalization Account be distributed earlier or later than is allowed under Section 409A. All distributions shall be made in a single lump sum cash payment.
6.2Distributions Upon Separation from Service.
If a Participant’s ARC Equalization Account becomes distributable based upon his or her Separation from Service, such distribution shall be made in a single lump sum payment on the first day of the month that immediately follows the Participant’s Distribution Valuation Date, subject to Section 6.4 below (Delay for Key Employees).
6.3Distributions Upon Death.
(a)If a Participant’s ARC Equalization Account becomes distributable based upon the Participant’s death, such distribution shall be distributed in a single lump sum payment on the first day of the month that immediately follows the Participant’s Distribution Valuation Date.
(b)Amounts paid following a Participant’s death shall be paid to the Participant’s Beneficiary; provided, however, that 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 to the Participant’s Eligible Spouse or Eligible Domestic Partner (each as defined below), if living; otherwise in equal shares to any surviving children of the Participant; otherwise to the Participant’s estate. The Plan Administrator shall determine a Participant’s
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“Eligible Spouse” based on the state or local law where the Participant has his or her primary residence at the time of death, and shall determine a Participant’s “Eligible Domestic Partner” under the definition and rules that apply to death benefits under the PepsiCo Savings Plan. 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)A Participant may designate (in a 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 ARC Equalization 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) that the Plan Administrator or Recordkeeper shall require from time to time. The Beneficiary designation must also be filed with the Recordkeeper prior to the Participant’s death, as determined by the Plan Administrator. An incomplete Beneficiary designation, as determined by the Recordkeeper or Plan Administrator, shall be void and of no effect. A Beneficiary designation of an individual by name remains in effect regardless of any change in the designated individual’s relationship to the Participant. Any Beneficiary designation submitted to the Recordkeeper that only specifies a Beneficiary by relationship shall not be considered an effective Beneficiary designation and shall be void and of 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 ARC Equalization Account (if any) for which percentages have not been designated. At any time, a Participant may change a Beneficiary designation for his or her ARC Equalization 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 ARC Equalization Account ceases to be
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Beneficiary with respect to a Participant’s ARC Equalization Account ceases to be a Beneficiary when all payments have been made from the ARC Equalization Account.
(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 Plan Administrator at least 14 days before any such amount is actually distributed by the Plan. Any claim received thereafter is untimely, and it shall be unenforceable against the Plan, the Company, the Plan Administrator or any other party acting for one or more of them.
6.4Delay for Key Employees.
(a)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 the time of payment based on Separation from Service shall be determined under the provisions of Section 6.2 as if the Distribution Valuation Date were the Valuation Date that is six months after the Distribution Valuation Date that would otherwise apply.
(b)Notwithstanding subsection (a) above, distribution in accordance with Section 6.3 or Section 6.4 shall be given priority over distribution in accordance with this Section if it would result in an earlier commencement date of the Participant’s distribution.
6.5Valuation.
In determining the amount of any individual distribution pursuant to this Article, the Participant’s ARC Equalization Account shall continue to be credited with earnings and gains (and debited for expenses and losses) as specified in Article V until the Valuation Date that is used in determining the amount of the distribution under this Article.
6.6Actual 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 no event shall the
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Participant (or Beneficiary) be permitted to designate the taxable year of the payment. The payment date may be delayed further in accordance with one or more applicable special rules under Section 409A that permit such later payment (for example, in the event of a bona fide dispute that meets the requirements of Treasury Regulation section 1.409A-3(g)).
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ARTICLE VII – PLAN ADMINISTRATION
7.1Plan 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.
7.2Action.
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.
7.3Powers 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;
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(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;
(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 7.6 (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 Participant’s Accounts. 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.
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7.4Compensation, 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 PAC (which serves as the Plan Administrator) or PIC, and no individual acting as the delegate of the PAC or PIC, 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 PAC and PIC 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 PAC or PIC 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 PAC or PIC (or his or her serving as the delegate of the PAC or PIC), excepting only expenses and liabilities arising out of his or her own willful misconduct or bad faith.
7.5Withholding.
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 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
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Participant’s Form W-2 for the applicable tax year. All such reporting and withholding shall be performed based on the rules and procedures of Section 409A.
7.6Conformance with Section 409A.
At all times during each Plan Year, this Plan shall be operated in accordance with the requirements of Section 409A. In all cases, the provisions of this Section shall apply notwithstanding any contrary provision of the Plan that is not contained in this Section.
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ARTICLE VIII – CLAIMS PROCEDURE
8.1Claims 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.
8.2Appeals 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.
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8.3Limitations on Actions.
Any claim filed under this Article VIII and any action filed in state or federal court by or on behalf of a former or current Employee, Participant, Beneficiary or any other individual, person or entity (collectively, a “Petitioner”) for the alleged wrongful denial of Plan benefits or for the alleged interference with or violation of ERISA-protected rights must be brought within two years of the date the Petitioner’s cause of action first accrues. For purposes of this subsection, a cause of action with respect to a Petitioner’s benefits under the Plan shall be deemed to accrue not later than the earliest of (i) when the Petitioner has received the calculation of the benefits that are the subject of the claim or legal action (ii) the date identified to the Petitioner by the Plan Administrator on which payments shall commence, or (iii) when the Petitioner has actual or constructive knowledge of the facts that are the basis of his claim. For purposes of this subsection, a cause of action with respect to the alleged interference with ERISA-protected rights shall be deemed to accrue when the claimant has actual or constructive knowledge of the acts that are alleged to interfere with ERISA-protected rights. Failure to bring any such claim or cause of action within this two-year time frame shall preclude a Petitioner, or any representative of the Petitioner, from filing the claim or cause of action. Correspondence or other communications following the mandatory appeals process described in Section
8.2 shall have no effect on this two-year time frame.
8.4Restriction on Venue.
Any claim or action filed in court or any other tribunal in connection with the Plan by or on behalf of a Petitioner (as defined in Section 8.3 above) shall only be brought or filed in the United States District Court for the Southern District of New York.
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ARTICLE IX – AMENDMENT AND TERMINATION
9.1Amendment to the Plan.
(a)The Company, or its delegate, 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 terms and conditions of Equalized Automatic Retirement Contributions, 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 balance of a Participant’s ARC Equalization Account as of the date such amendment is adopted. In addition, the Company shall have the limited right to amend the Plan at any time, retroactively or otherwise, in such respects and to such extent as may be necessary to fully qualify it under existing and applicable laws and regulations, and if and to the extent necessary to accomplish such purpose, may by such amendment decrease or otherwise affect benefits to which Participants may have already become entitled, notwithstanding any provision herein to the contrary.
(b)The Company’s right to amend the Plan shall not be affected or limited in any way by a Participant’s Separation from Service, death or disability. Prior practices by the Company or an Employer shall not diminish in any way the rights granted the Company under this Section. Also, it is expressly permissible for an amendment to affect less than all of the Participants covered by the Plan.
(c)Any amendment shall be in writing and adopted by the Company or by any officer of the Company who has authority or who has been granted or delegated the authority to amend this Plan. An amendment or restatement of this Plan shall not affect the validity or scope of any grant or delegation of such authority, which shall instead be solely determined based upon the terms of the grant or delegation (as determined under applicable law). All Participants and Beneficiaries shall be bound by such amendment.
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(d)Any amendments made to the Plan shall be subject to any restrictions on amendment that are applicable to ensure continued compliance under Section 409A.
9.2Termination of Plan.
(a)The Company expects to continue this Plan, but does not obligate itself to do so.
The Company 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 within the United States). 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 ARC Equalization Account. If this Plan is terminated (in whole or in part), the termination resolution shall provide for how amounts theretofore credited to affected Participants’ ARC Equalization Accounts will be distributed.
(b)This Section is subject to the same restrictions related to compliance with Section 409A that apply to Section 9.1. 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.
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ARTICLE X – MISCELLANEOUS
10.1Limitation on Participant Rights.
Participation in this Plan does not give any Participant the right to be retained in the Employer's or Company's employ (or any right or interest in this Plan or any assets of the Company or Employer other than as herein provided). The Company and Employer reserve the right to terminate the employment of any Participant without any liability for any claim against the Company or Employer under this Plan, except for a claim for payment of benefits as provided herein.
10.2Unfunded Obligation of Individual Employer.
The benefits provided by this Plan are unfunded. All amounts payable under this Plan to Participants are paid from the general assets of the Participant’s individual Employer. Nothing contained in this Plan requires the Company or 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 his or her Employer with respect to benefits granted 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 benefits made while the Participant was employed by that Employer to the new Employer (and the books of both Employers shall be adjusted appropriately).
10.3Other Benefit Plans.
This Plan shall not affect the right of any Eligible Employee 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
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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.
10.4Receipt or Release.
Any payment to a Participant or Beneficiary 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 Employer and the Company, and the Plan Administrator may require such Participant or Beneficiary, as a condition precedent to such payment, to execute a receipt and release to such effect.
10.5Governing Law.
This Plan shall be construed, administered, and governed in all respects in accordance with ERISA and, to the extent not preempted by ERISA, in accordance with the laws of the State of New York. 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.
10.6Adoption of Plan by Related Employers.
The Plan Administrator may select as an Employer any division of the Company, as well as any member of the PepsiCo Organization, and permit or cause such division or organization 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.
10.7Rules of Construction.
The provisions of this Plan shall be construed according to the following rules:
(a)Gender and Number. Whenever the context so indicates, the singular or plural number and the masculine, feminine, or neuter gender shall be deemed to include the other (or others).
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(b)Examples. 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).
(c) Compounds of the Word “Here” . The words "hereof", “herein”, "hereunder" and other similar compounds of the word "here" shall mean and refer to the entire Plan, not to any particular provision or section.
(d)Effect of Specific References. Specific references in the Plan to the Plan Administrator’s discretion shall create no inference that the Plan Administrator’s discretion in any other respect, or in connection with any other provisions, is less complete or broad.
(e)Subdivisions of the Plan Document. This Plan document is divided and subdivided using the following progression: articles, sections, subsections, paragraphs, subparagraphs and clauses. Articles are designated by capital roman numerals. Sections are designated by Arabic numerals containing a decimal point. Subsections are designated by lower-case letters in parentheses. Paragraphs are designated by Arabic numbers in parentheses. Subparagraphs are designated by lower-case roman numerals in parenthesis. Clauses are designated by upper-case letters in parentheses. Any reference in a section to a subsection (with no accompanying section reference) shall be read as a reference to the subsection with the specified designation contained in that same section. A similar reading shall apply with respect to paragraph references within a subsection and subparagraph references within a paragraph.
(f)Invalid Provisions. If any provision of this Plan is, or is hereafter declared to be void, voidable, invalid or otherwise unlawful, the remainder of the Plan shall not be affected thereby.
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10.8Successors 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 ARC Equalization Account of a Participant are not (except as provided in Sections 5.5) 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 ARC Equalization Account of a Participant. Any such payment shall be charged against and reduce the Participant’s ARC Equalization Account.
10.9Facility 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.
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ARTICLE XI – ERISA PLAN STRUCTURE
This Plan document encompasses two separate plans within the meaning of ERISA, as set forth in Sections 11.1 and 11.2 below. These two plans are severable for any and all purposes as directed by the Company.
11.1Excess Benefit Plan.
An excess benefit plan within the meaning of ERISA section 3(36), maintained solely for the purpose of providing benefits for Savings Plan participants in excess of the limitations on benefits imposed by Code section 415.
11.2Excess Compensation Top Hat Plan.
A plan maintained by the Company primarily for the purpose of providing deferred compensation for a select group of management or highly compensated employees within the meaning of ERISA sections 201(2) and 401(a)(1). The plan provides benefits for Savings Plan participants in excess of the limitations imposed by Code section 401(a)(17) on benefits under the Savings Plan (after taking into account any benefits under the Excess Benefit Plan).
11.3Allocation of Benefits Among Plans.
Benefits under this Plan shall be allocated first to the Excess Benefit Plan, to the extent of benefits paid for the purpose indicated in Section 11.1 above, and then any remaining benefits shall be allocated to the Excess Compensation Top Hat Plan.
[Remainder of this page intentionally left blank]
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ARTICLE XII – SIGNATURE
The PepsiCo Automatic Retirement Contribution Equalization Plan, as amended and restated, is hereby adopted as of this 11th day of December, 2023, to be effective as of January 1, 2023 or as otherwise stated herein.
PEPSICO, INC.
By: /s/ Becky Schmitt
Becky Schmitt
Executive Vice President and
Chief Human Resources Officer
Date: December 11, 2023
Law Department Approval
By: /s/ Jeffrey A. Arnold
Jeffrey A. Arnold
Legal Director, Employee Benefits Counsel
Date: December 11, 2023
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APPENDIX A – MERGER OF PBG SUPPLEMENTAL SAVINGS PLAN
A.1Scope.
This Article sets forth special provisions applicable to amounts earned under the PBG Supplemental Savings Plan (“PBG Plan”) prior to the merger of that plan with and into this Plan. Amounts earned under the PBG Plan prior to the merger shall be credited to a subaccount of the Participant’s ARC Equalization Account (“PBG Plan Subaccount”). All other defined terms used herein shall have the meaning assigned to such term under Article II unless otherwise indicated.
A.2Provisions Applicable to Amounts Earned Under PBG Plan.
Except as otherwise set forth in this Section A.2, the terms and conditions applicable to a Participant’s PBG Plan Subaccount are governed by the prior document for the PBG Plan.
(a)Investment Mapping. A Participant’s PBG Plan Subaccount shall be mapped to the phantom investment options that are available for Equalized Automatic Retirement Contributions under Article V of this Plan according to the same mapping method that will apply for purposes of transferring the Participants’ account balance under the PBG Savings Plan to the investment options available under the Savings Plan, except as otherwise provided by the Plan Administrator. Once the Participant’s PBG Plan Subaccount balance has been mapped as provided in the preceding sentence, the PBG Plan Subaccount shall be subject to the investment provisions set forth in Article V.
(b)Phantom PepsiCo Common Stock Fund. Notwithstanding subsection (a) above, the portion of a Participant’s PBG Plan Subaccount that is invested in the phantom PepsiCo Common Stock Fund shall not be subject to mapping, but instead shall remain invested in the phantom PepsiCo Common Stock Fund until such time as the Participant makes a reinvestment election. Thereafter, such portion of the Participant’s PBG Plan Subaccount shall remain eligible for investment and reinvestment in the phantom PepsiCo Common Stock Fund
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(notwithstanding any restrictions on investment in the phantom PepsiCo Common Stock Fund that may apply generally under Article V) in accordance with procedures established by the Plan Administrator for this purpose.
(c)Time and Form of Payment. A Participant’s PBG Plan Subaccount shall be paid on the first day of the calendar month following the Distribution Valuation Date that next follows the earliest of the following:
(1)The Participant’s Separation from Service;
(2)The Participant’s death; or
(3)A change in control of the Participant’s Employer (other than the successor to the Pepsi Bottling Group, Inc.), as defined in Section 409A.
Distributions upon Separation from Service under this subsection shall be subject to Section 6.5 (Delay for Key Employees), except that no priority shall be given to Section 6.4.
(d)Phantom PepsiCo Common Stock Fund Restrictions. To the extent necessary to ensure compliance with Rule 16b-3(f) of the Securities Exchange Act of 1934 (the “Act”), the Company may arrange for tracking of any such transaction defined in Rule 16b-3(b)(1) of the Act involving the phantom PepsiCo Common Stock Fund and the Company may bar any such transaction to the extent it would not be exempt under Rule 16b-3(f). The Company will 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 need (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.
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(e)Impact of Securities Law on Distributions. The provisions of (d) above and this subparagraph (e), shall apply in determining whether a Participant’s distribution shall be delayed beyond the date applicable under Article VI of the Plan.
(i)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) of the Act, if it were approved by the Company’s Board of Directors or the 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.
(ii)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) was not covered by an agreement, made at the time of the Participant’s original phantom investment election, that any investments in the phantom PepsiCo Common Stock Fund would, once made, remain in that fund until distribution, (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 phantom 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
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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 balance 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.
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APPENDIX B – GUIDING PRINCIPLES REGARDING BENEFIT PLAN COMMITTEE APPOINTMENTS
B.1Scope.
This Article B supplements the Plan document with respect to the appointment of the members of the PAC and PIC.
B.2General Guidelines.
To be a member of the PAC or the PIC, an individual must:
(a)Be an employee of the PepsiCo Organization at a Leadership Group 1 or above level,
(b)Be able to give adequate time to committee duties, and
(c)Have the character and temperament to act prudently and diligently in the exclusive interest of the Plan’s participants and beneficiaries.
B.3PAC Guidelines.
In addition to satisfying the requirements set forth in Section B.2, the following guidelines will also apply to the PAC membership:
(a)Each member of the PAC should have experience with benefit plan administration or other experience that can readily translate to a role concerning ERISA plan administration,
(b)The membership of the PAC as a whole should have experience and expertise with respect to the administration of ERISA health and welfare and retirement plans, and
(c)Each member of the PAC should be capable of prudently evaluating the reasonableness of expenses that are charged to the Plan.
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B.4PIC Guidelines.
In addition to satisfying the requirements set forth in Section B.2, the following guidelines will also apply to the PIC membership:
(a)Each member of the PIC should have experience in the areas of investment or finance, and
(b)The membership of the PIC as a whole should have experience and expertise with respect to evaluating investment options for unfunded ERISA benefit plans.
B.5Additional Information.
The Chairs of the PAC and PIC may seek information from Company personnel, including the Controller, CFO and CHRO, in connection with their identification of well qualified candidates for committee membership.
B.6Role of the Guidelines.
The foregoing guidelines in this Article B are intended to guide the Chairs of the PIC and the PAC in the selection of committee members; however, they neither diminish nor enlarge the legal standard applicable under ERISA, as applicable.
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APPENDIX ARTICLE C - PIRP TRANSFER PARTICIPANTS
C.1Scope:
This Article provides special rules for calculating the benefit of an individual who is a “PIRP Transfer Participant” under Section C.2 below. The benefit of a PIRP Transfer Participant shall be determined under Section C.3 below. Once a benefit is determined for a PIRP Transfer Participant under this Article, such benefit shall be subject to the Plan’s normal conditions and shall be paid in accordance with
the Plan’s normal terms. The provisions of this Article are effective January 1, 2016 (but they may take into account years that precede January 1, 2016).
C.2Definitions Related to PIRP Transfer Participants:
The following definitions apply for purposes of this Article.
(a)“PIRP-DC” is the portion of the PepsiCo International Retirement Program that provides a program of defined contributions.
(b)“PIRP-DC Employer” is the Company or an affiliate of the Company that is an “Employer” under the terms of PIRP-DC.
(c)“PIRP-DC Salary” is compensation that qualifies as “Salary” under the terms of PIRP-DC.
(d)“PIRP-DC Service” is service that qualifies as “Service” under the terms of PIRP-DC.
(e)A “PIRP Transfer Participant” is an individual who is described in paragraph (1) or (2) below.
(1)Incoming PIRP Transfer Participant: An individual – (i) who is employed during a year (including a year preceding 2016) by a PIRP-DC Employer in a position that is eligible to accrue
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benefits under PIRP-DC (or would be eligible if Section 9.14 of PIRP-DC did not apply), (ii) who is then transferred by the Company during the year from such position to a position that qualifies the individual to be an ARC Eligible Employee under the Savings Plan, (iii) whose PIRP-DC accrual for the Year of Transfer is blocked by Section 9.14 of PIRP-DC, (iv) who would otherwise be entitled to a PIRP-DC benefit enhancement for the Year of Transfer that relates to PIRP-DC Salary or PIRP-DC Service for the year of the transfer, and (v) whose PIRP-DC benefit was not already paid out by December 1, 2016 (but disregarding any such paid-out PIRP-DC benefit for this purpose that the PIRP-DC Vice President determines should be treated under this clause as if it had not been paid out).
(2)Outgoing PIRP Transfer Participant: An individual – (i) who is employed during a year (including a year preceding 2016) by an Employer in a position that qualifies to be an ARC Eligible Employee under the Savings Plan, (ii) who is then transferred by the Company during the year from such position to a position that is eligible to accrue benefits under PIRP-DC (or would be eligible if Section 9.14 of PIRP-DC did not apply), (iii) whose PIRP-DC accrual for the Year of Transfer is blocked by Section 9.14 of PIRP-DC, (iv) who would otherwise be entitled to a PIRP-DC benefit enhancement for the Year of Transfer that relates to PIRP- DC Salary or PIRP-DC Service for the year of the transfer, and (v) whose PIRP-DC benefit was not already paid out by December 1, 2016 (but disregarding any such paid-out PIRP-DC benefit for this purpose that the PIRP-DC Vice President determines should be treated under this clause as if it had not been paid out).
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(f)The “PIRP-DC Vice President” is the Company executive who has the role of the “Vice President” under the terms of PIRP-DC.
(g)A “U.S. Person” is an individual who is classified as a “U.S. Person” under the terms of PIRP-DC.
(h)“Year of Transfer” is the year in which a transfer described in subsection
(e) above occurs.
C.3Benefit Formula for PIRP Transfer Participants:
Except as provided in this Section C.3, a PIRP Transfer Participant’s benefit under the Plan shall be determined using a calculation methodology that is substantially similar to that which applies under Section 4.1 of the Plan.
(a)Total Automatic Retirement Contribution for PIRP Transfer Participant: Notwithstanding the preceding sentence, a PIRP Transfer Participant’s “Total Automatic Retirement Contribution” (as defined in Section 4.1(a) of the Plan) shall be calculated as if he were an eligible employee under the Savings Plan for the entire Year of Transfer, and as if he received Years of Entitlement Service and Eligible Pay under the Savings Plan for the Year of Transfer equal to – (i) his actual Years of Entitlement Service and Eligible Pay under the Savings Plan for the Year of Transfer, increased by (ii) any other compensation and service for the Year of Transfer that would have been recognized as PIRP-DC Salary and PIRP DC Service, if Section 9.14 of PIRP-DC did not apply for the Year of Transfer. In determining Years of Entitlement Service and Eligible Pay under the prior sentence, no compensation or service shall be taken into account more than once.
(b) Calculation of PIRP Transfer Participant’s Benefit : The PIRP Transfer Participant’s benefit under the Plan shall be calculated as of each relevant payroll date under the Savings Plan by reducing his Total
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Automatic Retirement Contribution as determined under subsection (a) above by the reductions that are normally applicable under Article IV for such payroll date.
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Exhibit 10.13 PEPSICO EXECUTIVE INCOME DEFERRAL PROGRAM Plan Document for the 409A Program Amended and Restated Effective as of January 1, 2023 | ||
TABLE OF CONTENTS
ARTICLE I – INTRODUCTION | 1 | ||||
ARTICLE II – DEFINITIONS | 2 | ||||
2.01 Account: | |||||
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: | 3 | ||||
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: | 5 | ||||
2.21 Performance Period: | 5 | ||||
2.22 Plan: | 5 | ||||
2.23 Plan Administrator: | 6 | ||||
2.24 Plan Year: | 6 | ||||
2.25 Pre-409A Program: | 6 | ||||
2.26 Prohibited Misconduct: | 6 | ||||
2.27 Recordkeeper: | 7 | ||||
2.28 Retirement: | 8 | ||||
2.29 Second Look Election: | 8 | ||||
2.30 Section 409A: | 8 | ||||
2.31 Separation from Service: | 8 | ||||
2.32 Specific Payment Date: | 8 | ||||
2.33 Unforeseeable Emergency: | 9 | ||||
2.34 U.S.: | 9 | ||||
2.35 Valuation Date: | 9 | ||||
ARTICLE III – ELIGIBILITY AND PARTICIPATION | 10 | ||||
-i-
TABLE OF CONTENTS
3.01 Eligibility to Participate: | 10 | ||||
3.02 Termination of Eligibility to Defer: | 11 | ||||
3.03 Termination of Participation: | 11 | ||||
3.04 Acquisitions and Divestitures: | 11 | ||||
3.05 Special Rules for Certain Executives | 11 | ||||
ARTICLE IV – DEFERRAL OF COMPENSATION | 13 | ||||
4.01 Deferral Election: | 14 | ||||
4.02 Time and Manner of Deferral Election: | 14 | ||||
4.03 Period of Deferral: | 16 | ||||
4.04 Form of Deferral Payout: | 16 | ||||
4.05 Second Look Elections: | 17 | ||||
ARTICLE V – INTERESTS OF PARTICIPANTS | 20 | ||||
5.01 Accounting for Participants’ Interests: | 20 | ||||
5.02 Investment Options: | 20 | ||||
5.03 Method of Allocation: | 20 | ||||
5.04 Vesting of a Participant’s Account: | 22 | ||||
5.05 Forfeiture of Earnings for Prohibited Misconduct: | 22 | ||||
ARTICLE VI – DISTRIBUTION | 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: | 24 | ||||
6.04 Distributions on Account of Death: | 25 | ||||
6.05 Distributions on Account of Retirement: | 26 | ||||
6.06 Distributions on Account of Disability: | 27 | ||||
6.07 Distributions on Account of Unforeseeable Emergency: | 27 | ||||
6.08 Valuation: | 28 | ||||
6.09 Section 162(m) Compliance: | 28 | ||||
6.10 Impact of Section 16 of the Act on Distributions: | 28 | ||||
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: | 32 | ||||
ARTICLE VIII – CLAIMS PROCEDURE | 33 | ||||
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TABLE OF CONTENTS
8.01 Claims for Benefits: | 33 | ||||
8.02 Appeals of Denied Claims: | 33 | ||||
8.03 Special Claims Procedures for Disability Determinations: | 34 | ||||
8.04 Effect of Specific References: | 34 | ||||
8.05 Claimant Must Exhaust the Plan’s Claims Procedures Before Filing in Court: | 34 | ||||
8.06 Limitations on Actions: | 36 | ||||
8.07 Restriction on Venue: | 36 | ||||
ARTICLE IX – AMENDMENT AND TERMINATION | 37 | ||||
9.01 Amendment of Plan: | 37 | ||||
9.02 Termination of Plan: | 37 | ||||
ARTICLE X – MISCELLANEOUS | 38 | ||||
10.01 Limitation on Participant’s Rights: | 38 | ||||
10.02 Unfunded Obligation of Individual Employer: | 38 | ||||
10.03 Other Plans: | 38 | ||||
10.04 Receipt or Release: | 38 | ||||
10.05 Governing Law: | 38 | ||||
10.06 Adoption of Plan by Related Employers: | 39 | ||||
10.07 Gender, Tense and Examples: | 39 | ||||
10.08 Successors and Assigns; Nonalienation of Benefits: | 39 | ||||
10.09 Facility of Payment: | 39 | ||||
ARTICLE XI – Signature/Authentication | 40 | ||||
| APPENDIX | |||||
| APPENDIX ARTICLE A – PARTICIPATING EMPLOYERS | A-1 | ||||
| APPENDIX ARTICLE B – PBG AND PAS EXECUTIVES | B-1 | ||||
| APPENDIX ARTICLE C – PARTICIPANTS AFFECTED BY JANUARY 20, 2022 TRANSACTION | C-1 | ||||
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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.
This document for the 409A Program was most recently restated effective as of January 1, 2023. This restatement reflects clarifications regarding the application of the Company’s recovery policies and the definition of Separation from Service.
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 unfunded benefits to a select group of management or highly compensated employees.
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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 5.01. The Recordkeeper may also establish such additional Deferral Subaccounts as it deems necessary for the proper administration of the Plan. 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:
Effective on or after January 1, 2011, an Eligible Executive’s adjusted base salary, to the extent payable in U.S. dollars from an Employer’s U.S. payroll (or as otherwise payable, with respect to currency and payroll, and provided in Section 3.01(a) in connection with certain events). The Plan Administrator shall be entitled to specify on the Election Form applicable to a particular deferral election (or in other documentation applicable to such deferral election) whether and to what extent (if at all) amounts will be subtracted from gross base salary to arrive at adjusted base salary. Any such specifications shall be made in writing no later than the date on which such deferral election becomes irrevocable pursuant to Section 4.02 of this Plan, and any amount to be subtracted that is variable shall be permitted to be variable under Section 409A. Any changes in such specifications from those in effect on January 1, 2019 shall be subject to Section 7.06.
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) (or such other person who becomes entitled to receive such amounts in accordance with Section 6.04).
2.05 Bonus Compensation:
Effective on or after May 21, 2010, 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 (or as otherwise payable, with respect to currency and payroll, and provided in Section 3.01(a) in connection with certain events). The Plan Administrator shall be entitled to specify on the Election Form applicable to a particular deferral election (or in other documentation applicable to such deferral election) whether and to what extent (if at all) amounts will be subtracted from a gross annual incentive award to arrive at an adjusted annual incentive award. Any such specifications shall be made in writing no later than the date on which such deferral election
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becomes irrevocable pursuant to Section 4.02, and any amount to be subtracted that is variable shall be permitted to be variable under Section 409A. Any changes in such specifications from those in effect on January 1, 2019 shall be subject to Section 7.06.
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.
2.12 Eligible Executive:
The term, Eligible Executive, shall have the meaning given to it in Section 3.01(a).
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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. Appendix Article A sets forth the list of the primary Employers as of January 20, 2022.
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 classified by an Employer as in a salaried executive position who is (i) receiving remuneration for personal services rendered in the employment of the Employer, (ii) paid in U.S. dollars from the Employer’s U.S. payroll (or as otherwise payable, with respect to currency and payroll, and provided in Section 3.01(a) in connection with certain events), and (iii) a U.S. citizen or a U.S. lawful permanent resident assigned to work primarily in the U.S. 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:
Effective from and after January 1, 2011, 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 $215,000 (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
(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
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409A and that any modification of the foregoing definition that applies under Section 409A shall be taken into account.
(b) Applicable Year. 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 applied 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 LG6 and above (for periods before January 1, 2017, 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.
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).
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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. In addition, the Company’s Senior Vice President, Total Rewards (previously titled, the Senior Vice President, Compensation and Benefits), or if such position is vacant or eliminated, the person who is acting to fulfill the majority of the duties of the position (or plurality of the duties if no one is fulfilling a majority) as such duties existed immediately prior to the vacancy or the position elimination, is delegated the responsibility for the operational administration of the Plan, including the powers set forth in Section 7.03 and Article VIII. In turn, such Senior Vice President, has the authority to re-delegate operational responsibilities to other persons or parties. Accordingly, such Senior Vice President, 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, such Senior Vice President, and those delegated by such Senior Vice President, other than the Recordkeeper. All delegations made under the authority granted by this Section are subject to Section 7.06.
2.24 Plan Year:
The 12-consecutive month period beginning on January 1 and ending on December 31.
2.25 Pre-409A Program:
The portion of the Plan that governs deferrals that are not subject to Section 409A. The terms of the “Pre-409A Program” are set forth in a separate set of documents.
2.26 Prohibited Misconduct:
Any of the following activities engaged in, directly or indirectly, by a Participant shall constitute Prohibited Misconduct:
(a) The Participant accepting any employment, assignment, position or responsibility, or acquiring any ownership interest, which involves the Participant’s “Participation” (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. Notwithstanding anything contained in the Plan or in any other confidentiality provision to which the Participant may be subject as a result of the Participant’s employment with the Company, nothing shall prohibit the Participant from, without
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notice to the Company, communicating with government agencies, providing information to government agencies, participating in government agency investigations, filing a complaint with government agencies, or testifying in government agency proceedings concerning any possible legal violations or from receiving any monetary award for information provided to a government agency. The Company nonetheless asserts and does not waive its attorney-client privilege over any information appropriately protected by the privilege. Further, notwithstanding any confidentiality provision to which the Participant may be subject, the Participant is hereby advised as follows pursuant to the Defend Trade Secrets Act: “An individual shall not be held criminally or civilly liable under any Federal or State trade secret law for the disclosure of a trade secret that (A) is made (i) in confidence to a Federal, State, or local government official, either directly or indirectly, or to an attorney; and (ii) solely for the purpose of reporting or investigating a suspected violation of law; or (B) is made in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal. An individual who files a lawsuit for retaliation by an employer for reporting a suspected violation of law may disclose the trade secret to the attorney of the individual and use the trade secret information in the court proceeding, if the individual (A) files any document containing the trade secret under seal; and (B) does not disclose the trade secret, except pursuant to court order.”
(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 – in-home and commercial beverage systems, carbon dioxide gas cylinders, carbon dioxide gas refills, consumables, ready to drink beverages, including without limitation carbonated soft drinks, tea, water, juices, juice drinks, juice products, sports drinks, coffee drinks and energy drinks; dairy products; snacks, including salty snacks, fruit and vegetable snacks, dips and spreads, sweet snacks, meat snacks, granola, nutrition and cereal bars, and cookies; hot cereals and ready-to-eat cereals; pancake mixes and pancake syrup; grain-based food products; pasta products; sports performance nutrition products, including without limitation, energy, protein, carbohydrate, nutrition and meal replacement chews, bars, powders, gels, drinks or drink mixes; 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.
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.
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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. 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 Second Look Election:
The term, Second Look Election, shall have the meaning given to it in Section 4.05.
2.30 Section 409A:
Section 409A of the Code and the applicable regulations and other guidance of general applicability that are issued thereunder.
