EXHIBIT 10.1
FORM OF RETENTION AGREEMENT (this “ Agreement ”)
dated as of May 3, 2009, between The Pepsi Bottling Group, Inc., a
Delaware corporation (the “
Company ”), and [NAME] (the “
Executive ”).
WHEREAS the Executive is a
skilled and dedicated employee of the Company who has important
management responsibilities and talents that benefit the
Company;
WHEREAS the
Compensation and Management Development Committee (the “
Committee ”) of the Board of Directors of the Company
(the “ Board ”) considers it essential to the
best interests of the Company and its shareholders to assure that
the Company and its subsidiaries will have the continued dedication
of the Executive, notwithstanding the possibility, threat or
occurrence of a Change in Control (as defined below);
and
WHEREAS the
Committee believes that it is imperative to diminish the
distraction of the Executive by virtue of the uncertainties and
risks created by the circumstances surrounding a Change in Control
and to ensure the Executive’s full attention to the Company
and its subsidiaries during such a period of
uncertainty;
NOW, THEREFORE,
in consideration of the mutual agreements, provisions and covenants
contained herein, and intending to be legally bound hereby, the
parties hereto agree as follows:
SECTION
1. Definitions. For purposes of this
Agreement, the following terms shall have the meanings set forth
below:
(a) “ Affiliate(s)
” means, with respect to any specified Person, any other
Person that, directly or indirectly, through one or more
intermediaries, controls, is controlled by, or is under common
control with, such specified Person; provided that
“Affiliate”, with respect to the Company and its
Subsidiaries, shall not include, prior to the Change in Control
Date, PepsiCo, Inc. or any of its Subsidiaries (other than the
Company and its Subsidiaries).
(b) “ Annual Base Salary
” means the Executive’s annual rate of base salary in
effect immediately prior to the Termination Date (without regard to
any reduction in annual base salary after the Change in Control
Date that would give rise to Good Reason).
(c) “ Annual Bonus
” means the amount of the Executive’s target bonus
under the Company’s annual incentive plan for the Fiscal Year
in which the Termination Date occurs (without regard to any
reduction in target bonus after the Change in Control Date that
would give rise to Good Reason).
(d) “ Cause ”
means the occurrence of any one of the following:
(i) the Executive’s continued
and willful failure, for at least 14 days following written notice
from the Company, to perform substantially the Executive’s
employment duties (other than any failure to perform any employment
duties that would give rise to Good Reason), except as a result of
incapacity due to physical or mental illness or after delivery by
the Executive of a Notice of Termination for Good
Reason;
(ii) the Executive’s gross
negligence or willful misconduct in the performance of the
Executive’s employment duties that results in material harm
to the Company;
(iii) the Executive’s
conviction of, or plea of guilty or nolo contendere to, any
felony;
(iv) the Executive’s commission
of an act of deceit or fraud in connection with the performance of
the Executive’s employment duties intended to result in
personal and unauthorized enrichment of the Executive at the
Company’s expense; or
(v) the Executive’s material
breach of a material obligation of the Executive to the Company
which, if correctable, remains uncorrected for 30 days following
written notice of such breach by the Company to the
Executive.
For purposes of
this provision, no act or failure to act on the part of the
Executive shall be considered “willful” unless it is
done, or omitted to be done, by the Executive in bad faith or
without reasonable belief that the Executive’s action or
omission was in the best interests of the Company.
