SEC Info - Pepsi Bottling Group Inc - ‘DEF 14A’ for 5/26/04

SEC Info℠

Home

Help

Please Sign In

Pepsi Bottling Group Inc – ‘DEF 14A’ for 5/26/04

On: Monday, 3/29/04, at 4:58pm ET · Effective: 3/29/04 · For: 5/26/04 · Accession #: 950123-4-3924 · File #: 1-14893

  As Of                Filer                Filing    For·On·As Docs:Size              Issuer               Agent

 3/29/04  Pepsi Bottling Group Inc          DEF 14A     5/26/04    1:181K                                   RR Donnelley/FA

Definitive Proxy Solicitation Material — Schedule 14A
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: DEF 14A     The Pepsi Bottling Group, Inc.                        53    262K

Document Table of Contents

Page	(sequential)	\|	(alphabetic)	Top
			Alternative Formats (Word, et al.) Admission to Annual Meeting Agreements and Transactions with PepsiCo and Affiliates Annual Cash Incentives Appendix B Pbg 2004 Long-Term Incentive Plan Approval of the Pbg 2004 Long-Term Incentive Plan Base Salaries Certain Relationships and Related Transactions Committees of the Board of Directors Communications with the Board of Directors Compensation Committee Report on Executive Compensation Compensation Philosophy and Programs Corporate Governance Corporate Governance Principles and Practices Description of the PBG Stock Incentive Plan Director Independence Directors' Compensation Election of Directors Equity Compensation Plan Information Executive Compensation General General Information About the Meeting Impact of Internal Revenue Code Section 162(m) Independent Auditors Long-Term Incentives Meetings of the Board of Directors New Plan Benefits Other Matters Other Stock Programs Ownership of Common Stock by Directors and Executive Officers Ownership of Pbg Common Stock Pension Plan Table Performance-Based Compensation Performance Graph Quorum and Voting Requirements Ratification of Independent Auditors Relationships and Transactions with Management and Others Report of the Audit and Affiliated Transactions Committee Section 16 Beneficial Ownership Reporting Compliance Stock Option Exercises and Holdings Stock Option Grants Stock Ownership and Director Relationships with PepsiCo Stock Ownership of Certain Beneficial Owners Summary Summary of Cash and Certain Other Compensation Summary of the 2004 Ltip Worldwide Code of Conduct Year 2005 Shareholders' Proposals 2003 Compensation of the Chief Executive Officer 2004 Plan Highlights
1	1st Page - Filing Submission
5	General Information About the Meeting
"	Quorum and Voting Requirements
"	Admission to Annual Meeting
6	Election of Directors
7	Corporate Governance
8	Director Independence
"	Corporate Governance Principles and Practices
"	Worldwide Code of Conduct
"	Communications with the Board of Directors
"	Meetings of the Board of Directors
"	Committees of the Board of Directors
11	Directors' Compensation
12	Ownership of Pbg Common Stock
"	Section 16 Beneficial Ownership Reporting Compliance
"	Stock Ownership of Certain Beneficial Owners
13	Ownership of Common Stock by Directors and Executive Officers
14	Executive Compensation
"	Summary of Cash and Certain Other Compensation
15	Stock Option Grants
16	Stock Option Exercises and Holdings
"	Equity Compensation Plan Information
17	Description of the PBG Stock Incentive Plan
"	Pension Plan Table
18	Compensation Committee Report on Executive Compensation
"	Compensation Philosophy and Programs
19	Base Salaries
"	Annual Cash Incentives
"	Long-Term Incentives
"	Other Stock Programs
"	2003 Compensation of the Chief Executive Officer
20	Impact of Internal Revenue Code Section 162(m)
"	Summary
"	Report of the Audit and Affiliated Transactions Committee
22	Independent Auditors
23	Performance Graph
"	Certain Relationships and Related Transactions
"	Stock Ownership and Director Relationships with PepsiCo
24	Agreements and Transactions with PepsiCo and Affiliates
25	Relationships and Transactions with Management and Others
"	Approval of the Pbg 2004 Long-Term Incentive Plan
26	2004 Plan Highlights
"	Summary of the 2004 Ltip
28	Performance-Based Compensation
31	New Plan Benefits
32	Ratification of Independent Auditors
"	Other Matters
"	Year 2005 Shareholders' Proposals
"	General
38	Appendix B Pbg 2004 Long-Term Incentive Plan

DEF 14A 1st Page of 53 TOC ↑Top Previous Next ↓Bottom Just 1st
SCHEDULE 14A
(RULE 14a-101)

INFORMATION REQUIRED IN PROXY STATEMENT

SCHEDULE 14A INFORMATION

PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )

Filed by the Registrant [X]

Filed by a Party other than the Registrant [ ]

Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] CONFIDENTIAL, FOR THE USE OF THE COMMISSION ONLY (AS PERMITTED BY RULE
14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-12

The Pepsi Bottling Group, Inc.
--------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)

--------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)

Payment of Filing Fee (Check the appropriate box):

[X] No fee required.

[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

(1) Title of each class of securities to which transaction applies:

------------------------------------------------------------------------

(2) Aggregate number of securities to which transaction applies:

------------------------------------------------------------------------

(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):

------------------------------------------------------------------------

(4) Proposed maximum aggregate value of transaction:

------------------------------------------------------------------------

(5) Total fee paid:

------------------------------------------------------------------------

[ ] Fee paid previously with preliminary materials.

[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.

(1) Amount Previously Paid:

------------------------------------------------------------------------

(2) Form, Schedule or Registration Statement No.:

------------------------------------------------------------------------

(3) Filing Party:

------------------------------------------------------------------------

(4) Date Filed:

------------------------------------------------------------------------

DEF 14A 2nd Page of 53 TOC 1st Previous Next ↓Bottom Just 2nd
(PBG LOGO)

THE PEPSI BOTTLING GROUP, INC.
One Pepsi Way
Somers, New York 10589

March 29, 2004

Dear Fellow Shareholders:

On behalf of your Board of Directors, we are pleased to invite you to
attend the 2004 Annual Meeting of Shareholders of The Pepsi Bottling Group, Inc.
(the "Company"). This meeting will be held on Wednesday, May 26, 2004, at 10:00
a.m. Eastern Daylight Time, at the Company's headquarters located at One Pepsi
Way in Somers, New York.

At this meeting, you will be asked to elect the Company's Directors,
approve the PBG 2004 Long-Term Incentive Plan and ratify the selection by the
Audit and Affiliated Transactions Committee of independent auditors to audit the
Company's financial statements for 2004. The enclosed notice and proxy statement
contain details about the business to be conducted at the meeting. To assure
that your shares are represented at the meeting, we urge you to mark your
choices on the enclosed proxy card, sign and date the card and return it
promptly in the envelope provided. If you are able to attend the meeting and
wish to vote your shares personally, you may do so at any time before the proxy
is voted at the meeting.

If you plan to attend the meeting, please check the "Annual Meeting" box on
your proxy card so that we may send you an admission card.

Sincerely,

/s/ John T. Cahill
John T. Cahill
Chairman of the Board and
Chief Executive Officer

DEF 14A 3rd Page of 53 TOC 1st Previous Next ↓Bottom Just 3rd
(PBG LOGO)

THE PEPSI BOTTLING GROUP, INC.
One Pepsi Way
Somers, New York 10589
--------------------------------------------------------------------------------

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
--------------------------------------------------------------------------------

TO OUR SHAREHOLDERS:

The Pepsi Bottling Group, Inc. ("PBG" or the "Company") will hold its
Annual Shareholders' Meeting at its headquarters at One Pepsi Way, Somers, New
York, on Wednesday, May 26, 2004, at 10:00 A.M. Eastern Daylight Time to:

- Elect the Company's directors;

- Approve the PBG 2004 Long-Term Incentive Plan;

- Ratify the appointment of KPMG LLP as the Company's independent
auditors; and

- Transact any other business that may properly come before the Annual
Meeting.

