Exhibit 10.02
EMPLOYEE PROGRAMS AGREEMENT
between
PepsiCo, Inc.
and
TRICON Global Restaurants, Inc.
Dated as of
____________, 1997
TABLE OF CONTENTS
1 DEFINITIONS AND REFERENCES.................................................................1
1.1 DEFINITIONS..........................................................................1
(a) 414(l)(1) Amount.................................................................1
(b) Action...........................................................................1
(c) Agreement........................................................................2
(d) ASO Contract.....................................................................2
(e) Award............................................................................2
(f) Casual Dining Businesses.........................................................2
(g) Bulk Asset Transfer..............................................................2
(h) Close of the Distribution Date...................................................2
(i) Code.............................................................................2
(j) Conversion Formula...............................................................2
(k) Deferral Programs................................................................2
(l) Distribution.....................................................................3
(m) Distribution Date................................................................3
(n) DRIP.............................................................................3
(o) ERISA............................................................................3
(p) Executive Programs...............................................................3
(q) Foreign Plan.....................................................................3
(r) Governmental Authority...........................................................4
(s) Group Insurance Policy...........................................................4
(t) Health and Welfare Plans.........................................................4
(u) Hiring Company...................................................................4
(v) HMO..............................................................................4
(w) HMO Agreements...................................................................4
(x) Immediately after the Distribution Date..........................................4
(y) Individual Agreement.............................................................5
(z) Indemnitor.......................................................................5
(aa) Initial Asset Transfer..........................................................5
(bb) Liabilities.....................................................................5
(cc) Long-Term Incentive Plan........................................................5
(dd) LTD VEBA........................................................................5
(ee) Master Trust....................................................................5
(ff) Material Feature................................................................6
(gg) Participating Company...........................................................6
(hh) Pension Equalization Plan.......................................................6
(ii) Pension Plan....................................................................6
(jj) PepsiCo Capital Stock...........................................................6
(kk) PepsiCo Executive...............................................................6
(ll) PepsiCo Group...................................................................7
(mm) PepsiCo Leave of Absence Programs...............................................7
(nn) Person..........................................................................7
(oo) Plan............................................................................7
(pp) Prior Company...................................................................7
(qq) Record Date.....................................................................7
(rr) Reimbursement Plans.............................................................7
(ss) Restaurant Businesses...........................................................7
(tt) Salaried Employee...............................................................8
(uu) Savings Plan....................................................................8
(vv) Separation Agreement............................................................8
(ww) SharePower Plan.................................................................8
(xx) Short-Term Incentive Plan.......................................................8
(yy) Stock Option Incentive Plan.....................................................8
(zz) Stock Purchase Plan.............................................................8
(aaa) Subsequent Asset Transfer......................................................9
(bbb) Subsidiary.....................................................................9
(ccc) Transferred Individual.........................................................9
(ddd) Transition Individual.........................................................10
(eee) Transition Period.............................................................10
(fff) TRICON Common Stock...........................................................11
(ggg) TRICON Group..................................................................11
1.2 REFERENCES..........................................................................11
2 GENERAL PRINCIPLES........................................................................12
2.1 ASSUMPTION OF LIABILITIES...........................................................12
2.2 TRICON PARTICIPATION IN PEPSICO PLANS...............................................12
(a) Participation in PepsiCo Plans and PepsiCo Restaurant Health and Welfare Plans..12
(b) PepsiCo's General Obligations as Plan Sponsor...................................12
(c) TRICON's General Obligations as Participating Company...........................13
(d) Termination of Participating Company Status.....................................13
2.3 ESTABLISHMENT OF TRICON PLANS.......................................................13
2.4 TERMS OF PARTICIPATION BY TRANSFERRED INDIVIDUALS...................................14
2.5 RESTRICTION ON PLAN AMENDMENTS......................................................14
3 DEFINED BENEFIT PLANS.....................................................................15
3.1 ESTABLISHMENT OF MIRROR PENSION TRUSTS..............................................15
3.2 PIZZA HUT PENSION PLANS.............................................................15
3.3 ASSUMPTION OF PENSION PLAN AND PENSION EQUALIZATION PLAN LIABILITIES AND
ALLOCATION OF INTERESTS IN THE PEPSICO PENSION TRUST................................15
(a) Assumption of Liabilities by TRICON Pension Plan................................15
(b) Asset Allocations and Transfers.................................................15
3.4 ACTION IN EVENT OF PBGC INTERVENTION................................................17
4 DEFINED CONTRIBUTION PLANS................................................................19
4.1 SAVINGS PLAN........................................................................19
(a) Savings Plan Trust..............................................................19
(b) Assumption of Liabilities and Transfer of Assets................................19
(c) Non-Employer Stock Funds........................................................19
(d) Miscellaneous Funds.............................................................20
4.2 ESOP................................................................................20
5 HEALTH AND WELFARE PLANS..................................................................21
5.1 ASSUMPTION OF HEALTH AND WELFARE PLAN LIABILITIES...................................21
5.2 ESTABLISHMENT OF MIRROR LTD VEBA....................................................21
5.3 LTD VEBA ASSET TRANSFERS............................................................21
5.4 CONTRIBUTIONS TO, INVESTMENTS OF, AND DISTRIBUTIONS FROM VEBAS......................22
5.5 VENDOR CONTRACTS....................................................................22
(a) ASO Contracts, Group Insurance Policies, HMO Agreements and Letters of
Understanding....................................................................22
(b) Effect of Change in Rates.......................................................23
(c) Management of the ASO Contracts, Group Insurance Policies, HMO Agreements,
Letters of Understanding and other Vendor Contracts..............................23
5.6 PEPSICO SALARY CONTINUATION.........................................................24
5.7 POSTRETIREMENT HEALTH AND LIFE INSURANCE BENEFITS...................................24
5.8 COBRA AND HIPAA.....................................................................24
5.9 LEAVE OF ABSENCE PROGRAMS...........................................................25
5.10 PEPSICO WORKERS' COMPENSATION PROGRAM..............................................25
5.11 PEPSICO PRIVATE LINE EMPLOYEE ASSISTANCE PROGRAM...................................25
5.12 POST-DISTRIBUTION TRANSITIONAL ARRANGEMENTS........................................25
(a) Continuance of Elections, Co-Payments and Maximum Benefits......................25
(b) Administration..................................................................26
(c) Other Post-Distribution Transitional Rules......................................27
5.13 APPLICATION OF ARTICLE 5 TO THE TRICON GROUP.......................................27
6 EXECUTIVE PROGRAMS........................................................................28
6.1 ASSUMPTION OF OBLIGATIONS...........................................................28
6.2 SHORT-TERM INCENTIVE PLANS..........................................................28
6.3 LONG-TERM INCENTIVE PLAN AND STOCK OPTION INCENTIVE PLAN............................28
(a) Transferred Individuals Who Are Active Employees of TRICON......................28
(b) Transferred Individuals Who Are Not Active Employees of TRICON..................30
6.4 DEFERRAL PROGRAMS...................................................................31
(a) PepsiCo Executive Income Deferral Program.......................................31
(b) PepsiCo Performance Share Unit Deferral Program.................................31
(c) PepsiCo Option Gains Deferral Program...........................................31
6.5 RESTAURANT DEFERRED COMPENSATION PLAN...............................................32
6.6 EXECUTIVE LOAN PROGRAM..............................................................32
6.7 STOCK OPTION INCENTIVE PLAN RECORDKEEPING ACCOUNTS..................................32
7 MISCELLANEOUS BENEFITS....................................................................34
7.1 SHAREPOWER PLAN.....................................................................34
(a) Treatment of Outstanding Grants Under PepsiCo SharePower Plan...................34
(b) Recordkeeping Accounts..........................................................34
7.2 STOCK PURCHASE PLAN.................................................................35
(a) Transfer of PepsiCo Capital Stock...............................................35
(b) Transfer of TRICON Common Stock.................................................35
8 TRANSITIONAL ARRANGEMENTS.................................................................36
8.1 TRANSITION INDIVIDUALS/RECOGNITION OF SERVICE.......................................36
8.2 PENSION PLANS.......................................................................36
(a) Assumption of Liabilities/Noncommencement of Pensions...........................36
(b) Asset/Liability Allocations and Transfers.......................................36
8.3 SAVINGS PLAN........................................................................37
8.4 HEALTH AND WELFARE PLANS............................................................37
(a) Continuance of Elections, Co-Payments, and Maximum Benefits.....................37
(b) Reimbursement Plans.............................................................37
8.5 EXECUTIVE PROGRAMS..................................................................37
(a) Long-Term Incentive Plan and Stock Option Incentive Plan........................37
(b) Restaurant Deferred Compensation Plan...........................................38
(c) Deferral Programs...............................................................38
8.6 SHAREPOWER PLANS....................................................................38
8.7 STOCK PURCHASE PLANS................................................................38
8.8 SHORT-TERM INCENTIVE PLAN...........................................................38
9 GENERAL...................................................................................39
9.1 PAYMENT OF AND ACCOUNTING TREATMENT FOR EXPENSES AND BALANCE SHEET AMOUNTS..........39
(a) Expenses........................................................................39
(b) Balance Sheet Amounts...........................................................39
9.2 SHARING OF PARTICIPANT INFORMATION..................................................39
9.3 RESTRICTIONS ON EXTENSION OF OPTION EXERCISE PERIODS, AMENDMENT OR MODIFICATION
OF OPTION TERMS AND CONDITIONS......................................................39
9.4 NON-SOLICITATION OF EMPLOYEES.......................................................40
9.5 REPORTING AND DISCLOSURE AND COMMUNICATIONS TO PARTICIPANTS.........................40
9.6 PLAN AUDITS.........................................................................40
(a) Audit Rights with Respect to the Allocation or Transfer of Plan Assets..........40
(b) Audit Rights With Respect to Information Provided...............................41
(c) Audits Regarding Vendor Contracts...............................................41
9.7 BENEFICIARY DESIGNATIONS............................................................42
9.8 REQUESTS FOR INTERNAL REVENUE SERVICE RULINGS AND UNITED STATES DEPARTMENT OF
LABOR OPINIONS......................................................................42
(a) Cooperation.....................................................................42
(b) Applications....................................................................42
9.9 FIDUCIARY AND RELATED MATTERS.......................................................42
9.10 NON-TERMINATION OF EMPLOYMENT; NO THIRD-PARTY BENEFICIARIES........................43
9.11 COLLECTIVE BARGAINING..............................................................43
9.12 CONSENT OF THIRD PARTIES...........................................................43
9.13 FOREIGN PLANS......................................................................43
9.14 EFFECT IF DISTRIBUTION DOES NOT OCCUR..............................................44
9.15 RELATIONSHIP OF PARTIES............................................................44
9.16 AFFILIATES.........................................................................44
9.17 ARBITRATION........................................................................44
9.18 INDEMNIFICATION....................................................................45
9.19 NOTICES............................................................................46
9.20 INTERPRETATION.....................................................................46
9.21 GOVERNING LAW/EXECUTION............................................................47
APPENDIX A PEPSICO EXECUTIVE PROGRAMS.......................................................48
APPENDIX B HEALTH AND WELFARE PLANS.........................................................49
APPENDIX C FOREIGN PLANS....................................................................51
EMPLOYEE PROGRAMS AGREEMENT
This EMPLOYEE PROGRAMS AGREEMENT, dated as of ___________, 1997, is by
and between PepsiCo, Inc., a North Carolina corporation ("PepsiCo"), and TRICON
Global Restaurants, Inc., a North Carolina corporation ("TRICON").
WHEREAS, PepsiCo has decided to consolidate the assets and operations of
its worldwide KFC, Pizza Hut and Taco Xxxx businesses (collectively, the
"Restaurant Businesses") into TRICON and TRICON's subsidiaries and affiliates
and to distribute the Common Stock of TRICON to the holders of PepsiCo Capital
Stock (the "Distribution"); and
WHEREAS, PepsiCo and TRICON have entered into a Separation Agreement,
dated as of the date of this agreement (the "Separation Agreement"), and certain
other agreements that will govern certain matters relating to the Distribution
and the relationship of PepsiCo and TRICON and their respective Subsidiaries
following the Distribution; and
WHEREAS, pursuant to the Separation Agreement, PepsiCo and TRICON have
agreed to enter into this Agreement for the purpose of allocating assets,
liabilities, and responsibilities with respect to certain employee compensation
and benefit plans and programs between them;
NOW, THEREFORE, in consideration of the mutual promises contained herein
and in the Separation Agreement, the Parties (as that term is defined in the
Separation Agreement) agree as follows:
ARTICLE
1
DEFINITIONS AND REFERENCES
1.1 DEFINITIONS
For purposes of this Agreement, capitalized terms used (other than the
formal names of PepsiCo Plans (as defined below)) and not otherwise defined
shall have the respective meanings assigned to them below or as assigned to them
in the Separation Agreement (as defined above):
(a) 414(l)(1) Amount
"414(l)(1) Amount" means, the minimum amount necessary to fund vested
benefits under the PepsiCo Pension Plan and the TRICON Pension Plan on a
"termination basis" (as that term is defined in Treas. Reg. Sec.
1.414(l)-1(b)(5)) in accordance with the actuarial assumptions described in
Section 3.2.
(b) Action
"Action" means any demand, action, cause of action, suit, countersuit,
arbitration, inquiry, proceeding, or investigation by or before any Governmental
Authority or any arbitration or mediation tribunal, pending or threatened, known
or unknown.
(c) Agreement
"Agreement" means this Employee Programs Agreement, including all the
attached Appendices.
(d) ASO Contract
"ASO Contract" means an administrative services only contract, related
prior practice, or related understanding with a third-party administrator that
pertains to any PepsiCo Health and Welfare Plan, PepsiCo Restaurants Health and
Welfare Plan, or TRICON Health and Welfare Plan.
(e) Award
"Award" means an award under a Long-Term Incentive Plan or a Short-Term
Incentive Plan or, as the context or facts may require, any other award under
another incentive or special bonus, incentive, or award program or arrangement.
(f) Casual Dining Businesses
"Casual Dining Businesses" has the meaning given that term under the
Separation Agreement.
(g) Bulk Asset Transfer
"Bulk Asset Transfer" is defined in Section 3.2(b)(2).
(h) Close of the Distribution Date
"Close of the Distribution Date" means 11:59:59 P.M., Eastern Standard
Time or Eastern Daylight Time (whichever shall then be in effect), on the
Distribution Date.
(i) Code
"Code" means the Internal Revenue Code of 1986, as amended, or any
successor federal income tax law. Reference to a specific Code provision also
includes any proposed, temporary, or final regulation in force under that
provision.
(j) Conversion Formula
"Conversion Formula" means the appropriate formula described in the Form
10, filed with the Securities and Exchange Commission by PepsiCo in connection
with the Distribution, which shall be applied for adjusting the exercise price
and award size of PepsiCo stock options under the PepsiCo Long-Term Incentive
Plan, PepsiCo SharePower Plan and PepsiCo Stock Option Incentive Plan or for
determining the exercise price and number of TRICON stock options issued as a
result of the conversion of PepsiCo options granted under the PepsiCo Long-Term
Incentive Plan, the PepsiCo Stock Option Incentive Plan and the PepsiCo
SharePower Plan, as applicable.
(k) Deferral Programs
"Deferral Programs," when immediately preceded by "PepsiCo" or when the
applicable Hiring Company or Prior Company is a member of the PepsiCo Group,
means the PepsiCo, Inc. Executive Income Deferral Program, the PepsiCo, Inc.
Performance Share Unit Deferral Program, and the PepsiCo, Inc. Option Gains
Deferral Program. When immediately preceded by "TRICON" or when the applicable
Hiring Company or Prior Company is a member of the TRICON Group, "Deferral Plan"
means the executive income deferral program, performance share unit deferral
program and the option gains deferral program to be established by TRICON
pursuant to Section 2.3.
(l) Distribution
"Distribution" has the meaning given that term under the Separation
Agreement.
(m) Distribution Date
"Distribution Date" has the meaning given that term under the Separation
Agreement.
(n) DRIP
"DRIP," when immediately preceded by "PepsiCo" or when the applicable
Hiring Company or Prior Company is a member of the PepsiCo Group, means the
PepsiCo Dividend Reinvestment Plan. When immediately preceded by "TRICON" or
when the applicable Hiring Company or Prior Company is a member of the TRICON
Group, "DRIP" means the dividend reinvestment plan or program to be established
by TRICON.
(o) ERISA
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended. Reference to a specific provision of ERISA also includes any proposed,
temporary, or final regulation in force under that provision.
(p) Executive Programs
"Executive Programs," when immediately preceded by "PepsiCo" or when the
applicable Hiring Company or Prior Company is a member of the PepsiCo Group,
means the executive benefit and nonqualified plans, programs, and arrangements
established, maintained, agreed upon, or assumed by a member of the PepsiCo
Group for the benefit of employees and former employees of members of the
PepsiCo Group before the Close of the Distribution Date, including the plans and
programs listed in Appendix A. When immediately preceded by "TRICON" or when the
applicable Hiring Company or Prior Company is a member of the TRICON Group,
"Executive Programs" means the executive benefit plans and programs to be
established by TRICON pursuant to Section 2.3 that correspond to the respective
PepsiCo Executive Programs including those plans and programs listed in Appendix
A.