(e) “ Change in Control
” means the occurrence of any of the following
events:
(i) any individual, corporation,
partnership, group, association or other entity (a “
Person ”) is or becomes the “beneficial
owner” (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of 50% or more of the outstanding Company
Voting Securities; provided , however , that for
purposes of this subparagraph (i), the following acquisitions shall
not constitute a Change in Control: (A) any
acquisition by the Company or any Affiliate, (B) any
acquisition by any employee benefit plan (or related trust)
sponsored or maintained by the Company or any Affiliate,
(C) any acquisition by an underwriter temporarily holding such
Company Voting Securities pursuant to an offering of such
securities or (D) any acquisition pursuant to a Reorganization
(as defined below) that does not constitute a Change in
Control;
(ii) during any consecutive two-year
period, persons who constitute the Board at the beginning of such
period cease at any time to constitute at least a majority of the
Board (provided that any new Board member who was approved by a
majority of directors who began the two-year period shall be
considered a director who began the two-year period, but excluding,
for purposes of this proviso, any such individual whose assumption
of office after the beginning of such period occurs as a result of
an actual or threatened proxy contest with respect to election or
removal of directors or other actual or threatened solicitation of
proxies or consents by or on behalf of a Person other than the
Board or the Company); or
(iii) the consummation of (A) a
merger or similar form of corporate transaction (including as a
part of a series of other transactions) involving (x) the
Company or (y) if Company Voting Securities are issued or are
issuable, any of its Subsidiaries or (B) a sale, exchange or
other disposition of all or substantially all the assets of the
Company (any such event, a “ Reorganization ”),
unless, immediately following such Reorganization, all or
substantially all the shareholders owning (directly or indirectly)
Company Voting Securities outstanding immediately prior to the
Reorganization beneficially own, directly or indirectly, 50% or
more of the combined voting power of the then outstanding voting
securities of the corporation or other entity resulting from such
Reorganization (including a corporation or other entity that, as a
result of such transaction, owns the Company or all or
substantially all the Company’s assets either directly or
through one or more subsidiaries) (the “ Continuing
Entity ”) in substantially the same proportions as their
ownership, immediately prior to the consummation of such
Reorganization, of the outstanding Company Voting Securities
(excluding any outstanding voting securities of the Continuing
Entity that such beneficial owners hold immediately following the
consummation of the Reorganization as a result of their ownership
prior to such consummation of voting securities of any corporation
or other entity involved in or forming part of such Reorganization
other than the Company or a Subsidiary).
(f) “ Change in Control
Date ” means the date on which a Change in Control occurs
(if any).
(g) “ Code ” means
the Internal Revenue Code of 1986, as amended from time to time,
and the regulations promulgated thereunder.
(h) “ Company Voting
Securities ” means common stock or other securities of
the Company ordinarily having the right to vote at elections of
directors.
(i) “ Disability ”
means the Executive’s absence for a period of
180 consecutive business days as a result of incapacity due to
a physical or mental condition, illness or injury which is
determined to be total and permanent by a physician mutually
acceptable to the Company and the Executive or the
Executive’s legal representative (such acceptance not to be
unreasonably withheld) after such physician has completed an
examination of the Executive; provided , however ,
that if an amount payable pursuant to this Agreement constitutes
deferred compensation (within the meaning of Section 409A of the
Code) and payment of such amount is intended to be triggered
pursuant to Section 409A(a)(2)(A)(ii) of the Code by the
Executive’s disability, such term shall mean that the
Executive is considered “disabled” within the meaning
of Section 409A of the Code; provided further that
Executive shall make himself available for such examination upon
the reasonable request of the Company, and the Company shall be
responsible for the cost of such examination.
(j) “ Equity Incentive
Plan ” means any of the Company’s or any of its
Affiliates’ equity-based or equity-related plans, practices,
policies or programs, including the 2004 Long-Term Incentive Plan,
2002 Long-Term Incentive Plan, 2000 Long-Term Incentive Plan, 1999
Long-Term Incentive Plan, and Stock Incentive Plan, or any award
agreements thereunder.
(k) “ Exchange Act
” means the Securities Exchange Act of 1934, as amended from
time to time, or any successor statute thereto.
(l) “ Excise Tax ”
means the excise tax imposed by Section 4999 of the Code, together
with any interest or penalties imposed with respect to such
tax.
(m) “ Fiscal Year
” means a fiscal year of the Company.