If you own shares of PBG Capital Stock as of the close of business on March
29, 2004 (the Record Date), you can vote those shares by proxy or at the Annual
Meeting. If you plan to attend the Annual Meeting, you must request an admission
card by checking the appropriate box on your proxy.

WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, PLEASE COMPLETE THE
ENCLOSED PROXY CARD AND SIGN, DATE AND RETURN IT PROMPTLY IN THE ENCLOSED
POSTAGE-PAID ENVELOPE SO THAT YOUR SHARES WILL BE REPRESENTED. THE HOLDERS OF
RECORD OF OUTSTANDING SHARES OF THE COMPANY'S CAPITAL STOCK ENTITLED TO CAST A
MAJORITY OF ALL VOTES AT THE ANNUAL MEETING MUST BE PRESENT IN PERSON OR
REPRESENTED BY PROXY AT THE ANNUAL MEETING IN ORDER TO HOLD THE MEETING. ANY
SHAREHOLDER RETURNING A PROXY MAY REVOKE IT AT ANYTIME BEFORE THE PROXY IS
EXERCISED BY FILING WITH THE SECRETARY OF THE COMPANY EITHER A NOTICE OF
REVOCATION OR A DULY EXECUTED PROXY BEARING A LATER DATE. THE POWERS OF THE
PROXY HOLDERS WILL BE SUSPENDED IF YOU ATTEND THE MEETING IN PERSON AND SO
REQUEST, ALTHOUGH ATTENDANCE AT THE MEETING WILL NOT BY ITSELF REVOKE A
PREVIOUSLY GRANTED PROXY.

By Order of the Board of Directors,

/s/ Pamela C. McGuire
Pamela C. McGuire
Secretary

March 29, 2004

DEF 14A 4th Page of 53 TOC 1st Previous Next ↓Bottom Just 4th
TABLE OF CONTENTS

[Download Table]

PAGE
----

GENERAL INFORMATION ABOUT THE MEETING....................... 1
Quorum and Voting Requirements.............................. 1
Admission to Annual Meeting................................. 1
PROXY ITEM NO. 1 -- ELECTION OF DIRECTORS................... 2
CORPORATE GOVERNANCE........................................ 3
Director Independence....................................... 4
Corporate Governance Principles and Practices............... 4
Worldwide Code of Conduct................................... 4
Communications with the Board of Directors.................. 4
Meetings of the Board of Directors.......................... 4
Committees of the Board of Directors........................ 4
Directors' Compensation..................................... 7
OWNERSHIP OF PBG COMMON STOCK............................... 8
Section 16 Beneficial Ownership Reporting Compliance........ 8
Stock Ownership of Certain Beneficial Owners................ 8
Ownership of Common Stock by Directors and Executive
Officers.................................................. 9
EXECUTIVE COMPENSATION...................................... 10
Summary of Cash and Certain Other Compensation.............. 10
Stock Option Grants......................................... 11
Stock Option Exercises and Holdings......................... 12
Equity Compensation Plan Information........................ 12
Description of the PBG Stock Incentive Plan................. 13
Pension Plan Table.......................................... 13
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION..... 14
Compensation Philosophy and Programs........................ 14
Base Salaries............................................... 15
Annual Cash Incentives...................................... 15
Long-Term Incentives........................................ 15
Other Stock Programs........................................ 15
2003 Compensation of the Chief Executive Officer............ 15
Impact of Internal Revenue Code Section 162(m).............. 16
Summary..................................................... 16
REPORT OF THE AUDIT AND AFFILIATED TRANSACTIONS COMMITTEE... 16
INDEPENDENT AUDITORS........................................ 18
PERFORMANCE GRAPH........................................... 19
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.............. 19
Stock Ownership and Director Relationships with PepsiCo..... 19
Agreements and Transactions with PepsiCo and Affiliates..... 20
Relationships and Transactions with Management and Others... 21
PROXY ITEM NO. 2 -- APPROVAL OF THE PBG 2004 LONG-TERM
INCENTIVE PLAN............................................ 21
2004 PLAN HIGHLIGHTS........................................ 22
SUMMARY OF THE 2004 LTIP.................................... 22
NEW PLAN BENEFITS........................................... 27
PROXY ITEM NO. 3 -- RATIFICATION OF INDEPENDENT AUDITORS.... 28
OTHER MATTERS............................................... 28
YEAR 2005 SHAREHOLDERS' PROPOSALS........................... 28
GENERAL..................................................... 28
APPENDIX A AUDIT AND AFFILIATED TRANSACTIONS COMMITTEE
CHARTER................................................... A-1
APPENDIX B PBG 2004 LONG-TERM INCENTIVE PLAN................ B-1

DEF 14A 5th Page of 53 TOC 1st Previous Next ↓Bottom Just 5th
THE PEPSI BOTTLING GROUP, INC.
Somers, New York 10589

March 29, 2004

PROXY STATEMENT

FOR ANNUAL MEETING TO BE HELD ON
MAY 26, 2004

The Board of Directors of The Pepsi Bottling Group, Inc., a Delaware
corporation ("PBG" or the "Company"), is soliciting proxies to be voted at the
Annual Meeting of Shareholders (the "Annual Meeting") to be held at 10:00 a.m.
Eastern Daylight Time, on Wednesday, May 26, 2004, at PBG's headquarters, One
Pepsi Way, Somers, New York, for the purposes set forth in the accompanying
Notice of Annual Meeting of Shareholders, and at any adjournment of the Annual
Meeting. We are sending this Proxy Statement in connection with the proxy
solicitation.

PBG will commence mailing this Proxy Statement to shareholders on or about
April 5, 2004.

GENERAL INFORMATION ABOUT THE MEETING

QUORUM AND VOTING REQUIREMENTS. The presence in person or by proxy of
shareholders holding as of the Record Date (defined below) the outstanding
shares of the Company's Capital Stock (defined below), which are entitled to
cast a majority of all votes that could be cast at the Annual Meeting, will
constitute a quorum for the transaction of all business at the Annual Meeting. A
shareholder voting for the election of directors may withhold authority to vote
for all or certain nominees for directors. A shareholder may also abstain from
voting on the other matters presented for shareholder vote. Votes withheld from
the election of any nominee for director and abstentions from any other proposal
will be treated as shares that are present and entitled to vote for purposes of
determining the presence of a quorum, but will not be counted in the number of
votes cast on a matter. If a shareholder holds shares through a broker, bank or
other nominee ("broker"), generally the broker may vote the shares it holds in
accordance with instructions received. If a shareholder does not give
instructions to a broker, the broker can vote the shares it holds with respect
to "discretionary" or routine proposals under the rules of the New York Stock
Exchange ("NYSE"). However, a broker can not vote shares with respect to
non-discretionary proposals for which you have not given instruction. The
proposal to approve the 2004 PBG Long-Term Incentive Plan is considered a
"non-discretionary" proposal and therefore may not be voted upon by your broker
unless you so instruct your broker.

