SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<Table>
[ ] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
[ ] Confidential, for the Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
</Table>
The Pepsi Bottling Group, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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[PBG LOGO]
THE PEPSI BOTTLING GROUP, INC.
One Pepsi Way
Somers, NY 10589
March 28, 2002
Dear Fellow Shareholders:
On behalf of your Board of Directors, we are pleased to invite you to
attend the 2002 Annual Meeting of Shareholders of The Pepsi Bottling Group, Inc.
This meeting will be held on Wednesday, May 22, 2002, at 10:00 a.m. Eastern
Daylight Time, at the Company's headquarters located at One Pepsi Way in Somers,
New York.
At this meeting, you will be asked to elect the Company's directors and
approve the PBG 2002 Long-Term Incentive Plan and the Board's selection of
independent auditors to audit the Company's financial statements for 2002. The
enclosed notice and proxy statement contain details about the business to be
conducted at the meeting. To assure that your shares are represented at the
meeting, we urge you to mark your choices on the enclosed proxy card, sign and
date the card and return it promptly in the envelope provided. If you are able
to attend the meeting and wish to vote your shares personally, you may do so at
any time before the proxy is voted at the meeting.
If you plan to attend the meeting, please check the "Annual Meeting" box on
your proxy card so that we may send you an admission card.
Sincerely,
<Table>
/s/ Craig E. Weatherup /s/ John T. Cahill
Craig E. Weatherup John T. Cahill
Chairman of the Board Chief Executive Officer
</Table>
[PBG LOGO]
THE PEPSI BOTTLING GROUP, INC.
One Pepsi Way
Somers, New York 10589
- --------------------------------------------------------------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO OUR SHAREHOLDERS:
- --------------------------------------------------------------------------------
The Pepsi Bottling Group, Inc. ("PBG" or the "Company") will hold its
Annual Shareholders' Meeting at its headquarters at One Pepsi Way, Somers, New
York, on Wednesday, MAY 22, 2002, at 10:00 A.M. Eastern Daylight Time to:
- Elect the Company's directors;
- Approve the PBG 2002 Long-Term Incentive Plan;
- Approve the appointment of KPMG LLP as the Company's independent
auditors; and
- Transact any other business that may properly come before the Annual
Meeting.
If you own shares of PBG Capital Stock as of the close of business on March
25, 2002 (the Record Date), you can vote those shares by proxy or at the Annual
Meeting. If you plan to attend the Annual Meeting, you must request an admission
card by checking the appropriate box on your proxy.
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, PLEASE COMPLETE THE
ENCLOSED PROXY CARD AND SIGN, DATE AND RETURN IT PROMPTLY IN THE ENCLOSED
POSTAGE-PAID ENVELOPE SO THAT YOUR SHARES WILL BE REPRESENTED. THE HOLDERS OF
RECORD OF OUTSTANDING SHARES OF THE COMPANY'S CAPITAL STOCK ENTITLED TO CAST A
MAJORITY OF ALL VOTES AT THE ANNUAL MEETING MUST BE PRESENT IN PERSON OR
REPRESENTED BY PROXY AT THE ANNUAL MEETING IN ORDER TO HOLD THE MEETING. ANY
SHAREHOLDER RETURNING A PROXY MAY REVOKE IT BY VOTING AT THE ANNUAL MEETING.
By Order of the Board of Directors,
/s/ Pamela C. McGuire
Pamela C. McGuire
Secretary
March 28, 2002
TABLE OF CONTENTS
<Table>
<Caption>
PAGE
----
GENERAL INFORMATION ABOUT THE MEETING....................... 1
Quorum and Voting Requirements.............................. 1
Admission to Annual Meeting................................. 1
PROXY ITEM NO. 1 -- ELECTION OF DIRECTORS................... 2
Meetings of the Board of Directors.......................... 3
Committees of the Board of Directors........................ 3
Directors' Compensation..................................... 4
Section 16 Beneficial Ownership Reporting Compliance........ 4
Stock Ownership of Certain Beneficial Owners................ 5
Ownership of Common Stock by Directors and Executive
Officers.................................................. 5
EXECUTIVE COMPENSATION...................................... 7
Summary of Cash and Certain Other Compensation.............. 7
Stock Option Grants......................................... 9
Stock Option Exercises and Holdings......................... 10
Pension Plan Table.......................................... 11
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION..... 12
Compensation Philosophy and Programs........................ 12
Base Salaries............................................... 12
Annual Cash Incentives...................................... 12
Long-Term Incentives........................................ 13
Other Stock Programs........................................ 13
2001 Compensation of the Chairman and the Chief Executive
Officer................................................... 13
Impact of Internal Revenue Code Section 162(m).............. 14
Summary..................................................... 14
REPORT OF THE AUDIT COMMITTEE............................... 15
INDEPENDENT PUBLIC ACCOUNTANTS.............................. 15
PERFORMANCE GRAPH........................................... 16
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.............. 17
Stock Ownership and Director Relationships with PepsiCo..... 17
Agreements and Transactions with PepsiCo and Affiliates..... 17
PROXY ITEM NO. 2 -- APPROVAL OF THE PBG 2002 LONG-TERM
INCENTIVE PLAN............................................ 19
NEW PLAN BENEFITS........................................... 23
PROXY ITEM NO. 3 -- APPROVAL OF AUDITORS.................... 23
OTHER MATTERS............................................... 23
YEAR 2003 SHAREHOLDERS' PROPOSALS........................... 24
GENERAL..................................................... 24
APPENDIX A.................................................. A-1
</Table>
THE PEPSI BOTTLING GROUP, INC.
Somers, New York 10589
March 28, 2002
PROXY STATEMENT
FOR ANNUAL MEETING TO BE HELD ON
MAY 22, 2002
The Board of Directors of The Pepsi Bottling Group, Inc., a Delaware
corporation ("PBG" or the "Company"), is soliciting proxies to be voted at the
Annual Meeting of Shareholders (the "Annual Meeting") to be held at 10:00 a.m.
Eastern Daylight Time, on Wednesday, May 22, 2002, at PBG's headquarters, One
Pepsi Way, Somers, New York, for the purposes set forth in the accompanying
Notice of the Annual Meeting, and at any adjournment of the Annual Meeting. We
are sending this Proxy Statement in connection with the proxy solicitation.
PBG is making its first mailing of this Proxy Statement on or about April
8, 2002.
GENERAL INFORMATION ABOUT THE MEETING
QUORUM AND VOTING REQUIREMENTS. The presence in person or by proxy of
shareholders holding as of the Record Date (defined below) the outstanding
shares of the Company's Capital Stock (as hereinafter defined), which are
entitled to cast a majority of all votes that could be cast at the Annual
Meeting, will constitute a quorum for the transaction of all business at the
Annual Meeting. A shareholder voting for the election of directors may withhold
authority to vote for all or certain nominees for directors. A shareholder may
also abstain from voting on the other matters presented for shareholder vote.
Votes withheld from the election of any nominee for director and abstentions
from any other proposal will be treated as shares that are present and entitled
to vote for purposes of determining the presence of a quorum, but will not be
counted in the number of votes cast on a matter. If a shareholder holds shares
through a broker, bank or other nominee, generally the nominee may vote the
shares it holds in accordance with instructions received. However, if a broker
does not receive voting instructions from the beneficial owner of shares on
certain particular matters ("broker non-votes"), those shares will be considered
as present and entitled to vote with respect to such matters, but will not be
counted in the number of votes cast "for" or "against" each such matter.
Only shareholders of record at the close of business on March 25, 2002, are
entitled to vote at the Annual Meeting. Any shareholder returning a proxy may
revoke it by casting a ballot at the Annual Meeting. Any proxy not revoked will
be voted as specified by the shareholder. If no choice is indicated, a proxy
will be voted in accordance with the Board of Directors' recommendations. Under
Delaware law, no appraisal rights will be available to dissenters in connection
with matters to be acted upon at the Annual Meeting.
PBG Capital Stock includes both Common Stock and Class B Common Stock. At
March 25, 2002 (the "Record Date"), there were 279,719,518 shares of PBG Common
Stock outstanding and 100,000 shares of Class B Common Stock outstanding. Each
share of Common Stock entitles the holder to one vote on all matters presented
at the Annual Meeting. The holders of Class B Common Stock are entitled to 250
votes per share. All outstanding shares of Class B Common Stock are held by
PepsiCo, Inc. ("PepsiCo").
ADMISSION TO ANNUAL MEETING. If you are a registered owner and plan to
attend the Annual Meeting in person, please check the "Annual Meeting" box on
the proxy so that we may send you an admission card. A beneficial owner who
plans to attend the Annual Meeting may obtain an admission ticket in advance by
sending a written request with proof of ownership (such as a bank or brokerage
firm account statement) to the Company's transfer agent, The Bank of New York, 1
Wall Street, New York, New York 10286. Admittance to the Annual Meeting will be
based upon availability of seating.
Shareholders who do not present admission tickets at the Annual Meeting
will be admitted upon verification of ownership at the admissions desk.
1
ELECTION OF DIRECTORS
(ITEM 1 ON PROXY CARD)
The Board of Directors proposes the following nine nominees for election as
directors at the Annual Meeting. The directors will hold office from election
until the next Annual Meeting of Shareholders, or until their successors are
elected and qualified.
LINDA G. ALVARADO, 49, was elected to PBG's Board in March 1999. She is the
President and Chief Executive Officer of Alvarado Construction, Inc., a general
contracting firm specializing in commercial, industrial, environmental and heavy
engineering projects, a position she assumed in 1976. Ms. Alvarado is also a
director of Pitney Bowes, Inc., Qwest Communications International, Inc., Lennox
International and 3M Company.
DAVID R. ANDREWS, 60, is PepsiCo's Senior Vice President, Government
Affairs, General Counsel and Secretary. Before joining PepsiCo, Mr. Andrews was
a partner in the law firm of McCutchen, Doyle, Brown & Enersen, LLP, a position
he held from May 2000 to February 2002 and from 1981 to July 1997. From August
1997 to April 2000, he served as the legal adviser to the U.S. Department of
State and former Secretary Madeleine Albright. Mr. Andrews is a director of PG&E
Corporation and UnionBanCal Corporation.
BARRY H. BERACHA, 60, was elected to PBG's Board in March 1999. He has been
the Chief Executive Officer of Sara Lee Bakery Group since August 2001.
Previously, Mr. Beracha was the Chairman of the Board and Chief Executive
Officer of The Earthgrains Company since 1993. Earthgrains was formerly part of
Anheuser-Busch Companies, where Mr. Beracha served from 1967 to 1996. From 1979
to 1993, he held the position of Chairman of the Board of Anheuser-Busch
Recycling Corporation. From 1976 to 1995, Mr. Beracha was also Chairman of the
Board of Metal Container Corporation. Mr. Beracha is also a director of St.
Louis University and McCormick & Co., Inc.
JOHN T. CAHILL, 44, was elected to PBG's Board in January 1999. He has been
our Chief Executive Officer since September 2001. Previously, Mr. Cahill served
as our President and Chief Operating Officer. Mr. Cahill served as our Executive
Vice President and Chief Financial Officer prior to becoming our President and
Chief Operating Officer in August 2000. He was Executive Vice President and
Chief Financial Officer of the Pepsi-Cola Company from April 1998 to November
1998. Prior to that, Mr. Cahill was Senior Vice President and Treasurer of
PepsiCo, having been appointed to that position in April 1997. In 1996, he
became Senior Vice President and Chief Financial Officer of Pepsi-Cola North
America. Mr. Cahill joined PepsiCo in 1989 and held several other senior
financial positions through 1996.
THOMAS H. KEAN, 66, was elected to PBG's Board in March 1999. Mr. Kean has
been the President of Drew University since 1990 and was the Governor of the
State of New Jersey from 1982 to 1990. Mr. Kean is also a director of Amerada
Hess Corporation, Aramark Corporation, Fiduciary Trust Company International and
UnitedHealth Group, Inc. He is also Chairman of Carnegie Corporation of New
York.
SUSAN D. KRONICK, 50, was elected to PBG's Board in March 1999. Ms. Kronick
has been Group President of Federated Department Stores since February 2001.
Previously, Ms. Kronick was the Chairman and Chief Executive Officer of
Burdines, a division of Federated Department Stores, a position she had held
since June 1997. From 1993 to 1997, Ms. Kronick served as President of
Federated's Rich's/Lazarus/Goldsmith's division. She spent the previous 20 years
at Bloomingdale's, where her last position was as Senior Executive Vice
President and Director of Stores. Ms. Kronick is also a director of Union
Planters National Bank in Miami.
BLYTHE J. MCGARVIE, 45, was elected to the Board at PBG's Board meeting in
March 2002. Ms. McGarvie is Executive Vice President and Chief Financial Officer
of BIC Group, a position she has held since July 1999. From 1994 to 1999, Ms.
McGarvie served as Senior Vice President and CFO of Hannaford Bros. Co. Ms.
McGarvie is a Certified Public Accountant and has also held senior
2
financial positions at Sara Lee Corporation, Kraft General Foods, Inc. and Pizza
Hut Inc. Ms. McGarvie is also a director of Accenture Ltd.