2.31 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) to identify entities that are considered controlled affiliates of the Company. 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) (relating to board of director members). If a Participant has had a bona fide Separation from Service, a rehire of the Participant that occurs following such Separation from Service shall not cause the Separation from Service to be canceled or disregarded under the Plan. The term may also be used as a verb (i.e., “Separates from Service”) with no change in meaning.
2.32 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 Sections 4.03 and 4.04. 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. \
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2.33 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.
2.34 U.S.:
The United States, comprised of its 50 states, the District of Columbia, and its possessions (other than Puerto Rico).
2.35 Valuation Date:
Each business day, as determined by the Recordkeeper, as of which Participant Accounts are valued in accordance with Plan procedures that are currently in effect. In accordance with procedures that may be adopted by the Plan Administrator, any current Valuation Date may be changed.
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ARTICLE III – ELIGIBILITY AND PARTICIPATION
3.01 Eligibility to Participate:
(a) In General.
(1) For Plan Years beginning on and after January 1, 2020 and for Performance Periods ending after December 31, 2019, subject to Paragraph (3) below, Section 3.05 and the election timing rules of Article IV, an Executive shall be eligible to defer compensation under the Plan if, as of the beginning of, and throughout the entirety of, the Deferral Window (as described in Section 4.02) related to an upcoming Plan Year and Performance Period, the Executive (i) is classified by the Employer as an Executive in a Leadership Group (“LG”) 2 or above position (or an eCommerce equivalent), (ii) had been employed by an Employer during at least a portion of each of the two Plan Years preceding the deferral election, (iii) earned total compensation from the Employers (including Base Compensation and Bonus Compensation) of more than $200,000 in each such Plan Year (as reflected in the books and records of the Employers), and (iv) has a reasonable expectation of earning more than $200,000 in total compensation (including Base Compensation and Bonus Compensation) in the Plan Year of the deferral election.
(2) For Plan Years and Performance Periods preceding those covered by Paragraph (1) and ending after January 1, 2006, subject to Paragraph (3) below and the election timing rules of Article IV, 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 LG2 or above (and while he or she remains so classified) or (ii) being promoted by an Employer from below LG2 into a LG2 or above position (for periods before January 1, 2017, references in this subsection to “LG2” shall be applied as references to “Band II”). 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 a member of the PepsiCo Organization) 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).
(3) The provisions of this Paragraph (3) shall apply notwithstanding Paragraph (1) or (2) 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. An Eligible Executive, who makes a valid election that becomes irrevocable (e.g., at the end of a Deferral Window), to participate with respect to Base or Bonus Compensation for a Plan Year or Performance Period (as applicable) shall remain an Eligible Executive for the remainder of the Plan Year or Performance Period and, with respect to Bonus Compensation, until the Eligible Executive’s Bonus Compensation for the Plan Year is deferred (i) regardless of whether such Executive ceases to meet the eligibility requirements of Paragraph (1) or (2) above, (ii) regardless of whether such Executive subsequently is not paid in U.S. dollars or is paid from a non-U.S. payroll, and (iii) regardless of whether such individual is transferred to an affiliate of the Company, if such transfer to an affiliate is not a Separation from Service; provided that the occurrence of such events shall cut off any election that has been made that has not yet become irrevocable under rules of the Plan Administrator that are intended to permit compliance with Section 409A.
(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.
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(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) The date he or she Separates from Service; or
(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 under rules of the Plan Administrator that are intended to permit compliance 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 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).
3.04 Acquisitions and Divestitures:
A written agreement between an Employer and a party that is not part of the PepsiCo Organization regarding the purchase or sale of a business unit, division, or subsidiary (“Business”) may provide for the termination or commencement of the participation of Executives in this Plan. Absent a specific provision in such agreement to the contrary:
(a) Each Executive of a Business that is sold shall cease being eligible for this Plan upon such sale (subject to the transitional extension of participation under Section 3.01(a) in the case of a sale that does not result in a Separation from Service as a result of the 20% affiliate rule in the definition of Separation from Service); and
(b) No Executive of a Business that is acquired shall be eligible for this Plan except as otherwise designated in the Plan or in such documents related to the Plan as the Plan Administrator may designate from time to time.
For purposes of Article IX (amendment and termination of the Plan), an Employer’s approval and execution of a written agreement of acquisition or divesture, which is described in the first sentence of this Section, constitutes approval by the Company of the provisions of the agreement that relate to participation in this Plan.
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3.05 Special Rules for Certain Executives
For Plan Years beginning on and after January 1, 2020 and for Performance Periods ending after December 31, 2019, in the case of an Executive who is an officer within the meaning of Section 16 of the Securities Exchange Act of 1934 (“Section 16 Officer”), the Section 16 Officer’s eligibility shall be determined under the Plan’s provisions in effect as of January 1, 2019 (the “2019 Provisions”) and as provided in this Section 3.05. To provide for the eligibility of Section 16 Officers under the 2019 Provisions consistently with the Plan’s exemption under Section 4(a)(2) of the Securities Act of 1933 pursuant to Rule 506 of Regulation D, the Plan will comply with Rule 506(b), including by determining the Section 16 Officers’ accredited investor status using any basis permissible under Rule 506(b) (notwithstanding anything to the contrary in Section 3.01(a)(1)). In addition, in the case of a Section 16 Officer who becomes newly eligible for the Plan under circumstances that qualify for the special 30-day election period permitted by Treasury Regulation § 1.409A-2(a)(7), the Section 16 Officer shall be entitled to make a deferral election for Base Compensation during a 30-day election period pursuant to the 2019 Provisions.
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ARTICLE IV – DEFERRAL OF COMPENSATION
4.01 Deferral Election:
(a) Deferrals of Base Compensation. Effective on or after January 1, 2010, each Eligible Executive may make an election to defer under the Plan any whole percentage up to 75% of his or her Base Compensation in the manner described in Section 4.02. The Plan Administrator shall be entitled to specify on the Election Form applicable to a particular deferral election (or in other documentation applicable to such deferral election) a lower percentage limitation on the amount of Base Compensation that may be deferred pursuant to such deferral election. Any such specification shall be made in writing no later than the date on which such deferral election becomes irrevocable pursuant to Section 4.02. Any changes in such specification from that in effect on January 1, 2019 shall be subject to Section 7.06.
(b) Deferrals of Bonus Compensation.
(1) General Rules. Effective on or after May 21, 2010, 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. The Plan Administrator shall be entitled to specify on the Election Form applicable to a particular deferral election (or in other documentation applicable to such deferral election) a lower percentage limitation on the amount of Bonus Compensation that may be deferred pursuant to such deferral election. Any such specification shall be made in writing no later than the date on which such deferral election becomes irrevocable pursuant to Section 4.02. Any changes in such specification from that in effect on January 1, 2019 shall be subject to Section 7.06.
(2) Special Rules for Promoted Eligible Executives for Performance Periods Ending Before 2020. For Performance Periods ending before January 1, 2020, an Eligible Executive that becomes an Eligible Executive during a Plan Year as a result of a promotion from below LG2 into a position that is LG2 or above shall only be eligible to defer Bonus Compensation earned for such Performance Period 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 (for periods before January 1, 2017, references in this paragraph to “LG2” shall be applied as references to “Band II”). 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 for Performance Periods Ending Before 2020. For Performance Periods ending before January 1, 2020, 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 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
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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.
(1) In General. 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. If December 31(or an applicable earlier day) is not a business day, the deadline shall be the nearest preceding day that is a business day. Notwithstanding the prior two sentences, 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. Any changes in such policies or procedures or in established waiver practices from those applicable on January 1, 2019 shall be subject to Section 7.06.
(2) Mid-Year Elections for Plan Years Before 2020. For Plan Years ending before January 1, 2020, subject to the last sentence of Section 3.01(a)(2) and (for later Plan Years) Section 3.05, 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 by the Recordkeeper.
(b) Deferrals of Bonus Compensation.
(1) Performance Periods Ending After 2019. In the case of an Eligible Executive’s Bonus Compensation that relates to a Performance Period ending after December 31, 2019, an Eligible Executive must make a deferral election with respect to such Bonus Compensation no later than the last day of the Company’s fiscal year that ends just before such Performance Period. If the last day of such fiscal year is not a business day, the deadline shall be the nearest preceding day that is a business day.
(2) Performance Periods Ending Before 2019. In the case of an Eligible Executive’s Bonus Compensation that relates to a Performance Period ending before December 31, 2019, the 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
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eligible to defer Bonus Compensation under Section 4.01(b) for such Plan Year, such Eligible Executive must make a deferral election for Bonus Compensation that is earned for the Performance Period that relates to the Plan Year in which he or she is promoted at least six months prior to the end of the applicable Performance Period.
Notwithstanding the provisions in Paragraphs (1) and (2) above, 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 otherwise applicable under Paragraph (1) and (2) above) by the Plan Administrator to prevent undue hardship for one or more Eligible Executives. Any changes in such policies or procedures or in established waiver practices from those applicable on January 1, 2019 shall be subject to Section 7.06.
(c) General Provisions. For purposes of Section 3.01 and this Section 4.02, the period of time to make the deferral election described under (a) and (b) above shall be referred to as the Deferral Window. 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 deadline applicable under Subsections (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 or the Performance Period that relates to the Plan Year, as applicable. Except as provided below in this Subsection, an election is irrevocable by the Eligible Employee 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). The Plan Administrator, however, may cancel elections that have been received and accepted for a Plan Year up until the end of the day on the December 31 that precedes such Plan Year . Increases or decreases in the amount or percentage a Participant has elected 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, and such new election shall be made in accordance with the rules of Sections 4.01 and 4.02.
(d) Beneficiaries.
(1)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
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change in the designated individual’s relationship to the Participant. Solely for periods prior to June 3, 2002, a Beneficiary designation solely by relationship (for example, a designation of “spouse,” that does not give the name of the spouse) shall designate whoever is the person in that relationship to the Participant at his or her death. However, any Beneficiary designation submitted to the Recordkeeper from and after June 3, 2002 that only specifies a Beneficiary by relationship shall not be considered an effective Beneficiary designation and shall be void and of no effect. 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.
(2) If the Participant designates a Beneficiary and such Beneficiary survives the Participant, but dies prior to the complete distribution of such Beneficiary’s interest in the Participant’s Account, the Plan Administrator shall direct the Recordkeeper to pay such Beneficiary’s remaining interest in the Participant’s Account to the Beneficiary’s estate.
4.03 Period of Deferral:
An Eligible Executive making a deferral election shall specify a deferral period on his or her Election Form by designating either a Specific Payment Date or the date he or she incurs a Separation from Service. In no event shall an Eligible Executive’s deferral period end later than his or her 80th birthday, regardless of whether the Participant chose a single lump sum or installments as the form of payment. Notwithstanding an Eligible Executive’s actual election of a Specific Payment Date, an Eligible Executive shall be deemed to have elected a period of deferral of not less than:
(a) For Base Compensation 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 for a fixed number of years. Installment elections for a fixed dollar amount shall be paid based on the selected frequency and
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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 as an election for installments over a period of whole and partial years that ends on the Eligible Executive’s 80th birthday or, if earlier, 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 Elections:
(a) In General. Subject to Subsection (b) below and the next sentence, a Participant who has made a valid initial deferral in accordance with the foregoing provisions of this Article may subsequently make additional elections 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.” For periods before January 1, 2020, a Participant was eligible to make only one Second Look Election with respect to each individual deferral of Base or Bonus Compensation.
(b) Requirements for Second Look Elections. A Second Look Election is subject to all of the conditions of Subsection (a) above and must comply with all of the following requirements:
(1) If a Participant’s initial election for a deferral (or the latest subsequent Second Look Election) specified payment based on a Specific Payment Date, the Participant may only change the payment terms for such deferral through a current Second Look Election if the election is made at least 12 months before the Participant’s original (or if applicable, last subsequently elected) Specific Payment Date. In addition, in this case the Participant’s current Second Look Election must delay the payment of the Participant’s deferral to a new Specific Payment Date that is at least five years after the original (or if applicable, last subsequently elected) 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 and the Participant separates from Service for Retirement. In addition, in this case the Participant’s Second Look Election must delay the payment of the Participant’s deferral for at least five years. For example, the Second Look Election must delay the payment of the Participant’s deferral to a Specific Payment Date that turns out to be at least five years after the later of (i) the Participant’s Separation from Service or (ii) the last designated period following the Participant’s Separation from Service that was designated in a prior Second Look Election. Alternatively, the Second Look Election may delay the payment of the Participant’s deferral for a designated period of five years (or more) following the later of (A) the Participant’s Separation from Service or (B) the end of the last period following the Participant’s Separation from Service that was designated in a prior Second Look Election. If the five-year delay election is made by selecting a Specific Payment Date that turns out to be less than five years after the Participant’s Separation from Service (or if later, the last designated period following the Participant’s Separation from Service), the Second Look Election is void and payment shall be made based on the Participant’s Separation from Service (or if later, the last validly designated period following the Participant’s Separation from Service).
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(3) For periods before January 1, 2013, neither a Separation from Service nor a period of delay after a Separation from Service could be specified as the payout date resulting from a Second Look Election.
(4) To the extent permitted by Subsection (a) above, a Participant may make an unlimited number of Second Look Elections for each individual deferral, however, each Second Look Election 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 five years after when the lump sum payment would have been paid based upon the Participant’s initial election (or, if applicable, any subsequent Second Look Election). A Participant may not make a Second Look Election if the election would provide for installment payments to be made after the Participant’s 80th birthday.
(6) If a Participant’s initial election (or any subsequent Second Look 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 five years after the first payment date that applied under the Participant’s initial (or, if applicable, subsequent) installment election. 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 (or subsequent Second Look 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 five years after the first payment date that applied under the Participant’s initial (or, if applicable, subsequent) installment election.
(8) For purposes of this Section and Code Section 409A, 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 (or, if applicable, subsequent) election shall be superseded (including any Specific Payment Date specified therein), and this original (or, if applicable, subsequent) election shall not be taken into account with respect to the deferral that is subject to the effective 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 are 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
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otherwise modify any requirement for a Second Look Election set forth in this Section or in Section 409A.
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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 Savings Plan (or such similar plan as may be offered by the Company from time to time). 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, 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
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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%.
(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 increments permitted by the Plan Administrator, 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.) Effective as of January 1, 2020, the increments permitted by the Plan Administrator are whole percentages, whole shares or whole dollars, as specified in the fund transfer forms provided to Participants and authorized by the Plan Administrator. 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
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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:
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. Notwithstanding the prior sentence, the deferral of compensation pursuant to this Plan (including the crediting of related earnings on such deferred compensation) shall not in any way exempt the compensation and related earnings from the full application of the Company’s clawback and other forfeiture and recovery policies (“Clawback Policies”), as they are in effect from time to time. Accordingly, a Participant’s Account shall be subject to forfeiture (and if paid out, to recovery) to the extent determined to be appropriate by the Plan Administrator to give full effect to these Clawback Policies. Section 5.05 shall not be construed to reduce or impair the forfeiture and recovery rights provided by this Section.
5.05 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. Section 5.04 shall not be construed to reduce or impair the forfeiture rights provided by this Section 5.05, but the Plan Administrator shall have the authority to reduce the forfeitures that would apply under this Section to the extent necessary to avoid an inappropriate duplication (determined in the Plan Administrator’s sole discretion) of the forfeitures applicable under Section 5.04.
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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 a Participant dies. 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 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 a Participant becomes Disabled. If a Participant who becomes Disabled dies, Section 6.04 shall take precedence over Section 6.06 to the extent it would result in an earlier distribution of all or part of a Participant’s Account. If a Participant is entitled to receive or is receiving a distribution under Section 6.02, 6.03 or 6.05 at the time of his Disability, Section 6.06 shall take precedence over those sections to the extent Section 6.06 would result in an earlier distribution of all or part of a Participant’s Account.
(f) Section 6.07 (Distributions on Account of Unforeseeable Emergency) applies when a 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
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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 a 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. 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.
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.
(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
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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 remaining 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 entire 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).
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. Effective January 1, 2019 and notwithstanding the preceding sentence, upon a Participant’s death, the value of the Participant’s Account under the Plan shall be distributed in a single lump sum payment during the period that (i) begins on the first day of the calendar quarter beginning after the Participant’s death, and (ii) ends on December 31 of the year following the year of 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 applicable 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 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 as Beneficiaries 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) If no Participant 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 by the
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Participant 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 (or for deaths on and after January 1, 2019, in a domestic partnership) at the time of his/her death, all payments made pursuant to this Section shall be paid to the Participant’s surviving spouse or surviving eligible domestic partner; and
(2)If the Participant is not married (or for deaths on and after January 1, 2019, in a domestic partnership) at the time of his/her death, all payments made pursuant to this Section shall be paid to the Participant’s surviving children in equal shares.
(3)If the Participant is not married (or for deaths on and after January 1, 2019, in a domestic partnership) and does not have any living children 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. For these purposes, an “eligible domestic partner” means the individual, (i) with whom the Participant was in a valid civil union under state law at the time of the Participant’s death, (ii) who would satisfy the criteria to be enrolled in the Company’s health benefits as the Participant’s domestic partner at the time of the Participant’s death or (iii) who satisfies such other criteria of domestic partnership as the Plan Administrator has specified in writing. 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.
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
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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).
(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
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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.
6.09 Section 162(m) Compliance:
Notwithstanding Sections 6.01 through 6.07 of this Article, Plan distributions may be delayed in accordance with the special rule in Treas. Reg. §1.409A-2(b)(7)(i) (the “162(m) Provision”). The 162(m) Provision’s special rule permits distributions to be delayed to the extent the Employer reasonably anticipates that, if the distribution were made as otherwise scheduled, the Employer’s deduction for the distribution would not be permitted as a result of Code Section 162(m). Use of the 162(m) Provision’s special rule is subject to conditions, including:
(a) The Employer must treat all similarly situated employees on a reasonably consistent basis,
(b) If the Employer delays a Plan distribution under the 162(m) Provision, the Employer must delay all payments of deferred compensation to a Participant (including payments under other arrangements) that (i) could be delayed under the 162(m) Provision, and (ii) are scheduled to be paid to the Participant in the same tax year in which the delayed distribution was scheduled to be paid, and
(c) Distribution must be made in accordance with the schedule specified in the 162(m) Provision (including any applicable six-month delay) once a distribution would be deductible taking into account Code Section 162(m).
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.
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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.
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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;
(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
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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. All decisions and determinations made by the Plan Administrator will be final, conclusive, and binding on all parties. The Plan Administrator may consider the intent of the Company with respect to a Plan provision in making any determination with respect to the provision, notwithstanding the provisions set forth in any document that arguably do not contemplate considering such intent. The Plan Administrator’s discretion is absolute, and in any case where the breadth of the Plan Administrator’s discretion is at issue, it is expressly intended that the Plan Administrator (or its delegate) be accorded the maximum possible discretion. Any exercise by the Plan Administrator of its discretionary authority shall be reviewed by a court under the arbitrary and capricious standard (i.e., abuse of discretion).
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).
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 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.
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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.
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.
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ARTICLE VIII – CLAIMS PROCEDURE
8.01 Claims for Benefits:
The Plan Administrator has the discretionary right to modify the claims process described in this Section in any manner so long as the claims review process, as modified, includes the basic steps described in this Section and Section 8.02. If a Participant, putative Participant, Beneficiary, putative 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, or if a Claimant believes some other right derived from or related to the Plan has been withheld or abridged, he or she may make a claim for benefits to the Plan Administrator. The claim for benefits must be in writing (or in such other form acceptable to the Plan Administrator) 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 (indicating the special circumstances that require the extension), 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, pertinent Plan provisions on which the denial is based, 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. Upon review, the Plan Administrator shall provide the claimant a full and fair review of the claim, including the opportunity to submit to the Plan Administrator comments, document, records and other information relevant to the claim, and the Plan Administrator’s review shall take into account such comments, documents, records and information regardless of whether it was submitted or considered at the initial determination. 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 (indicating the special circumstances that require the extension), 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.
Effective March 1, 2020 and continuing at least through November 1, 2022, the Department of Labor, the Department of the Treasury, and the Internal Revenue Service (IRS) (collectively the “Agencies”) extended certain deadlines applicable to the Plan in light of the COVID-19 outbreak, pursuant to the authority granted in ERISA section 518 and Code section 7508A(b) and as set forth in Disaster Relief Notices 2020-01 and 2021-01 issued by the Employee Benefits Security Administration (“EBSA”), and the Notice of Extension of Certain Timeframes for Employee Benefit Plans, Participants, and Beneficiaries Affected by the COVID–19 Outbreak issued by the Agencies. The Plan will comply with these extensions as required by applicable law and Agency guidance. Specifically, the Agencies provided that a period of up to one year may be disregarded in the case of an employee benefit plan, sponsor, administrator, participant, beneficiary, or other person with respect to the employee benefit plan in determining the date by which any action is required or permitted to be completed as a result of the Covid-19 outbreak. This relief ends on the earlier of (a) 1 year from the date a person was first eligible for the relief, or (b) 60 days after the announced end of the National Emergency (the
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end of the Outbreak Period), which is still on-going as of November 1, 2022. In no case will a disregarded period exceed 1 year. This relief includes but is not limited to notices and disclosures required by the Plan, and the deadlines under the ERISA claims procedure.
Any claim under the Plan that is reviewed by a court, arbitrator or any other tribunal shall be reviewed solely on the basis of the record before the Plan Administrator at the time it made its determination. In addition, any such review shall be conditioned on the Claimant’s having fully exhausted all rights under this section as is more fully explained in Section 7.5. Any notice or other notification that is required to be sent to a claimant under this section may be sent pursuant to any method approved under Department of Labor Regulation Section 2520.104b-1 or other applicable guidance.
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).
8.04 Effect of Specific References:
Specific references in the Plan to the Plan Administrator’s discretion shall create no inference that the Plan Administrator’s discretion in any other respect, or in connection with any other provision, is less complete or broad.
8.05 Claimant Must Exhaust the Plan’s Claims Procedures Before Filing in Court:
Before filing any Claim (including a suit or other action) in court or in another tribunal, a Claimant must first fully exhaust all of the Claimant’s rights under the claims procedures of this Article.
(a) Upon review by any court or other tribunal, the exhaustion requirement of this Section 8.05 is intended to be interpreted to require exhaustion in as many circumstances as possible (and any steps necessary to clarify or effect this intent may be taken). For example, exhaustion may not be excused (i) for failure to respond to a Claim unless the purported claimant took sufficient steps to make it reasonably clear to the Plan Administrator that the purported claimant was submitting a Claim with respect to the Plan, or (ii) for failure to fulfill a request for documents unless (A) ERISA requires the documents to be provided in response to the request, (B) the Claimant requests such documents in a writing that is addressed to and actually received by the Plan Administrator, (C) the Plan Administrator fails to provide the requested documents within 6 months after the date the request is received, or within such longer period as may be reasonable under the facts and circumstances, and (D) the requestor took sufficient steps to make it reasonably clear to the Plan Administrator that the requestor was asserting an ERISA right to the documents. Accordingly, without limitation, a purported claimant or requestor who was not treated as a Participant shall not be deemed to have taken sufficient steps for purposes of the prior sentence unless he makes it reasonably clear to the Plan Administrator that he is claiming to have been entitled to be a Participant.
(b) In any action or consideration of a Claim in court or in another tribunal following exhaustion of the Plan’s claims procedure as described in this Section 8.05, the subsequent action or consideration shall be limited, to the maximum extent permissible, to the record that was before Plan Administrator in the claims procedure.
(c) The exhaustion requirement of this Section 8.05 shall apply: (i) regardless of whether other Disputes that are not Claims (including those that a court might consider at the
34
same time) are of greater significance or relevance, (ii) to any rights the Plan Administrator may choose to provide in connection with novel Disputes or in particular situations, (iii) regardless of whether the rights are actual or potential and (iv) even if the Plan Administrator has not previously defined or established specific claims procedures that directly apply to the submission and consideration of such Claim (in which case the Plan Administrator (upon notice of the Claim) shall either promptly establish such claims procedures or shall apply (or act by analogy to) the claims procedures of Section 8.05 that apply to claims for benefits).
(d) The Plan Administrator may make special arrangements to consider a Claim on a class basis or to address unusual conflicts concerns, and such minimum arrangements in these respects shall be made as are necessary to maximize the extent to which exhaustion is required.
(e) For purposes of this Section 8.05, the following definitions apply.
(1) A “Dispute” is any claim, dispute, issue, assertion, action or other matter.
(2) A “Claim” is any Dispute that implicates in whole or in part any one or more of the following –
(A) The interpretation of the Plan;
(B) The interpretation of any term or condition of the Plan;
(C) The interpretation of the Plan (or any of its terms or conditions) in light of applicable law;
(D) Whether the Plan or any term or condition under the Plan has been validly adopted or put into effect;
(E) The administration of the Plan;
(F) Whether the Plan, in whole or in part, has violated any terms, conditions or requirements of ERISA or other applicable law or regulation, regardless of whether such terms, conditions or requirements are, in whole or in part, incorporated into the terms, conditions or requirements of the Plan;
(G) A request for Plan benefits or an attempt to recover Plan benefits;
(H) An assertion that any entity or individual has breached any fiduciary duty; or
(I) Any Claim that: (i) is deemed similar to any of the foregoing by the Plan Administrator, or (ii) relates to the Plan in any way.
It is the Plan Administrator’s intent to interpret and operate the Plan in good faith and at all times consistently with any applicable requirements of ERISA. Therefore, as a condition for any right or recovery related to the Plan, the Plan imposes a contractual obligation for complete exhaustion under this Section with respect to any Claim (as defined above) in order to allow for the efficient and uniform resolution of such Claims and to protect the Plan from potentially substantial and unnecessary litigation expenses that exhaustion could obviate.
(3) A “Claimant” is any actual or putative Employee, former Employee, Participant, former Participant, Beneficiary (or the spouse, former spouse, estate, heir or representative of any of the foregoing individuals), or any other individual, person, entity with a relationship to any of the foregoing individuals or the Plan, as well as any group of one or more of the foregoing, who has a Claim.
35
8.06 Limitations on Actions:
Effective for claims and actions filed on or after April 1, 2016, any claim filed under Article VIII and any action filed in state or federal court by or on behalf of a former or current Employee, Participant, beneficiary or any other individual, person or entity (collectively, a “Petitioner”) for the alleged wrongful denial of Plan benefits or for the alleged interference with or violation of ERISA-protected rights must be brought within two years of the date the Petitioner’s cause of action first accrues. For purposes of this subsection, a cause of action with respect to a Petitioner’s benefits under the Plan shall be deemed to accrue not later than the earliest of (i) when the Petitioner has received the calculation of the benefits that are the subject of the claim or legal action (ii) the date identified to the Petitioner by the Plan Administrator on which payments shall commence, or (iii) when the Petitioner has actual or constructive knowledge of the facts that are the basis of his claim. For purposes of this subsection, a cause of action with respect to the alleged interference with ERISA-protected rights shall be deemed to accrue when the claimant has actual or constructive knowledge of the acts that are alleged to interfere with ERISA-protected rights. Failure to bring any such claim or cause of action within this two-year time frame shall preclude a Petitioner, or any representative of the Petitioner, from filing the claim or cause of action. Correspondence or other communications following the mandatory appeals process described in this Article shall have no effect on this two-year time frame.
8.07 Restriction on Venue:
Any claim or action filed in court or any other tribunal in connection with the Plan by or on behalf of a Petitioner (as defined in Section 8.06 above) shall only be brought or filed in the United States District Court for the Southern District of New York, effective for claims or actions filed on or after January 1, 2019.
36
ARTICLE IX – AMENDMENT AND TERMINATION
9.01 Amendment of Plan:
The Compensation Committee of the Board of Directors of the Company, or its delegate or delegates, 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. As of September 25, 2019, the Company’s Executive Vice President and Chief Human Resources Officer (or if such position is vacant or eliminated, the person who is acting to fulfill the majority of the duties of the position (or plurality of the duties if no one is fulfilling a majority) as such duties existed immediately prior to the vacancy or the position elimination) is delegated the responsibility to amend the Plan at any time and in any manner, except with respect to those provisions of the Plan which relate to matters subject to Section 7.06. Any amendment shall be in writing and adopted by the Committee or its delegate or delegates. 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.
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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.
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 New York. If any provisions of this instrument shall be held by a court
38
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.
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.
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ARTICLE XI – SIGNATURE/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. Pursuant to the direction and authorization of the Compensation Committee of the Company’s Board of Directors at the Compensation Committee’s duly authorized meeting on September 25, 2019, this 409A Program document has been amended and restated effective as of January 1, 2023 (except as otherwise provided).
PEPSICO, INC.
By: /s/ Becky Schmitt
Becky Schmitt
Executive Vice President and Chief Human Resources Officer
Date: December 11, 2023
LAW AND TAX DEPARTMENT APPROVAL:
By: /s/ Stacy Grindal
Stacy Grindal
Sr. Legal Director, Compensation and Benefits Counsel
Date: December 6, 2023
By: /s/ Christine Griff
Christine Griff
Vice President, Tax Counsel
Tax Department
Christine Griff
Vice President, Tax Counsel
Tax Department
Date: December 6, 2023
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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 - PARTICIPATING EMPLOYERS
The following members of the PepsiCo Organization have been designated as the primary Employers as of January 20, 2022:
PepsiCo, Inc.
Bare Foods Co.
Bottling Group, LLC
C&I Leasing, Inc.
CytoSport, Inc.
FL Transportation
Frito Lay North America, Inc.
Frito Lay, Inc.
Golden Grain Co.
Grayhawk Leasing, LLC
Health Warrior, Inc.
Hillwood Bottling LLC
New Bern Transport Corporation
Pepsi Logistics
Pepsi Northwest Beverages LLC
PepsiCo Global Mobility
PepsiCo Sales Inc.
Pepsi-Cola Advertising & Marketing
Pepsi-Cola Finance, LLC
Pepsi-Cola Management & Admin Services
Pepsi-Cola National Marketing, LLC
Pepsi-Cola Sales & Dist, Inc.
Pepsi-Cola Technical Ops, Inc.
QTG Development, Inc.
Quaker Manufacturing LLC
Quaker Oats Company
Quaker Sales & Distribution, Inc.
Rolling Frito Lay Sales LLP
SodaStream USA, Inc.
Stacy's Pita Chip Company, Inc.
SVC Equipment Co.
SVC Logistics, Inc.
SVC Manufacturing, Inc.
The Gatorade Co.
A-1
APPENDIX ARTICLE B – PBG AND PAS EXECUTIVES
B.1 Purpose. The purpose of this Article is to provide for a “home plan rules” approach for employees who move between, or are newly hired by, a PepsiCo Business, a PBG Business or PAS Business following the merger of The Pepsi Bottling Group, Inc. and PepsiAmericas, Inc. into the Pepsi-Cola Metropolitan Company, Inc., a wholly owned subsidiary the Company, except as provided herein with respect to the deferral of Bonus Compensation under the Plan by PBG Executives and PAS Executives for the 2010 Plan Year. This Article B is effective as of the Effective Time.
B.2 Definitions. The definitions listed below apply for purposes of this Article B. Any other defined term used herein shall have the meaning applied to that term in the main portion of the Plan document.
(a)“Effective Time” means:
(1)With respect to the provisions of this Article B applicable to PAS Executives or PAS Businesses, the meaning given to that term under the Agreement and Plan of Merger dated as of August 3, 2009, among PepsiAmericas, Inc., PepsiCo, Inc., and Pepsi-Cola Metropolitan Bottling Company, Inc.; and
(2)With respect to the provisions of this Article B applicable to PBG Executives or PBG Businesses, the meaning given to that term under the Agreement and Plan of Merger dated as of August 3, 2009, among Pepsi Bottling Group, Inc., PepsiCo, Inc., and Pepsi-Cola Metropolitan Bottling Company, Inc.
(b)“PAS Business” means each Employer, division of an Employer or other organizational subdivision of an Employer that the Company classifies as part of the PAS business.
(c)“PAS Executive” means an individual who is employed by a PAS Business.
(d)“PBG Business” means each Employer, division of an Employer or other organizational subdivision of an Employer that the Company classifies as part of the PBG business.
(e)“PBG Executive” means an individual who is employed by a PBG Business.
(f)“PepsiCo Business” means each Employer, division of an Employer or other organizational subdivision of an Employer that the Company classifies as part of the PepsiCo business.
B.3 Participating Employers. PBG Businesses and PAS Businesses are not Employers under the Plan, except with respect to:
(a)Individuals who are hired by a PAS Business or PBG Business and who were Executives immediately before such date of hire; and
B-1
(b)PAS Executives and PBG Executives who elect to defer their Bonus Compensation under the Plan for the Plan Year beginning January 1, 2010 and later Plan Years.
B.4 Eligibility to Participate. PBG Executives and PAS Executives are eligible to participate in this Plan as follows:
(a)An individual who is hired by a PepsiCo Business after the Effective Time shall be eligible to participate in the Plan upon satisfying the Plan’s eligibility requirements (and shall not be eligible to participate in the non-qualified defined contribution plan of another member of the PepsiCo Organization) unless he was employed by a member of the PepsiCo Organization that is not a PepsiCo Business immediately before such date of hire with a PepsiCo Business. PBG Executives and PAS Executives are ineligible to participate in this Plan, except that an individual who is hired by a PBG Business or PAS Business on or after the Effective Time, and who is an Executive immediately before such date of hire, shall be eligible to continue participating in this Plan for so long as he is continuously employed by a member of the PepsiCo Organization, to the same extent as if he had remained an Executive.