(q) Foreign Plan
"Foreign Plan," when immediately preceded by "PepsiCo," means a Plan
maintained by the PepsiCo Group or when immediately preceded as "TRICON," a plan
maintained by the TRICON Group, in either case for the benefit of employees who
are compensated under a payroll which is administered outside the 50 United
States, its territories and possessions, and the District of Columbia.
(r) Governmental Authority
"Governmental Authority" means any federal, state, local, foreign, or
international court, government, department, commission, board, bureau, agency,
official, or other regulatory, administrative, or governmental authority,
including the Department of Labor, the Internal Revenue Service, and the Pension
Benefit Guaranty Corporation.
(s) Group Insurance Policy
"Group Insurance Policy" means a group insurance policy issued in
connection with any PepsiCo Health and Welfare Plan, PepsiCo Restaurants Health
and Welfare Plan, or any TRICON Health and Welfare Plan, as applicable.
(t) Health and Welfare Plans
"Health and Welfare Plans," when immediately preceded by "PepsiCo" or
when the applicable Hiring Company or Prior Company is a member of the PepsiCo
Group, means the health and welfare benefit plans, programs, and policies which
are sponsored by PepsiCo. When immediately preceded by "PepsiCo Restaurant,"
"Health and Welfare Plans" means the benefit plans, programs and policies listed
in the first part of Appendix B to this Agreement that are sponsored by a member
of the TRICON Group for periods immediately before the Close of the Distribution
Date, and such other welfare plans or programs as may apply to any such member's
employees, retirees and dependents for such periods. When immediately preceded
by "TRICON" or when the applicable Hiring Company or Prior Company is a member
of the TRICON Group, "Health and Welfare Plans" means benefit plans, programs,
and policies listed in the second part of Appendix B to this Agreement which are
sponsored by a member of the TRICON Group for periods Immediately after the
Distribution Date.
(u) Hiring Company
"Hiring Company," with respect to a Transition Individual described in
Section 1.1(ddd)(1) or (4), means a member of the PepsiCo Group, and, with
respect to a Transition Individual described in Section 1.1(ddd)(2) or (3),
means a member of the TRICON Group.
(v) HMO
"HMO" means a health maintenance organization that provides benefits
under the PepsiCo Health and Welfare Plans, PepsiCo Restaurants Health and
Welfare Plans, or the TRICON Health and Welfare Plans, as applicable.
(w) HMO Agreements
"HMO Agreements" means contracts, letter agreements, practices, and
understandings with HMOs that provide medical services under the PepsiCo Health
and Welfare Plans, PepsiCo Restaurants Health and Welfare Plans, and TRICON
Health and Welfare Plans, as applicable.
(x) Immediately after the Distribution Date
"Immediately after the Distribution Date" means 12:00 A.M., Eastern
Standard Time or Eastern Daylight Time (whichever shall then be in effect), on
the day after the Distribution Date.
(y) Individual Agreement
"Individual Agreement" means an individual contract or agreement
(whether written or unwritten) entered into between a member of the PepsiCo
Group or a member of the TRICON Group and any employee that establishes the
right of such individual to special compensation or benefits, special bonuses,
supplemental pension benefits, hiring bonuses, loans, guaranteed payments,
special allowances, tax equalization payments, special expatriate compensation
payments, disability benefits, or share units granted (and payable in the form
of cash or otherwise) under individual phantom share agreements, or that
provides benefits similar to those identified in Appendix A.
(z) Indemnitor
"Indemnitor" is defined in Section 9.18.
(aa) Initial Asset Transfer
"Initial Asset Transfer" is defined in Section 3.2(b)(2).
(bb) Liabilities
"Liabilities" means any and all losses, claims, charges, debts, demands,
actions, costs and expenses (including administrative and related costs and
expenses of any Plan, program, or arrangement), of any nature whatsoever,
whether absolute or contingent, matured or unmatured, liquidated or
unliquidated, accrued or unaccrued, known or unknown, whenever arising.
(cc) Long-Term Incentive Plan
"Long-Term Incentive Plan," when immediately preceded by "PepsiCo" or
when the applicable Hiring Company or Prior Company is a member of the PepsiCo
Group, means the PepsiCo, Inc. 1987 Long-Term Incentive Plan, the PepsiCo, Inc.
1994 Long-Term Incentive Plan, and any other long-term incentive or stock-based
incentive plans assumed by a member of the PepsiCo Group by reason of merger,
acquisition, or otherwise. When immediately preceded by "TRICON" or when the
applicable Hiring Company or Prior Company is a member of the TRICON Group,
"Long-Term Incentive Plan" means the long-term incentive plan to be established
by TRICON pursuant to Section 2.3.
(dd) LTD VEBA
"LTD VEBA," when immediately preceded by "PepsiCo," means the PepsiCo
Long Term Disability Benefit Trust. When immediately preceded by "TRICON," "LTD
VEBA" means the welfare benefit fund to be established by TRICON pursuant to
Section 5.2 that corresponds to the PepsiCo LTD VEBA.
(ee) Master Trust
"Master Trust," when immediately preceded by "PepsiCo", means the master
trusts evidenced by the PepsiCo, Inc. Master Trust Agreement dated February 1,
1978 and the PepsiCo, Inc. Special Master Trust Agreement dated September 11,
1985, as amended from time to time, and currently associated with, among other
plans, the PepsiCo Pension Plan and the Pizza Hut Pension Plan. When immediately
preceded by "TRICON," "Master Trust" means the master trust(s) to be established
by TRICON pursuant to Section 3.1 that corresponds to the PepsiCo Master Trust.
(ff) Material Feature
"Material Feature" means any feature of a Plan that could reasonably be
expected to be of material importance to the sponsoring employer or the
participants and beneficiaries of the Plan, which could include, depending on
the type and purpose of the particular Plan, the class or classes of employees
eligible to participate in such Plan, the nature, type, form, source, and level
of benefits provided by the employer under such Plan and the amount or level of
contributions, if any, required to be made by participants (or their dependents
or beneficiaries) to such Plan.
(gg) Participating Company
"Participating Company" means any Person (other than an individual) that
is participating in a Plan sponsored by a member of the PepsiCo Group or a
member of the TRICON Group, as the context requires.
(hh) Pension Equalization Plan
"Pension Equalization Plan," when immediately preceded by "PepsiCo" or
when the applicable Hiring Company or Prior Company is a member of the PepsiCo
Group, means the PepsiCo Pension Equalization Plan. When immediately preceded by
"TRICON" or when the applicable Hiring Company or Prior Company is a member of
the TRICON Group, "Pension Equalization Plan" means the plan to be established
by TRICON pursuant to Section 2.3 that corresponds to the PepsiCo Pension
Equalization Plan.
(ii) Pension Plan
"Pension Plan," when immediately preceded by "PepsiCo" or when the
applicable Hiring Company or Prior Company is a member of the PepsiCo Group,
means the PepsiCo Salaried Employees Retirement Plan. When immediately preceded
by "TRICON" or when the applicable Hiring Company or Prior Company is a member
of the TRICON Group, "Pension Plan" means the plan to be established by TRICON
pursuant to Section 2.3 that corresponds to the PepsiCo Pension Plan. When
immediately preceded by "Pizza Hut," "Pension Plan" means the Pizza Hut Hourly
Employees Pension Plan.
(jj) PepsiCo Capital Stock
"PepsiCo Capital Stock" has the meaning given that term in the
Separation Agreement.
(kk) PepsiCo Executive
"PepsiCo Executive" means an employee or former employee of a member of
the PepsiCo Group or a member of the TRICON Group, who immediately before the
Close of the Distribution Date is or was eligible to participate in or receive a
benefit under any PepsiCo Executive Program.
(ll) PepsiCo Group
"PepsiCo Group" has the meaning given that term under the Separation
Agreement.
(mm) PepsiCo Leave of Absence Programs
"PepsiCo Leave of Absence Programs" means the leave of absence programs
offered from time to time under the personnel policies and practices of PepsiCo
and leaves offered in accordance with the Family and Medical Leave Act of 1993,
as amended.
(nn) Person
"Person" means an individual, a general or limited partnership, a
corporation, a trust, a joint venture, an unincorporated organization, a limited
liability entity, any other entity, and any Governmental Authority.
(oo) Plan
"Plan," when immediately preceded by "PepsiCo" or "TRICON," means any
plan, policy, program, payroll practice, on-going arrangement, contract, trust,
insurance policy or other agreement or funding vehicle, whether written or
unwritten, providing benefits to employees, or former employees of the PepsiCo
Group or the TRICON Group, as applicable.
(pp) Prior Company
"Prior Company," with respect to a Transition Individual described in
Section 1.1(ddd)(1) or (4), means a member of the TRICON Group and, with respect
to a Transition Individual described in Section 1.1(ddd)(2) or (3), means a
member of the PepsiCo Group.
(qq) Record Date
"Record Date" has the meaning given that term under the Separation
Agreement.
(rr) Reimbursement Plans
"Reimbursement Plans," when immediately preceded by "PepsiCo" or when
the applicable Hiring Company or Prior Company is a member of the PepsiCo Group,
means the PepsiCo Inc. Health Care Reimbursement account plan that is part of
the PepsiCo Employees Health Care Program and the PepsiCo, Inc. Dependent Care
Reimbursement Account Plan, as applicable. When immediately preceded by "TRICON"
or when the applicable Hiring Company or Prior Company is a member of the TRICON
Group, "Reimbursement Account Plans" means the corresponding health care
reimbursement account plan and the dependent care reimbursement account plan to
be established by TRICON pursuant to Section 2.3.
(ss) Restaurant Businesses
"Restaurant Businesses" is defined in the second paragraph of the
preamble of this Agreement.
(tt) Salaried Employee
"Salaried Employee" means any individual who is an eligible employee
within the meaning of the PepsiCo Pension Plan or the TRICON Pension Plan, as
applicable.
(uu) Savings Plan
"Savings Plan," when immediately preceded by "PepsiCo" or when the
applicable Hiring Company or Prior Company is a member of the PepsiCo Group,
means the PepsiCo Long Term Savings Program. When immediately preceded by
"TRICON" or when the applicable Hiring Company or Prior Company is a member of
the TRICON Group, "Savings Plan" means the TRICON Long Term Savings Program to
be established by TRICON pursuant to Section 2.3.
(vv) Separation Agreement
"Separation Agreement" is defined in the third paragraph of the preamble
of this Agreement.
(ww) SharePower Plan
"SharePower Plan," when immediately preceded by "PepsiCo" or when the
applicable Hiring Company or Prior Company is a member of the PepsiCo Group,
means the PepsiCo SharePower Stock Option Plan. When immediately preceded by
"TRICON" or when the applicable Hiring Company or Prior Company is a member of
the TRICON Group, "SharePower Plan" means the stock option plan to be
established by TRICON pursuant to Section 2.3.
(xx) Short-Term Incentive Plan
"Short-Term Incentive Plan," when immediately preceded by "PepsiCo,"
means the PepsiCo, Inc. 1994 Executive Incentive Compensation Plan, the PepsiCo,
Inc. Executive Incentive Plan, the Middle Management Incentive Compensation
Plan, and any other special compensation, bonus and incentive compensation
programs. When immediately preceded by "TRICON," "Short-Term Incentive Plan"
means the executive incentive compensation plan, executive incentive plan, the
middle management compensation plan and any other special compensation, bonus
and incentive compensation programs to be established by TRICON pursuant to
Section 2.3.
(yy) Stock Option Incentive Plan
"Stock Option Incentive Plan" when immediately preceded by "PepsiCo" or
when the applicable Hiring Company or Prior Company is a member of the PepsiCo
Group, means the "PepsiCo, Inc. 1995 Stock Option Incentive Plan" and any
predecessor plans. When immediately preceded by "TRICON" or when the applicable
Hiring Company or Prior Company is a member of the TRICON Group, "Stock Option
Incentive Plan" means the stock option incentive plan established by TRICON
pursuant to Section 2.3.
(zz) Stock Purchase Plan
"Stock Purchase Plan," when immediately preceded by "PepsiCo" or when
the applicable Hiring Company or Prior Company is a member of the PepsiCo Group,
means the PepsiCo Capital Stock Purchase Plan. When immediately preceded by
"TRICON" or when the applicable Hiring Company or Prior Company is a member of
the TRICON Group, "Stock Purchase Plan" means the employee stock purchase plan
to be established by TRICON pursuant to Section 2.3.
(aaa) Subsequent Asset Transfer
"Subsequent Asset Transfer" is defined in Section 3.2(b)(2).
(bbb) Subsidiary
"Subsidiary" of any Person means any corporation or other organization
whether incorporated or unincorporated of which at least a majority of the
securities or interests having by the terms thereof ordinary voting power to
elect at least a majority of the board of directors or others performing similar
functions with respect to such corporation or other organization is directly or
indirectly owned or controlled by such Person or by any one or more of its
Subsidiaries, or by such Person and one or more of its Subsidiaries; provided,
however, that no Person that is not directly or indirectly wholly owned by any
other Person shall be a Subsidiary of such other Person unless such other Person
controls, or has the right, power, or ability to control, that Person.
(ccc) Transferred Individual
"Transferred Individual" means any individual who, as of the Close of
the Distribution Date: (1) is either then actively employed by, or then on a
leave of absence from, a member of the TRICON Group; or (2) is neither then
actively employed by, nor then on a leave of absence from, a member of the
TRICON Group, but (A) whose most recent (through the Close of the Distribution
Date) active employment with PepsiCo or a past or present affiliate of PepsiCo
was with an entity or a corporate division of the Restaurant Businesses, the
Casual Dining Businesses, and the predecessors of any such entities, to the
extent such information is available, and who has not had an intervening period
of employment covered by an agreement under which assets and liabilities with
respect to the individual were or are to be transferred from a PepsiCo Pension
Plan, or (B) who otherwise is identified pursuant to a methodology approved by
PepsiCo and TRICON, which methodology shall be consistent with the intent of the
parties that former employees of PepsiCo or a past or present affiliate of
PepsiCo will be aligned with the entity for which they most recently (through
the Close of the Distribution Date) worked and based upon the business of such
entity. An alternate payee under a qualified domestic relations order (within
the meaning of Code Sec. 414(p) and ERISA Sec. 206(d)), alternate recipient
under a qualified medical child support order (within the meaning of ERISA Sec.
609(a)), beneficiary or covered dependent, in each case, of an employee or
former employee described in (1) or (2) above shall also be a Transferred
Individual with respect to that employee's or former employee's benefit under
the applicable Plans. Such an alternate payee, alternate recipient, beneficiary,
or covered dependent shall not otherwise be considered a Transferred Individual
with respect to his or her own benefits under any applicable Plans unless he or
she is a Transferred Individual by virtue of either of the first two sentences
of this definition. In addition, PepsiCo, in its sole discretion, may designate
any other individuals, or group of individuals, as Transferred Individuals. An
individual may be a Transferred Individual pursuant to this definition
regardless of whether such individual is, as of the Distribution Date, alive,
actively employed, on a temporary leave of absence from active employment, on
layoff, terminated from employment, retired or on any other type of employment
or post-employment status relative to a PepsiCo or TRICON Plan, and regardless
of whether, as of the Close of the Distribution Date, such individual is then
receiving any benefits from a PepsiCo or TRICON Plan. Transferred Individual
includes any individual who is on an international assignment whether paid on a
U.S. payroll or a payroll outside the U.S. if such individual otherwise falls
within any of the above categories.
(ddd) Transition Individual
"Transition Individual" means any individual who:
(1) is a Transferred Individual who during the Transition Period
becomes an employee of a member of the PepsiCo Group, without an
intervening period of employment, as a result of transfer arranged by
PepsiCo and TRICON; or
(2) is an employee of a member of the PepsiCo Group as of the
Distribution Date (and is not a Transferred Individual) who during the
Transition Period becomes an employee of a member of the TRICON Group,
without an intervening period of employment, as a result of a transfer
arranged by PepsiCo and TRICON; or
(3) is a Transferred Individual who during the Transition Period
(A) becomes an employee of a member of the PepsiCo Group, and (B)
subsequently becomes an employee of a member of the TRICON Group, in
each case without an intervening period of employment and as a result of
a transfer arranged by PepsiCo and TRICON; or
(4) is an employee of a member of the PepsiCo Group as of the
Distribution Date (and is not a Transferred Individual) who during the
Transition Period (A) becomes an employee of a member of the TRICON
Group, and (B) subsequently becomes an employee of a member of the
PepsiCo Group, in each case without an intervening period of employment
and as a result of a transfer arranged by PepsiCo and TRICON.
An alternate payee under a qualified domestic relations order, (within
the meaning of Code Sec. 414(p) and ERISA Sec. 206(d)), alternate recipient
under a qualified medical child support order, (within the meaning of ERISA Sec.
609(a)), beneficiary or covered dependent, in each case, of an individual
described in clause (1), (2), (3), or (4) of this definition shall also be a
Transition Individual with respect to that individual's benefit under the
applicable Plans. Such an alternate payee, alternate recipient, beneficiary, and
covered dependent shall not otherwise be considered a Transition Individual with
respect to his or her own benefits under any applicable Plans, unless he or she
is a Transition Individual by virtue of clause (1), (2), (3), or (4) of this
definition.