(n) “ Good Reason
” means, without the Executive’s express written
consent, the occurrence of any one or more of the
following:
(i) any material reduction in the
authority, duties, titles or responsibilities held by the Executive
immediately prior to the Change in Control Date or any assignment
to the Executive of duties or responsibilities that are materially
inconsistent with the Executive’s status, offices, titles and
reporting relationships as in effect immediately prior to the
Change in Control Date;
(ii) (A) any reduction in the
Executive’s annual base salary (other than a reduction that
(x) is generally applicable on the same basis to all similarly
situated senior executives of the Company and (y) does not result,
when aggregated with any previous reductions in annual base salary,
in an annual base salary that is less than 90% of the
Executive’s annual base salary as in effect immediately prior
to the Change in Control Date), (B) any material reduction in the
Executive's target annual bonus, other than a reduction that is
generally applicable on the same basis to all similarly situated
senior executives of the Company, and (C) any material reduction in
the Executive's employee benefits in the aggregate (without regard
to annual bonuses);
(iii) any change of the
Executive’s principal place of employment to a location more
than 35 miles from the Executive’s principal place of
employment immediately prior to the Change in Control
Date;
(iv) any failure of the Company to
pay the Executive any compensation when due, other than an
inadvertent and isolated failure not occurring in bad faith that is
remedied within ten days after receipt of notice thereof given by
the Executive;
(v) delivery by the Company or any
Subsidiary of a written notice to the Executive relating to the
termination of the Executive’s employment for any reason,
other than Cause or Disability, in each case in accordance with
this Agreement, regardless of whether such termination is intended
to become effective during or after the Protection Period;
or
(vi) any failure by the Company to
comply with and satisfy the requirements of Section
11(c).
(o) “ Payment ”
means any payment, right, benefit or distribution (or combination
thereof) by the Company, any of its Affiliates or any trust
established by the Company or its Affiliates, to or for the benefit
of the Executive, whether paid, payable, distributed, distributable
or provided pursuant to this Agreement or otherwise, including any
payment, benefit or other right that constitutes a “parachute
payment” within the meaning of Section 280G of the
Code.
(p) “ Protection Period
” means the period commencing on the Change in Control Date
and ending on the second anniversary thereof.
(q) “ Qualifying
Termination ” means any termination of the
Executive’s employment (i) by the Company, other than
for Cause, death or Disability, that is effective (or with respect
to which the Executive is given written notice) during the
Protection Period or (ii) by the Executive for Good Reason
that is effective (or relates to circumstances constituting Good
Reason that arose) during the Protection Period.
(r) “ Subsidiary ”
means any entity in which the Company, directly or indirectly,
possesses 50% or more of the total combined voting power of all
classes of its stock.
(s) “ Termination Date
” means the date (if any) on which the termination of the
Executive’s employment, in accordance with the terms of this
Agreement, is effective.
SECTION
2. Effectiveness and Term. This
Agreement shall become effective as of the date hereof (the “
Effective Date ”). This Agreement
shall remain in effect until the second
anniversary of the Effective Date, except that, beginning on the
first anniversary of the Effective Date and on each anniversary
thereafter ( i.e. , one year prior to the scheduled
expiration of the term hereof), the term of this Agreement shall be
automatically extended for an additional one-year period, unless
the Company or the Executive provides the other party with 60
days’ prior written notice before the applicable anniversary
that the term of this Agreement shall not be so
extended. Notwithstanding the foregoing, in the event of
a Change in Control during the term of this Agreement (whether the
original term or the term as extended), this Agreement shall not
thereafter terminate, and the term hereof shall be extended, until
the Company and its Subsidiaries have performed all their
obligations hereunder with no future performance being possible;
provided , however , that this Agreement shall only
be effective with respect to the first Change in Control that
occurs during the term of this Agreement.
SECTION
3. Impact of a Change in Control on Equity
Compensation Awards. Effective as of any Change in
Control Date during the term of this Agreement, notwithstanding any
provision to the contrary in any of the Company’s Equity
Incentive Plans, (A) all outstanding equity-based,
equity-related and other long-term incentive awards then held by
the Executive that are subject to performance-based vesting
criteria (including restricted stock units granted pursuant to any
Strategic Leadership Awards (if any)) shall be deemed to have been
earned at the target performance level, provided that any
service-based vesting requirements applicable to such awards shall
remain in effect and shall only lapse, subject to Section 4, in
accordance with the terms of the applicable award as in effect on
the Change in Control Date and (B) in the event that any
outstanding stock options, stock appreciation rights, restricted
shares, restricted stock units or similar awards then held by the
Executive that are then unexercisable or unvested are not assumed,
rolled-over, exchanged or otherwise continued in connection with
the Change in Control on a basis equivalent to that immediately
prior to the Change in Control Date, such rights and awards shall
automatically and immediately be fully vested, exercisable or
settled, as applicable; provided that , in the event
that any such award constitutes “deferred compensation”
(within the meaning of Section 409A) and the exercise, payment
or settlement of such award pursuant to this Section 3 would
result in the imposition of additional taxes or penalties under
Section 409A, such award shall automatically and immediately
cease to be forfeitable but shall not be exercisable, payable or
settleable, as the case may be, until the earliest date on which
such award would otherwise by exercisable, payable or settleable in
accordance with its terms and without the imposition of such
additional taxes or penalties, all as reasonably determined in good
faith by the Company.