(b)Notwithstanding the foregoing, the PBG Executive and PAS Executives are eligible to defer Base Compensation and Bonus Compensation under the Plan, subject to the terms and conditions of the main provisions of the Plan, beginning with Bonus Compensation payable for the Performance Period that relates to the Plan Year that begins on January 1, 2010, and Base Compensation for the Plan Year that begins on January 1, 2011.
B.5 No Special Rights. Nothing in this Article is intended to override the provisions of Section 3.04 of the Plan or to otherwise confer any rights under the Plan not specifically authorized herein.
B-2
APPENDIX ARTICLE C – PARTICIPANTS AFFECTED BY JANUARY 20, 2022 TRANSACTION
C.1 Scope. This Article C provides for the termination and liquidation, in accordance with Treasury Regulation § 1.409A-3(j)(4)(ix)(B), of the portion of the 409A Program that relates to certain Participants who are affected by the “Closing” of the “Transaction” (as those terms are defined below). This Article is effective as of the Closing.
C.2 Definitions. Where the following words and phrases appear in this Appendix Article C with initial capitals, they shall have the meaning set forth below unless a different meaning is plainly required by the context. Any terms used in this Appendix Article C with initial capitals and not defined herein shall have the same meaning as in the main Plan, unless a different meaning is plainly required by the context.
(a) “Affected Participant” means a Participant who experiences, within the meaning of Treasury Regulation § 1.409A-3(j)(4)(ix)(B), the change in control event that results from the Closing of the Transaction.
(b) “Agreement” means that certain Unit Purchase Agreement dated as of August 2, 2021, and entered into by and between PepsiCo, Inc., Bengal Beverages LP, a Delaware limited partnership, Bengal Debt Merger Sub, LLC, a Delaware limited liability company and wholly owned Subsidiary of the Buyer, and Naked Juice Co., a Pennsylvania corporation.
(c) “Closing” means the consummation of the Transaction as specified in Section 2.3 of the Agreement.
(d) “Transaction” means the set of transactions contemplated by the Agreement that result in a change in control, within the meaning of Treasury Regulation § 1.409A-3(i)(5), with respect to certain businesses that were part of the PepsiCo Organization prior to the change in control.
C.3 The Termination. Pursuant to this Article C, the 409A Program is intended to be irrevocably terminated with respect to all Affected Participants effective as of January 18, 2023 (i.e., 12 months after the date of the Closing). Prior to that time (i.e., through January 17, 2023) the Plan sponsor shall retain the absolute right to revoke the adoption of the termination otherwise provided for in this Article C. However, in the absence of such a timely written revocation, the adoption of this Article C by the Plan sponsor shall constitute, as of January 18, 2023, the irrevocable action that is necessary to provide for the termination and liquidation of the Affected Participant’s entire interest under the 409A Program pursuant to Treasury Regulation §1.409A-3.
C.4 Distributions. Provided the termination pursuant to Section C.3 above becomes irrevocable, and to carry out the liquidation of the Affected Participants’ entire interests, each Affected Participant will be paid the Participant’s entire unpaid interest under the 409A Program as a single lump sum as of January 1, 2024 and, in any case, not later than January 17, 2024 (and otherwise in full conformity with Treasury Regulation § 1.409A-3(j)(4)(ix)(B)). Such unpaid interest shall include, without limitation, any remaining installments or other distributions from the 409A Program that would otherwise be due and payable at a future date to (or with respect to) the Affected Participant. With respect to the January 1, 2024 distribution date, an Affected Participant’s remaining interest shall be valued in accordance with the 409A Program’s regular valuation rules for lump sum distributions on such date, as these rules are in effect on such date.
C-1
Exhibit 10.22
2020 PEPSICO ANNUAL LONG-TERM INCENTIVE AWARD
STOCK OPTIONS / RESTRICTED STOCK UNITS / PERFORMANCE STOCK UNITS
TERMS AND CONDITIONS
These Terms and Conditions (including the country-specific terms set forth in the attached Addendum), along with the 2020 PepsiCo Annual Long-Term Incentive Award Summary (an “Award Summary”) provided by the Plan Service Provider (as defined in Paragraph E.3 below) to, or delivered herewith and signed by the individual named on the Award Summary (the “Participant”), as applicable, shall constitute an agreement (this “Agreement”) effective as of the “grant date” indicated on the Award Summary (the “Grant Date”), by and between PepsiCo, Inc., a North Carolina corporation having its principal office at 700 Anderson Hill Road, Purchase, New York 10577 (“PepsiCo,” and with its divisions and direct and indirect subsidiaries, the “Company”), and the Participant.
W I T N E S S E T H:
WHEREAS, the Board of Directors and shareholders of PepsiCo have approved the PepsiCo, Inc. Long-Term Incentive Plan (the “Plan”), for the purposes and subject to the provisions set forth in the Plan; and
WHEREAS, pursuant to the authority granted to it in the Plan, the Compensation Committee of the Board of Directors of PepsiCo (the “Committee”) or its delegate authorized the grant to the Participant of the PepsiCo stock options (“Options”), restricted stock units (“RSUs”) and/or performance stock units (“PSUs”) set forth on the Award Summary on or prior to the Grant Date; and
WHEREAS, awards granted under the Plan are to be evidenced by an Agreement in such form and containing such terms and conditions as the Committee shall determine.
NOW, THEREFORE, it is mutually agreed as follows:
A. Terms and Conditions Applicable to Stock Options. These terms and conditions shall apply with respect to the stock options, if any, granted to the Participant as indicated on the Award Summary.
1. Grant. In consideration of the Participant remaining in the employ of the Company and agreeing to be bound by the covenants of Paragraph D, PepsiCo hereby grants to the Participant, on the terms and conditions set forth herein, the right and option to purchase the number of shares of PepsiCo Common Stock, par value $.0167 per share, as indicated on the Award Summary, at the “option exercise price” indicated on the Award Summary (the “Option Exercise Price”), which was the Fair Market Value (as defined below) of PepsiCo Common Stock on the Grant Date, rounded up to the nearest quarter. The right to purchase each such share is referred to herein as an “Option.” All Options granted hereunder shall be “Non-Qualified Stock Options” as defined in the Plan.
2. Vesting and Exercisability. Subject to the terms and conditions set forth herein, the Options shall become fully vested on the “vesting date” as indicated on the Award Summary (the “Stock Option Vesting Date”) and shall be exercisable from the Stock Option Vesting Date through the “expiration date” as indicated on the Award Summary (the “Expiration Date”). Options may vest only while the Participant is actively employed by the Company. Once vested and exercisable, and until terminated or expired, all or any portion of the Options may be exercised from time to time and at any time under procedures that the Committee or its delegate shall establish from time to time, including, without limitation, procedures regarding the frequency of exercise and the minimum number of Options which may be exercised at any time.
3. Exercise Procedure. Subject to terms and conditions set forth herein, Options may be exercised by giving written notice of exercise to PepsiCo in the manner specified from time to time by PepsiCo. The aggregate Option Exercise Price for the shares being purchased, together with any amount which the Company may be required to withhold upon such exercise in respect of applicable foreign, federal (including FICA), state and local taxes, must be paid in full at the time of issuance of such shares.
4. Effect of Termination of Employment, Retirement, Death, and Total Disability.
(a) Termination of Employment. Options may vest only while the Participant is actively employed by the Company. Thus, no vesting shall occur following the termination of the Participant’s active employment with the Company, and, subject to subparagraphs 4(b) and 4(c), all unvested Options
shall automatically be forfeited and cancelled upon the date that the Participant’s active employment with the Company terminates. Only vested Options may be exercised. Subject to subparagraphs 4(b) and 4(c), vested Options shall be exercisable until, and shall automatically be forfeited and cancelled upon, the earlier of the Expiration Date and the date that is the last trading day on the principal exchange on which PepsiCo Common Stock is traded during the 90-calendar day period after the date the Participant’s employment with the Company terminates. It is intended that an authorized severance leave of absence may extend employment for purposes of determining the period when vested Options may be exercised. However, an authorized severance leave of absence will not be treated as active employment, and, as a result, vesting of unvested Options will not be extended by any such period.
(b) Retirement Prior to Age 62. If the Participant’s employment terminates prior to the Stock Option Vesting Date by reason of the Participant’s Retirement (as defined below) prior to attaining at least age 62, then: (i) a portion of the Options shall vest on the Participant’s last day of active employment with the Company, with such portion determined in proportion to the Participant’s active service (measured in calendar days) during the period commencing on the Grant Date and ending on the Stock Option Vesting Date; (ii) such Options shall continue to become exercisable in accordance with Paragraph A.2 of this Agreement, with no change in the earliest date of exercise as a result of the vesting provided by this subparagraph 4(b); and (iii) the Options may be exercised by the Participant prior to the Expiration Date in accordance with this Agreement.
(c) Retirement on or After Age 62, Death or Total Disability. If the Participant’s employment terminates by reason of the Participant’s Retirement after attaining at least age 62, death or Total Disability (as defined below), then: (i) the Options shall become fully vested on the Participant’s last day of active employment with the Company (which, for purposes of Total Disability, means the effective date of Total Disability); (ii) the Options shall continue to become exercisable in accordance with Paragraph A.2 of this Agreement, with no change in the earliest date of exercise as a result of the vesting provided by this subparagraph 4(c); and (iii) the Options may be exercised by the Participant’s legal representative (or any person to whom the Options may be transferred by will or the applicable laws of descent and distribution), in the event of death, or the Participant, in the event of Retirement or Total Disability, prior to the Expiration Date in accordance with this Agreement.
(d) Transfers to a Related Entity. In the event the Participant transfers to a Related Entity (as defined below) and such transfer is arranged and approved by PepsiCo, the Options shall continue to vest and to become exercisable after such transfer and shall remain outstanding and be exercisable in accordance with this Agreement by treating the Participant’s employment with the Related Entity as employment with the Company for purposes of this Agreement.
5. Buy-Out of Option Gains. The Committee shall have the right at any time, in its sole discretion and without the consent of the Participant, to cancel any Option and to cause PepsiCo to pay to the Participant the excess, if any, of the Fair Market Value of the shares of PepsiCo Common Stock covered by such Option over the Option Exercise Price of such Option as of the date the Committee provides written notice (the “Buy-Out Notice”) of its intention to exercise such right. Payments of such buy-out amounts pursuant to this provision shall be effected by PepsiCo as promptly as possible after the date of the Buy-Out Notice and shall be made in shares of PepsiCo Common Stock. The number of shares shall be the greatest number of whole shares determined by dividing the amount of the payment to be made by the Fair Market Value of a share of PepsiCo Common Stock at the date of the Buy-Out Notice. Payments of any such buy-out amounts shall be made net of the minimum applicable foreign, federal (including FICA), state and local withholding taxes, if any.
6. No Rights as Shareholder. The Participant shall have no rights as a holder of PepsiCo Common Stock with respect to the Options granted hereunder unless and until such Options are exercised and the shares of PepsiCo Common Stock have been registered in the Participant’s name as owner.
B. Terms and Conditions Applicable to RSUs . These terms and conditions shall apply with respect to the restricted stock units, if any, granted to the Participant as indicated on the Award Summary.
1. Grant. In consideration of the Participant remaining in the employ of the Company and agreeing to be bound by the covenants of Paragraph D, PepsiCo hereby grants to the Participant, on the terms and conditions set forth herein, the number of RSUs, as indicated on the Award Summary (the “RSUs”).
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2. Vesting. Subject to the terms and conditions set forth herein and subparagraphs 2(a) and 2(b) below, the RSUs shall become fully vested on the “vesting date” as indicated on the Award Summary (the “RSU Vesting Date”) and shall be paid as soon as practicable after that date. RSUs may vest only while the Participant is actively employed by the Company. The RSUs payable pursuant to the preceding sentence shall be reduced by any RSUs that are paid pursuant to subparagraphs 2(a) and 2(b) below.
(a) Eligibility for Retirement Prior to Age 62. A Participant shall be vested in 33% of his or her RSUs on the first March 1 that follows the Grant Date if on such March 1 the Participant: (i) is eligible for Retirement, (ii) is not yet age 62, and (iii) has been actively employed by the Company continuously since the Grant Date. This vested portion shall be paid as soon as practicable after this March 1 (but not later than March 15). A Participant shall be vested in 66% of his or her RSUs on the second March 1 that follows the Grant Date if on such March 1 the conditions in (i), (ii) and (iii) of this subparagraph (a) are satisfied. This vested portion shall be paid as soon as practicable after this second March 1 (but not later than March 15), net of any RSUs previously paid out. A Participant shall be vested in 100% of his or her RSUs on the third March 1 that follows the Grant Date if on such March 1 the conditions in (i), (ii) and (iii) of this subparagraph (a) are satisfied. This vested portion shall be paid as soon as practicable after this third March 1 (but not later than March 15), net of any RSUs previously paid out.
(b) Eligibility for Retirement on or After Age 62. A Participant shall be fully vested in his or her RSUs on the first March 1 that follows the Grant Date if on such March 1 the Participant: (i) is eligible for Retirement, (ii) is at least age 62, and (iii) has been actively employed by the Company continuously since the Grant Date. The Participant’s RSUs shall be paid as soon as practicable after this March 1 (but not later than March 15). A Participant shall be fully vested in his or her RSUs on the second March 1 that follows the Grant Date if on such March 1 the conditions in (i), (ii) and (iii) of this subparagraph (b) are satisfied. The Participant’s RSUs shall be paid as soon as practicable after this second March 1 (but not later than March 15), net of any RSUs previously paid out. A Participant shall be fully vested in his or her RSUs on the third March 1 that follows the Grant Date if on such March 1 the conditions in (i), (ii) and (iii) of this subparagraph (b) are satisfied. The Participant’s RSUs shall be paid as soon as practicable after this third March 1 (but not later than March 15), net of any RSUs previously paid out.
3. Payment. RSUs that vest and become payable shall be settled in shares of PepsiCo Common Stock with the Participant receiving one share of PepsiCo Common Stock for each vested RSU. No fractional shares shall be delivered under this Agreement, and so any fractional share that may be payable shall be rounded to the nearest whole share. Any amount that the Company may be required to withhold upon the settlement of RSUs and/or the payment of dividend equivalents (see Paragraph B.5 below) in respect of applicable foreign, federal (including FICA), state and local taxes, must be paid in full at the time of the issuance of shares or payment of cash. Unless the Participant makes other arrangements to satisfy this withholding obligation in accordance with procedures approved by the Company in its discretion, the Company shall withhold shares to satisfy the required withholding obligation related to the settlement of RSUs.
4. Effect of Termination of Employment, Retirement, Death and Total Disability.
(a) Termination of Employment. RSUs may vest and become payable only while the Participant is actively employed by the Company. Thus, vesting ceases upon the termination of the Participant’s active employment with the Company. Subject to subparagraphs 4(b) and 4(c), all unvested RSUs shall automatically be forfeited and cancelled upon the date that the Participant’s active employment with the Company terminates. An authorized severance leave of absence will not be treated as active employment, and, as a result, the vesting of RSUs will not be extended by any such period.
(b) Retirement Prior to Age 62. If the Participant’s employment terminates prior to the RSU Vesting Date by reason of the Participant’s Retirement prior to attaining at least age 62, then a whole number of RSUs shall vest on the Participant’s last day of active employment with the Company, with such number determined in proportion to the Participant’s active service (measured in calendar days) during the period commencing on the Grant Date and ending on the RSU Vesting Date (the “RSU Vesting Period”), and shall be paid as soon as practicable after that date, net of any RSUs previously paid out.
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(c) Retirement on or After Age 62, Death or Total Disability. If the Participant’s employment terminates by reason of the Participant’s Retirement after attaining at least age 62, death or Total Disability, then the RSUs shall become fully vested on the Participant’s last day of active employment with the Company (which, for purposes of Total Disability, means the effective date of Total Disability) and will be paid as soon as practicable after that date, net of any RSUs previously paid out.
(d) Transfers to a Related Entity. In the event the Participant transfers to a Related Entity and such transfer is arranged and approved by PepsiCo, the RSUs shall continue to vest (and their time of payment shall be determined) after such transfer by treating the Participant’s employment with the Related Entity as employment with the Company for purposes of this Agreement.
5. Dividend Equivalents. During the RSU Vesting Period, the Participant shall accumulate dividend equivalents with respect to the RSUs, which dividend equivalents shall be paid in cash (without interest) to the Participant only if and when the applicable RSUs vest and become payable. Dividend equivalents shall equal the dividends actually paid with respect to PepsiCo Common Stock during the RSU Vesting Period while (and to the extent) the RSUs remain outstanding and unpaid. Upon the forfeiture of RSUs, any accumulated dividend equivalents attributable to such RSUs shall also be forfeited.
6. No Rights as Shareholder. The Participant shall have no rights as a holder of PepsiCo Common Stock with respect to the RSUs granted hereunder unless and until such RSUs have been settled in shares of PepsiCo Common Stock that have been registered in the Participant’s name as owner.
C. Terms and Conditions Applicable to PSUs . These terms and conditions shall apply with respect to the performance stock units, if any, granted to the Participant as indicated on the Award Summary.
1. Grant. In consideration of the Participant remaining in the employ of the Company and agreeing to be bound by the covenants of Paragraph D, PepsiCo hereby grants to the Participant, on the terms and conditions set forth herein, the target number of performance stock units as indicated on the t Award Summary (the “PSUs”).
2. Vesting and Payment. PSUs may only vest while the Participant is actively employed by the Company. Subject to Paragraphs C.3 and C.4 below, the PSUs earned in accordance with Paragraph C.3 shall vest on the “vesting date” as indicated on the Award Summary (the “PSU Vesting Date”) and be paid as soon as practicable after such date (the “Payment Date”). PSUs that become earned and payable shall be settled in shares of PepsiCo Common Stock with the Participant receiving one share of PepsiCo Common Stock for each PSU earned. No fractional shares shall be delivered under this Agreement, and so any fractional share that may be payable shall be rounded to the nearest whole share. Any amount that the Company may be required to withhold upon the settlement of PSUs and/or the payment of dividend equivalents (see Paragraph C.5 below) in respect of applicable foreign, federal (including FICA), state and local taxes, must be paid in full at the time of the issuance of shares or payment of cash. Unless the Participant makes other arrangements to satisfy this withholding obligation in accordance with procedures approved by the Company in its discretion, the Company will withhold shares to satisfy the required withholding obligation related to the settlement of PSUs.
3. Earning and Forfeiture of PSUs. Subject to the terms and conditions set forth herein, the Participant can earn a specified number of PSUs with respect to the period which shall include the fiscal year in which the Grant Date occurs and the two fiscal years following such year (the “Performance Period”), determined based on the achievement of performance targets established by the Committee.. Any PSUs that are not earned in accordance with this Paragraph C.3 shall be forfeited and cancelled. Subject to the terms and conditions set forth herein, the PSUs shall be earned as follows:
(a) One-half of the PSUs shall be earned based on and subject to the level of achievement with respect to a performance measure selected by the Committee for the Performance Period pursuant to the performance scale established by the Committee and communicated to the Participant . The Committee shall determine and certify the results of the level of achievement of such performance measure.
(b) One-half of the PSUs shall be earned based on and subject to the level of achievement with respect to a second performance measure selected by the Committee for the Performance Period pursuant to the performance scale established by the Committee and communicated to the Participant. The Committee shall determine and certify the results of the level of achievement of such performance measure.
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Notwithstanding the level of performance achieved with respect to the performance targets established under Paragraphs C.3(a) and C.3(b) above, the Committee has the discretion to reduce the number of PSUs to be paid. The Committee’s right to exercise this discretion with respect to the earned portion of the PSUs shall continue until the date on which the PSUs are delivered to the Participant. Except in the case of death or Total Disability, the PSUs for which a Participant has satisfied the performance criteria will be payable in one payment as soon as practicable after the Payment Date. Any PSUs that are not earned in accordance with this Paragraph C.3 shall be forfeited and cancelled.
4. Effect of Termination of Employment, Retirement, Death and Total Disability.
(a) Termination of Employment. PSUs may vest and become payable only while the Participant is actively employed by the Company. Thus, vesting ceases upon the termination of the Participant’s active employment with the Company. Subject to subparagraphs 4(b), 4(c) and 4(d), all unvested PSUs shall automatically be forfeited and cancelled upon the date that the Participant’s active employment with the Company terminates regardless of whether any such PSUs have previously been earned in accordance with Paragraph C.3 above. An authorized severance leave of absence will not be treated as active employment, and, as a result, the vesting of PSUs will not be extended by any such period.
(b) Retirement Prior to Age 62. If the Participant’s employment terminates prior to the PSU Vesting Date by reason of the Participant’s Retirement prior to attaining at least age 62, then a whole number of the target PSUs granted hereunder shall vest on the Participant’s last day of active employment with the Company, with such number determined in proportion to the Participant’s active service (measured in calendar days) during the period commencing on the Grant Date and ending on the PSU Vesting Date (the “PSU Vesting Period”). All PSUs that vest in accordance with the foregoing sentence shall remain subject to the earning and forfeiture provisions of Paragraph C.3 and shall be paid on the original Payment Date.
(c) Retirement on or After Age 62. If the Participant’s employment terminates by reason of the Participant’s Retirement after attaining at least age 62, then the PSUs granted hereunder shall become fully vested on the Participant’s last day of active employment with the Company. All such vested PSUs shall remain subject to the earning and forfeiture provisions of Paragraph C.3 and shall be paid on the original Payment Date.
(d) Death or Total Disability. If the Participant’s employment terminates by reason of death or Total Disability, then the target number of PSUs set forth in the Award Summary shall become fully vested on the Participant’s last day of active employment with the Company (which, for purposes of Total Disability, means the effective date of Total Disability), and shall be paid as soon as practicable following the date of termination.
(e) Transfers to a Related Entity. In the event the Participant transfers to a Related Entity and such transfer is arranged and approved by PepsiCo, the PSUs shall continue to vest (and their time of payment shall be determined) after such transfer by treating the Participant’s employment with the Related Entity as employment with the Company for purposes of this Agreement. All such PSUs shall remain subject to the vesting, earning and forfeiture provisions of Paragraphs C.2 and C.3 and shall be paid on the original Payment Date.
5. Dividend Equivalents. During the PSU Vesting Period, the Participant shall accumulate dividend equivalents with respect to the PSUs, which dividend equivalents shall be paid in cash (without interest) to the Participant only if and when the applicable PSUs vest and become payable. Dividend equivalents shall equal the dividends actually paid with respect to PepsiCo Common Stock during the PSU Vesting Period while (and to the extent) the PSUs remain outstanding and unpaid. For purposes of determining the dividend equivalents accumulated under this Paragraph C.5, any PSUs that become payable hereunder shall be considered to have been outstanding from the Grant Date. Upon the forfeiture of PSUs, any accumulated dividend equivalents attributable to such PSUs shall also be forfeited.
6. No Rights as Shareholder. The Participant shall have no rights as a holder of PepsiCo Common Stock with respect to the PSUs granted hereunder unless and until such PSUs have been settled in shares of PepsiCo Common Stock that have been registered in the Participant’s name as owner.
D. Prohibited Conduct. In consideration of the Company disclosing and providing access to Confidential Information, as more fully described in Paragraph D.2 below, after the date hereof, the grant
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by the Company of the Options, RSUs and PSUs, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Participant and the Company, intending to be legally bound, hereby agree as follows.
1. Non-Competition and Non-Solicitation. The Participant hereby covenants and agrees that at all times during his or her employment with the Company and for a period of twelve months after the termination of the Participant’s employment with the Company for any reason whatsoever (including a termination due to the Participant’s Retirement), he or she will not, without the prior written consent of PepsiCo’s chief human resources officer or chief legal officer, either directly or indirectly, for himself/herself or on behalf of or in conjunction with any other person, partnership, corporation or other entity, engage in any activities prohibited in the following Paragraphs D.1(a) through (c):
(a) The Participant shall not, in any country in which the Company operates, accept any employment, assignment, position or responsibility, provide services in any capacity, or acquire any ownership interest that involves the Participant’s Participation (as defined below) in an entity that markets, sells, distributes or produces Covered Products (as defined below), unless such entity makes retail sales or consumes Covered Products without in any way competing with the Company;
(b) With respect to Covered Products, the Participant shall not directly or indirectly solicit for competitive business purposes any customer or Prospective Customer (as defined below) of the Company called on, serviced by, or contacted by the Participant in any capacity during his or her employment; or
(c) The Participant shall not in any way, directly or indirectly (including through someone else acting on the Participant’s recommendation, suggestion, identification or advice), solicit any Company employee to leave the Company’s employment or to accept any position with any other entity.
Notwithstanding anything in this Paragraph D.1, the Participant shall not be considered to be in violation of Paragraph D.1(a) solely by reason of owning, directly or indirectly, up to five percent (5%) in the aggregate of any class of securities of any publicly traded corporation engaged in the prohibited activities described in Paragraph D.1(a).
2. Non-Disclosure. In order to assist the Participant with his or her duties, the Company shall continue to provide the Participant with access to confidential and proprietary operational information and other confidential information that is either information not known by actual or potential competitors, customers and third parties of the Company or is proprietary information of the Company (“Confidential Information”). Such Confidential Information shall include all non-public information the Participant acquired as a result of his or her positions with the Company. Examples of such Confidential Information include, without limitation, non-public information about the Company’s customers, suppliers, distributors and potential acquisition targets; its business operations, structure and methods of operation; its product lines, formulae and pricing; its processes, machines and inventions; its research and know-how; its production techniques; its financial data; its advertising and promotional ideas and strategy; information maintained in its computer systems; devices, processes, compilations of information and records; and its plans and strategies. The Participant agrees that such Confidential Information remains confidential even if committed to the Participant’s memory. The Participant agrees, during the term of his or her employment and at all times thereafter, not to use, divulge, or furnish or make accessible to any third party, company, corporation or other organization (including but not limited to, customers or competitors of the Company), without the Company’s prior written consent, any Confidential Information of the Company, except as necessary in his or her position with the Company or as permitted below with respect to Protected Activity.
Notwithstanding the foregoing, nothing in this Agreement, the Plan, any other Award made under the Plan or in any other confidentiality provision to which the Participant may be subject as a result of the Participant’s employment with the Company shall: (1) limit the Participant’s rights to make truthful statements or disclosures about any facts and circumstances related to any claim or allegation of unlawful discrimination by the Company; (2) bar the Participant from giving testimony pursuant to a compulsory legal process or as otherwise required by law; or (3) prohibit Participant from, without notice to the Company, communicating with government agencies, providing information to government agencies, participating in government agency investigations, filing a complaint or charge with government agencies, or testifying in government agency proceedings concerning any possible legal violations or
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from receiving a monetary award for information provided to a government agency (collectively, “Protected Activity”). The Company nonetheless asserts and does not waive its attorney-client privilege over any information appropriately protected by the privilege. Further, notwithstanding any confidentiality provision to which the Participant may be subject, the Participant is hereby advised as follows pursuant to the Defend Trade Secrets Act: “An individual shall not be held criminally or civilly liable under any Federal or State trade secret law for the disclosure of a trade secret that (A) is made (i) in confidence to a Federal, State, or local government official, either directly or indirectly, or to an attorney; and (ii) solely for the purpose of reporting or investigating a suspected violation of law; or (B) is made in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal. An individual who files a lawsuit for retaliation by an employer for reporting a suspected violation of law may disclose the trade secret to the attorney of the individual and use the trade secret information in the court proceeding, if the individual (A) files any document containing the trade secret under seal; and (B) does not disclose the trade secret, except pursuant to court order.”
3. Return of Confidential Information and Company Property. The Participant agrees that whenever the Participant’s employment with the Company ends for any reason, (a) all documents containing or referring to the Company’s Confidential Information as may be in the Participant’s possession, or over which the Participant may have control, and all other property of the Company provided to the Participant by the Company during the course of the Participant’s employment with the Company will be returned by the Participant to the Company immediately, with no request being required; and (b) all Company computer and computer-related equipment and software, and all Company property, files, records, documents, drawings, specifications, lists, equipment, and similar items relating to the business of the Company, whether prepared by the Participant or otherwise, coming into the Participant’s possession or control during the course of his or her employment shall remain the exclusive property of the Company, and shall be delivered by the Participant to the Company immediately, with no request being required.
4. Misconduct. During the term of his or her employment with the Company, the Participant shall not engage in any of the following acts that are considered to be contrary to the Company’s best interests: (a) breaching any contract with or violating any obligation to the Company, including the Company’s Code of Conduct, Insider Trading Policy or any other written policies of the Company, provided, however that nothing in this subsection is intended to bar the Participant from engaging in Protected Activity, (b) unlawfully trading in the securities of PepsiCo or of any other company based on information gained as a result of his or her employment with the Company, (c) committing a felony or other serious crime or (d) engaging in any activity that constitutes gross misconduct in the performance of his or her employment duties.
5. Reasonableness of Provisions. The Participant agrees that: (a) the terms and provisions of this Agreement are reasonable and constitute an otherwise enforceable agreement to which the terms and provisions of this Paragraph D are ancillary or a part of; (b) the consideration provided by the Company under this Agreement is not illusory; (c) the restrictions contained in this Paragraph D are necessary and reasonable for the protection of the legitimate business interests and goodwill of the Company; and (d) the consideration given by the Company under this Agreement, including, without limitation, the provision by the Company of Confidential Information to the Participant, gives rise to the Company’s interest in the covenants set forth in this Paragraph D.
6. Repayment and Forfeiture. The Participant specifically recognizes and affirms that each of the covenants contained in Paragraphs D.1 through D.4 of this Agreement is a material and important term of this Agreement that has induced the Company to provide for the award of the Options, RSUs and/or PSUs granted hereunder, the disclosure of Confidential Information referenced herein, and the other promises made by the Company herein. The Participant further agrees that in the event that (i) the Company determines that the Participant has breached any term of Paragraphs D.1 through D.4 or (ii) all or any part of Paragraph D is held or found invalid or unenforceable for any reason whatsoever by a court of competent jurisdiction in an action between the Participant and the Company, in addition to any other remedies at law or in equity the Company may have available to it, the Company may in its sole discretion:
(a) cancel any unexercised Options or unpaid RSUs or PSUs granted hereunder;
(b) require the Participant to pay to the Company all gains realized from the exercise of any Options granted hereunder; and/or
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(c) require the Participant to pay to the Company the value (determined as of the date paid) of any RSUs or PSUs granted hereunder that have been paid out.
In addition to the provisions of this Paragraph D.6, the Participant agrees that he or she will be bound by the terms of any Company compensation clawback policy applicable to the Participant that the Company may adopt from time to time.
7. Equitable Relief. In the event the Company determines that the Participant has breached or attempted or threatened to breach any term of Paragraph D, in addition to any other remedies at law or in equity the Company may have available to it, it is agreed that the Company shall be entitled, upon application to any court of proper jurisdiction, to a temporary restraining order or preliminary injunction (without the necessity of (a) proving irreparable harm, (b) establishing that monetary damages are inadequate or (c) posting any bond with respect thereto) against the Participant prohibiting such breach or attempted or threatened breach by proving only the existence of such breach or attempted or threatened breach.
8. Extension of Restrictive Period. The Participant agrees that the period during which the covenants contained in this Paragraph D shall be effective shall be computed by excluding from such computation any time during which the Participant is in violation of any provision of Paragraph D.
9. Acknowledgments. The Company and the Participant agree that it was their intent to enter into a valid and enforceable agreement. The Participant and the Company thereby acknowledge the reasonableness of the restrictions set forth in Paragraph D, including the reasonableness of the geographic area, duration as to time and scope of activity restrained. The Participant further acknowledges that his or her skills are such that he or she can be gainfully employed in noncompetitive employment and that the agreement not to compete will not prevent him or her from earning a living. The Participant agrees that if any covenant contained in Paragraph D of this Agreement is found by a court of competent jurisdiction to contain limitations as to time, geographical area, or scope of activity that are not reasonable and impose a greater restraint than is necessary to protect the goodwill or other business interest of the Company, then the court shall reform the covenant to the extent necessary to cause the limitations contained in the covenant as to time, geographical area, and scope of activity to be restrained to be reasonable and to impose a restraint that is not greater than necessary to protect the goodwill and other business interests of the Company and to enforce the covenants as reformed.
10. Provisions Independent. The covenants on the part of the Participant in this Paragraph D shall be construed as an agreement independent of any other agreement, including any employee benefit agreement, and independent of any other provision of this Agreement, and the existence of any claim or cause of action of the Participant against the Company, whether predicated upon this Agreement or otherwise, shall not constitute a defense to the enforcement by the Company of such covenants.
11. Notification of Subsequent Employer. The Participant agrees that the Company may notify any person or entity employing the Participant or evidencing an intention of employing the Participant of the existence and provisions of this Agreement.
12. Transfers to a Related Entity. In the event the Participant transfers to a Related Entity as a result of actions by PepsiCo, any reference to “Company” in this Paragraph D shall be deemed to refer to such Related Entity in addition to the Company.
