Exhibit 10.5
SHARED SERVICES AGREEMENT
This Shared Services Agreement is dated as of __________________, 1999 by and
between PepsiCo, Inc., a North Carolina company ("PEP") and The Pepsi Bottling
Group, Inc., a Delaware company ("PBG").
WHEREAS, PEP currently provides certain services to PBG, and PBG likewise
provides certain services to PEP;
WHEREAS, it is contemplated that an initial public offering will be made of a
portion of the capital stock of PBG, resulting in partial public ownership of
PBG, and that PEP and PBG will continue to provide certain services to each
other following the initial public offering; and
WHEREAS, it is further contemplated that PEP and PBG may provide certain
services to other licensed Pepsi-Cola bottlers who have signed a Master Bottling
Agreement with PEP (the "Master Bottlers");
NOW, THEREFORE, the parties agree as follows:
1. PURPOSE OF AGREEMENT
The purpose of this Agreement is to set forth (i) the roles and
responsibilities with regard to services to be provided by PEP and PBG
to each other, and (ii) certain guidelines with regard to PEP and PBG
providing services to the Master Bottlers. The intent of both parties is
to achieve reduced costs, increased productivity and improved customer
service for both parties and for the Master Bottlers.
2. TERM OF AGREEMENT.
This Agreement shall remain in effect until such time as it has been
terminated as to all Services in accordance with Paragraph 10 below.
3. SERVICES TO BE PROVIDED.
A. Exhibits 1 through 27 attached to and made a part of this Agreement
describe both Key Services (consisting of Payroll, Credit and
Collection, Purchasing and Information Technology Services) and Non-Key
Services (consisting of all the other Services referred in the Exhibits
hereto) to be provided by PEP and PBG to each other. The Key Services
and the Non-Key Services are referred to herein, collectively, as the
"Services", and individually as a "Service". The parties have made a
good faith effort as of the date hereof to identify each Service and to
complete the content of the Exhibits accurately. It is anticipated that
the parties will modify the Services from time to time. In that case or
to the extent that any Exhibit is incomplete, the parties will use good
faith efforts to modify the
Exhibits. There are certain terms that are specifically addressed in the
Exhibits attached hereto that may differ from the terms provided
hereunder. In those cases, the specific terms described in the Exhibits
shall govern that Service.
B. The parties may also identify additional Services that they wish to
incorporate into this Agreement. The parties will create additional
Exhibits setting forth the description of the Services, the fees for
such Services and any other applicable terms.
C. The parties will provide the Services either through their own
resources, the resources of their subsidiaries or affiliates, or by
contracting with independent contractors as agreed hereunder. To the
extent that a Service provider decides to provide a Non-Key Service
through an independent contractor in the future, it shall notify the
Service recipient of its intent to do so. To the extent that a Service
provider decides to provide all or any material portion (e.g., an entire
Information Technology Service area) of a Key Service through an
independent contractor, the Service provider shall consult with and
obtain the prior approval of the Service recipient, which approval shall
not be unreasonably withheld.
D. In providing the Services hereunder each party will exercise the same
degree of care as it has historically exercised in providing such
Services prior to the date hereof. The objective of the parties is that
the Services will be provided with the same level of quality,
responsiveness and timeliness as has been exercised by each party with
respect to their own Services prior to the date hereof. To the extent
there are assets which the Service provider, or its independent
contractor, requires in the performance of the Services which are in the
control of the Service recipient, the Service recipient shall provide
reasonable access to such assets to the Service provider or its
independent contractor.
4. SERVICES PROVIDED TO MASTER BOTTLERS.
PEP and/or PBG may both provide Services to other Master Bottlers, at
the request and agreement of the Master Bottlers. In no event will PEP,
on the one hand, or PBG, on the other hand, provide Services to the
Master Bottlers for lower fees or on better terms and conditions than
those provided to PBG by PEP, on the one hand, or by PBG to PEP, on the
other hand. Cost allocations will be made on a fair and equitable basis
among PEP, PBG and the Master Bottlers. If either party hereto enters
into, expands or significantly modifies any arrangement by which it
provides Services to a Master Bottler and if such action would have a
material adverse effect on the aggregate costs or benefits to the other
party hereunder, it will notify the other party of such action. PEP and
PBG will review the cost allocations resulting from such action and will
make any adjustments that they mutually determine may be necessary to
prevent a material adverse effect on the aggregate costs or benefits to
the party not initiating the action. Upon reasonable notice, each of PEP
and PBG will have the right to audit the cost allocations hereunder
through an independent auditor.
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5. FEES.
A. The fees for each Service are set forth or described in the attached
Exhibits. For certain of the Services, a fixed fee is stated on the
applicable Exhibit whereas for other Services a budget based on 1999
plans or a cost allocation methodology is articulated. In some cases,
the Exhibit reflects that the Service recipient will be responsible for
the third party payments, whereas for other Services, all third party
payments are included in the articulated fee. The fees have been
calculated to reflect the fully-allocated direct and indirect costs of
providing the Service (including G&A), and all applicable federal, state
and local sales, use or similar taxes in force, and in PBG's case, are
based on volume and territories as of October 1998. The fees specified
in the attached Exhibits include all charges, costs and expenses related
to the Services, unless otherwise specifically provided in the Exhibits
or agreed in an AOP. Except as specifically provided herein or in the
Exhibits, or as subsequently agreed in an AOP, the Service recipient
will not be responsible to the Service provider or to any independent
contractor retained by such party, for any additional fees, charges,
costs or expenses relating to the Services, unless such additional fees,
charges, costs or expenses are a direct result of the Service
recipient's unilateral deviation from an agreed protocol or methodology
with respect to the Service.
B. The fees will not be changed, except on prior written agreement of both
parties, including as subsequently agreed in an AOP (as defined below).
As a part of the AOP process referred to in Paragraph 7 below, the
parties will set new fixed fees or new budgets for each ensuing year,
and may make other changes to the fee arrangement in respect of each
Service. Once an AOP has been finalized (whether by agreement or
pursuant to the provisions of Paragraph 9 hereof), the fee arrangement
set out in that AOP will apply for the ensuing year, subject to any
subsequent written agreements between parties. Among other reasons, the
parties acknowledge fees and Services may need to be adjusted based upon
changes to territories
C. Each party will pay the other party an amount fifteen days after each
period end based on the fees outlined in the Exhibits or as subsequently
agreed in an AOP (as defined below).
D. With respect to Credit & Collection, Purchasing, Supplier, Aviation,
Payroll and Information Technology Services, (the "Quarterly Reviewed
Services") PEP and PBG will quarterly reconcile the then prevailing fee
arrangement of each Quarterly Reviewed Service with the Service
provider's cost of rendering that Quarterly Reviewed Service on an
individual Service basis. Unless the Service recipient agrees to the
contrary, the Service recipient shall not be required to pay, in respect
to any of the Quarterly Reviewed Services provided in any one year, an
amount greater than the then prevailing fee for that Quarterly Reviewed
Service rendered in that year. In the event, however, that the Service
provider's cost with respect to any of the Quarterly Reviewed Services
in respect of one year is less than the then prevailing fees for that
Quarterly Reviewed Service rendered in that year, 100% of that cost
savings shall be passed on to the Service
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recipient (either in the form of rebate or discount from the otherwise
applicable fees). The parties will use the quarterly review process as
described in Paragraph 7(B) to discuss the reconciliation for the
Quarterly Reviewed Services.
E. Where a fixed fee has been agreed in the Exhibits, such fee shall be
reviewed six months from the date hereof and such fee shall be adjusted
based upon an increase or reduction in Services applicable thereto.
F. To the extent that the Service recipient uses a Service provider's
working capital to procure or continue Services, the Service recipient
will be charged the cost of capital by the Service provider.
6. STAFFING AND PERSONNEL.
A. The parties recognize that the staffing of Key Services is critical to
the quality, timeliness and effectiveness of those Services. With
respect to Key Services, the Service recipient shall have the right to
approve replacement personnel for those positions identified as "Key
Persons" on the applicable Exhibits hereto, which approval shall not be
unreasonably withheld or delayed. In addition, with respect to all
Services, the Service provider will not make any material changes to
service capability without first consulting with the Service recipient.
B. Each party will appoint a representative ("Representative(s)") to
facilitate communications and performance under this Agreement. Each
party may treat an act of a Representative of the other party as being
authorized by such other party. The initial Representatives are ▇▇▇▇ ▇▇▇
with respect to PEP and ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ with respect to PBG. Each party
may replace its Representative by giving notice written notice of the
replacement to the other party.
C. No additional Exhibits, modifications to existing Exhibits,
modifications to an AOP approved pursuant to Paragraph 7, or amendments
to this Agreement shall be effective unless and until executed by the
Representatives of each of PEP and PBG.
7. PLANNING PROCESS.
A. The Representative of each party will coordinate the development of an
annual operating plan ("AOP") setting forth the specific objectives,
service standards, performance measures, activity levels and a detailed
budget for each of the Services. In the AOP process, the parties agree
to use their best efforts to harmonize the interest of the Service
recipient to have quality service at affordable cost and the interest of
the Service provider to recover its cost of performing Services. On or
before November 1 of each calendar year, an AOP for each Service for the
next calendar year will be submitted to the Chief Financial Officer
("CFO") of each party for review and approval. Approval by the CFO of
each party will constitute approval by that party of the AOP. If the
Representatives fail to submit an AOP to the CFOs or if the CFOs fail to
approve an AOP, the parties will continue to operate under the existing
AOP for that
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Service (but with pricing adjusted to reflect the Service provider's
then current cost structure) and the parties will refer the failure to
submit or approve the AOP to the Chief Executive Officers ("CEO") of the
parties pursuant to Paragraph 9.
B. Promptly following the end of each quarter, the Service provider will
prepare and submit to the other party a performance review for that
quarter. The parties will meet on a quarterly basis to review progress
against the AOP objectives, service standards, performance measures, and
activity levels. The parties will use good faith efforts to resolve any
issues concerning service standards or performance measures during these
quarterly meetings. If the parties are unable to resolve those issues,
they will refer the disputed issues to the CEOs pursuant to Paragraph 9.
8. THIRD PARTY AGREEMENTS
To the extent that it is not practicable to have a Service recipient as
the contracting party for a third party obligation, each party hereto,
with respect to all goods or services supplied by the Service provider
or contracted for by the Service provider on behalf of the Service
recipient, shall use commercially reasonable efforts to cause all such
third party contracts to extend to and be enforceable by the Service
recipient, or to assign such contracts to the Service recipient. In the
event that such contracts are not extendable or assignable, as will
usually be the case with Information Technology Services, the Service
provider shall act as agent for the Service recipient in the pursuit of
any claims, issues, demands or actions against such third party provider
at the Service recipient's expense. The Service recipient will indemnify
the Service provider for any liability under third party contracts
arising directly out of the acts or omissions of the Service recipient.
9. DISPUTE RESOLUTION
A. If any AOP is not submitted or is not approved by the parties, or if the
parties are unable to resolve any service, performance or budget issues
during the quarterly business reviews or if there is a material breach
of this Agreement which has not been corrected within thirty (30) days
of receipt of notice of such breach, the CEOs of the parties will meet
promptly to review and resolve those issues in good faith. If, despite
their good faith efforts, the CEOs are unable to resolve the disputed
issues within thirty (30) days of their meeting, then such dispute shall
be settled by arbitration in accordance with the then prevailing
Commercial Arbitration Rules of the American Arbitration Association
(the "AAA"), as such rules may be modified herein. ----
B. An award rendered in connection with an arbitration pursuant to this
Section shall be final and binding and judgment upon such an award may
be entered and enforced in any court of competent jurisdiction.
C. The forum for arbitration under this Section shall be agreed upon by the
parties, or, failing such agreement, shall be New York, New York.