SECTION
4. Termination of Employment.
(a) Qualifying Termination.
In the event of a Qualifying Termination:
(i) Severance
Pay. The Company shall pay the Executive an amount
equal to two (the “ Multiple ”) times the sum of
(A) the Executive’s Annual Base Salary and (B) the
Executive’s Annual Bonus, in a single lump-sum cash payment
payable within ten days after the date the release described in
Section 4(a)(viii) becomes effective and irrevocable (the
“ Release Effective Date ”); provided ,
however , that such amount is paid in lieu of, and the
Executive hereby waives the right to receive, any other cash
severance payment relating to salary or bonus continuation the
Executive is otherwise eligible to receive upon termination of
employment under any severance plan, practice, policy or program of
the Company or any Subsidiary or under any agreement between the
Company and the Executive.
(ii) Prorated
Annual Bonus. With respect to the annual bonus for
which the Executive was eligible under the Company’s annual
incentive plan for the Fiscal Year in which the Termination Date
occurs, the Company shall pay to the Executive an amount equal to
the product of (A) the Executive’s Annual Bonus
and (B) a fraction, the numerator of which is the number of days
elapsed in the Fiscal Year in which the Termination Date occurs
through the Termination Date, and the denominator of which is 365,
in a single lump-sum cash payment within ten business days after
the Release Effective Date.
(iii) Continued
Welfare Benefits. During the 24-month period
following the Termination Date, the Company shall permit the
Executive to purchase continued medical, dental and vision coverage
for the Executive and the Executive’s eligible spouse and
dependents (if any) under the Company’s insurance plans
pursuant to the Consolidated Omnibus Reconciliation Act of 1985, as
amended (" COBRA "). The Company shall reimburse
the Executive for the Executive’s purchase of such continued
coverage at the rate of 160% of the Executive's cost of
such continued coverage; provided , however that, in
the event that the release described under Section 4(a)(viii) does
not become effective prior to the 45th day after the Termination
Date, the Company shall cease to have any obligation to provide any
such reimbursements; and provided , further ,
however , that any continued coverage pursuant to this
Section 4(a)(iii) shall cease upon the Executive’s becoming
eligible for comparable coverage from a subsequent
employer. Any period of continued coverage pursuant to
this Section 4(a)(iii) shall be recognized for purposes of
satisfying the Company’s obligations under COBRA.
(iv) Equity
Compensation Awards. Notwithstanding any provision
to the contrary in any Equity Incentive Plan, upon the Termination
Date, all outstanding equity-based, equity-related and other
long-term incentive awards (including restricted stock units
granted pursuant to the Strategic Leadership Awards (if any)) then
held by the Executive that were granted prior to the Change in
Control Date and are then unexercisable or unvested
shall automatically and immediately become fully vested,
exercisable or settled, as applicable; provided that
, in the event that any such award constitutes “deferred
compensation” (within the meaning of Section 409A) and
the exercise, payment or settlement of such award pursuant to this
Section 4(a)(iv) would result in the imposition of additional
taxes or penalties under Section 409A, such award shall
automatically and immediately cease to be forfeitable but shall not
be exercisable, payable or settleable, as the case may be, until
the earliest date on which such award would otherwise by
exercisable, payable or settleable in accordance with its terms and
without the imposition of such additional taxes or penalties, all
as reasonably determined in good faith by the Company.
(v)
Outplacement Counseling. During the number of
years following the Termination Date equal to 50% of the Multiple,
the Executive shall be entitled to reimbursement from the Company,
upon the Executive’s presentation to the Company of a written
invoice from the applicable vendor requesting payment, for the cost
of executive level outplacement services offered by a vendor
selected by the Executive; provided that the amount of such
reimbursements shall not exceed $50,000 per year.