MARGARET D. MOORE, 54, was elected to PBG's Board in January 2001. Ms.
Moore is Senior Vice President, Human Resources of PepsiCo, a position she
assumed at the end of 1999. From November 1998 to December 1999, she was Senior
Vice President and Treasurer of PBG. Prior to joining PBG, Ms. Moore spent 25
years with PepsiCo in a number of senior financial and human resources
positions.
CRAIG E. WEATHERUP, 56, was elected to PBG's Board in January 1999. He has
been Chairman of the Board of PBG since March 1999. Mr. Weatherup was also the
Chief Executive Officer of PBG from March 1999 to September 2001. He served on
the Board of Directors of PepsiCo from 1996 until March 1999. Prior to becoming
Chairman and Chief Executive Officer of PBG, he had served as Chairman and Chief
Executive Officer of the Pepsi-Cola Company since July 1996. He was appointed
President of the Pepsi-Cola Company in 1988, President and Chief Executive
Officer of Pepsi-Cola North America in 1991, and served as PepsiCo's President
in 1996. Mr. Weatherup is also a director of Federated Department Stores, Inc.
and Starbucks Corporation.
If any of these nominees for director becomes unavailable, the persons
named in the enclosed proxy intend to vote for any alternate designated by the
present Board.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ALL OF THE ABOVE-NAMED
NOMINEES FOR ELECTION AS DIRECTORS.
MEETINGS OF THE BOARD OF DIRECTORS. PBG's Board of Directors held five
regular meetings during fiscal year 2001. Attendance by incumbent directors at
all Board and Committee meetings was 99%.
COMMITTEES OF THE BOARD OF DIRECTORS. The Board of Directors has three
standing committees: Audit and Affiliated Transactions, Compensation and
Management Development (including a Compensation Subcommittee consisting solely
of "outside directors"), and Nominating and Corporate Governance.
The Audit and Affiliated Transactions Committee consists of Barry H.
Beracha, Susan D. Kronick and Thomas W. Jones, who serves as Chairperson, all of
whom have been determined by the Board of Directors to be independent (as
independence is defined under the New York Stock Exchange listing standards).
Mr. Jones will not be standing for re-election to PBG's Board at the Annual
Meeting. The Audit and Affiliated Transactions Committee's primary
responsibilities are to: (i) oversee the Company's financial reporting
principles and policies and internal control systems, including review of the
Company's quarterly and annual financial statements; (ii) review and monitor the
performance and independence of the Company's independent auditors and the
performance of the internal auditing department; (iii) provide an open avenue of
communication among the independent auditors, financial and senior management,
the internal auditing department, and the Board; and (iv) select (subject to
shareholder ratification), evaluate, and where appropriate, replace PBG's
independent auditors. The Audit and Affiliated Transactions Committee also
reviews transactions between the Company and PepsiCo, or any entity in which
PepsiCo has a 20% or greater interest, that are outside the ordinary course of
business and have a value of more than $10 million. The Audit and Affiliated
Transactions Committee held four meetings during fiscal 2001.
The Compensation and Management Development Committee consists of Linda G.
Alvarado, Thomas W. Jones, Thomas H. Kean, Susan D. Kronick, Margaret D. Moore,
Robert F. Sharpe, Jr. (during 2001 through early March 2002) and Barry H.
Beracha, who serves as Chairperson. In early March 2002, Robert F. Sharpe, Jr.
resigned from PBG's Board and the Compensation and Management Development
Committee after stepping down as Senior Vice President, Public Affairs, General
Counsel and Secretary of PepsiCo. The Compensation and Management Development
Committee's responsibilities include: (i) reviewing the Company's compensation
and benefits philosophy; (ii) approving and, where appropriate, recommending to
the shareholders for approval
3
annual and long-term executive compensation programs or any changes in such
plans; (iii) evaluating, in conjunction with the Nominating and Corporate
Governance Committee, the performance of both the Chairman and the CEO and
approving both the Chairman's and the CEO's base salary; (iv) evaluating the
performance of the other executive officers and approving their base salaries;
(v) approving the aggregate amount for annual bonus awards; (vi) approving
awards under stock-based plans (other than to both the Chairman and the CEO and
other named executive officers); and (vii) reviewing senior management
succession planning.
In addition, for purposes of complying with Section 162(m) of the Internal
Revenue Code of 1986 (the "Code") and Rule 16b-3 of the Securities Exchange Act
of 1934, the Board of Directors has established a Compensation Subcommittee,
consisting of Linda G. Alvarado, Barry H. Beracha, Thomas W. Jones, Thomas H.
Kean and Susan D. Kronick, all of whom are "outside" and "non-employee"
directors. The Compensation Subcommittee's responsibilities include: (i)
administering PBG's annual and long-term executive compensation plans with
respect to the Company's executive officers, including both the Chairman and the
CEO, and other executives deemed covered by Section 162(m) of the Code (the
"Covered Executives"); (ii) approving performance goals, maximum awards and
payout schedules for annual incentive awards for the Covered Executives; (iii)
certifying performance and approving annual incentive awards for the Covered
Executives; and (iv) approving awards of long-term incentives to the Covered
Executives. The Compensation and Management Development Committee and
Compensation Subcommittee each held four meetings during fiscal 2001.
The Nominating and Corporate Governance Committee consists of Linda G.
Alvarado and Thomas H. Kean, who serves as Chairperson. The Nominating and
Corporate Governance Committee's responsibilities include: (i) identifying
candidates for future Board membership and proposing criteria for Board
candidates and candidates to fill Board vacancies, as well as a slate of
directors for election by the shareholders at each annual meeting; (ii)
periodically assessing and reporting to the Board on Board performance and
effectiveness; (iii) periodically reviewing and making recommendations to the
Board concerning the composition, size and structure of the Board and its
Committees; (iv) periodically reviewing and recommending the compensation for
non-employee directors; and (v) in conjunction with the Compensation and
Management Development Committee, advising the Board in its periodic evaluation
of both the Chairman's and the CEO's performance. The Nominating and Corporate
Governance Committee held two meetings during fiscal 2001. The Committee does
not solicit director nominations, but will consider recommendations sent to the
Secretary of The Pepsi Bottling Group, Inc. at One Pepsi Way, Somers, New York,
10589.
DIRECTORS' COMPENSATION. Employee directors do not receive additional
compensation for serving on the Board of Directors. Non-employee directors
receive a one-time grant of $25,000 in restricted shares of PBG Common Stock
upon joining the Board of Directors. This grant may be converted to phantom
stock and deferred until the director leaves the Board. In addition, non-
employee directors received an annual grant of options to purchase PBG Common
Stock in the amount of $275,000 for 2001. Options are granted at fair market
value and may be exercised for up to ten years while a director is serving on
the Board (the full ten-year term applies in the case of death or disability).
In addition, non-employee directors have a one-time opportunity to convert
options into PBG Common Stock at a ratio of three options for each share.
Options converted to PBG Common Stock may in turn be deferred as phantom stock
for a minimum period of two years. Non-employee directors do not receive
retirement, health or life insurance benefits and do not receive additional fees
for meeting attendance or acting as Committee Chairperson. Non-employee
directors, however, are eligible to participate in PBG's charitable gift match
program whereby certain charitable donations of up to $10,000 are matched
annually.
SECTION 16 BENEFICIAL OWNERSHIP REPORTING COMPLIANCE. Section 16(a) of the
Securities Exchange Act of 1934 requires the Company's directors, certain
officers and persons who own more than ten percent of the outstanding Common
Stock of the Company, to file with the Securities and Exchange Commission
reports of ownership and changes in ownership of the Capital Stock of the
Company held by such persons. Officers, directors and greater-than-ten percent
shareholders
4
are also required to furnish the Company with copies of all forms they file
under this regulation. To the Company's knowledge, based solely on a review of
the copies of such reports furnished to the Company and representations that no
other reports were required, all Section 16(a) filing requirements applicable to
all of its reporting persons were complied with during fiscal 2001, except as
follows. PepsiCo, a beneficial owner of more than 10% of the Company's Common
Stock, made a late filing of two reports on Form 4 with respect to 327 sale
transactions that occurred over a two-month period beginning in April 2001. All
transactions have now been reported.
STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS. Based on Schedule 13G
filings, shareholders holding more than 5% of PBG Capital Stock as of February
21, 2002, are:
<Table>
<Caption>
NAME AND ADDRESS NUMBER OF SHARES PERCENT
OF BENEFICIAL OWNER TITLE OF CLASS BENEFICIALLY OWNED(1) OF CLASS
- ------------------- -------------------- ---------------------- --------
1) PepsiCo, Inc.(2).................. Class B Common Stock 100,000 100%
700 Anderson Hill Road Common Stock 105,911,358 37.9%(5)
Purchase, NY 10577
2) FMR Corp.(3)...................... Common Stock 19,611,114 7.0%(5)
82 Devonshire Street
Boston, MA 02109
3) Putnam Investments, LLC(4)........ Common Stock 16,328,357 5.8%(5)
One Post Office Square
Boston, MA 02109
</Table>
- ---------------
(1) Amounts reflect a 2-for-1 stock split of the Company's Capital Stock
effective November 27, 2001.
(2) PepsiCo reported its beneficial ownership as of December 29, 2001 on a
Schedule 13G filed with the Securities and Exchange Commission ("SEC"). The
filing indicates that PepsiCo has sole voting power for 106,011,358 shares
(for combined Class B Common Stock and Common Stock), shared voting power
for 0 shares, sole dispositive power for 106,011,358 shares (for combined
Class B Common Stock and Common Stock) and shared dispositive power for 0
shares.
(3) FMR Corp. ("FMR") reported its beneficial ownership as of December 31, 2001
on a Schedule 13G filed with the SEC. The filing indicates that FMR has sole
voting power for 303,214 shares, shared voting power for 0 shares, sole
dispositive power for 19,611,114 shares and shared dispositive power for 0
shares.
(4) Putnam Investments, LLC ("Putnam") reported its beneficial ownership as of
February 5, 2001 on a Schedule 13G filed with the SEC. The filing indicates
that Putnam has sole voting power for 0 shares, shared voting power for
3,531,676 shares, sole dispositive power for 0 shares and shared dispositive
power for 16,328,357 shares.
(5) Percentages are calculated based upon the number of outstanding shares of
PBG Common Stock as of February 21, 2002.
OWNERSHIP OF COMMON STOCK BY DIRECTORS AND EXECUTIVE OFFICERS. The
following table shows, as of February 21, 2002, the shares of PBG Common Stock
beneficially owned by (i) each director (including nominees), (ii) each
executive officer of the Company named in the Summary Compensation Table, and
(iii) all directors and such executive officers as a group. Except as otherwise
noted, each of the following persons has sole voting and investment power with
respect to the shares of Common Stock beneficially owned by him or her. PBG's
internal stock ownership guidelines call for key senior executives to own PBG
Common Stock (or deferral plan units) with a value ranging from 1 to 5 times
their base salary (depending on position) within five years from the
5
date of their election or appointment. For 2001, 100% of PBG's key senior
executives met or exceeded their annual stock ownership guideline requirement.
<Table>
<Caption>
NUMBER OF
SHARES
NAME OF INDIVIDUAL OR BENEFICIALLY DEFERRAL PERCENT
NUMBER OF PERSONS IN GROUP OWNED(1)(2) PLANS(1)(3) TOTAL(1) OF CLASS
- -------------------------- ------------ ----------- --------- --------
Linda G. Alvarado.......................... 44,316 6,998(4) 51,314 (5)
David R. Andrews........................... 0 0 0 (5)
Barry H. Beracha........................... 62,964 0 62,964 (5)
John T. Cahill............................. 1,012,288 101,252 1,113,540 (5)
Alfred H. Drewes........................... 33,990 1,319 35,309 (5)
Eric J. Foss............................... 622,670 26,078 648,748 (5)
Thomas W. Jones............................ 10,000 21,104(6) 31,104 (5)
Thomas H. Kean............................. 46,316 6,998(4) 53,314 (5)
Susan D. Kronick........................... 58,790 2,174 60,964 (5)
Blythe J. McGarvie(7)...................... 0 0 0 (5)
Pamela C. McGuire.......................... 554,616 0 554,616 (5)
Margaret D. Moore.......................... 281,698(8)(9) 21,510 303,208 (5)
Yiannis Petrides........................... 279,448 0 279,448 (5)
Robert F. Sharpe, Jr....................... 4,000(9) 9,758(10) 13,758 (5)
Craig E. Weatherup......................... 2,871,810 506,912 3,378,722 1.2 %
All directors and named executive officers
as a group (15 PERSONS).................. 5,882,906 704,103 6,587,009 2.3 %
</Table>
- ---------------
(1) Amounts reflect a 2-for-1 split of PBG Common Stock effective November 27,
2001.
(2) Includes vested stock options and stock options that will become
exercisable within 60 days.
(3) Units denominated as PBG phantom stock under deferred compensation
arrangements.
(4) Includes 4,824 units of PBG phantom stock representing the conversion of
14,474 vested stock options to purchase PBG Common Stock into PBG phantom
stock at a 3-to-1 ratio.