E. Additional Terms and Conditions.
1. Adjustment for Change in PepsiCo Common Stock. In the event of any change in the outstanding shares of PepsiCo Common Stock by reason of any stock split, stock dividend, recapitalization, reorganization, merger, consolidation, combination or exchange of shares, spin-off or other similar corporate change, (a) the number and type of shares that the Participant may purchase pursuant to the Options and the Option Exercise Price at which the Participant may purchase such shares shall be adjusted, and (b) the number and type of shares to which the RSUs or PSUs held by the Participant relate shall be adjusted, in the case of (a) and (b), as may be, and to such extent (if any), determined to be appropriate and equitable by the Committee.
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2. Nontransferability. Unless the Committee specifically determines otherwise: (a) the Options, RSUs and PSUs are personal to the Participant and, with respect to Options, during the Participant’s lifetime, such Options may be exercised only by the Participant, and (b) the Options, RSUs and PSUs shall not be transferable or assignable, other than in the case of the Participant’s death by will or the laws of descent and distribution, and any such purported transfer or assignment shall be null and void.
3. Definitions. As used in this Agreement, the following terms shall have the meanings set forth below:
(a) “Covered Products” means any product that falls into one or more of the following categories, so long as the Company is producing, marketing, selling or licensing such product anywhere in the world: in-home and commercial beverage systems, carbon dioxide gas cylinders, carbon dioxide gas refills, consumables, and ready-to-drink beverages, including without limitation carbonated soft drinks, tea, water, juices, juice drinks, juice products, sports drinks, coffee drinks, and energy drinks; dairy products; snacks, including salty snacks, fruit and vegetable snacks, dips and spreads, sweet snacks, meat snacks, granola, nutrition and cereal bars, and cookies; hot cereals and ready-to-eat cereals; pancake mixes and pancake syrup; grain-based food products; pasta products; sports performance nutrition products, including without limitation, energy, protein, carbohydrate, nutrition and meal replacement chews, bars, powders, gels, drinks or drink mixes; or any product or service that the Participant had reason to know was under development by the Company during the Participant’s employment with the Company.
(b) “Fair Market Value” of a share of PepsiCo Common Stock on any date shall mean an amount equal to the average of the high and low market prices at which a share of PepsiCo Common Stock shall have been sold on such date, or the immediately preceding trading day if such date was not a trading day, as reported by Bloomberg, L.P., or any successor thereto or any other financial reporting service selected by PepsiCo in good faith.
(c) “Participation” shall be construed broadly to include, without limitation: (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.
(d) “Plan Service Provider” shall mean the individual or entity which the Committee or its delegate has designated to provide administrative services to the Plan.
(e) “Prospective Customer” shall mean any individual or entity of which the Participant has gained knowledge as a result of the Participant’s employment with the Company and with which the Participant dealt with or had contact with during the six (6) months preceding his or her termination of employment with the Company.
(f) “Related Entity” shall mean any entity (i) as to which PepsiCo directly or indirectly owns 20% or more, but less than a majority, of the entity’s voting securities, general partnership interests, or other voting or management rights at the relevant time and (ii) which the Committee or its delegate deems in its sole discretion to be a related entity at the relevant time.
(g) “Retirement” shall mean (i) early, normal or late retirement as used in the U.S. pension plan of the Company in which the Participant participates (if any) and for which the Participant is eligible pursuant to the terms of such plan or (ii) termination of employment after attaining at least age 55 and completing at least 10 years of service with the Company (or, if earlier, after attaining at least age 65 and completing at least five years of service with the Company), with the number of years of service completed by a Participant subject to clause (ii) to be calculated in accordance with administrative procedures established from time to time under the Plan.
(h) “Total Disability” shall mean being considered totally disabled under the PepsiCo Long-Term Disability Program (as amended and restated from time to time), with such status having resulted in benefit payments from such plan or another Company-sponsored disability plan and 12 months having elapsed since the Participant was so considered to be disabled from the cause of the current disability. The effective date of a Participant’s Total Disability shall be the first day that all of the foregoing requirements are met.
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4. Notices. Any notice to be given to PepsiCo in connection with the terms of this Agreement shall be addressed to PepsiCo at 700 Anderson Hill Road, Purchase, New York 10577, Attention: Senior Vice President, Total Rewards, or such other address as PepsiCo may hereafter designate to the Participant. Any such notice shall be deemed to have been duly given when personally delivered, addressed as aforesaid, or when enclosed in a properly sealed envelope or wrapper, addressed as aforesaid, and deposited, postage prepaid, with the federal postal service.
5. Binding Effect. This Agreement shall be binding upon and inure to the benefit of any assignee or successor in interest to PepsiCo, whether by merger, consolidation or the sale of all or substantially all of PepsiCo’s assets. PepsiCo will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of PepsiCo expressly to assume and agree to perform this Agreement in the same manner and to the same extent that PepsiCo would be required to perform it if no such succession had taken place. This Agreement shall be binding upon and inure to the benefit of the Participant or his or her legal representative and any person to whom the Options, RSUs and PSUs may be transferred by will or the applicable laws of descent and distribution.
6. No Contract of Employment; Agreement’s Survival. This Agreement is not a contract of employment. This Agreement does not impose on the Company any obligation to retain the Participant in its employ and shall not interfere with the ability of the Company to terminate the Participant’s employment relationship at any time. This Agreement shall survive the termination of the Participant’s employment for any reason. If an entity ceases to be a majority-owned subsidiary of PepsiCo for purposes of Rule 12b-2 of the Exchange Act or a Related Entity, such cessation shall, for purposes of this Agreement, be deemed to be a termination of employment with the Company with respect to any Participant employed by such entity, unless the Committee or its delegate determines otherwise in its sole discretion.
7. Registration, Listing and Qualification of Shares of PepsiCo Common Stock. The Committee may require that the Participant make such representations and agreements and furnish such information as the Committee deems appropriate to assure compliance with or exemption from the requirements of any securities exchange, any foreign, federal, state or local law, any governmental regulatory body, or any other applicable legal requirement, and PepsiCo Common Stock shall not be issued unless and until the Participant makes such representations and agreements and furnished such information as the Committee deems appropriate.
8. Amendment; Waiver. The terms and conditions of this Agreement may be amended in writing by the chief human resources officer or chief legal officer of PepsiCo (or either of their delegates); provided, however, that (i) no such amendment shall adversely affect the awards granted hereunder without the Participant’s written consent (except to the extent the Committee reasonably determines that such amendment is necessary or appropriate to comply with applicable law, including the provisions of Internal Revenue Code of 1986, as amended (the “Code”) Section 409A and the regulations thereunder pertaining to the deferral of compensation, or the rules and regulations of any stock exchange on which PepsiCo Common Stock is listed or quoted); and (ii) the amendment must be permitted under the Plan. The Company’s failure to insist upon strict compliance with any provision of this Agreement or failure to exercise, or any delay in exercising, any right, power or remedy under this Agreement shall not be deemed to be a waiver of such provision or any such right, power or remedy which the Board (as defined in the Plan), the Committee or the Company has under this Agreement.
9. Severability or Reform by Court. In the event that any provision of this Agreement is deemed by a court to be broader than permitted by applicable law, then such provision shall be reformed (or otherwise revised or narrowed) so that it is enforceable to the fullest extent permitted by applicable law. If any provision of this Agreement shall be declared by a court to be invalid or unenforceable to any extent, the validity or enforceability of the remaining provisions of this Agreement shall not be affected.
10. Plan Terms. The Options, RSUs, PSUs and the terms and conditions set forth herein are subject in all respects to the terms and conditions of the Plan and any guidelines, policies or regulations which govern administration of the Plan. The Committee reserves its rights to amend or terminate the Plan at any time without the consent of the Participant; provided, however, that Options, RSUs and PSUs outstanding under the Plan at the time of such action shall not, without the Participant’s written consent,
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be adversely affected thereby (except to the extent the Committee reasonably determines that such amendment or termination is necessary or appropriate to comply with applicable law, including the provisions of Code Section 409A and the regulations thereunder pertaining to the deferral of compensation, or the rules and regulations of any stock exchange on which PepsiCo Common Stock is listed or quoted). The Committee shall have full power and authority to administer and interpret the Plan and to adopt or establish such rules, regulations, agreements, guidelines, procedures and instruments that are not contrary to the terms of the Plan and that, in its opinion, may be necessary or advisable for the administration and operation of the Plan. All interpretations or determinations of the Committee or its delegate shall be final, binding and conclusive upon the Participant (and his or her legal representatives and any recipient of a transfer of the Options, RSUs or PSUs permitted by this Agreement) on any question arising hereunder or under the Plan or other guidelines, policies or regulations which govern administration of the Plan.
11. Participant Acknowledgements. By entering into this Agreement, the Participant acknowledges and agrees that:
(a) the Option, RSU and/or PSU grant will be exclusively governed by the terms of the Plan, including the right reserved by the Company to amend or cancel the Plan at any time without the Company incurring liability to the Participant (except for Options, RSUs and PSUs already granted under the Plan);
(b) the Participant has been provided a copy of PepsiCo’s Prospectus relating to the Plan, the Options, RSUs, PSUs (and the shares covered thereby);
(c) the Options, RSUs and PSUs are not a constituent part of the Participant’s salary and that the Participant is not entitled, under the terms and conditions of his or her employment, or by accepting or being awarded the Options, RSUs and/or PSUs pursuant to this Agreement, to require options, restricted stock units, performance stock units or other awards to be granted to him/her in the future under the Plan or any other plan;
(d) upon exercise of the Options or payment of RSUs or PSUs the Participant will arrange for payment to the Company an estimated amount to cover employee payroll taxes resulting from the exercise or such payment and/or, to the extent necessary, any balance may be withheld from the Participant’s wages;
(e) benefits received under the Plan will be excluded from the calculation of termination indemnities or other severance payments;
(f) in the event of termination of the Participant’s employment, a severance or notice period to which the Participant may be entitled under local law and which follows the date of termination specified in a notice of termination or other document evidencing the termination of the Participant’s employment will not be treated as active employment for purposes of this Agreement and, as a result, vesting of unvested Options, RSUs or PSUs will not be extended by any such period;
(g) for purposes of this Agreement, a Participant will be considered actively employed during (i) the first six months of an authorized leave of absence approved by the Company, in its sole discretion, or (ii) other statutory leaves that have requirements in excess of six months;
(h) the Participant will seek all necessary approval under, make all required notifications under and comply with all laws, rules and regulations applicable to the ownership of stock options and stock and the exercise of stock options, including, without limitation, currency and exchange laws, rules and regulations;
(i) this Agreement will be interpreted and applied so that the Options and RSUs, in all cases, and PSUs, to the extent possible, will not be subject to Code Section 409A. To the extent the PSUs are subject to Code Section 409A because of the Participant’s eligibility for Retirement, then payments limited to the earliest permissible payment date under Code Section 409A shall be made following a Change in Control only (i) upon a Change in Control if it qualifies under Code Section 409A(a)(2)(A)(v) (a “409A CIC”), and (ii) upon a termination of employment if it occurs after a 409A CIC and it constitutes a Code Section 409A separation from service (and in this case, the six-month delay of Code Section 409A(a)(2)(B)(i) shall apply to “specified employees,” determined under the default rules of Code Section 409A or such other rules as apply generally under the Company’s Section 409A plans).
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Notwithstanding any other provision of this Agreement, this Agreement will be modified to the extent the Committee reasonably determines is necessary or appropriate for such Options, RSUs or PSUs to comply with Code Section 409A; and
(j) the non-disclosure provisions set forth in Paragraph D.2. supersede and replace in their entirety the non-disclosure provisions set forth in the Plan as in effect on the date hereof, in any agreement evidencing an Award made under the Plan and in any other Awards made under the Plan.
12. Right of Set-Off. The Participant agrees, in the event that the Company in its reasonable judgment determines that the Participant owes the Company any amount due to any loan, note, obligation or indebtedness, including but not limited to amounts owed to the Company pursuant to the Company’s tax equalization program or the Company’s policies with respect to travel and business expenses, and if the Participant has not satisfied such obligation(s), then the Company may instruct the plan administrator to withhold and/or sell shares of PepsiCo Common Stock acquired by the Participant upon exercise of his or her Options or settlement of the RSUs or PSUs (to the extent such Options, RSUs or PSUs are not subject to Code Section 409A), or the Company may deduct funds equal to the amount of such obligation from other funds due to the Participant from the Company to the maximum extent permitted by Code Section 409A.
13. Electronic Delivery and Acceptance. The Participant hereby consents and agrees to electronic delivery of any Plan documents, proxy materials, annual reports and other related documents. The Participant hereby consents to any and all procedures that the Company has established or may establish for an electronic signature system for delivery and acceptance of Plan documents (including documents relating to any programs adopted under the Plan), and agrees that his or her electronic signature is the same as, and shall have the same force and effect as, his or her manual signature. Participant consents and agrees that any such procedures and delivery may be effected by a third party engaged by the Company to provide administrative services related to the Plan, including any program adopted under the Plan.
14. Data Privacy. Participant hereby acknowledges and consents to the collection, use, processing and/or transfer of Personal Data as defined and described in this Paragraph E.14. Participant is not obliged to consent, however a failure to provide consent, or the withdrawal of consent at any time, may impact Participant’s ability to participate in the Plan. The Company and/or Participant’s employer collects and maintains certain personal information about Participant that may include name, home address and telephone number, email address, date of birth, social security number or other government or employer-issued identification number, salary grade, hire data, salary, citizenship, job title, any shares of PepsiCo Common Stock, or details of all options, restricted stock units, performance stock units or any other entitlement to shares of PepsiCo Common Stock awarded, cancelled, purchased, vested, or unvested (collectively “Personal Data”). The Company and the Participant’s employer will transfer Personal Data internally as necessary for the purpose of implementation, administration and management of the Participant’s participation in the Plan and the Company and/or the Participant’s employer may further transfer Personal Data to any third parties assisting the Company in the implementation, administration and management of the Plan. These recipients may be located in the European Economic Area, or elsewhere throughout the world, such as the United States. The Participant hereby authorizes (where required under applicable law) the recipients to receive, possess, use, retain and transfer Personal Data, in electronic or other form, as may be required for the administration of the Plan and/or the subsequent holding of any shares of PepsiCo Common Stock on the Participant’s behalf, to a broker or other third party with whom the Participant may elect to deposit any shares of PepsiCo Common Stock acquired pursuant to the Plan. Third parties retained by the Company may use the Personal Data as authorized by the Company to provide the requested services. Third parties may be located throughout the world, including but not limited to the United States. Third parties often maintain their own published policies that describe their privacy and security practices. The Company is not responsible for the privacy or security practices of any third parties. Participant may access, review or amend certain Personal Data by contacting the Company and/or the Plan’s service provider. The Participant may, at any time, exercise the Participant's rights provided under applicable personal data protection laws, which may include the right to (i) obtain confirmation as to the existence of Personal Data, (ii) verify the content, origin and accuracy of Personal Data, (iii) request the integration, update, amendment, deletion or blockage (for breach of applicable laws) of Personal Data, (iv) oppose, for legal reasons, the collection, processing or transfer of the Personal Data which is not necessary or required for the implementation, administration
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and/or operation of the Plan and the Participant's participation in the Plan, and (v) withdraw the Participant's consent to the collection, processing or transfer of Personal Data as provided hereunder (in which case, the stock options, restricted stock units, performance stock units or any other entitlement to shares of PepsiCo Common Stock awarded will become null and void). The Participant may seek to exercise these rights by contacting the Participant's Human Resources manager or the Company's Human Resources Department, who may direct the matter to the applicable Company privacy official. Finally, the Participant understands that the Company may rely on a different legal basis for the processing and/or transfer of Personal Data in the future and/or request the Participant to provide another data privacy consent. If applicable and upon request of the Company, the Participant agrees to provide an executed acknowledgment or data privacy consent (or any other acknowledgments, agreements or consents) to the Company or the employer that the Company and/or the employer may deem necessary to obtain under the data privacy laws in the Participant's country, either now or in the future. The Participant understands that the Participant will not be able to participate in the Plan if the Participant fails to execute any such acknowledgment or consent requested by the Company and/or the employer.
15. Stock Ownership/ Exercise & Hold Guidelines. The Participant agrees as a condition of this grant that, in the event that the Participant is or becomes subject to the Company’s Stock Ownership or Exercise & Hold Guidelines, the Participant shall not sell any shares of PepsiCo Common Stock obtained upon exercise of the Options or settlement of the RSUs or PSUs unless such sale complies with the Stock Ownership and Exercise & Hold Guidelines as in effect from time to time.
16. Governing Law. Notwithstanding the provisions of Paragraphs E.10 and E.11, this Agreement shall be governed, construed and enforced in accordance with the laws of the State of New York, without giving effect to conflict of law rules or principles.
17. Choice of Venue; Attorneys’ Fees. Notwithstanding the provisions of Paragraphs E.10 and E.11, any action or proceeding seeking to enforce any provision of or based on any right arising out of this Agreement may be brought against the Participant or the Company only in the courts of the State of New York or, if it has or can acquire jurisdiction, in the United States District Court for the Southern District of New York, and the Participant and the Company consents to the jurisdiction of such courts (and of the appropriate appellate courts) in any such action or proceeding and waives any objection to venue laid therein. In the event that a Participant or the Company brings an action to enforce the terms of the Plan or any Award Agreement and the Company prevails, the Participant shall pay all costs and expenses incurred by the Company in connection with that action, including reasonable attorneys’ fees, and all further costs and fees, including reasonable attorneys’ fees incurred by the Company in connection with the collection.
18. Addendum to Agreement. Notwithstanding any provisions of this Agreement to the contrary, the Options, RSUs and/or PSUs shall be subject to such special terms and conditions for the Participant's country of residence (and country of employment, if different), as are set forth in the addendum to this Agreement (the “Addendum”). Further, if the Participant transfers residency and/or employment to another country, any special terms and conditions for such country will apply to the Options, RSUs and/or PSUs to the extent the Committee or its duly authorized delegate determines, in its sole discretion, that the application of such terms and conditions is necessary or advisable in order to comply with local laws, rules or regulations or to facilitate the operation and administration of the Options, RSUs and/or PSUs and the Plan (or the Committee or its duly authorized delegate may establish alternative terms and conditions as may be necessary or advisable to accommodate the Participant's transfer). In all circumstances, the Addendum shall constitute part of this Agreement.
19. Entire Agreement. This Agreement contains all the understanding and agreements between the Participant and the Company regarding the subject matter hereof.
PepsiCo, Inc.
/s/ Duncan Micallef
Duncan Micallef
Senior Vice President, Total Rewards
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Exhibit 10.23
2021 PEPSICO ANNUAL LONG-TERM INCENTIVE AWARD
STOCK OPTIONS / RESTRICTED STOCK UNITS
TERMS AND CONDITIONS
These Terms and Conditions (including the country-specific terms set forth in the attached Addendum), along with the 2021 PepsiCo Annual Long-Term Incentive Award Summary provided to the Participant (the “Award Summary”), and signed by the individual named on the Award Summary (the “Participant”), as applicable, shall constitute an agreement (this “Agreement”) effective as of the “grant date” indicated on the Award Summary (the “Grant Date”), by and between PepsiCo, Inc., a North Carolina corporation having its principal office at 700 Anderson Hill Road, Purchase, New York 10577 (“PepsiCo,” and with its divisions and direct and indirect subsidiaries, the “Company”), and the Participant.
W I T N E S S E T H:
WHEREAS, the Board of Directors and shareholders of PepsiCo have approved the PepsiCo, Inc. Long-Term Incentive Plan (the “Plan”), for the purposes and subject to the provisions set forth in the Plan; and
WHEREAS, pursuant to the authority granted to it in the Plan, the Compensation Committee of the Board of Directors of PepsiCo (the “Committee”) or its delegate authorized the grant to the Participant of the PepsiCo stock options (“Options”) and/or restricted stock units (“RSUs”) set forth on the Award Summary on or prior to the Grant Date; and
WHEREAS, awards granted under the Plan are to be evidenced by an Agreement in such form and containing such terms and conditions as the Committee shall determine.
NOW, THEREFORE, it is mutually agreed as follows:
A. Terms and Conditions Applicable to Stock Options. These terms and conditions shall apply with respect to the stock options, if any, granted to the Participant as indicated on the Award Summary.
1. Grant. In consideration of the Participant remaining in the employ of the Company and agreeing to be bound by the covenants of Paragraph C, PepsiCo hereby grants to the Participant, on the terms and conditions set forth herein, the right and option to purchase the number of shares of PepsiCo Common Stock, par value $.0167 per share, as indicated on the Award Summary, at the “option exercise price” indicated on the Award Summary (the “Option Exercise Price”), which was the Fair Market Value (as defined below) of PepsiCo Common Stock on the Grant Date, rounded up to the nearest quarter. The right to purchase each such share is referred to herein as an “Option.” All Options granted hereunder shall be “Non-Qualified Stock Options” as defined in the Plan.
2. Vesting and Exercisability. Subject to the terms and conditions set forth herein, the Options shall become fully vested on the “vesting date” as indicated on the Award Summary (the “Stock Option Vesting Date”) and shall be exercisable from the Stock Option Vesting Date through the “expiration date” as indicated on the Award Summary (the “Expiration Date”). Options may vest only while the Participant is actively employed by the Company. Once vested and exercisable, and until terminated or expired, all or any portion of the Options may be exercised from time to time and at any time under procedures that the Committee or its delegate shall establish from time to time, including, without limitation, procedures regarding the frequency of exercise and the minimum number of Options which may be exercised at any time.
3. Exercise Procedure. Subject to terms and conditions set forth herein, Options may be exercised by giving written notice of exercise to PepsiCo in the manner specified from time to time by PepsiCo. The aggregate Option Exercise Price for the shares being purchased, together with any amount which the Company may be required to withhold upon such exercise in respect of applicable foreign, federal (including FICA), state and local taxes, must be paid in full at the time of issuance of such shares.
4. Effect of Termination of Employment, Retirement, Death, and Total Disability.
(a) Termination of Employment. Options may vest only while the Participant is actively employed by the Company. Thus, no vesting shall occur following the termination of the Participant’s
active employment with the Company, and, subject to subparagraphs 4(b) and 4(c), all unvested Options shall automatically be forfeited and cancelled upon the date that the Participant’s active employment with the Company terminates. Only vested Options may be exercised. Subject to subparagraphs 4(b) and 4(c), vested Options shall be exercisable until, and shall automatically be forfeited and cancelled upon, the earlier of the Expiration Date and the date that is the last trading day on the principal exchange on which PepsiCo Common Stock is traded during the 90-calendar day period after the date the Participant’s employment with the Company terminates. It is intended that an authorized severance leave of absence may extend employment for purposes of determining the period when vested Options may be exercised. However, an authorized severance leave of absence will not be treated as active employment, and, as a result, vesting of unvested Options will not be extended by any such period.
(b) Retirement Prior to Age 62. If the Participant’s employment terminates prior to the Stock Option Vesting Date by reason of the Participant’s Retirement (as defined below) prior to attaining at least age 62, then: (i) a portion of the Options shall vest on the Participant’s last day of active employment with the Company, with such portion determined in proportion to the Participant’s active service (measured in calendar days) during the period commencing on the Grant Date and ending on the Stock Option Vesting Date; (ii) such Options shall continue to become exercisable in accordance with Paragraph A.2 of this Agreement, with no change in the earliest date of exercise as a result of the vesting provided by this subparagraph 4(b); and (iii) the Options may be exercised by the Participant prior to the Expiration Date in accordance with this Agreement.
(c) Retirement on or After Age 62, Death or Total Disability. If the Participant’s employment terminates by reason of the Participant’s Retirement after attaining at least age 62, death or Total Disability (as defined below), then: (i) the Options shall become fully vested on the Participant’s last day of active employment with the Company (which, for purposes of Total Disability, means the effective date of Total Disability); (ii) the Options shall continue to become exercisable in accordance with Paragraph A.2 of this Agreement, with no change in the earliest date of exercise as a result of the vesting provided by this subparagraph 4(c); and (iii) the Options may be exercised by the Participant’s legal representative (or any person to whom the Options may be transferred by will or the applicable laws of descent and distribution), in the event of death, or the Participant, in the event of Retirement or Total Disability, prior to the Expiration Date in accordance with this Agreement.
(d) Transfers to a Related Entity. In the event the Participant transfers to a Related Entity (as defined below) and such transfer is arranged and approved by PepsiCo, the Options shall continue to vest and to become exercisable after such transfer and shall remain outstanding and be exercisable in accordance with this Agreement by treating the Participant’s employment with the Related Entity as employment with the Company for purposes of this Agreement.
5. Buy-Out of Option Gains. The Committee shall have the right at any time, in its sole discretion and without the consent of the Participant, to cancel any Option and to cause PepsiCo to pay to the Participant the excess, if any, of the Fair Market Value of the shares of PepsiCo Common Stock covered by such Option over the Option Exercise Price of such Option as of the date the Committee provides written notice (the “Buy-Out Notice”) of its intention to exercise such right. Payments of such buy-out amounts pursuant to this provision shall be effected by PepsiCo as promptly as possible after the date of the Buy-Out Notice and shall be made in shares of PepsiCo Common Stock. The number of shares shall be the greatest number of whole shares determined by dividing the amount of the payment to be made by the Fair Market Value of a share of PepsiCo Common Stock at the date of the Buy-Out Notice. Payments of any such buy-out amounts shall be made net of the minimum applicable foreign, federal (including FICA), state and local withholding taxes, if any.
6. No Rights as Shareholder. The Participant shall have no rights as a holder of PepsiCo Common Stock with respect to the Options granted hereunder unless and until such Options are exercised and the shares of PepsiCo Common Stock have been registered in the Participant’s name as owner.
B. Terms and Conditions Applicable to RSUs . These terms and conditions shall apply with respect to the restricted stock units, if any, granted to the Participant as indicated on the Award Summary.
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1. Grant. In consideration of the Participant remaining in the employ of the Company and agreeing to be bound by the covenants of Paragraph C, PepsiCo hereby grants to the Participant, on the terms and conditions set forth herein, the number of RSUs, as indicated on the Award Summary (the “RSUs”).
2. Vesting. Subject to the terms and conditions set forth herein and subparagraphs 2(a) and 2(b) below, the RSUs shall become fully vested on the “vesting date” as indicated on the Award Summary (the “RSU Vesting Date”) and shall be paid as soon as practicable after that date. RSUs may vest only while the Participant is actively employed by the Company. The RSUs payable pursuant to the preceding sentence shall be reduced by any RSUs that are paid pursuant to subparagraphs 2(a) and 2(b) below.
(a) Eligibility for Retirement Prior to Age 62. A Participant shall be vested in 33% of his or her RSUs on the first March 1 that follows the Grant Date if on such March 1 the Participant: (i) is eligible for Retirement, (ii) is not yet age 62, and (iii) has been actively employed by the Company continuously since the Grant Date. This vested portion shall be paid as soon as practicable after this March 1 (but not later than March 15). A Participant shall be vested in 66% of his or her RSUs on the second March 1 that follows the Grant Date if on such March 1 the conditions in (i), (ii) and (iii) of this subparagraph (a) are satisfied. This vested portion shall be paid as soon as practicable after this second March 1 (but not later than March 15), net of any RSUs previously paid out. A Participant shall be vested in 100% of his or her RSUs on the third March 1 that follows the Grant Date if on such March 1 the conditions in (i), (ii) and (iii) of this subparagraph (a) are satisfied. This vested portion shall be paid as soon as practicable after this third March 1 (but not later than March 15), net of any RSUs previously paid out.
(b) Eligibility for Retirement on or After Age 62. A Participant shall be fully vested in his or her RSUs on the first March 1 that follows the Grant Date if on such March 1 the Participant: (i) is eligible for Retirement, (ii) is at least age 62, and (iii) has been actively employed by the Company continuously since the Grant Date. The Participant’s RSUs shall be paid as soon as practicable after this March 1 (but not later than March 15). A Participant shall be fully vested in his or her RSUs on the second March 1 that follows the Grant Date if on such March 1 the conditions in (i), (ii) and (iii) of this subparagraph (b) are satisfied. The Participant’s RSUs shall be paid as soon as practicable after this second March 1 (but not later than March 15), net of any RSUs previously paid out. A Participant shall be fully vested in his or her RSUs on the third March 1 that follows the Grant Date if on such March 1 the conditions in (i), (ii) and (iii) of this subparagraph (b) are satisfied. The Participant’s RSUs shall be paid as soon as practicable after this third March 1 (but not later than March 15), net of any RSUs previously paid out.
3. Payment. RSUs that vest and become payable shall be settled in shares of PepsiCo Common Stock with the Participant receiving one share of PepsiCo Common Stock for each vested RSU. No fractional shares shall be delivered under this Agreement, and so any fractional share that may be payable shall be rounded to the nearest whole share. Any amount that the Company may be required to withhold upon the settlement of RSUs and/or the payment of dividend equivalents (see Paragraph B.5 below) in respect of applicable foreign, federal (including FICA), state and local taxes, must be paid in full at the time of the issuance of shares or payment of cash. Unless the Participant makes other arrangements to satisfy this withholding obligation in accordance with procedures approved by the Company in its discretion, the Company shall withhold shares to satisfy the required withholding obligation related to the settlement of RSUs.
4. Effect of Termination of Employment, Retirement, Death and Total Disability.
(a) Termination of Employment. RSUs may vest and become payable only while the Participant is actively employed by the Company. Thus, vesting ceases upon the termination of the Participant’s active employment with the Company. Subject to subparagraphs 4(b) and 4(c), all unvested RSUs shall automatically be forfeited and cancelled upon the date that the Participant’s active employment with the Company terminates. An authorized severance leave of absence will not be treated as active employment, and, as a result, the vesting of RSUs will not be extended by any such period.
(b) Retirement Prior to Age 62. If the Participant’s employment terminates prior to the RSU Vesting Date by reason of the Participant’s Retirement prior to attaining at least age 62, then a whole number of RSUs shall vest on the Participant’s last day of active employment with the Company, with such number determined in proportion to the Participant’s active service (measured in calendar days) during the period commencing on the Grant Date and ending on the RSU Vesting Date (the “RSU
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Vesting Period”), and shall be paid as soon as practicable after that date, net of any RSUs previously paid out.
(c) Retirement on or After Age 62, Death or Total Disability. If the Participant’s employment terminates by reason of the Participant’s Retirement after attaining at least age 62, death or Total Disability, then the RSUs shall become fully vested on the Participant’s last day of active employment with the Company (which, for purposes of Total Disability, means the effective date of Total Disability) and will be paid as soon as practicable after that date, net of any RSUs previously paid out.
(d) Transfers to a Related Entity. In the event the Participant transfers to a Related Entity and such transfer is arranged and approved by PepsiCo, the RSUs shall continue to vest (and their time of payment shall be determined) after such transfer by treating the Participant’s employment with the Related Entity as employment with the Company for purposes of this Agreement.
5. Dividend Equivalents. During the RSU Vesting Period, the Participant shall accumulate dividend equivalents with respect to the RSUs, which dividend equivalents shall be paid in cash (without interest) to the Participant only if and when the applicable RSUs vest and become payable. Dividend equivalents shall equal the dividends actually paid with respect to PepsiCo Common Stock during the RSU Vesting Period while (and to the extent) the RSUs remain outstanding and unpaid. Upon the forfeiture of RSUs, any accumulated dividend equivalents attributable to such RSUs shall also be forfeited.
6. No Rights as Shareholder. The Participant shall have no rights as a holder of PepsiCo Common Stock with respect to the RSUs granted hereunder unless and until such RSUs have been settled in shares of PepsiCo Common Stock that have been registered in the Participant’s name as owner.
C. Prohibited Conduct. In consideration of the Company disclosing and providing access to Confidential Information, as more fully described in Paragraph C.2 below, after the date hereof, the grant by the Company of the Options and RSUs, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Participant and the Company, intending to be legally bound, hereby agree as follows.
1. Non-Competition and Non-Solicitation. The Participant hereby covenants and agrees that at all times during his or her employment with the Company and for a period of twelve months after the termination of the Participant’s employment with the Company for any reason whatsoever (including a termination due to the Participant’s Retirement), he or she will not, without the prior written consent of PepsiCo’s chief human resources officer or chief legal officer, either directly or indirectly, for himself/herself or on behalf of or in conjunction with any other person, partnership, corporation or other entity, engage in any activities prohibited in the following Paragraphs C.1(a) through (c):
(a) The Participant shall not, in any country in which the Company operates, accept any employment, assignment, position or responsibility, provide services in any capacity, or acquire any ownership interest that involves the Participant’s Participation (as defined below) in an entity that markets, sells, distributes or produces Covered Products (as defined below), unless such entity makes retail sales or consumes Covered Products without in any way competing with the Company;
(b) With respect to Covered Products, the Participant shall not directly or indirectly solicit for competitive business purposes any customer or Prospective Customer (as defined below) of the Company called on, serviced by, or contacted by the Participant in any capacity during his or her employment; or
(c) The Participant shall not in any way, directly or indirectly (including through someone else acting on the Participant’s recommendation, suggestion, identification or advice), solicit any Company employee to leave the Company’s employment or to accept any position with any other entity.
Notwithstanding anything in this Paragraph C.1, the Participant shall not be considered to be in violation of Paragraph C.1(a) solely by reason of owning, directly or indirectly, up to five percent (5%) in the aggregate of any class of securities of any publicly traded corporation engaged in the prohibited activities described in Paragraph C.1(a).