(eee) Transition Period
"Transition Period" means the period beginning Immediately after the
Distribution Date and ending on December 31, 1998.
(fff) TRICON Common Stock
"TRICON Common Stock" has the meaning given that term in the Separation
Agreement.
(ggg) TRICON Group
"TRICON Group" has the meaning given that term under the Separation
Agreement.
1.2 REFERENCES
Unless the context clearly indicates otherwise, reference to a
particular Article, Section, or subsection means the Article, Section, or
subsection so delineated in this Agreement.
ARTICLE
2
GENERAL PRINCIPLES
2.1 ASSUMPTION OF LIABILITIES
TRICON hereby assumes and agrees to pay, perform, fulfill, and
discharge, in accordance with their respective terms, all of the following
(regardless of when or where such Liabilities arose or arise or were or are
incurred): (i) all Liabilities to or relating to Transferred Individuals arising
out of or resulting from employment by a member of the PepsiCo Group before
becoming Transferred Individuals (including Liabilities under PepsiCo Plans and
TRICON Plans); (ii) all other Liabilities to or relating to Transferred
Individuals and other employees or former employees of a member of the TRICON
Group, and their dependents and beneficiaries, to the extent relating to,
arising out of or resulting from future, present or former employment with a
member of the TRICON Group (including Liabilities under PepsiCo Plans and TRICON
Plans); (iii) all Liabilities relating to, arising out of, or resulting from any
other actual or alleged employment relationship with the TRICON Group; (iv) all
Liabilities under any Individual Agreements relating to Transferred Individuals;
and (v) all other Liabilities relating to, arising out of, or resulting from
obligations, liabilities, and responsibilities expressly assumed or retained by
a member of the TRICON Group, or a TRICON Plan pursuant to this Agreement.
TRICON shall have assumed all such Liabilities described in this Agreement,
unless the Liability is explicitly retained in writing by PepsiCo or excluded in
writing by PepsiCo from those being assumed by TRICON.
2.2 TRICON PARTICIPATION IN PEPSICO PLANS
(a) Participation in PepsiCo Plans and PepsiCo Restaurant Health and
Welfare Plans
Subject to the terms and conditions of this Agreement, each member of
the TRICON Group that is, as of the date of this Agreement, a Participating
Company in any of the PepsiCo Plans or the PepsiCo Restaurant Health and Welfare
Plans shall continue as such through the Close of the Distribution Date.
Effective as of any date before the Distribution Date, a member of the TRICON
Group not described in the preceding sentence may, at its request and with the
consent of PepsiCo (which shall not be unreasonably withheld), become a
Participating Company in any or all of the PepsiCo Plans (applicable to
Transferred Individuals) or PepsiCo Restaurant Health and Welfare Plans.
(b) PepsiCo's General Obligations as Plan Sponsor
PepsiCo shall continue through the Close of the Distribution Date to
administer, or cause to be administered, in accordance with their terms and
applicable law, the PepsiCo Plans and the PepsiCo Restaurant Health and Welfare
Plans; provided, however, that effective September 1, 1997 through the Close of
the Distribution Date (unless PepsiCo directs otherwise, in its sole
discretion), TRICON shall be responsible, subject to the direction and control
of PepsiCo, for administering, or causing to be administered, in accordance with
their terms and applicable law, the PepsiCo Restaurant Health and Welfare Plans
and such portion of the PepsiCo Plans as PepsiCo shall determine in its sole
discretion. Through the Close of the Distribution Date, PepsiCo shall have the
sole discretion and authority to interpret the PepsiCo Plans and the PepsiCo
Restaurant Health and Welfare Plans as set forth therein.
(c) TRICON's General Obligations as Participating Company
TRICON shall perform with respect to its participation in the PepsiCo
Plans and PepsiCo Restaurant Health and Welfare Plans, and shall cause each
other member of the TRICON Group that is a Participating Company in any PepsiCo
Plan or PepsiCo Restaurant Health and Welfare Plan to perform the duties of a
Participating Company as set forth in such Plans or any procedures adopted
pursuant thereto, including: (i) assisting in the administration of claims, to
the extent requested by the claims administrator or plan administrator of the
applicable PepsiCo Plan or PepsiCo Restaurant Health and Welfare Plan; (ii)
cooperating fully with PepsiCo Plan or PepsiCo Restaurant Health and Welfare
Plan auditors, benefit personnel and benefit vendors; (iii) preserving the
confidentiality of all financial arrangements PepsiCo has or may have with any
vendors, claims administrators, trustees or any other entity or individual with
whom PepsiCo has entered into an agreement relating to the PepsiCo Plans or
PepsiCo Restaurant Health and Welfare Plans; and (iv) preserving the
confidentiality of participant health information (including health information
in relation to leaves under the Family and Medical Leave Act of 1993, as
amended).
(d) Termination of Participating Company Status
Effective as of the Close of the Distribution Date, TRICON and each
other member of the TRICON Group shall cease to be a Participating Company in
the PepsiCo Plans.
2.3 ESTABLISHMENT OF TRICON PLANS
Effective Immediately after the Distribution Date, unless otherwise
provided, TRICON shall have adopted, or shall have caused to be adopted, before
the Close of the Distribution Date, the TRICON Pension Plan, the TRICON Pension
Equalization Plan, the TRICON Savings Plan, the TRICON SharePower Plan, the
TRICON Stock Purchase Plan, and the TRICON Executive Programs for the benefit of
Transferred Individuals and other current, future, and former employees of the
TRICON Group. Before the Close of the Distribution Date, to the extent that it
has not already occurred, TRICON shall have adopted, or shall have caused to be
adopted, effective Immediately after the Distribution Date, the TRICON Health
and Welfare Plans listed in the second part of Appendix B to this Agreement, and
it shall substitute itself or another member of the TRICON Group as the plan
sponsor and administrator of the TRICON Health and Welfare Plans. In the context
of TRICON's adoption of the TRICON Health and Welfare Plans, TRICON shall also
take such steps as may be necessary to adopt and shall assume all Liabilities
with respect to the PepsiCo Restaurant Health and Welfare Plans and those plans
and programs under the PepsiCo Health and Welfare Plans in which Transferred
Individuals participate as of the Close of the Distribution Date. TRICON shall
convert such PepsiCo Restaurant Health and Welfare Plan, along with any PepsiCo
Health and Welfare Plans in which Transferred Individuals participate as of the
Close of the Distribution Date, to TRICON Health and Welfare Plans effective
Immediately after the Distribution Date. Except for the TRICON Stock Option
Incentive Plan, the TRICON Long-Term Incentive Plan, the TRICON SharePower Plan,
and the TRICON Stock Purchase Plan , the foregoing TRICON Plans as in effect
Immediately after the Distribution Date shall be substantially identical in all
Material Features to the corresponding PepsiCo Plans as in effect as of the
Close of the Distribution Date. The TRICON Stock Option Incentive Plan, the
TRICON Long-Term Incentive Plan, the TRICON SharePower Plan, and the TRICON
Stock Purchase Plan shall be adopted by TRICON and approved by PepsiCo as sole
shareholder of TRICON, before the Close of the Distribution Date, to become
effective Immediately after the Distribution Date.
2.4 TERMS OF PARTICIPATION BY TRANSFERRED INDIVIDUALS
The TRICON Plans shall be, with respect to Transferred Individuals, in
all respects the successors in interest to, shall recognize all rights and
entitlements as of the Close of the Distribution Date under, and shall not
provide benefits that duplicate benefits provided by, the corresponding PepsiCo
Plans for such Transferred Individuals. PepsiCo and TRICON shall agree on
methods and procedures, including amending the respective Plan documents, to
prevent Transferred Individuals from receiving duplicative benefits from the
PepsiCo Plans and the TRICON Plans. TRICON shall not permit any TRICON Plan to
commence benefit payments to any Transferred Individual until it receives notice
from PepsiCo regarding the date on which payments under the corresponding
PepsiCo Plan shall cease. With respect to Transferred Individuals, each TRICON
Plan shall provide that all service, all compensation, and all other
benefit-affecting determinations that, as of the Close of the Distribution Date,
were recognized under the corresponding PepsiCo Plan (including the PepsiCo
Restaurant Health and Welfare Plans) (for periods immediately before the Close
of the Distribution Date) shall, as of Immediately after the Distribution Date,
receive full recognition, credit, and validity and be taken into account under
such TRICON Plan to the same extent as if such items occurred under such TRICON
Plan, except to the extent that duplication of benefits would result. The
provisions of this Agreement for the transfer of assets from certain trusts
relating to PepsiCo Plans (including Foreign Plans) to the corresponding trusts
relating to TRICON Plans (including Foreign Plans) are based upon the
understanding of the parties that each such TRICON Plan will assume all
Liabilities of the corresponding PepsiCo Plan to or relating to Transferred
Individuals, as provided for herein. If there are any legal or other
authoritative reasons that any such Liabilities are not effectively assumed by
the appropriate TRICON Plan, then the amount of assets transferred to the trust
relating to such TRICON Plan from the trust relating to the corresponding
PepsiCo Plan shall be recomputed, ab initio, as set forth below but taking into
account the retention of such Liabilities by such PepsiCo Plan, and assets shall
be transferred by the trust relating to such TRICON Plan to the trust relating
to such PepsiCo Plan so as to place each such trust in the position it would
have been in, had the initial asset transfer been made in accordance with such
recomputed amount of assets.
2.5 RESTRICTION ON PLAN AMENDMENTS
During the Transition Period, neither PepsiCo nor TRICON shall adopt any
amendment, or allow any amendment to be adopted, to any of their respective
Pension Plans or Savings Plans that, in the opinion of counsel acceptable to
both PepsiCo and TRICON, would violate Code Sec. 411(d)(6) or that would create
an optional form of benefit subject to Code Sec. 411(d)(6). During the
Transition Period, TRICON shall not eliminate any investment option available
under the TRICON Savings Plan as of Immediately after the Distribution Date.
ARTICLE
3
DEFINED BENEFIT PLANS
3.1 ESTABLISHMENT OF MIRROR PENSION TRUSTS
Effective Immediately after the Distribution Date, TRICON shall
establish, or cause to be established, the TRICON Master Trust which shall be
qualified under Code Sec. 401(a), exempt from taxation under Code Sec.
501(a)(1), and forming part of the TRICON Pension Plan and the Pizza Hut Pension
Plan.
3.2 PIZZA HUT PENSION PLANS
TRICON shall continue to be responsible for all Liabilities relating to
the Pizza Hut Pension Plan. Effective no later than the Close of the
Distribution Date, TRICON shall substitute itself or another member of the
TRICON Group for PepsiCo as the plan sponsor and administrator of the Pizza Hut
Pension Plan.
3.3 ASSUMPTION OF PENSION PLAN AND PENSION EQUALIZATION PLAN LIABILITIES AND
ALLOCATION OF INTERESTS IN THE PEPSICO PENSION TRUST
(a) Assumption of Liabilities by TRICON Pension Plan
Immediately after the Distribution Date all Liabilities to or relating
to Transferred Individuals under the PepsiCo Pension Plan and the PepsiCo
Pension Equalization Plan shall cease to be Liabilities of the PepsiCo Pension
Plan and the PepsiCo Pension Equalization Plan, as applicable, and shall be
assumed in full and in all respects by the TRICON Pension Plan and the TRICON
Pension Equalization Plan, respectively.
(b) Asset Allocations and Transfers
(1) Calculation of Pension Plan Asset Allocation
(A) As soon as practicable after the Close of the
Distribution Date, PepsiCo shall cause to be calculated the 414(l)(1) Amount for
the PepsiCo Pension Plan and the TRICON Pension Plan as of the Close of the
Distribution Date. The assumptions used in determining the 414(l)(1) Amount for
each Pension Plan shall be as follows:
(i) As if each plan were terminating as of the Close of the
Distribution Date and with 100% of participants who are active
employees, employees on leave of absence, or former employees
with rights to a future deferred vested pension assumed to elect
a lump sum distribution of the value of the pension benefit
accrued as of the Close of the Distribution Date.
(ii) For purposes of calculating the lump sum present value,
mortality rates shall be based on the applicable mortality table
under Code Sec. 417(e)(3)(A)(ii)(I) as specified in Rev. Xxx.
00-0 and interest calculated based on the annual rate of interest
on 30-year Treasury securities for the second month preceding the
month of the Close of the Distribution Date.
(iii) For retired participants or former employees receiving
benefits as of the Close of the Distribution Date, the lump sum
present value of the form of benefit currently elected shall be
valued in the same manner and using the same assumptions as in
(i) and (ii) above. For active participants who are eligible to
retire as of the Close of the Distribution Date, the lump sum
benefit shall be based on the accrued benefit payable at the
current age reflecting appropriate early retirement reductions
under the plan. For all other participants, the lump sum value is
the present value of the accrued benefit commencing at normal
retirement age. Early retirement subsidies shall be considered
only for those participants who are retired or eligible to retire
as of the Close of the Distribution Date.
(B) If the aggregate amount of the assets of the PepsiCo
Pension Plan, determined as of the Close of the Distribution Date, is not less
than the sum of the 414(l)(1) Amounts for the PepsiCo Pension Plan and the
TRICON Pension Plan determined in accordance with (A) above, then such assets
shall be allocated between the PepsiCo Pension Plan and the TRICON Pension Plan
in proportion to the 414(l)(1) Amounts of each plan.
(C) If the aggregate amount of the assets of the PepsiCo
Pension Plan, determined as of the Close of the Distribution Date is less than
the sum of the 414(l)(1) Amounts for the PepsiCo Pension Plan and the TRICON
Pension Plan, then such assets shall be allocated between the PepsiCo Pension
Plan and the TRICON Pension Plan proportionately to each priority category as
specified under ERISA Sec. 4044, using the assumptions specified in (A) above.
(2) Transfer of Assets to TRICON Pension Trusts
Effective Immediately after the Distribution Date, PepsiCo shall cause
to be transferred from the PepsiCo Master Trust to the TRICON Master Trust an
initial amount of assets in cash ("the Initial Asset Transfer"). The amount of
the Initial Asset Transfer shall be an estimate, determined by PepsiCo in its
sole discretion, of the cash required by the TRICON Pension Plan and Pizza Hut
Pension Plan to make payment of benefits and appropriate expenses from the
TRICON Master Trust in accordance with the plans from Immediately after the
Distribution Date to the time of the Bulk Asset Transfer, described below. In
the event that the Initial Asset Transfer provides insufficient cash for this
purpose and upon TRICON's written request therefor, PepsiCo will cause to be
transferred other amounts of assets in cash ("Subsequent Asset Transfer"), but
only to the extent required to make cash payments as described above.
As soon as practicable after the calculation of each plan's interest in
the Master Trust pursuant to Section 3.2(b)(1), but in no event before PepsiCo
(or its authorized representative) determines that the calculation and the data
on which it is based are acceptably complete, accurate, and consistent, PepsiCo
will cause the appropriate amount of assets to be transferred from the PepsiCo
Master Trust to the TRICON Master Trust (the "Bulk Asset Transfer"). The amount
of assets to be transferred in the Bulk Asset Transfer shall be equal to the
aggregate of interests of the TRICON Pension Plan determined pursuant to Section
3.2(b)(1) and the Pizza Hut Pension Plan, adjusted by PepsiCo as of the date of
the Bulk Asset Transfer to the extent necessary or appropriate to reasonably and
appropriately reflect additional pension contributions, actual investment gains
and losses experienced in the PepsiCo Master Trust, benefit payments, expenses,
the Initial Asset Transfer, Subsequent Asset Transfers, data corrections,
enhancements, and computational refinements from Immediately after the
Distribution Date through the date of the actual asset transfer of such assets.
The specific assets to be transferred from the PepsiCo Master Trust to
the TRICON Master Trust in the Bulk Asset Transfer shall represent a reasonable
cross-section of the asset classes in the PepsiCo Master Trust consistent with
the objective of enabling TRICON to implement an investment program for the
TRICON Master Trust, but in no event shall PepsiCo or the PepsiCo Master Trust
be required to incur unreasonable transaction costs in the process of
transferring assets and subsequently re-balancing the investment portfolio held
by the PepsiCo Master Trust. Furthermore, PepsiCo shall not transfer any shares
of PepsiCo or TRICON stock or any interests in group annuity contracts held by
the PepsiCo Master Trust unless specifically requested by TRICON in writing, and
PepsiCo shall not be required to transfer any specific asset, any portion of any
specific fund or investment manager account, or any specific portion of any
specific asset, fund or investment manager account. In transferring specific
assets, PepsiCo makes no representation as to the appropriateness of the
resulting asset allocation or investment performance resulting from the specific
assets transferred. By accepting the assets transferred, TRICON acknowledges
that it and not PepsiCo is serving as the fiduciary for the TRICON Master Trust
with respect to the determination and actual transfer of assets from the PepsiCo
Master Trust and that, acting as fiduciary for the TRICON Pension Plan and Pizza
Hut Pension Plan, TRICON further acknowledges that it is able to change the
asset allocation as it deems appropriate at any time. Once the assets have been
transferred to and received by the TRICON Master Trust, such event shall fully
and finally foreclose any issue or matter of any nature whatsoever by TRICON,
the TRICON Master Trust, the TRICON Pension Plan, and the Pizza Hut Pension Plan
or any other trust(s) related to such plans against PepsiCo, the PepsiCo Master
Trust, the PepsiCo Pension Plan, or any other trust(s) related to such plans
relating to the condition, identity, or value of such assets and TRICON shall
fully indemnify PepsiCo, its employees, officers, directors, and the PepsiCo
Pension Plan and the PepsiCo Master Trust regarding any Liability or regulatory
issue of any nature with respect thereto.