(5) Ownership percentage is less than 1% of the total amount of PBG Common
Stock outstanding as of February 21, 2002.
(6) Includes 18,930 units of PBG phantom stock representing the conversion of
56,790 vested stock options to purchase PBG Common Stock into PBG phantom
stock at a 3-to-1 ratio.
(7) Ms. McGarvie was elected to the Board at PBG's Board meeting in March 2002.
(8) Includes 3,000 shares of PBG Common Stock held indirectly through children.
(9) Ms. Moore and Mr. Sharpe each disclaims any beneficial ownership that he or
she may have in PepsiCo's shares of PBG Capital Stock.
(10) Includes 7,584 units of PBG phantom stock representing the conversion of
22,750 vested stock options to purchase PBG Common Stock into PBG phantom
stock at a 3-to-1 ratio.
6
EXECUTIVE COMPENSATION
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION. The following table
provides information on compensation earned and stock options awarded for the
years indicated by PBG to both our current and former Chief Executive Officers
and four other most highly compensated executive officers as of the end of the
Company's 2001 fiscal year in accordance with the rules of the SEC. These six
individuals are referred to in this proxy statement as the "named executive
officers."
SUMMARY COMPENSATION TABLE
<Table>
<Caption>
LONG-TERM
COMPENSATION(1)
AWARDS PAYOUTS
----------------------
ANNUAL COMPENSATION SECURITIES
-------------------------------------------- UNDER-
OTHER ANNUAL LYING LTIP ALL OTHER
COMPENSATION OPTIONS(2) PAYOUTS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) ($) (#) ($) ($)
- --------------------------- ---- --------- ---------- ------------ ----------- -------- ------------
Craig E. Weatherup(3)....... 2001 $909,231 $1,315,000 $142,900(4) 1,270,770 $ 0 $ 11,188(5)(6)(7)
Chairman and Chief 2000 858,654 1,488,000 67,500 0 32,060
Executive Officer 1999 800,000 1,200,000 168,143 1,086,957 12,411
John T. Cahill.............. 2001 636,712 870,000 12,566(8) 739,300(9) 442,200 6,821(6)(7)
Chief Executive Officer 2000 539,904 811,320 14,139 240,000 6,800
1999 468,077 531,250 7,608 264,130 1,000,000
Eric J. Foss................ 2001 416,923 460,360 154,565(10) 385,364(9) 0 6,800(7)
President, North America 2000 350,385 436,310 46,477 136,533 6,800
1999 269,815 260,000 157,506 138,261 750,000
Pamela C. McGuire........... 2001 310,154 271,130 11,074(8) 150,362 0 6,380(11)
Senior Vice President, 2000 301,923 323,700 11,515 117,333 6,800
General Counsel and 1999 261,750 223,440 4,949 143,478 500,000
Secretary
Alfred H. Drewes............ 2001 175,000(12) 268,090(12) 7,522(8) 135,758 0 0
Senior Vice President 2000
and Chief Financial 1999
Officer
Yiannis Petrides(13)(14).... 2001 343,284 249,433 120,185(15) 219,630(9) 187,110 0
President, Europe 2000
1999
</Table>
- ---------------
(1) Amounts include (i) a standard annual stock option award and (ii) a
one-time variable award granted prior to the IPO ("Variable Award") that
was payable in cash or stock options at the election of the executive.
These Variable Awards are based on PBG performance targets as
pre-established by the Compensation Subcommittee. The stock options granted
pursuant to the Variable Awards became exercisable on February 1, 2001.
(2) Stock options granted in 2001 are adjusted to reflect the 2-for-1 split of
PBG Common Stock effective November 27, 2001; stock options granted in 2000
and 1999 are presented on a pre-split basis.
(3) Mr. Weatherup relinquished his position as Chief Executive Officer
effective September 19, 2001.
(4) This amount includes (i) benefits from the use of corporate transportation
and (ii) payment of executive's tax liability with respect to certain
Company provided perquisites.
7
(5) This amount includes the Company paid portion of a life insurance policy
for Mr. Weatherup in the amount of $4,297. If Mr. Weatherup dies while
employed by the Company, the Company is reimbursed for its payments from
the proceeds of the policy.
(6) In 2001, Messrs. Weatherup and Cahill waived their rights to receive
certain future compensation payments under the Company's executive income
deferral plan. In connection with this waiver, the Company entered into an
arrangement by which such waived amounts were used for the purpose of
purchasing insurance for their benefit and the benefit of their designated
beneficiaries. The cost of the insurance policy will not exceed the cost
the Company would have incurred with respect to the compensation payment
waived by Messrs. Weatherup and Cahill. Premiums of $91.00 and $21.00
included for Messrs. Weatherup and Cahill, respectively, in this amount are
based on coverage being effective for 4 days in 2001.
(7) This amount includes a standard Company matching contribution of $6,800 in
PBG Common Stock to the executive's 401(k) account.
(8) This amount represents payment of executive's tax liability with respect to
certain Company provided perquisites.
(9) This amount includes a special stock option award granted in September 2001
in recognition of new roles and responsibilities as a result of senior
management succession. These stock options become exercisable on September
30, 2006.
(10) This amount reflects (i) earnings on deferred compensation paid in 2001 and
(ii) payment of executive's tax liability with respect to certain Company
provided perquisites.
(11) This amount reflects a standard Company matching contribution in PBG Common
Stock to Ms. McGuire's 401(k) account.
(12) Mr. Drewes' salary reflects his employment with PBG effective June 25,
2001. Mr. Drewes' bonus reflects a full year payout based on PBG and
PepsiCo Beverages International performance results.
(13) Mr. Petrides' compensation is paid in Euros. The dollar values listed are
based on the average exchange rate in 2001 of 1.1154 Euros to one U.S.
dollar.
(14) Mr. Petrides owns 22,642 shares of PBG restricted stock with a value of
$538,879 based on PBG's share price of $23.80 on December 28, 2001 (the
last trading day before fiscal year end).
(15) This amount reflects (i) payment of executive's tax liability with respect
to certain Company provided perquisites and (ii) reimbursement of certain
expatriate living expenses consisting of $57,299 in housing lease costs and
$26,940 in housing utility allowances.
8
STOCK OPTION GRANTS. The following table presents information with respect
to stock option grants that were made during the fiscal year ending December 29,
2001 to each of the named executive officers. All options granted by the Company
in 2001 were non-qualified stock options, and no stock appreciation rights were
granted in 2001.
OPTION GRANTS IN LAST FISCAL YEAR(1)
<Table>
<Caption>
INDIVIDUAL GRANTS
----------------------------------
NUMBER OF % OF TOTAL POTENTIAL REALIZABLE VALUE
SECURITIES OPTIONS AT ASSUMED ANNUAL RATES
UNDER- GRANTED TO EXERCISE OF STOCK PRICE APPRECIATION
LYING EMPLOYEES OR BASE FOR OPTION TERM
OPTIONS IN FISCAL PRICE EXPIRATION ---------------------------
NAME GRANTED(#) YEAR(2) ($/SH) DATE 5%($)(3) 10%($)(3)
- ---- ---------- ---------- -------- ---------- ------------ ------------
Craig E. Weatherup..... 270,770(4) 2.7% $19.50 01/31/11 $ 3,320,573 $ 8,414,984
1,000,000(5) 10.0% 20.50 03/29/11 12,892,340 32,671,720
John T. Cahill......... 272,634(5) 2.7% 20.50 03/29/11 3,514,890 8,907,422
466,666(6) 4.7% 22.50 09/30/11 6,603,384 16,734,272
Eric J. Foss........... 65,364(4) 0.7% 19.50 01/31/11 801,588 2,031,381
160,000(5) 1.6% 20.50 03/29/11 2,062,774 5,227,475
160,000(6) 1.6% 22.50 09/30/11 2,264,021 5,737,473
Pamela C. McGuire...... 28,606(4) 0.3% 19.50 01/31/11 350,808 889,017
121,756(5) 1.2% 20.50 03/29/11 1,569,720 3,977,978
Alfred H. Drewes....... 135,758(5) 1.4% 20.63 03/29/11 1,760,910 4,462,493
Yiannis Petrides....... 107,636(5) 1.1% 20.50 03/29/11 1,387,680 3,516,653
111,994(6) 1.1% 22.50 09/30/11 1,584,730 4,016,016
</Table>
- ---------------
(1) Amounts reflect a 2-for-1 split of PBG Common Stock effective November 27,
2001.
(2) Approximately 10,000,000 options to purchase PBG Common Stock were granted
primarily to key employees in 2001. This amount also includes a broad-based
grant to front-line employees in Spain and Greece.
(3) The 5% and 10% rates of appreciation are based on a ten-year option term and
were specified by the SEC. These rates are not intended to forecast future
appreciation, if any, of PBG Common Stock.
(4) Amounts reflect options to purchase PBG Common Stock that were granted
pursuant to Variable Awards and became exercisable on February 1, 2001.
(5) Amounts reflect standard annual stock option awards exercisable as follows:
25% on March 30, 2002; 25% on March 30, 2003; and 50% on March 30, 2004.
(6) Amounts reflect a special stock option award granted in September 2001 in
recognition of new roles and responsibilities as a result of senior
management succession. These stock options become exercisable on September
30, 2006.
9
STOCK OPTION EXERCISES AND HOLDINGS. No company-granted options were
exercised during the last fiscal year by the named executive officers. The
following table presents information with respect to the status and current
value of unexercised stock options held as of December 29, 2001.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION VALUES(1)(2)
<Table>
<Caption>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED IN-THE-
SHARES OPTIONS AT FY-END(#) MONEY OPTIONS AT FY-END($)
ACQUIRED ON VALUE ------------------------------- -----------------------------
NAME EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- ----------- ----------- ------------- ------------ --------------
Craig E. Weatherup.......... 0 0 1,705,553(3)(4) 1,739,131 $18,812,145 $12,391,308
John T. Cahill.............. 0 0 120,000(5) 1,627,560 1,731,000 13,196,956
Eric J. Foss................ 0 0 133,631(4)(5) 801,322 1,265,809 7,091,453
Pamela C. McGuire........... 0 0 87,273(4)(5) 584,712 969,270 6,470,146
Alfred H. Drewes............ 0 0 0 135,758 0 431,032
Yiannis Petrides............ 0 0 32,055(5) 472,582 462,386 3,816,442
</Table>
- ---------------
(1) Amounts reflect a 2-for-1 split of PBG Common Stock effective November 27,
2001.
(2) The closing price for a share of PBG Common Stock on December 28, 2001, the
last trading day prior to PBG's fiscal year end, was $23.80.
(3) Amount includes Mr. Weatherup's Founder's Grant award exercisable as
follows: one-third on March 30, 2000; one-third on March 30, 2001; and
one-third on March 30, 2002.
(4) Amounts include options to purchase PBG Common Stock that were granted
pursuant to Variable Awards and became exercisable on February 1, 2001.
(5) The 2000 stock option award is exercisable as follows: 25% on March 30,
2001; 25% on March 30, 2002; and 50% on March 30, 2003.
10
PENSION PLAN TABLE
The Company has adopted the PBG Salaried Employees Retirement Plan, the PBG
Pension Equalization Plan and the PBG International Retirement Plan. The annual
benefits payable under these pension plans to employees with five or more years
of service at age 65 are, for the first 10 years of credited service, 30% of the
employee's highest consecutive five-year average annual earnings plus an
additional 1% of the employee's highest consecutive five-year average annual
earnings for each additional year of credited service over ten years, less .43%
of final average earnings not to exceed Social Security covered compensation
multiplied by years of service (not to exceed 35 years) in the case of the PBG
Salaried Employees Retirement and Pension Equalization Plans. The PBG
International Pension Plan is offset by any other pension benefit the Company
has contributed on the employee's behalf, including Company contributions to
local social security plans. Service under PBG's plans generally includes credit
for service at PepsiCo. Under PBG's plans, when an executive retires at the
normal retirement age (65), the approximate annual benefits payable after
January 1, 2002, for the following pay classifications and years of service are
expected to be:
<Table>
<Caption>
YEARS OF SERVICE
----------------------------------------------------------
REMUNERATION 15 20 25 30 35
- ------------ -------- -------- ---------- ---------- ----------
$ 250,000 $ 84,984 $ 96,646 $ 108,307 $ 119,969 $ 131,630
500,000 172,484 196,646 220,807 244,969 269,130
750,000 259,984 296,646 333,307 369,969 406,630
1,000,000 347,484 396,646 445,807 494,969 544,130
1,250,000 434,984 496,646 558,307 619,969 681,630
1,500,000 522,484 596,646 670,807 744,969 819,130
1,750,000 609,984 696,646 783,307 869,969 956,630
2,000,000 697,484 796,646 895,807 994,969 1,094,130
2,250,000 784,984 896,646 1,008,307 1,119,969 1,231,630
2,500,000 872,484 996,646 1,120,807 1,244,969 1,369,130
</Table>
The pay covered by the pension plans noted above is based on the salary and
bonus shown in the Summary Compensation Table on page 7 for each of the named
executive officers. The years of credited service as of January 1, 2002 for the
named executive officers are as follows: 27 years for Mr. Weatherup; 12 years
for Mr. Cahill; 19 years for Mr. Foss; 24 years for Ms. McGuire; 19 years for
Mr. Drewes and 14 years for Mr. Petrides.