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2. Non-Disclosure. In order to assist the Participant with his or her duties, the Company shall continue to provide the Participant with access to confidential and proprietary operational information and other confidential information that is either information not known by actual or potential competitors, customers and third parties of the Company or is proprietary information of the Company (“Confidential Information”). Such Confidential Information shall include all non-public information the Participant acquired as a result of his or her positions with the Company. Examples of such Confidential Information include, without limitation, non-public information about the Company’s customers, suppliers, distributors and potential acquisition targets; its business operations, structure and methods of operation; its product lines, formulae and pricing; its processes, machines and inventions; its research and know-how; its production techniques; its financial data; its advertising and promotional ideas and strategy; information maintained in its computer systems; devices, processes, compilations of information and records; and its plans and strategies. The Participant agrees that such Confidential Information remains confidential even if committed to the Participant’s memory. The Participant agrees, during the term of his or her employment and at all times thereafter, not to use, divulge, or furnish or make accessible to any third party, company, corporation or other organization (including but not limited to, customers or competitors of the Company), without the Company’s prior written consent, any Confidential Information of the Company, except as necessary in his or her position with the Company or as permitted below with respect to Protected Activity.
Notwithstanding the foregoing, nothing in this Agreement, the Plan, any other Award made under the Plan or in any other confidentiality provision to which the Participant may be subject as a result of the Participant’s employment with the Company shall: (1) limit the Participant’s rights to make truthful statements or disclosures about any facts and circumstances related to any claim or allegation of unlawful discrimination by the Company; (2) bar the Participant from giving testimony pursuant to a compulsory legal process or as otherwise required by law; or (3) prohibit the Participant from, without notice to the Company, filing a complaint or charge with government agencies (including, without limitation, the Equal Employment Opportunity Commission), communicating with government agencies, providing information to government agencies, participating in government agency investigations, or testifying in government agency proceedings concerning any possible legal violations or from receiving a monetary award for information provided to a government agency (collectively, “Protected Activity”). The Company nonetheless asserts and does not waive its attorney-client privilege over any information appropriately protected by the privilege. Further, notwithstanding any confidentiality provision to which the Participant may be subject, the Participant is hereby advised as follows pursuant to the Defend Trade Secrets Act: “An individual shall not be held criminally or civilly liable under any Federal or State trade secret law for the disclosure of a trade secret that (A) is made (i) in confidence to a Federal, State, or local government official, either directly or indirectly, or to an attorney; and (ii) solely for the purpose of reporting or investigating a suspected violation of law; or (B) is made in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal. An individual who files a lawsuit for retaliation by an employer for reporting a suspected violation of law may disclose the trade secret to the attorney of the individual and use the trade secret information in the court proceeding, if the individual (A) files any document containing the trade secret under seal; and (B) does not disclose the trade secret, except pursuant to court order.”
3. Return of Confidential Information and Company Property. The Participant agrees that whenever the Participant’s employment with the Company ends for any reason, (a) all documents containing or referring to the Company’s Confidential Information as may be in the Participant’s possession, or over which the Participant may have control, and all other property of the Company provided to the Participant by the Company during the course of the Participant’s employment with the Company will be returned by the Participant to the Company immediately, with no request being required; and (b) all Company computer and computer-related equipment and software, and all Company property, files, records, documents, drawings, specifications, lists, equipment, and similar items relating to the business of the Company, whether prepared by the Participant or otherwise, coming into the Participant’s possession or control during the course of his or her employment shall remain the exclusive property of the Company, and shall be delivered by the Participant to the Company immediately, with no request being required.
4. Misconduct. During the term of his or her employment with the Company, the Participant shall not engage in any of the following acts that are considered to be contrary to the Company’s best interests: (a) breaching any contract with or violating any obligation to the Company, including, without limitation,
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the Company’s Code of Conduct, Insider Trading Policy or any other written policies of the Company, (b) unlawfully trading in the securities of PepsiCo or of any other company based on information gained as a result of his or her employment with the Company, (c) committing acts involving gross misconduct in the performance of employment duties, dishonesty, fraud, illegality, or moral turpitude, or that cause or contribute to the need for an accounting adjustment to PepsiCo’s financial results or (d) in the judgment of the Company, engaging in conduct that may be detrimental to or reflect unfavorably upon the Company or its brands, services, or products; provided, however that nothing in this section is intended to bar the Participant from engaging in Protected Activity.
5. Reasonableness of Provisions. The Participant agrees that: (a) the terms and provisions of this Agreement are reasonable and constitute an otherwise enforceable agreement to which the terms and provisions of this Paragraph C are ancillary or a part of; (b) the consideration provided by the Company under this Agreement is not illusory; (c) the restrictions contained in this Paragraph C are necessary and reasonable for the protection of the legitimate business interests and goodwill of the Company; and (d) the consideration given by the Company under this Agreement, including, without limitation, the provision by the Company of Confidential Information to the Participant, gives rise to the Company’s interest in the covenants set forth in this Paragraph C.
6. Repayment and Forfeiture. The Participant specifically recognizes and affirms that each of the covenants contained in Paragraphs C.1 throughC.4 of this Agreement is a material and important term of this Agreement that has induced the Company to provide for the award of the Options and/or RSUs granted hereunder, the disclosure of Confidential Information referenced herein, and the other promises made by the Company herein. The Participant further agrees that in the event that (i) the Company determines that the Participant has breached any term of Paragraphs C.1 through C.4 or (ii) all or any part of Paragraph C is held or found invalid or unenforceable for any reason whatsoever by a court of competent jurisdiction in an action between the Participant and the Company, in addition to any other remedies at law or in equity the Company may have available to it, the Company may in its sole discretion:
(a) cancel any unexercised Options or unpaid RSUs granted hereunder;
(b) require the Participant to pay to the Company all gains realized from the exercise of any Options granted hereunder; and/or
(c) require the Participant to pay to the Company the value (determined as of the date paid) of any RSUs granted hereunder that have been paid out.
In addition to the provisions of this Paragraph C.6, the Participant agrees that he or she will be bound by the terms of any Company compensation clawback policy applicable to the Participant that the Company may adopt from time to time.
7. Equitable Relief. In the event the Company determines that the Participant has breached or attempted or threatened to breach any term of Paragraph C, in addition to any other remedies at law or in equity the Company may have available to it, it is agreed that the Company shall be entitled, upon application to any court of proper jurisdiction, to a temporary restraining order or preliminary injunction (without the necessity of (a) proving irreparable harm, (b) establishing that monetary damages are inadequate or (c) posting any bond with respect thereto) against the Participant prohibiting such breach or attempted or threatened breach by proving only the existence of such breach or attempted or threatened breach.
8. Extension of Restrictive Period. The Participant agrees that the period during which the covenants contained in this Paragraph C shall be effective shall be computed by excluding from such computation any time during which the Participant is in violation of any provision of Paragraph C.
9. Acknowledgments. The Company and the Participant agree that it was their intent to enter into a valid and enforceable agreement. The Participant and the Company thereby acknowledge the reasonableness of the restrictions set forth in Paragraph C, including the reasonableness of the geographic area, duration as to time and scope of activity restrained. The Participant further acknowledges that his or her skills are such that he or she can be gainfully employed in noncompetitive employment and that the agreement not to compete will not prevent him or her from earning a living. The Participant agrees that if
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any covenant contained in Paragraph C of this Agreement is found by a court of competent jurisdiction to contain limitations as to time, geographical area, or scope of activity that are not reasonable and impose a greater restraint than is necessary to protect the goodwill or other business interest of the Company, then the court shall reform the covenant to the extent necessary to cause the limitations contained in the covenant as to time, geographical area, and scope of activity to be restrained to be reasonable and to impose a restraint that is not greater than necessary to protect the goodwill and other business interests of the Company and to enforce the covenants as reformed.
10. Provisions Independent. The covenants on the part of the Participant in this Paragraph C shall be construed as an agreement independent of any other agreement, including any employee benefit agreement, and independent of any other provision of this Agreement, and the existence of any claim or cause of action of the Participant against the Company, whether predicated upon this Agreement or otherwise, shall not constitute a defense to the enforcement by the Company of such covenants.
11. Notification of Subsequent Employer. The Participant agrees that the Company may notify any person or entity employing the Participant or evidencing an intention of employing the Participant of the existence and provisions of this Agreement.
12. Transfers to a Related Entity. In the event the Participant transfers to a Related Entity as a result of actions by PepsiCo, any reference to “Company” in this Paragraph C shall be deemed to refer to such Related Entity in addition to the Company.
D. Additional Terms and Conditions.
1. Adjustment for Change in PepsiCo Common Stock. In the event of any change in the outstanding shares of PepsiCo Common Stock by reason of any stock split, stock dividend, recapitalization, reorganization, merger, consolidation, combination or exchange of shares, spin-off or other similar corporate change, (a) the number and type of shares that the Participant may purchase pursuant to the Options and the Option Exercise Price at which the Participant may purchase such shares shall be adjusted, and (b) the number and type of shares to which the RSUs held by the Participant relate shall be adjusted, in the case of (a) and (b), as may be, and to such extent (if any), determined to be appropriate and equitable by the Committee.
2. Nontransferability. Unless the Committee specifically determines otherwise: (a) the Options and RSUs are personal to the Participant and, with respect to Options, during the Participant’s lifetime, such Options may be exercised only by the Participant, and (b) the Options and RSUs shall not be transferable or assignable, other than in the case of the Participant’s death by will or the laws of descent and distribution, and any such purported transfer or assignment shall be null and void.
3. Definitions. As used in this Agreement, the following terms shall have the meanings set forth below:
(a) “Covered Products” means any product that falls into one or more of the following categories, so long as the Company is producing, marketing, selling or licensing such product anywhere in the world: in-home and commercial beverage systems, carbon dioxide gas cylinders, carbon dioxide gas refills, consumables, and ready-to-drink beverages, including without limitation carbonated soft drinks, tea, water, juices, juice drinks, juice products, sports drinks, coffee drinks, and energy drinks; dairy products; snacks, including salty snacks, fruit and vegetable snacks, dips and spreads, sweet snacks, meat snacks, granola, nutrition and cereal bars, and cookies; hot cereals and ready-to-eat cereals; pancake mixes and pancake syrup; grain-based food products; pasta products; sports performance nutrition products, including without limitation, energy, protein, carbohydrate, nutrition and meal replacement chews, bars, powders, gels, drinks or drink mixes; or any product or service that the Participant had reason to know was under development by the Company during the Participant’s employment with the Company.
(b) “Fair Market Value” of a share of PepsiCo Common Stock on any date shall mean an amount equal to the average of the high and low market prices at which a share of PepsiCo Common Stock shall have been sold on such date, or the immediately preceding trading day if such date was not a trading day, as reported by Bloomberg, L.P., or any successor thereto or any other financial reporting service selected by PepsiCo in good faith.
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(c) “Participation” shall be construed broadly to include, without limitation: (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.
(d) “Prospective Customer” shall mean any individual or entity of which the Participant has gained knowledge as a result of the Participant’s employment with the Company and with which the Participant dealt with or had contact with during the six (6) months preceding his or her termination of employment with the Company.
(e) “Related Entity” shall mean any entity (i) as to which PepsiCo directly or indirectly owns 20% or more, but less than a majority, of the entity’s voting securities, general partnership interests, or other voting or management rights at the relevant time and (ii) which the Committee or its delegate deems in its sole discretion to be a related entity at the relevant time.
(f) “Retirement” shall mean (i) early, normal or late retirement as used in the U.S. pension plan of the Company in which the Participant participates (if any) and for which the Participant is eligible pursuant to the terms of such plan or (ii) termination of employment after attaining at least age 55 and completing at least 10 years of service with the Company (or, if earlier, after attaining at least age 65 and completing at least five years of service with the Company), with the number of years of service completed by a Participant subject to clause (ii) to be calculated in accordance with administrative procedures established from time to time under the Plan.
(g) “Total Disability” shall mean being considered totally disabled under the PepsiCo Long-Term Disability Program (as amended and restated from time to time), with such status having resulted in benefit payments from such plan or another Company-sponsored disability plan and 12 months having elapsed since the Participant was so considered to be disabled from the cause of the current disability. The effective date of a Participant’s Total Disability shall be the first day that all of the foregoing requirements are met.
4. Notices. Any notice to be given to PepsiCo in connection with the terms of this Agreement shall be addressed to PepsiCo at 700 Anderson Hill Road, Purchase, New York 10577, Attention: Senior Vice President, Total Rewards, or such other address as PepsiCo may hereafter designate to the Participant. Any such notice shall be deemed to have been duly given when personally delivered, addressed as aforesaid, or when enclosed in a properly sealed envelope or wrapper, addressed as aforesaid, and deposited, postage prepaid, with the federal postal service.
5. Binding Effect. This Agreement shall be binding upon and inure to the benefit of any assignee or successor in interest to PepsiCo, whether by merger, consolidation or the sale of all or substantially all of PepsiCo’s assets. PepsiCo will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of PepsiCo expressly to assume and agree to perform this Agreement in the same manner and to the same extent that PepsiCo would be required to perform it if no such succession had taken place. This Agreement shall be binding upon and inure to the benefit of the Participant or his or her legal representative and any person to whom the Options and RSUs may be transferred by will or the applicable laws of descent and distribution.
6. No Contract of Employment; Agreement’s Survival. This Agreement is not a contract of employment. This Agreement does not impose on the Company any obligation to retain the Participant in its employ and shall not interfere with the ability of the Company to terminate the Participant’s employment relationship at any time. This Agreement shall survive the termination of the Participant’s employment for any reason. If an entity ceases to be a majority-owned subsidiary of PepsiCo for purposes of Rule 12b-2 of the Exchange Act or a Related Entity, such cessation shall, for purposes of this Agreement, be deemed to be a termination of employment with the Company with respect to any Participant employed by such entity, unless the Committee or its delegate determines otherwise in its sole discretion.
7. Registration, Listing and Qualification of Shares of PepsiCo Common Stock. The Committee may require that the Participant make such representations and agreements and furnish such information as the Committee deems appropriate to assure compliance with or exemption from the requirements of any
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securities exchange, any foreign, federal, state or local law, any governmental regulatory body, or any other applicable legal requirement, and PepsiCo Common Stock shall not be issued unless and until the Participant makes such representations and agreements and furnished such information as the Committee deems appropriate.
8. Amendment; Waiver. The terms and conditions of this Agreement may be amended in writing by the chief human resources officer or chief legal officer of PepsiCo (or either of their delegates); provided, however, that (i) no such amendment shall adversely affect the awards granted hereunder without the Participant’s written consent (except to the extent the Committee reasonably determines that such amendment is necessary or appropriate to comply with applicable law, including the provisions of Internal Revenue Code of 1986, as amended (the “Code”) Section 409A and the regulations thereunder pertaining to the deferral of compensation, or the rules and regulations of any stock exchange on which PepsiCo Common Stock is listed or quoted); and (ii) the amendment must be permitted under the Plan. The Company’s failure to insist upon strict compliance with any provision of this Agreement or failure to exercise, or any delay in exercising, any right, power or remedy under this Agreement shall not be deemed to be a waiver of such provision or any such right, power or remedy which the Board (as defined in the Plan), the Committee or the Company has under this Agreement.
9. Severability or Reform by Court. In the event that any provision of this Agreement is deemed by a court to be broader than permitted by applicable law, then such provision shall be reformed (or otherwise revised or narrowed) so that it is enforceable to the fullest extent permitted by applicable law. If any provision of this Agreement shall be declared by a court to be invalid or unenforceable to any extent, the validity or enforceability of the remaining provisions of this Agreement shall not be affected.
10. Plan Terms. The Options and RSUs and the terms and conditions set forth herein are subject in all respects to the terms and conditions of the Plan and any guidelines, policies or regulations which govern administration of the Plan. The Committee reserves its rights to amend or terminate the Plan at any time without the consent of the Participant; provided, however, that Options and RSUs outstanding under the Plan at the time of such action shall not, without the Participant’s written consent, be adversely affected thereby (except to the extent the Committee reasonably determines that such amendment or termination is necessary or appropriate to comply with applicable law, including the provisions of Code Section 409A and the regulations thereunder pertaining to the deferral of compensation, or the rules and regulations of any stock exchange on which PepsiCo Common Stock is listed or quoted). The Committee shall have full power and authority to administer and interpret the Plan and to adopt or establish such rules, regulations, agreements, guidelines, procedures and instruments that are not contrary to the terms of the Plan and that, in its opinion, may be necessary or advisable for the administration and operation of the Plan. All interpretations or determinations of the Committee or its delegate shall be final, binding and conclusive upon the Participant (and his or her legal representatives and any recipient of a transfer of the Options or RSUs permitted by this Agreement) on any question arising hereunder or under the Plan or other guidelines, policies or regulations which govern administration of the Plan.
11. Participant Acknowledgements. By entering into this Agreement, the Participant acknowledges and agrees that:
(a) the Option and/or RSU grant will be exclusively governed by the terms of the Plan, including the right reserved by the Company to amend or cancel the Plan at any time without the Company incurring liability to the Participant (except for Options and RSUs already granted under the Plan);
(b) the Participant has been provided a copy of PepsiCo’s Prospectus relating to the Plan, the Options and RSUs (and the shares covered thereby);
(c) the Options and RSUs are not a constituent part of the Participant’s salary and that the Participant is not entitled, under the terms and conditions of his or her employment, or by accepting or being awarded the Options and/or RSUs pursuant to this Agreement, to require options, restricted stock units, performance stock units or other awards to be granted to him/her in the future under the Plan or any other plan;
(d) upon exercise of the Options or payment of RSUs the Participant will arrange for payment to the Company an estimated amount to cover employee payroll taxes resulting from the exercise or such payment and/or, to the extent necessary, any balance may be withheld from the Participant’s wages;
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(e) benefits received under the Plan will be excluded from the calculation of termination indemnities or other severance payments;
(f) in the event of termination of the Participant’s employment, a severance or notice period to which the Participant may be entitled under local law and which follows the date of termination specified in a notice of termination or other document evidencing the termination of the Participant’s employment will not be treated as active employment for purposes of this Agreement and, as a result, vesting of unvested Options or RSUs will not be extended by any such period;
(g) for purposes of this Agreement, a Participant will be considered actively employed during (i) the first six months of an authorized leave of absence approved by the Company, in its sole discretion, or (ii) other statutory leaves that have requirements in excess of six months;
(h) the Participant will seek all necessary approval under, make all required notifications under and comply with all laws, rules and regulations applicable to the ownership of stock options and stock and the exercise of stock options, including, without limitation, currency and exchange laws, rules and regulations;
(i) this Agreement will be interpreted and applied so that the Options and RSUs, in all cases, will not be subject to Code Section 409A. Notwithstanding any other provision of this Agreement, this Agreement will be modified to the extent the Committee reasonably determines is necessary or appropriate for such Options or RSUs to comply with Code Section 409A; and
(j) the non-disclosure provisions set forth in Paragraph C.2. supersede and replace in their entirety the non-disclosure provisions set forth in the Plan as in effect on the date hereof, in any agreement evidencing an Award made under the Plan and in any other Awards made under the Plan.
12. Right of Set-Off. The Participant agrees, in the event that the Company in its reasonable judgment determines that the Participant owes the Company any amount due to any loan, note, obligation or indebtedness, including but not limited to amounts owed to the Company pursuant to the Company’s tax equalization program or the Company’s policies with respect to travel and business expenses, and if the Participant has not satisfied such obligation(s), then the Company may instruct the plan administrator to withhold and/or sell shares of PepsiCo Common Stock acquired by the Participant upon exercise of his or her Options or settlement of the RSUs (to the extent such Options or RSUs are not subject to Code Section 409A), or the Company may deduct funds equal to the amount of such obligation from other funds due to the Participant from the Company to the maximum extent permitted by Code Section 409A.
13. Electronic Delivery and Acceptance. The Participant hereby consents and agrees to electronic delivery of any Plan documents, proxy materials, annual reports and other related documents. The Participant hereby consents to any and all procedures that the Company has established or may establish for an electronic signature system for delivery and acceptance of Plan documents (including documents relating to any programs adopted under the Plan), and agrees that his or her electronic signature is the same as, and shall have the same force and effect as, his or her manual signature. Participant consents and agrees that any such procedures and delivery may be effected by a third party engaged by the Company to provide administrative services related to the Plan, including any program adopted under the Plan.
14. Data Privacy. Participant hereby acknowledges and consents to the collection, use, processing and/or transfer of Personal Data as defined and described in this Paragraph D.14. Participant is not obliged to consent, however a failure to provide consent, or the withdrawal of consent at any time, may impact Participant’s ability to participate in the Plan. The Company and/or Participant’s employer collects and maintains certain personal information about Participant that may include name, home address and telephone number, email address, date of birth, social security number or other government or employer-issued identification number, salary grade, hire data, salary, citizenship, job title, any shares of PepsiCo Common Stock, or details of all options, restricted stock units, performance stock units or any other entitlement to shares of PepsiCo Common Stock awarded, cancelled, purchased, vested, or unvested (collectively “Personal Data”). The Company and the Participant’s employer will transfer Personal Data internally as necessary for the purpose of implementation, administration and management of the Participant’s participation in the Plan and the Company and/or the Participant’s employer may further
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transfer Personal Data to any third parties assisting the Company in the implementation, administration and management of the Plan. These recipients may be located in the European Economic Area or UK, or elsewhere throughout the world, such as the United States. The Participant hereby authorizes (where required under applicable law) the recipients to receive, possess, use, retain and transfer Personal Data, in electronic or other form, as may be required for the administration of the Plan and/or the subsequent holding of any shares of PepsiCo Common Stock on the Participant’s behalf, to a broker or other third party with whom the Participant may elect to deposit any shares of PepsiCo Common Stock acquired pursuant to the Plan. Third parties retained by the Company may use the Personal Data as authorized by the Company to provide the requested services. Third parties may be located throughout the world, including but not limited to the United States. Third parties often maintain their own published policies that describe their privacy and security practices. The Company is not responsible for the privacy or security practices of any third parties. Participant may access, review or amend certain Personal Data by contacting the Company and/or the Plan’s service provider. The Participant may, at any time, exercise the Participant's rights provided under applicable personal data protection laws, which may include the right to (i) obtain confirmation as to the existence of Personal Data, (ii) verify the content, origin and accuracy of Personal Data, (iii) request the integration, update, amendment, deletion or blockage (for breach of applicable laws) of Personal Data, (iv) oppose, for legal reasons, the collection, processing or transfer of the Personal Data which is not necessary or required for the implementation, administration and/or operation of the Plan and the Participant's participation in the Plan, and (v) withdraw the Participant's consent to the collection, processing or transfer of Personal Data as provided hereunder (in which case, the stock options, restricted stock units, performance stock units or any other entitlement to shares of PepsiCo Common Stock awarded will become null and void). The Participant may seek to exercise these rights by contacting the Participant's Human Resources manager or the Company's Human Resources Department, who may direct the matter to the applicable Company privacy official. Finally, the Participant understands that the Company may rely on a different legal basis for the processing and/or transfer of Personal Data in the future and/or request the Participant to provide another data privacy consent. If applicable and upon request of the Company, the Participant agrees to provide an executed acknowledgment or data privacy consent (or any other acknowledgments, agreements or consents) to the Company or the employer that the Company and/or the employer may deem necessary to obtain under the data privacy laws in the Participant's country, either now or in the future. The Participant understands that the Participant will not be able to participate in the Plan if the Participant fails to execute any such acknowledgment or consent requested by the Company and/or the employer.
15. Stock Ownership/ Exercise & Hold Guidelines. The Participant agrees as a condition of this grant that, in the event that the Participant is or becomes subject to the Company’s Stock Ownership or Exercise & Hold Guidelines, the Participant shall not sell any shares of PepsiCo Common Stock obtained upon exercise of the Options or settlement of the RSUs unless such sale complies with the Stock Ownership and Exercise & Hold Guidelines as in effect from time to time.
16. Governing Law. Notwithstanding the provisions of Paragraphs D.10 and D.11, this Agreement shall be governed, construed and enforced in accordance with the laws of the State of New York, without giving effect to conflict of law rules or principles.
17. Choice of Venue; Attorneys’ Fees. Notwithstanding the provisions of Paragraphs D.10 and D.11, any action or proceeding seeking to enforce any provision of or based on any right arising out of this Agreement may be brought against the Participant or the Company only in the courts of the State of New York or, if it has or can acquire jurisdiction, in the United States District Court for the Southern District of New York, and the Participant and the Company consents to the jurisdiction of such courts (and of the appropriate appellate courts) in any such action or proceeding and waives any objection to venue laid therein. In the event that a Participant or the Company brings an action to enforce the terms of the Plan or any Award Agreement and the Company prevails, the Participant shall pay all costs and expenses incurred by the Company in connection with that action, including reasonable attorneys’ fees, and all further costs and fees, including reasonable attorneys’ fees incurred by the Company in connection with the collection.
18. Addendum to Agreement. Notwithstanding any provisions of this Agreement to the contrary, the Options and/or RSUs shall be subject to such special terms and conditions for the Participant's country of residence (and country of employment, if different), as are set forth in the addendum to this Agreement (the “Addendum”). Further, if the Participant transfers residency and/or employment to another country,
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any special terms and conditions for such country will apply to the Options and/or RSUs to the extent the Committee or its duly authorized delegate determines, in its sole discretion, that the application of such terms and conditions is necessary or advisable in order to comply with local laws, rules or regulations or to facilitate the operation and administration of the Options and/or RSUs and the Plan (or the Committee or its duly authorized delegate may establish alternative terms and conditions as may be necessary or advisable to accommodate the Participant's transfer). In all circumstances, the Addendum shall constitute part of this Agreement.
19. Entire Agreement. This Agreement contains all the understanding and agreements between the Participant and the Company regarding the subject matter hereof.
PepsiCo, Inc.
/s/ Duncan Micallef
Duncan Micallef
Senior Vice President, Total Rewards
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Exhibit 10.24
2023 PEPSICO ANNUAL LONG-TERM INCENTIVE AWARD
STOCK OPTIONS / RESTRICTED STOCK UNITS
TERMS AND CONDITIONS
These Terms and Conditions (including the country-specific terms set forth in the attached Addendum), along with the 2023 PepsiCo Annual Long-Term Incentive Award Summary provided to the Participant (the “Award Summary”), and signed by the individual named on the Award Summary (the “Participant”), shall constitute an agreement (this “Agreement”) effective as of the “grant date” indicated on the Award Summary (the “Grant Date”), by and between PepsiCo, Inc., a North Carolina corporation having its principal office at 700 Anderson Hill Road, Purchase, New York 10577 (“PepsiCo,” and with its divisions and direct and indirect subsidiaries, the “Company”), and the Participant.
W I T N E S S E T H:
WHEREAS, the Board of Directors and shareholders of PepsiCo have approved the PepsiCo, Inc. Long-Term Incentive Plan (the “Plan”), for the purposes and subject to the provisions set forth in the Plan; and
WHEREAS, pursuant to the authority granted to it in the Plan, the Compensation Committee of the Board of Directors of PepsiCo (the “Committee”) or its delegate authorized the grant to the Participant of the PepsiCo stock options (“Options”) and/or restricted stock units (“RSUs”) set forth on the Award Summary on or prior to the Grant Date; and
WHEREAS, awards granted under the Plan are to be evidenced by an Agreement in such form and containing such terms and conditions as the Committee shall determine.
NOW, THEREFORE, it is mutually agreed as follows:
A. Terms and Conditions Applicable to Stock Options. These terms and conditions shall apply with respect to the stock options, if any, granted to the Participant as indicated on the Award Summary.
1. Grant. In consideration of the Participant remaining in the employ of the Company and agreeing to be bound by the covenants of Paragraph C, PepsiCo hereby grants to the Participant, on the terms and conditions set forth herein, the right and option to purchase the number of shares of PepsiCo Common Stock, par value $.0167 per share, as indicated on the Award Summary, at the “option exercise price” indicated on the Award Summary (the “Option Exercise Price”), which was the Fair Market Value (as defined below) of PepsiCo Common Stock on the Grant Date, rounded up to the nearest quarter. The right to purchase each such share is referred to herein as an “Option.” All Options granted hereunder shall be “Non-Qualified Stock Options” as defined in the Plan.
2. Vesting and Exercisability. Subject to the terms and conditions set forth herein, the Options shall become fully vested on the “vesting date” as indicated on the Award Summary (the “Stock Option Vesting Date”) and shall be exercisable from the Stock Option Vesting Date through the “expiration date” as indicated on the Award Summary (the “Expiration Date”). Options may vest only while the Participant is actively employed by the Company. Once vested and exercisable, and until terminated or expired, all or any portion of the Options may be exercised from time to time and at any time under procedures that the Committee or its delegate shall establish from time to time, including, without limitation, procedures regarding the frequency of exercise and the minimum number of Options which may be exercised at any time.
3. Exercise Procedure. Subject to terms and conditions set forth herein, Options may be exercised by giving written notice of exercise to PepsiCo in the manner specified from time to time by PepsiCo. The aggregate Option Exercise Price for the shares being purchased, together with any amount which the Company may be required to withhold upon such exercise in respect of applicable foreign, federal (including FICA), state and local taxes, must be paid in full at the time of issuance of such shares. In the event the Participant is at the time of exercise subject to Section 16 of the Securities Exchange Act of 1934, payment of the exercise price and tax withholding shall be accomplished by net share settlement with the Company in accordance with procedures approved by the Company in its discretion.
4. Effect of Termination of Employment, Retirement, Death, and Total Disability.
(a) Termination of Employment. Options may vest only while the Participant is actively employed by the Company. Thus, no vesting shall occur following the termination of the Participant’s active employment with the Company, and, subject to subparagraphs 4(b) and 4(c), all unvested Options shall automatically be forfeited and cancelled upon the date that the Participant’s active employment with the Company terminates. Only vested Options may be exercised. Subject to subparagraphs 4(b) and 4(c), vested Options shall be exercisable until, and shall automatically be forfeited and cancelled upon, the earlier of the Expiration Date and the date that is the last trading day on the principal exchange on which PepsiCo Common Stock is traded during the 90-calendar day period after the date the Participant’s employment with the Company terminates. It is intended that an authorized severance leave of absence may extend employment for purposes of determining the period when vested Options may be exercised. However, an authorized severance leave of absence will not be treated as active employment, and, as a result, vesting of unvested Options will not be extended by any such period.
(b) Retirement Prior to Age 62. If the Participant’s employment terminates prior to the Stock Option Vesting Date by reason of the Participant’s Retirement (as defined below) prior to attaining at least age 62, then: (i) a portion of the Options shall vest on the Participant’s last day of active employment with the Company, with such portion determined in proportion to the Participant’s active service (measured in calendar days) during the period commencing on the Grant Date and ending on the Stock Option Vesting Date; (ii) such Options shall continue to become exercisable in accordance with Paragraph A.2 of this Agreement, with no change in the earliest date of exercise as a result of the vesting provided by this subparagraph 4(b); and (iii) the Options may be exercised by the Participant prior to the Expiration Date in accordance with this Agreement.
(c) Retirement on or After Age 62, Death or Total Disability. If the Participant’s employment terminates by reason of the Participant’s Retirement after attaining at least age 62, death or Total Disability (as defined below), then: (i) the Options shall become fully vested on the Participant’s last day of active employment with the Company (which, for purposes of Total Disability, means the effective date of Total Disability); (ii) the Options shall continue to become exercisable in accordance with Paragraph A.2 of this Agreement, with no change in the earliest date of exercise as a result of the vesting provided by this subparagraph 4(c); and (iii) the Options may be exercised by the Participant’s legal representative (or any person to whom the Options may be transferred by will or the applicable laws of descent and distribution), in the event of death, or the Participant, in the event of Retirement or Total Disability, prior to the Expiration Date in accordance with this Agreement.
(d) Transfers to a Related Entity. In the event the Participant transfers to a Related Entity (as defined below) and such transfer is arranged and approved by PepsiCo, the Options shall continue to vest and to become exercisable after such transfer and shall remain outstanding and be exercisable in accordance with this Agreement by treating the Participant’s employment with the Related Entity as employment with the Company for purposes of this Agreement.
5. Buy-Out of Option Gains. The Committee shall have the right at any time, in its sole discretion and without the consent of the Participant, to cancel any Option and to cause PepsiCo to pay to the Participant the excess, if any, of the Fair Market Value of the shares of PepsiCo Common Stock covered by such Option over the Option Exercise Price of such Option as of the date the Committee provides written notice (the “Buy-Out Notice”) of its intention to exercise such right. Payments of such buy-out amounts pursuant to this provision shall be effected by PepsiCo as promptly as possible after the date of the Buy-Out Notice and shall be made in shares of PepsiCo Common Stock. The number of shares shall be the greatest number of whole shares determined by dividing the amount of the payment to be made by the Fair Market Value of a share of PepsiCo Common Stock at the date of the Buy-Out Notice. Payments of any such buy-out amounts shall be made net of the minimum applicable foreign, federal (including FICA), state and local withholding taxes, if any.
6. No Rights as Shareholder. The Participant shall have no rights as a holder of PepsiCo Common Stock with respect to the Options granted hereunder unless and until such Options are exercised and the shares of PepsiCo Common Stock have been registered in the Participant’s name as owner.
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B. Terms and Conditions Applicable to RSUs . These terms and conditions shall apply with respect to the restricted stock units, if any, granted to the Participant as indicated on the Award Summary.