Only shareholders of record at the close of business on March 29, 2004 are
entitled to vote at the Annual Meeting. Any shareholder returning a proxy may
revoke it at anytime before the proxy is exercised by filing with the Secretary
of the Company either a notice of revocation or a duly executed proxy bearing a
later date. The powers of the proxy holders will be suspended if you attend the
meeting in person and so request, although attendance at the meeting will not by
itself revoke a previously granted proxy. Any proxy not revoked will be voted as
specified by the shareholder. If no choice is indicated, a proxy will be voted
in accordance with the Board of Directors' recommendations. Under Delaware law,
no appraisal rights will be available to dissenters in connection with matters
to be acted upon at the Annual Meeting.

PBG Capital Stock includes both Common Stock and Class B Common Stock. At
March 29, 2004 (the "Record Date"), there were 258,011,630 shares of PBG Common
Stock outstanding and 100,000 shares of Class B Common Stock outstanding. Each
share of Common Stock entitles the holder to one vote on each matter presented
at the Annual Meeting. The holders of Class B Common Stock are entitled to 250
votes per share. All outstanding shares of Class B Common Stock are held by
PepsiCo, Inc. ("PepsiCo").

ADMISSION TO ANNUAL MEETING. If you are a registered owner and plan to
attend the Annual Meeting in person, please check the "Annual Meeting" box on
the proxy so that we may send you

DEF 14A 6th Page of 53 TOC 1st Previous Next ↓Bottom Just 6th
an admission card. A beneficial owner who plans to attend the Annual Meeting may
obtain an admission ticket in advance by sending a written request with proof of
ownership (such as a bank or brokerage firm account statement) to the Company's
transfer agent, The Bank of New York, 101 Barclay Street, New York, New York
10286 Attention: Stock Transfer Administration Department. Admittance to the
Annual Meeting will be based upon availability of seating.

Shareholders who do not present admission tickets at the Annual Meeting
will be admitted upon verification of ownership at the admissions desk.

ELECTION OF DIRECTORS
(ITEM 1 ON PROXY CARD)

The Board of Directors proposes the following ten nominees for election as
directors at the Annual Meeting. The directors will hold office from election
until the next Annual Meeting of Shareholders, or until their successors are
elected and qualified.

LINDA G. ALVARADO, 51, was elected to PBG's Board in March 1999. She is the
President and Chief Executive Officer of Alvarado Construction, Inc., a general
contracting firm specializing in commercial, industrial, environmental and heavy
engineering projects, a position she assumed in 1976. Ms. Alvarado is also a
director of Pitney Bowes, Inc., Qwest Communications International, Inc., Lennox
International and 3M Company.

BARRY H. BERACHA, 62, was elected to PBG's Board in March 1999. Prior to
his retirement in June 2003, Mr. Beracha most recently served as an Executive
Vice President of Sara Lee Corporation and Chief Executive Officer of Sara Lee
Bakery Group since August 2001. Previously, Mr. Beracha was the Chairman of the
Board and Chief Executive Officer of The Earthgrains Company from 1993 to August
2001. Earthgrains was formerly part of Anheuser-Busch Companies, where Mr.
Beracha served from 1967 to 1996. From 1979 to 1993, he held the position of
Chairman of the Board of Anheuser-Busch Recycling Corporation. From 1976 to
1995, Mr. Beracha was also Chairman of the Board of Metal Container Corporation.
Mr. Beracha is also a director of McCormick & Co., Inc. and a Trustee of St.
Louis University.

JOHN T. CAHILL, 46, was elected to PBG's Board in January 1999 and became
Chairman of the Board in January 2003. He has been our Chief Executive Officer
since September 2001. Previously, Mr. Cahill served as our President and Chief
Operating Officer. Mr. Cahill served as our Executive Vice President and Chief
Financial Officer prior to becoming our President and Chief Operating Officer in
August 2000. He was Executive Vice President and Chief Financial Officer of the
Pepsi-Cola Company from April 1998 to November 1998. Prior to that, Mr. Cahill
was Senior Vice President and Treasurer of PepsiCo, having been appointed to
that position in April 1997. In 1996, he became Senior Vice President and Chief
Financial Officer of Pepsi-Cola North America. Mr. Cahill joined PepsiCo in 1989
and held several other senior financial positions through 1996.

IRA D. HALL, 59, was elected to the Board at PBG's Board meeting in March
2003. Mr. Hall has been the Chief Executive Officer of Utendahl Capital
Management, L.P. since 2002. From 1999 to 2001, he was Treasurer of Texaco Inc.
and General Manager, Alliance Management for Texaco Inc. from 1998 to 1999. From
1985 to 1998, Mr. Hall held several positions with International Business
Machines. Mr. Hall is also a director of Imagistics International, Inc., The
Reynolds and Reynolds Company and TECO Energy, Inc.

THOMAS H. KEAN, 68, was elected to PBG's Board in March 1999. Mr. Kean has
been the President of Drew University since 1990 and was the Governor of the
State of New Jersey from 1982 to 1990. Mr. Kean is also a director of Amerada
Hess Corporation, Aramark Corporation, Franklin Resources, Inc. and UnitedHealth
Group, Inc. Mr. Kean is also Chairman of The National Commission on Terrorist
Attacks upon the United States.

SUSAN D. KRONICK, 52, was elected to PBG's Board in March 1999. Ms. Kronick
became Vice Chairman of Federated Department Stores in February 2003.
Previously, she had been Group

DEF 14A 7th Page of 53 TOC 1st Previous Next ↓Bottom Just 7th
President of Federated Department Stores since April 2001. From 1997 to 2001,
Ms. Kronick was the Chairman and Chief Executive Officer of Burdines, a division
of Federated Department Stores. From 1993 to 1997, Ms. Kronick served as
President of Federated's Rich's/Lazarus/Goldsmith's division. She spent the
previous 20 years at Bloomingdale's, where her last position was as Senior
Executive Vice President and Director of Stores.

BLYTHE J. MCGARVIE, 47, was elected to the Board at PBG's Board meeting in
March 2002. Ms. McGarvie is President of Leadership for International Finance, a
private consulting firm. From 1999 to December 2002, Ms. McGarvie was Executive
Vice President and Chief Financial Officer of BIC Group. From 1994 to 1999, Ms.
McGarvie served as Senior Vice President and Chief Financial Officer of
Hannaford Bros. Co. Ms. McGarvie is a Certified Public Accountant and has also
held senior financial positions at Sara Lee Corporation, Kraft General Foods,
Inc. and Pizza Hut, Inc. Ms. McGarvie is also a director of Accenture Ltd. and
Travelers Property Casualty Corp.

MARGARET D. MOORE, 56, was elected to PBG's Board in January 2001. Ms.
Moore is Senior Vice President, Human Resources of PepsiCo, a position she
assumed at the end of 1999. From November 1998 to December 1999, she was Senior
Vice President and Treasurer of PBG. Prior to joining PBG, Ms. Moore spent 25
years with PepsiCo in a number of senior financial and human resources
positions.

ROGELIO REBOLLEDO, 59, is a director nominee and was appointed President
and Chief Executive Officer of PBG Mexico in January 2004. From 2000 to 2003,
Mr. Rebolledo was President and Chief Executive Officer of Frito-Lay
International ("FLI"), a subsidiary of PepsiCo, Inc., operating in Latin
America, Asia Pacific, Australia, Europe, Middle East and Africa. From 1997 to
2000, Mr. Rebolledo was the President of the Latin America/Asia Pacific region
for FLI. Mr. Rebolledo joined PepsiCo, Inc. in 1976 and held several senior
positions including serving as President and Chief Executive Officer of the
Latin America Region of PepsiCo Foods International ("PFI") and President of the
Sabritas, Gamesa, Brazil and Spain PFI operations.