11
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation and Management Development Committee (the "Committee") is
responsible for providing thought leadership in the development of a
compensation and benefits philosophy that drives the Company's performance and
shareholder value.
COMPENSATION PHILOSOPHY AND PROGRAMS. PBG is focused on maximizing value
for its shareholders by consistently delivering superior business results. The
Committee's goal is to ensure that PBG's executive compensation programs are
designed to enable the Company to attract, retain, and motivate global executive
talent whose performance is critical to the Company's success. PBG's executive
compensation programs provide key employees with the opportunity to receive
fixed and variable pay through annual and long-term incentives. These programs
were developed based on the following principles:
- Align the interests of shareholders, the Company, and executives by
placing particular emphasis on long term stock based programs that foster
a strong relationship between shareholder return and executive
compensation.
- Attract and retain key talent by providing a total compensation package
that is competitive within our industry, rewards executives for superior
performance and builds employee wealth over the long-term.
- Develop programs that are (i) appropriate within our financial structure;
and (ii) simple and straightforward so that employees have a clear
understanding of the business results required to earn variable pay.
In addition, the Committee periodically examines annual and long-term
compensation levels for executives against a peer group made up of comparably
sized companies from the consumer goods, bottling, retail and service
industries. Two of these companies are included in the Bottling Group Index
described in the Performance Graph section on page 16. The Committee believes
that targeting compensation at a level comparable to this group of companies
appropriately reflects the labor market for the Company's executives.
PBG's executives are eligible for three compensation components: (1) base
salary, (2) annual cash incentives, and (3) long-term incentives.
BASE SALARIES. The Company's executive salary structure is based on broad
salary bands. Executive base pay is targeted at the 75th percentile of the peer
group. Individual base salaries are determined based on a targeted pay level for
each position within each salary band. Annual increases are based on individual
performance, experience and responsibilities, and reflect the Company's
philosophy of paying for performance against underlying job accountabilities.
ANNUAL CASH INCENTIVES. Executive officers are eligible to receive annual
cash incentives under the Executive Incentive Compensation Plan ("EICP"). The
plan's objectives are to support the attainment of PBG's business and
performance goals by placing a sizeable percentage of pay at risk. Other
executives receive annual cash incentives under a bonus plan that includes
specific goals for each organizational unit reflective of PBG's team-based
approach. The primary PBG performance goal is based on earnings before interest,
taxes, depreciation and amortization ("EBITDA"). Team performance goals at the
local level are based on profit and volume measures. Individual payouts are
based on an executive's bonus target and attainment of these pre-established
goal(s).
In order to ensure compliance under Section 162(m) of the Code, the
Compensation Subcommittee (comprised entirely of "outside directors") (the
"Compensation Subcommittee") determines the annual and long-term incentives for
our executive officers and other officers deemed covered by Section 162(m) of
the Code. In 2001, the pre-established incentive goal for the named executive
officers was based 100% on EBITDA. No payment is made to the named executive
officers if a minimum EBITDA target is not met. Once the minimum or higher
EBITDA target is achieved, the named executive officers are eligible to receive
a related maximum award. The Compensation Subcommittee may then exercise
discretion to decrease (but not increase) the
12
amount payable to the named executive officers. Pursuant to the terms of the
EICP, the Subcommittee certified the results against the performance objectives,
exercised its discretion and approved the annual incentive awards for the named
executive officers.
LONG-TERM INCENTIVES. The Company provides long-term incentives through
its Long-Term Incentive Plans (collectively "LTIP"). These long-term incentives
may include non-qualified stock options, performance units, incentive stock
options, stock appreciation rights, and restricted stock grants. The objective
of the LTIP is to provide a long-term focus that links executive compensation to
the creation of shareholder value and balances the short-term focus of the
annual incentives and base pay. Non-qualified stock options are the primary
long-term incentive vehicle of the Company. Individual grants are tied to an
executive's salary band and current base salary and are targeted at the 75th
percentile of the peer group.
OTHER STOCK PROGRAMS. The Committee has established stock ownership
guidelines for the Company's key senior executives. The guidelines vary from one
to five times annual salary. Ownership levels are measured annually and affected
employees must meet or exceed the guidelines within five years of
implementation. In 2001, 100% of PBG's key senior executives met or exceeded
their annual requirement.
2001 COMPENSATION OF THE CHAIRMAN AND CHIEF EXECUTIVE OFFICERS. Mr.
Weatherup served as the Company's Chairman and Chief Executive Officer until
September 2001, at which time, Mr. Cahill replaced Mr. Weatherup as Chief
Executive Officer.
2001 COMPENSATION OF CRAIG E. WEATHERUP.
In 2001, Mr. Weatherup received an increase of $70,000 bringing his annual
salary to $920,000.
Like the other named executive officers, Mr. Weatherup receives no annual
incentive if the minimum EBITDA target is not met. Once the minimum or higher
EBITDA target is achieved, Mr. Weatherup is eligible to receive a related
maximum award. The Compensation Subcommittee then determines the actual award,
which may not exceed the maximum. In doing so, financial and non-financial
performance measures are considered. The non-financial measures for 2001
included: (i) establishing a strong and powerful operating culture; (ii)
leveraging organizational capabilities to achieve business strategy; and (iii)
focusing on key business drivers. The financial measure for 2001 was based 100%
on the attainment of a pre-established EBITDA target. After combining the
achievement of both the financial and non-financial performance measures, and in
order to acknowledge Mr. Weatherup's significant contributions to PBG's success
in 2001, the Compensation Subcommittee awarded Mr. Weatherup a bonus of
$1,315,000.
A majority of Mr. Weatherup's long-term incentive awards in 2001 were
granted to reflect his leadership and role in the succession planning, in
addition to his continued involvement, as PBG's Chairman, in setting the
long-term strategy for the Company. Mr. Weatherup did not receive a long-term
incentive award in 2000.
2001 COMPENSATION OF JOHN T. CAHILL.
In addition to his annual merit increase, Mr. Cahill received an increase
in September 2001 of $79,000 bringing his salary to $700,000. This new salary
reflects his increased responsibilities as Chief Executive Officer.
The Compensation Subcommittee determines Mr. Cahill's annual bonus payout
by considering his performance against financial and non-financial measures. The
financial measure for 2001 was based 100% on the attainment of a pre-established
EBITDA target. The non-financial measures included (i) effective external
communication with PBG's investment community; (ii) leadership of PBG's senior
management team; and (iii) implementation and execution of a strong Annual
Operating Plan. After combining the achievement in both financial and
non-financial measures, and in recognition of Mr. Cahill's new responsibilities
as Chief Executive Officer, the Compensation Subcommittee awarded Mr. Cahill a
bonus of $870,000.
13
The majority of Mr. Cahill's long-term incentive awards in 2001 were
granted in recognition of his new responsibilities as Chief Executive Officer of
PBG.
IMPACT OF INTERNAL REVENUE CODE SECTION 162(m). Under the Omnibus Budget
Reconciliation Act of 1993, provisions were added to the Code under Section
162(m) that limit the tax deduction for compensation in excess of one million
dollars paid to certain executive officers. However, performance-based
compensation can be excluded from the limit so long as it meets certain
requirements. The Committee and the Compensation Subcommittee believe the EICP
and LTIP satisfy the requirements for exemption under the Code Section 162(m).
Payments made under these plans are generally expected to qualify as
performance-based compensation and to constitute the majority of aggregate
incentive payments for the named executive officers.
For 2001, the annual salary paid to Mr. Weatherup, Mr. Cahill and the other
named executive officers was in each case less than one million dollars. The
2001 annual incentives were all paid pursuant to the EICP and will, therefore,
be deductible when paid. The stock option awards made to executive officers
under the terms of the LTIP are exempt as performance-based compensation for
purposes of calculating the one million-dollar limit. Due to the Company's focus
on performance-based compensation plans and continued deferral of compensation
by certain executive officers, the Committee expects to continue to qualify most
compensation paid to the group as tax deductible.
SUMMARY. The Compensation Committee believes that the compensation
programs of the Company are well structured to encourage attainment of
objectives and foster a shareholder perspective in management, in particular
through employee stock ownership. The Committee feels that the awards made in
2001 were competitive and appropriate, and serve shareholders' long-term
interests.
Respectfully submitted,
The Compensation and Management Development Committee
<Table>
Barry H. Beracha (Chairperson) Thomas H. Kean
Linda G. Alvarado Susan D. Kronick
Thomas W. Jones Margaret D. Moore
</Table>
14
REPORT OF THE AUDIT COMMITTEE
The Audit Committee (the "Committee") of the Company's Board of Directors
is composed of three directors, Thomas W. Jones (Chairperson), Barry H. Beracha
and Susan D. Kronick, all of whom have been determined by the Board of Directors
to be independent (as independence is defined under the New York Stock Exchange
listing standards). The Committee operates under a written charter adopted by
the Board of Directors, which was attached as an appendix to the Proxy Statement
for the 2001 annual meeting of shareholders. The Committee recommends to the
Board of Directors, subject to shareholder ratification, the selection of the
Company's independent auditors.
Management is responsible for the Company's internal controls and the
financial reporting process. The independent auditors are responsible for
performing an independent audit of consolidated financial statements in
accordance with auditing standards generally accepted in the United States of
America and for issuing a report thereon. The Committee's responsibility is to
monitor and oversee these processes.
In this context, the Committee has met and held discussions with management
and KPMG LLP, the independent auditing firm for the Company. Management
represented that the consolidated financial statements were prepared in
accordance with accounting principles generally accepted in the United States of
America. The Committee reviewed and discussed the audited consolidated financial
statements with management and KPMG LLP. The Committee discussed with KPMG LLP
matters required to be discussed by Statement of Auditing Standards No. 61
(Communication with Audit Committees).
KPMG LLP also provided the Committee with the written disclosures required
by Independence Standard Board Standard No. 1 (Independence Discussions with
Audit Committees), and the Committee discussed with KPMG LLP that firm's
independence.
Based on discussions with management and KPMG LLP and review of the
representations of management and the report of the independent auditors, the
Committee recommended to the Board of Directors that the audited consolidated
financial statements be included in the Company's Annual Report on Form 10-K for
the year ended December 29, 2001 filed with the SEC.
Thomas W. Jones (Chairperson)
Barry H. Beracha
Susan D. Kronick
INDEPENDENT PUBLIC ACCOUNTANTS
In addition to retaining KPMG LLP to audit our consolidated financial
statements for 2002, the Company and its affiliates retained KPMG LLP, as well
as other accounting and consulting firms, to provide various consulting services
in 2002, and expect to continue to do so in the future. The aggregate fees
billed for professional services by KPMG LLP in 2001 were as follows.
Audit Fees. The aggregate fees billed by KPMG LLP for professional
services rendered for the audit of PBG's consolidated financial statements for
the fiscal year ended December 29, 2001, and the reviews of its interim
financial statements included in PBG's Forms 10-Q were approximately $1.3
million, including all statutory audits.
Financial Information Systems Design and Implementation Fee. There were no
fees billed by KPMG LLP for services rendered in connection with PBG's financial
information systems design and implementation during the fiscal year ended
December 29, 2001.
All Other Fees. The aggregate amount of all fees billed for services
rendered to PBG by KPMG LLP for the fiscal year ended December 29, 2001 (other
than the audit fees described above) were approximately $863,000, primarily
related to due diligence work on acquisitions, tax planning and advice, audits
of employee benefit plans and other audit related services.
The Audit Committee has determined that the provision of all non-audit
services performed for PBG by KPMG LLP is compatible with maintaining that
firm's independence.
15
PERFORMANCE GRAPH
The following performance graph compares the cumulative total return of the
Company's Common Stock to the S&P 500 Stock Index and to an index of peer
companies selected by the Company (the "Bottling Group Index"). The Bottling
Group Index consists of Coca-Cola Amatil Limited, Coca-Cola Bottling Co.
Consolidated, Coca-Cola Enterprises Inc., Panamerican Beverages, Inc. and
PepsiAmericas, Inc. The graph assumes the return on $100 invested on March 31,
1999, the day the shares of PBG Common Stock began trading on the New York Stock
Exchange, to December 29, 2001, the last day of the Company's fiscal year. The
returns of each member of the Bottling Group Index are weighted according to
each member's stock market capitalization as of the beginning of the period
measured and includes the subsequent reinvestment of dividends on a quarterly
basis.
[PERFORMANCE GRAPH]
<Table>
<Caption>
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
3/31/99 6/12/99 9/4/99 12/25/99 3/18/00 6/10/00 9/2/00 12/30/00 3/24/01 6/16/01
---------------------------------------------------------------------------------------------------
PPG* 100 101 92 75 93 125 145 184 177 192
Bottling Group
Index 100 110 91 70 71 61 64 68 75 66
S&P 500 Index 100 101 106 113 114 113 118 103 91 97
<Caption>
Q3 Q4
9/8/01 12/29/01
------------------
PPG* 207 221
Bottling Group
Index 63 69
S&P 500 Index 87 93
</Table>
- ---------------
* PBG's share price was $23.80 on December 28, 2001 (the last trading day before
fiscal year end), reflecting a 2-for-1 split of PBG Common Stock effective
November 27, 2001.