1. Grant. In consideration of the Participant remaining in the employ of the Company and agreeing to be bound by the covenants of Paragraph C, PepsiCo hereby grants to the Participant, on the terms and conditions set forth herein, the number of RSUs, as indicated on the Award Summary (the “RSUs”).
2. Vesting. Subject to the terms and conditions set forth herein and subparagraphs 2(a) and 2(b) below, the RSUs shall become fully vested on the “vesting date” as indicated on the Award Summary (the “RSU Vesting Date”) and shall be paid as soon as practicable after that date. RSUs may vest only while the Participant is actively employed by the Company. The RSUs payable pursuant to the preceding sentence shall be reduced by any RSUs that are paid pursuant to subparagraphs 2(a) and 2(b) below.
(a) Eligibility for Retirement Prior to Age 62. A Participant shall be vested in 33% of his or her RSUs on the first March 1 that follows the Grant Date if on such March 1 the Participant: (i) is eligible for Retirement, (ii) is not yet age 62, and (iii) has been actively employed by the Company continuously since the Grant Date. This vested portion shall be paid as soon as practicable after this March 1 (but not later than March 15). A Participant shall be vested in 66% of his or her RSUs on the second March 1 that follows the Grant Date if on such March 1 the conditions in (i), (ii) and (iii) of this subparagraph (a) are satisfied. This vested portion shall be paid as soon as practicable after this second March 1 (but not later than March 15), net of any RSUs previously paid out. A Participant shall be vested in 100% of his or her RSUs on the third March 1 that follows the Grant Date if on such March 1 the conditions in (i), (ii) and (iii) of this subparagraph (a) are satisfied. This vested portion shall be paid as soon as practicable after this third March 1 (but not later than March 15), net of any RSUs previously paid out.
(b) Eligibility for Retirement on or After Age 62. A Participant shall be fully vested in his or her RSUs on the first March 1 that follows the Grant Date if on such March 1 the Participant: (i) is eligible for Retirement, (ii) is at least age 62, and (iii) has been actively employed by the Company continuously since the Grant Date. The Participant’s RSUs shall be paid as soon as practicable after this March 1 (but not later than March 15). A Participant shall be fully vested in his or her RSUs on the second March 1 that follows the Grant Date if on such March 1 the conditions in (i), (ii) and (iii) of this subparagraph (b) are satisfied. The Participant’s RSUs shall be paid as soon as practicable after this second March 1 (but not later than March 15), net of any RSUs previously paid out. A Participant shall be fully vested in his or her RSUs on the third March 1 that follows the Grant Date if on such March 1 the conditions in (i), (ii) and (iii) of this subparagraph (b) are satisfied. The Participant’s RSUs shall be paid as soon as practicable after this third March 1 (but not later than March 15), net of any RSUs previously paid out.
3. Payment. RSUs that vest and become payable shall be settled in shares of PepsiCo Common Stock with the Participant receiving one share of PepsiCo Common Stock for each vested RSU. No fractional shares shall be delivered under this Agreement, and so any fractional share that may be payable shall be rounded to the nearest whole share. Any amount that the Company may be required to withhold upon the settlement of RSUs and/or the payment of dividend equivalents (see Paragraph B.5 below) in respect of applicable foreign, federal (including FICA), state and local taxes, must be paid in full at the time of the issuance of shares or payment of cash. Unless the Participant makes other arrangements to satisfy this withholding obligation in accordance with procedures approved by the Company in its discretion, the Company shall withhold shares to satisfy the required withholding obligation related to the settlement of RSUs. In the event the Participant is subject to Section 16 of the Securities Exchange Act of 1934 at the time of payment, payment tax withholding shall be accomplished by net share settlement with the Company in accordance with procedures approved by the Company in its discretion.
4. Effect of Termination of Employment, Retirement, Death and Total Disability.
(a) Termination of Employment. RSUs may vest and become payable only while the Participant is actively employed by the Company. Thus, vesting ceases upon the termination of the Participant’s active employment with the Company. Subject to subparagraphs 4(b) and 4(c), all unvested RSUs shall automatically be forfeited and cancelled upon the date that the Participant’s active employment with the
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Company terminates. An authorized severance leave of absence will not be treated as active employment, and, as a result, the vesting of RSUs will not be extended by any such period.
(b) Retirement Prior to Age 62. If the Participant’s employment terminates prior to the RSU Vesting Date by reason of the Participant’s Retirement prior to attaining at least age 62, then a whole number of the RSUs granted hereunder shall vest on the Participant’s last day of active employment with the Company, with such number determined in proportion to the Participant’s active service (measured in calendar days) during the period commencing on the Grant Date and ending on the RSU Vesting Date (the “RSU Vesting Period”), and shall be paid as soon as practicable after that date, net of any RSUs previously paid out.
(c) Retirement on or After Age 62, Death or Total Disability. If the Participant’s employment terminates by reason of the Participant’s Retirement after attaining at least age 62, death or Total Disability, then the RSUs shall become fully vested on the Participant’s last day of active employment with the Company (which, for purposes of Total Disability, means the effective date of Total Disability) and will be paid as soon as practicable after that date, net of any RSUs previously paid out.
(d) Transfers to a Related Entity. In the event the Participant transfers to a Related Entity and such transfer is arranged and approved by PepsiCo, the RSUs shall continue to vest (and their time of payment shall be determined) after such transfer by treating the Participant’s employment with the Related Entity as employment with the Company for purposes of this Agreement.
5. Dividend Equivalents. During the RSU Vesting Period, the Participant shall accumulate dividend equivalents with respect to the RSUs, which dividend equivalents shall be paid in cash (without interest) to the Participant only if and when the applicable RSUs vest and become payable. Dividend equivalents shall equal the dividends actually paid with respect to PepsiCo Common Stock during the RSU Vesting Period while (and to the extent) the RSUs remain outstanding and unpaid. Upon the forfeiture of RSUs, any accumulated dividend equivalents attributable to such RSUs shall also be forfeited.
6. No Rights as Shareholder. The Participant shall have no rights as a holder of PepsiCo Common Stock with respect to the RSUs granted hereunder unless and until such RSUs have been settled in shares of PepsiCo Common Stock that have been registered in the Participant’s name as owner.
C. Prohibited Conduct. In consideration of the Company disclosing and providing access to Confidential Information, as more fully described in Paragraph C.2 below, after the date hereof, the grant by the Company of the Options and RSUs, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Participant and the Company, intending to be legally bound, hereby agree as follows.
1. Non-Competition and Non-Solicitation. The Participant hereby covenants and agrees that at all times during his or her employment with the Company and for a period of twelve months after the termination of the Participant’s employment with the Company for any reason whatsoever (including a termination due to the Participant’s Retirement), he or she will not, without the prior written consent of PepsiCo’s chief human resources officer or chief legal officer, either directly or indirectly, for himself/herself or on behalf of or in conjunction with any other person, partnership, corporation or other entity, engage in any activities prohibited in the following Paragraphs C.1(a) through (c):
(a) The Participant shall not, in any country in which the Company operates, accept any employment, assignment, position or responsibility, provide services in any capacity, or acquire any ownership interest that involves the Participant’s Participation (as defined below) in an entity that markets, sells, distributes or produces Covered Products (as defined below), unless such entity markets, sells, distributes or produces Covered Products without in any way competing with any business of the Company to which the Participant provided services during the last twenty-four (24) months of the Participant’s employment or to which the Participant had access to Confidential Information (as defined below);
(b) With respect to Covered Products, the Participant shall not directly or indirectly solicit for competitive business purposes any customer or Prospective Customer (as defined below) of the
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Company called on, serviced by, or contacted by the Participant in any capacity during the last six (6) months of his or her employment; or
(c) The Participant shall not in any way, directly or indirectly (including through someone else acting on the Participant’s recommendation, suggestion, identification or advice), solicit any Company employee to leave the Company’s employment or to accept any position with any other entity.
Notwithstanding anything in this Paragraph C.1, the Participant shall not be considered to be in violation of Paragraph C.1(a) solely by reason of owning, directly or indirectly, up to five percent (5%) in the aggregate of any class of securities of any publicly traded corporation engaged in the prohibited activities described in Paragraph C.1(a).
The Company advises the Participant to consult with an attorney regarding the provisions in this Paragraph C.1 before accepting this Agreement. Participant agrees and acknowledges that Participant has been given at least fourteen (14) days in which to consider these restrictions before entering into this Agreement. Part of the consideration described in the Award Summary and provided under this Agreement is in exchange for the Participant’s promises in this Paragraph C.1, Non-Competition and Non-Solicitation.
2. Non-Disclosure. In order to assist the Participant with his or her duties, the Company shall continue to provide the Participant with access to confidential and proprietary operational information and other confidential information that is either information not known by actual or potential competitors, customers and third parties of the Company or is proprietary information of the Company (“Confidential Information”). Such Confidential Information shall include all non-public information the Participant acquired as a result of his or her positions with the Company. Examples of such Confidential Information include, without limitation, non-public information about the Company’s customers, suppliers, distributors and potential acquisition targets; its business operations, structure and methods of operation; its product lines, formulae and pricing; its processes, machines and inventions; its research and know-how; its production techniques; its financial data; its advertising and promotional ideas and strategy; information maintained in its computer systems; devices, processes, compilations of information and records; and its plans and strategies. The Participant agrees that such Confidential Information remains confidential even if committed to the Participant’s memory. The Participant agrees, during the term of his or her employment and at all times thereafter, not to use, divulge, or furnish or make accessible to any third party, company, corporation or other organization (including but not limited to, customers or competitors of the Company), without the Company’s prior written consent, any Confidential Information of the Company, except as necessary in his or her position with the Company or as permitted below with respect to Protected Activity.
Notwithstanding the foregoing, nothing in this Agreement, the Plan, any other Award made under the Plan or in any other confidentiality provision to which the Participant may be subject as a result of the Participant’s employment with the Company shall: (1) limit the Participant’s rights to make truthful statements or disclosures about any facts and circumstances related to any claim or allegation of unlawful discrimination by the Company and, for Participants located in California, shall not prevent such California Participant from discussing or disclosing information about unlawful acts in the workplace, such as harassment or discrimination or any other conduct that the Participant has reason to believe is unlawful or violates public policy; (2) bar the Participant from giving testimony pursuant to a compulsory legal process or as otherwise required by law; or (3) prohibit the Participant from, without notice to the Company, filing a complaint or charge with government agencies (including, without limitation, the Equal Employment Opportunity Commission and the Securities and Exchange Commission), communicating with government agencies, providing information to government agencies, participating in government agency investigations, or testifying in government agency proceedings concerning any possible legal violations or from receiving a monetary award for information provided to a government agency (collectively, “Protected Activity”). The Company nonetheless asserts and does not waive its attorney-client privilege over any information appropriately protected by the privilege. Further, notwithstanding any confidentiality provision to which the Participant may be subject, the Participant is hereby advised as follows pursuant to the Defend Trade Secrets Act: “An individual shall not be held criminally or civilly liable under any Federal or State trade secret law for the disclosure of a trade secret that (A) is made (i) in confidence to a Federal, State, or local government official, either directly or
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indirectly, or to an attorney; and (ii) solely for the purpose of reporting or investigating a suspected violation of law; or (B) is made in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal. An individual who files a lawsuit for retaliation by an employer for reporting a suspected violation of law may disclose the trade secret to the attorney of the individual and use the trade secret information in the court proceeding, if the individual (A) files any document containing the trade secret under seal; and (B) does not disclose the trade secret, except pursuant to court order.”
3. Return of Confidential Information and Company Property. The Participant agrees that whenever the Participant’s employment with the Company ends for any reason, (a) all documents containing or referring to the Company’s Confidential Information as may be in the Participant’s possession, or over which the Participant may have control, and all other property of the Company provided to the Participant by the Company during the course of the Participant’s employment with the Company will be returned by the Participant to the Company immediately, with no request being required; and (b) all Company computer and computer-related equipment and software, and all Company property, files, records, documents, drawings, specifications, lists, equipment, and similar items relating to the business of the Company, whether prepared by the Participant or otherwise, coming into the Participant’s possession or control during the course of his or her employment shall remain the exclusive property of the Company, and shall be delivered by the Participant to the Company immediately, with no request being required.
4. Misconduct. During the term of his or her employment with the Company, the Participant shall not engage in any of the following acts that are considered to be contrary to the Company’s best interests: (a) breaching any contract with or violating any obligation to the Company, including, without limitation, the Company’s Code of Conduct, Insider Trading Policy or any other written policies of the Company, (b) unlawfully trading in the securities of PepsiCo or of any other company based on information gained as a result of his or her employment with the Company, (c) committing acts involving gross misconduct in the performance of employment duties, dishonesty, fraud, illegality, or moral turpitude, or that cause or contribute to the need for an accounting adjustment to PepsiCo’s financial results, or (d) in the judgment of the Company, engaging in conduct that may be detrimental to or reflect unfavorably upon the Company or its brands, services, or products; provided, however that nothing in this section is intended to bar the Participant from engaging in Protected Activity.
5. Reasonableness of Provisions. The Participant agrees that: (a) the terms and provisions of this Agreement are reasonable and constitute an otherwise enforceable agreement to which the terms and provisions of this Paragraph C are ancillary or a part of; (b) the consideration provided by the Company under this Agreement is not illusory; (c) the restrictions contained in this Paragraph C are necessary and reasonable for the protection of the legitimate business interests and goodwill of the Company; and (d) the consideration given by the Company under this Agreement, including, without limitation, the provision by the Company of Confidential Information to the Participant, gives rise to the Company’s interest in the covenants set forth in this Paragraph C.
6. Repayment and Forfeiture. The Participant specifically recognizes and affirms that each of the covenants contained in Paragraphs C.1 throughC.4 of this Agreement is a material and important term of this Agreement that has induced the Company to provide for the award of the Options and/or RSUs granted hereunder, the disclosure of Confidential Information referenced herein, and the other promises made by the Company herein. The Participant further agrees that in the event that (i) the Company determines that the Participant has breached any term of Paragraphs C.1 through C.4 or (ii) all or any part of Paragraph C is held or found invalid or unenforceable for any reason whatsoever by a court of competent jurisdiction in an action between the Participant and the Company, in addition to any other remedies at law or in equity the Company may have available to it, the Company may in its sole discretion:
(a) cancel any unexercised Options or unpaid RSUs granted hereunder;
(b) require the Participant to pay to the Company all gains realized from the exercise of any Options granted hereunder; and/or
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(c) require the Participant to pay to the Company the value (determined as of the date paid) of any RSUs granted hereunder that have been paid out.
In addition to the provisions of this Paragraph C.6, the Participant agrees that he or she will be bound by the terms of any Company compensation clawback policy applicable to the Participant that the Company may adopt from time to time.
7. Equitable Relief. In the event the Company determines that the Participant has breached or attempted or threatened to breach any term of Paragraph C, in addition to any other remedies at law or in equity the Company may have available to it, it is agreed that the Company shall be entitled, upon application to any court of proper jurisdiction, to a temporary restraining order or preliminary injunction (without the necessity of (a) proving irreparable harm, (b) establishing that monetary damages are inadequate or (c) posting any bond with respect thereto) against the Participant prohibiting such breach or attempted or threatened breach by proving only the existence of such breach or attempted or threatened breach.
8. Extension of Restrictive Period. The Participant agrees that the period during which the covenants contained in this Paragraph C shall be effective shall be computed by excluding from such computation any time during which the Participant is in violation of any provision of Paragraph C.
9. Acknowledgments. The Company and the Participant agree that it was their intent to enter into a valid and enforceable agreement. The Participant and the Company thereby acknowledge the reasonableness of the restrictions set forth in Paragraph C, including the reasonableness of the geographic area, duration as to time and scope of activity restrained. The Participant further acknowledges that his or her skills are such that he or she can be gainfully employed in noncompetitive employment and that the agreement not to compete will not prevent him or her from earning a living. The Participant agrees that if any covenant contained in Paragraph C of this Agreement is found by a court of competent jurisdiction to contain limitations as to time, geographical area, or scope of activity that are not reasonable and impose a greater restraint than is necessary to protect the goodwill or other business interest of the Company, then the court shall reform the covenant to the extent necessary to cause the limitations contained in the covenant as to time, geographical area, and scope of activity to be restrained to be reasonable and to impose a restraint that is not greater than necessary to protect the goodwill and other business interests of the Company and to enforce the covenants as reformed.
10. Provisions Independent. The covenants on the part of the Participant in this Paragraph C shall be construed as an agreement independent of any other agreement, including any employee benefit agreement, and independent of any other provision of this Agreement, and the existence of any claim or cause of action of the Participant against the Company, whether predicated upon this Agreement or otherwise, shall not constitute a defense to the enforcement by the Company of such covenants.
11. Notification of Subsequent Employer. The Participant agrees that the Company may notify any person or entity employing the Participant or evidencing an intention of employing the Participant of the existence and provisions of this Agreement.
12. Transfers to a Related Entity. In the event the Participant transfers to a Related Entity as a result of actions by PepsiCo, any reference to “Company” in this Paragraph C shall be deemed to refer to such Related Entity in addition to the Company.
D. Additional Terms and Conditions.
1. Adjustment for Change in PepsiCo Common Stock. In the event of any change in the outstanding shares of PepsiCo Common Stock by reason of any stock split, stock dividend, recapitalization, reorganization, merger, consolidation, combination or exchange of shares, spin-off or other similar corporate change, (a) the number and type of shares that the Participant may purchase pursuant to the Options and the Option Exercise Price at which the Participant may purchase such shares shall be adjusted, and (b) the number and type of shares to which the RSUs held by the Participant relate shall be
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adjusted, in the case of (a) and (b), as may be, and to such extent (if any), determined to be appropriate and equitable by the Committee.
2. Nontransferability. Unless the Committee specifically determines otherwise: (a) the Options and RSUs are personal to the Participant and, with respect to Options, during the Participant’s lifetime, such Options may be exercised only by the Participant, and (b) the Options and RSUs shall not be transferable or assignable, other than in the case of the Participant’s death by will or the laws of descent and distribution, and any such purported transfer or assignment shall be null and void.
3. Definitions. As used in this Agreement, the following terms shall have the meanings set forth below:
(a) “Covered Products” means any product that falls into one or more of the following categories, so long as the Company is producing, marketing, selling or licensing such product anywhere in the world: in-home and commercial beverage systems, carbon dioxide gas cylinders, carbon dioxide gas refills, consumables, and ready-to-drink beverages, including without limitation carbonated soft drinks, tea, water, juices, juice drinks, juice products, sports drinks, coffee drinks, alcoholic beverages, and energy drinks; dairy products; snacks, including salty snacks, fruit and vegetable snacks, dips and spreads, sweet snacks, meat snacks, granola, nutrition and cereal bars, and cookies; hot cereals and ready-to-eat cereals; pancake mixes and pancake syrup; grain-based food products; pasta products; sports performance nutrition products, including without limitation, energy, protein, carbohydrate, nutrition and meal replacement chews, bars, powders, gels, drinks or drink mixes; or any product or service that the Participant had reason to know was under development by the Company during the Participant’s employment with the Company.
(b) “Fair Market Value” of a share of PepsiCo Common Stock on any date shall mean an amount equal to the average of the high and low market prices at which a share of PepsiCo Common Stock shall have been sold on such date, or the immediately preceding trading day if such date was not a trading day, as reported by Bloomberg, L.P., or any successor thereto or any other financial reporting service selected by PepsiCo in good faith.
(c) “Participation” shall be construed broadly to include, without limitation: (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.
(d) “Prospective Customer” shall mean any individual or entity of which the Participant has gained knowledge as a result of the Participant’s employment with the Company and with which the Participant dealt with or had contact with during the six (6) months preceding his or her termination of employment with the Company.
(e) “Related Entity” shall mean any entity (i) as to which PepsiCo directly or indirectly owns 20% or more, but less than a majority, of the entity’s voting securities, general partnership interests, or other voting or management rights at the relevant time and (ii) which the Committee or its delegate deems in its sole discretion to be a related entity at the relevant time.
(f) “Retirement” shall mean (i) early, normal or late retirement as used in the U.S. pension plan of the Company in which the Participant participates (if any) and for which the Participant is eligible pursuant to the terms of such plan or (ii) termination of employment after attaining at least age 55 and completing at least 10 years of service with the Company (or, if earlier, after attaining at least age 65 and completing at least five years of service with the Company), with the number of years of service completed by a Participant subject to clause (ii) to be calculated in accordance with administrative procedures established from time to time under the Plan.
(g) “Total Disability” shall mean being considered totally disabled under the PepsiCo Long-Term Disability Program (as amended and restated from time to time), with such status having resulted in benefit payments from such plan or another Company-sponsored disability plan and 12 months having elapsed since the Participant was so considered to be disabled from the cause of the current disability. The effective date of a Participant’s Total Disability shall be the first day that all of the foregoing requirements are met.
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4. Notices. Any notice to be given to PepsiCo in connection with the terms of this Agreement shall be addressed to PepsiCo at 700 Anderson Hill Road, Purchase, New York 10577, Attention: Senior Vice President, Total Rewards, or such other address as PepsiCo may hereafter designate to the Participant. Any such notice shall be deemed to have been duly given when personally delivered, addressed as aforesaid, or when enclosed in a properly sealed envelope or wrapper, addressed as aforesaid, and deposited, postage prepaid, with the federal postal service.
5. Binding Effect. This Agreement shall be binding upon and inure to the benefit of any assignee or successor in interest to PepsiCo, whether by merger, consolidation or the sale of all or substantially all of PepsiCo’s assets. PepsiCo will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of PepsiCo expressly to assume and agree to perform this Agreement in the same manner and to the same extent that PepsiCo would be required to perform it if no such succession had taken place. This Agreement shall be binding upon and inure to the benefit of the Participant or his or her legal representative and any person to whom the Options and RSUs may be transferred by will or the applicable laws of descent and distribution.
6. No Contract of Employment; Agreement’s Survival. This Agreement is not a contract of employment. This Agreement does not impose on the Company any obligation to retain the Participant in its employ and shall not interfere with the ability of the Company to terminate the Participant’s employment relationship at any time. This Agreement shall survive the termination of the Participant’s employment for any reason. If an entity ceases to be a majority-owned subsidiary of PepsiCo for purposes of Rule 12b-2 of the Exchange Act or a Related Entity, such cessation shall, for purposes of this Agreement, be deemed to be a termination of employment with the Company with respect to any Participant employed by such entity, unless the Committee or its delegate determines otherwise in its sole discretion.
7. Registration, Listing and Qualification of Shares of PepsiCo Common Stock. The Committee may require that the Participant make such representations and agreements and furnish such information as the Committee deems appropriate to assure compliance with or exemption from the requirements of any securities exchange, any foreign, federal, state or local law, any governmental regulatory body, or any other applicable legal requirement, and PepsiCo Common Stock shall not be issued unless and until the Participant makes such representations and agreements and furnishes such information as the Committee deems appropriate.
8. Amendment; Waiver. The terms and conditions of this Agreement may be amended in writing by the chief human resources officer or chief legal officer of PepsiCo (or either of their delegates); provided, however, that (i) no such amendment shall adversely affect the awards granted hereunder without the Participant’s written consent (except to the extent the Committee reasonably determines that such amendment is necessary or appropriate to comply with applicable law, including the provisions of Internal Revenue Code of 1986, as amended (the “Code”) Section 409A and the regulations thereunder pertaining to the deferral of compensation, or the rules and regulations of any stock exchange on which PepsiCo Common Stock is listed or quoted); and (ii) the amendment must be permitted under the Plan. The Company’s failure to insist upon strict compliance with any provision of this Agreement or failure to exercise, or any delay in exercising, any right, power or remedy under this Agreement shall not be deemed to be a waiver of such provision or any such right, power or remedy which the Board (as defined in the Plan), the Committee or the Company has under this Agreement.
9. Severability or Reform by Court. In the event that any provision of this Agreement is deemed by a court to be broader than permitted by applicable law, then such provision shall be reformed (or otherwise revised or narrowed) so that it is enforceable to the fullest extent permitted by applicable law. If any provision of this Agreement shall be declared by a court to be invalid or unenforceable to any extent, the validity or enforceability of the remaining provisions of this Agreement shall not be affected.
10. Plan Terms. The Options and RSUs and the terms and conditions set forth herein are subject in all respects to the terms and conditions of the Plan and any guidelines, policies or regulations which govern administration of the Plan. The Committee reserves its rights to amend or terminate the Plan at any time without the consent of the Participant; provided, however, that Options and RSUs outstanding under the Plan at the time of such action shall not, without the Participant’s written consent, be adversely affected thereby (except to the extent the Committee reasonably determines that such amendment or
9
termination is necessary or appropriate to comply with applicable law, including the provisions of Code Section 409A and the regulations thereunder pertaining to the deferral of compensation, or the rules and regulations of any stock exchange on which PepsiCo Common Stock is listed or quoted). The Committee shall have full power and authority to administer and interpret the Plan and to adopt or establish such rules, regulations, agreements, guidelines, procedures and instruments that are not contrary to the terms of the Plan and that, in its opinion, may be necessary or advisable for the administration and operation of the Plan. All interpretations or determinations of the Committee or its delegate shall be final, binding and conclusive upon the Participant (and his or her legal representatives and any recipient of a transfer of the Options or RSUs permitted by this Agreement) on any question arising hereunder or under the Plan or other guidelines, policies or regulations which govern administration of the Plan.
11. Participant Acknowledgements. By entering into this Agreement, the Participant acknowledges and agrees that:
(a) the Option and/or RSU grant will be exclusively governed by the terms of the Plan, including the right reserved by the Company to amend or cancel the Plan at any time without the Company incurring liability to the Participant (except for Options and RSUs already granted under the Plan);
(b) the Participant has been provided a copy of PepsiCo’s Prospectus relating to the Plan, the Options and RSUs (and the shares covered thereby);
(c) the Options and RSUs are not a constituent part of the Participant’s salary and that the Participant is not entitled, under the terms and conditions of his or her employment, or by accepting or being awarded the Options and/or RSUs pursuant to this Agreement, to require options, restricted stock units, performance stock units or other awards to be granted to him/her in the future under the Plan or any other plan;
(d) upon exercise of the Options or payment of RSUs the Participant will arrange for payment to the Company an estimated amount to cover employee payroll taxes resulting from the exercise or such payment which payment shall be in the manner set forth in this Agreement and/or, to the extent necessary, any balance may be withheld from the Participant’s wages;
(e) notwithstanding any action taken by the Company, the Participant is ultimately liable for any or all income tax, social insurance, payroll tax, payment on account or other tax-related items ("Tax-Related Items") related to the Participant's participation in the Plan and legally applicable to the Participant. The Participant further acknowledges that the Company (i) makes no representations or undertakings regarding the treatment of any Tax-Related Items in connection with any aspect to the award, including, but not limited to, the grant, vesting or settlement and exercise of the award, the subsequent sale of PepsiCo Common Stock acquired pursuant to such award and the receipt of any dividends and/or dividend equivalents; and (ii) does not commit to and is under no obligation to structure the terms of any Award to reduce or eliminate Participant's liability for Tax-Related Items or achieve any particular tax result.
(f) benefits received under the Plan will be excluded from the calculation of termination indemnities or other severance payments;
(g) in the event of termination of the Participant’s employment, a severance or notice period to which the Participant may be entitled under local law and which follows the date of termination specified in a notice of termination or other document evidencing the termination of the Participant’s employment will not be treated as active employment for purposes of this Agreement and, as a result, vesting of unvested Options or RSUs will not be extended by any such period;
(h) for purposes of this Agreement, a Participant will be considered actively employed during (i) the first six months of an authorized leave of absence approved by the Company, in its sole discretion, or (ii) other statutory leaves that have requirements in excess of six months;
(i) the Participant will seek all necessary approvals under, make all required notifications under and comply with all laws, rules and regulations applicable to the ownership of stock options and stock and the exercise of stock options, including, without limitation, currency and exchange laws, rules and regulations;
10
(j) this Agreement will be interpreted and applied so that the Options and RSUs, in all cases, will not be subject to Code Section 409A. Notwithstanding any other provision of this Agreement, this Agreement will be modified to the extent the Committee reasonably determines is necessary or appropriate for such Options or RSUs to comply with Code Section 409A;
(k) the non-disclosure provisions set forth in Paragraph C.2. supersede and replace in their entirety the non-disclosure provisions set forth in the Plan as in effect on the date hereof, in any agreement evidencing an Award made under the Plan and in any other Awards made under the Plan; and
(l) the Participant will not receive any benefits under this Agreement if the Participant does not timely accept the Agreement as presented.
12. Right of Set-Off. The Participant agrees, in the event that the Company in its reasonable judgment determines that the Participant owes the Company any amount due to any loan, note, obligation or indebtedness, including but not limited to amounts owed to the Company pursuant to the Company’s tax equalization program or the Company’s policies with respect to travel and business expenses, and if the Participant has not satisfied such obligation(s), then the Company may instruct the plan administrator to withhold and/or sell shares of PepsiCo Common Stock acquired by the Participant upon exercise of his or her Options or settlement of the RSUs (to the extent such Options or RSUs are not subject to Code Section 409A), or the Company may deduct funds equal to the amount of such obligation from other funds due to the Participant from the Company to the maximum extent permitted by Code Section 409A.
13. Electronic Delivery and Acceptance. The Participant hereby consents and agrees to electronic delivery of any Plan documents, proxy materials, annual reports and other related documents. The Participant hereby consents to any and all procedures that the Company has established or may establish for an electronic signature system for delivery and acceptance of Plan documents (including documents relating to any programs adopted under the Plan), and agrees that his or her electronic signature is the same as, and shall have the same force and effect as, his or her manual signature. Participant consents and agrees that any such procedures and delivery may be effected by a third party engaged by the Company to provide administrative services related to the Plan, including any program adopted under the Plan.
14. Data Privacy. Participant hereby acknowledges and consents to the collection, use, processing and/or transfer of Personal Data as defined and described in this Paragraph D.14. Participant is not obliged to consent, however a failure to provide consent, or the withdrawal of consent at any time, may impact Participant’s ability to participate in the Plan. The Company and/or Participant’s employer collects and maintains certain personal information about Participant that may include name, home address and telephone number, email address, date of birth, social security number or other government or employer-issued identification number, salary grade, hire data, salary, citizenship, job title, any shares of PepsiCo Common Stock, or details of all options, restricted stock units, performance stock units or any other entitlement to shares of PepsiCo Common Stock awarded, cancelled, purchased, vested, or unvested (collectively “Personal Data”). The Company and the Participant’s employer will transfer Personal Data internally as necessary for the purpose of implementation, administration and management of the Participant’s participation in the Plan and the Company and/or the Participant’s employer may further transfer Personal Data to any third parties assisting the Company in the implementation, administration and management of the Plan. These recipients may be located in the European Economic Area or UK, or elsewhere throughout the world, such as the United States. The Participant hereby authorizes (where required under applicable law) the recipients to receive, possess, use, retain and transfer Personal Data, in electronic or other form, as may be required for the administration of the Plan and/or the subsequent holding of any shares of PepsiCo Common Stock on the Participant’s behalf, to a broker or other third party with whom the Participant may elect to deposit any shares of PepsiCo Common Stock acquired pursuant to the Plan. Third parties retained by the Company may use the Personal Data as authorized by the Company to provide the requested services. Third parties may be located throughout the world, including but not limited to the United States. Third parties often maintain their own published policies that describe their privacy and security practices. The Company is not responsible for the privacy or security practices of any third parties. Participant may access, review or amend certain Personal Data by contacting the Company and/or the Plan’s service provider. The Participant may, at any time, exercise
11
the Participant's rights provided under applicable personal data protection laws, which may include the right to (i) obtain confirmation as to the existence of Personal Data, (ii) verify the content, origin and accuracy of Personal Data, (iii) request the integration, update, amendment, deletion or blockage (for breach of applicable laws) of Personal Data, (iv) oppose, for legal reasons, the collection, processing or transfer of the Personal Data which is not necessary or required for the implementation, administration and/or operation of the Plan and the Participant's participation in the Plan, and (v) withdraw the Participant's consent to the collection, processing or transfer of Personal Data as provided hereunder (in which case, the stock options, restricted stock units, performance stock units or any other entitlement to shares of PepsiCo Common Stock awarded will become null and void). The Participant may seek to exercise these rights by contacting the Participant's Human Resources manager or the Company's Human Resources Department, who may direct the matter to the applicable Company privacy official. Finally, the Participant understands that the Company may rely on a different legal basis for the processing and/or transfer of Personal Data in the future and/or request the Participant to provide another data privacy consent. If applicable and upon request of the Company, the Participant agrees to provide an executed acknowledgment or data privacy consent (or any other acknowledgments, agreements or consents) to the Company or the employer that the Company and/or the employer may deem necessary to obtain under the data privacy laws in the Participant's country, either now or in the future. The Participant understands that the Participant will not be able to participate in the Plan if the Participant fails to execute any such acknowledgment or consent requested by the Company and/or the employer.
15. Stock Ownership/Exercise & Hold Guidelines. The Participant agrees as a condition of this grant that, in the event that the Participant is or becomes subject to the Company’s Stock Ownership, Exercise & Hold Guidelines or Share Retention Policy, the Participant shall not sell any shares of PepsiCo Common Stock obtained upon exercise of the Options or settlement of the RSUs unless such sale complies with the Stock Ownership, Exercise & Hold Guidelines and Share Retention Policy as in effect from time to time.