(vi) Early
Retirement Benefits. In
the event that, as of the Termination Date, the Executive has (A)
been credited with 10 years of service under the Company’s
Salaried Employees Retirement Plan and (B) attained an age of at
least 50 but less than 55, the Executive shall be eligible to
receive the Special Early Retirement Benefits set forth on
Exhibit A hereto. In the event that, as of the
Termination Date, the Executive has (A) been credited with 10 years
of service under the Company’s Salaried Employees Retirement
Plan and (B) attained an age of at least 55, the Executive shall be
eligible to receive early retirement benefits as provided for under
the terms of the Company’s benefit plans.
(vii) Accrued
Rights. The Executive shall be entitled to (A)
payments of any unpaid annual base salary or other amount earned or
accrued through the Termination Date and for reimbursement of any
unreimbursed business expenses incurred through the Termination
Date, (B) the Executive’s annual bonus (determined in
accordance with the applicable Company bonus plan) for the year
immediately prior to the year in which the Termination Date occurs
in the event that the annual bonus for such prior year has not been
paid to the Executive by the Termination Date, (C) any payments or
benefits explicitly set forth in any other agreements, benefit
plans, practices, policies and programs (including the
Company’s vacation policies) in which the Executive
participates and (D) any other rights the Executive may have to
welfare or fringe benefits (other than severance benefits) under
any other agreement or arrangement between the Executive and the
Company or any Subsidiary (the rights to such payments, the “
Accrued Rights ”). For the avoidance of
doubt, the Executive shall not be permitted to defer or contribute
any amounts under the PBG Executive Income Deferral Program (the
“ EID Plan ”) after the Termination Date;
provided that the Executive’s account balances under
the EID Plan shall be paid to the Executive in accordance with the
terms thereunder.
(viii) Release
of Claims. Notwithstanding any provision of this
Agreement to the contrary, the Company shall not be obligated to
make any payments described in Section 4(a)(i) or (ii),
unless, on or before the 45th day after the Termination Date, the
Executive has executed and delivered a Separation Agreement and
Release in the form of Exhibit B hereto and such release has
become effective and irrevocable in accordance with its terms prior
to such 45th day.
(b)
Non-Qualifying Termination. In the event of any
termination of Executive’s employment other than a Qualifying
Termination (including a termination of employment as a result of
death or Disability), the Executive (and, in the case of the
Executive’s death, the Executive’s estate) shall not be
entitled to any additional payments or benefits from the Company
under Section 4(a), other than the Accrued
Rights. For the avoidance of doubt, in the event of any
termination of the Executive’s employment other than a
Qualifying Termination, the treatment of outstanding equity-based,
equity-related and other long-term incentive awards (including
restricted stock units granted pursuant to the Strategic Leadership
Awards (if any)) then held by the Executive will be determined in
accordance with the terms of the applicable Equity Incentive
Plan.
(c)
Termination Procedures. The following procedures
shall be applicable to any termination of the Executive’s
employment during the Protection Period:
(i)
Termination for Cause. The Company shall provide
prompt written notice to the Executive of the facts that the
Company believes in good faith give rise to Cause. The
termination of the Executive’s employment for Cause shall not
be effective unless and until there shall have been delivered to
the Executive a copy of a resolution duly adopted by the
affirmative vote of not less than a majority of the entire
membership of the Board (excluding the Executive) at a meeting of
the Board called and held for such purpose (after the Executive is
given a reasonable opportunity, together with counsel, to be heard
before the Board), finding that, in the good faith opinion of the
Board, the Executive is guilty of the conduct that constitutes
Cause and specifying the particulars thereof in
detail. Any termination for Cause shall be effective as
of the date designated in such Board resolution.
(ii) Termination for Good
Reason. The Executive’s right to terminate
employment for Good Reason shall not be affected by the
Executive’s incapacity due to physical or mental
illness. A termination of employment by the Executive
for Good Reason for purposes of this Agreement shall be effectuated
by giving the Company written notice (“ Notice of
Termination for Good Reason ”), not later than 90 days
following the occurrenc