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D. Arbitration shall be conducted by a single arbitrator selected jointly
by PEP and PBG. If within 30 days after a demand for arbitration is
made, PEP and PBG are unable to agree on a single arbitrator, three
arbitrators shall be appointed. Within 30 days after such inability to
agree, PEP and PBG shall each select one arbitrator and those two
arbitrators shall then select a third arbitrator unaffiliated with
either party. In connection with the selection of the third arbitrator,
consideration shall be given to familiarity with corporate divestiture
transactions and experience in dispute resolution between parties, as a
judge or otherwise. If PEP and PBG cannot agree on the third arbitrator
within such 30-day period, they shall promptly thereafter discuss the
qualifications of such third arbitrator with the AAA prior to selection
of such arbitrator, which selection shall be in accordance with the
Commercial Arbitration Rules of the AAA.
E. If an arbitrator cannot continue to serve, a successor to an arbitrator
selected by PEP or PBG, as the case may be, also shall be selected by
the same party, and a successor to the neutral arbitrator shall be
selected as specified in subsection (D) of this Section. A full
rehearing will be held only if the neutral arbitrator is unable to
continue to serve or if the remaining arbitrators unanimously agree that
such a rehearing is appropriate.
F. The arbitrator or arbitrators shall be guided, but not bound, by the
Federal Rules of Evidence and by the procedural rules, including
discovery provisions, of the Federal Rules of Civil Procedure. Any
discovery shall be limited to information directly relevant to the
controversy or claim in arbitration.
G. The parties hereto shall bear their own costs in any arbitration and the
costs specifically related to the arbitration proceedings shall be split
evenly between the parties.
10. TERMINATION
Either party may terminate this Agreement without cause with respect to
one or more Non-Key Services under this Agreement, effective December 31
of any calendar year, by providing written notice to the other party no
later than January 1 of the same calendar year or as agreed between the
parties hereto. As to all Key Services, this Agreement will remain in
force and effect unless and until terminated by the written agreement of
both of the parties.
11. GOOD FAITH COOPERATION; CONSENTS
The parties will use good faith efforts to cooperate with each other in
all matters relating to the provision and receipt of Services. Such good
faith cooperation will include exchanging information, providing
electronic access to systems used in connection with Services, and using
commercially reasonable efforts to obtain all consents, licenses,
sublicenses or approvals necessary to permit each party to perform its
obligations. The parties will cooperate with each other in making such
information available as needed in the event of any and all internal or
external audits, whether in the United States or any other country. If
this Agreement is terminated in whole or in part, the parties will
cooperate with each
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other in all reasonable respects in order to effect an efficient
transition and to minimize the disruption to the business of both
parties, including the assignment or transfer of the rights and
obligations under any contracts.
12. RESPONSIBILITY
In an action for monetary damages arising out of an alleged breach of
contract claim, each party shall be liable hereunder only for the actual
damages suffered by the other party arising out of the failure of the
first party to perform its obligations hereunder consistent with the
standard of care referred to in the first sentence of Paragraph 3(D)
above and the concepts laid out in Paragraph 11 above; provided,
however, that neither party shall be liable for consequential or special
damages of the other party.
13. FORCE MAJEURE
Any delay or failure by either party in the performance of this
Agreement will be excused to the extent that the delays or failure are
due solely to causes or contingencies beyond the reasonable control of
such party.
14. INDEPENDENT CONTRACTOR
It is expressly understood that PEP and PBG are independent contractors
of one another, and that neither has the authority to bind the other to
any third person, or otherwise to act in any way as the representative
of the other, unless expressly agreed to in writing signed by both
parties hereto.
15. ASSIGNMENT
This Agreement is not assignable in whole or in part by either party
without the prior written consent of the other, provided that either
party may assign this Agreement in whole or in part to a parent, a
direct or indirect wholly-owned subsidiary, an affiliate or a successor
thereto.
16. CONFIDENTIALITY
Each party will keep confidential all information relating to the
business of the other party that it obtains as a result of the Services
provided under this Agreement. Such confidential information will only
be used for purposes of providing the Services and will only be
disclosed to parties who need to know in order to provide Services. The
foregoing will not apply with respect to any information (i) that is or
becomes publicly known through no fault of the party receiving the
information (the "Receiver"); (ii) that is legally obtained by the
Receiver from a third party reasonably believed by the Receiver to be
legally entitled to disclose it; (iii) that is required to be disclosed
pursuant to a requirement of a government agency or law; (v) that can be
documented through the Receiver's files as known to the Receiver prior
to receipt pursuant to this Agreement; or (v) that is developed by or
for the Receiver, independent of activities under this Agreement.
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17. GOVERNING LAW
This Agreement and performance hereunder will be governed by and
construed in accordance with the laws of the State of New York without
regard to the principles of conflict of laws.
18. ENTIRE AGREEMENT
This Agreement, including the attached Exhibits, is the complete and
exclusive statement of the agreement between the parties and supersedes
all prior proposals, understandings and all other agreements, oral and
written, between the parties relating to the subject matter of this
Agreement. This Agreement may not be modified or altered except by
written instrument duly executed by both parties.
IN WITNESS WHEREOF, the parties have signed this Agreement on the date
first set forth above.
PepsiCo, Inc.
By:
--------------------------------
Name:
Title:
The Pepsi Bottling Group, Inc.
By:
--------------------------------
Name:
Title:
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EXHIBIT 1
SUPPLIER SERVICES
1. DESCRIPTION OF SERVICES
A. SCOPE
PepsiCo, Inc. ("PEP") will provide Supplier Services to The Pepsi Bottling
Group, Inc. ("PBG") of paying suppliers for services or goods supplied,
and reimbursing employees for travel or relocation expenses incurred in
the course of business. The services will cover all supplier, T&E,
relocation or procurement card payments made in the U.S.
B. SPECIFIC SERVICES
The specific services that PEP will provide are as follows:
o Process amounts payable to suppliers. Resolve invoice differences
with suppliers.
o Support Purchasing organization through analysis of contract spend
and compliance, raw material standard setting and price variance
analysis.
o Process T&E and Relocation claims for payment. Maintain T&E
Procurement Credit Card processes. Respond to employee calls through
1-800 number.
Additional services may be included upon agreement of both parties.
C. PRIMARY CONTACTS
The primary contacts for the services are as follows:
PepsiCo: ▇▇▇▇ ▇▇▇
PBG:▇▇▇▇ ▇▇▇▇▇
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2. SERVICE FEES
A. SERVICE FEES
The Supplier Services function provides support to Pepsi-Cola Concentrate,
PepsiCo, Pepsi-Cola International as well as PBG. Fees charged to PBG will
be based on an allocation of the actual costs of the Supplier Services
function. This allocation will be based on Purchasing spend for Accounts
Payable and Supplier Development support, and on Corporate Travel
cardholders for T&E costs.
Based on 1999 Plan, PBG 1999 costs would be:
$5,066,000 for Accounts Payable, Supplier Development and T&E Support.
Service Fees will be adjusted for any change in territories on a basis
proportional with the change in volume (or card holders for T&E support).
Approved:
PepsiCo, Inc. The Pepsi Bottling Group, Inc.
By: ___________________ By: ____________________
Title: _______________ Title: _________________
Date: ________________ Date: __________________
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EXHIBIT 2
GOVERNMENT AFFAIRS SERVICES
1. DESCRIPTION OF SERVICES
A. SCOPE
PepsiCo, Inc. ("PEP") will provide government affairs services to
The Pepsi Bottling Group, Inc. ("PBG") to enable PBG to attain its
business objectives of protecting against unwarranted government
intrusion and regulation of its marketplace while facilitating
business opportunities within government and educational channels.
The services will cover the government affairs needs of all PBG
market units and business units in all states and local
jurisdictions where they do business and on the federal level.
B. SPECIFIC SERVICES
The specific services that PEP will provide are as follows:
1. Provide coverage and advocacy on federal, state and local
governmental issues affecting PBG's business and products.
2. Represent the business, political and local interests of PBG
in federal and state industry business coalitions and trade
associations.
3. Assist where needed by developing business and marketing
opportunities in federal, state and local governmental sales
channels, including secondary schools, military, colleges and
universities, parks, prisons, etc.
Services which are ordinarily provided to bottlers without
charge, shall be also provided to PBG without charge.
Additional services may be included upon agreement of both
parties.
C. PRIMARY CONTACTS
PepsiCo: ▇▇▇▇ ▇▇▇▇▇
PBG: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇/▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
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2. SERVICE FEE
A. SERVICE FEES
PBG will pay the following service fees:
PBG Government Affairs Budget Allocations:
Employee % of time allocated to PBG PBG Cost
-------- -------------------------- --------
▇. ▇▇▇▇▇▇ 65% $132,000*
▇. ▇▇▇▇▇▇ 70% $129,000*
▇. ▇▇▇▇▇▇▇▇ 40% $ 83,000*
▇. ▇▇▇▇▇▇ 50% $ 25,000*
-------------------------------------------------------------
Total $344,000
*T&E Included
Dues for PBG membership in coalitions and trade associations will be
payable separately by PBG.
B. NO ADDITIONAL CHARGES
The fees provided above will not be changed, except on prior written
agreement of both parties. The fees include all charges, costs and
expenses related to the services, other than outside consulting and
vending fees which shall only be incurred and charged to PBG upon
the prior agreement of PBG and PEP. Except for the foregoing, PBG
will not be responsible to PEP or to any third party retained by PEP
for any additional fees, charges, costs or expenses relating to the
services.
3. ADDITIONAL TERMS
Period of coverage will be ongoing subject to yearly reviews during the
annual budgeting process.
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APPROVED:
PEPSICO, INC.
By:
-------------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇
Title: Vice President, Government Affairs
Date:
THE PEPSI BOTTLING GROUP, INC.
By:
-------------------------------------
Title:
----------------------------------
Date:
----------------------------------
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EXHIBIT 3
PURCHASING SERVICES
1. DESCRIPTION OF SERVICES
A. SCOPE
PepsiCo Inc. ("PEP") will provide procurement and supply management
services to The Pepsi Bottling Group, Inc. ("PBG"). The services will cover
supplier selection, inventory and forecast management of all materials
(i.e. cans, PET bottles, closures, paperboard wraps, fructose as well as
the entire category of Other Goods & Services). PBG is required to purchase
100% of its requirements for all of its materials used by all of its U.S.
and Canadian operations through PEP. PBG may continue to purchase raw
materials locally for its non-Canadian international operations, except
with regard to PET purchases which shall continue pursuant to a separate
arrangement between PEP and PBG.
B. GOALS AND OBJECTIVES
The following goals and objectives have been established with regard to the
provision of these services:
Provide uninterrupted supply through a disciplined forecast process and
build supplier infrastructure to support PBG's business.
Continue to enhance processes and systems to obtain the highest quality
materials.
To obtain the best advantage in the marketplace.
C. SPECIFIC SERVICES
The specific services that PEP will provide are as follows:
o Supplier selection and supplier management.
o Procure material supply through agreed upon forecasted needs.
o Negotiations and management of the entire supplier base.
o Management of the quality and service parameters needed for all materials
and services to operate the business.
D. PRIMARY CONTACTS AND KEY PERSON
The primary contacts for the services are as follows:
PepsiCo: ▇▇▇ ▇▇▇▇▇▇▇▇▇
PBG:▇▇▇▇ ▇▇▇▇▇▇
Key Person: ▇▇▇ ▇▇▇▇▇▇▇▇▇
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2. SERVICE FEES
Fees charged to PBG will be based on an allocation of the actual cost of
the Purchasing Group. Based upon the 1999 plan, PBG's costs will be:
$4.691 million to cover all costs in the U.S., including individuals and
T&E.
$650 thousand to cover all costs internationally, including individuals
and T&E.
3. ADDITIONAL TERMS
PAYMENT FOR RAW MATERIALS AND GOODS & SERVICES
As contemplated in this Exhibit, PBG shall be responsible for the
obligations contracted for on its behalf by PEP. Standard pricing and
rebates will be used to maintain confidentiality of cost data. PEP will not
incorporate a profit ▇▇▇▇-up to costs actually charged for raw materials
and goods & services. Any multi-year agreements and hedging transactions
other than as agreed in the AOP shall be contracted for or implemented only
with the prior approval of PBG.
Approved:
PepsiCo, Inc. The Pepsi Bottling Group, Inc.