16. Governing Law. Notwithstanding the provisions of Paragraphs D.10 and D.11, this Agreement shall be governed, construed and enforced in accordance with the laws of the State of New York, without giving effect to conflict of law rules or principles. Notwithstanding the foregoing, if Participant is a resident of, or primarily works for the Company, in the State of California at the time that Participant enters into this Agreement, then this Agreement shall be governed, construed, and enforced in accordance with the laws of the State of California, without giving effect to its conflict of law rules or principles. Moreover, if Participant is a resident of, or primarily works for the Company, in the State of California at the time that Participant enters into this Agreement, then the restrictions set forth in paragraph C.1 shall not apply to Participant.
17. Choice of Venue; Attorneys’ Fees. Notwithstanding the provisions of Paragraphs D.10 and D.11, any action or proceeding seeking to enforce any provision of, or based on any right arising out of, this Agreement may be brought against the Participant or the Company only in the courts of the State of New York or, if it has or can acquire jurisdiction, in the United States District Court for the Southern District of New York, and the Participant and the Company consents to the jurisdiction of such courts (and of the appropriate appellate courts) in any such action or proceeding and waives any objection to venue laid therein. In the event that a Participant or the Company brings an action to enforce the terms of the Plan or this Agreement and the Company prevails, the Participant shall pay all costs and expenses incurred by the Company in connection with that action, including reasonable attorneys’ fees, and all further costs and fees, including reasonable attorneys’ fees incurred by the Company in connection with the collection. Notwithstanding the foregoing, if Participant is a resident of, or primarily works for the Company, in the State of California at the time that Participant enters into this Agreement, then any action or proceeding seeking to enforce any provision of, or based on any right arising out of, this Agreement may be brought against the Participant or the Company only in the courts of the State of California or, if they have or can acquire jurisdiction, in the United States District Courts located in the State of California, and the Participant and the Company consent to the jurisdiction of such courts (and of the appropriate appellate courts) in any such action or proceeding and waive any objection to venue laid therein.
18. Addendum to Agreement. Notwithstanding any provisions of this Agreement to the contrary, the Options and/or RSUs shall be subject to such special terms and conditions for the Participant's country
12
of residence (and country of employment, if different), as are set forth in the addendum to this Agreement (the “Addendum”). Further, if the Participant transfers residency and/or employment to another country, any special terms and conditions for such country will apply to the Options and/or RSUs to the extent the Committee or its duly authorized delegate determines, in its sole discretion, that the application of such terms and conditions is necessary or advisable in order to comply with local laws, rules or regulations or to facilitate the operation and administration of the Options and/or RSUs and the Plan (or the Committee or its duly authorized delegate may establish alternative terms and conditions as may be necessary or advisable to accommodate the Participant's transfer). In all circumstances, the Addendum shall constitute part of this Agreement.
19. Entire Agreement. This Agreement contains all the understanding and agreements between the Participant and the Company regarding the subject matter hereof.
PepsiCo, Inc.
/s/ Duncan Micallef
Duncan Micallef
Senior Vice President, Total Rewards
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EXHIBIT 21
PEPSICO, INC. SUBSIDIARIES (as of December 30, 2023)
| Entity Name | Jurisdiction | ||||
| Alimentos del Istmo, S.A. | Panama | ||||
| Alimentos Quaker Oats y Compania Limitada | Guatemala | ||||
| Amavale Agricola Ltda. | Brazil | ||||
| Anderson Hill Insurance Limited | Bermuda | ||||
| Asia Bottlers Limited | Hong Kong | ||||
| BAESA Capital Corporation Ltd. | Cayman Islands | ||||
| Balmoral Industries LLC | United States, Delaware | ||||
| Baltray Finance Unlimited Company | Ireland | ||||
| Bare Foods Co. | United States, Delaware | ||||
| Beaman Bottling Company | United States, Delaware | ||||
| Bebidas Sudamerica S.A. | Argentina | ||||
| Beech Limited | Cayman Islands | ||||
| Bell Taco Funding Syndicate | Australia | ||||
| Bendler Investments S.à r.l | Luxembourg | ||||
| Beverages, Foods & Service Industries, Inc. | United States, Delaware | ||||
| BFY Brands Limited | United Kingdom | ||||
| BFY Brands, LLC | United States, Delaware | ||||
| Bishkeksut, OJSC | Kyrgyzstan | ||||
| Blaue NC, S. de R.L. de C.V. | Mexico | ||||
| Blue Cloud Distribution of Alabama, Inc. | United States, Alabama | ||||
| Blue Cloud Distribution of Alaska, Inc. | United States, Alaska | ||||
| Blue Cloud Distribution of Arizona, Inc. | United States, Arizona | ||||
| Blue Cloud Distribution of Arkansas, Inc. | United States, Arkansas | ||||
| Blue Cloud Distribution of California, Inc. | United States, California | ||||
| Blue Cloud Distribution of Colorado, Inc. | United States, Colorado | ||||
| Blue Cloud Distribution of Connecticut, Inc. | United States, Connecticut | ||||
| Blue Cloud Distribution of D.C., Inc. | United States, District of Colombia | ||||
| Blue Cloud Distribution of Delaware, Inc. | United States, Delaware | ||||
| Blue Cloud Distribution of Florida, Inc. | United States, Florida | ||||
| Blue Cloud Distribution of Georgia, Inc. | United States, Georgia | ||||
| Blue Cloud Distribution of Hawaii, Inc. | United States, Hawaii | ||||
| Blue Cloud Distribution of Idaho, Inc. | United States, Idaho | ||||
| Blue Cloud Distribution of Illinois, Inc. | United States, Illinois | ||||
| Blue Cloud Distribution of Indiana, Inc. | United States, Indiana | ||||
| Blue Cloud Distribution of Iowa, Inc. | United States, Iowa | ||||
| Blue Cloud Distribution of Kansas, Inc. | United States, Kansas | ||||
| Blue Cloud Distribution of Kentucky, Inc. | United States, Kentucky | ||||
| Blue Cloud Distribution of Louisiana, Inc. | United States, Louisiana | ||||
| Blue Cloud Distribution of Maine, Inc. | United States, Maine | ||||
| Blue Cloud Distribution of Maryland, Inc. | United States, Maryland | ||||
| Blue Cloud Distribution of Massachusetts, Inc. | United States, Massachusetts | ||||
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| Blue Cloud Distribution of Michigan, Inc. | United States, Michigan | ||||
| Blue Cloud Distribution of Minnesota, Inc. | United States, Minnesota | ||||
| Blue Cloud Distribution of Mississippi, Inc. | United States, Mississippi | ||||
| Blue Cloud Distribution of Missouri, Inc. | United States, Missouri | ||||
| Blue Cloud Distribution of Montana, Inc. | United States, Montana | ||||
| Blue Cloud Distribution of Nebraska, Inc. | United States, Nebraska | ||||
| Blue Cloud Distribution of Nevada, Inc. | United States, Nevada | ||||
| Blue Cloud Distribution of New Hampshire, Inc. | United States, New Hampshire | ||||
| Blue Cloud Distribution of New Jersey, Inc. | United States, New Jersey | ||||
| Blue Cloud Distribution of New Mexico, Inc. | United States, New Mexico | ||||
| Blue Cloud Distribution of New York, Inc. | United States, New York | ||||
| Blue Cloud Distribution of North Carolina, Inc. | United States, North Carolina | ||||
| Blue Cloud Distribution of North Dakota, Inc. | United States, North Dakota | ||||
| Blue Cloud Distribution of Ohio, Inc. | United States, Ohio | ||||
| Blue Cloud Distribution of Oklahoma, Inc. | United States, Oklahoma | ||||
| Blue Cloud Distribution of Oregon, Inc. | United States, Oregon | ||||
| Blue Cloud Distribution of Pennsylvania, Inc. | United States, Pennsylvania | ||||
| Blue Cloud Distribution of Rhode Island, Inc. | United States, Rhode Island | ||||
| Blue Cloud Distribution of South Carolina, Inc. | United States, South Carolina | ||||
| Blue Cloud Distribution of South Dakota, Inc. | United States, South Dakota | ||||
| Blue Cloud Distribution of Tennessee, Inc. | United States, Tennessee | ||||
| Blue Cloud Distribution of Texas, Inc. | United States, Texas | ||||
| Blue Cloud Distribution of Utah, Inc. | United States, Utah | ||||
| Blue Cloud Distribution of Vermont, Inc. | United States, Vermont | ||||
| Blue Cloud Distribution of Virginia, Inc. | United States, Virginia | ||||
| Blue Cloud Distribution of Washington, Inc. | United States, Washington | ||||
| Blue Cloud Distribution of Wisconsin, Inc. | United States, Wisconsin | ||||
| Blue Cloud Distribution, Inc. | United States, Delaware | ||||
| Blue Ridge Sales, LLC | United States, Delaware | ||||
| Bluebird Foods Limited | New Zealand | ||||
| Bluecan Holdings Unlimited Company | Ireland | ||||
| Bokomo (Botswana) Proprietary Limited | Botswana | ||||
| Bokomo Zambia Limited | Zambia | ||||
| Boquitas Fiestas S.R.L. | Honduras | ||||
| Boquitas Fiestas, LLC | United States, Delaware | ||||
| Bottling Group Financing, LLC | United States, Delaware | ||||
| Bottling Group Holdings, LLC | United States, Delaware | ||||
| Bottling Group, LLC | United States, Delaware | ||||
| Bronte Industries, Ltd | United Kingdom | ||||
| BUG de Mexico, S.A. de C.V. | Mexico | ||||
| C & I Leasing, Inc. | United States, Maryland | ||||
| Caroni Investments, LLC | United States, Delaware | ||||
| CB Manufacturing Company, Inc. | United States, Delaware | ||||
| CEME Holdings, LLC | United States, Delaware | ||||
| Centro-Mediterranea de Bebidas Carbonicas PepsiCo, S.L. | Spain | ||||
2
| Ceres Fruit Juices (Pty) Ltd | South Africa | ||||
| ChampBev, Inc. | United States, California | ||||
| China Concentrate Holdings (Hong Kong) Limited | Hong Kong | ||||
| Chipsy for Food Industries S.A.E. | Egypt | ||||
| Chipsy International for Food Industries S.A.E. | Egypt | ||||
| Chitos Internacional y Cia Ltda | Guatemala | ||||
| Clara Finance Holdings Unlimited Company | Ireland | ||||
| CMC Investment Company | Bermuda | ||||
| Cocina Autentica, Inc. | United States, Delaware | ||||
| Comercializadora CMC Investment y Compania Limitada | Guatemala | ||||
| Comercializadora Nacional SAS Ltda. | Colombia | ||||
| Comercializadora PepsiCo Mexico, S de R.L. de C.V. | Mexico | ||||
| Compania de Bebidas PepsiCo, S.L. | Spain | ||||
| Concentrate Holding Uruguay Pte. Ltd. | Singapore | ||||
| Concentrate Manufacturing (Singapore) Pte. Ltd. | Singapore | ||||
| Confiteria Alegro, S. de R.L. de C.V. | Mexico | ||||
| Copper Beech International, LLC | United States, Delaware | ||||
| Corina Snacks Limited | Cyprus | ||||
| Corporativo Internacional Mexicano, S. de R.L. de C.V. | Mexico | ||||
| CytoSport Holdings, Inc. | United States, Delaware | ||||
| CytoSport, Inc. | United States, California | ||||
| Davlyn Realty Corporation | United States, Delaware | ||||
| Defosto Holdings Limited | Cyprus | ||||
| Desarrollo Inmobiliario Gamesa, S. de R.L. de C.V. | Mexico | ||||
| Drinkfinity USA, Inc. | United States, Delaware | ||||
| Drinkstation Innovation Co., Ltd. | China | ||||
| Drinkstation Limited | Hong Kong | ||||
| Drinkstation, Inc. | United States, Delaware | ||||
| Dunluce Finance Holdings Unlimited Company | Ireland | ||||
| Dutch Snacks Holding, S.A. de C.V. | Mexico | ||||
| Duyvis Production B.V. | Netherlands | ||||
| Echo Bay Holdings, Inc. | United States, Delaware | ||||
| Elaboradora Argentina de Cereales S.R.L. | Argentina | ||||
| Enter Logistica, LLC | Russia | ||||
| Environ at Inverrary Partnership | United States, Florida | ||||
| Environ of Inverrary, Inc. | United States, Florida | ||||
| EPIC Enterprises, Inc. | United States, Massachusetts | ||||
| Eridanus Investments S.à r.l | Luxembourg | ||||
| Evercrisp Snack Productos de Chile S.A. | Chile | ||||
| Fabrica de Productos Alimenticios Rene y Cia S.C.A. | Guatemala | ||||
| Fabrica PepsiCo Mexicali, S. de R.L. de C.V. | Mexico | ||||
| Fairlight International SRL | Barbados | ||||
| Far East Bottlers (Hong Kong) Limited | Hong Kong | ||||
| FL Transportation, Inc. | United States, Delaware | ||||
| FLI Andean, LLC | United States, Delaware | ||||
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| FLI Colombia, LLC | United States, Delaware | ||||
| FLI Snacks Andean GP, LLC | United States, Delaware | ||||
| Food Concepts Pioneer Ltd. | Nigeria | ||||
| Forest Akers Nederland B.V. | Netherlands | ||||
| Forty-Six Peaks Holding, Inc. | United States, Delaware | ||||
| Four Bench Capital Ltd. | Bermuda | ||||
| Fovarosi Asvanyviz es Uditoipari Zartkoruen Mukodo Reszvenytarsasag | Hungary | ||||
| Frito Lay de Guatemala y Compania Limitada | Guatemala | ||||
| Frito Lay Gida Sanayi Ve Ticaret Anonim Sirketi | Turkey | ||||
| Frito Lay Poland Sp. z o.o. | Poland | ||||
| Frito Lay Sp. z o.o. | Poland | ||||
| Frito-Lay Australia Holdings Pty Limited | Australia | ||||
| Frito-Lay Dip Company, Inc. | United States, Delaware | ||||
| Frito-Lay Dominicana, S.A. | Dominican Republic | ||||
| Frito-Lay Global Investments B.V. | Netherlands | ||||
| Frito-Lay Investments B.V. | Netherlands | ||||
| Frito-Lay Manufacturing LLC | Russia | ||||
| Frito-Lay Netherlands Holding B.V. | Netherlands | ||||
| Frito-Lay North America, Inc. | United States, Delaware | ||||
| Frito-Lay Sales, Inc. | United States, Delaware | ||||
| Frito-Lay Trading Company (Europe) GmbH | Switzerland | ||||
| Frito-Lay Trading Company (Poland) GmbH | Switzerland | ||||
| Frito-Lay Trading Company GmbH | Switzerland | ||||
| Frito-Lay Trinidad Unlimited | Trinidad And Tobago | ||||
| Frito-Lay, Inc. | United States, Delaware | ||||
| Fruko Mesrubat Sanayi Limited Sirketi | Turkey | ||||
| Future Life Health Products (Pty) Ltd | South Africa | ||||
| Gambrinus Investments Limited | Cayman Islands | ||||
| Gamesa LLC | United States, Delaware | ||||
| Gamesa, S. de R.L. de C.V. | Mexico | ||||
| Gas Natural de Merida, S. A. de C. V. | Mexico | ||||
| Gatorade Puerto Rico Company | United States, Delaware | ||||
| GB Czech, LLC | United States, Delaware | ||||
| GB International, Inc. | United States, Delaware | ||||
| GB Russia LLC | United States, Delaware | ||||
| GB Slovak, LLC | United States, Delaware | ||||
| General Bottlers of Hungary, Inc. | United States, Delaware | ||||
| GMP Manufacturing, Inc. | United States, California | ||||
| Golden Grain Company | United States, California | ||||
| Goveh S.R.L. | Peru | ||||
| Grayhawk Leasing, LLC | United States, Delaware | ||||
| Green Hemlock International, LLC | United States, Delaware | ||||
| Grupo Frito Lay y Compania Limitada | Guatemala | ||||
| Grupo Gamesa, S. de R.L. de C.V. | Mexico | ||||
| Grupo Sabritas, S. de R.L. de C.V. | Mexico | ||||
4
| Gulkevichskiy Maslozavod, JSC | Russia | ||||
| Hangzhou Baicaowei Corporate Management Consulting Co., Ltd. | China | ||||
| Hangzhou Haomusi Food Co., Ltd. | China | ||||
| Hangzhou Tao Dao Technology Co., Ltd. | China | ||||
| Health Warrior, Inc. | United States, Delaware | ||||
| Heathland, LP | United States, Delaware | ||||
| Helioscope Limited | Cyprus | ||||
| Hill Crest Holdings, Ltd. | Bermuda | ||||
| Hillbrook, Inc. | United States, Vermont | ||||
| Hillgrove Investments Holdings, Inc. | United States, Delaware | ||||
| Hillgrove, Inc. | United States, Delaware | ||||
| Hillwood Bottling, LLC | United States, Delaware | ||||
| Holding Company "Opolie" JSC | Russia | ||||
| Homefinding Company of Texas | United States, Texas | ||||
| Hudson Valley Insurance Company | United States, New York | ||||
| IC Equities, Inc. | United States, Delaware | ||||
| Inmobiliaria Interamericana, S.A. De C.V. | Mexico | ||||
| Integrated Beverage Services (Bangladesh) Limited | Bangladesh | ||||
| Integrated Foods & Beverages Pvt. Ltd. | Bangladesh | ||||
| International Bottlers Management Co. LLC | United States, Delaware | ||||
| International KAS Aktiengesellschaft | Liechtenstein | ||||
| Inversiones Borneo S.R.L. | Peru | ||||
| Inversiones PFI Chile Limitada | Chile | ||||
| Inviting Foods Holdings, Inc. | United States, Delaware | ||||
| Inviting Foods LLC | United States, Delaware | ||||
| ISO-Foods (Pty) Ltd | South Africa | ||||
| KAS Anorthosis S.à r.l | Luxembourg | ||||
| KAS S.L. | Spain | ||||
| Kinvara, LLC | United States, Delaware | ||||
| Kungursky Molkombinat, JSC | Russia | ||||
| Lahinch Finance Unlimited Company | Ireland | ||||
| Lake Shore Finance Holdings Unlimited Company | Ireland | ||||
| Larragana S.L. | Spain | ||||
| Latin American Holdings Ltd. | Cayman Islands | ||||
| Latin Foods International, LLC | United States, Delaware | ||||
| Lebedyansky Holdings, LLC | Russia | ||||
| Lebedyansky, LLC | Russia | ||||
| Limited Liability Company "Sandora" | Ukraine | ||||
| Linkbay Limited | Cyprus | ||||
| Lithuanian Snacks UAB | Lithuania | ||||
| Marbo d.o.o. Laktasi | Bosnia and Herzegovina | ||||
| Marbo Product d.o.o. Beograd | Serbia | ||||
| Matudis - Comercio de Produtos Alimentares, Limitada | Portugal | ||||
| Matutano - Sociedade de Produtos Alimentares, Lda. | Portugal | ||||
| Mid-America Improvement Corporation | United States, Illinois | ||||
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| Mountainview Insurance Company, Inc. | United States, Vermont | ||||
| NCJV, LLC | United States, Delaware | ||||
| New Bern Transport Corporation | United States, Delaware | ||||
| New Century Beverage Company, LLC | United States, Delaware | ||||
| New Quaker Oats Europe, Inc. | United States, Delaware | ||||
| Noble Leasing LLC | United States, Delaware | ||||
| Northeast Hot-Fill Co-op, Inc. | United States, Delaware | ||||
| Office at Solyanka LLC | Russia | ||||
| Onbiso Inversiones, S.L. | Spain | ||||
| One World Enterprises, LLC | United States, Delaware | ||||
| One World Investors, Inc. | United States, Delaware | ||||
| P-A Barbados Bottling Company, LLC | United States, Delaware | ||||
| P-A Bottlers (Barbados) SRL | Barbados | ||||
| P-Americas, LLC | United States, Delaware | ||||
| Papas Chips S.A. | Uruguay | ||||
| PAS Luxembourg, S.à r.l | Luxembourg | ||||
| PAS Netherlands B.V. | Netherlands | ||||
| PBG Canada Holdings II, LLC | United States, Delaware | ||||
| PBG Canada Holdings, Inc. | United States, Delaware | ||||
| PBG Investment Partnership | Canada | ||||
| PBG Midwest Holdings S.à r.l | Luxembourg | ||||
| PBG Soda Can Holdings, S.à r.l | Luxembourg | ||||
| PCBL, LLC | United States, Delaware | ||||
| PCNA Manufacturing, Inc. | United States, Delaware | ||||
| Pei N.V. | Curacao | ||||
| Pep Trade LLC | Egypt | ||||
| Pepsi B.V. | Netherlands | ||||
| Pepsi Beverages Holdings LLC | United States, Delaware | ||||
| Pepsi Bottling Group Hoosiers B.V. | Netherlands | ||||
| Pepsi Bottling Holdings, Inc. | United States, Delaware | ||||
| Pepsi Bugshan Investments S.A.E. | Egypt | ||||
| Pepsi Cola Colombia Ltda | Colombia | ||||
| Pepsi Cola Egypt S.A.E. | Egypt | ||||
| Pepsi Cola Panamericana S.R.L. | Peru | ||||
| Pepsi Cola Servis Ve Dagitim Limited Sirketi | Turkey | ||||
| Pepsi Logistics Company, Inc. | United States, Delaware | ||||
| Pepsi Northwest Beverages LLC | United States, Delaware | ||||
| Pepsi Overseas (Investments) Partnership | Canada | ||||
| Pepsi Promotions, Inc. | United States, Delaware | ||||
| Pepsi Ventures Holdings, Inc. | United States, Delaware | ||||
| PepsiCo (China) Limited | China | ||||
| PepsiCo (Malaysia) Sdn. Bhd. | Malaysia | ||||
| PepsiCo Alimentos Antioquia, Ltda. | Colombia | ||||
| PepsiCo Alimentos Colombia Ltda. | Colombia | ||||
| PepsiCo Alimentos de Bolivia S.R.L. | Bolivia | ||||
6
| PepsiCo Alimentos Ecuador Cia. Ltda. | Ecuador | ||||
| PepsiCo Alimentos Z.F., Ltda. | Colombia | ||||
| PepsiCo Amacoco Bebidas Do Brasil Ltda. | Brazil | ||||
| PepsiCo ANZ Holdings Pty Ltd | Australia | ||||
| PepsiCo Asia Research & Development Center Company Limited | China | ||||
| PepsiCo Australia Financing Cyprus Limited | Cyprus | ||||
| PepsiCo Australia Financing Limited Partnership | Australia | ||||
| PepsiCo Australia Financing Partner 1 LLC | United States, Delaware | ||||
| PepsiCo Australia Financing Partner 2 LLC | United States, Delaware | ||||
| PepsiCo Australia Financing Pty Ltd | Australia | ||||
| PepsiCo Australia Holdings Pty Limited | Australia | ||||
| PepsiCo Australia International | Australia | ||||
| PepsiCo Austria Services GmbH | Austria | ||||
| PepsiCo Azerbaijan Limited Liability Company | Azerbaijan | ||||
| PepsiCo BeLux BV | Belgium | ||||
| PepsiCo Beverage Sales, LLC | United States, Delaware | ||||
| PepsiCo Beverages (Hong Kong) Limited | Hong Kong | ||||
| PepsiCo Beverages Australia Pty Ltd | Australia | ||||
| PepsiCo Beverages International Limited | Nigeria | ||||
| PepsiCo Beverages Italia Societa' A Responsabilita' Limitata | Italy | ||||
| PepsiCo Canada (Holdings) ULC | Canada | ||||
| PepsiCo Canada Finance, LLC | United States, Delaware | ||||
| PepsiCo Canada Investment ULC | Canada | ||||
| PepsiCo Canada ULC | Canada | ||||
| PepsiCo Captive Holdings, Inc. | United States, Delaware | ||||
| PepsiCo Caribbean, Inc. | Puerto Rico | ||||
| PepsiCo Central Asia Limited Liability Partnership | Kazakhstan | ||||
| PepsiCo Consulting Polska Sp. z o.o. | Poland | ||||
| PepsiCo de Argentina S.R.L. | Argentina | ||||
| PepsiCo De Bolivia S.R.L. | Bolivia | ||||
| PepsiCo de Mexico S. de R.L. de C.V. | Mexico | ||||
| PepsiCo Del Paraguay S.R.L. | Paraguay | ||||
| PepsiCo Deutschland GmbH | Germany | ||||
| PepsiCo do Brasil Indústria e Comércio de Alimentos Ltda. | Brazil | ||||
| PepsiCo do Brasil Ltda. | Brazil | ||||
| PepsiCo Eesti AS | Estonia | ||||
| PepsiCo Europe Support Center, S.L. | Spain | ||||
| PepsiCo Finance (Antilles B) N.V. | Curacao | ||||
| PepsiCo Finance (South Africa) (Proprietary) Limited | South Africa | ||||
| PepsiCo Finance Americas Company | United States, Delaware | ||||
| PepsiCo Financial Shared Services, Inc. | United States, Delaware | ||||
| PepsiCo Financing Holdings, Inc. | United States, Delaware | ||||
| PepsiCo Food & Beverage Holdings Hong Kong Limited | Hong Kong | ||||
| PepsiCo Foods (China) Company Limited | China | ||||
| PepsiCo Foods (Guangdong) Co., Ltd. | China | ||||
7
| PepsiCo Foods (Private) Limited | Pakistan | ||||
| PepsiCo Foods (Shandong) Co., Ltd. | China | ||||
| PepsiCo Foods (Sichuan) Co., Ltd. | China | ||||
| PepsiCo Foods Group Pty Ltd | Australia | ||||
| PepsiCo Foods Nigeria Limited | Nigeria | ||||
| PepsiCo Foods Taiwan Co., Ltd. | Taiwan | ||||
| PepsiCo Foods Vietnam Company | Vietnam | ||||
| PepsiCo Foods, A.I.E. | Spain | ||||
| PepsiCo France SAS | France | ||||
| PepsiCo Georgia LLC | Georgia | ||||
| PepsiCo Global Business Services India LLP | India | ||||
| PepsiCo Global Business Services Poland Sp. z o.o. | Poland | ||||
| PepsiCo Global Holdings Limited | Bermuda | ||||
| PepsiCo Global Investments B.V. | Netherlands | ||||
| PepsiCo Global Investments S.à r.l | Luxembourg | ||||
| PepsiCo Global Mobility, LLC | United States, Delaware | ||||
| PepsiCo Global Real Estate, Inc. | United States, Delaware | ||||
| PepsiCo Global Trading Solutions Unlimited Company | Ireland | ||||
| PepsiCo Golden Holdings, LLC | United States, Delaware | ||||
| PepsiCo Group Finance International B.V. | Netherlands | ||||
| PepsiCo Group Holdings International B.V. | Netherlands | ||||
| PepsiCo Group Spotswood Holdings S.à r.l | Luxembourg | ||||
| PepsiCo Gulf International FZE | United Arab Emirates | ||||
| PepsiCo Hellas Single Member Industrial and Commercial Société Anonyme | Greece | ||||
| PepsiCo Holding de Espana S.L. | Spain | ||||
| PepsiCo Holdings | United Kingdom | ||||
| PepsiCo Holdings Toshkent LLC | Uzbekistan | ||||
| PepsiCo Holdings, LLC | Russia | ||||
| PepsiCo Hong Kong, LLC | United States, Delaware | ||||
| PepsiCo Iberia Servicios Centrales, S.L. | Spain | ||||
| PepsiCo India Holdings Private Limited | India | ||||
| PepsiCo India Sales Private Limited | India | ||||
| PepsiCo Internacional México, S. de R. L. de C. V. | Mexico | ||||
| PepsiCo International (OPC) Regional Headquarters | Saudi Arabia | ||||
| PepsiCo International Hong Kong Limited | Hong Kong | ||||
| PepsiCo International Limited | United Kingdom | ||||
| PepsiCo International Pte Ltd. | Singapore | ||||
| PepsiCo Investments (Europe) I B.V. | Netherlands | ||||
| PepsiCo Investments Ltd. | Mauritius | ||||
| PepsiCo Ireland Food & Beverages Unlimited Company | Ireland | ||||
| PepsiCo Japan Co., Ltd. | Japan | ||||
| PepsiCo Kyrgyzstan Limited Liability Company | Kyrgyzstan | ||||
| PepsiCo Light B.V. | Netherlands | ||||
| PepsiCo Logistyka Sp. z o.o. | Poland | ||||
| PepsiCo Management Services SAS | France | ||||
8
| PepsiCo Manufacturing, A.I.E. | Spain | ||||
| PepsiCo Mexico Holdings, S. de R.L. de C.V. | Mexico | ||||
| PepsiCo Nederland B.V. | Netherlands | ||||
| PepsiCo Nordic Denmark ApS | Denmark | ||||
| PepsiCo Nordic Finland Oy | Finland | ||||
| PepsiCo Nordic Norway AS | Norway | ||||
| PepsiCo Nutrition Trading DMCC | United Arab Emirates | ||||
| PepsiCo One B.V. | Netherlands | ||||
| PepsiCo Overseas Corporation | United States, Delaware | ||||
| PepsiCo Overseas Financing Partnership | Canada | ||||
| PepsiCo Panimex Inc | Mauritius | ||||
| PepsiCo Products B.V. | Netherlands | ||||
| PepsiCo Products FLLC | Belarus | ||||
| PepsiCo Puerto Rico, Inc. | United States, Delaware | ||||
| PepsiCo Sales, Inc. | United States, Delaware | ||||
| PepsiCo Sales, LLC | United States, Delaware | ||||
| PepsiCo Services Asia Ltd. | Thailand | ||||
| PepsiCo Services CZ s.r.o. | Czech Republic | ||||
| PepsiCo Services N.V. | Belgium | ||||
| PepsiCo Services, LLC | United States, Delaware | ||||
| PepsiCo Singapore Financing I Pte. Ltd. | Singapore | ||||
| PepsiCo Singapore Financing II Pte. Ltd. | Singapore | ||||
| PepsiCo South Africa (Pty) Ltd | South Africa | ||||
| PepsiCo Trading Azerbaijan Limited Liability Company | Azerbaijan | ||||
| PepsiCo Trading Solutions Unlimited Company | Ireland | ||||
| PepsiCo Twist B.V. | Netherlands | ||||
| PepsiCo UK Pension Plan Trustee Limited | United Kingdom | ||||
| PepsiCo Ventures B.V. | Netherlands | ||||
| PepsiCo Wave Holdings LLC | United States, Delaware | ||||
| PepsiCo World Trading Company, Inc. | United States, Delaware | ||||
| PepsiCo Y LLC | Armenia | ||||
| Pepsi-Cola (Bermuda) Limited | Bermuda | ||||
| Pepsi-Cola (Thai) Trading Co., Ltd. | Thailand | ||||
| Pepsi-Cola Advertising and Marketing, Inc. | United States, Delaware | ||||
| Pepsi-Cola Bottlers Holding C.V. | Netherlands | ||||
| Pepsi-Cola Bottling Company of Ft. Lauderdale-Palm Beach, LLC | United States, Florida | ||||
| Pepsi-Cola Bottling Company Of St. Louis, Inc. | United States, Missouri | ||||
| Pepsi-Cola Company | United States, Delaware | ||||
| Pepsi-Cola de Honduras S.R.L. | Honduras | ||||
| Pepsi-Cola Ecuador Cia. Ltda. | Ecuador | ||||
| Pepsi-Cola Far East Trade Development Co., Inc. | Philippines | ||||
| Pepsi-Cola Finance, LLC | United States, Delaware | ||||
| Pepsi-Cola General Bottlers Poland Sp. z o.o. | Poland | ||||
| Pepsi-Cola Industrial da Amazonia Ltda. | Brazil | ||||
| PepsiCola Interamericana de Guatemala S.A. | Guatemala | ||||
9
| Pepsi-Cola International (Private) Limited | Pakistan | ||||
| Pepsi-Cola International Limited | Bermuda | ||||
| Pepsi-Cola International Limited (U.S.A.) | United States, Delaware | ||||
| Pepsi-Cola International LLC | United Arab Emirates | ||||
| Pepsi-Cola Korea Co., Ltd. | Korea, Republic Of | ||||
| Pepsi-Cola Management and Administrative Services, Inc. | United States, Delaware | ||||
| Pepsi-Cola Manufacturing (Mediterranean) Limited | Bermuda | ||||
| Pepsi-Cola Manufacturing Company Of Uruguay S.R.L. | Uruguay | ||||
| Pepsi-Cola Manufacturing International, Limited | Bermuda | ||||
| Pepsi-Cola Marketing Corp. Of P.R., Inc. | Puerto Rico | ||||
| Pepsi-Cola Mediterranean, Ltd. | United States, Wyoming | ||||
| Pepsi-Cola Metropolitan Bottling Company, Inc. | United States, New Jersey | ||||
| Pepsi-Cola Mexicana Holdings LLC | United States, Delaware | ||||
| Pepsi-Cola Mexicana, S. de R.L. de C.V. | Mexico | ||||
| Pepsi-Cola National Marketing, LLC | United States, Delaware | ||||
| Pepsi-Cola of Corvallis, Inc. | United States, Oregon | ||||
| Pepsi-Cola Operating Company Of Chesapeake And Indianapolis | United States, Delaware | ||||
| Pepsi-Cola Sales and Distribution, Inc. | United States, Delaware | ||||
| Pepsi-Cola Technical Operations, Inc. | United States, Delaware | ||||
| Pet Iberia S.L. | Spain | ||||
| Pete & Johnny Limited | United Kingdom | ||||
| Pine International Limited | Cayman Islands | ||||
| Pine International, LLC | United States, Delaware | ||||
| Pinstripe Leasing, LLC | United States, Delaware | ||||
| Pioneer Food Group (Pty) Ltd | South Africa | ||||
| Pioneer Foods (Pty) Ltd | South Africa | ||||
| Pioneer Foods Groceries (Pty) Ltd | South Africa | ||||
| Pioneer Foods Holdings (Pty) Ltd | South Africa | ||||
| Pioneer Foods Wellingtons (Pty) Ltd | South Africa | ||||
| Pipers Crisps Limited | United Kingdom | ||||
| PlayCo, Inc. | United States, Delaware | ||||
| PopCorners Holdings, Inc. | United States, Delaware | ||||
| Portfolio Concentrate Solutions Unlimited Company | Ireland | ||||
| PRB Luxembourg S.à r.l | Luxembourg | ||||
| Premier Nutrition Trading L.L.C. | United Arab Emirates | ||||
| Prestwick LLC | United States, Delaware | ||||
| Prev PepsiCo Sociedade Previdenciaria | Brazil | ||||
| Productos Alimenticios René, LLC | United States, Delaware | ||||
| Productos S.A.S. C.V. | Netherlands | ||||
| Productos SAS Management B.V. | Netherlands | ||||
| PRS, Inc. | United States, Delaware | ||||
| PSAS Inversiones LLC | United States, Delaware | ||||
| PSE Logistica S.R.L. | Argentina | ||||
| PT. PepsiCo Indonesia Foods and Beverages | Indonesia | ||||
| PT. Quaker Indonesia | Indonesia | ||||
10
| Punica Getranke GmbH | Germany | ||||
| Q O Puerto Rico, Inc. | Puerto Rico | ||||
| QFL OHQ Sdn. Bhd. | Malaysia | ||||
| QTG Development, Inc. | United States, Delaware | ||||
| QTG Services, Inc. | United States, Delaware | ||||
| Quadrant - Amroq Beverages S.R.L. | Romania | ||||
| Quaker Development B.V. | Netherlands | ||||
| Quaker European Beverages, LLC | United States, Delaware | ||||
| Quaker European Investments B.V. | Netherlands | ||||
| Quaker Global Investments B.V. | Netherlands | ||||
| Quaker Holdings (UK) Limited | United Kingdom | ||||
| Quaker Manufacturing, LLC | United States, Delaware | ||||
| Quaker Oats Asia, Inc. | United States, Delaware | ||||