CLAY G. SMALL, 54, was elected to PBG's Board in May 2002. Mr. Small is
Vice President and Deputy General Counsel-PepsiCo. From 1997 to February 2004,
Mr. Small was Senior Vice President and General Counsel of Frito-Lay, Inc., a
subsidiary of PepsiCo. Mr. Small joined PepsiCo as an attorney in 1981. He
served as Vice President and Division Counsel of the Pepsi-Cola Company from
1983 to 1987 and Senior Vice President and General Counsel of Pizza Hut, Inc.
from 1987 to 1997.

If any of these nominees for director becomes unavailable, the persons
named in the enclosed proxy intend to vote for any alternate designated by the
present Board. All of the Directors attended the 2003 Annual Meeting of
Shareholders. Barring special circumstances, all Directors are expected to be
present at the 2004 Annual Meeting of Shareholders.

Craig E. Weatherup served on PBG's Board since 1999. Mr. Weatherup also
served as the Chairman of the Board from 1999 to January 2003. Mr. Weatherup
will not be standing for re-election as a Director of PBG at the Annual Meeting.
The Board thanks Mr. Weatherup for his years of dedicated service.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ALL OF THE ABOVE-NAMED
NOMINEES FOR ELECTION AS DIRECTORS.

CORPORATE GOVERNANCE

The Board of Directors of PBG is committed to transparency in financial
reporting and a high level of corporate governance. Over the past year, the
Board has reviewed PBG's governance policies and practices and has implemented
the following changes based on the Sarbanes-Oxley Act of 2002 and new rules and
regulations promulgated by the Securities and Exchange Commission ("SEC") and
the NYSE.

DEF 14A 8th Page of 53 TOC 1st Previous Next ↓Bottom Just 8th
DIRECTOR INDEPENDENCE. The Board has adopted a Director Independence
Policy to determine the independence of the members of the Board in accordance
with the new NYSE corporate governance rules and applicable SEC rules. Each
Director affirmatively determined by the Board to have met the standards set
forth in the PBG Director Independence Policy is referred to herein as an
"Independent Director". The PBG Director Independence Policy is posted on the
PBG website at http://www.pbg.com under Corporate Governance. The Board has
determined that the following Board members are Independent Directors: Linda G.
Alvarado, Barry H. Beracha, Ira D. Hall, Thomas H. Kean, Susan D. Kronick and
Blythe J. McGarvie.

As of March 25, 2004, all members of the Audit and Affiliated Transactions
Committee, Nominating and Corporate Governance Committee and Compensation and
Management Development Committee are Independent Directors.

CORPORATE GOVERNANCE PRINCIPLES AND PRACTICES. PBG adopted a statement of
Corporate Governance Principles and Practices in 1999 which was revised to
comply with the new NYSE corporate governance rules and was adopted by the Board
in March 2004. The revised statement of Corporate Governance Principles and
Practices is posted on the PBG website at http://www.pbg.com under Corporate
Governance.

WORLDWIDE CODE OF CONDUCT. PBG adopted a Worldwide Code of Conduct in 2000
which was revised to comply with the new NYSE corporate governance rules and was
adopted by the Board in March 2003. The Worldwide Code of Conduct applies to all
Directors and employees of PBG, including the Chief Executive Officer, the Chief
Financial Officer and the Controller. The Worldwide Code of Conduct is posted on
the PBG website at http://www.pbg.com under Corporate Governance. PBG intends to
post on its website any material amendments to its Worldwide Code of Conduct and
the description of any waiver from a provision of the Code of Conduct granted by
the Board of Directors to any Director or executive officer of PBG.

COMMUNICATIONS WITH THE BOARD OF DIRECTORS. Shareholders and other
interested parties who wish to communicate directly with any of the PBG
Directors, or the non-management Directors as a group, may do so by writing to
the Board of Directors, The Pepsi Bottling Group, Inc., One Pepsi Way, Somers,
NY 10589. All communications will be received, sorted and summarized by the
General Counsel, as agent for the non-management Directors. Communications
relating to PBG's accounting, internal accounting controls or auditing matters
will be referred to the Chair of the Audit and Affiliated Transactions
Committee. Other communications will be referred to the Presiding Director of
the Board or to such other non-management Director as may be appropriate.
Communications may be submitted anonymously or confidentially.

MEETINGS OF THE BOARD OF DIRECTORS. PBG's Board of Directors held five
regular meetings and one telephonic meeting during fiscal year 2003. Attendance
by incumbent directors at all Board and Committee meetings was approximately
99%.

In 2003, all Board meetings, other than the telephonic Board meeting in
December 2003, included an executive session with only non-management Directors
present. Additionally, beginning in 2004, an executive session will be held
periodically with only Independent Directors present. Executive sessions are
chaired by Thomas H. Kean, the Chair of the Nominating and Corporate Governance
Committee, or by another Director as determined by the Board of Directors.

COMMITTEES OF THE BOARD OF DIRECTORS. The Board of Directors has three
standing Committees: Audit and Affiliated Transactions, Compensation and
Management Development, and Nominating and Corporate Governance.

The Audit and Affiliated Transactions Committee consists of Ira D. Hall,
Susan D. Kronick, Blythe J. McGarvie and Barry H. Beracha, who serves as
Chairperson, each of whom has been determined by the Board of Directors to be an
Independent Director. The Audit and Affiliated Transactions Committee acts under
a written charter that was recently revised and approved by the Board of
Directors to comply with the new NYSE corporate governance rules and applicable
SEC rules and regulations. The charter is attached as Appendix A to this Proxy
Statement and is also posted on the
4

DEF 14A 9th Page of 53 TOC 1st Previous Next ↓Bottom Just 9th
PBG website at http://www.pbg.com under Corporate Governance. The Board of
Directors has determined that each member of the Audit and Affiliated
Transactions Committee is financially literate and that Ms. McGarvie is
qualified to serve as the Audit and Affiliated Transactions Committee's
"financial expert" (as the term is defined by SEC regulations). A brief
description of Ms. McGarvie's work experience is included on page 3. The Board
of Directors has also determined that Mr. Hall's simultaneous service on the
audit committee of three other public companies will not impair his ability to
effectively serve on PBG's Audit and Affiliated Transactions Committee. Members
of the Audit and Affiliated Transactions Committee do not receive any
compensation from the Company other than Directors' compensation.

The Audit and Affiliated Transactions Committee's primary responsibilities
are to: (i) oversee the quality and integrity of the Company's financial
statements; (ii) appoint (subject to shareholder ratification), compensate,
evaluate (including evaluating independence) and, where appropriate, terminate
the independent auditors; (iii) oversee the work of the independent auditors and
ensure that they report directly to the Committee; (iv) pre-approve all audit,
audit-related and non-audit services to be provided by the independent auditors
and approve fees to be paid for such services; (v) review and monitor the
performance of the internal audit department; (vi) review the adequacy of the
Company's internal controls and disclosure controls; (vii) discuss the Company's
risk assessment and risk management policies; (viii) review the Company's
earnings releases and periodic reports filed with the SEC; (ix) provide an open
avenue of communication among the independent auditors, senior management, the
internal audit department and the Board; (x) monitor the Company's compliance
with applicable laws and regulations and with the Worldwide Code of Conduct;
(xi) establish procedures for the Committee to receive, retain and respond to
complaints regarding accounting, internal accounting controls and auditing
matters, as well as for confidential, anonymous submission by employees of
concerns related to questionable accounting or auditing matters; and (xii)
report to shareholders in the proxy statement on those matters required by SEC
rules. The Audit and Affiliated Transactions Committee also reviews transactions
between the Company and PepsiCo, or any entity in which PepsiCo has a 20% or
greater interest, that are outside the ordinary course of business and have a
value of more than $10 million. The Audit and Affiliated Transactions Committee
annually assesses its performance and effectiveness. The Audit and Affiliated
Transactions Committee held four regular meetings and one telephonic meeting
during 2003. At each regular meeting in 2003, the Audit and Affiliated
Transactions Committee met with KPMG LLP, the Company's independent auditors, in
executive session. In addition, the Audit and Affiliated Transactions Committee
met twice with PBG's Director of Internal Audit and four times with PBG's Chief
Financial Officer in 2003. The report of the Audit and Affiliated Transactions
Committee is included on page 16.