16
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
STOCK OWNERSHIP AND DIRECTOR RELATIONSHIPS WITH PEPSICO. PBG was initially
incorporated in January 1999 as a wholly owned subsidiary of PepsiCo to effect
the separation of most of PepsiCo's company-owned bottling businesses. PBG
became a publicly traded company on March 31, 1999. As of February 21, 2002,
PepsiCo's ownership represented 37.9% of the outstanding Common Stock and 100%
of the outstanding Class B Common Stock together representing 42.9% of the
voting power of all classes of PBG's voting stock. PepsiCo also owns 7.0% of the
equity of Bottling Group, LLC, PBG's principal operating subsidiary. In
addition, David R. Andrews, a director nominee, is an executive officer of
PepsiCo.
AGREEMENTS AND TRANSACTIONS WITH PEPSICO AND AFFILIATES. PBG and PepsiCo
(and certain of its affiliates) have entered into transactions and agreements
with one another, incident to their respective businesses, and PBG and PepsiCo
are expected to enter into material transactions and agreements from time to
time in the future. As used in this section, "PBG" includes the Company and its
subsidiaries.
Material agreements and transactions between PBG and PepsiCo (and certain
of its affiliates) during 2001 are described below.
Beverage Agreements and Purchases of Concentrates and Finished
Products. PBG purchases concentrates from PepsiCo and manufactures, packages,
distributes and sells carbonated and non-carbonated beverages under license
agreements with PepsiCo. These agreements give PBG the right to manufacture,
sell and distribute beverage products of PepsiCo in both bottles and cans and
fountain syrup in specified territories. The agreements also provide PepsiCo
with the ability to set prices of such concentrates, as well as the terms of
payment and other terms and conditions under which PBG purchases such
concentrates. In addition, PBG bottles water under the Aquafina trademark
pursuant to an agreement with PepsiCo, which provides for the payment of a
royalty fee to PepsiCo. In certain instances, PBG purchases finished beverage
products from PepsiCo.
During 2001, total payments by PBG to PepsiCo for concentrates, royalties
and finished beverage products were approximately $1.7 billion.
PBG Manufacturing Services. PBG provides manufacturing services to PepsiCo
in connection with the production of certain finished beverage products. In
2001, amounts paid or payable by PepsiCo to PBG for these services were
approximately $13.8 million.
Purchase of Distribution Rights. During 2001, PBG paid PepsiCo $9.1
million for distribution rights relating to the SoBe brand in certain PBG-owned
territories in the United States.
Transactions with Joint Ventures in which PepsiCo holds an equity
interest. PBG purchases tea concentrate and finished beverage products from the
Pepsi/Lipton Tea Partnership, a joint venture of Pepsi-Cola North America, a
division of PepsiCo, and Lipton (the "Partnership"). During 2001, total amounts
paid or payable to PepsiCo for the benefit of the Partnership were approximately
$116.7 million. In addition, PBG provides certain manufacturing services in
connection with the hot-filled tea products of the Partnership to PepsiCo for
the benefit of the Partnership. In 2001, amounts paid or payable by PepsiCo to
PBG for these services were approximately $18.4 million.
PBG purchases finished beverage products from the North American Coffee
Partnership, a joint venture of Pepsi-Cola North America and Starbucks. During
2001, amounts paid or payable to the North American Coffee Partnership by PBG
were approximately $108.3 million.
In addition to the amounts described above, PBG received approximately $4.2
million from an international joint venture, in which PepsiCo holds an equity
interest in 2001.
Purchase of Snack Food Products from Frito-Lay, Inc. PBG purchases snack
food products from Frito-Lay, Inc., a subsidiary of PepsiCo, for sale and
distribution through all of Russia except for Moscow. In 2001, amounts paid or
payable by PBG to Frito-Lay, Inc. were approximately $27.1 million.
17
Shared Services. PepsiCo provides various services to PBG pursuant to a
shared services agreement, including procurement of raw materials, processing of
accounts payable and credit and collection, certain tax and treasury services
and information technology maintenance and systems development. During 2001,
amounts paid or payable to PepsiCo for shared services totaled approximately
$178.9 million.
Pursuant to the shared services agreements, PBG provides certain employee
benefit and international tax and accounting services to PepsiCo. During 2001,
payments to PBG from PepsiCo for these services totaled approximately $598,000.
Rental Payments. Amounts paid or payable by PepsiCo to PBG for rental of
office space at certain PBG facilities were approximately $11.6 million in 2001.
Insurance Services. Hillbrook Insurance Company, Inc., a subsidiary of
PepsiCo, provides insurance and risk management services to PBG pursuant to a
contractual arrangement. Costs associated with such services in 2001 totaled
approximately $57.8 million.
National Fountain Services. PBG provides certain manufacturing, delivery
and equipment maintenance services to PepsiCo's national fountain customers. In
2001, net amounts paid or payable by PepsiCo to PBG for these services were
approximately $184.6 million.
Marketing and Other Support Arrangements. PepsiCo provides PBG with
various forms of marketing support. The level of this support is negotiated
annually and can be increased or decreased at the discretion of PepsiCo. This
marketing support is intended to cover a variety of programs and initiatives,
including direct marketplace support (including point-of-sale materials),
capital equipment funding and shared media and advertising support. For 2001,
total direct marketing support funding paid or payable to PBG by PepsiCo
approximated $553.8 million.
Transactions with Bottlers in which PepsiCo holds an Equity Interest. PBG
and PepsiAmericas, Inc., a bottler in which PepsiCo owns an equity interest, and
PBG and Pepsi Bottling Ventures LLC, a bottler in which PepsiCo owns an equity
interest, bought from and sold to each other finished beverage products. These
transactions occurred in instances where the proximity of one party's production
facilities to the other party's markets or lack of manufacturing capability, as
well as other economic considerations, made it more efficient or desirable for
one bottler to buy finished product from another. In 2001, PBG's sales to those
bottlers totaled approximately $774,000 and purchases were approximately
$40,000.
PBG provides certain administrative support services to PepsiAmericas, Inc.
and Pepsi Bottling Ventures LLC. In 2001, amounts paid or payable by
PepsiAmericas, Inc. and Pepsi Bottling Ventures LLC to PBG for these services
were approximately $650,000.
In connection with PBG's acquisition of Pepsi-Cola Bottling of Northern
California ("Northern California") in 2001, PBG paid $10.3 million to PepsiCo
for its equity interest in Northern California.
On March 13, 2002, PBG acquired the operations and exclusive right to
manufacture, sell and distribute Pepsi-Cola's international beverages in Turkey.
As part of this acquisition, PBG paid PepsiCo $7.3 million, subject to certain
purchase price adjustments, for its equity interest in the acquired entity and
received $16.4 million from PepsiCo for the sale of the acquired entity's local
brands to PepsiCo.
Bottling Group, LLC Distribution. PepsiCo has a 7.0% ownership interest in
Bottling Group, LLC, our principal operating subsidiary. In accordance with the
Bottling Group, LLC's Limited Liability Company Agreement, PepsiCo received a
$15.8 million distribution from Bottling Group, LLC in 2001.
Relationships and Transactions with Management and Others. Linda G.
Alvarado, a member of PBG's Board of Directors, together with her husband and
children, own and operate Taco Bell and Pizza Hut restaurant companies that
purchase beverage products from PBG. In 2001, the total amount of these
purchases was approximately $381,288.
18
APPROVAL OF THE PBG 2002 LONG-TERM INCENTIVE PLAN
(ITEM 2 ON PROXY CARD)
The PBG 2002 Long-Term Incentive Plan (the "2002 LTIP") has been
established by PBG to secure for PBG and its shareholders the benefits arising
from providing long-term incentive compensation opportunities to those key
employees and officers of PBG who are and will be responsible for its future
growth and continued success.
Some key features of the 2002 LTIP include:
- a prohibition against repricing of stock options;
- a prohibition against granting stock options with an exercise price less
than the fair market value of PBG Common Stock on the date of grant;
- a minimum vesting period of one year for stock options, stock
appreciation rights, performance units and restricted and other stock
awards; and
- specific performance targets for awards of performance units.
Introduction. The Board of Directors recommends that shareholders approve
the 2002 LTIP, which was adopted by the Compensation and Management Development
Committee of the Board of Directors of PBG (the "Committee") on March 4, 2002,
subject to shareholder approval. If the 2002 LTIP is approved by shareholders,
certain awards made under the 2002 LTIP will be eligible to qualify as
"performance-based" compensation that is exempt from the one million dollar
deduction limit (as described below) imposed by Section 162(m) of the federal
Internal Revenue Code (the "Code") and 18,000,000 shares of PBG Common Stock
will be authorized and available for awards under the 2002 LTIP. A summary of
the material provisions of the 2002 LTIP is set forth below and is qualified in
its entirety by reference to the 2002 LTIP as set forth on Appendix A hereto. If
the 2002 LTIP is not so approved, it will be canceled.
Purpose. The purpose of the 2002 LTIP is to: (i) provide long-term
incentives to those persons with significant responsibility for the success and
growth of PBG; (ii) attract and retain persons eligible to participate in the
2002 LTIP; and (iii) align participants' interests with those of PBG's other
shareholders through compensation that is based on the performance of PBG Common
Stock.
Eligibility. Each key employee of PBG and its subsidiaries may be granted
any of the awards under the 2002 LTIP. Awards are generally made at the
discretion of the Committee (or its Compensation Subcommittee, the
"Subcommittee," with respect to executive officers and other executives who are
deemed to be covered by Section 162(m) of the Code). As of February 21, 2002,
PBG and its subsidiaries had approximately 450 key employees.
Stock Options. The Committee or Subcommittee may grant options under the
2002 LTIP to purchase PBG Common Stock that may be either non-qualified stock
options or incentive stock options. The purchase price of a share of PBG Common
Stock under each type of option shall not be less than the fair market value of
a share of PBG Common Stock on the date the option is granted. The options shall
be exercisable in accordance with the terms established by the Committee or the
Subcommittee, but no options shall have a vesting period of less than one year.
In general, the Committee and the Subcommittee intend that options will vest and
become fully exercisable within three years after their grant date. However,
without regard to the vesting period assigned, the vesting and exercisability of
options may be accelerated in connection with a change of control and certain
transfers, as explained below, or in connection with a participant's death,
disability or retirement. The full purchase price of each share of PBG Common
Stock purchased upon the exercise of any option shall be paid at the time of the
exercise. Except as otherwise determined by the Committee or Subcommittee, the
purchase price shall be payable in cash or in PBG Common Stock (valued at fair
market value as of the day of exercise), or in any combination thereof.
19
Stock Appreciation Rights. The Committee or Subcommittee may grant a stock
appreciation right ("SAR") in connection with all or any portion of a previously
or contemporaneously granted option or independent of any option grant. SARs
shall be exercisable in accordance with the terms established by the Committee
or the Subcommittee but no SARs shall have a vesting period of less than one
year. However, without regard to the vesting period assigned, the vesting and
exercisability of SARs may be accelerated in connection with a change of control
and certain transfers, as explained below, or in connection with a participant's
death, disability or retirement. An SAR entitles the participant to receive the
amount by which the fair market value of a specified number of shares on the
exercise date exceeds an exercise price established by the Committee or
Subcommittee, which shall not be less than 100% of the fair market value of the
PBG Common Stock at the time the SAR is granted. Such excess amount shall be
payable in PBG Common Stock, in cash, or in a combination thereof, as determined
by the Committee or Subcommittee.
Performance Units. The Committee or Subcommittee may grant performance
units (a right to receive a designated dollar amount of PBG Common Stock or cash
contingent on achievement of performance or other objectives). The full and/or
partial payment of performance unit awards granted will be made only upon
certification by the Committee or Subcommittee of the attainment by PBG, over a
performance period established by the Committee or Subcommittee, of any one or
more performance targets, which have been established by the Committee or
Subcommittee and which are based on objective criteria. No payment will be made
if the targets are not met. In addition, all performance units granted will have
a minimum vesting period of one year. However, without regard to the vesting
period assigned, the vesting of performance units may be accelerated in
connection with a change of control, as explained below, or in connection with a
participant's death, disability or retirement.
Restricted and Other Stock Awards. The Committee or Subcommittee may grant
restricted stock awards (a grant of PBG Common Stock with such shares subject to
a risk of forfeiture or other restrictions that lapse upon the achievement of
one or more performance or other objectives, as determined by the Committee or
Subcommittee) or stock awards (a grant of PBG Common Stock). Any such awards
shall be subject to such conditions, restrictions and contingencies as the
Committee or Subcommittee determines, but all restricted and other stock awards
shall have a vesting period of at least one year. However, without regard to the
vesting period assigned, the vesting of restricted and other stock awards may be
accelerated in connection with a change of control and (in the case of
restricted stock) certain transfers, as explained below, or in connection with a
participant's death, disability or retirement.