| Quaker Oats Australia Pty Ltd | Australia | ||||
| Quaker Oats B.V. | Netherlands | ||||
| Quaker Oats Capital Corporation | United States, Delaware | ||||
| Quaker Oats Europe II, LLC | United States, Delaware | ||||
| Quaker Oats Europe LLC | United States, Delaware | ||||
| Quaker Oats Limited | United Kingdom | ||||
| Quaker Products UK Limited | United Kingdom | ||||
| Quaker Sales & Distribution, Inc. | United States, Delaware | ||||
| Raptas Finance S.à r.l. | Luxembourg | ||||
| Rare Fare Foods, LLC | United States, Delaware | ||||
| Rare Fare Holdings, Inc. | United States, Delaware | ||||
| Reading Industries, Ltd | United Kingdom | ||||
| Real Estate Holdings, LLC | Puerto Rico | ||||
| Rolling Frito-Lay Sales, LP | United States, Delaware | ||||
| Rye Lake Capital Korlátolt Felelősségű Társaság | Hungary | ||||
| Rye Lake Holdings Korlátolt Felelősségű Társaság | Hungary | ||||
| S & T of Mississippi, Inc. | United States, Mississippi | ||||
| Sabritas de Costa Rica, S. de R.L. | Costa Rica | ||||
| Sabritas Snacks America Latina de Nicaragua y Cia, Ltda | Nicaragua | ||||
| Sabritas y Cia. S en C de C.V. | El Salvador | ||||
| Sabritas, LLC | United States, Delaware | ||||
| Sabritas, S. de R.L. de C.V. | Mexico | ||||
| Sakata Rice Snacks Australia Pty Ltd | Australia | ||||
| Sandora Holdings B.V. | Netherlands | ||||
| Saudi Snack Foods Company Limited | Saudi Arabia | ||||
| Sea Eagle International SRL | Barbados | ||||
| Seepoint Holdings Ltd. | Cyprus | ||||
| Senselet Food Processing PLC | Ethiopia | ||||
| Senselet Holding B.V. | Netherlands | ||||
| Servicios Gamesa Puerto Rico, L.L.C. | Puerto Rico | ||||
| Servicios GBF, Sociedad de Responsabilidad Limitada | Honduras | ||||
| Servicios GFLG y Compania Limitada | Guatemala | ||||
11
| Servicios SYC, S. de R.L. de C.V. | El Salvador | ||||
| Seven-Up Asia, Inc. | United States, Missouri | ||||
| Seven-Up Light B.V. | Netherlands | ||||
| Seven-Up Nederland B.V. | Netherlands | ||||
| Shanghai PepsiCo Snack Company Limited | China | ||||
| Shanghai YuHo Agricultural Development Co., Ltd | China | ||||
| Shoebill, LLC | United States, Delaware | ||||
| SIH International, LLC | United States, Delaware | ||||
| Sitka Spruce | South Africa | ||||
| Smartfoods, Inc. | United States, Delaware | ||||
| Smiles and Bites Holdings, S.de R.L. de C.V. | Mexico | ||||
| Smiths Crisps Limited | United Kingdom | ||||
| Snack Food Investments GmbH | Switzerland | ||||
| Snack Food Investments II LLC | United States, Delaware | ||||
| Snack Food Investments Limited | Bermuda | ||||
| Snack Food-Beverage Asia Products Limited | Hong Kong | ||||
| Snacks America Latina S.R.L. | Peru | ||||
| Snacks Guatemala, Ltd. | Bermuda | ||||
| So Spark Ltd. | Israel | ||||
| Soda-Club CO2 Ltd. | British Virgin Islands | ||||
| Soda-Club Switzerland GmbH | Switzerland | ||||
| Soda-Club Worldwide B.V. | Netherlands | ||||
| SodaStream (New Zealand) Ltd. | New Zealand | ||||
| SodaStream (SA) (Pty) Ltd. | South Africa | ||||
| SodaStream (Switzerland) GmbH | Switzerland | ||||
| SodaStream Australia Pty Ltd | Australia | ||||
| SodaStream Canada Ltd. | Canada | ||||
| SodaStream Enterprises N.V. | Curacao | ||||
| SodaStream France SAS | France | ||||
| SodaStream GmbH | Germany | ||||
| SodaStream Iberia, S.L. | Spain | ||||
| SodaStream Industries Ltd. | Israel | ||||
| SodaStream International B.V. | Netherlands | ||||
| SodaStream International Ltd. | Israel | ||||
| SodaStream Israel Ltd. | Israel | ||||
| SodaStream K.K. | Japan | ||||
| SodaStream Nordics AB | Sweden | ||||
| SodaStream Österreich GmbH | Austria | ||||
| SodaStream Poland Sp. z o.o. | Poland | ||||
| SodaStream USA, Inc. | United States, Delaware | ||||
| South Beach Beverage Company, Inc. | United States, Delaware | ||||
| South Properties, Inc. | United States, Illinois | ||||
| Sportmex Internacional, S.A. de C.V. | Mexico | ||||
| Springboig Industries, Ltd | United Kingdom | ||||
| Spruce Limited | Cayman Islands | ||||
12
| Stacy's Pita Chip Company, Incorporated | United States, Massachusetts | ||||
| Star Foods E.M. S.R.L. | Romania | ||||
| Stokely-Van Camp, Inc. | United States, Indiana | ||||
| Stratosphere Communications Pty Ltd | Australia | ||||
| Stratosphere Holdings (2018) Limited | New Zealand | ||||
| SVC Logistics, Inc. | United States, Delaware | ||||
| SVC Manufacturing, Inc. | United States, Delaware | ||||
| SVE Russia Holdings GmbH | Liechtenstein | ||||
| Tasman Finance S.à r.l | Luxembourg | ||||
| TFL Holdings, LLC | United States, Delaware | ||||
| The Gatorade Company | United States, Delaware | ||||
| The Pepsi Bottling Group (Canada), ULC | Canada | ||||
| The Quaker Oats Company | United States, New Jersey | ||||
| The Smith's Snackfood Company Pty Limited | Australia | ||||
| Thomond Group Holdings Limited | Hong Kong | ||||
| Thunderhorse, Inc. | United States, Delaware | ||||
| Tobago Snack Holdings, LLC | United States, Delaware | ||||
| Tropicana Alvalle S.L. | Spain | ||||
| Troya-Ultra LLC | Russia | ||||
| United Foods Companies Restaurantes S.A. | Brazil | ||||
| VentureCo (Israel) Ltd | Israel | ||||
| Veurne Snack Foods BV | Belgium | ||||
| Vitamin Brands Ltd. | United Kingdom | ||||
| Walkers Group Limited | United Kingdom | ||||
| Walkers Snack Foods Limited | United Kingdom | ||||
| Walkers Snacks (Distribution) Limited | United Kingdom | ||||
| Walkers Snacks Limited | United Kingdom | ||||
| Whitman Corporation | United States, Delaware | ||||
| Whitman Insurance Co. Ltd. | United States, Vermont | ||||
| Wimm-Bill-Dann Beverages, JSC | Russia | ||||
| Wimm-Bill-Dann Brands Co. Ltd. | Russia | ||||
| Wimm-Bill-Dann Central Asia-Almaty, LLP | Kazakhstan | ||||
| Wimm-Bill-Dann Foods LLC | Russia | ||||
| Wimm-Bill-Dann Georgia Ltd. | Georgia | ||||
| Wimm-Bill-Dann JSC | Russia | ||||
| Wimm-Bill-Dann Ukraine, PJSC | Ukraine | ||||
| Woodglen Holdings, Inc. | United States, Delaware | ||||
13
Consent of Independent Registered Public Accounting Firm
To the Board of Directors
PepsiCo, Inc.:
We consent to the incorporation by reference in the registration statements and Forms listed below of PepsiCo, Inc. and subsidiaries (PepsiCo, Inc.) of our report dated February 8, 2024, with respect to the Consolidated Balance Sheet of PepsiCo, Inc. as of December 30, 2023 and December 31, 2022, and the related Consolidated Statements of Income, Comprehensive Income, Cash Flows, and Equity for each of the fiscal years in the three-year period ended December 30, 2023, and the related notes (collectively, the consolidated financial statements), and the effectiveness of internal control over financial reporting as of December 30, 2023, which report appears in the December 30, 2023 annual report on Form 10-K of PepsiCo, Inc.
Description, Registration Statement Number
Form S-3
•PepsiCo Automatic Shelf Registration Statement, 333-266332
•PepsiCo Automatic Shelf Registration Statement, 333-234767
•PepsiCo Automatic Shelf Registration Statement, 333-216082
•PepsiCo Automatic Shelf Registration Statement, 333-197640
•PepsiCo Automatic Shelf Registration Statement, 333-177307
•PepsiCo Automatic Shelf Registration Statement, 333-154314
•PepsiCo Automatic Shelf Registration Statement, 333-133735
•PepsiAmericas, Inc. 2000 Stock Incentive Plan, 333-165176
•PBG 2004 Long Term Incentive Plan, PBG 2002 Long Term Incentive Plan, PBG Long Term Incentive Plan, The Pepsi Bottling Group, Inc. 1999 Long Term Incentive Plan and PBG Stock Incentive Plan, 333-165177
Form S-8
•The PepsiCo Savings Plan, 333-76204, 333-76196, 333-150867 and 333-150868
•PepsiCo, Inc. 2007 Long-Term Incentive Plan, 333-142811 and 333-166740
•PepsiCo, Inc. 2003 Long-Term Incentive Plan, 333-109509
•PepsiCo SharePower Stock Option Plan, 33-29037, 33-35602, 33-42058, 33-51496, 33-54731, 33-66150 and 333-109513
•Director Stock Plan, 33-22970 and 333-110030
•1979 Incentive Plan and the 1987 Incentive Plan, 33-19539
•1994 Long-Term Incentive Plan, 33-54733
•PepsiCo, Inc. 1995 Stock Option Incentive Plan, 33-61731, 333-09363 and 333-109514
•1979 Incentive Plan, 2-65410
•PepsiCo, Inc. Long Term Savings Program, 2-82645, 33-51514 and 33-60965
•PepsiCo 401(k) Plan, 333-89265
•Retirement Savings and Investment Plan for Union Employees of Tropicana Products, Inc. and Affiliates (Teamster Local Union #173) and the Retirement Savings and Investment Plan for Union Employees of Tropicana Products, Inc. and Affiliates, 333-65992
•The Quaker Long Term Incentive Plan of 1990, The Quaker Long Term Incentive Plan of 1999 and The Quaker Oats Company Stock Option Plan for Outside Directors, 333-66632
•The Quaker 401(k) Plan for Salaried Employees and The Quaker 401(k) Plan for Hourly Employees, 333-66634
•The PepsiCo Share Award Plan, 333-87526
•PBG 401(k) Savings Program, PBG 401(k) Program, PepsiAmericas, Inc. Salaried 401(k) Plan and PepsiAmericas, Inc. Hourly 401(k) Plan, 333-165106
•PBG 2004 Long Term Incentive Plan, PBG 2002 Long Term Incentive Plan, PBG Long Term Incentive Plan, The Pepsi Bottling Group, Inc. 1999 Long Term Incentive Plan, PBG Directors’ Stock Plan, PBG Stock Incentive Plan and PepsiAmericas, Inc. 2000 Stock Incentive Plan, 333-165107
/s/ KPMG LLP
New York, New York
February 8, 2024
EXHIBIT 24
POWER OF ATTORNEY
KNOW ALL BY THESE PRESENTS, that PepsiCo, Inc. (“PepsiCo”) and each other undersigned, an officer or director, or both, of PepsiCo, do hereby appoint David Flavell, Cynthia A. Nastanski and Heather A. Hammond, and each of them severally, its, his or her true and lawful attorney-in-fact to execute on behalf of PepsiCo and the undersigned the following documents and any and all amendments thereto (including post-effective amendments) deemed necessary or appropriate by any such attorney-in-fact:
(i)Automatic Shelf Registration Statement No. 333-266332 relating to the offer and sale of PepsiCo Common Stock, Debt Securities, Warrants and Units, the Automatic Shelf Registration Statement No. 333-234767 relating to the offer and sale of PepsiCo Common Stock, Debt Securities, Warrants and Units, the Automatic Shelf Registration Statement No. 333-133735 relating to the offer and sale of PepsiCo Common Stock, Debt Securities, Warrants and Units, the Automatic Shelf Registration Statement No. 333-154314 relating to the offer and sale of PepsiCo Common Stock, Debt Securities, Guarantees of Debt Securities, Warrants and Units, the Automatic Shelf Registration Statement No. 333-177307 relating to the offer and sale of PepsiCo Common Stock, Debt Securities, Warrants and Units, the Automatic Shelf Registration Statement No. 333-197640 relating to the offer and sale of PepsiCo Common Stock, Debt Securities, Warrants and Units, and the Automatic Shelf Registration Statement No. 333-216082 relating to the offer and sale of PepsiCo Common Stock, Debt Securities, Warrants and Units;
(ii)Registration Statements No. 33-53232, 33-64243, 333-102035 and 333-228466 relating to the offer and sale of PepsiCo’s Debt Securities, Warrants and/or Guarantees;
(iii)Registration Statements No. 33-4635, 33-21607, 33-30372, 33-31844, 33-37271, 33-37978, 33-47314, 33-47527, 333-53436 and 333-56302 all relating to the primary and/or secondary offer and sale of PepsiCo Common Stock issued or exchanged in connection with acquisition transactions;
(iv)Registration Statements No. 33-29037, 33-35602, 33-42058, 33-51496, 33-54731, 33-42121, 33-50685, 33-66150 and 333-109513 relating to the offer and sale of PepsiCo Common Stock under the PepsiCo SharePower Stock Option Plan;
(v)Registration Statements No. 2-82645, 33-51514, 33-60965 and 333-89265 relating to the offer and sale of PepsiCo Common Stock under the PepsiCo Long-Term Savings Program or the PepsiCo 401(k) Plan; Registration Statement No. 333-65992 relating to the offer and sale of PepsiCo Common Stock under the Retirement Savings and Investment Plan for Union Employees of Tropicana Products, Inc. and Affiliates (Teamster Local Union #173), the Retirement Savings and Investment Plan for Union Employees of Tropicana Products, Inc. and Affiliates; Registration Statement No. 333-66634 relating to the offer and sale of PepsiCo Common Stock under The Quaker 401(k) Plan for Salaried Employees and The Quaker 401(k) Plan for Hourly Employees; Registration Statements Numbers 333-76196, 333-76204, 333-150867 and 333-150868 each relating to the offer and sale of PepsiCo Common Stock under The PepsiCo Savings Plans;
(vi)Registration Statements No. 33-61731, 333-09363 and 333-109514 relating to the offer and sale of PepsiCo Common Stock under The PepsiCo, Inc. 1995 Stock Option Incentive Plan;
Registration Statement No. 33-54733 relating to the offer and sale of PepsiCo Common Stock under The PepsiCo, Inc. 1994 Long-Term Incentive Plan and resales of such shares by executive officers of PepsiCo; Registration Statement No. 33-19539 relating to the offer and sale of PepsiCo Common Stock under PepsiCo’s 1987 Incentive Plan and resales of such shares by executive officers of PepsiCo; Registration Statement No. 2-65410 relating to the offer and sale of PepsiCo Common Stock under PepsiCo’s 1979 Incentive Plan and 1972 Performance Share Plan, as amended; Registration Statement No. 333-66632 relating to the offer and sale of PepsiCo Common Stock under The Quaker Long Term Incentive Plan of 1990, The Quaker Long Term Incentive Plan of 1999, and The Quaker Oats Company Stock Option Plan for Outside Directors; Registration Statement No. 333-109509 relating to the offer and sale of PepsiCo Common Stock under the PepsiCo, Inc. 2003 Long-Term Incentive Plan and resales of such shares by executive officers and directors of PepsiCo; and Registration Statements Nos. 333-142811 and 333-166740 relating to the offer and sale of PepsiCo Common Stock under the PepsiCo, Inc. 2007 Long-Term Incentive Plan;
(vii)Registration Statements No. 33-22970 and 333-110030 relating to the offer and sale of PepsiCo Common Stock under PepsiCo’s Director Stock Plan and resales of such shares by Directors of PepsiCo;
(viii)Registration Statement No. 333-162261 relating to the issuance of shares of PepsiCo Common Stock to stockholders of The Pepsi Bottling Group, Inc. pursuant to the Agreement and Plan of Merger dated as of August 3, 2009, as may be amended from time to time, among PepsiCo, PBG and Pepsi-Cola Metropolitan Bottling Company, Inc. (“Metro”);
(ix)Registration Statement No. 333-162260 relating to the issuance of shares of PepsiCo Common Stock to stockholders of PAS pursuant to the Agreement and Plan of Merger dated as of August 3, 2009, as may be amended from time to time, among PepsiCo, PAS and Metro;
(x)Schedule 13E-3 relating to the Agreement and Plan of Merger dated as of August 3, 2009, as may be amended from time to time, among PepsiCo, PBG and Metro;
(xi)Schedule 13E-3 relating to the Agreement and Plan of Merger dated as of August 3, 2009, as may be amended from time to time, among PepsiCo, PAS and Metro;
(xii)Registration Statement No. 333-87526 relating to the offer and sale of PepsiCo Common Stock under The PepsiCo Share Award Plan;
(xiii)Registration Statement No. 333-165106 relating to the offer and sale of PepsiCo Common Stock under the PBG 401(k) Savings Program, the PBG 401(k) Program, the PepsiAmericas, Inc. Salaried 401(k) Plan and the PepsiAmericas, Inc. Hourly 401(k) Plan;
(xiv)Registration Statement No. 333-165107 relating to the offer and sale of PepsiCo Common Stock under the PBG 2004 Long Term Incentive Plan, the PBG 2002 Long Term Incentive Plan, the PBG Long Term Incentive Plan, The Pepsi Bottling Group, Inc. 1999 Long Term Incentive Plan, the PBG Directors’ Stock Plan, the PBG Stock Incentive Plan and the PepsiAmericas, Inc. 2000 Stock Incentive Plan;
(xv)Registration Statement No. 333-165176 relating to the offer and sale of PepsiCo Common Stock under the PepsiAmericas, Inc. 2000 Stock Incentive Plan;
(xvi)Registration Statement No. 333-165177 relating to the offer and sale of PepsiCo Common Stock under the PBG 2004 Long Term Incentive Plan, the PBG 2002 Long Term Incentive Plan, the PBG Long Term Incentive Plan, The Pepsi Bottling Group, Inc. 1999 Long Term Incentive Plan and the PBG Stock Incentive Plan; and
(xvii)the Annual Report on Form 10-K for the fiscal year ended December 30, 2023 and all other applications, reports, registrations, information, documents and instruments filed or required to be filed by PepsiCo with the Securities and Exchange Commission (the “SEC”), including, but not limited to the Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K or any amendment or supplement thereto, any stock exchanges or any governmental official or agency in connection with the listing, registration or approval of PepsiCo Common Stock, PepsiCo debt securities or warrants, other securities or PepsiCo guarantees of its subsidiaries’ or third party debt securities or warrants, or the offer and sale thereof, or in order to meet PepsiCo’s reporting requirements to such entities or persons;
and to file the same with the SEC, any stock exchange or any governmental official or agency, with all exhibits thereto and other documents in connection therewith, and each of such attorneys-in-fact shall have the power to act hereunder with or without any other.
* * *
Each of the undersigned hereby grants to each such attorney-in-fact full power and authority to do and perform any and every act and thing whatsoever requisite, necessary, or proper to be done in the exercise of any of the rights and powers herein granted, as fully to all intents and purposes as the undersigned might or could do if personally present, with full power of substitution or revocation, hereby ratifying and confirming all that such attorney-in-fact, or such attorney-in-fact’s substitute or substitutes, shall lawfully do or cause to be done by virtue of this Power of Attorney and the rights and powers herein granted.
This Power of Attorney may be executed in counterparts and all such duly executed counterparts shall together constitute the same instrument. This Power of Attorney shall not revoke any powers of attorney previously executed by the undersigned. This Power of Attorney shall not be revoked by any subsequent power of attorney that the undersigned may execute, unless such subsequent power of attorney specifically provides that it revokes this Power of Attorney by referring to the date of the undersigned’s execution of this Power of Attorney. This Power of Attorney, unless earlier revoked by the undersigned in the manner set forth above, will be valid as to each attorney-in-fact until such time as such attorney-in-fact ceases to be an employee of PepsiCo.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, each of the undersigned has executed this instrument on the date indicated opposite its, his or her name.
| PepsiCo, Inc. | February 8, 2024 | ||||||||||
| By: | /s/ Ramon L. Laguarta | ||||||||||
| Ramon L. Laguarta | |||||||||||
| Chairman of the Board of Directors and Chief Executive Officer | |||||||||||
/s/ Ramon L. Laguarta Ramon L. Laguarta | Chairman of the Board of Directors and Chief Executive Officer | February 8, 2024 | ||||||
/s/ James T. Caulfield James T. Caulfield | Executive Vice President and Chief Financial Officer | February 8, 2024 | ||||||
/s/ Marie T. Gallagher Marie T. Gallagher | Senior Vice President and Controller (Principal Accounting Officer) | February 8, 2024 | ||||||
/s/ Segun Agbaje Segun Agbaje | Director | February 8, 2024 | ||||||
/s/ Jennifer Bailey Jennifer Bailey | Director | February 8, 2024 | ||||||
/s/ Cesar Conde Cesar Conde | Director | February 8, 2024 | ||||||
/s/ Ian M. Cook Ian M. Cook | Director | February 8, 2024 | ||||||
/s/ Edith W. Cooper Edith W. Cooper | Director | February 8, 2024 | ||||||
/s/ Susan M. Diamond Susan M. Diamond | Director | February 8, 2024 | ||||||
/s/ Dina Dublon Dina Dublon | Director | February 8, 2024 | ||||||
/s/ Michelle Gass Michelle Gass | Director | February 8, 2024 | ||||||
/s/ Dave J. Lewis Dave J. Lewis | Director | February 8, 2024 | ||||||
/s/ David C. Page David C. Page | Director | February 8, 2024 | ||||||
/s/ Robert C. Pohlad Robert C. Pohlad | Director | February 8, 2024 | ||||||
/s/ Daniel Vasella Daniel Vasella | Director | February 8, 2024 | ||||||
/s/ Darren Walker Darren Walker | Director | February 8, 2024 | ||||||
/s/ Alberto Weisser Alberto Weisser | Director | February 8, 2024 | ||||||
EXHIBIT 31
CERTIFICATION
I, Ramon L. Laguarta, certify that:
1.I have reviewed this annual report on Form 10-K of PepsiCo, Inc.;
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
| Date: February 8, 2024 | /s/ Ramon L. Laguarta | ||||
| Ramon L. Laguarta | |||||
| Chairman of the Board of Directors and Chief Executive Officer | |||||
CERTIFICATION
I, James T. Caulfield, certify that:
1.I have reviewed this annual report on Form 10-K of PepsiCo, Inc.;
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
| Date: February 8, 2024 | /s/ James T. Caulfield | ||||
| James T. Caulfield | |||||
| Chief Financial Officer | |||||
EXHIBIT 32
CERTIFICATION PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of PepsiCo, Inc. (the “Corporation”) on Form 10-K for the fiscal year ended December 30, 2023 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Ramon L. Laguarta, Chairman of the Board of Directors and Chief Executive Officer of the Corporation, certify to my knowledge, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350), that:
1.The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2.The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Corporation.
| Date: February 8, 2024 | /s/ Ramon L. Laguarta | ||||
| Ramon L. Laguarta | |||||
| Chairman of the Board of Directors and Chief Executive Officer | |||||
CERTIFICATION PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of PepsiCo, Inc. (the “Corporation”) on Form 10-K for the fiscal year ended December 30, 2023 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, James T. Caulfield, Chief Financial Officer of the Corporation, certify to my knowledge, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350), that:
1.The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2.The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Corporation.
| Date: February 8, 2024 | /s/ James T. Caulfield | ||||
| James T. Caulfield | |||||
| Chief Financial Officer | |||||
Exhibit 97
PepsiCo, Inc.
Compensation Recovery Policy for Covered Executives
Effective October 2, 2023
This Compensation Recovery Policy for Covered Executives (this “Policy”) has been adopted by the Compensation Committee (the “Committee”) of the Board of Directors (the “Board”) of PepsiCo, Inc. (the “Corporation”) in accordance with the applicable requirements of Nasdaq Listing Rule 5608 (“Rule 5608”), which implements Rule 10D-1 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) (as promulgated pursuant to Section 954 of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010).
1.Definitions
For purposes of this Policy, the following terms shall have the meaning set forth below.
(a)“Accounting Restatement” means a requirement that the Corporation prepare an accounting restatement due to the material noncompliance of the Corporation with any financial reporting requirement under the U.S. federal securities laws, including any required accounting restatement to correct an error in previously issued financial statements that is material to the previously issued financial statements, or that would result in a material misstatement if the error were corrected in the current period or left uncorrected in the current period. Changes to the Corporation’s financial statements that do not represent error corrections are not an Accounting Restatement, including: (A) retrospective application of a change in accounting principle; (B) retrospective revision to reportable segment information due to a change in the structure of the Corporation’s internal organization; (C) retrospective reclassification due to a discontinued operation; (D) retrospective application of a change in reporting entity, such as from a reorganization of entities under common control; and (E) retrospective revision for stock splits, reverse stock splits, stock dividends or other changes in capital structure.
(b)“Covered Executive” means a person who served as an Executive Officer at any time during the performance period for the applicable Incentive-Based Compensation.
(c)“Erroneously Awarded Compensation” means the amount of Incentive-Based Compensation that was Received that exceeds the amount of Incentive-Based Compensation that otherwise would have been Received had the amount of Incentive-Based Compensation been determined based on the restated amounts, computed without regard to any taxes paid. For Incentive-Based Compensation based on stock price or total shareholder return, where the amount of erroneously awarded compensation is not subject to mathematical recalculation directly from the information in an accounting restatement, the amount of Erroneously Awarded Compensation will be based on a reasonable estimate by the Committee of the effect of the Accounting Restatement on the stock price or total shareholder return upon which the Incentive-Based Compensation was Received.
(d)“Executive Officer” means the Corporation’s officers as defined in Rule 16a-1(f) under the Exchange Act.
(e)“Financial Reporting Measures” means (A) measures that are determined and presented in accordance with the accounting principles used in preparing the Corporation’s financial statements, and any measures that are derived wholly or in part from such measures (whether or not such measures are presented within the Corporation’s financial statements or included in a filing made with the U.S. Securities and Exchange Commission), (B) stock price and (C) total shareholder return.
(f)“Incentive-Based Compensation” means any compensation that is granted, earned, or vested based wholly or in part upon the attainment of a Financial Reporting Measure.
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(g)Incentive-Based Compensation is deemed to be “Received” in the Corporation’s fiscal period during which the Financial Reporting Measure specified in the applicable Incentive-Based Compensation award is attained, even if the payment, vesting or grant of the Incentive-Based Compensation occurs after the end of that period.
(h)“Recovery Period” means the three completed fiscal years immediately preceding the earlier of: (A) the date the Board, a committee of the Board, or the officer or officers of the Corporation authorized to take such action if Board action is not required, concludes, or reasonably should have concluded, that the Corporation is required to prepare an Accounting Restatement; or (B) the date a court, regulator, or other legally authorized body directs the Corporation to prepare an Accounting Restatement. In addition, if there is a change in the Corporation’s fiscal year end, the Recovery Period will also include any transition period to the extent required by Rule 5608.
2.Recovery of Erroneously Awarded Compensation
Subject to the terms of this Policy and the requirements of Rule 5608, if the Corporation is required to prepare an Accounting Restatement, the Corporation will attempt to recover, reasonably promptly from each Covered Executive, any Erroneously Awarded Compensation that was Received by such Covered Executive during the Recovery Period pursuant to Incentive-Based Compensation that is subject to this Policy.
3.Interpretation and Administration
(a)Role of the Committee. This Policy will be administered and interpreted by the Committee in a manner that is consistent with Rule 5608 and any other applicable law and will otherwise be interpreted in the business judgment of the Committee. Any applicable award agreement or other document setting forth the terms and conditions of any compensation covered by this Policy shall be deemed to include the restrictions imposed herein and incorporate this Policy by reference and nothing in such agreement or other document will limit application of this Policy. All decisions and interpretations of the Committee will be final and binding.
(b)Compensation Not Subject to this Policy. This Policy does not apply to Incentive-Based Compensation that was Received before October 2, 2023. With respect to any Covered Executive, this Policy does not apply to Incentive-Based Compensation that was Received by such Covered Executive before beginning service as an Executive Officer.
(c)Determination of Means of Recovery. The Committee will determine the appropriate means of recovery, which may vary between Covered Executives or based on the nature of the applicable Incentive-Based Compensation, and which may involve, without limitation, establishing a deferred repayment plan or setting off against current or future compensation otherwise payable to the Covered Executive.
(d)Determination That Recovery is Impracticable. The Corporation is not required to recover Erroneously Awarded Compensation if a determination is made by the Committee that either (A) after the Corporation has made and documented a reasonable attempt to recover such Erroneously Awarded Compensation, the direct expense paid to a third party to assist in enforcing this Policy would exceed the amount to be recovered or (B) recovery of such Erroneously Awarded Compensation would likely cause an otherwise tax-qualified retirement plan, under which benefits are broadly available to employees of the Corporation, to fail to meet the requirements of Section 401(a)(13) or 411(a) of the Internal Revenue Code and regulations thereunder.
(e)No Indemnification or Corporation-Paid Insurance. The Corporation will not indemnify any Covered Executive against the loss of Erroneously Awarded Compensation and
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will not pay or reimburse any Covered Executive for the purchase of a third-party insurance policy to fund potential recovery obligations.
(f)Interaction with Other Clawback Provisions. The Corporation will be deemed to have recovered Erroneously Awarded Compensation in accordance with this Policy to the extent the Corporation actually receives such amounts pursuant to any other Corporation policy, program or agreement or pursuant to Section 304 of the Sarbanes-Oxley Act or otherwise.
(g)No Limitation on Other Remedies. Nothing in this Policy will be deemed to limit the Corporation’s right to terminate employment of any Covered Executive, to seek recovery of other compensation paid to a Covered Executive, or to pursue other rights or remedies available to the Corporation under any other Corporation policy, program or agreement or applicable law.
(h)Amendment and Termination. Subject to Rule 10D-1 of the Exchange Act and Rule 5608, this Policy may be amended or terminated by the Committee at any time.
Adopted by the Compensation Committee on September 28, 2023.
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