3.4 ACTION IN EVENT OF PBGC INTERVENTION
Notwithstanding any provision of this Agreement to the contrary, in the
event that at any time the Pension Benefit Guaranty Corporation ("PBGC") asserts
that the Distribution may provide justification for PBGC to seek termination of
the PepsiCo Pension Plan pursuant to ERISA Sec. 4042 or otherwise asserts that
the transaction may increase unreasonably the long-run loss to the PBGC (within
the meaning of ERISA Sec. 4042(a)(4)) with respect to the PepsiCo Pension Plan,
PepsiCo may, in its sole discretion (i) retain all assets and Liabilities with
respect to Transferred Individuals and Transition Individuals under the PepsiCo
Pension Plan and/or the PepsiCo Pension Equalization Plan and require TRICON to
provide equivalent benefits under plans maintained by it with an offset for any
benefits continued to be provided under the PepsiCo Pension Plan and/or the
PepsiCo Pension Equalization Plan, (ii) enter into negotiations with the PBGC to
resolve these issues and, upon satisfactorily resolving such issues, TRICON
shall fully comply with the terms of this Article; or (iii) reach such other
agreement as may be satisfactory to PepsiCo and TRICON. In any case and
notwithstanding any other provision of this Agreement, TRICON shall be fully
responsible and liable for any obligation to, agreement with, or undertaking (on
behalf of or relating to the TRICON Pension Plan) to the PBGC and shall hold
PepsiCo free from and fully indemnify it against any such obligation, agreement,
or undertaking. For purposes of this Section 3.4, reference to the PepsiCo
Pension or the TRICON Pension Plan, as applicable, shall mean and include the
Pizza Hut Pension Plan. If PepsiCo retains any liability of any Transferred
Individual under the PepsiCo Pension Equalization Plan, TRICON shall fully
reimburse PepsiCo for the full costs of, and any administrative expenses
relating to, any such liability.
ARTICLE
4
DEFINED CONTRIBUTION PLANS
4.1 SAVINGS PLAN
(a) Savings Plan Trust
Effective Immediately after the Distribution Date, TRICON shall
establish, or cause to be established, a trust qualified under Code Sec. 401(a),
exempt from taxation under Code Sec. 501(a)(1), and forming part of the TRICON
Savings Plan.
(b) Assumption of Liabilities and Transfer of Assets
Effective Immediately after the Distribution Date: (i) the TRICON
Savings Plan shall assume and be solely responsible for all Liabilities
(including any amounts attributable to additional contributions with respect to
Transferred Individuals required pursuant to negotiations with the Internal
Revenue Service that began before the Distribution Date) to or relating to
Transferred Individuals under the PepsiCo Savings Plan; (ii) the TRICON Savings
Plan shall assume and be solely responsible for all ongoing rights of or
relating to Transferred Individuals for future participation (including the
right to make contributions through payroll deductions) in the TRICON Savings
Plan; and (iii) PepsiCo shall cause the accounts of the Transferred Individuals
under the PepsiCo Savings Plan which are held by its related trust as of the
Close of the Distribution Date to be transferred to the TRICON Savings Plan and
its related trust, and TRICON shall cause such transferred accounts to be
accepted by such plan and trust. Effective no later than Immediately after the
Distribution Date, TRICON shall use its reasonable best efforts to enter into
such agreements to accomplish such assumptions and transfers, the maintenance of
the necessary participant records, the appointment of State Street Bank and
Trust Company as initial trustee under the TRICON Savings Plan, and the
engagement of State Street Bank and Trust Company as initial recordkeeper under
such plans. As soon as practicable after the Close of the Distribution Date,
assets related to the accounts of all Transferred Individuals shall be
transferred from the PepsiCo Savings Plan to the TRICON Savings Plan in cash or
in kind, at PepsiCo's discretion, and to the extent practicable, shall be
invested in comparable investment options in the TRICON Savings Plan as such
accounts were invested immediately before the Close of the Distribution Date.
(c) Non-Employer Stock Funds
Effective Immediately after the Distribution Date, a TRICON common stock
fund shall be added as an investment option to the PepsiCo Savings Plan and the
TRICON Savings Plan shall provide for both a PepsiCo capital stock fund and a
TRICON common stock fund as investment options. The TRICON common stock fund in
the PepsiCo Savings Plan and the PepsiCo capital stock fund in the TRICON
Savings Plan are each referred to as a "Non-Employer Stock Fund" with respect to
the applicable plan. Each Non-Employer Stock Fund shall be maintained under the
respective Plan at least through December 31, 1998. The PepsiCo Savings Plan and
the TRICON Savings Plan shall each provide that, after the Distribution Date, no
new contributions may be invested in, and no amounts may be transferred from
other investment options to the Non-Employer Stock Fund under the respective
Plan. The PepsiCo Savings Plan shall provide that no earnings or dividends under
its Non-Employer Stock Fund may be reinvested in TRICON Common Stock and the
TRICON Savings Plan shall provide that no earnings or dividends under its
Non-Employer Stock Fund may be reinvested in PepsiCo Capital Stock.
(d) Miscellaneous Funds
In the event that PepsiCo determines that it is not feasible or
appropriate to transfer in-kind the assets of a particular investment fund from
the PepsiCo Savings Plan to the TRICON Savings Plan, then the value of the
assets, as of the close of business on the Distribution Date (plus earnings
attributable to such amount from the Distribution Date to the date the assets
are actually transferred) shall be transferred in cash to the TRICON Savings
Plan and TRICON shall invest such cash in its plan and trust in the same manner
and proportion as it was invested in the PepsiCo Savings Plan or otherwise at
the direction of each affected participant.
4.2 ESOP
At PepsiCo's election and as soon as reasonably practicable after the
Distribution Date with respect to Transferred Individuals and Transition
Individuals, after transfer to TRICON, the accounts of all Transferred
Individuals and Transition Individuals (described in Section 1.1(ddd)(2) or (3))
shall either be (i) retained under the PepsiCo Employee Stock Ownership Plan and
such individuals shall not be considered to have terminated service for any
purposes under the Plan, or (ii) shall be transferred to the TRICON Savings Plan
and invested in the PepsiCo or TRICON stock funds, as applicable, under the
TRICON Savings Plan or, if such is not possible, in such fund or funds as
otherwise determined by TRICON or, at TRICON's election, as directed by each
such Transferred Individual or Transition Individual, respectively. If the
accounts of Transferred Individuals and Transition Individuals are retained
under the PepsiCo Employee Stock Ownership Plan, TRICON will undertake to inform
PepsiCo of any change in employment status or any relevant information about
TRICON employees who have balances in the PepsiCo Employee Stock Ownership Plan.
ARTICLE
5
HEALTH AND WELFARE PLANS
5.1 ASSUMPTION OF HEALTH AND WELFARE PLAN LIABILITIES
Immediately after the Distribution Date, all Liabilities for or relating
to Transferred Individuals under the PepsiCo Health and Welfare Plans, PepsiCo
Restaurant Health and Welfare Plans or TRICON Health and Welfare Plans shall
cease to be Liabilities of PepsiCo or the PepsiCo Plans and shall be assumed by
TRICON and the TRICON Health and Welfare Plans. Thus, TRICON shall be
responsible for all Liabilities that pertain to Transferred Individuals,
including all reported claims that are unpaid, all incurred but not reported
claims as of the Close of the Distribution Date, and all future claims that
pertain to Transferred Individuals under the PepsiCo Health and Welfare Plans,
PepsiCo Restaurant Health and Welfare Plans and the TRICON Health and Welfare
Plans. TRICON shall be required to make all payments due or payable to
Transferred Individuals under the TRICON Health and Welfare Plans for the period
beginning Immediately after the Distribution Date, including incurred but not
reported claims. All treatments which have been pre-certified for or are being
provided to a Transferred Individual as of the Close of the Distribution Date
shall continue to be provided without interruption under the appropriate TRICON
Health and Welfare Plan and TRICON shall continue to be responsible for all
Liabilities relating to, arising out of, or resulting from such on-going
treatments as of the Close of the Distribution Date. Unless otherwise
specifically set forth in writing, TRICON shall not be entitled to assets
associated with any PepsiCo Health and Welfare Plan, PepsiCo Restaurant Health
and Welfare Plan, or TRICON Health and Welfare Plan including, but not limited
to, premium stabilization reserves, contract or plan surpluses, any other
reserve, prior inter-company assessments or premiums, any prior per-capita
inter-company rate payments, reimbursement for charges or premiums previously
collected or any other payment or credit, of any nature whatsoever, from
PepsiCo, any trust associated with any plan or program or from any third-party
vendor.
5.2 ESTABLISHMENT OF MIRROR LTD VEBA
On or before the Distribution Date, TRICON shall establish, or cause to
be established, the TRICON LTD VEBA, for the purpose of funding long-term
disability benefits under the TRICON Health and Welfare Plans. Such trust shall
constitute a voluntary employees' beneficiary association under Code
Sec.501(c)(9) which is exempt from the imposition of federal income tax under
Code Sec.501(a).
5.3 LTD VEBA ASSET TRANSFERS
This Section 5.3 shall govern the transfer of assets from the PepsiCo LTD VEBA
to the TRICON LTD VEBA. As soon as practicable after the Close of the
Distribution Date, PepsiCo shall determine the aggregate present value, as of
the Close of the Distribution Date, of the future benefit obligations of each
PepsiCo Plan funded by the PepsiCo LTD VEBA (separately with respect to
Transferred Individuals who are eligible to receive benefits under the PepsiCo
LTD VEBA as of the Close of the Distribution Date, and with respect to other
individuals who are not Transferred Individuals who are eligible for such
benefits). The future benefit obligations will be determined by the actuary
appointed by PepsiCo, for purposes of providing necessary actuarial services for
the PepsiCo LTD VEBA, in the following manner: the disabled life reserve
(exclusive of the incurred but not reported ("IBNR") reserve) will be calculated
as of the Close of the Distribution Date using September 1, 1997 census
information requested from the third-party administrator (Aetna). The reserve
for the lives that will be transferred to TRICON will be calculated separately.
The actuarial basis for the disabled life reserve will be calculated using the
following assumptions: interest at 7% compounded annually; termination of
disability based on rates of recovery and mortality developed from the 1975
study of the Society of Actuaries of experience under Group LTD policies for
durations of disablement of three years or less. For durations of disablement in
excess of three years, assumed terminations are based on a modification of the
1952 Disability Study. As soon as practicable after such determination is made,
there shall be transferred from the PepsiCo LTD VEBA to the TRICON LTD VEBA an
amount having a fair market value on the date of transfer equal to the amount
calculated as [(A)/(B)] x (C), where "(A)" is the disabled life reserve as of
the Close of the Distribution Date for the lives that will be transferred to
TRICON using September 1, 1997 census information; "(B)" is the disabled life
reserve for all lives under the PepsiCo LTD VEBA as of the Close of the
Distribution Date using September 1, 1997 census information; and "(C)" is the
market value of the PepsiCo LTD VEBA assets on the date of transfer. PepsiCo
shall direct the trustee of the PepsiCo LTD VEBA to transfer cash to the trustee
of the TRICON LTD VEBA in the amount determined above and TRICON shall direct
the trustee of the TRICON LTD VEBA to accept such cash transfer.
5.4 CONTRIBUTIONS TO, INVESTMENTS OF, AND DISTRIBUTIONS FROM VEBAS
Before the Close of the Distribution Date, PepsiCo shall have sole
authority to direct the trustee of the PepsiCo LTD VEBA, and any other VEBA
sponsored by PepsiCo, as to the timing and manner of any contributions, if any,
to the PepsiCo LTD VEBA, and any other VEBA sponsored by PepsiCo, the investment
of any trust assets, and the distributions and/or transfers of trust assets to
PepsiCo, TRICON, any Participating Company in the trusts, any paying agent, any
successor trustee, or any other Person.
5.5 VENDOR CONTRACTS
(a) ASO Contracts, Group Insurance Policies, HMO Agreements and Letters
of Understanding
(1) Before the Distribution Date, PepsiCo shall, in its sole
discretion, take such steps as are necessary under each ASO Contract, Group
Insurance Policy, HMO Agreement and letters of understanding and arrangements in
existence as of the date of this Agreement to permit TRICON to participate in
the terms and conditions of such ASO Contract, Group Insurance Policy, HMO
Agreement or letters of understanding and arrangements from Immediately after
the Distribution Date through December 31, 1998. PepsiCo, in its sole
discretion, may cause one or more of its ASO Contracts, Group Insurance
Policies, HMO Agreements and letters of understanding and arrangements into
which PepsiCo enters after the date of this Agreement, but before the Close of
the Distribution Date, to allow TRICON to participate in the terms and
conditions thereof. Nothing contained in this Section 5.5(a) shall preclude
PepsiCo from choosing to enter into ASO Contracts, Group Insurance Policies, HMO
Agreements or other letters of understandings and arrangements with new or
different vendors.
(2) PepsiCo shall have the right to determine, and shall promptly
notify TRICON of, the manner in which TRICON's participation in the terms and
conditions of ASO Contracts, Group Insurance Policies, HMO Agreements, letters
of understanding and arrangements as set forth above shall be effectuated. The
permissible ways in which TRICON's participation may be effectuated include, but
are not limited to, automatically making TRICON a party to the ASO Contracts,
Group Insurance Policies, HMO Agreement or letters of understanding and
arrangements or obligating the third party to enter into a separate ASO
Contract, Group Insurance Policy, or HMO Agreement or letters of understanding
and arrangements with TRICON providing (to the extent practicable and agreeable
to such third party) for the same terms and conditions as are contained in the
ASO Contracts, Group Insurance Policies, HMO Agreements and letters of
understanding and arrangements to which PepsiCo is a party. Such terms and
conditions shall include the financial and termination provisions, performance
standards, methodology, auditing policies, quality measures, reporting
requirements and target claims. TRICON hereby authorizes PepsiCo to act on its
behalf to extend to TRICON the terms and conditions of the ASO Contracts, Group
Insurance Policies, HMO Agreements and letters of understanding and
arrangements. TRICON shall fully cooperate with PepsiCo in such efforts, and,
for periods through December 31, 1998, TRICON shall not perform any act,
including discussing any alternative arrangements with any third party, that
would prejudice PepsiCo's efforts.
(b) Effect of Change in Rates
PepsiCo and TRICON shall use their reasonable best efforts to cause each
of the insurance companies, HMOs, paid provider organizations and third-party
administrators providing services and benefits under the PepsiCo Health and
Welfare Plans and the TRICON Health and Welfare Plans to maintain the premium
and/or administrative rates based on the aggregate number of participants in
both the PepsiCo Health and Welfare Plans, after the Close of the Distribution
Date, and the TRICON Health and Welfare Plans through December 31, 1998,
separately rated or adjusted for the demographics, experience or other relevant
factors related to the covered participants of PepsiCo and TRICON, respectively.
To the extent they are not successful in such efforts, PepsiCo and TRICON shall
each bear the revised premium or administrative rates for health and welfare
benefits attributable to the individuals covered by their respective Plans.
(c) Management of the ASO Contracts, Group Insurance Policies, HMO
Agreements, Letters of Understanding and other Vendor Contracts
From September 1, 1997 through the Close of the Distribution Date,
TRICON shall be responsible, subject to the direction and control of PepsiCo,
for the management of the existing contractual and other arrangements pertaining
to the administration of the PepsiCo Restaurant Health and Welfare Plans.
Immediately after the Distribution Date, TRICON shall be responsible for the
management and control of the ASO contracts, Group Insurance Policies, HMO
Agreements, letters of understanding, arrangements and other vendor contracts
and relationships to the extent such contracts, policies and agreements apply to
the TRICON Health and Welfare Plans. Notwithstanding the foregoing, nothing
contained in this Section 5.5(c) shall permit TRICON to direct any insurance
carrier, third-party vendor or claims administrator with respect to any
contractual arrangement, policy or agreement pertaining to or impacting any
PepsiCo Health and Welfare Plan.
5.6 PEPSICO SALARY CONTINUATION
PepsiCo shall be responsible for the administration of claims incurred
under the PepsiCo Salary Continuation Plan by Transferred Individuals, and other
employees and former employees of the TRICON Group before the Close of the
Distribution Date; provided, however, that effective September 1, 1997 (unless
PepsiCo directs otherwise in its sole discretion), TRICON shall be responsible,
subject to the direction and control of PepsiCo, for administering or causing to
be administered in accordance with its terms and applicable law, the TRICON
Salary Continuation Plan. Any determination made or settlements entered into by
PepsiCo with respect to such claims shall be final and binding. PepsiCo shall
transfer to TRICON, effective Immediately after the Distribution Date, and
TRICON shall assume responsibility for (i) administering all claims incurred by
Transferred Individuals and other employees and former employees of the TRICON
Group before the Close of the Distribution Date that are administered by PepsiCo
as of the Close of the Distribution Date, and (ii) all Liabilities for
Transferred Individuals as of the Close of the Distribution Date, in the same
manner, and using the same methods and procedures, as PepsiCo used in
determining and paying such claims. As of the Close of the Distribution Date,
TRICON shall have sole discretionary authority to make any necessary
determinations with respect to such claims, including entering into settlements
with respect to such claims, and shall be solely responsible for any costs,
liabilities or related expenses of any nature whatsoever related to such claims,
payments or obligations.