Performance-Based Compensation. A federal income tax deduction will
generally be unavailable for annual compensation in excess of one million
dollars paid to the Chairman, Chief Executive Officer and the four other most
highly compensated officers of a public corporation. However, amounts that
constitute "performance-based" compensation are not counted toward the one
million dollar limit. Grants of stock options are expected to qualify as
performance-based compensation. In addition, the Subcommittee may designate any
award described in the preceding two paragraphs as intended to be
"performance-based" compensation. Any awards so designated shall be conditioned
on the achievement of one or more performance goals, as required by Section
162(m) of the Code. The performance goals that may be used by the Subcommittee
for such awards shall be based on any one or more of the following PBG
performance measures, as selected by the Subcommittee: cash flow; earnings;
earnings per share; market value added or economic value added; EBITDA; return
on assets; return on equity; return on investment capital; revenues; stock
price; or total shareholder return. Each goal may be based on or otherwise
employ comparisons relating to capital, shareholders' equity and/or shares
outstanding, investments or to assets or net assets. To satisfy the requirements
that apply to "performance-based" compensation, these goals must be approved by
PBG's shareholders, and approval of the 2002 LTIP will also constitute approval
of the foregoing goals.
Administration. The 2002 LTIP is administered by the Committee or the
Subcommittee (with respect to the executive officers and other executives deemed
covered by Section 162(m) of the Code) (collectively, the "Committees"). The
Committees will have the authority and discretion to select from among the
eligible individuals those persons who shall receive awards, to determine the
20
time or times of receipt, to determine the types of awards and the number of
shares covered by the awards, to establish the terms, conditions, performance
criteria, restrictions, and other provisions of such awards, and subject to
certain limits, to cancel or suspend awards. Each of the Committees will have
the authority and discretion to interpret the 2002 LTIP, to establish, amend,
and rescind any rules and regulations relating to the 2002 LTIP, and to make all
other determinations that may be necessary or advisable for the administration
of the 2002 LTIP. Any interpretation of the 2002 LTIP by the Committees and any
decision made by the Committees under the 2002 LTIP is final and binding on all
persons. Except with respect to executive officers and other executives deemed
covered by Section 162(m) of the Code and except to the extent prohibited by
applicable law or the applicable rules of a stock exchange, each of the
Committees may allocate all or any portion of its responsibilities and powers to
any one or more of its members and may delegate all or any part of its
responsibilities and powers to any person or persons selected by it.
In the event of a corporate transaction involving PBG (including, without
limitation, any stock dividend, stock split, extraordinary cash dividend,
recapitalization, reorganization, merger, consolidation, split-up, spin-off,
combination or exchange of shares), the Committees may adjust awards to preserve
the benefits or potential benefits of the awards. Action by the Committees may
include: (i) adjustment of the number and kind of shares which may be delivered
under the 2002 LTIP; (ii) adjustment of the number and kind of shares subject to
outstanding awards; (iii) adjustment of the exercise price of outstanding
options and SARs; and (iv) any other adjustments that the Committees determine
to be equitable.
Except as otherwise provided by the Committees, awards under the 2002 LTIP
are not transferable except as designated by the participant by will or by the
laws of descent and distribution.
Limit on Shares. The maximum number of shares of stock that may be
delivered to participants under the 2002 LTIP is eighteen million (18,000,000)
shares of PBG Common Stock (adjusted for corporate transactions described
above). No participant may be granted awards which would result in his or her
receiving, in the aggregate, during the term of the 2002 LTIP, more than 25% of
the maximum number of shares available for award under the 2002 LTIP. Solely for
purposes of determining whether this maximum is met, a performance unit or SAR
shall be treated as entitling the holder thereof to one share of PBG Common
Stock.
Change in Control and Certain Transfers. Upon a change in control, as
defined in the 2002 LTIP, all outstanding options and SARs will become fully
exercisable and all performance units, restricted stock and stock awards will
become fully vested. Following an involuntary termination or certain other
events after a change in control, a participant will become entitled to receive
the value of his or her awards. In addition, in connection with certain
PBG-approved transfers to certain allied organizations, as described in the 2002
LTIP, the transferred participant's outstanding options and SARs will become
fully exercisable and restricted stock awards will become fully vested.
Employment by the allied organization will be treated as employment by PBG in
determining the participant's right to exercise and in applying the 2002 LTIP's
misconduct provisions.
Amendment and Termination. The Committees may, at any time, amend or
terminate the 2002 LTIP, provided that no amendment or termination may, in the
absence of consent to the change by the affected participant, adversely affect
the rights of any participant or beneficiary under any award granted under the
2002 LTIP prior to the date such amendment or termination is adopted by the
Board. However, unless the shareholders of PBG shall have first approved, no
amendment may change eligibility, increase the limits on shares, change the
performance goals for performance units or restricted stock, or decrease the
minimum option or SAR exercise price.
Federal Income Tax Considerations. The following discussion is a summary
of certain federal income tax issues and does not purport to be a complete
analysis of all of the potential tax aspects relating to the 2002 LTIP or the
awards. The discussion is not intended as a substitute for careful tax planning
by each participant, and does not consider state and local taxes that may be
applicable to the awards. Therefore, PBG encourages participants to consult with
their individual tax advisors
21
regarding the taxation of their awards. The discussion is based on federal
income tax laws, regulations and interpretations thereof presently in effect,
all of which are subject to change, possibly with retroactive effect. Nothing in
this discussion is or should be construed as legal or tax advice.
Non-Qualified Options. The grant of a non-qualified option under the 2002
LTIP should not result in taxable income to the participant. Generally, the
participant would realize ordinary income at the time of exercise in an amount
equal to the excess of the fair market value of the shares of PBG Common Stock
acquired over the exercise price for those shares and PBG would be entitled to a
corresponding deduction. Gains or losses realized by the participant upon the
subsequent disposition of such shares will be treated as capital gains and
losses, with the basis in such PBG Common Stock equal to the fair market value
of the shares at the time of exercise.
Incentive Stock Options. The grant of an incentive stock option should not
result in taxable income to the participant. The exercise of an incentive stock
option will not result in taxable income to the participant provided that the
participant was, without a break in service, an employee of PBG or a subsidiary
during the period beginning on the date of the grant of the option and ending on
the date three months prior to the date of exercise (one year prior to the date
of exercise if the participant is disabled, as that term is defined in the Code,
with an extended exercise period also applying following the participant's
death). The excess of the fair market value of the PBG Common Stock at the time
of the exercise of an incentive stock option over the exercise price is an
adjustment that is included in the calculation of the participant's alternative
minimum taxable income for the tax year in which the incentive stock option is
exercised.
If the participant does not sell or otherwise dispose of the PBG Common
Stock within two years from the date of the grant of the incentive stock option,
nor within one year after the transfer of such PBG Common Stock to the
participant, then, upon disposition of such PBG Common Stock, any amount
realized in excess of the exercise price will be taxed to the participant as a
capital gain and PBG will not be entitled to a corresponding deduction. A
capital loss will be recognized to the extent that the amount realized is less
than the exercise price. If the foregoing holding period requirements are not
met, the participant will generally realize ordinary income at the time of the
disposition of the shares, in an amount equal to the lesser of (i) the excess of
the fair market value of PBG Common Stock on the date of exercise over the
exercise price, or (ii) the excess, if any, of the amount realized upon
disposition of the shares over the exercise price and PBG will be entitled to a
corresponding deduction. In this case, if the amount realized upon the
disposition of the shares exceeds the value of the shares on the date of
exercise, any additional amount will be a capital gain. If the amount realized
upon the disposition of the shares is less than the exercise price, the
participant will recognize no income, and a capital loss will be recognized
equal to the excess of the exercise price over the amount realized upon the
disposition of the shares.
Stock Appreciation Rights. The grant of an SAR should not result in
taxable income to the participant. Generally, upon exercise of an SAR, the
amount of cash or the fair market value of PBG Common Stock received will be
taxable to the participant as ordinary income and PBG will be entitled to a
corresponding deduction. If the SAR is settled in PBG Common Stock, a gain or
loss realized by the participant upon the disposition of any such shares will be
treated as a capital gain or loss, with the basis in such shares equal to the
fair market value of the shares at the time of exercise.
Performance Units. A participant who has been granted a performance unit
award should not realize taxable income at the time of grant and PBG will not be
entitled to a corresponding deduction. Generally, the participant will have
compensation income at the time of distribution equal to the amount of cash
received and the then fair market value of the distributed shares and PBG will
be entitled to a corresponding deduction.
Restricted and Other Stock. A participant who has been granted a
restricted stock award should not realize taxable income at the time of grant
and PBG will not be entitled to a corresponding deduction, assuming that the
restrictions constitute a "substantial risk of forfeiture" for federal
22
income tax purposes. Upon the vesting of stock subject to an award, the
participant would realize ordinary income in an amount equal to the then fair
market value of those shares, and PBG would then be entitled to a corresponding
deduction. The tax basis in such shares should then be equal to the fair market
value of the shares at the time of vesting. Gain or loss realized by the
participant upon a subsequent disposition of such shares would generally be
treated as a capital gain or loss. Cash dividends paid to the participant during
the restriction period, if so provided, will also be ordinary income to the
participant and PBG would be entitled to a corresponding deduction. A
participant may elect pursuant to Section 83(b) of the Code to have income
recognized at the date of grant of a restricted stock award. If such an election
is made, the amount of ordinary income taxable to the participant would be equal
to the fair market value of the restricted stock at the date of grant and PBG
would be entitled to a corresponding deduction at that time. The tax basis of
such stock will then be equal to the ordinary income recognized by the
participant. Gain or loss realized upon a subsequent disposition of restricted
shares would generally be treated as a capital gain or loss. Elections for
Section 83(b) treatment must be made within 30 days of the date of grant and
filed with PBG and the Internal Revenue Service.
Withholding of Taxes. PBG may withhold amounts to satisfy withholding tax
requirements from amounts due to participants. Subject to guidelines established
by the Committees, participants may have PBG Common Stock withheld from awards
or may tender PBG Common Stock to PBG to satisfy tax withholding requirements.
One Million Dollar Limit. As previously noted, Section 162(m) of the Code
disallows a federal income tax deduction for certain compensation in excess of
one million dollars per year paid to each of PBG's Chairman, Chief Executive
Officer and its four other most highly compensated executive officers.
Compensation that qualifies as "performance-based" compensation is not subject
to the one million dollar limit. The 2002 LTIP has been structured to permit
awards and payments that will satisfy the requirements applicable to
"performance-based" compensation.
NEW PLAN BENEFITS
The future benefits or amounts that would be received under the 2002 LTIP
by executive officers and non-executive officer employees are discretionary and
are therefore not determinable at this time. See "Option Grants in Last Fiscal
Year" for the name, position and grant information for executive officers and
non-executive officer employees who were granted options during 2001.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE APPROVAL
OF THE PBG 2002 LONG-TERM INCENTIVE PLAN. The PBG 2002 Long-Term Incentive Plan
is attached as Appendix A.
APPROVAL OF AUDITORS
(ITEM 3 ON PROXY CARD)
The Board of Directors, upon recommendation of the Audit Committee,
recommends that KPMG LLP continue as PBG's independent auditors for fiscal 2002.
They have been PBG's independent auditors since 1999. Representatives of KPMG
LLP will be available to answer questions at the Annual Meeting and are free to
make statements during the meeting.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE APPROVAL
OF KPMG LLP AS PBG'S INDEPENDENT AUDITORS FOR FISCAL 2002.
OTHER MATTERS
As of the mailing date of this Proxy Statement, the Board of Directors
knows of no other matters to be brought before the Annual Meeting. If matters
other than the ones listed in this Proxy Statement arise at the Annual Meeting,
the persons named in the proxy will vote the shares represented by the proxy
according to their judgment.
23
CONFIDENTIALITY. PBG's policy is that proxies identifying individual
shareholders are private except as necessary to determine compliance with law or
assert or defend legal claims, or in a contested proxy solicitation, or in the
event that a shareholder makes a written comment on a proxy card or an
attachment to it. PBG retains an independent organization to tabulate
shareholder votes and certify voting results.
YEAR 2003 SHAREHOLDERS' PROPOSALS
PBG welcomes comments or suggestions from its shareholders. If a
shareholder wants to have a proposal formally considered at the 2003 Annual
Shareholders' Meeting, and included in the Proxy Statement for that meeting, PBG
must receive the proposal in writing on or before December 10, 2002. If a
proposal is received by February 14, 2003, PBG may include it in the Proxy
Statement and, if it does, may use its discretionary authority to vote on the
proposal. For proposals that are not submitted by February 14, 2003, PBG may use
its discretionary voting authority when the proposal is raised at the 2003
Annual Meeting, without inclusion of the proposal in its Proxy Statement.
GENERAL
PBG will pay the costs of preparing, assembling and mailing this Proxy
Statement and the costs relating to the Annual Meeting.