By:____________________ By:___________________________
Title:_________________ Title:________________________
Date:__________________ Date:_________________________
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EXHIBIT 4
REAL ESTATE SERVICES
1. DESCRIPTION OF SERVICES ▇▇▇▇▇▇ SITE - 522,800 GROSS SQ.FT. ON 206 ACRES.
A. SCOPE
The Pepsi Bottling Group, Inc. ("PBG"), through the ▇▇▇▇▇▇ Facility Department,
will assist PepsiCo, Inc. ("PEP") with compliance with lease terms, manage PEP
assets on the premises and provide facility services to PEP as listed below,
including the provision of administrative office space and support services. The
services will cover the use of the ▇▇▇▇▇▇ office building, site and specific
associated services listed below in paragraph C.
B. SERVICES PROVIDED TO PEP:
1. Manage the facility in compliance with all terms and conditions of
lease agreement.
2. Administration of lease to include compliance with all agreements,
commercial terms, and administration of all lease payments.
3. Manage assets of PEP and its subsidiaries on the premises (i.e.:
furniture, equipment, vehicles, etc.)
C. SPECIFIC SERVICES PROVIDED TO PEP - (charged through rent):
The specific services that PBG, through the ▇▇▇▇▇▇ Facility Department, will
provide are as follows:
1. Dedicated office space, furniture and accessories
2. Parking
3. Staffed reception desk and lobby area
4. 24hr security of building and grounds
5. 24hr access to site and building
6. Snow removal
7. Heating, ventilation, air conditioning & lighting
8. Routine maintenance, repairs and upkeep of building, grounds,
furniture & fixtures
9. Audio visual services
10. Custodial services, recycling and trash removal
11. Mail pick up and delivery service 2x day
12. On site express mail service (fee charged)
13. Staffed loading dock with 1 delivery per day to building
14. Conference center & video teleconference via reservation
15. Floor copiers, paper and service
16. On site cafeteria and catering
17. Staffed medical office
18. Credit union
19. Limited on site storage areas
20. Retail company store
21. On site rental car reservations, pick up and return
22. On site travel office
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23. On site reproduction center (fee charged for some services)
24. On site fitness center (use via membership)
25. Office space alterations (fee charged)
D. PRIMARY CONTACTS
▇▇▇▇▇ ▇▇▇▇▇▇ - PBG
▇▇▇ ▇'▇▇▇▇ - PEP
2. SERVICE FEES
A. RENT ALLOCATION BY OPERATING UNIT
NOTE: THE ALLOCATION OF EMPLOYEES PER GROUP IS AS OF 12/10/98
THE CARRYING COST OF UNOCCUPIED SPACE IS NOT ALLOCATED TO ALL OPERATING UNITS
AND WILL BE ABSORBED BY PBG.
RENTABLE SQ.
% TOTAL USEABLE FT.(USEABLE SQ.FT.X RENT PER ANNUAL RENTAL
OPERATING UNIT POPULATION USEABLE SQ. FT. SPACE RENTABLE FACTOR) SQ. FT. COST
-------------- ---------- -------------- --------------- -------------------- -------- -------------
PepsiCo (PEP) 574 92,936 30% 156,695 $37.17 $ 5,823,611
Pepsi-Cola (PEP) 108 15,262 5% 25,732 $37.17 $ 956,330
PCI (PEP) 37 7,280 2% 12,274 $37.17 $ 456,142
PBG 671 131,317 43% 221,407 $37.17 $ 8,228,609
Unoccupied space 0 63,279 20% 106,692 $37.17 $ 3,965,208
TOTALS 1390 310,074 100% 522,800 $19,429,900
COMMON SPACE SQ.FT. 212,726
TOTAL BUILDING SQ. FT. 522,800
RENTABLE FACTOR 1.686
B. ASSUMPTIONS
o The carrying cost for unoccupied space will be absorbed by PBG. (1999 plan
$3.96MM based on current occupancy as of 12/10/98 and is subject to change
dependent upon increase/decrease of unoccupied space).
o Population mix will be reviewed quarterly and any adjustments to the rent
allocation will be made at that time.
o Rent Allocation
o PBG will invoice each operating unit at PEP on a periodic basis.
9
Approved:
PepsiCo, Inc. The Pepsi Bottling Group, Inc.
By:___________________ By:____________________
Title:________________ Title:_________________
Date:_________________ Name:__________________
10
EXHIBIT 5
EMPLOYEE BENEFIT AND RELOCATION SERVICES
1. DESCRIPTION OF SERVICES
A. SCOPE
The Pepsi Bottling Group Inc., ("PBG") will provide employee benefit and
relocation administration to PepsiCo, Inc. ("PEP"). This agreement covers
administrative services for Flex benefits, pension, SaveUp 401(k),
SharePower, Severance, Service Awards, and domestic relocation programs.
Services will be provided to approximately 1550 active PEP, Pepsi-Cola
North America ("PCNA") and PCI employees who are based primarily in the US
and, in the case of benefits, to terminated and retired PEP employees.
Services described in this agreement are not being provided to former
employees of NAVL, Leeway, ▇▇▇▇▇▇ Sporting Goods and other entities that
have been sold or discontinued by PEP.
B. SPECIFIC SERVICES
The specific services that PBG will provide are as follows:
1) BENEFITS ADMINISTRATION
o Employee benefits data and vendor feeds
o Annual and ongoing Flex enrollment
o Pension calculations (for PCNA employees), election
processing and set-ups
o LTD, life insurance and AD&D claims
o SharePower administration
o SaveUp 401(k) administration
o Service awards
o Severance
o COBRA, LTD medical and retiree medical administration
o Claim appeals and litigation
2) EMPLOYEE SERVICES
o 55-PEPSI availability during standard hours o Resolution
of employee benefit issues and questions o Support to
PEP HR and Benefits on benefit issues or employee
questions
11
B. Specific services (continued)
3) BENEFITS COMMUNICATIONS
o Mandatory and discretionary employee communications as
agreed to by PBG and PEP o Drafting, design, production
and distribution of communications to employees
4) MANAGEMENT OF COMPANY APARTMENTS (16 COMPANY APARTMENTS TO BE
USED FOR RELOCATING EMPLOYEES)
o Lease negotiation, upkeep and maintenance of company
apartments
o Scheduling and administration of temporary housing for
relocated employees
o Scheduling, transfer and arrangements including special
accommodations
5) DOMESTIC RELOCATION SERVICES
o Management and administration of employee relocations in
the US
o Policy counseling o Expense payment, management and all
accounting functions
Additional services may be included upon agreement of both parties.
C. PRIMARY CONTACTS
The primary contacts for the services are as follows:
PEPSICO: ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇ Alziar
PCNA: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
PCI: ▇▇▇ ▇▇▇▇▇▇▇▇
PBG: ▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇
2. SERVICE FEES
A. SERVICE FEES
PEP will pay the following service fees, which reflect PBG's direct and
indirect, fully-allocated cost (including overhead) of providing the
service:
o A pro-rata share of the operating costs for PBG employees who
provide the services described above, based on PEP active employee
headcount relative to the total headcount supported by such PBG
employees. Operating costs shall include actual salaries, benefit
costs, T&E and other expenses incurred in the ordinary course of
business for the PBG employees who provide the services described.
12
Plus,
o Actual time and materials charges for outside expenses such as
printing, postage, vendor fees, consulting or legal expenses,
utilities, rental charges, maintenance charges, etc. Whenever
outside expenses are to be incurred, they need to be pre-agreed by
the parties. Outside expenses will be passed through to PEP at cost
using PBG standard billing terms. To the extent that outside
expenses are incurred on behalf of a broader population than PEP's,
they will be allocated to PEP on a per capita basis where those
services and expenses have been previously agreed by PEP and PBG.
Special projects and/or extraordinary services will only be
conducted if agreed to in advance.
It is also understood that from time to time, other PBG employees may be
required to assist in the provision of services described above, and that
there may be projects above and beyond the ordinary that result in
additional work. To the extent practical a pro rata portion of the
operating costs for these PBG employees will be allocated to PEP for such
work.
On the basis described above, estimated fees for 1999 are as follows:
Benefits Administration $234,240
RELOCATION $75,000
TOTAL $309,240
B. ADDITIONAL CHARGES
The fees above include all charges, costs and expenses related to the services
other than Information Technology (including software purchasing and licensing)
which shall be the responsibility of PEP to maintain and to fund separately.
Approved
PepsiCo, Inc. The Pepsi Bottling Group, Inc.
By:______________________________ By:_______________________
Title:___________________________ Title:____________________
Date:____________________________ Date:_____________________
13
EXHIBIT 6
INTERNATIONAL PERSONNEL ADMINISTRATION SERVICES
1. DESCRIPTION OF SERVICES
A. SCOPE
PepsiCo, Inc. ("PEP") will provide personnel administration services to
The Pepsi Bottling Group, Inc. ("PBG") with respect to compensation,
benefits, expatriate employee administration, relocation and HRIS
services. The services will cover executive/managerial/professional
employee administration in Russia, Spain, and Greece and expatriates in
Canada. To the extent other territories are added to PBG, additional
services will be discussed at that time. These services are in addition to
those that PEP provides to its franchise bottlers in the ordinary course
of business.
B. SPECIFIC SERVICES
The specific services that PEP will provide are as follows:
ADMINISTRATION OF ANNUAL CYCLE PROCESSES ADMINISTRATION OF BASELINE KEY REGIONAL
ACCOUNTABILITIES INITIATIVES
---------------------------------------- -------------------------- ------------
o Expatriate H&W benefits (including o Multi-national pooling - o Total comp -
IPS) Balancing, financing, terms trimester reviews,
o Annual Stock option grants (if o Negotiations with local insurers affordability analyses
applicable) o Job evaluation services o Sales comp
o Performance management (base o Retirement plan administration - initiatives
salary/bonus administration)* Eligibility, inter-country moves, o Banding
o Annual expat assignment set-up expenses, funding (excludes Canada)
(allowances, tables) o Severance agreements*
o Expat tax filings, returns, reserves o Package
o Coordination of total compensation development/administration - executives
planning process (local salary ranges, o Core process guide
merit grids, annual pay plans, excludes o Share Power administration - for
Canada) vested employees with grants (including
o Local pension plan administration IPS, excludes Canada)
(excludes Canada) o Expat/inpat tax equalization -
o US pension administration for Policy, mechanics, local payroll,
vested pensioners* tools, compliance
o Executive Income Deferral o Price-Waterhouse Coopers
administration outsourcing management
o Expat tax administration (annual o IPS production processing - data
W2/related reconciliations, US payroll collection, vendor interface,
reporting coordination for foreign reporting, field support
reporting/returns, tax equalization, o IPS database or remote site data
accounting administration)* synchronization
o IPS HQ administration & customer
service
o IPS ongoing application upgrades &
technology updates
14
o Synergies: travel, car fleet,
payroll*
o Field administration training
o Relocation services
o Ongoing employee communication
on benefits & compensation
*TBD whether support from IPA is required/desired by PBG.
C. PRIMARY CONTACTS
The primary contacts for the services are as follows:
PepsiCo: Europe/Middle East/Africa Region - ▇▇▇▇ ▇▇▇▇▇▇
US/PwC/Relocation - ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
International HRIS - ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
PBG: ▇▇▇▇▇ ▇▇▇▇▇▇▇
2. SERVICE FEES AND PAYMENT
After the first year, both parties reserve the right to revisit scope
and pricing of this agreement.
A. SERVICE FEES
PBG will pay the following service fees:
REGIONAL SERVICE FEES: LOCALS & NON US EXPATS:
o (pound)2,000 per expatriate assignee per year (1999 estimated
total number of expatriates in Russia (22); total estimated
charges = (pound)44,000). This amount to be provisioned by the
local controllers to include amount billed directly from
PepsiCo Richmond for regional office support
o $3,500 per expatriate assignee per year (1999 estimated total
number of expatriates in Russia (22); total estimated charges
= $77,000). This amount to be provisioned by the local
controllers to include balance for filings/other tax work
billed direct from Price-Waterhouse Coopers local offices.