5.7 POSTRETIREMENT HEALTH AND LIFE INSURANCE BENEFITS
As soon as practicable after the Distribution Date, TRICON shall
determine all Transferred Individuals who are, to the best knowledge of TRICON,
eligible to receive retiree medical coverage and/or postretirement life
insurance coverage under the PepsiCo Health and Welfare Plans or PepsiCo
Restaurant Health and Welfare Plans as of the Close of the Distribution Date,
and the type of retiree medical coverage and the level of life insurance
coverage for which they are eligible, as applicable. With respect to Transferred
Individuals receiving postretirement health benefits or postretirement life
insurance benefits under the PepsiCo Health and Welfare Plans or PepsiCo
Restaurant Health and Welfare Plans as of the Close of the Distribution Date,
TRICON agrees to provide substantially the same postretirement health and
postretirement life insurance benefits Immediately after the Distribution Date.
To the extent a claim or cause of action asserted by or on behalf of any
Transferred Individual or any Liabilities arise at any time following the Close
of the Distribution Date in connection with such postretirement health or
postretirement life insurance benefits, TRICON shall be solely responsible for
such Liabilities and shall hold each member of the PepsiCo Group and their
respective directors, officers and employees and the PepsiCo Plans harmless for
all such Liabilities.
5.8 COBRA AND HIPAA
For periods prior to September 1, 1997, PepsiCo shall be responsible for
administering compliance with the continuation coverage requirements for "group
health plans" under Title X of the Consolidated Omnibus Budget Reconciliation
Act of 1985, as amended, and the portability requirements under the Health
Insurance Portability and Accountability Act of 1996 with respect to Transferred
Individuals and other employees and former employees of the TRICON Group and
beneficiaries and dependents thereof and the TRICON Group shall be responsible
for filing all necessary employee change notices with respect to these persons
in accordance with applicable PepsiCo policies and procedures. Effective
September 1, 1997 and thereafter, TRICON shall be solely responsible for
administering compliance with such health care continuation coverage and
portability requirements with respect to these persons.
5.9 LEAVE OF ABSENCE PROGRAMS
TRICON shall be responsible for the administration and compliance of all
leaves of absences and related programs (including compliance with the Family
and Medical Leave Act) affecting Transferred Individuals for the period
Immediately after the Closing Date.
5.10 PEPSICO WORKERS' COMPENSATION PROGRAM
Notwithstanding any other provision of this Agreement or the Separation
Agreement, effective Immediately after the Distribution Date, TRICON shall
assume all Liabilities for Transferred Individuals related to any and all
workers' compensation matters under any law of any state, territory, or
possession of the U.S. or the District of Columbia and TRICON shall be fully
responsible for the administration of all such claims. If TRICON is unable to
assume any such Liability or the administration of any such claim because of the
operation of applicable state law or for any other reason, TRICON shall fully
indemnify PepsiCo for all such Liabilities, including the costs of any
administration that TRICON has not been able to assume.
5.11 PEPSICO PRIVATE LINE EMPLOYEE ASSISTANCE PROGRAM
Effective Immediately after the Distribution Date, TRICON shall be
responsible for the TRICON Private Line Employee Assistance Program which is the
employee assistance plan component of the TRICON Employees Health Care Program
with respect to Transferred Individuals.
5.12 POST-DISTRIBUTION TRANSITIONAL ARRANGEMENTS
(a) Continuance of Elections, Co-Payments and Maximum Benefits
...............(1) TRICON shall cause the TRICON Health and Welfare Plans to
recognize and maintain all coverage and contribution elections made by
Transferred Individuals under the PepsiCo Restaurant Health and Welfare Plans in
effect for the period immediately prior to the Distribution Date and shall apply
such elections under the TRICON Health and Welfare Plans for the remainder of
the period or periods for which such elections are by their terms applicable.
...............(2) TRICON shall cause the TRICON Health and Welfare Plans to
recognize and give credit for (A) all amounts applied to deductibles,
out-of-pocket maximums, and other applicable benefit coverage limits with
respect to such expenses which have been incurred by Transferred Individuals
under the PepsiCo Restaurant Health and Welfare Plans (or other PepsiCo Plans)
for the remainder of the benefit limit year in which the Distribution occurs,
and (B) all benefits paid to Transferred Individuals under the PepsiCo
Restaurant Health and Welfare Plans, (or other PepsiCo Plans) during and prior
to the benefit limit year in which the Distribution occurs, for purposes of
determining when such persons have reached their lifetime maximum benefits under
the TRICON Health and Welfare Plans.
(3) Subject to Section 5.8, TRICON shall recognize and cover
under the TRICON Health and Welfare Plans through December 31, 1998 all eligible
populations covered by the PepsiCo Health and Welfare Plans (pertaining to
Transferred Individuals) and the PepsiCo Restaurant Health and Welfare Plans on
the Close of the Distribution Date (determined under the applicable Plan
documents), including term and temporary employees and all categories of
part-time employees (which are fully and partially eligible for employer
contributions).
(4) TRICON shall (A) provide coverage to Transferred Individuals
under the TRICON Health and Welfare Plans without the need to undergo a physical
examination or otherwise provide evidence of insurability, and (B) recognize and
maintain all irrevocable assignments and elections made by Transferred
Individuals in connection with their life insurance coverage under the PepsiCo
Restaurant Health and Welfare Plans and any predecessor plans.
(b) Administration
(1) Coordination of Benefits for Spouses and Dependents
Effective as of the first January 1 or change in family status (within
the meaning of the Code and applicable regulations) that occurs Immediately
after the Distribution Date, TRICON shall cause the TRICON Health and Welfare
Plans to permit eligible Transferred Individuals to cover their lawful spouses
as dependents if such lawful spouses are active or retired PepsiCo employees
(but were not otherwise covered as a dependent under the PepsiCo Restaurant
Health and Welfare Plans or other PepsiCo Plans due to their previous status as
both employee and dependent of a PepsiCo employee). As of the first January 1 or
change in family status (within the meaning of the Code and applicable
regulations) that occurs Immediately after the Distribution Date, PepsiCo shall
cause the PepsiCo Health and Welfare Plans to permit eligible PepsiCo Group
employees to cover their lawful spouses as dependents if such lawful spouses are
active or retired TRICON employees. All benefits provided under any such plans
to a lawful spouse dependent of the other company's employees shall be
coordinated pursuant to the terms and conditions of the applicable PepsiCo and
TRICON Plans.
(2) Health Care Financing Administration Data Match
Immediately after the Distribution Date, TRICON shall assume all
Liabilities relating to, arising out of or resulting from claims verified by
PepsiCo or TRICON under the Health Care Financing Administration data match
reports that relate to Transferred Individuals. TRICON and PepsiCo shall share
all information necessary to verify Health Care Financing Administration data
match reports regarding Transferred Individuals. TRICON shall not change any
employee identification numbers assigned by PepsiCo without notifying PepsiCo of
the change and the new Employee Identification Number.
(c) Other Post-Distribution Transitional Rules
(1) PepsiCo Reimbursement Plans
To the extent any Transferred Individual contributed to an account under
the TRICON Health Care Reimbursement Plan or PepsiCo Dependent Care
Reimbursement Plan during the calendar year that includes the Distribution Date,
effective as of the Close of the Distribution Date, TRICON shall be solely
responsible for the account balances of Transferred Individuals for such
calendar year under the TRICON Health Care Reimbursement Plan or TRICON
Dependent Care Reimbursement Plan.
(2) Health and Welfare Plans Subrogation Recovery
If TRICON recovers any amounts through subrogation or otherwise for
claims incurred by or reimbursed to employees and former employees of the
PepsiCo Group and their respective beneficiaries and dependents (other than
Transferred Individuals), TRICON shall pay such amounts to PepsiCo.
5.13 APPLICATION OF ARTICLE 5 TO THE TRICON GROUP
Any reference in this Article 5 to "TRICON" shall include a reference to
another member of the TRICON Group when and to the extent TRICON has caused the
other member of the TRICON Group to (a) become a party to a vendor contract,
group insurance contract, HMO agreement, letter of understanding or arrangement
associated with a TRICON Health and Welfare Plan, (b) become a self-insured
entity for the purposes of one or more TRICON Health and Welfare Plans, (c)
assume all or a portion of the Liabilities or administrative responsibilities
for benefits which arose before the Close of the Distribution Date under a
PepsiCo Restaurant Health and Welfare Plan and which were expressly assumed by
TRICON pursuant to this Agreement, or (d) take any other action, extend any
coverage, assume any other Liability or fulfill any other responsibility that
TRICON would otherwise be required to take under the terms of this Article 5,
unless it is clear from the context that the particular reference is not
intended to include another member of the TRICON Group. In all such instances in
which a reference in this Article 5 to "TRICON" includes a reference to another
member of the TRICON Group, TRICON shall be responsible to PepsiCo for ensuring
that the other member of the TRICON Group complies with the applicable terms of
this Agreement and the Transferred Individuals allocated to such member of the
TRICON Group shall have the same rights and entitlements to benefits under the
applicable TRICON Health and Welfare Plans that the Transferred Individual would
have had if he or she had instead been allocated to TRICON.
ARTICLE
6
EXECUTIVE PROGRAMS
6.1 ASSUMPTION OF OBLIGATIONS
Effective Immediately after the Distribution Date, the TRICON Group
shall assume and be solely responsible for all Liabilities to or relating to
Transferred Individuals under all PepsiCo Executive Programs. TRICON shall be
solely responsible for all such Liabilities notwithstanding any failure by
TRICON to complete its obligations under this Article 6.
SHORT-TERM INCENTIVE PLANS
With respect to all Awards that would otherwise be payable under a
Short-Term Incentive Plan to Transferred Individuals for the 1997 performance
year, TRICON shall be responsible for determining (a) the extent to which
established performance criteria have been met, and (b) the payment level for
each Transferred Individual for the 1997 performance year, and TRICON shall be
solely responsible for paying all such Awards. Nothing contained in this Section
6.2 shall entitle PepsiCo or TRICON to any contributions for any Short-Term
Incentive Plan payment made by the other under this Section.
6.3 LONG-TERM INCENTIVE PLAN AND STOCK OPTION INCENTIVE PLAN
PepsiCo and TRICON shall use their reasonable best efforts to take all
actions necessary or appropriate so that each outstanding Award granted under
any PepsiCo Long-Term Incentive Plan or PepsiCo Stock Option Incentive Plan held
by any Transferred Individual shall be converted, as set forth in this Section
6.3, to an Award under the TRICON Long-Term Incentive Plan or TRICON Stock
Option Incentive Plan, whichever is applicable, as provided below. References to
PepsiCo and its affiliates under the PepsiCo Long-Term Incentive Plan and the
PepsiCo Stock Option Incentive Plan shall be amended to refer to TRICON and its
affiliates.
The treatment of outstanding Awards described below shall also apply to
Transferred Individuals who are compensated under a payroll which is
administered outside the 50 United States, its territories and possessions, and
the District of Columbia; provided, however, if such treatment is not legally
permitted, or results in adverse consequence for PepsiCo or the Transferred
Individual, as determined by PepsiCo in its sole discretion, PepsiCo may
determine in its sole discretion, a different treatment.
(a) Transferred Individuals Who Are Active Employees of TRICON
(1) Before 1996 Award Year Stock Options
Effective Immediately after the Distribution Date, each Award or grant
consisting of an option based on or included in an award year before 1996,
regardless of the date granted, that is outstanding under the PepsiCo Stock
Option Incentive Plan or PepsiCo Long-Term Incentive Plan as of the Close of the
Distribution Date for Transferred Individuals shall continue to be held as an
option for PepsiCo Capital Stock. At PepsiCo's election, such Award or grant
shall either (i) remain, and recordkeeping accounts shall be maintained, under
the PepsiCo Stock Option Incentive Plan or PepsiCo Long-Term Incentive Plan,
whichever is applicable, after the Distribution Date and, at PepsiCo's further
election, TRICON shall be fully responsible for administering and providing for
the recordkeeping for such PepsiCo options under the PepsiCo Stock Option
Incentive Plan or PepsiCo Long-Term Incentive Plan in a manner consistent with
provisions of such plans, or (ii) be held and treated, and recordkeeping
accounts shall be maintained by TRICON, under the TRICON Stock Option Incentive
Plan or TRICON Long-Term Incentive Plan. As soon as practicable after the
Distribution Date, the number of options and the exercise price for such options
which shall continue to be held as options for PepsiCo Capital Stock shall be
adjusted, as of the Close of the Distribution Date, by a Conversion Formula. The
determination of which company shall be entitled to any tax deduction and any
other treatment related to any such tax deduction (federal and state) with
respect to the exercise of such PepsiCo stock options shall be made in
accordance with applicable provisions of the Tax Separation Agreement. TRICON
shall be solely responsible for all recordkeeping, plan maintenance and
administrative costs and fees associated with such PepsiCo options.
(2) 1996 or Later Award Year Stock Options
Effective Immediately after the Distribution Date, each Award or grant
consisting of an option based on or included in an award year of 1996,
regardless of the date of the grant, under the PepsiCo Long-Term Incentive Plan
or PepsiCo Stock Option Incentive Plan that is outstanding as of the Close of
the Distribution Date for all such Transferred Individuals shall be converted to
options for TRICON Common Stock under the TRICON Long-Term Incentive Plan or
TRICON Stock Option Incentive Plan, whichever is applicable, and shall be
transferred to the recordkeeper of the TRICON Long-Term Incentive Plan or TRICON
Stock Option Incentive Plan, as appropriate. As soon as practicable after the
Distribution Date, the number of options and the exercise price for such options
converted to options for TRICON Common Stock shall be determined, as of the
Close of the Distribution Date, in accordance with a Conversion Formula. Such
converted TRICON stock option grants shall continue to vest and become
exercisable under the TRICON Stock Option Incentive Plan or TRICON Long-Term
Incentive Plan in accordance with the terms of the original grant under the
PepsiCo Stock Option Incentive Plan or PepsiCo Long-Term Incentive Plan,
whichever is applicable. TRICON shall be the obligor with respect to such
options. TRICON shall be solely responsible for all stock option grants and
payments under the TRICON Stock Option Incentive Plan or TRICON Long-Term
Incentive Plan, with respect to, but not limited to, recordkeeping,
administrative costs and fees, plan maintenance, option exercise and related tax
filings.
(3) Performance Units
............... (i) 1994 Award Year
PepsiCo shall cause each Award under the PepsiCo Long-Term Incentive
Plan consisting of PepsiCo performance unit awards based on the 1994 award year
that is (A) outstanding as of the Close of the Distribution Date, and (B) is
held by a Transferred Individual who, as of the Distribution Date, is an active
employee of, or on leave of absence from, the TRICON Group, to remain an
outstanding Award under the PepsiCo Long-Term Incentive Plan under its original
terms and conditions; provided, however, that (i) Transferred Individuals shall
not be deemed to have terminated employment under the PepsiCo Long-Term
Incentive Plan until such time as they have terminated employment from TRICON,
and (ii) PepsiCo ,in its sole discretion, shall determine the administration and
related recorkeeping with respect to Awards for Transferred Individuals,
including transfer of all related recordkeeping and administration to TRICON.
Notwithstanding the foregoing, for purposes of determining whether any
performance unit targets have been attained for Awards from the 1994 award year,
performance shall be measured based on the consolidated performance of PepsiCo
and TRICON for the 1994 through 1997 performance period. TRICON agrees to
furnish PepsiCo with such data and information as may be necessary for PepsiCo
to determine consolidated performance results for the applicable performance
period and PepsiCo, in its sole discretion, shall determine whether and to what
extent performance criteria or targets have been attained.
(ii) 1996 Award Year
To the extent a Transferred Individual has an Award under the PepsiCo
Long-Term Incentive Plan consisting of PepsiCo performance units from the 1996
award year or later that is (A) outstanding as of the Close of the Distribution
Date, and (B) held by a Transferred Individual who, as of the Distribution Date,
is an active employee of, or on leave of absence from, the TRICON Group, TRICON
agrees to assume such Award under the TRICON Long-Term Incentive Plan, effective
Immediately after the Distribution Date. The number of TRICON performance units
shall be adjusted as determined by PepsiCo in its sole discretion. Each such
Award assumed by TRICON shall otherwise have the same terms and conditions as
were applicable to the corresponding PepsiCo Award as of the Close of the
Distribution Date, except that references to PepsiCo and its affiliates shall be
amended to refer to TRICON and its affiliates. For purposes of determining
whether a performance unit target has been attained for the 1996 award year and
any subsequent year Awards, TRICON shall be required to measure its performance
period based solely on TRICON's performance and PepsiCo shall have no
responsibility, financial or otherwise, to Transferred Individuals for these
1996 or later Awards. To the extent any Award of performance units has been
assumed by TRICON, any shares distributable by reason of such Awards shall be in
the form of TRICON Common Stock. TRICON shall be solely responsible for all such
Liabilities notwithstanding any failure by TRICON to complete its obligations
under this Article 6.