In addition to the solicitation of proxies by mail, PBG intends to ask
brokers and bank nominees to solicit proxies from their principals and will pay
the brokers and bank nominees their expenses for such solicitation.
To be sure that we have the necessary quorum to hold the Annual Meeting,
PBG has hired the firm of Morrow & Co., Inc., to help in soliciting proxies by
mail, telephone and personal interview for fees estimated at approximately
$8,500.
Employees of PBG may also solicit proxies. They will not receive any
additional pay for such solicitation.
The Annual Report to Shareholders for 2001 and financial statements were
mailed with this Proxy Statement or were previously delivered to shareholders
and are not part of the material for the solicitation of proxies. To reduce
postage costs, we sent materials at bulk mail rates. If you have not received
the Annual Report by the time you receive your Proxy Statement, please write or
call PBG's Director of Investor Relations, at The Pepsi Bottling Group, Inc.,
One Pepsi Way, Somers, NY 10589 or (914) 767-7216.
Please complete, sign, and date the enclosed proxy card, which can be
revoked by voting at the meeting, and mail it promptly in the enclosed
postage-paid envelope.
By Order of the Board of Directors,
/s/ Pamela C. McGuire
Pamela C. McGuire
Secretary
24
APPENDIX A
PBG 2002 LONG-TERM INCENTIVE PLAN
1. PURPOSE.
The purposes of the PBG 2002 Long-Term Incentive Plan (the "Plan") are: (a)
to provide long term incentives to those persons with significant responsibility
for the success and growth of The Pepsi Bottling Group, Inc. ("PBG") and its
subsidiaries, divisions and affiliated businesses (collectively, the "Company");
(b) to assist the Company in attracting and retaining key employees on a
competitive basis; and (c) to associate the interests of such employees with
those of PBG shareholders.
2. ADMINISTRATION OF THE PLAN.
(a) The Plan shall be administered by the Compensation and Management
Development Committee of the Board of Directors of PBG (except that, with
respect to executive officers and other executives deemed covered by section
162(m) of the Internal Revenue Code (collectively, "Covered Executives"), the
Plan shall be administered by such Committee's Compensation Subcommittee). The
Compensation Subcommittee shall be appointed by the Board of Directors of PBG
(the "Board") and shall consist of two or more members of the Board who qualify
as outside directors for purposes of section 162(m) of the Internal Revenue
Code. Any reference in the Plan to the "Committee" shall be understood to refer
to the Compensation and Management Development Committee or the Compensation
Subcommittee, whichever has administrative authority with respect to the matter.
(b) The Committee shall have all powers vested in it by the terms of the
Plan, such powers to include the authority (within the limitations described
herein) to select the employees to be granted awards under the Plan; to
determine the type, size and terms of awards to be granted to each employee
selected, provided, however, that no awards granted under the Plan shall have a
vesting period of less than one year; to determine the time when awards will be
granted and any conditions which must be satisfied by employees before an award
is granted; to establish performance objectives and conditions for earning
awards; to determine whether such objectives and conditions have been met and
whether awards will be paid at the end of the award period or at the time the
award is exercised (whichever applies), or whether payment will be deferred; to
determine whether payment of an award should be reduced or eliminated; and to
determine whether such awards should qualify as deductible in their entirety for
federal income tax purposes.
(c) The Committee shall have full power and authority to administer and
interpret the Plan and to adopt such rules, regulations, agreements, guidelines
and instruments for the administration of the Plan and for the conduct of its
business as the Committee deems necessary or advisable. The Committee's
interpretations of the Plan, and all actions taken and determinations made by
the Committee pursuant to the powers vested in it hereunder, shall be conclusive
and binding on all parties concerned, including the Company, PBG shareholders
and any person receiving an award under the Plan.
(d) Except with respect to Covered Executives (or as prohibited by law or
applicable stock exchange rules), the Committee may delegate to one or more
persons any or all of its authority under Sections 2(b) and 2(c).
3. ELIGIBILITY.
Each key employee of the Company may, in the Committee's discretion, be
granted any of the awards available under the Plan.
A-1
4. AWARDS.
(a) Types. Awards under the Plan include stock options, incentive stock
options, stock appreciation rights, performance units, restricted stock and
share awards.
(i) Stock Options. Stock options are rights to purchase shares of PBG
Common Stock ("Common Stock") at a fixed price for a specified period of
time. The purchase price per share of Common Stock covered by a stock
option awarded pursuant to this Plan, including any incentive stock
options, shall be equal to or greater than the "Fair Market Value" of a
share of PBG Common Stock on the date the stock option is awarded. "Fair
Market Value" means an amount equal to the average of the high and low
sales prices for Common Stock as reported on the composite tape for
securities listed on The New York Stock Exchange, Inc. on the date in
question (or, if no sales of Common Stock were made on such Exchange on
this date, on the next preceding day on which sales were made on such
Exchange), except that such average price shall be rounded up to the
nearest one-fourth. The purchase price per share may be payable in cash or
Common Stock or both (with any Common Stock valued at its Fair Market Value
on the date of exercise).
(ii) Stock Appreciation Rights. Stock appreciation rights ("SARs")
are rights to receive the difference between: (A) an exercise price, which
shall not be less than the Fair Market Value of a share of PBG Common Stock
on the grant date, and (B) the Fair Market Value of a share of Common Stock
on the date the SAR is exercised. Such difference may be paid in cash,
Common Stock or both.
(iii) Performance Units. Performance units are rights to receive up
to 100% of the value of shares of Common Stock as of the date of grant,
which value may be paid in cash or Common Stock, without payment of any
amounts to PBG. The full and/or partial payment of performance unit awards
granted under this Plan will be made only upon certification by the
Committee of the attainment by PBG, over a performance period established
by the Committee, of any one or more performance targets, which have been
established by the Committee. The applicable performance targets shall be
based on one or more of the following business criteria, as selected by the
Committee in its sole discretion: cash flow, earnings, earnings per share,
market value added, economic value added, EBITDA (earnings before interest,
taxes, depreciation and amortization), return on assets, return on equity,
return on investment capital, revenues, stock price, or total shareholder
return. Each criterion may be determined in comparison to capital,
shareholders' equity, shares outstanding, investments, assets or net
assets. Performance targets may be stated in the alternative. No payment
will be made if the minimum applicable performance target is not met.
(iv) Restricted Stock. Restricted stock awards are grants of Common
Stock subject to a substantial risk of forfeiture or other restrictions.
The full and/or partial vesting of any restricted stock award made to key
employees under this Plan will occur in accordance with a vesting schedule
established by the Committee and/or upon the attainment by PBG of any
primary or secondary performance targets, which have been established by
the Committee at the time the award is made. These targets shall be based
on objective criteria, including (without limitation) one or more of the
following: cash flow, earnings, earnings per share, market value added,
economic value added, EBITDA (earnings before interest, taxes, depreciation
and amortization), return on assets, return on equity, return on investment
capital, revenues, stock price, or total shareholder return. Each criterion
may be determined in comparison to capital, shareholders' equity, shares
outstanding, investments, assets or net assets. Performance targets may be
stated in the alternative. No payment will be made if the minimum
applicable performance target is not met.
(v) Share Awards. Share awards are grants of shares of Common Stock.
The Committee may grant a share award to any eligible employee on such
terms and conditions as the Committee may determine in its sole discretion.
Share awards may be made as additional
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compensation for services rendered by the eligible employee or may be in
lieu of cash or other compensation to which the eligible employee is
entitled from the Company.
(b) Supplemental Awards. Employees who are newly hired or promoted into
eligible status during the vesting or performance period may be granted
supplemental pro rata grants or supplemental incremental grants of stock
options, performance units and/or restricted stock, as determined by the
Committee in its sole discretion.
(c) Negative Discretion. Notwithstanding the attainment by PBG of one or
more performance target specified under this Plan, the Committee has the
discretion, by participant, to reduce some or all of an award that would
otherwise be paid.
(d) Guidelines. The Committee may, from time to time, adopt written
policies for its implementation of the Plan. Any such policies shall be
consistent with the Plan and may include, but need not be limited to, the type,
size and term of awards to be made, and the conditions for payment of such
awards.
(e) Maximum Awards. An eligible employee may be granted multiple awards
under the Plan, but no one employee may be granted awards which would result in
his or her receiving, in the aggregate, during the term of the Plan, more than
25% of the maximum number of shares available for award under the Plan. Solely
for the purposes of determining whether this maximum is met, a performance unit
or SAR shall be treated as entitling the holder thereof to one share of Common
Stock.
(f) Employment by the Company. To the extent the vesting, exercise, or
term of any stock option, SAR or restricted stock award is conditioned on
employment by the Company, an award recipient whose Company employment
terminates through a Company-approved transfer to an allied organization: (i)
shall vest in and be entitled to exercise any stock option, SAR or restricted
stock award immediately prior to the transfer, (ii) shall have employment with
the allied organization treated as employment by the Company in determining the
term of such award and the period for exercise, and (iii) shall have the allied
organization considered part of the Company for purposes of applying the
misconduct provisions of Section 8. The Chief Personnel Officer shall specify
the entities that are considered allied organizations as of any time.
5. SHARES OF STOCK SUBJECT TO THE PLAN.
The shares that may be delivered or purchased under the Plan shall not
exceed an aggregate of 18,000,000 shares of Common Stock, as adjusted, if
appropriate, pursuant to Section 7 hereof.
6. DEFERRED PAYMENTS.
The Committee may determine that all or a portion of a payment to a
participant under the Plan, whether it is to be made in cash, shares of Common
Stock or a combination thereof, shall be deferred. Deferrals shall be for such
periods and upon such terms as the Committee may determine in its sole
discretion.
7. DILUTION AND OTHER ADJUSTMENTS.
In the event of (i) any change in the outstanding shares of Common Stock by
reason of any split, stock dividend, recapitalization, merger, reorganization,
consolidation, combination or exchange of shares, (ii) any separation of a
corporation (including a spin-off or other distribution of assets of the Company
to its shareholders), (iii) any partial or complete liquidation, or (iv) other
similar corporate change, such equitable adjustments shall be made in the Plan
and the awards thereunder as the Committee determines are necessary and
appropriate, including, if necessary, an adjustment in the maximum number or
kind of shares subject to the Plan or which may be or have been awarded to any
participant (including the conversion of shares subject to awards from Common
Stock to stock of another entity). Such adjustment shall be conclusive and
binding for all purposes of the Plan.
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8. MISCONDUCT.
If the Committee or its delegate determines that a participant has, at any
time prior to, or within twelve months after, the exercise of any option or SAR
granted hereunder or the vesting of any other award made hereunder committed
"Misconduct," then the Committee may, in its sole discretion: (i) cancel any
outstanding option or other award granted hereunder and (ii) require the
participant to pay to the Company any and all gains realized from any options or
awards granted hereunder that were exercised (in the case of options or SARs),
or vested (in the case of other awards), within the twelve month period
immediately preceding the date of such cancellation (or if there is no
cancellation, the date on which such claim for payment is made). A participant
commits Misconduct if the Committee or its delegate determines that the
participant: (a) "Competed" (as defined below) with the Company; (b) engaged in
any act which is considered by the Committee to be contrary to the Company's
best interests, including, but not limited to, recruiting or hiring away
employees of the Company; (c) violated the Company's Code of Conduct or engaged
in any other activity which constitutes gross misconduct; (d) engaged in
unlawful trading in the securities of PBG or of any other company based on
information gained as a result of his or her employment with the Company; or (e)
disclosed to an unauthorized person or misused confidential information or trade
secrets of the Company. This paragraph shall also apply in the case of a former
Company employee (including, without limitation, a retired or disabled employee)
who commits Misconduct after his or her employment with the Company terminated.
"Competed" shall mean (i) worked for, managed, operated, controlled or
participated in the ownership, arrangement, operation or control of (or have
been connected with or served on the board of directors of) any company or
entity that engages in the production, marketing or sale of any product or
service which is also produced, marketed or sold by the Company; or (ii) any
action or omission which is injurious to the Company or which diverts customers
or suppliers from the Company.
9. CHANGE IN CONTROL.
Upon a "Change in Control" (as defined in subsection (d) below), the
following shall occur:
(a) Options and SARs. At the date of such Change in Control, all
outstanding and unvested stock options and SARs granted under the LTIP
shall immediately vest and become exercisable, and all stock options and
SARs then outstanding under the LTIP shall remain outstanding in accordance
with their terms. In the event that any stock option or SAR granted under
the LTIP becomes unexercisable during its term on or after a Change in
Control because: (i) the individual who holds such option or SAR is
involuntarily terminated (other than for cause) within two years after the
Change in Control; (ii) such option or SAR is terminated or adversely
modified; or (iii) PBG Common Stock is no longer issued and outstanding, or
no longer traded on a national securities exchange, then the holder of such
option or SAR shall immediately be entitled to receive a lump sum cash
payment equal to the gain on such option or SAR on the date such option or
SAR becomes unexercisable. For purposes of the preceding sentence, the gain
on a stock option or SAR shall be calculated as the difference between the
Fair Market Value per share of PBG Common Stock as of the date such option
or SAR becomes unexercisable less the exercise price per share of such
option or SAR.