HQ SERVICE FEES: $0 in 1999. Charges for future years will be
determined later in 1999.
PWC FEES - US EXPATS/ EXPATS IN CANADA, SPAIN, RUSSIA, GREECE,
INPATRIATES: (estimated to be 17 in total)
o Approximately $6,000/expatriate
o Other Price-Waterhouse Coopers work billed at standard
Price-Waterhouse Coopers fees less PepsiCo 25% discount on a
project basis subject to approval
15
REGIONAL SERVICE FEES - OTHER EMPLOYEE WORK:
o (pound)60,000 for Spain per yEAR
o (pound)110,000 for Russia per YEAR
o (pound)20,000 for Greece per YEAR
RELOCATION FEES:
o Household goods management, expense processing, counseling, property
management: $2,200/expat
IPS FEES:
o Ongoing annual charges: $45,500
o Initial one time start up cost of US $10,000 for IPS new company set
up
PAYROLL FEES: See Exhibit 8
These fees include all applicable federal, state and local sales, use
or similar taxes currently in force.
B. ADDITIONAL CHARGES
The fees provided above shall not be changed, except on prior written
agreement of both parties. The fees include all charges, costs and
expenses related to the services, other than VAT, local pension
valuations and administration, hardware, operating system software,
telecommunications, LAN/WAN, consulting fees, survey fees, and travel
costs of PBG employees. Other fees such as relocation, destination
services, AIRINC charges, etc. will be billed directly to PBG. Third
party vendor per capita administrative fees will be paid directly by
PBG (e.g. ▇▇▇▇▇▇▇ ▇▇▇▇▇, CIGNA, ▇▇▇▇▇▇, Kwasha Lipton). All such
foregoing fees shall be payable by PBG on prior agreement of PEP and
PBG.
C. PAYMENT TERMS
PBG will pay for the services as follows:
1. Regional fees - billed quarterly directly by ▇. ▇▇▇▇▇▇ to BUs in
Spain, Russia, Greece.
2. Other fees - to PepsiCo HQ on a quarterly basis.
3. Price-Waterhouse Coopers fees - billed monthly directly by
Price-Waterhouse Coopers to PBG.
D. ASSUMPTIONS
o Local benefit plans will not change.
o IPS support sites encompass the current locations: Moscow, Madrid,
Athens. These figures do not include any expenses that local fields
would incur such as hardware, software, telecom lines.
16
o There will continue to be an HR administrator in each of these
locations.
o Payroll and accounting interface capability work (especially TEQ)
will be done by PBG.
o Current employee relations capability and accountabilities in these
BUs is continued by PGB.
E. U.S. EXPATS TAX EQUALIZATION RESERVES
Tax reserves for Russia, Spain and Greece will be maintained by PEP for
payments to be made through December 31, 1998. Any risks or exposures
resulting from a deficiency in tax reserves for Russia, Spain and Greece
for amounts payable prior to December 31, 1998 will remain with PEP.
Thereafter, PBG will bear any risks or exposures associated with payments
and associated tax reserves as of January 1, 1999.
Approved:
PEPSICO, INC. THE PEPSI BOTTLING GROUP, INC.
By: ___________________________ By:____________________________
Title:_________________________ Title: ______________________
Date:__________________________ Date: ______________________
17
EXHIBIT 7
HEALTH AND WELFARE BENEFITS - PLANNING AND DELIVERY SERVICES
1. DESCRIPTION OF SERVICES
A. SCOPE
PepsiCo, Inc. ("PEP") will provide health and welfare planning and
delivery services to The Pepsi Bottling Group, Inc. ("PBG"). The
services will be provided in total or in part for employees located in
the United States and Canada, employees participating in the Expat/TCN
plan and employees participating in programs that are part of PepsiCo's
multinational pools.
B. SPECIFIC SERVICES
The specific services that PEP will provide are as follows:
o Input on reviews of plan designs in light of cost, competitive
and employee data
o Secure group purchasing and discounts (includes vendors and
consultants) o Vendor selection, fee negotiation and service
level contracts (including maintenance)
o Provide technical expertise and consultative support on plan
design, cost management, acquisitions/divestitures, new
programs/vendors
o Project management of large-cross divisional initiatives
o Perform data analysis and reporting, manage data vendor
o Assist with country specific developments to maximize
financial advantages of pools o Continue to measure joint
areas of network adequacy issues and work with vendors to
resolve
o Organize Y2K compliance review
o Provide centralized compliance review of communications and
plan documentation
C. PRIMARY CONTACTS
The primary contacts for the services are as follows:
PepsiCo: ▇▇▇▇ ▇▇▇▇▇
PBG: ▇▇▇▇ ▇▇▇▇▇▇▇
2. SERVICE FEES
A. SERVICE FEES
For the services listed under 1B, PBG will pay PepsiCo based on the
allocation of time spent by the current staff: Manager and Analyst,
Health and Welfare Delivery, Manager
18
and Analyst, Health and Welfare Planning and Analyst, International
Health and Welfare.
o PBG will pay PepsiCo a service fee of $150,000 for 1999.
B. NO ADDITIONAL CHARGES
The fees provided above will not be changed, except on prior written
agreement of both parties. The fees include all charges, costs and
expenses related to the services, other than direct vendor and
outside consulting fees. Any such fees to be charged to PBG relating
to outside consultants and vendors shall be agreed in advance by PEP
and PBG.
Approved:
PepsiCo, Inc. The Pepsi Bottling Group, Inc.
By:________________________ By:_______________________
Title:_____________________ Title:____________________
Date:______________________ Date:_____________________
19
EXHIBIT 8
FINANCIAL PLAN ADMINISTRATION SERVICES
1. DESCRIPTION OF SERVICES
A. SCOPE
PepsiCo, Inc. (PEP) will provide benefits administration services to
the Pepsi Bottling Group, Inc. (PBG) in the areas of pension and 401(k)
administration.
B. SPECIFIC SERVICES
The specific services that PEP will provide are as follows:
i) Baseline Accountabilities
a) Management of pension administration vendor (e.g.,
setting and monitoring performance guarantees, fee
negotiation, administrative policy)
b) Management of 401(k) record keeping vendor
c) Management of actuarial services vendor
d) Management of benefit payment provider
e) Management of audit vendor
f) PIRP administration and retirements
g) Provide consulting services as requested (e.g., plan
design, cost management, administrative policy,
acquisitions and mergers, business restructuring, audit
and compliance)
ii) Administration of Recurring processes
a) Pension valuations (Salaried, Hourly, PEP, PIRP and
Allied plans)
b) FAS 87 Expense determinations
c) Government forms filing
d) 401(k) fund performance reporting
C. PRIMARY CONTACTS
PepsiCo: ▇▇▇▇ ▇▇▇▇▇ / ▇▇▇▇▇▇ ▇▇▇▇▇▇
PBG: ▇▇▇▇ ▇▇▇▇▇▇▇ / ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
2. SERVICE FEES
Where separately identifiable and as agreed in advance by PEP and PBG, PBG
will be billed separately by outside vendors (pension/401(k)
administration, PBG-only actuarial and legal services) and pay fees
directly to outside vendors.
For services performed by outside vendors that are not separately
identifiable, costs will
20
be allocated among PEP and PBG in a manner satisfactory to both PEP and
PBG.
For recurring services provided by the Sr. Manager, Pension Plans Manager
and 2 Analysts, PBG will be billed a proportion of PepsiCo's employee cost
based on time spent on PBG related projects.
Estimated annual fee: $105,000
For special projects provided by the Sr. Manager, Pension Plans Manager
and 2 Analyst, PBG pay for services as agreed upon by both PEP and PBG.
Approved:
PepsiCo, Inc. The Pepsi Bottling Group, Inc.
By:_____________________ By:______________________
Title: _________________ Title:___________________
Date:___________________ Date:____________________
21
EXHIBIT 9
BENEFIT COMMUNICATIONS
1. DESCRIPTION OF SERVICES
A. SCOPE
PepsiCo, Inc. ("PEP") will provide employee communication services to The
Pepsi Bottling Group, Inc. ("PBG"). Communication services will relate to
the 401k, pension, SharePower, health & welfare and compensation programs.
The services will cover eligible union and non-union employees in the
U.S., Canada, Spain and Greece in these categories: executive, managerial
and front-line.
B. SPECIFIC SERVICES
The specific services that PEP will provide are listed below. These
services include consulting (development of key messages/packaging),
writing, design and distribution, and coordinating legal and technical
review with persons designated by PBG.
o Flex H&W benefit enrollment
o Communications on expiring SharePower options
o Coordination and distribution of Total Compensation Statements
o Announcement of changes to any benefit plan
o Rollout of new benefits
o Newsletters and event-driven communications
o Modules for any Intranet/Internet benefit application
o Updates, including legal and technical review, to all Summary Plan
Documents (SPDs)
o Updates to required SARs
o Quarterly statements
o Administration and analysis of Benefit surveys
o Year-end 401(k) letters
o Annual PRP, Medicare tax and other pension letters
C. PRIMARY CONTACTS
The primary contacts for the services are as follows:
PepsiCo: ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇
PBG: ▇▇▇▇ ▇▇▇▇▇▇▇
22
2. SERVICE FEES
PBG will pay for services provided by PEP by the Senior Manager, Manager
and Analyst of Communications.
o Cost: $44,500
Approved:
PepsiCo, Inc. The Pepsi Bottling Group, Inc.
By:_______________________ By:_______________________
Title:____________________ Title:____________________
Date:_____________________ Date:_____________________
23
EXHIBIT 10
GLOBAL SHAREPOWER ADMINISTRATION SERVICES
1. DESCRIPTION OF SERVICES
A. SCOPE
PepsiCo, Inc. ("PEP") will provide administrative and vendor management
services to The Pepsi Bottling Group, Inc. ("PBG"). The services will cover
overall management of the vendor (▇▇▇▇▇▇▇ ▇▇▇▇▇) for PBG employees who continue
to hold PepsiCo options under the SharePower program. Additionally, PEP will
provide assistance in resolving any SharePower participant issues that can not
be resolved by PBG and ▇▇▇▇▇▇▇ ▇▇▇▇▇ alone.
B. SPECIFIC SERVICES
The specific services that PEP will provide are as follows:
o resolve any participant issues that arise from PBG employees'
efforts to exercise SharePower options
o resolve participant issues that arise as a result of the IPO
C. PRIMARY CONTACTS
The primary contacts for the services are as follows:
PepsiCo: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
PBG: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
2. SERVICE FEES
PBG will pay the administrative fees directly to ▇▇▇▇▇▇▇ ▇▇▇▇▇ for:
o Account administration
o Exercise fees
o System enhancements
PBG will pay for services provided by PEP's Manager, Analyst and
Administrator of SharePower
o 1999 cost: $17,750
24
Approved:
PepsiCo, Inc. The Pepsi Bottling Group, Inc.
By:_____________________ By:_______________________
Title:__________________ Title:____________________
Date:___________________ Date:_____________________
25
EXHIBIT 11
PAYROLL SERVICES
1. DESCRIPTION OF SERVICES
A. SCOPE
PepsiCo, Inc. ("PEP") will provide Payroll Services to The Pepsi Bottling
Group, Inc. ("PBG") to enable PBG to compensate employees for time worked,
pay, commission for product sold, and remit amounts deducted to the
appropriate taxing agencies or authorized benefits or other parties. The
services will cover all U.S.-based employees.
B. SPECIFIC SERVICES
The specific services that PEP will provide are as follows:
o Preparation and distribution of weekly and bi-weekly employee checks
o Payment of related taxes, garnishments and other deductions to
appropriate partners
o Preparation and filing of employer tax returns
o Preparation of annual W-2 to employees o Response to employee
questions through 1-800 telephone line
o Feed accounting information to General Ledger of PEP (Concentrate
and International).
Additional services may be included upon agreement of both parties.