(b) Transferred Individuals Who Are Not Active Employees of TRICON
Each outstanding Award under the PepsiCo Long-Term Incentive Plan and
each grant under the PepsiCo Stock Option Incentive Plan that is held by a
Transferred Individual who, as of the Close of the Distribution Date, is not an
active employee of, or on leave of absence from, the TRICON Group shall remain
outstanding Immediately after the Distribution Date in accordance with its terms
as applicable as of the Close of the Distribution Date, subject to such
adjustments as may be applicable to outstanding Awards held by individuals who
remain active employees of, or on leave of absence from, the PepsiCo Group after
the Distribution Date.
6.4 DEFERRAL PROGRAMS
(a) PepsiCo Executive Income Deferral Program
Immediately after the Distribution Date, the liability with respect to
the balance of any Transferred Individual in an account under the PepsiCo
Executive Income Deferral Program as of the Close of the Distribution Date shall
be transferred to the TRICON Executive Income Deferral Program. TRICON agrees to
maintain and administer the TRICON Executive Income Deferral Program (1) so as
to continue all elections by Transferred Individuals under the PepsiCo Executive
Income Deferral Program, and (2) in a manner that will ensure that as of the
Close of Distribution Date, the investment choices will be the same; provided ,
however, that TRICON may, in its sole discretion amend, modify or terminate
investment alternatives after the Distribution Date. Account balances invested
in whole or in part in PepsiCo phantom shares as of the Close of the
Distribution Date, shall be converted to investments in phantom shares of
PepsiCo and TRICON in a manner consistent with the treatment of employer
securities in the PepsiCo Savings Plan and the TRICON Savings Plan, as
determined in PepsiCo's sole discretion. After the Close of the Distribution
Date, TRICON shall have the right to amend or modify such investment options.
(b) PepsiCo Performance Share Unit Deferral Program
Immediately after the Distribution Date, any obligations or Liabilities
with respect to the balance of any Transferred Individual in an account under
the PepsiCo Performance Share Unit Deferral Program as of the Close of the
Distribution Date shall be transferred to and assumed by the TRICON Performance
Share Unit Deferral Program.
TRICON agrees to maintain and continue all elections by Transferred
Individuals under the PepsiCo Performance Share Unit Deferral Program, and to
provide, as of the Close of the Distribution Date, the same investment choices
as provided by this Program.; provided, however, that deferrals credited to the
phantom stock investment account shall be converted to investments in phantom
shares of PepsiCo and TRICON in a manner consistent with the treatment of
employer securities in the PepsiCo Savings Plan and the TRICON Savings Plan, as
determined in PepsiCo's sole discretion. After the Close of the Distribution
Date, TRICON shall have the right to amend or modify such investment options.
(c) PepsiCo Option Gains Deferral Program
Effective as of the Close of the Distribution Date, any obligations or
Liabilities with respect to the balance of any Transferred Individual under the
PepsiCo Option Gains Deferral Program shall be transferred to and assumed by
TRICON. TRICON agrees to maintain and administer the current deferrals under the
PepsiCo Option Gains Deferral Program, as of the Close of the Distribution Date,
so as to maintain and continue all elections by Transferred Individuals under
the PepsiCo Option Gains Deferral Program; provided, however, that Transferred
Individuals shall not be permitted to defer any gains by reason of the exercise
of any option after the Close of the Distribution Date under the PepsiCo
Long-Term Incentive Plan and Transferred Individuals shall not be credited with
any phantom PepsiCo stock, stock units, or dividend equivalents under the TRICON
Option Gains Deferral Program following the Close of the Distribution Date.
6.5 RESTAURANT DEFERRED COMPENSATION PLAN
Effective Immediately after the Distribution Date, TRICON shall have
established the TRICON Restaurant Deferred Compensation Plan and shall have
assumed all Liabilities under the Restaurant Deferred Compensation Plan.
Effective Immediately after the Distribution Date, TRICON shall cause such
TRICON Restaurant Deferred Compensation Plan to have the same investment options
and phase-out of investment features as TRICON will apply to the TRICON Savings
Plan. PepsiCo shall not transfer any assets to TRICON in connection with the
Restaurant Deferred Compensation Plan.
6.6 EXECUTIVE LOAN PROGRAM
Effective Immediately after the Distribution Date, TRICON shall assume,
accept the assignment of, and be solely responsible for all loans extended to
Transferred Individuals under the PepsiCo Executive Loan Program. TRICON agrees
to execute such documents as may be necessary to effect the assignment of any
outstanding loans and any related security for such loans and agrees to
guarantee all such loan repayments to the applicable lender and to hold PepsiCo
harmless for any amounts due and owing on such loans with respect to Transferred
Individuals.
6.7 STOCK OPTION INCENTIVE PLAN RECORDKEEPING ACCOUNTS
PepsiCo and TRICON shall make their reasonable best efforts to provide
accurate, timely information with respect to stock options granted Transferred
Individuals under the PepsiCo Stock Option Incentive Plan and PepsiCo Long-Term
Incentive Plan and the TRICON Stock Option Incentive Plan and TRICON Long-Term
Incentive Plan. Whichever of PepsiCo or TRICON controls, and is responsible for
providing, the information to a recordkeeper, may take such action as is
necessary to effectuate a correction of any erroneous or inaccurate information
provided to the recordkeepers of the TRICON Stock Option Incentive Plan or the
TRICON Long-Term Incentive Plan and the PepsiCo Stock Option Incentive Plan or
the PepsiCo Long-Term Incentive Plan, respectively. On or after the Close of the
Distribution Date, PepsiCo shall be under no obligation to accept any data
correction with respect to any TRICON employee's eligibility for stock option
grants. TRICON agrees that in the event that any stock option is incorrectly or
erroneously exercised under the PepsiCo Stock Option Incentive Plan or the
PepsiCo Long-Term Incentive Plan, due to the untimely or inaccurate transmission
of data to the recordkeeper of the PepsiCo Stock Option Incentive Plan or the
PepsiCo Long-Term Incentive Plan, TRICON shall indemnify PepsiCo and hold
PepsiCo and its directors, officers, employees and the Plans harmless for any
Liabilities arising as a result of such transaction, including reimbursing
PepsiCo for amounts paid to any individual by reason of the improper exercise of
an option.
TRICON shall be responsible for the integrity of any data or information
that it provides to the recordkeeper of the PepsiCo Stock Option Incentive Plan
or the PepsiCo Long-Term Incentive Plan. TRICON agrees to provide to PepsiCo
unlimited access to records in its possession which may be relevant to
eligibility, vesting, exercise or other aspects of the PepsiCo Stock Option
Incentive Plan or the PepsiCo Long-Term Incentive Plan with respect to any
Transferred Individual or Transition Individual.
TRICON shall provide or cause to be provided all such information as may
be reasonably necessary or required by PepsiCo, in its sole discretion, to
prepare any financial returns, records or reports and shall provide such
information on a timely basis sufficiently far in advance to permit the orderly
preparation and filing of such financial returns, records and reports.
ARTICLE
7
MISCELLANEOUS BENEFITS
7.1 SHAREPOWER PLAN
(a) Treatment of Outstanding Grants Under PepsiCo SharePower Plan
Effective Immediately after the Distribution Date, all outstanding
vested stock option grants under the PepsiCo SharePower Plan as of the Close of
the Distribution Date of all Transferred Individuals shall continue to be held
as options for PepsiCo Capital Stock and, at PepsiCo's election, shall either
(1) remain, and recordkeeping accounts shall be maintained, under the PepsiCo
SharePower Plan after the Distribution Date and, at PepsiCo's further election,
TRICON shall be fully responsible for administering and providing for the
recordkeeping for such PepsiCo options under the PepsiCo SharePower Plan in a
manner consistent with provisions of such plan, or (2) be held and treated, and
recordkeeping accounts shall be maintained, under the TRICON SharePower Plan. As
soon as practicable after the Distribution Date, the number of options and the
exercise price for such options which shall continue to be held as options for
PepsiCo Capital Stock shall be adjusted, as of the Close of the Distribution
Date, by a Conversion Formula. The determination of which company shall be
entitled to any tax deduction and any other treatment related to any such tax
deduction (federal and state) with respect to the exercise of such PepsiCo stock
options shall be made in accordance with applicable provisions of the Tax
Separation Agreement. Effective Immediately after the Distribution Date, all
outstanding nonvested stock option grants under the PepsiCo SharePower Plan as
of the Close of the Distribution Date of all such Transferred Individuals shall
be converted to options for TRICON Common Stock under the TRICON SharePower Plan
and shall be transferred to the recordkeeper of the TRICON SharePower Plan. The
number of options and the exercise price for such TRICON options shall be
determined in accordance with the Conversion Formula. Such converted,
transferred TRICON stock option grants shall continue to vest and become
exercisable under the TRICON SharePower Plan in accordance with the terms in
effect as of the date of the original grant under the PepsiCo SharePower Plan.
TRICON shall be the obligor with respect to such options. TRICON shall be solely
responsible for all aspects of the stock option grants under the TRICON
SharePower Plan, including, but not limited to, recordkeeping, administrative
costs and fees, plan maintenance, option exercise and related tax filings.
The foregoing shall apply to Transferred Individuals who are compensated
under a payroll which is administered outside the 50 United States, its
territories and possessions, and the District of Columbia; provided, however, if
such treatment is not legally permitted, or results in adverse consequences for
PepsiCo or the Transferred Individual, as determined by PepsiCo in its sole
discretion, PepsiCo may determine in its sole discretion, a different treatment.
(b) Recordkeeping Accounts
PepsiCo and TRICON shall make their reasonable best efforts to provide
accurate, timely information with respect to stock options granted Transferred
Individuals under the PepsiCo SharePower Plan. Whichever of PepsiCo or TRICON
controls, and is responsible for providing, the information to a recordkeeper,
may take such action as is necessary to effectuate a correction of any erroneous
or inaccurate information provided to the recordkeepers of the TRICON SharePower
Plan or the PepsiCo SharePower Plan, respectively. On or after the Close of the
Distribution Date, PepsiCo shall be under no obligation to accept any data
correction with respect to any TRICON employee's eligibility for stock option
grants. TRICON agrees that in the event that any stock option is incorrectly or
erroneously exercised under the PepsiCo SharePower Plan, due to the untimely or
inaccurate transmission of data to the recordkeeper, TRICON shall indemnify
PepsiCo and hold PepsiCo and its directors, officers, employees and the Plans
harmless for any Liabilities arising as a result of such transaction, including
reimbursing PepsiCo for amounts paid to any individual by reason of the improper
exercise of an option.
TRICON shall be responsible for the integrity of any data or information
that it provides to the recordkeeper. TRICON agrees to provide to PepsiCo
unlimited access to records in its possession which may be relevant to
eligibility, vesting, exercise or other aspects of the PepsiCo SharePower Plan
with respect to any Transferred Individual or Transition Individual.
TRICON shall provide or cause to be provided all such information as may
be reasonably necessary or required by PepsiCo, in its sole discretion, to
prepare any financial returns, records or reports and shall provide such
information on a timely basis sufficiently far in advance to permit the orderly
preparation and filing of such financial returns, records and reports.
7.2 STOCK PURCHASE PLAN
(a) Transfer of PepsiCo Capital Stock
With respect to all Transferred Individuals who have beneficial
ownership of PepsiCo Capital Stock in the PepsiCo Stock Purchase Plan, as of the
Close of the Distribution Date, PepsiCo shall create individual accounts under
the PepsiCo DRIP, and shall transfer such PepsiCo Capital Stock to those
accounts, as of the Close of the Distribution Date or as soon as practicable
thereafter.
(b) Transfer of TRICON Common Stock
With respect to all Transferred Individuals who become beneficial owners
of TRICON Common Stock received under the PepsiCo Stock Purchase Plan, as a
result of the Distribution, TRICON shall create individual accounts under the
TRICON Stock Purchase Plan for the purpose of receiving such TRICON Common Stock
which shall be transferred by PepsiCo, as of the Close of the Distribution Date
or as soon as practicable thereafter.
With respect to all employees or former employees of the PepsiCo Group
who become beneficial owners of TRICON Common Stock received under the PepsiCo
Stock Purchase Plan, as a result of the Distribution, TRICON shall create
individual accounts under the TRICON DRIP, for the purpose of receiving such
TRICON Common Stock which shall be transferred by PepsiCo, as of the Close of
the Distribution Date or as soon as practicable thereafter.
ARTICLE
8
TRANSITIONAL ARRANGEMENTS
8.1 TRANSITION INDIVIDUALS/RECOGNITION OF SERVICE
The parties intend that, for the duration of the Transition Period, the
respective Plans of PepsiCo and TRICON shall mutually recognize service,
compensation, and other benefit determining factors (except as otherwise
provided herein with respect to stock options) with respect to Transition
Individuals as if the Transition Individual's service recognized by either the
PepsiCo Group or the TRICON Group, respectively, had been performed entirely for
the Hiring Company. In this regard, in determining a Transition Individual's
service under the Hiring Company's Pension Plan, Pension Equalization Plan,
Savings Plan, SharePower Plan, Stock Purchase Plan, Health and Welfare Plans,
Executive Programs, vacation and payroll practices, and other Plans, the Hiring
Company shall grant full credit for and recognition of the Transition
Individual's service as such may be recognized under the above mentioned plans
and programs.
8.2 PENSION PLANS
(a) Assumption of Liabilities/Noncommencement of Pensions
Effective as of the date a Transition Individual is transferred to a
Hiring Company: (i) the Hiring Company's Pension Plan shall assume and be solely
responsible for all Liabilities to or relating to the Transition Individual
under the Prior Company's Pension Plan; and (ii) no pension benefits with
respect to the Transition Individual from a Prior Company's Pension Plan or
Pension Equalization Plan shall commence while he or she is employed by the
Hiring Company.
(b) Asset/Liability Allocations and Transfers
PepsiCo or TRICON, as applicable, shall arrange to transfer liabilities
and assets under the Prior Company Pension Plan and/or Pension Equalization Plan
to the Hiring Company Pension Plan and/or Pension Equalization Plan relating to
the benefit of each Transition Individual effective as of the date a Transition
Individual is transferred to a Hiring Company. The calculation of the liability
related to each such Transition Individual shall be calculated in accordance
with the same procedures and assumptions provided in Section 3.2(b) effective as
of the date the Transition Individual is transferred to the Hiring Company. The
assets relating to such liability shall be transferred, as soon as practicable
after the Transition Period, from the plan and trust maintained by the company
which transferred the greater aggregate liability related to Transition
Individuals to the plan and trust maintained by the company which transferred
the lesser aggregate liability related to Transition Individuals during the
entire Transition Period. The amount of the assets to be transferred from the
Master Trust shall be aggregated with the amount of assets equal to all
liabilities, to the extent funded, for all Transition Individuals transferred
during the Transition Period, adjusted by decreasing such amount for the amount
of Liabilities related to Transition Individuals transferred during the
Transition Period from the company receiving assets. Assets shall be transferred
only to the extent that transferred liabilities are funded. Thus, no assets will
be transferred with respect to any Pension Equalization Plan Liabilities.
8.3 SAVINGS PLAN
Upon a Transition Individual's transfer to a Hiring Company (i) the
Prior Company shall cause the accounts of the Transition Individual under the
Prior Company's Savings Plan which are held by their related trusts to be
transferred to the corresponding Hiring Company's Savings Plan and their related
trusts as soon as practicable after the Transition Individual's date of
transfer; and (ii) the Hiring Company shall cause the transferred accounts to be
accepted by its plans and trusts; and (iii) as soon as the assets relating to
the Transition Individual's account have been transferred, the Hiring Company's
Savings Plan shall assume and be solely responsible for all Liabilities to or
relating to the Transition Individual under the corresponding Prior Company's
Savings Plan. Assets may be transferred from the Prior Company Savings Plan to
the Hiring Company Savings Plan in cash or in kind and, to the extent
practicable, the Transition Individual's accounts shall be invested in
comparable investment options under the Hiring Company Savings Plan as his or
her accounts were invested under the Prior Company Savings Plan immediately
before the transfer.
8.4 HEALTH AND WELFARE PLANS
(a) Continuance of Elections, Co-Payments, and Maximum Benefits.
Each of PepsiCo and TRICON shall cause the Health and Welfare Plans of
itself and its affiliates to recognize and maintain all coverage and
contribution elections made by Transition Individuals under the Health and
Welfare Plans of the other company and its affiliates. Each Hiring Company shall
apply such elections under its Health and Welfare Plans for the remainder of the
period or periods for which the elections are by their terms originally
applicable; provided, however that Hiring Company shall cause the Hiring Company
Health and Welfare Plans to permit new coverage and contribution elections by
Transition Individuals in the same manner as such elections were permitted by
PepsiCo for transfers between its divisions before the Distribution Date.
PepsiCo Health and Welfare Plans and TRICON Health and Welfare Plans
shall recognize and give credit for all amounts applied to deductibles,
out-of-pocket maximums, and other applicable benefit coverage limits with
respect to the current year.