(b) Performance Units, Restricted Stock or Share Awards. Each
performance unit, restricted stock and share award granted under the LTIP
that are outstanding on the date of the Change in Control shall immediately
vest, and the holder of such performance unit, restricted stock or share
award shall be entitled to a lump sum cash payment equal to the amount of
such award payable at the end of the performance period as if 100% of the
performance objectives have been achieved.
(c) Time of Payment. Any amount required to be paid pursuant to this
Section shall be paid within 20 days after the date such amount becomes
payable.
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(d) Definition. A "Change in Control" means the occurrence of any of
the following events: (i) any individual, corporation, partnership, group,
association or other entity, other than PepsiCo, Inc. ("PepsiCo") or an
entity approved by PepsiCo, is or becomes the "beneficial owner" (as
defined in Rule 13(d)-3 under the Securities Exchange Act of 1934),
directly or indirectly, of 50% or more of the combined voting power of
PBG's outstanding securities ordinarily having the right to vote at
elections of directors; (ii) during any consecutive two-year period,
persons who constitute the Board at the beginning of the period cease to
constitute at least 50% of the Board (unless the election of each new Board
member was approved by a majority of directors who began the two-year
period or was approved by PepsiCo); (iii) the approval by the shareholders
of PBG of a plan or agreement providing for a merger or consolidation of
PBG with another company, other than with PepsiCo or an entity approved by
PepsiCo, and PBG is not the surviving company (unless the shareholders of
PBG prior to the merger or consolidation continue to have 50% or more of
the combined voting power of the surviving company's outstanding
securities); or (iv) the sale, exchange or other disposition of all or
substantially all of PBG's assets, other than to PepsiCo or an entity
approved by PepsiCo.
In addition, a "Change in Control" means the occurrence of any of the
following events with respect to PepsiCo: (i) any individual, corporation,
partnership, group, association or other entity is or becomes the "beneficial
owner" (as defined in Rule 13(d)-3 under the Securities Exchange Act of 1934),
directly or indirectly, of 20% or more of the combined voting power of PepsiCo's
outstanding securities ordinarily having the right to vote at elections of
directors; excluding, however, any acquisition by PepsiCo or any acquisition by
an employee benefit plan or related trust sponsored or maintained by PepsiCo;
(ii) during any consecutive two-year period, persons who constitute the Board of
Directors of PepsiCo (the "PepsiCo Board") at the beginning of the period cease
to constitute at least 50% of the PepsiCo Board (unless the election of each new
PepsiCo Board member was approved by a majority of directors who began the
two-year period); (iii) the approval by the shareholders of PepsiCo of a plan or
agreement providing for a merger or consolidation of PepsiCo with another
company, and PepsiCo is not the surviving company (unless the shareholders of
PepsiCo prior to the merger or consolidation continue to have 50% or more of the
combined voting power of the surviving company's outstanding securities); or
(iv) the sale, exchange or other disposition of all or substantially all of
PepsiCo's assets.
10. MISCELLANEOUS PROVISIONS.
(a) Rights as Shareholder. A participant in the Plan shall have no rights
as a holder of Common Stock with respect to awards hereunder, unless and until
certificates for shares of Common Stock are issued to such participant.
(b) Assignment or Transfer. Unless the Committee shall specifically
determine otherwise, no award granted under the Plan or any rights or interests
therein shall be assignable or transferable by a participant, except by will or
the laws of descent and distribution.
(c) Agreements. All awards granted under the Plan shall be evidenced by
agreements in such form and containing such terms and conditions (not
inconsistent with the Plan), as the Committee shall approve.
(d) Requirements for Transfer. No share of Common Stock shall be issued or
transferred under the Plan until all legal requirements applicable to the
issuance or transfer of such shares have been complied with to the satisfaction
of the Committee. The Committee shall have the right to condition any issuance
of shares of Common Stock made to any participant upon such participant's
written undertaking to comply with such restrictions on his subsequent
disposition of such shares as the Committee or PBG shall deem necessary or
advisable as a result of any applicable law, regulation or official
interpretation thereof, and certificates representing such shares may be
legended to reflect any such restrictions.
A-5
(e) Withholding Taxes. PBG shall have the right to deduct from all awards
hereunder paid in cash any federal, state, local or foreign taxes required by
law to be withheld with respect to such awards, and with respect to awards paid
or satisfied in stock, to require the payment (through withholding from the
participant's salary or otherwise) of any such taxes. The obligations of PBG to
make delivery of awards in cash or Common Stock shall be subject to currency or
other restrictions imposed by any government.
(f) No Implied Rights to Awards. Except as set forth herein, no employee
or other person shall have any claim or right to be granted an award under the
Plan. Neither the Plan nor any action taken hereunder shall be construed as
giving any employee any right to be retained in the employ of the Company.
(g) Costs and Expenses. The cost and expenses of administering the Plan
shall be borne by PBG and not charged to any award nor to any employee receiving
an award.
(h) Funding of Plan. PBG shall not be required to establish any special or
separate fund or to make any other segregation of assets to assure the payment
of any award under the Plan.
11. EFFECTIVE DATE, AMENDMENTS AND TERMINATION.
(a) Effective Date. The Plan shall become effective on its approval by
PBG's shareholders.
(b) Amendments. The Committee may at any time terminate or from time to
time amend the Plan in whole or in part, but no such action shall adversely
affect any rights or obligations with respect to any awards theretofore granted
under the Plan.
In addition, unless the shareholders of PBG shall have first approved, no
amendment of the Plan shall be effective which would: (i) modify the
requirements as to eligibility for participation in the Plan; (ii) increase the
maximum number of shares of Common Stock which may be delivered under the Plan
or to any one individual, except to the extent such amendment is made pursuant
to Section 7 hereof, (iii) change the performance criteria for performance
units, or (iv) decrease the minimum option or SAR exercise price.
The Committee may, at any time, amend outstanding agreements evidencing
awards under the Plan in a manner not inconsistent with the terms of the Plan;
provided, however, that if such amendment is adverse to the participant, the
amendment shall not be effective unless and until the participant consents, in
writing, to such amendment.
(c) Termination. No awards shall be granted under the Plan after December
31, 2007. Determination of the award actually earned and payout or settlement of
the award may occur later.
A-6
DIRECTIONS TO THE PEPSI BOTTLING GROUP, INC.
SOMERS, NEW YORK
----------------------
MAPS
----------------------
DIRECTIONS BY CAR
The Pepsi Bottling Group's Headquarters is located at the Intersection of Rt. 35
and Rt. 100 in Somers, New York. The headquarters has two entrances, one on Rt.
35 approximately 500 yards East of the intersection of Rt. 35 and Rt. 100 and
the second on Rt. 100 approximately 100 yards North of the Intersection of Rt.
35 and Rt. 100.
FROM I-684
If you are using I-684 (either North or South) take exit #6 (Katonah-Cross
River, Rt. 35) Take Rt. 35 West for approximately two miles. Entrance is on Rt.
35 approximately 500 yards East of the intersection of Rt. 35 and Rt. 100.
FROM MANHATTAN -- WEST SIDE
West Side Highway/Henry Hudson Parkway to Saw Mill River Parkway. Saw Mill River
Parkway merges with I-684 at exit #6. Take exit #6 and follow directions above.
FROM MANHATTAN -- EAST SIDE
FDR Drive to I-87 Major Deegan North to Saw Mill River Parkway and follow
directions above.
FROM BRONX -- EAST SIDE
Hutchinson River Parkway North to I-684 (Brewster) North and follow directions
above.
FROM BROOKLYN AND J.F.K. AIRPORT
Van Wyck Expressway (676) to the Bronx Whitestone Bridge to Hutchinson River
Parkway North, Take I-684 (Brewster) North and follow directions above.
FROM LAGUARDIA AIRPORT
Grand Central Parkway East. Exit Whitestone Expressway. Cross the Whitestone
Bridge North to Hutchinson River Parkway to I-684 (Brewster) North and follow
directions above.
FROM LONG ISLAND AND QUEENS
Long Island Expressway or the Grand Central Parkway to the Cross Island Parkway.
Cross Island Parkway West to the Throgs Neck Bridge. Cross the Bridge North and
travel North on New England Thruway (Route 95) to Cross Westchester (I-287) to
(I-684) North and follow directions above.
FROM WEST OF HUDSON RIVER-TAPPAN ZEE BRIDGE
Cross Tappan Zee Bridge South. Follow Cross Westchester (I-287) to I-684
(Brewster) North and follow directions above.
FROM CONNECTICUT-MERRITT PARKWAY
Take the Merritt Parkway South, which becomes the Hutchinson River Parkway
to I-684 (Brewster) North and follow directions above.
NEW ENGLAND THRUWAY
Follow the New England Thruway to Exit for Cross Westchester Expressway
Westbound to Exit 9 North, Hutchinson River Parkway to I-684 (Brewster) North
and follow directions above.
FROM CONNECTICUT -- RT. 35
Heading West on Rt. 35 from the Connecticut/New York line (Ridgefield,
CT.), proceed on Rt. 35 past the intersection of I-684 and follow directions
above.
THE PEPSI BOTTLING GROUP, INC.
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS
MAY 22, 2002
THIS PROXY IS SOLICITED ON BEHALF OF
THE PEPSI BOTTLING GROUP, INC.'S BOARD OF DIRECTORS
The undersigned hereby appoints John T. Cahill, Pamela C. McGuire, and
each of them, proxies for the undersigned, with full power of substitution, to
vote all shares of The Pepsi Bottling Group, Inc. Common Stock which the
undersigned may be entitled to vote at the Annual Meeting of Shareholders of The
Pepsi Bottling Group, Inc., in Somers, New York, on Wednesday, May 22, 2002 at
10:00 A.M., or at any adjournment thereof, upon the matters set forth on the
reverse side and described in the accompanying Proxy Statement and upon such
other business as may properly come before the meeting or any adjournment
thereof.
PLEASE MARK THIS PROXY AS INDICATED ON THE REVERSE SIDE TO VOTE ON ANY
ITEM. IF YOU WISH TO VOTE IN ACCORDANCE WITH THE BOARD OF DIRECTORS'
RECOMMENDATIONS, PLEASE SIGN THE REVERSE SIDE; NO BOXES NEED TO BE CHECKED.
(Continued and to be signed on other side)
THE PEPSI BOTTLING GROUP, INC.
P.O. BOX 11425
NEW YORK, N.Y. 10203-0425
- --------------------------------------------------------------------------------
Please Detach Here
* You Must Detach This Portion of the Proxy Card *
Before Returning it in the Enclosed Envelope
[PBG LOGO]
The Pepsi Bottling Group, Inc.
March 28, 2002
Your proxy card is attached below.
Please read the enclosed Proxy Statement, then vote and return the card at your
earliest convenience.
*FOLD AND DETACH HERE*
- --------------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ITEMS 1, 2 AND 3.
1. Election of Directors: Nominees Linda G. Alvarado, David R. Andrews, Barry
H. Beracha, John T. Cahill, Thomas H. Kean, Susan D. Kronick, Blythe J.
McGarvie, Margaret D. Moore and Craig E. Weatherup
FOR all nominees [ ] WITHHOLD AUTHORITY [ ] EXCEPTIONS [ ]
to vote for all nominees
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, MARK
THE "EXCEPTIONS" BOX AND WRITE THAT NOMINEE'S NAME IN THE SPACE PROVIDED
BELOW.)
* EXCEPTIONS
----------------------------------------------------------------
2. Approval of the PBG 2002 Long-Term Incentive Plan
FOR [ ] AGAINST [ ] ABSTAIN [ ]
3. Approval of Auditors
FOR [ ] AGAINST [ ] ABSTAIN [ ]
Where no voting instructions are given, the shares represented by this Proxy
will be VOTED FOR Items No. 1, 2, and 3.
CHANGE OF ADDRESS AND/OR COMMENTS MARK HERE [ ]
I PLAN TO ATTEND ANNUAL MEETING.
IF YOU CHECK THIS BOX TO THE RIGHT AN ADMISSION CARD WILL BE SENT TO YOU. [ ]
Receipt is hereby acknowledged of The Pepsi Bottling Group, Inc., Notice of
Meeting and Proxy Statement.
IMPORTANT: PLEASE SIGN EXACTLY AS YOUR NAME OR NAMES APPEAR ON THIS PROXY. WHERE
SHARES ARE HELD JOINTLY, BOTH HOLDERS SHOULD SIGN. WHEN SIGNING AS ATTORNEY,
EXECUTOR, ADMINISTRATOR, TRUSTEE OR GUARDIAN, PLEASE GIVE YOUR FULL TITLE AS
SUCH. IF THE HOLDER IS A CORPORATION, EXECUTE IN FULL CORPORATE NAME BY
AUTHORIZED OFFICER.
Dated: , 2002
--------------------------------------
--------------------------------------------------
Signature
--------------------------------------------------
Signature
(PLEASE SIGN, DATE AND RETURN THIS PROXY CARD VOTES MUST BE INDICATED (X)
IN THE ENCLOSED ENVELOPE.) IN BLACK OR BLUE INK. [ ]