The Compensation and Management Development Committee consists of Linda G.
Alvarado, Barry H. Beracha, Ira D. Hall, Thomas H. Kean, Blythe J. McGarvie and
Susan D. Kronick, who serves as Chairperson, each of whom has been determined by
the Board of Directors to be an Independent Director. As a result of the new
NYSE corporate governance rules on independence, Ms. Moore and Mr. Small are no
longer members of the Committee and the Committee is now composed entirely of
Independent Directors. The Compensation and Management Development Committee
acts under a written charter which was recently revised and approved by the
Board of Directors to comply with the new NYSE corporate governance rules. The
charter is posted on the PBG website at http://www.pbg.com under Corporate
Governance. The Compensation and Management Development Committee's primary
responsibilities are to: (i) ensure that the Company's executive compensation
programs are appropriately competitive, support organization objectives and
shareholder interests and provide linkage between compensation and both
individual and company performance; (ii) approve and, where appropriate,
recommend to the shareholders for approval annual and long-term executive
compensation plans and any changes in such plans; (iii) in cooperation with the
Nominating and Corporate Governance Committee advise the Board in its evaluation
of the performance of the Chairman and CEO and approve the base salary of the
Chairman and CEO; (iv) approve annual performance goals and objectives and
maximum annual incentive awards for the Chairman and CEO and other Covered
Executives (as defined below);
5

DEF 14A 10th Page of 53 TOC 1st Previous Next ↓Bottom Just 10th
(v) certify year-end performance and determine annual incentive awards for the
Chairman and CEO and Covered Executives; (vi) evaluate the performance of the
other executive officers and approve their base salaries; (vii) approve the
aggregate amount for annual incentive awards; (viii) review performance targets
and goals for annual incentive awards to other executives and approve the
aggregate award pool for such executives; (ix) approve long-term compensation
awards; (x) establish Chairman and CEO and key executive succession planning and
review management development plans for key executives; and (xi) report to
shareholders in the proxy statement on those matters required by the SEC rules.
The Compensation and Management Development Committee annually assesses its
performance and effectiveness. The Compensation and Management Development
Committee held four regular meetings and one telephonic meeting during fiscal
2003. The report of the Compensation and Management Development Committee is
included on page 14.

In addition, for purposes of complying with Section 162(m) of the Internal
Revenue Code of 1986 (the "Code") and Rule 16b-3 of the Securities Exchange Act
of 1934, the Board of Directors established a Compensation Subcommittee,
consisting in 2003 of Linda G. Alvarado, Barry H. Beracha, Ira D. Hall, Thomas
H. Kean, Blythe J. McGarvie and Susan D. Kronick, all of whom are "outside" and
"non-employee" directors. The Compensation Subcommittee's responsibilities
included: (i) administering PBG's annual and long-term executive compensation
plans with respect to the Company's executive officers, including the Chairman
and CEO, and other executives deemed covered by Section 162(m) of the Code (the
"Covered Executives"); (ii) approving performance goals, maximum awards and
payout schedules for annual incentive awards for the Covered Executives; (iii)
certifying performance and approving annual incentive awards for the Covered
Executives; and (iv) approving awards of long-term incentives to the Covered
Executives. The Compensation Subcommittee held two regular meetings during
fiscal 2003. Since the Compensation Committee is now composed entirely of
Independent Directors, who also qualify as "outside" and "non-employee"
directors, the Compensation Subcommittee was dissolved in March 2004.

The Nominating and Corporate Governance Committee consists of Linda G.
Alvarado and Thomas H. Kean, who serves as Chairperson, each of whom has been
determined by the Board of Directors to be an Independent Director. Mr.
Weatherup, who served on the Nominating and Corporate Governance Committee
during 2003, will not be standing for re-election as a Director of PBG at the
Annual Meeting. The Nominating and Corporate Governance Committee acts under a
written charter which was recently revised and approved by the Board of
Directors to comply with new NYSE corporate governance rules. The charter is
posted on the PBG website at http://www.pbg.com under Corporate Governance. The
Nominating and Corporate Governance Committee's primary responsibilities are to:
(i) identify and recommend to the Board for election at the annual meeting of
shareholders qualified candidates for Board membership; (ii) periodically review
the appropriate skills and characteristics required of directors and develop
criteria for selecting new directors; (iii) in cooperation with the Compensation
and Management Development Committee, advise the Board in its periodic
evaluation of the performance of the Chairman and CEO; (iv) periodically review
and report to the Board regarding director compensation and benefits; (v)
establish policies and procedures for receipt and consideration of director
nominations by shareholders; (vi) review and recommend to the Board the
appointment of Directors to Board Committees and the selection of the
chairperson of each of the Committees; (vii) periodically review the Company's
Corporate Governance Principles and Practices and recommend to the Board any
modifications that the Committee deems appropriate; (viii) periodically review
the Company's Director Independence Policy and recommend to the Board any
modifications that the Committee deems appropriate; and (ix) report to
shareholders in the proxy statement on those matters required by SEC rules. The
Nominating and Corporate Governance Committee annually assesses the performance
and effectiveness of the Board and its Committees. Based on the assessment, the
Committee makes recommendations to the Board concerning composition, size,
structure and activities of the Board and its Committees. The Nominating and
Corporate Governance Committee held three regular meetings and one telephonic
meeting during fiscal 2003.

DEF 14A 11th Page of 53 TOC 1st Previous Next ↓Bottom Just 11th
In carrying out the Nominating and Corporate Governance Committee's
responsibility to identify and recommend to the Board qualified candidates for
election as Director at the Annual Meeting of Shareholders, the Committee
considers candidates suggested by its members, other Directors, senior
management and shareholders, as necessary in anticipation of upcoming Director
elections and other potential or expected Board vacancies. The Committee is also
authorized, at the expense of the Company, to retain search firms to identify
and assess, potential candidates. The Committee provides guidance to search
firms it retains about the particular qualifications the Board is seeking. In
2003, the Committee used a professional search firm to identify and evaluate
potential director candidates. The Chairperson of the Committee interviewed Mr.
Rogelio Rebolledo and the Committee then recommended Mr. Rebolledo to the Board
for election as a Director.

All director candidates, including those recommended by shareholders, are
evaluated on the same basis. Candidates for director must possess the level of
education, experience, sophistication and expertise required to perform the
duties of a member of a board of directors of a public company of PBG's size and
scope. At a minimum, the Committee will consider (i) whether the recommended
candidate is subject to a disqualifying factor as described in the PBG Director
Independence Policy; (ii) the number of other boards and committees on which the
individual serves; (iii) the extent of the individual's experience in business,
trade, finance or management; (iv) the extent of the individual's knowledge of
regional, national and international business affairs; (v) whether the
individual possesses the overall judgment to advise and direct the Company in
meeting its responsibilities to shareholders, customers, employees and the
public; (vi) whether the individual provides the appropriate experience and
expertise in light of the prevailing business conditions and the composition of
the Board of Directors; and (vii) any other factors, including those set forth
in the Corporate Governance Principles and Practices, relating to the ability
and willingness of the individual to serve.