(b) Reimbursement Plans
To the extent any Transition Individual contributed to an account under
a Prior Company's Reimbursement Plan during a calendar year falling within the
Transition Period, the Prior Company shall transfer to the Hiring Company (a)
the liability for such account balances for that calendar year and (b) an equal
amount of cash to cover such liability.
8.5 EXECUTIVE PROGRAMS
(a) Long-Term Incentive Plan and Stock Option Incentive Plan
Effective as of the date a Transition Individual is transferred to a
Hiring Company, the Transition Individual shall retain such stock options,
phantom shares, and performance units as were granted or awarded and in effect
as of the effective date of transfer under the Prior Company Plans. Service with
the Prior Company and the Hiring Company shall be mutually recognized under each
company's Long-Term Incentive Plan and Stock Option Incentive Plan.
(b) Restaurant Deferred Compensation Plan
To the extent the Transition Individual is a participant in the
Restaurant Deferred Compensation Plan, and is transferred from TRICON to
PepsiCo, TRICON shall retain all Liabilities with regard to such Transition
Individual under the Restaurant Deferred Compensation Plan. TRICON will amend
its plan to preclude distributions on account of termination of employment prior
to the Transition Individual's termination of employment from PepsiCo or TRICON.
(c) Deferral Programs
Effective as of the date a Transition Individual is transferred to a
Hiring Company, the Transition Individual's account balance under the Deferral
Programs of the Prior Company shall remain on the books and records of the Prior
Company. The Transition Individual shall not be entitled to a distribution from
such Deferral Programs at the Prior Company by reason of the transfer.
8.6 SHAREPOWER PLANS
Effective as of the date a Transition Individual is transferred to a
Hiring Company, the Transition Individual shall retain such stock options as
were granted or awarded and in effect as of the effective date of transfer under
the Prior Company SharePower Plan. Service with the Prior Company and the Hiring
Company shall be mutually recognized under each company's SharePower Plans.
8.7 STOCK PURCHASE PLANS
As soon as practicable after a Transiton Individual is transferred to a
Hiring Company, the Prior Company shall determine whether the Transition
Individual has a beneficial interest in any stock (PepsiCo Capital Stock or
TRICON Common Stock, as applicable) purchased under the Prior Company Stock
Purchase Plan. In the event that a Transition Individual has a beneficial
interest in any stock (PepsiCo Capital Stock or TRICON Common Stock, as
applicable) purchased under the Prior Company Stock Purchase Plan, the Prior
Company shall transfer such stock to an individual account established under its
DRIP for the benefit of such Transition Individual
8.8 SHORT-TERM INCENTIVE PLAN
To the extent a Transition Individual is hired or rehired by a Hiring
Company during the Transition Period, the payment of any Award under the PepsiCo
Short-Term Incentive Plan or TRICON Short-Term Incentive Plan or any comparable
or other incentive or award program shall be paid for in its entirety by the
entity (PepsiCo or TRICON) on whose payroll the Transition Individual was
employed on December 31, 1997 (for the 1997 performance year) or December 31,
1998 (for the 1998 performance year) and shall be based on the Transition
Individual's period of employment with both the Hiring Company and the Prior
Company during the performance year in question. Neither PepsiCo nor TRICON
shall be entitled to any reimbursement from the other for payments under this
Section.
ARTICLE
9
GENERAL
9.1 PAYMENT OF AND ACCOUNTING TREATMENT FOR EXPENSES AND BALANCE SHEET AMOUNTS
(a) Expenses
All expenses (and the accounting treatment related thereto) through the
Close of the Distribution Date regarding matters addressed herein shall be
handled and administered by PepsiCo and TRICON in accordance with past PepsiCo
accounting and financial practices and procedures pertaining to such matters. To
the extent expenses are unpaid as of the Close of the Distribution Date that
pertain to Transferred Individuals, TRICON or any member of the TRICON Group,
TRICON shall be solely responsible for such payment, without regard to any
accounting treatment to be accorded such expense by PepsiCo or TRICON on their
respective books and records. The accounting treatment to be accorded all such
expenses, whether such expenses are paid by PepsiCo or TRICON, shall be
determined by PepsiCo in its sole discretion.
(b) Balance Sheet Amounts
TRICON shall assume any balance sheet liability for any Liability
assumed by it under this Agreement as of the Close of the Distribution Date or
thereafter, with respect to any Transferred Individual or Transition Individual.
The determination of any balance sheet liability as of the Close of the
Distribution Date shall be determined by PepsiCo in its sole discretion
consistent with past accounting practices, consistently applied.
9.2 SHARING OF PARTICIPANT INFORMATION
PepsiCo and TRICON shall share, PepsiCo shall cause each applicable
member of the PepsiCo Group to share, and TRICON shall cause each applicable
member of the TRICON Group to share, with each other and their respective agents
and vendors (without obtaining releases) all participant information necessary
for the efficient and accurate administration of each of the PepsiCo Plans and
the TRICON Plans during the Transition Period. PepsiCo and TRICON and their
respective authorized agents shall, subject to applicable laws on
confidentiality, be given reasonable and timely access to, and may make copies
of, all information relating to the subjects of this Agreement in the custody of
the other party, to the extent necessary for such administration. Until the
Close of the Distribution Date, all participant information shall be provided in
the manner and medium applicable to Participating Companies in the PepsiCo Plans
generally, and thereafter until December 31, 1998, all participant information
shall be provided in a manner and medium that is compatible with the data
processing systems of PepsiCo as in effect of the Close of the Distribution
Date, unless otherwise agreed to by PepsiCo and TRICON.
9.3 RESTRICTIONS ON EXTENSION OF OPTION EXERCISE PERIODS, AMENDMENT OR
MODIFICATION OF OPTION TERMS AND CONDITIONS
TRICON agrees that, without the prior written consent of PepsiCo,
neither TRICON nor any of its affiliates shall take any action to extend the
exercise period of or to provide for additional vesting with respect to any
PepsiCo options for Transferred or Transition Individuals, including, but not
limited to, providing such Transferred or Transition Individuals with leaves of
absences or special termination or severance arrangements. Neither TRICON nor
any of its affiliates may in any way or for any purpose modify, alter, amend or
terminate any terms or conditions with respect to any PepsiCo option.
9.4 NON-SOLICITATION OF EMPLOYEES
For a period of two years from the Close of the Distribution Date,
TRICON and its affiliates will not, without the prior written consent of
PepsiCo, and PepsiCo and its affiliates will not, without the prior written
consent of TRICON, whether directly or indirectly, solicit (in writing or
orally) for employment or other services, whether as an employee, officer,
director, agent, consultant or independent contractor, any person who or which
is at the time of such solicitation an employee, agent, representative, officer
or director of the other party; provided, however, that this covenant shall
continue to apply in the case of Persons who have left the employ of either
party within a thirty day period prior to being solicited by the other party.
9.5 REPORTING AND DISCLOSURE AND COMMUNICATIONS TO PARTICIPANTS
While TRICON is a Participating Company in the PepsiCo Plans, TRICON
shall take, and shall cause each other applicable member of the TRICON Group to
take, all actions necessary or appropriate to facilitate the distribution of all
PepsiCo Plan-related communications and materials to employees, participants and
beneficiaries, including summary plan descriptions and related summaries of
material modification, summary annual reports, investment information,
prospectuses, notices and enrollment material for the TRICON Plans. TRICON shall
assist, and TRICON shall cause each other applicable member of the TRICON Group
to assist, PepsiCo in complying with all reporting and disclosure requirements
of ERISA, including the preparation of Form 5500 annual reports for the PepsiCo
Plans, where applicable.
9.6 PLAN AUDITS
(a) Audit Rights with Respect to the Allocation or Transfer of Plan
Assets
The allocation of Pension Plan assets and liabilities pursuant to
Section 3.2 and the transfer of assets from PepsiCo VEBAs pursuant to Section
5.2, shall, at the election of TRICON, be audited on behalf of both PepsiCo and
TRICON by an actuarial and benefit consulting firm mutually selected by the
parties. The scope of such audit shall be limited to the accuracy of the data
and the accuracy of the computation and adherence to the methodology specified
in this Agreement and except as set forth in the penultimate sentence of this
Section 9.6(a), such audit shall not be binding on the parties. The actuarial
and benefit consulting firm shall provide its report to both PepsiCo and TRICON.
No other audit shall be conducted with respect to the transfer or allocation of
Plan assets and no issue of any nature whatsoever may be raised by TRICON once
the allocation has been effected. TRICON shall pay or shall be responsible for
the payment of the full costs of such audit. To the extent such audit recommends
a change to the value of assets allocated to a TRICON Plan of less than 5%, the
original determination shall be binding on the parties and shall not be subject
to the dispute resolution process provided under the Separation Agreement. To
the extent such audit recommends such a change of 5% or more, any unresolved
dispute between the parties as to whether and how to make any change in response
to such recommendation shall be subject to the dispute resolution process
provided under the Separation Agreement.
(b) Audit Rights With Respect to Information Provided
...............(1) Each of PepsiCo and TRICON, and their duly authorized
representatives, shall have the right to conduct audits at any time upon
reasonable prior notice, at their own expense, with respect to all information
provided to it or to any Plan recordkeeper or third party administrator by the
other party; provided, however, that PepsiCo or itsauthorized representatives
may, at TRICON's expense, conduct audits at any time with respect to any
information related to PepsiCo options granted to Transferred Individuals or
Transition Individuals. The party conducting the audit shall have the sole
discretion to determine the procedures and guidelines for conducting audits and
the selection of audit representatives under this Section 9.6(b); provided, that
audits with respect to the allocation or transfer of Plan assets and liabilities
shall be subject only to Section 9.6(a). The auditing party shall have the right
to make copies of any records at its expense, subject to the confidentiality
provisions set forth in the Separation Agreement, which are incorporated by
reference herein. The party being audited shall provide the auditing party's
representatives with reasonable access during normal business hours to its
operations, computer systems and paper and electronic files, and provide
workspace to its representatives. After any audit is completed, the party being
audited shall have the right to review a draft of the audit findings and to
comment on those findings in writing within five business days after receiving
such draft.
...............(2) The auditing party's audit rights under this Section 9.6(b)
shall include the right to audit, or participate in an audit facilitated by the
party being audited, of any Subsidiaries and affiliates of the party being
audited and of any benefit providers and third parties with whom the party being
audited has a relationship, or agents of such party, to the extent any such
persons are affected by or addressed in this Agreement (collectively, the
"Non-parties"). The party being audited shall, upon written request from the
auditing party, provide an individual (at the auditing party's expense) to
supervise any audit of any such benefit provider or third party. The auditing
party shall be responsible for supplying, at its expense, additional personnel
sufficient to complete the audit in a reasonably timely manner.
(c) Audits Regarding Vendor Contracts
From Immediately after the Distribution Date through December 31, 1998,
PepsiCo and TRICON and their duly authorized representatives shall have the
right to conduct joint audits with respect to any vendor contracts that relate
to both the PepsiCo Health and Welfare Plans and the TRICON Health and Welfare
Plans. The scope of such audits shall encompass the review of all
correspondence, account records, claim forms, canceled drafts (unless retained
by the bank), provider bills, medical records submitted with claims, billing
corrections, vendor's internal corrections of previous errors and any other
documents or instruments relating to the services performed by the vendor under
the applicable vendor contracts. PepsiCo and TRICON shall agree on the
performance standards, audit methodology, auditing policy and quality measures
and reporting requirements relating to the audits described in this Section 9.6
and the manner in which costs incurred in connection with such audits will be
shared.
9.7 BENEFICIARY DESIGNATIONS
All beneficiary designations made by Transferred Individuals for PepsiCo
Plans shall be transferred to and be in full force and effect under the
corresponding TRICON Plans until such beneficiary designations are replaced or
revoked by the Transferred Individual who made the beneficiary designation. All
beneficiary designations made by Transition Individuals for Prior Company Plans
shall be transferred to and be in full force and effect under the corresponding
Hiring Company Plans until such beneficiary designations are replaced or revoked
by the Transition Individual who made the beneficiary designation.
9.8 REQUESTS FOR INTERNAL REVENUE SERVICE RULINGS AND UNITED STATES DEPARTMENT
OF LABOR OPINIONS
(a) Cooperation
TRICON shall cooperate fully with PepsiCo on any issue relating to the
transactions contemplated by this Agreement for which PepsiCo elects to seek a
determination letter or private letter ruling from the Internal Revenue Service
or an advisory opinion from the United States Department of Labor. PepsiCo shall
cooperate fully with TRICON with respect to any request for a determination
letter or private letter ruling from the Internal Revenue Service or advisory
opinion from the United States Department of Labor with respect to any of the
TRICON Plans relating to the transactions contemplated by this Agreement.
(b) Applications
PepsiCo and TRICON shall make such applications to regulatory agencies,
including the Internal Revenue Service and the United States Department of
Labor, as may be necessary to ensure that any transfers of assets from the
PepsiCo LTD VEBA to the TRICON LTD VEBA will neither (i) result in any adverse
tax, legal or fiduciary consequences to PepsiCo and TRICON, the PepsiCo LTD
VEBA, the TRICON LTD VEBA, any participant therein or beneficiaries thereof, ,
any successor welfare benefit funds established by or on behalf of TRICON, or
the trustees of such trusts, nor (ii) contravene any statute, regulation or
technical pronouncement issued by any regulatory agency. Before the Close of the
Distribution Date, TRICON shall prepare all forms required to obtain favorable
determination letters from the Internal Revenue Service with respect to the
tax-exempt status of the TRICON LTD VEBA. TRICON and PepsiCo agree to cooperate
with each other to fulfill any filing and/or regulatory reporting obligations
with respect to such transfers.
9.9 FIDUCIARY AND RELATED MATTERS
TRICON acknowledges that PepsiCo will not be a fiduciary with respect to
the TRICON Plans. TRICON also acknowledges that PepsiCo shall not be deemed to
be in violation of this Agreement if it fails to comply with any provisions
hereof based upon its good faith determination that to do so would violate any
applicable fiduciary duties or standards of conduct under ERISA or other
applicable law. Notwithstanding any other provision in this Agreement, the
Parties may take such actions as necessary or appropriate to effectuate the
terms and provisions of this Agreement.
9.10 NON-TERMINATION OF EMPLOYMENT; NO THIRD-PARTY BENEFICIARIES
No provision of this Agreement or the Separation Agreement shall be
construed to create any right, or accelerate entitlement, to any compensation or
benefit whatsoever on the part of any Transferred Individual or other future,
present, or former employee of the PepsiCo Group or the TRICON Group under any
PepsiCo Plan or TRICON Plan or otherwise. Without limiting the generality of the
foregoing, except as expressly provided in this Agreement: (i) neither the
Distribution nor the termination of the Participating Company status of a member
of the TRICON Group shall cause any employee to be deemed to have incurred a
termination of employment which entitles such individual to the commencement of
benefits under any of the PepsiCo Plans, any of the TRICON Plans, or any of the
Individual Agreements; and (ii) nothing in this Agreement other than those
provisions specifically set forth herein to the contrary shall preclude TRICON,
at any time after the Close of the Distribution Date, from amending, merging,
modifying, terminating, eliminating, reducing, or otherwise altering in any
respect any TRICON Plan, any benefit under any Plan or any trust, insurance
policy or funding vehicle related to any TRICON Plan.
9.11 COLLECTIVE BARGAINING
To the extent any provision of this Agreement is contrary to the
provisions of any applicable collective bargaining agreement to which PepsiCo or
any affiliate of PepsiCo is a party, the terms of such collective bargaining
agreement shall prevail. Should any provisions of this Agreement be deemed to
relate to a topic determined by an appropriate authority to be a mandatory
subject of collective bargaining, PepsiCo or TRICON may be obligated to bargain
with the union representing affected employees concerning those subjects.
Neither party will agree to a modification of any applicable collective
bargaining agreement without the consent of the other. In the event a force
surplus affecting members of a bargaining unit in both the PepsiCo Group (on the
one hand) and the TRICON Group (on the other hand) directly results, due to the
provisions of such a collective bargaining agreement, in an employee
involuntarily leaving the payroll of the party not declaring the surplus, then
the party declaring the surplus shall bear the cost of any severance payable to
such employee.
9.12 CONSENT OF THIRD PARTIES
If any provision of this Agreement is dependent on the consent of any
third party (such as a vendor or a union) and such consent is withheld, PepsiCo
and TRICON shall use their reasonable best efforts to implement the applicable
provisions of this Agreement to the full extent practicable. If any provision of
this Agreement cannot be implemented due to the failure of such third party to
consent, PepsiCo and TRICON shall negotiate in good faith to implement the
provision in a mutually satisfactory manner. The phrase "reasonable best
efforts" as used in this Agreement shall not be construed to require the
incurrence of any non-routine or unreasonable expense or liability or the waiver
of any right.
9.13 FOREIGN PLANS
As soon as practicable after the date of this Agreement, PepsiCo and
TRICON shall enter into an agreement regarding the treatment of Foreign Plans
consistent with the principles set forth in Appendix C.
9.14 EFFECT IF DISTRIBUTION DOES NOT OCCUR
If the Distribution does not occur, then all actions and events that
are, under this Agreement, to be taken or occur effective as of the Close of the
Distribution Date, Immediately after the Distribution Date, or otherwise in
connection with the Distribution, shall not be taken or occur except to the
extent specifically agreed by TRICON and PepsiCo.