C. PRIMARY CONTACTS AND KEY PERSON
The primary contacts for the services are as follows:
PepsiCo: ▇▇▇ ▇▇▇▇▇▇▇
PBG: ▇▇▇▇ ▇▇▇▇▇
Key Person: ▇▇▇ ▇▇▇▇▇▇▇
26
2. SERVICE FEES
PBG will pay the following service fees:
PAYROLL
U.S. Employee: $139 per year per person
International Employee: $168 per year per person
Payroll estimates are based on an estimate of 29,705 U.S. employees and
630 International employees.
Approved:
PepsiCo, Inc. The Pepsi Bottling Group, Inc.
By: _____________________ By:______________________
Title: _________________ Title:___________________
Date: __________________ Date:____________________
27
EXHIBIT 12
RISK MANAGEMENT SERVICES
1. DESCRIPTION OF SERVICES
A. Scope
PepsiCo, Inc. ("PEP") will provide risk management, safety and claim
services to The Pepsi Bottling Group, Inc. ("PBG"). The services will
cover approximately thirteen property and casualty insurance programs;
risk, safety and claim vendor selection and oversight; and risk, safety
and claim processes and measurements for PBG.
B. Specific Services and Service Fees
The specific Services that PEP will provide and Service Fees that will be
charged are to be described in detail in an Insurance and Risk Management
Agreement to be executed by PBG, PEP and Hillbrook Insurance Company, Inc.
C. Primary Contacts
The primary contacts for the services are as follows:
PEP: ▇▇▇▇ ▇▇▇▇▇▇▇, Senior Vice President and Treasurer
PBG: ▇▇▇▇▇ ▇▇▇▇▇, Senior Vice President and Treasurer
Approved:
PepsiCo, Inc. The Pepsi Bottling Group, Inc.
By:_____________________________ By:______________________________
Title: _________________________ Title:___________________________
Date: __________________________ Date:____________________________
28
EXHIBIT 13
CREDIT & COLLECTION
1. DESCRIPTION OF SERVICES
A. SCOPE
PepsiCo, Inc. ("PEP") will provide Credit & Collection services to The
Pepsi Bottling Group, Inc. ("PBG") for the billing and collection of
customer receivables. The services will cover managing credit risk, billing
credit customers, facilitating the resolution process of any customer
disputes, and following up on past due accounts.
B. SPECIFIC SERVICES
The specific services that PEP will provide are as follows:
Administrative processes directly associated with the collection of credit
receivables including:
o Send daily, weekly or monthly statements to credit customers
o Follow-up on overdue accounts, facilitate resolution of billing
disputes, respond to customer queries as necessary.
o Identify credit risk and determine credit limits and the appropriate
timing for the conversion to cash terms.
o Develop electronic billing and collection capability including EDI
and credit card acceptance.
o Determine the appropriate resolution and/or next steps with high
risk, severely delinquent and bankrupt accounts.
o Execution of processes in accordance with PIP guidelines.
Additional services may be included upon agreement of both parties.
C. PRIMARY CONTACTS AND KEY PERSON
The primary contacts for the services are as follows:
PepsiCo: ▇▇▇▇ ▇▇▇
PBG: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Key Person: ▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
29
2. SERVICE FEES
A. SERVICE FEES
The Customer Service Center will provide support to Pepsi-Cola Concentrate
with respect to National Fountain customers. In addition, the Customer
Service Center may provide Credit & Collection services to other Pepsi-Cola
bottlers.
PBG's share of costs will be based on an allocation of total credit &
collection costs at the CSC, including an appropriate share of support
costs (i.e., building rent, maintenance and services). PBG's share will be
based on its share of annual credit sales to total annual credit sales
managed by the Customer Service Center.
Based on 1999 Plan, PBG's share of costs will be $16,798,000 for 1999.
B. ADDITIONAL TERMS
The provision of Services by outside vendors and the associated cost must
be previously agreed upon by PEP and PBG. The costs of such agreed outside
vendors shall be charged to specific PBG locations as incurred.
The credit and collection process may incur costs related to non payment as
a result of billing disputes. Non payment also occurs as a result of other
customer related issues. PBG will establish a separate reserve based on
experience for any failure to pay as a result of bankruptcy, customer
financial distress or any other reason the receivable is deemed
uncollectable.
Approved:
PepsiCo, Inc. The Pepsi Bottling Group, Inc.
By: ___________________ By: ____________________
Title: _______________ Title: _________________
Date: ________________ Date: __________________
30
EXHIBIT 14
FINANCIAL REPORTING FOR INTERNATIONAL LOCATIONS
1. DESCRIPTION OF SERVICES
A. SCOPE
PepsiCo, Inc. ("PEP") will provide Financial Reporting Services to The
Pepsi Bottling Group, Inc. ("PBG") to enable PBG to attain its business
objectives of reporting monthly financial results of operations and cash
flow. The services will cover Spain, Greece and Russia.
B. SPECIFIC SERVICES
The specific services that PEP will provide are as follows:
o Access to Hyperion Database, including restated financial income
statement, balance sheet and cash flow to 1993.
o Supervision and training of PBG employees related to the
consolidation of monthly results through the Hyperion Financial
Database and development of stand alone Financial statements
pursuant to agreed business terms and conditions (e.g. concentrate
price and A&M funding).
o Standard routine maintenance of the Hyperion application (e.g. chart
of accounts and organizational changes).
o Tax reporting services.
Additional services may be included upon agreement of both parties.
C. PRIMARY CONTACTS
The primary contacts for the services are as follows:
PCI: ▇▇▇ ▇▇▇▇▇▇▇▇▇ and ▇▇▇ ▇▇▇▇▇▇▇▇▇
PBG: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
31
2. SERVICE FEES
A. SERVICE FEES
PBG will pay the following service fees:
Financial Reporting: $34,000
Tax Reporting: $30,000
-------
$64,000
In addition to the fees above, PBG will pay the cost of any new Hyperion
license arrangements or amendments relating to PBG having to separately
license the Hyperion software.
Approved:
PepsiCo, Inc. The Pepsi Bottling Group, Inc.
By: ___________________ By: ____________________
Title: _______________ Title: _________________
Date: ________________ Date: __________________
32
EXHIBIT 15
INFORMATION TECHNOLOGY SERVICES
1. DESCRIPTION OF SERVICES
A. SCOPE
PepsiCo, Inc. ("PEP") will provide Information Technology services to
The Pepsi Bottling Group, Inc. ("PBG") to enable PBG to attain its
business objectives of developing, implementing, operating and
supporting Information Technology requirements within agreed to service
levels, and funding levels. The services will cover the activities
defined in Section B below for all countries in which PBG operates.
B. SPECIFIC SERVICES
The specific services that PEP will provide are as follows (definitions
are included as an Addendum):
1. Basic Maintenance
2. Year 2000 Readiness (in accordance with agreed PEP/PBG
plan for Year 2000 Readiness)
3. Operational Continuity
4. Enhancements
5. Investment Projects
Basic Maintenance, Year 2000 Readiness (in accordance with agreed
PEP/PBG plan for Year 2000 Readiness) and Operational Continuity are
referred to as Non-Discretionary services; Enhancements and Investment
Projects are referred to as Discretionary services.
Each year an Annual Operating Plan (AOP) will be prepared by
Information Technology Services working with PBG's functional leaders.
Discretionary and Non-Discretionary services will be estimated and
Discretionary services will be prioritized by PBG's functional leaders.
At least once a quarter, Information Technology Services will provide
an update on the status of Non-Discretionary work, activity levels and
overall spending and Discretionary development work and overall
spending. In addition, certain investment projects identified by PBG
will be subject to Capital Expenditure review and approval policies
which will include scope, rate of return, functionality milestones
reviews, etc.
C. PRIMARY CONTACTS AND KEY PERSON The primary contacts for the
services are as follows:
PepsiCo: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇▇▇
Senior VP, Information Technology & C.I.O., PEP
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
(▇▇▇)▇▇▇-▇▇▇▇, ▇▇▇▇▇.▇▇▇▇▇▇▇▇▇▇▇▇▇@▇▇▇▇▇▇▇.▇▇▇
PBG: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Senior VP & Controller, PBG
▇▇▇ ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
(▇▇▇) ▇▇▇-▇▇▇▇, ▇▇▇▇▇▇▇▇▇@▇▇▇▇▇.▇▇▇
Key Person: ▇▇▇▇ ▇▇▇▇▇
2. SERVICE FEES
PBG will pay service fees, which reflect PEP's fully allocated direct
and indirect cash costs of providing the services as agreed in the AOP.
The AOP will set forth the specific objectives, service standards,
performance measures, activity levels and a detailed budget for each of
the services.
The Information Technology Service function provides support to all PEP
Divisions as well as PBG. Fees charged to PBG will be based on specific
identification of costs to dedicated PBG applications, where possible,
and an agreed allocation of costs where this is not practical.
Certain services may fall under the definition of PEP Shared Services.
These include systems built to support common work processes of PBG and
PEP's operating divisions. PEP will fund the development of these
applications. PEP may, on occasion also fund initiatives to improve the
overall effectiveness of Information Technology Services. PBG and PEP's
operating divisions will be charged for Shared Service Support once
these applications/initiatives are operational based on an agreed
allocation of costs that will be negotiated. The negotiated cost
allocation will be designed to recover PEP's investment.
Approved:
PepsiCo, Inc. The Pepsi Bottling Group, Inc.
By: ____________________ By: ____________________
Title: _________________ Title: _________________
Date: __________________ Date: __________________
34
ADDENDUM A
---------------------- --------------------------------------------------------
SERVICE AREA DESCRIPTION
---------------------- --------------------------------------------------------
BASIC MAINTENANCE Work and system related performance associated with
(NON-DISCRETIONARY) keeping systems and applications running to support
CURRENT Business; operations, structure, transaction
volumes, user populations and data retention
requirements
INCLUDES:
1. FRONT-LINE SUPPORT - respond to user questions or
operational issues, i.e. Help Desk.
2. ENTERPRISE COMPUTING - services associated with
supporting the data center(s) requirements of the
business inclusive of all systems management,
hardware and software upgrades (either vendor
driven or prompted by lease termination), batch
processing, data retention, security, back-up and
recovery to support the current systems
environment and user population (including
Disaster Recovery Services).
3. NETWORK SUPPORT - services associated with
providing and managing capabilities for internal
and external voice and data communication and
information sharing both domestically and
internationally for the current systems
environment and user population. This includes
support of the current voice and data network
design, voicemail, ACD (Automatic Call
Distributor), Voice Response Units, Headquarters
PBXs, data network usage (local and wide area)
generated from the existing IT developed and
supported application and desktop portfolio,
current voice network usage, and hardware and
software upgrades.
4. DISTRIBUTED PROCESSING - services associated with
supporting departmental and/or local office needs
for desktops, laptops, printers and servers
acquired and configured with products from the
standard IT supplied hardware and software for the
current user population. This is inclusive of the
standard desktop office suite, e-mail, integration
and support of the existing IT developed and
supported custom application portfolio with the
base environment, security, server backup and
recovery, hardware and software, and data
retention. Not included: laptop and desktop data
backup and palmtops.
5. COMMON SERVICES - internally focused activities
necessary to execute and support the I/T mission.
Examples are project office, data architecture,
application architecture and transition services
which enable the development, implementation and
support of the systems and application portfolio
for the business.
6. EMERGENCY FIXES - unplanned work to fix problems
preventing the application/technology from
functioning as required. Examples would be
problems where (A)(i) the majority of the users
for a particular system are affected, (ii) a
location reasonably named by Pepsi as mission
critical is affected or (iii) any other entity
reasonably deemed critical by Pepsi is affected
and (B) the problem has high visibility and
materially impacts Pepsi's ability to perform its
business and there is no workaround.
---------------------- --------------------------------------------------------
35
----------------------- --------------------------------------------------------
BASIC MAINTENANCE BASIC MAINTENANCE EXCLUDES:
(NON-DISCRETIONARY)
1. Shadow Systems and Applications Support
2. Video-Conferencing
3. Field Based PBX Support and Voice Costs
4. Reorganizations, Consolidations or Locations Moves.
(Internal/External)
5. Acquisitions or Divestitures.
6. New - Functionality, Data Requirements or Reports.
7. Increased user, data and retention projections.
8. Projects or Investment Strategies
9. Desktop and Laptop Back-Ups
10. Technology Services and Common Services Growth
Driven by Incremental Operational Continuity,
Enhancement or Investment Project Spending.