Shareholders wishing to recommend a director candidate to the Chairperson
of the Nominating and Corporate Governance Committee for its consideration
should write to the Secretary, The Pepsi Bottling Group, Inc., One Pepsi Way,
Somers, NY 10589 and must be received no later than December 2, 2004 to be
included in the Proxy Statement for the 2005 Annual Meeting of Shareholders. All
recommendations meeting the minimum requirements set forth in section 3 of the
Corporate Governance Principles and Practices will be referred to the
Chairperson of the Nominating and Corporate Governance Committee. Such letters
of recommendation must include the address and number of shares owned by the
nominating shareholder, the recommended individual's name and address, and a
description of the recommended individual's background and qualifications. A
signed statement from the recommended individual must accompany the letter of
recommendation indicating that he or she consents to being considered as a
candidate and that, if nominated by the Board of Directors and elected by the
shareholders, he or she will serve as a Director of PBG.

DIRECTORS' COMPENSATION. Management Directors do not receive additional
compensation for serving on the Board of Directors. Non-management Directors
receive a one-time grant of $25,000 in restricted shares of PBG Common Stock
upon joining the Board of Directors. This grant may be converted to phantom
stock and deferred until the Director leaves the Board. Non-management Directors
are eligible to receive an annual grant of options to purchase PBG Common Stock
in the face amount of $300,000 and receive an annual cash retainer of $50,000
which is made in quarterly cash payments. Options are granted at fair market
value and may be exercised for up to ten years while a Director is serving on
the Board (the full ten-year term also applies in the case of death or
disability). Non-management Directors have a one-time opportunity to convert
options into PBG Common Stock at a ratio of three options for each share.
Converted shares may in turn be deferred as phantom stock for a minimum period
of two years. In addition, Committee chairs receive an additional annual $10,000
which is also made in quarterly cash payments. Non-management Directors do not
receive retirement, health or life insurance benefits. They are, however,
eligible to participate in PBG's charitable gift match program whereby certain
charitable donations of up to an aggregate of $10,000 (or if the Director serves
on the board of the recipient charitable institution up to $20,000) are matched
annually.

DEF 14A 12th Page of 53 TOC 1st Previous Next ↓Bottom Just 12th
OWNERSHIP OF PBG COMMON STOCK

SECTION 16 BENEFICIAL OWNERSHIP REPORTING COMPLIANCE. Section 16(a) of the
Securities Exchange Act of 1934 requires the Company's Directors, certain
officers and persons who own more than ten percent of the outstanding Common
Stock of the Company to file with the SEC reports of ownership and changes in
ownership of the Capital Stock of the Company held by such persons. Officers,
Directors and greater-than-ten percent shareholders are also required to furnish
the Company with copies of all forms they file under this regulation. To the
Company's knowledge, based solely on a review of the copies of such reports
furnished to the Company, all Section 16(a) filing requirements applicable to
all of its reporting persons were complied with during fiscal 2003 except, due
to administrative error, as follows: (i) Craig E. Weatherup, a director of the
Company, made a late filing on Form 4 in January 2003 with respect to an award
made to Mr. Weatherup of 980 shares of restricted stock of the Company upon
becoming a non-management Director, and (ii) Yiannis Petrides, President of PBG
Europe, made a late filing on Form 5 in February 2004 with respect to 2,010
stock options awarded on June 1, 2000; 1,282 stock options awarded on April 2,
2001; 935 stock options awarded on April 1, 2002 and 1,592 stock options awarded
on April 1, 2003. To the Company's knowledge, all transactions have now been
reported.

STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS. Based on Schedule 13G
filings, shareholders holding more than 5% of PBG Capital Stock as of February
20, 2004 are:

[Enlarge/Download Table]

NAME AND ADDRESS NUMBER OF SHARES PERCENT
OF BENEFICIAL OWNER TITLE OF CLASS BENEFICIALLY OWNED OF CLASS
------------------- -------------------- ------------------ --------

(1) PepsiCo, Inc.(1).............. Class B Common Stock 100,000 100%
700 Anderson Hill Road Common Stock 105,911,358 40.8%(4)
Purchase, NY 10577
(2) Barclays Global Investors, NA
and Affiliates(2)............. Common Stock 27,651,337 10.6%(4)
45 Fremont Street, 17th Floor
San Francisco, CA 94105
(3) State Street Bank and Trust
Company(3).................... Common Stock 13,597,998 5.2%(4)
225 Franklin Street
Boston, MA 02110

---------------

(1) PepsiCo reported its beneficial ownership on a Schedule 13G filed with the
SEC on February 11, 2002. The filing indicates that PepsiCo has sole voting
power and sole dispositive power for 106,011,358 shares (for combined Class
B Common Stock and Common Stock).

(2) Barclays Global Investors, NA and Affiliates ("BGI") reported its beneficial
ownership on a Schedule 13G filed with the SEC on February 13, 2004. The
filing indicates that BGI has sole voting power and sole dispositive power
for 24,876,448 shares.

(3) State Street Bank and Trust Company ("SSB") reported its beneficial
ownership on a Schedule 13G filed with the SEC on February 6, 2004. The
filing indicates that SSB has sole voting power for 5,630,865 shares, shared
voting power for 7,524,768 shares, sole dispositive power for 13,590,058
shares and shared dispositive power for 7,940 shares.

(4) Percentages are calculated based upon the number of outstanding shares of
PBG Common Stock as of February 20, 2004.

DEF 14A 13th Page of 53 TOC 1st Previous Next ↓Bottom Just 13th
OWNERSHIP OF COMMON STOCK BY DIRECTORS AND EXECUTIVE OFFICERS. The
following table shows, as of February 20, 2004, the shares of PBG Common Stock
beneficially owned by (i) each Director (including the nominee), (ii) each
executive officer of the Company named in the Summary Compensation Table, and
(iii) all Directors and executive officers as a group. Except as otherwise
noted, each of the following persons has sole voting and investment power with
respect to the shares of Common Stock beneficially owned by him or her. PBG's
2003 internal stock ownership guidelines called for key senior executives to own
PBG Common Stock (or deferral plan units) with a value ranging from 1 to 5 times
their base salary (depending on position) within five years of the date of their
election or appointment.

[Enlarge/Download Table]

NAME OF INDIVIDUAL OR NUMBER OF SHARES DEFERRAL PERCENT
NUMBER OF PERSONS IN GROUP BENEFICIALLY OWNED PLANS(1) TOTAL OF CLASS
-------------------------- ------------------ -------- --------- --------

Linda G. Alvarado....................... 71,538 6,998 78,536 (2)
Barry H. Beracha........................ 90,186 0 90,186 (2)
Ira D. Hall............................. 16,438 1,370 17,808 (2)
Thomas H. Kean.......................... 73,538 6,998 80,536 (2)
Susan D. Kronick........................ 74,769 2,174 76,943 (2)
Blythe J. McGarvie...................... 31,122 980 32,102 (2)
Margaret D. Moore....................... 307,922(3)(4) 21,510 329,432 (2)
Rogelio Rebolledo(5).................... 0 0 0 (2)
Clay G. Small........................... 8,341(4) 0 8,341 (2)
Craig E. Weatherup...................... 3,628,528 0 3,628,528 1.4%
John T. Cahill.......................... 1,567,526(6) 212,294 1,779,820 (2)
Alfred H. Drewes........................ 224,805(6) 9,636 234,441 (2)
Eric J. Foss............................ 976,435(6) 26,128 1,002,563 (2)
Pamela C. McGuire....................... 814,531(6) 0 814,531 (2)
Yiannis Petrides........................ 388,097(6) 0 388,097 (2)
Jaime Costa Lavin(7).................... 0 0 0 (2)
All directors and all executive officers
as a group (17 persons)............... 8,273,776(6) 288,088 8,561,864 3.3%

---------------

(1) Units denominated as PBG phantom stock under deferred compensation
arrangements.