9.15 RELATIONSHIP OF PARTIES
Nothing in this Agreement shall be deemed or construed by the parties or
any third party as creating the relationship of principal and agent, partnership
or joint venture between the parties, it being understood and agreed that no
provision contained herein, and no act of the parties, shall be deemed to create
any relationship between the parties other than the relationship set forth
herein.
9.16 AFFILIATES
Each of PepsiCo and TRICON shall cause to be performed, and hereby
guarantees the performance of, all actions, agreements and obligations set forth
in this Agreement to be performed by members of the PepsiCo Group or members of
the TRICON Group, respectively, where relevant.
9.17 ARBITRATION
Any controversy or claim arising out of or relating to this Agreement,
or the breach hereof, shall be settled by arbitration in accordance with the
then prevailing Commercial Arbitration Rules of the American Arbitration
Association (the "AAA") as such rules may be modified herein.
An award rendered in connection with an arbitration pursuant to this
Section shall be final and binding and judgment upon such an award may be
entered and enforced in any court of competent jurisdiction.
The forum for arbitration under this Section shall be agreed upon by the
Parties, or, failing such agreement, shall be New York, New York.
Arbitration shall be conducted by a single arbitrator selected jointly
by PepsiCo and TRICON. If within 30 days after a demand for arbitration is made,
PepsiCo and TRICON are unable to agree on a single arbitrator, three arbitrators
shall be appointed. Within 30 days after such inability to agree, PepsiCo and
TRICON shall each select one arbitrator and those two arbitrators shall then
select a third arbitrator unaffiliated with either Party. In connection with the
selection of the third arbitrator, consideration shall be give to familiarity
with employee benefit plans and programs and related matters and experience in
dispute resolution between parties, as a judge or otherwise. If the arbitrators
selected by PepsiCo and TRICON cannot agree on the third arbitrator within such
30 day period, they shall discuss the qualifications of such third arbitrator
with the AAA prior to selection of such arbitrator, which selection shall be in
accordance with the Commercial Arbitration Rules of the AAA.
If an arbitrator cannot continue to serve, a successor to an arbitrator
selected by PepsiCo or TRICON, as the case may be, also shall be selected by the
same Party, and a successor to the neutral arbitrator shall be selected as
specified above. A full rehearing will be held only if the neutral arbitrator is
unable to continue to serve or if the remaining arbitrators unanimously agree
that such a rehearing is appropriate.
The arbitrator or arbitrators shall be guided, but not bound, by the
Federal Rules of Evidence and by the procedural rules, including discovery
provisions, of the Federal Rules of Civil Procedure. Any discovery shall be
limited to information directly relevant to the controversy or claim in
arbitration.
9.18 INDEMNIFICATION
Effective on the Distribution Date, TRICON agrees to indemnify and hold
harmless each member of the PepsiCo Group and each of their respective officers,
directors, employees and agents and the PepsiCo Plans from and against any and
all losses, Liabilities, claims, suits, damages, costs and expenses (including
without limitation, reasonable attorneys' fees and any and all expenses
reasonably incurred in investigating, preparing or defending against any pending
or seriously threatened litigation or claim) arising out of or related in any
manner to Transferred Individuals and Transition Individuals described in
Section 1.1(ddd)(2) and (3). Similarly, effective on the Distribution Date,
PepsiCo agrees to indemnify and hold harmless each member of the TRICON Group
and each of their respective officers, directors, employees and agents and the
TRICON Plans from and against any and all losses, Liabilities, claims, suits,
damages, costs and expenses (including, without, limitation reasonable
attorneys' fees and any and all expenses reasonably incurred in investigating,
preparing or defending against any pending or seriously threatened litigation or
claim) arising out of or related in any manner to Transferred Individuals and
Transition Individuals described in Section 1.1(ddd)(1) and (4).
If any action is brought or any claim is made against a Party or person
in respect of which indemnity may be sought pursuant to this Section 9.18 (the
"Indemnitee"), the Indemnitee shall, within ten days after the receipt of
information indicating that an action or claim is likely, notify in writing the
Party from whom indemnification is sought (the "Indemnitor") of the institution
of the action or the making of the claim, and the Indemnitor shall have the
right, and at the request of the Indemnitee, shall have the obligation, to
assume the defense of the action or claim, including the employment of counsel.
If the Indemnitor assumes the defense of the action or claim, the Indemnitor
shall be entitled to settle the action or claim on behalf of the Indemnitee
without the prior written consent of the Indemnitee unless such settlement
would, in addition to the payment of money, materially affect the ongoing
business or employment of the Indemnitee.
The Indemnitee shall have the right to employ its own counsel, but the
fees and expenses of that counsel shall be the responsibility of the Indemnitee
unless (i) the employment of that counsel shall have been authorized in writing
by the Indemnitor in connection with the defense of the action or claim; (ii)
the Indemnitor shall not have employed counsel to have charge of the defense of
such action or claim; or (iii) such Indemnitee shall have reasonably concluded
that there may be defenses available to it which are different from or
additional to those available to the Indemnitor (in which case the Indemnitor
shall not have the right to direct any different defense of the action or claim
on behalf of the Indemnitee). The Indemnitee shall, in any event, be kept fully
informed of the defense of any such action or claim. Except as expressly
provided above, in the event that the Indemnitor shall not previously have
assumed the defense of an action or claim, at such time as the Indemnitor does
assume the defense of the action or claim, the Indemnitor shall not thereafter
be liable to any Indemnitee for legal or other expenses subsequently incurred by
the Indemnitee in investigating, preparing or defending against such action or
claim.
Anything in this Section 9.18 to the contrary notwithstanding, the
Indemnitor shall not be liable for any settlement of any claim or action
effected without its written consent; provided, however, that if after due
notice the Indemnitor refuses to defend a claim or action, the Indemnitee shall
have the right to defend and/or settle such action, and the Indemnitee shall not
be precluded from making a claim against the Indemnitor for reasonable expenses
and liabilities resulting from such defense and/or settlement in accordance with
this Section 9.18.
Notwithstanding the foregoing provisions of this Section 9.18, there may
be particular actions or claims which reasonably could result in both Parties
being liable to the other under the indemnification provisions of this
Agreement. In such events, the Parties shall endeavor, acting reasonably and in
good faith, to agree upon a manner of conducting the defense and settlement of
the action or claim with a view to minimizing the legal expenses and associated
costs that might otherwise be incurred by the Parties, such as, by way of
illustration only, agreeing to use the same legal counsel.
The indemnification provisions of this Section 9.18 shall not inure to
the benefit of any third party. By way of illustration only, an insurer who
would otherwise be obligated to pay any claim shall not be relieved of the
responsibility with respect thereto, or, solely by virtue of the indemnification
provisions, hereof, have any subrogation rights with respect thereto, it being
expressly understood and agreed that no insurer or any other third party shall
be entitled to a "windfall" (i.e., a benefit they would not be entitled to
receive in the absence of the indemnification provisions) by virtue of these
indemnification provisions.
9.19 NOTICES
Any notice, demand, claim, or other communication under this Agreement
shall be in writing and shall given in accordance with the provisions for giving
notice under the Separation Agreement.
9.20 INTERPRETATION
Words in the singular shall be held to include the plural and vice versa
and words of one gender shall be held to include the other genders as the
context requires. The terms "hereof," "herein," and "herewith" and words of
similar import shall, unless otherwise stated, be construed to refer to this
Agreement as a whole (including all Exhibits hereto) and not to any particular
provision of this Agreement. The word "including" and words of similar import
when used in this Agreement shall mean "including, without limitation," unless
the context otherwise requires or unless otherwise specified. The word "or"
shall not be exclusive.
9.21 GOVERNING LAW/EXECUTION
This Agreement shall be governed by and construed in accordance with the
laws of the State of North Carolina, may not be assigned by either Party without
the written consent of the other, and shall bind and inure to the benefit of the
Parties hereto and their respective successors and permitted assignees. This
Agreement may not be amended or supplemented except by an agreement in writing
signed by PepsiCo and TRICON. This Agreement may be executed in counterparts,
each of which shall be deemed an original and all of which together shall
constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have caused this Employee Programs
Agreement to be duly executed as of the day and year first above written.
PepsiCo, Inc.
By: -----------------------------
Name:
Title:
TRICON, Inc.
By: -----------------------------
Name:
Title:
APPENDIX A
PEPSICO EXECUTIVE PROGRAMS
PepsiCo, Inc. Executive Income Deferral Program
PepsiCo, Inc. Performance Share Unit Deferral Program
PepsiCo, Inc. 1994 Executive Incentive Compensation Plan
PepsiCo, Inc. Option Gains Deferral Program
Middle Management Incentive Compensation Plan
PepsiCo Inc. Executive Incentive Plan
PepsiCo, Inc. 1987 Long-Term Incentive Plan
PepsiCo, Inc. 1995 Stock Option Incentive Plan
PepsiCo, Inc. 1994 Long-Term Incentive Plan
Financial Planning (including tax planning and return preparation)
Country Club Program
Split-Dollar Life Insurance
Executive Automobile Program
Executive Loan Program
Individual Agreements (including employment, separation and consulting
agreements, special bonus arrangements, leave of absence agreements and
commitments made in the context of any merger, acquisition or similar activity)
Restaurant Deferred Compensation Plan
APPENDIX B
HEALTH AND WELFARE PLANS
Part One: PepsiCo Restaurant Health and Welfare Plans
Health Plan:
Restaurant Employees Health Care Program (which includes medical,
post-retirement medical, dental, prescription drug, mental
health/substance abuse, various HMOs and OSCs, vision/hearing,
LensCrafters vision, health care reimbursement, and employee assistance
benefits).
Group Insurance Plan:
Restaurant Employees Group Insurance Program (which includes basic and
optional life, accidental death and dismemberment, and business travel
accident insurance benefits).
Disability Plans:
PepsiCo Long Term Disability Plan
PepsiCo Salary Continuation Plan (short-term disability plan)
Salary Continuation Plan for Employees Working in States other than
California
Combination Plan (Health and Cafeteria):
Taco Xxxx Pre-Tax Elective Benefits Plan
Severance Plans:
Pizza Hut Severance Plan
KFC Severance Plan
Taco Xxxx Xxxxxxxxx Plan
Miscellaneous Plans (ERISA):
PepsiCo Group Legal Services Plan
PepsiCo Vacation Plan for Hourly Crew Employees
Cafeteria Plans (non-ERISA):
Pizza Hut Benefits Plus
Pizza Hut Pre-Tax Crew Benefits Plan
KFC Benefits Plus
PepsiCo One + Plus (KFC hourly plan)
Taco Xxxx Benefits Plus
Miscellaneous Plans (non-ERISA):
PepsiCo Dependent Care Reimbursement Plan
PepsiCo Educational Assistance Program
Part Two: TRICON Health and Welfare Plans
Health Plan:
TRICON Employees Health Care Program (which includes medical,
post-retirement medical, dental, prescription drug, mental
health/substance abuse, various HMOs and OSCs, vision/hearing,
LensCrafters vision, health care reimbursement, and employee assistance
benefits).
Group Insurance Plan:
TRICON Employees Group Insurance Program (which includes basic and
optional life, accidental death and dismemberment, and employee
assistance benefits).
Disability Plans:
TRICON Long Term Disability Plan
TRICON Salary Continuation Plan (Short-Term disability plan)
TRICON Salary Continuation Plan for Employees Working in States other
than California
Combination Plan (Health and Cafeteria):
Taco Xxxx Pre-Tax Elective Benefits Plan
Severance Plans:
Pizza Hut Severance Plan
KFC Severance Plan
Taco Xxxx Xxxxxxxxx Plan
Miscellaneous Plans (ERISA):
TRICON Group Legal Services Plan
TRICON Vacation Plan for Hourly Crew Employees
Cafeteria Plan (non-ERISA):
Pizza Hut Benefits Plus
Pizza Hut Pre-Tax Crew Benefits Plan
KFC Benefits Plus
KFC One + Plus
Taco Xxxx Benefits Plan
Miscellaneous Plans (non-ERISA):
TRICON Dependent Care Reimbursement Plan
TRICON Educational Assistance Program
APPENDIX C
FOREIGN PLANS
This Appendix C describes the principles under which Foreign Plans shall
be treated. For purposes of this Appendix, outside the U.S. means outside the 50
United States, its territories and possessions, and the District of Columbia,
and employed outside the U.S. means compensated under a payroll which is
administered outside the U.S..
C.1 Plans Covering only Employees of PepsiCo or TRICON
Effective as of the Close of the Distribution Date or such later date as
may be required by applicable law, union, or works council agreement, any
Foreign Plan that covers only individuals employed outside the U.S. by the
PepsiCo Group shall be the sole responsibility of the PepsiCo Group and no
member of the TRICON Group shall have any Liability with respect to such a Plan;
and any Foreign Plan that covers only individuals employed outside the U.S. by
the TRICON Group shall be the sole responsibility of the TRICON Group and no
member of the PepsiCo Group shall have any Liability with respect to such a
Plan.
C.2 Plans Covering Employees of Both PepsiCo and TRICON
(a)....Termination of Participation
Effective as of the Close of the Distribution Date, if legally
permitted, or as soon as possible thereafter, TRICON and each other applicable
member of the TRICON Group shall cease to be a Participating Company in each
Foreign Plan maintained by the PepsiCo Group and PepsiCo and each other
applicable member of the PepsiCo Group shall cease to be a Participating Company
in each Foreign Plan maintained by the TRICON Group.
(b)....Mirror Plans
...............(1) Effective Immediately after the Distribution Date, TRICON
shall adopt, or cause to be adopted, Foreign Plans for the benefit of employees
of the TRICON Group employed outside the United States who are eligible to
participate in PepsiCo Foreign Plans and shall cause such TRICON Foreign Plans
to be substantially identical in all Material Features to the corresponding
PepsiCo Foreign Plans as in effect on the Distribution Date; provided, however,
that TRICON may satisfy this requirement by extending coverage to such
individuals under a Foreign Plan of the TRICON Group which was in effect before
the Distribution Date.
...............(2) Effective Immediately after the Distribution Date, PepsiCo
shall adopt, or cause to be adopted, Plans for the benefit of employees of the
PepsiCo Group employed outside the United States who are eligible to participate
in Plans and shall cause such Plans to be substantially identical in all
Material Features to the corresponding TRICON Foreign Plans as in effect on the
Distribution Date; provided, however, that PepsiCo may satisfy this requirement
by extending or continuing coverage to such individuals under a PepsiCo Foreign
Plan of the PepsiCo Group which was in effect before the Distribution Date.
...............(3) The continuation by PepsiCo or TRICON of separate employment
terms and conditions for employees previously covered by the other entity's
Plans shall not continue beyond the time legally required.
(c)....Transfer of Assets
As of the Close of the Distribution Date, PepsiCo nad TRICON will use
their reasonable best efforts to ensure that, to the extent legally permitted:
(i) Liabilities of the Foreign Plans of PepsiCo to or relating to Transferred
Individuals shall be assumed by the appropriate Foreign Plans of TRICON; and
(ii) a portion of any assets of the Foreign Plans of PepsiCo shall be
transferred to the appropriate Foreign Plans of TRICON, and vice versa.
C.3 Severance Issues
If under applicable law, any Transferred Individual employed outside the
U.S. is deemed to have incurred a termination of employment as a result of the
Distribution or any other transaction contemplated by the Separation Agreement
or this Agreement, which entitles such individual to receive any payment or
benefit under any Foreign Plan, governmental plan or arrangement or pursuant to
any law or regulation, including severance benefits, notwithstanding such
individual's continued employment by the TRICON Group, then TRICON shall be
liable for any such payment or benefit and, notwithstanding any other provision
hereof, to the extent legally permitted, appropriate adjustments shall be made
to the treatment of such individual during such continued employment, including
not giving such individual credit for prior service and/or treating such
individual as having been newly hired immediately after such deemed termination,
for purposes of all applicable Foreign Plans. Liability with respect to such
payments shall be the responsibility of TRICON.
C.4 Legally Permitted
For purposes of this Appendix C, "legally permitted" means permitted
under the laws of the country, the labor union, works council, or collective
agreement without adverse consequences to PepsiCo, TRICON or Transferrred
Individuals, as determined by PepsiCo, in its sole discretion, including
mandated waiting periods before which working conditions (including benefits)
cannot be changed, and upon receiving required agreement from individual
employees and/or Plan trustees, foundation boards and members, and any other
organizations having a recognized right to determine or affect benefits and/or
funding of the Plan.
C.5 Multinational Pooling
PepsiCo and TRICON shall keep their existing multinational pooling
arrangements intact through December 31, 1997. If there is any dividend payable
from the consolidated pooling arrangements with respect to the 1997 pool
accounting year, that dividend will be allocated between PepsiCo and TRICON
proportionately, based on the contribution to the overall surplus of the pooling
arrangements by the PepsiCo Group and the TRICON Group, respectively.
Alternatively, any net deficits incurred under any one (or all) consolidated
pooling arrangement(s) will be apportioned back to the entity which incurred the
deficit proportionately based on each entities' contribution to the net deficit.
Any potential additions (local insurance contracts) to the consolidated
pooling arrangement during the remainder of the 1997 international accounting
period will be mutually agreed upon between PepsiCo and TRICON.