----------------------- --------------------------------------------------------
YEAR 2000 Completion of the Information Technology work
(NON-DISCRETIONARY) associated with remediating the systems and
applications environment. Excludes all
non-Information Technology owned or supplied
equipment or services, inclusive of, but not
limited to; manufacturing, fleet, vending
equipment, facilities, suppliers, customers,
franchise partners, power supply and other public
utilities.
----------------------- --------------------------------------------------------
OPERATIONAL Work associated with supporting critical business
CONTINUITY or technology related activities resulting from;
(NON-DISCRETIONARY) legal and regulatory issues, business changes,
market place driven process changes.
EXAMPLES:
1. Business Realignment
2. Tax Updates
3. Electronic interfaces with customers
----------------------- --------------------------------------------------------
ENHANCEMENTS
(DISCRETIONARY) Work associated with improving, enhancing or adding new
functionality to current systems and applications. The
scale or complexity of these initiatives requires a
level of planning and discipline above BASIC
MAINTENANCE, but not as comprehensive as a major CAPEX
based investments. The work is usually scheduled as part
of an annual release schedule as agreed to by the
business, but is limited in scope based on the amount of
funding and/or resources approved. This service level
provides the business with a flexible way to address
CONTINUOUS IMPROVEMENT OPPORTUNITIES working within the
current systems and applications framework. This work
are funded as a going rate increment above and beyond
basic maintenance, but once increases in scale,
complexity, integration or infrastructure needs, should
be reassessed as a potential INVESTMENT PROJECT.
----------------------- --------------------------------------------------------
INVESTMENT PROJECTS
(DISCRETIONARY) Significant investments which support the business's
strategic direction or PepsiCo's technology direction,
which require a high level of integration, resources,
funding and/or infrastructure. Approved through a CAPEX
process and supported by a business justification.
----------------------- --------------------------------------------------------
36
EXHIBIT 16
TREASURY SERVICES
1. DESCRIPTION OF SERVICES
A. SCOPE
PepsiCo, Inc. ("PEP") will provide U.S. treasury operations and U.S. cash
management acquisition integration services to The Pepsi Bottling Group,
Inc. ("PBG") to enable PBG to attain its business objectives of performing
operations necessary to support certain treasury activities and integrate
acquired bottlers.
B. SPECIFIC SERVICES
The specific services that PEP will provide are as follows:
1. U.S. TREASURY OPERATIONS
o Calculate, document and initiate disbursement requests for the
payment of certain PBG Treasury items related to domestic long
term debt, common dividends, credit facility fees and domestic
interest rate swap agreements at PBG's direction.
o Poll daily bank account balances for PBG's U.S. banks.
o Post PBG's cash desk activity to PBG's general ledger.
o Provide reporting on short-term borrowings and investments and
interface with PBG's general ledger.
o Administer PBG bank accounts, including opening, closing and
modifying accounts at the request and approval of PBG.
o Review PBG bank fees for accuracy.
o Provide for the preparation of PBG guarantees for signature by
authorized PBG personnel, recording and reporting of such
items.
2. U.S. CASH MANAGEMENT ACQUISITION SERVICES
o Provide acquisition support, including redocumenting the
acquired company's bank accounts and integrating the acquired
company into PBG's cash management system.
Additional services may be included upon agreement of both parties.
C. PRIMARY CONTACTS
The primary contacts for the services are as follows:
PEP: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Senior Vice President and Treasurer
PBG: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Senior Vice President and Treasurer
37
2. SERVICE FEES
A. SERVICE FEES
PBG will pay the following service fees, which reflect PEP's direct,
fully-allocated cost (without overhead) of providing the service:
U.S. Treasury Operations: $95,000 per year (increasing 5% per annum
beginning in fiscal year 2000).
U.S. Cash Management Acquisition Services: $10,000 per acquisition.
Reasonable travel expenses to support PBG acquisition work will be borne
by PBG.
B. PAYMENT TERMS
PBG will pay for U.S. Treasury Operations services fifteen days after each
period and U.S. Cash Management Acquisition services ten days after the
close of each transaction.
Approved:
PepsiCo, Inc. The Pepsi Bottling Group, Inc.
By: _____________________ By: _______________________
Title: _____________________ Title: _______________________
Date: _____________________ Date: _______________________
38
EXHIBIT 17
LEGAL SERVICES
1. DESCRIPTION OF SERVICES
A. SCOPE
PepsiCo, Inc. ("PEP") will provide legal services to The Pepsi Bottling
Group, Inc. ("PBG"). The services will include legal support to the PEP
Information Technology and Procurement groups providing shared services to
PBG. The services will also include legal work in Russia and Canada for
PBG's operations, as well as assistance on Trademark and Employee Benefits
matters.
B. SPECIFIC SERVICES
The specific services that PEP will provide are as follows:
1. Negotiating, drafting and reviewing contracts for Procurement
Group and providing legal advice on supplier management
issues.
2. Negotiating, drafting and reviewing contracts for Information
Technology Group and providing support on related legal
issues.
3. Supervising local attorney in Russia and providing general
legal services for PBG's Russian business.
4. Providing Legal services to PBG's Canadian business.
5. Preparing and reviewing pension, compensation and employee
benefit plans and providing legal services related to those
plans.
6. Providing general corporate legal services.
7. Conducting trademark searches and reviewing advertising and
marketing materials for trademark usage.
Additional services may be included upon agreement of both parties.
C. PRIMARY CONTACTS
The primary contacts for the services are as follows:
PepsiCo: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇.
PBG: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
39
2. SERVICE FEES
A. SERVICE FEES
PBG will pay the following service fees, which reflect PEP's direct and
indirect, fully-allocated cost (including overhead) of providing the
service:
1. Procurement and IT -- $66,100
2. Russia -- $25,400
3. Canada -- $75,000
4. Pension and benefits -- $30,000
5. General corporate -- $10,000
6. Trademarks -- $10,000
These fees are based on projected usage in 1999 and will be revised each
year to reflect projected usage for that year. These fees will be reviewed
by PEP and PBG six months from the date hereof in order to determine any
necessary adjustments.
B. ADDITIONAL TERMS
It is understood that the PEP attorneys providing legal services pursuant
to this Agreement have been retained by PBG for the express purpose of
providing legal advice to PBG and that their communication with PBG will
be subject to the attorney-client privilege to the extent permitted by law
and by applicable ethical requirements. The parties agree that no conflict
of interest between PEP and PBG currently exists with respect to the
services being provided. To the extent a conflict of interest arises PEP
and PBG will discuss and resolve such conflict consistent with the
principles and obligations of professional responsibility.
Approved:
PepsiCo, Inc. The Pepsi Bottling Group, Inc.
By:_____________________________ By:______________________________
Title: _________________________ Title:___________________________
Date: __________________________ Date:____________________________
40
EXHIBIT 18
AVIATION SERVICES
1. DESCRIPTION OF SERVICES
A. SCOPE
PepsiCo, Inc. ("PEP") will provide aviation services to The Pepsi Bottling
Group, Inc. ("PBG") with respect to 2 Challenger Aircraft, Serial Numbers
SN5071 and SN5121 (the "Aircraft") in addition to other services as listed
below.
B. SPECIFIC SERVICES
The specific services that PEP will provide and the fees that will be
charged are to be described in detail in a Joint Ownership Agreement
regarding the Aircraft to be executed by PBG and PEP.
Approved:
PepsiCo, Inc. The Pepsi Bottling Group, Inc.
By: ________________________ By: ________________________
Title: ______________________ Title: ______________________
Date: _______________________ Date: _______________________
41
EXHIBIT 19
MARKET INFORMATION SERVICES
1. DESCRIPTION OF SERVICES
A. SCOPE
PepsiCo, Inc. ("PEP") will provide market information data and services to
The Pepsi Bottling Group, Inc. ("PBG").
B. SPECIFIC SERVICES
The specific services that PEP will provide are as follows:
(i) Access to standard market data purchased by PEP for the United
States, Spain, Greece, Russia and Canada from the respective market
data providers, including IRI, EMS and ▇▇▇▇▇▇▇ among others.
(ii) Provision of periodic standard reports transmitted in standard
formats provided to PEP (via electronic methods or other standard
formats).
(iii) Provision of demand driven customized market data reports and the
availability of personnel who can assist in the access of this data.
(iv) Services of ▇▇▇▇ ▇▇▇▇ in accordance with Exhibit A attached hereto.
PBG shall make standard market data purchased by it available to PEP upon
request. The parties will agree an approval process for charges
attributable to customized market data requests. Additional services may
be included upon agreement of both parties.
C. PRIMARY CONTACTS
The primary contacts for the services are as follows:
PepsiCo: ▇▇▇▇▇▇ ▇▇▇▇▇▇
PBG: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
2. SERVICE FEES
A. SERVICE FEES
There will be no charge for the services and data as described in
Paragraphs 1(B)(i) and 1(B)(ii) above. To the extent that PBG requests any
customized market data reports under Paragraph 1(B)(iii) above, PBG will
be charged for the data and provision of such data in accordance with the
market information supplier's standard rates in keeping with the PEP
Master Agreement with such supplier; provided, however, PEP shall provide
up to $1 million in customized market data reports, as requested by PBG,
free of charge in 1999. There will be a cross charge to PBG relative to
▇▇. ▇▇▇▇'▇ employment per quarter in accordance with Exhibit A attached
hereto.
42
Approved:
PepsiCo, Inc. The Pepsi Bottling Group, Inc.
By:_____________________________ By:______________________________
Title: _________________________ Title:___________________________
Date: __________________________ Date:____________________________
43
EXHIBIT A
MARKETING CONSULTING SERVICES
PROVIDED BY ▇▇▇▇ ▇▇▇▇
1. DESCRIPTION OF SERVICES
A. Scope
The services provided under this Agreement will specifically cover only
those consulting services provided by ▇▇▇▇ ▇▇▇▇ ("▇▇▇▇"), a PEP employee,
to the PBG marketing department.
B. Specific services
The specific services that PEP will provide relate to PBG's National
Program and Media Strategy and will include, but not necessarily be
limited to, the following:
1. Co-design national programs and funding with USA.
2. Develop PBG/Frito-Lay P.O.O. modules and funding.
3. Ethnic strategy.
4. Develop national occasion-based marketing partners.
5. Create incremental PBG programs by trimester.
-- National modules.
-- Fill calendar gaps and address PBG-specific
priority areas and channels.
6. Identify existing prestige strategy and funding
approval/allocation.
-- Prioritize account types/geography.
-- Sell-Ins and account activation programs.
-- Manage PBG budget and USA funding.
7. Manage PBG media strategy, funding and timing.
Additional services may be included upon agreement of both parties.
C. Term of Agreement
This Agreement will take effect on January __, 1999, and will continue
until and agreed date between PBG and PEP.
D. Primary contacts
The primary contacts for the services are as follows:
44
PepsiCo: ▇▇▇▇ ▇▇▇▇
PBG: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
2. SERVICE FEES
A. Service fees
PBG will pay the following service fees, which reflect PEP's direct,
fully-allocated cost (without overhead) of providing the service:
▇▇▇▇'▇ compensation, including salary and bonuses. In addition, all
T&E expenses will be paid by PEP and reimbursed by PBG.
3. ADDITIONAL TERMS
A. AT-WILL EMPLOYMENT STATUS
This Shared Services Agreement does not constitute an employment contract
for a specific term, and does not alter ▇▇▇▇'▇ at-will employment status.
B. PERFORMANCE MANAGEMENT
▇▇▇▇ will report to, and take direction from, ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇, or his
designate or assignee. His performance will be evaluated through the PEP
Performance Management Process, with primary input from ▇▇. ▇▇▇▇▇▇▇▇▇▇▇.