(2) Ownership percentage is less than 1% of the total amount of PBG Common Stock
outstanding as of February 20, 2004.

(3) Includes 2,000 shares of PBG Common Stock held indirectly through children.

(4) Ms. Moore and Mr. Small each disclaims any beneficial ownership that she or
he may have in PepsiCo's shares of PBG Capital Stock.

(5) Mr. Rebolledo is a Director nominee.

(6) Includes shares of PBG Common Stock that the Company's executive officers
have the right to acquire within 60 days of February 20, 2004 through the
exercise of stock options as follows: John T. Cahill, 339,748 shares; Alfred
H. Drewes, 128,071 shares; Eric J. Foss, 172,287 shares; Pamela C. McGuire,
116,012 shares; Yiannis Petrides, 113,442 shares; and all directors and
executive officers as a group, 869,560 shares.

(7) Mr. Lavin's employment with the Company terminated in December 2003.

DEF 14A 14th Page of 53 TOC 1st Previous Next ↓Bottom Just 14th
EXECUTIVE COMPENSATION

SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION. The following table
provides information on compensation earned and stock options awarded for the
years indicated by PBG to the Chief Executive Officer and five other most highly
compensated executive officers as of the end of the Company's 2003 fiscal year
in accordance with the rules of the SEC. These six individuals are referred to
in this Proxy Statement as the "named executive officers".

SUMMARY COMPENSATION TABLE

[Enlarge/Download Table]

LONG-TERM COMPENSATION
-------------------------------------
AWARDS PAYOUTS
-------------------------- --------
ANNUAL COMPENSATION SECURITIES
------------------------------------------ RESTRICTED UNDER-
OTHER ANNUAL STOCK LYING LTIP ALL OTHER
COMPENSATION AWARDS OPTIONS PAYOUTS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) ($) ($) (#) ($) ($)
--------------------------- ---- --------- -------- ------------ ---------- ---------- -------- ------------

John T. Cahill............ 2003 $817,692 $515,630 $ 26,409(1) $1,500,000(2) 526,596 $ 0 $ 8,141(3)
Chairman and Chief 2002 721,154 681,500 32,227 0 287,129 0 6,843
Executive Officer 2001 636,712 870,000 12,566 0 739,300 442,200 6,821

Alfred H. Drewes.......... 2003 372,231 140,630 14,475(4) 1,500,000(2) 127,660 241,050(5) 8,000(6)
Senior Vice President 2002 355,923 217,550 13,060 0 113,109 218,962 6,338
and Chief Financial 2001 175,000 268,090 7,522 0 135,758 0 0
Officer

Eric J. Foss.............. 2003 515,000 262,510 14,356(4) 1,500,000(2) 223,404 0 6,923(6)
President, North 2002 458,462 366,560 34,902 0 145,743 0 6,338
America 2001 416,923 460,360 154,565 0 385,364 0 6,800

Pamela C. McGuire......... 2003 345,385 131,250 18,465(4) 1,500,000(2) 119,149 0 7,923(6)
Senior Vice President, 2002 318,769 210,000 17,660 0 101,386 0 6,031
General Counsel and 2001 310,154 271,130 11,074 0 150,362 0 6,380
Secretary

Yiannis Petrides(7)....... 2003 468,415 226,353 213,339(8) 1,500,000(2) 137,762 0 0
President, Europe 2002 414,447 202,464 201,832 0 90,090 0 0
2001 343,284 249,433 120,185 0 219,630 187,110 0

Jaime Costa Lavin(9)...... 2003 495,700 395,865 0 300,000(10) 194,043(10) 0 621,911(11)
CEO, PBG Mexico

---------------
(1) This amount reflects (i) benefits from the use of corporate transportation
and (ii) payment of the executive's tax liability with respect to certain
Company provided perquisites.

(2) This amount reflects the dollar value of the maximum number of restricted
shares of PBG Common Stock available to the executive under a Special
Leadership Award authorized by the Compensation Subcommittee in January 2003
and granted to the executive on March 1, 2003 (the "Grant Date"). The actual
number of shares retained by the executive will range from 0 to a maximum of
63,830 depending upon the financial performance of PBG for the 3-year period
commencing on the Grant Date and the executive's continued active employment
with PBG through December 31, 2007. If the performance condition is met,
fifty percent of the award will vest on December 31, 2005 and the remaining
fifty percent will vest on December 31, 2007. Dividends that are declared
and paid by the Company on the shares of restricted stock shall be deferred
until the shares have vested. Upon forfeiture of any such shares, the
deferred dividends shall also be forfeited. The dollar value of the award
was calculated by multiplying the average of the high and low trading price,
rounded up to the nearest quarter, of PBG's Common Stock on the Grant Date,
by the maximum number of shares awarded.

DEF 14A 15th Page of 53 TOC 1st Previous Next ↓Bottom Just 15th
(3) This amount reflects (i) a standard Company matching contribution in PBG
Common Stock to the executive's 401(k) account and (ii) a premium amount of
$141.00 for Mr. Cahill, imputed as income in connection with his waiver of
rights to future compensation payments under the Company's executive income
deferral plan and the arrangement entered into by the Company whereby such
waived amounts were used for the purpose of purchasing insurance for his
benefit and that of his designated beneficiary.

(4) This amount reflects payment of the executive's tax liability with respect
to certain Company provided perquisites.

(5) This amount reflects the cash payout of a variable award granted in 2000
based, in part, upon PBG performance targets pre-established by the
Compensation Subcommittee.

(6) This amount reflects a standard Company matching contribution in PBG Common
Stock to the executive's 401(k) account.

(7) Mr. Petrides' compensation is paid in Euros. The dollar values listed are
based on the average exchange rate in 2003 of .884 Euros to one U.S.
dollar.

(8) This amount reflects (i) payment of executive's tax liability with respect
to certain Company provided perquisites and (ii) reimbursement of certain
expatriate living expenses, including $154,245 in housing lease costs.

(9) Mr. Lavin's employment with the Company terminated in December 2003. Mr.
Lavin's compensation was paid in Pesos. The dollar values listed are based
on the average exchange rate in 2003 of 10.082 Pesos to one U.S. dollar.

(10) This award was forfeited upon Mr. Lavin's termination of employment with
the Company in December 2003.

(11) This amount reflects payment to Mr. Lavin in connection with his
termination of employment, a portion of which was paid in exchange for an
agreement not to participate in any competitive business for a certain
period of time. In addition, a substantial portion of the aggregate amount
was paid pursuant to legal requirements under Mexican law.

STOCK OPTION GRANTS. The following table presents information with respect
to stock option grants that were made during the fiscal year ended December 27,
2003 to each of the named executive officers. All options granted by the Company
in 2003 were non-qualified stock options, and no stock appreciation rights were
granted in 2003.