45
EXHIBIT 20
SALES AND USE PROPERTY TAX SERVICES
1. DESCRIPTION OF SERVICES
A. SCOPE
The Pepsi Bottling Group, Inc. ("PBG") will provide sales/use and property
tax compliance service to PepsiCo, Inc. ("PEP") for Tropicana and PepsiCo
within the U.S. The service will cover compliance, audits and tax planning
activities relating to sales/use including business licenses, and property
taxes.
B. SPECIFIC SERVICES
The specific services that PBG will provide are as follows:
1. Gathering of data necessary to complete the returns.
2. File tax return with the tax jurisdiction.
3. Defend tax return on subsequent audit; that were originally filed
after February 1998.
4. Reconcile tax accruals to returns as filed.
5. Identify exposures for aggressive positions taken on returns.
6. Provide information for AOP purposes as to tax provisions.
7. Identify tax planning opportunities.
8. Appeal real estate assessments as necessary.
C. PRIMARY CONTACTS
The primary contacts for the services are as follows:
PBG: ▇▇▇▇▇▇ ▇▇▇▇
PEP: ▇▇▇ ▇▇▇▇▇▇▇
2. SERVICE FEES
SERVICE FEES
PEP will pay the following service fees, which reflects PBG's direct and
indirect, fully-allocated cost (including overhead) of providing the service.
Based on 1999 Plan, PEP's share of costs will be $200,000 and
out-of-pocket expenses with PEP prior approval.
All federal, state and local taxes, as applicable, are included in the
fee.
46
3. ADDITIONAL TERMS
o PEP retains the right to approve all audit settlements and planning
opportunities.
o PBG must submit to PEP each quarter a status report of all audits in
progress.
o PBG will make tax payments out of funds provided by PEP.
o PEP is responsible for the accuracy of the data. PBG is responsible
for all other aspects required in order to comply with this
agreement.
Approved:
PepsiCo, Inc. The Pepsi Bottling Group, Inc.
By:____________________________ By:______________________
Title:_________________________ Title:___________________
Date:__________________________ Date:____________________
47
EXHIBIT 21
CANADIAN TAX AND TREASURY SERVICES
1. DESCRIPTION OF SERVICES
A. SCOPE
PepsiCo, Inc. ("PEP"), through Pepsi-Cola Canada Ltd. (PCCL), will provide
Canadian tax, pension, insurance, cash management, treasury operations and
corporate accounting services to The Pepsi Bottling Group, Inc. ("PBG").
The services will cover approximately $70 million of pension assets, 3500
employees, 38 locations, 2 legal entities and 8 bank accounts.
B. SPECIFIC SERVICES
The specific services that PEP will provide are as follows:
1. Banking/Cash Management
o Maintain banking relations in Canada
o Invest daily cash balances
o Purchase foreign exchange
o Implement and monitor PBG foreign exchange hedging
program
o Review new bank products and services
o Banking contract negotiation and documentation
2. Pensions
o Monitor pension asset investments
o Prepare pension plan financial statements
o Cashflow management by plan
o Regulatory filings and actuarial valuations
o Manage external advisor/agent relationships
o Support plan conversions and mergers
o Lead Pension Committee
o Pension accounting
o Investment structure design and implementation
3. Insurance
o Maintain Canadian insurance program
o Coordinate yearly renewals/tenderings
o Insurance accounting and cost allocations
o Manage broker and adjuster relationships
4. Legal Entity Accounting
o Prepare Canadian GAAP financial statements for PBG
Canada
48
5. Acquisition/Divestiture Support
o Tax/treasury due diligence
o Transition of tax, banking, insurance and other
corporate functions
o Determination and implementation of optimum financing
structure for the transaction
6. Taxation
o Compliance
- Federal and provincial returns
- Income, capital and withholding taxes
- Foreign transaction reporting
- U.S. Form 5471 data reporting
o Tax provision calculation
o Managing tax audits
o Tax rate forecasts
o Tax and financing structure planning
o Tax accounting
o Transfer pricing
o Sales tax support
o Review tax implications of business proposals
Additional services may be included upon agreement of both parties.
C. PRIMARY CONTACTS
The primary contacts for the services are as follows:
PepsiCo: ▇▇▇▇▇ ▇▇▇▇▇▇, Treasurer, PCCL
PBG: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Senior Vice President and Treasurer ▇▇▇▇▇ ▇▇▇▇▇▇▇▇,
Senior Vice President and Controller ▇▇▇ ▇▇▇▇▇▇▇, Vice President
Finance, PBG Canada
2. SERVICE FEES
A. SERVICE FEES
PBG will pay the following service fees, which reflect PEP's direct, fully
allocated cost of providing the service::
45% of the PCCL Treasury Department's budget for compensation,
T&E and G&A expenses (1999 - $175,000).
These fees include all applicable federal, provincial and local sales, use
or similar taxes currently in force, except those that are refundable to
PBG (e.g. GST).
49
B. ADDITIONAL CHARGES
The fees provided above will not be changed, except on prior written
agreement of both parties. PBG will be responsible for all costs which are
in the ordinary course of business and which are solely attributable to
PBG (e.g. banking fees, insurance premiums, etc.). In addition, to the
extent that the use of external advisers are pre-approved by PBG, PBG will
pay charges attributable to them for accounting, legal, actuarial and
other professional fees required to: prepare, review or audit PBG
financial statements and tax returns; support PBG's tax, financing and
corporate structure, or; otherwise support the services provided under
this agreement. Except for the foregoing, PBG will not be responsible to
PEP or to any third party retained by PEP for any additional fees,
charges, costs or expenses relating to the services.
Approved:
PepsiCo, Inc. The Pepsi Bottling Group, Inc.
By:____________________________ By:______________________________
Title: ________________________ Title:___________________________
Date: _________________________ Date:____________________________
50
EXHIBIT 22
MEDICAL SERVICES
1. DESCRIPTION OF SERVICES
A. SCOPE
PepsiCo, Inc. ("PEP") will provide medical and wellness services to The
Pepsi Bottling Group, Inc. ("PBG"). The services will include operation of
the ▇▇▇▇▇▇ medical facility, PBG executive physicals, and consultation and
advice on the individual health, disability and wellness needs of
Westchester-based PBG employees.
B. SPECIFIC SERVICES
The specific services that PEP will provide are as follows:
o Manage the ▇▇▇▇▇▇ Medical Department and staff.
o Determine the nature and scope of Medical services to be
offered in ▇▇▇▇▇▇, and supplement them as needed through the
Purchase Medical Department.
o Provide annual physicals, and medical consultation as needed,
to PBG executives.
o Provide inoculations for International business travelers.
o Advise Westchester-based employees on the treatment of
disabilities, physical therapy and readiness to return to
work.
o Assess employee fitness for work following medical leaves or
other extended health-related absences.
o Develop and maintain wellness programs such as diet classes,
smoking cessation programs, etc.
o Treatment of illness occurring during the work day.
o Acting as a liaison between the employee and his/her
physician: Laboratory testing, x-rays, electrocardiograms,
cardiac stress testing, audiology testing, pulmonary function
testing, visual acuity.
o Physician referral service for all employees both domestic and
int'l.
o Assisting all field service personnel and bottlers
establishing return to work policies, pre-employment
assessment and managing medical referral centers of
excellence.
o Allergy therapy and inoculations as requested by family
physician or allergist.
o Health travel advice/immunizations/physicals for international
travel and relocations. Family members included if being
relocated.
o Pre-marital blood tests as requested by specific states.
o Therapeutic medication monitoring.
o Health counseling and education.
o Emotional health assistance and referral.
51
o Return to work job assessment and disability evaluation in
compensation related injuries.
Additional services may be included upon agreement of both parties.
C. PRIMARY CONTACTS
The primary contacts for the services are as follows:
PepsiCo: ▇▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
PBG: ▇▇▇▇▇ ▇▇▇
2. SERVICE FEES
PBG will pay the following service fees:
1999: $272,000
This is based upon 25% of the Purchase Medical Facility for PBG employees
and 88% of the ▇▇▇▇▇▇ Medical Facility for PBG employees.
Approved:
PepsiCo, Inc. The Pepsi Bottling Group, Inc.
By:____________________________ By:______________________________
Title: ________________________ Title:___________________________
Date: _________________________ Date:____________________________
52
EXHIBIT 23
TAX, LEGAL AND FRANCHISE BOTTLING SERVICES - SPAIN AND GREECE
1. DESCRIPTION OF SERVICES
A. SCOPE
The Pepsi Bottling Group, Inc. ("PBG") will provide tax and legal services
for Frito-Lay - Spain, Frito-Lay - Portugal, Pepsi-Cola - Italy and
Pepsi-Cola - Portugal and franchise bottling operation management services
in Spain and in Cyprus and ▇▇▇▇▇▇ to PepsiCo, Inc. ("PEP"). The services
will be provided by personnel in PBG's Spain and Greece offices.
B. SPECIFIC SERVICES
The specific services that PBG will provide include as follows:
A. Tax services including, but not limited to:
1. Acquisition/Divestiture Support
o Tax Due Diligence
o Transition of tax corporate function
o Determination and implementation of optimum fiscal and
financing structure for the acquisition
2. Taxation
o Tax structure planning and implementation
o Tax efficient financing
o Assisting in the management of tax audits and negotiations
with tax authorities
o Transfer pricing
o Review of tax implications of business proposals and
assistance with implementation as required
B. Legal services
C. Franchise bottling operation management in Spain
D. Franchise bottling operation management for Cyprus and ▇▇▇▇▇▇ out of
Greece
Additional services may be included upon agreement of both parties.
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C. Primary contacts
The primary contacts for the services are as follows:
PEP: ▇▇ ▇▇▇▇▇▇
PBG: Sebastian del ▇▇▇▇
2. SERVICE FEES
A. SERVICE FEES
PEP will pay the following service fees for 1999:
1. Tax and Legal:
(i) Frito-Lay Spain $40,000
(ii) Frito-Lay Portugal $20,000
(iii) Pepsi-Cola Portugal $20,000
(iv) Pepsi-Cola Italy $20,000
2. Franchise Bottling operation management: $600,000 (for Spain)
$200,000 (for Cyprus and
▇▇▇▇▇▇ out of Greece)
The fees outlined above are quoted exclusive of VAT, which shall be added
if applicable.
B. NO ADDITIONAL CHARGES
The fees provided above will not be changed, except on prior written
agreement of both parties. The fees include all charges, costs and
expenses relating to the services except for the costs of external
advisors, which shall be borne directly by PEP. The use of external
advisors in providing these services is subject to prior approval by PEP
as appropriate. Except for the foregoing, PEP will not be responsible to
PBG or to any third party retained by PBG for any additional fees,
charges, costs or expenses relating to the services
Approved:
PepsiCo, Inc. The Pepsi Bottling Group, Inc.
By:_____________________________ By:______________________________
Title: _________________________ Title:___________________________
Date: __________________________ Date:____________________________
54
EXHIBIT 24
SCIENTIFIC & REGULATORY AFFAIRS SERVICES
1. DESCRIPTION OF SERVICES
A. SCOPE
PepsiCo, Inc. ("PEP") will provide Scientific & Regulatory Affairs
services to The Pepsi Bottling Group, Inc. ("PBG") so that PBG is
kept abreast of all emerging environmental and food regulatory
requirements, assist in representing their interests with
appropriate regulatory authorities and industry groups on these
matters, and provide specialized expertise on product and packaging
safety matters including co-ordination with public affairs, legal
and consumer relations.
The services will cover all PBG markets domestic and international,
including state regulatory matters domestically.
B. SPECIFIC SERVICES
The specific services that PEP will provide are as follows:
1. Awareness of regulatory requirements, on environmental and
food matters that affect plant operations, and assist in
resolving any issues that emerge.
- Liaison with state and federal agencies to resolve
environmental issues (facility specific), and provide
subject matter expertise to the facilities.
- Liaison with state and federal agencies to resolve
regulatory matters, such as FDA inspections, on behalf
of the facilities.
- Monitor environmental legislation on a federal level in
the areas of air, water, hazardous waste and assess
potential impact on PBG.
- Prepare operations-level tool-kits for facilities to use
to help achieve environmental compliance.
- Assist bottler in managing remediation projects by
providing expertise or managing external consultants.
- Provide subject matter expertise on environmental due-
diligence reports on potential acquisitions.
2. Provide leadership on crisis management support.
- Provide direct crisis management support as requested.
- Co-ordinate technical activities with SRA, R&D and
Consumer Relations.
- Represent PBG with regulators, local health authorities
as required.
3. Represent the interests of PBG in external industry technical
groups dealing with regulatory matters.
55
- NSDA technical activities related to bottling needs.
- Association of Food & Drug Officials (AFDO) - State
linkages.
- Other associations as requested.
4. Field support in international markets on technical/regulatory
matters.
- Develop linkages with field technical personnel.
- Support from SRA & other departments in PEP.
Additional services may be included upon agreement of both
parties.
C. PRIMARY CONTACTS:
PepsiCo: ▇▇▇▇▇ ▇▇▇▇▇▇▇ (overall accountability for co-ordinating
services) and ▇▇▇ ▇▇▇▇▇▇▇▇ (safety matters)
PBG: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
2. SERVICE FEES
A. SERVICE FEES
PBG will pay the following service fees:
85% of ▇▇▇▇▇ ▇▇▇▇▇▇▇'▇ Comp/▇▇▇/T&E = $100,500.
($71,700+$11,800+17,000) per year.
5% of ▇▇▇ ▇▇▇▇▇▇▇▇'▇ Comp/Ben/no T&E for Crisis Management Support
and General Safety Support = $7,500 per year..
B. NO ADDITIONAL CHARGES
The fees provided above will not be changed, except on prior written
agreement of both parties. The fees include all charges, costs and
expenses related to the services, other than outside consulting and
vending fees which shall only be incurred and charged to PBG upon
the prior agreement of PBG and PEP. Except for the foregoing, PBG
will not be responsible to PEP or to any third party retained by PEP
for any additional fees, charges, costs or expenses relating to the
services.
Approved:
PepsiCo, Inc. The Pepsi Bottling Group, Inc.
By:___________________________ By:___________________________
Title:________________________ Title:________________________
Date:_________________________ Date:_________________________
56
EXHIBIT 25
PUBLIC RELATIONS SERVICES
1. DESCRIPTION OF SERVICES
A. SCOPE
PepsiCo, Inc. ("PEP") will provide certain consumer affairs, news
monitoring, crisis management and meetings services to Public Relations
group within The Pepsi Bottling Group, Inc. ("PBG").
B. SPECIFIC SERVICES
The specific services that PEP will provide to PBG Public Relations
are as follows:
1. General research - use of Purchase and Valhalla libraries
2. Copies of ▇▇▇▇▇▇▇'▇ sent to Consumer Relations at PBG
3. As-needed assistance and support for crisis management
4. Consumer Relations services on an ongoing basis to deal with
consumer inquiries
5. Meeting services
Additional services may be included upon agreement of both parties.
C. PRIMARY CONTACTS
The primary contacts for the services are as follows:
PepsiCo: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
PBG: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇/▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
2. SERVICE FEES
A. SERVICE FEES
Meeting services shall be provided by outside vendors as arranged by PBG
and PEP on a mutually acceptable basis and charges to PBG for the services
of such outside vendors shall be on a basis consistent with those rates
previously agreed between PEP and such outside vendors for the same
services as provided to PEP. The remaining services will be provided free
of charge; provided, however, to the extent that coupons, product or other
related goods are required in response to consumer relations issues, PBG
shall provide such goods at its own cost.
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Approved:
PepsiCo, Inc. The Pepsi Bottling Group, Inc.
By:_____________________________ By:______________________________
Title: _________________________ Title:___________________________
Date: __________________________ Date:____________________________
58
EXHIBIT 26
INTERNATIONAL TAX SERVICES - RUSSIA AND GREECE
1. DESCRIPTION OF SERVICES
A. SCOPE
PepsiCo Inc ("PEP") will procure the provision of tax services to The
Pepsi Bottling Group, Inc. ("PBG"). The services will cover corporate tax
planning and advisory services in relation to PBG's businesses in Russia
and Greece, provided by PepsiCo's Corporate Tax group based in Richmond,
UK through the company PepsiCo International Limited.
B. SPECIFIC SERVICES
The specific services that PEP will provide are as follows:
1. Acquisition/Divestiture Support
o Tax Due Diligence
o Transition of tax corporate function
o Determination and implementation of optimum fiscal and
financing structure for the acquisition
2. Taxation
o Tax structure planning and implementation
o Tax efficient financing
o Assisting in the management of tax audits and negotiations
with tax authorities
o Transfer pricing
o Review of tax implications of business proposals and
assistance with implementation as required
PBG shall undertake to provide to PEP such information and access to
personnel as PEP shall reasonably require to perform such services on a
timely basis as agreed from time to time. PEP shall be entitled to treat
any information provided to them under the terms of this agreement as
complete and accurate in all material respects. Furthermore PEP shall
treat any information so provided as confidential and shall not disclose
any such information to a third party without the consent of PBG.
Additional services may be included upon the agreement of both parties.
C. PRIMARY CONTACTS
The primary contacts for the services are as follows:
PepsiCo: ▇▇▇▇▇ ▇▇▇▇, Tax Director, Europe, Middle East & Africa
▇▇▇▇▇▇ ▇▇▇▇▇▇▇, Tax Manager, Europe, Middle East & Africa
Binne Vries, Tax Manager, Europe, Middle East & Africa
59
PBG: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ (Greece)
▇▇▇▇▇ ▇▇▇▇▇ (Russia)
▇▇▇▇ Bortniaeva (Russia)
2. SERVICE FEES
A. SERVICE FEES
PBG will pay the following service fees, which reflect PEP's direct, fully
allocated cost of providing the services:
For Russia:
All actual direct costs of compensation, T&E and G&A expenses incurred in
providing the services, plus a ▇▇▇▇-up of 10%. The costs are estimated to
be 60 days per year tax manager time and 20 days per year tax director
time which approximates to US$65,000 based on 1999 budgets before ▇▇▇▇-up.
For Greece:
All actual direct costs of compensation, T&E and G&A expenses incurred in
providing the services, plus a ▇▇▇▇-up of 10%. The costs are estimated to
be 10 days per year tax director time and 30 hours per year tax manager
time which approximates to US$40,000 based on 1999 budgets before ▇▇▇▇-up.
The fees outlined above are quoted exclusive of VAT, which shall be added
if applicable.
B. NO ADDITIONAL CHARGES
The fees provided above will not be changed, except on prior written
agreement of both parties. The fees include all charges, costs and
expenses relating to the services except for the costs of external
advisors, which shall be borne directly by PBG Russia or PBG Greece. The
use of external advisors in providing these services is subject to prior
approval by PBG. Except for the foregoing, PBG will not be responsible to
PEP or to any third party retained by PEP for any additional fees,
charges, costs or expenses relating to the services.
Approved:
PepsiCo, Inc. The Pepsi Bottling Group, Inc.
By:_____________________________ By: ____________________________
Title: _________________________ Title: _________________________
Date: __________________________ Date: __________________________
60
EXHIBIT 27
EXECUTIVE COMPENSATION SERVICES
1. DESCRIPTION OF SERVICES
A. SCOPE
PepsiCo, Inc. ("PEP") will provide executive compensation
administration services to The Pepsi Bottling Group, Inc. ("PBG") of
administering its executive income deferral and stock option
exercise programs. The program will cover all participants in each
program, approximately 200 for executive deferrals and 420 for stock
option exercises.
In addition, PBG will continue to use the ECLIPS system to track
compensation information for its executives.
B. SPECIFIC SERVICES
The specific services that PEP will provide are as follows:
I. Continue the administration of the Executive Income Deferral
Plan ("EID") for all current and future PBG Band II+ (or
equivalent) executives. This includes annual elections,
racking, quarterly statements, and executing elected payouts.
II. Continue the exercise of all PepsiCo options held by PBG
executives. Utilize ▇▇▇▇▇ ▇▇▇▇▇▇ for the exercise of these
options. PBG agrees to keep PEP accurately informed regarding
the status of all its executives for purposes of determining
which options are eligible for exercise.
III. PEP is currently re-writing its ECLIPS system. As part of this
re-write separate coding will be incorporated allowing for
continued tracking and reporting on PBG executives as well as
the ability to rack future options granted in PBG shares.
C. PRIMARY CONTACTS
The primary contacts for the services above are as follows:
PepsiCo: ▇▇▇▇ ▇▇▇▇ - VP Compensation
PBG: ▇▇▇▇▇ ▇▇▇▇▇▇▇ - VP Compensation & Benefits
2. SERVICE FEES
A. SERVICE FEES
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PBG will pay the service fees based on the following method, which
reflect PEP's direct, fully allocated direct/indirect cost
(including overhead) of providing the service:
I. EID: Per capita percentage of PEP EID Program administrators
(currently ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇ ▇▇▇▇▇▇▇). In addition, per
capita share of any future changes to the administration of
the EID. This amount will be paid annually at the end of each
calendar year.
II. OPTION EXERCISES: Per capita percentage of PEP Option Exercise
Program administrator (currently ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇
▇▇▇▇▇▇▇▇), actual ▇▇▇▇▇ ▇▇▇▇▇▇ fees as well as prorated
production and mailing costs. In addition, per capita share of
any future changes to the administration of the option
exercise program.
III. ECLIPS SYSTEM: There are currently no anticipated costs
associated with this service. The link between PBG systems and
ECLIPS already exist. However, PBG will be expected to pay a
pro-rata share of any changes or upgrades to the ECLIPS system
while they are users.
PBG will pay PEP an estimated fee of $70,000 for 1999. These
fees will include all applicable federal, state, and local
sales, use or similar taxes currently in force.
B. NO ADDITIONAL CHARGES
The fees provided above will not be changed, except on prior written
agreement of both parties. The fees include all charges, costs and
expenses related to the services.
APPROVED:
PEPSICO, INC. THE PEPSI BOTTLING GROUP, INC.
By: ___________________________ By:______________________________
Title:__________________________ Title:___________________________
Date:___________________________ Date:____________________________
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Shared Services
RESPONSIBLE PARTIES
EXHIBITS PBG PEPSICO
-------- --- -------
1. Supplier ▇▇▇▇▇ ▇▇▇
2. Government Affairs ▇▇▇▇▇/Jabbonsky ▇▇▇▇▇/Madeira
3. Purchasing ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
4. Real Estate ▇▇▇▇▇▇ O'Gara
5. Employee Benefits Cox ▇▇▇▇▇▇/▇▇▇▇
and Relocation
6. Regional International Personnel Cox Fraser/▇▇▇▇▇▇▇
Administration
7. Health and Welfare Benefits Cox ▇▇▇▇▇▇/▇▇▇▇
8. Financial Plan Administration Cox ▇▇▇▇▇▇/▇▇▇▇
9. Benefit Communications Cox ▇▇▇▇▇▇/▇▇▇▇
10. Global SharePower Administration Cox ▇▇▇▇▇▇/▇▇▇▇
11. Payroll ▇▇▇▇▇ ▇▇▇▇▇▇▇
12. Risk Management ▇▇▇▇▇ ▇▇▇▇▇▇▇
13. Credit & Collection ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇
14. Financial Reporting- ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇/▇▇▇▇▇▇▇▇▇
International
15. Information Technology Bridgman ▇▇▇▇▇▇▇▇▇▇▇▇▇
16. Treasury ▇▇▇▇▇ ▇▇▇▇▇▇▇
17. Law ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
18. Aviation Bridgman ▇▇▇
19. Market Information ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
20. Sales and Use Bridgman ▇▇▇▇▇▇▇
and Property Tax
21. Tax and Treasury - Canada ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
22. Medical Cox ▇▇▇▇▇▇
23. Tax, Treasury, FOBO - Spain Bridgman ▇▇▇▇▇▇
and Greece
24. Scientific and Regulatory ▇▇▇▇▇/▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
25. Public Relations ▇▇▇▇▇/Jabbonsky Madeira
26. Tax - Russia and Greece ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
27. Executive Compensation Cox ▇▇▇▇▇▇