OPTION GRANTS IN LAST FISCAL YEAR

[Enlarge/Download Table]

INDIVIDUAL GRANTS
-----------------------
NUMBER OF % OF TOTAL POTENTIAL REALIZABLE VALUE
SECURITIES OPTIONS AT ASSUMED ANNUAL RATES
UNDER- GRANTED TO EXERCISE OF STOCK PRICE APPRECIATION
LYING EMPLOYEES OR BASE FOR OPTION TERM
OPTIONS IN FISCAL PRICE EXPIRATION ----------------------------
NAME GRANTED(#) YEAR(1) ($/SH) DATE 5%($)(2) 10%($)(2)
---- ---------- ---------- -------- ---------- ------------ -------------

John T. Cahill........... 526,596(3) 6.6 % $23.50 3/29/13 $7,782,575 $19,722,573
Alfred H. Drewes......... 127,660(3) 1.6 23.50 3/29/13 1,886,690 4,781,243
Eric J. Foss............. 223,404(3) 2.8 23.50 3/29/13 3,301,693 8,367,138
Pamela C. McGuire........ 119,149(3) 1.5 23.50 3/29/13 1,760,906 4,462,481
Yiannis Petrides......... 136,170(3) 1.7 23.50 3/29/13 2,012,460 5,099,968
1,592(4) .01 18.25 3/31/13 18,272 46,305
Jaime Costa Lavin........ 194,043(5) 2.4 23.50 3/29/13 2,867,766 7,267,482

---------------
(1) Approximately 8.0 million options to purchase PBG Common Stock were granted
primarily to key employees in 2003. This amount also includes a broad-based
grant to front-line employees in Spain, Greece, Turkey and Mexico.

DEF 14A 16th Page of 53 TOC 1st Previous Next ↓Bottom Just 16th
(2) The 5% and 10% rates of appreciation are based on a ten-year option term and
were specified by the SEC. These rates are not intended to forecast future
appreciation, if any, of PBG Common Stock.

(3) Amounts reflect a standard annual stock option award exercisable as follows:
25% on March 30, 2004; 25% on March 30, 2005 and 50% on March 30, 2006.

(4) Amount reflects an award of stock options granted pursuant to PBG's PepsiWin
program. These stock options become exercisable in March 2006.

(5) Amount reflects stock options that were forfeited upon Mr. Lavin's
termination of employment in December 2003.

STOCK OPTION EXERCISES AND HOLDINGS. The following table presents
information with respect to aggregate option exercises and option values as of
December 27, 2003.

AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION VALUES(1)

[Enlarge/Download Table]

NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED IN-THE-
SHARES OPTIONS AT FY-END(#) MONEY OPTIONS AT FY-END($)
ACQUIRED ON VALUE --------------------------- -----------------------------
NAME EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ----------- ----------- ------------- ------------ --------------

John T. Cahill................ 0 $ 0 1,216,360 1,344,925 $13,882,890 $1,225,786
Alfred H. Drewes.............. 0 0 96,157 280,370 216,195 255,769
Eric J. Foss.................. 0 0 731,388 572,711 7,892,212 543,655
Pamela C. McGuire............. 0 0 636,453 256,066 7,244,630 238,442
Yiannis Petrides.............. 128,218 1,635,689 234,905 372,657 2,129,675 382,241
Jaime Costa Lavin(2).......... 0 0 0 0 0 0

---------------
(1) The closing price for a share of PBG Common Stock on December 26, 2003, the
last trading day prior to PBG's fiscal year end, was $23.81.

(2) Mr. Lavin's stock options were forfeited upon his termination of employment
in December 2003.

EQUITY COMPENSATION PLAN INFORMATION. The table below sets forth certain
information as of December 27, 2003 for (i) all equity compensation plans
previously approved by our shareholders and (ii) all equity compensation plans
not previously approved by our shareholders.

[Enlarge/Download Table]

NUMBER OF SECURITIES
REMAINING AVAILABLE FOR FUTURE
NUMBER OF SECURITIES TO BE ISSUANCE UNDER EQUITY
ISSUED UPON EXERCISE OF WEIGHTED-AVERAGE EXERCISE COMPENSATION PLANS
OUTSTANDING OPTIONS, WARRANTS PRICE OF OUTSTANDING OPTIONS, (EXCLUDING SECURITIES REFLECTED
AND RIGHTS WARRANTS AND RIGHTS IN COLUMN (A))
PLAN CATEGORY (A) (B) (C)

Equity compensation plans
approved by security
holders(1) 37,330,434 $17.55 15,083,225(2)
Equity compensation plans
not approved by
security holders(3) 4,054,470 13.69 1,101,439
Total 41,384,904 17.17 16,184,664

(1) The securities reflected in this category are authorized for issuance under
the following PBG plans: (i) 1999 Long-Term Incentive Plan; (ii) 2000
Long-Term Incentive Plan; (iii) 2002 Long-Term Incentive Plan and (iv)
Directors' Stock Plan. If the 2004 LTIP is approved by shareholders,

DEF 14A 17th Page of 53 TOC 1st Previous Next ↓Bottom Just 17th
no further awards will be made under the 1999 Long-Term Incentive Plan, the
2000 Long-Term Incentive Plan, or the 2002 Long-Term Incentive Plan.

(2) Excludes 222,468 shares of PBG Common Stock available for future issuance as
of December 27, 2003 in connection with the PBG phantom stock account under
the terms of our Executive Income Deferral Plan (the "Plan"). The Plan
permits the deferral of certain compensation into the PBG phantom stock
account and such deferrals may be paid out, at the discretion of our
Compensation and Management Development Committee (the "Committee") of our
Board of Directors, in cash or shares of our Common Stock. As of the date
hereof, the Committee has not issued shares of our Common Stock to pay out
deferrals from the Plan's PBG phantom stock account. The number of shares
reflected above in this footnote was calculated by reference to the average
of the high and low trading price of PBG Common Stock on the NYSE on
December 26, 2003 (the last trading day before the end of our fiscal year).

(3) The securities reflected in this category are authorized for issuance under
the PBG Stock Incentive Plan (the "SIP"). If the 2004 PBG LTIP is approved
by shareholders, no further awards will be made under the SIP.

DESCRIPTION OF THE PBG STOCK INCENTIVE PLAN. If the 2004 PBG LTIP is
approved by shareholders, no further awards will be made under the SIP. The SIP
is a non-shareholder approved, broad-based plan that was adopted by the Board of
Directors on March 30, 1999. The maximum number of shares that can be awarded
under the SIP is 7.4 million. Shares underlying canceled or expired options
become available for future grants. Under the SIP, awards may be made in the
form of stock options, restricted stock and other share awards. No grants, other
than stock option awards, have been made under the SIP. Stock options have been
granted annually to select groups of non-management employees with an exercise
price equal to the fair market value of PBG Common Stock on the grant date.
Stock options awarded under the SIP generally become exercisable three years
from the date of grant and have a ten-year term. As noted in the table on the
previous page, at year-end 2003, options covering 4,054,470 shares were
outstanding under the SIP and 1,101,439 shares would be available for future
issuance in the event the 2004 LTIP is not approved by shareholders. The SIP is
filed as Exhibit 10.11 to our Annual Report on Form 10-K for the year ended
December 25, 1999 and qualifies this summary in its entirety.

PENSION PLAN TABLE. The Company has adopted the PBG Salaried Employees
Retirement Plan, the PBG Pension Equalization Plan, the PBG Mexico Retirement
Plan and The PepsiCo International Retirement Plan. The annual benefits payable
under these pension plans to employees with five or more years of service at age
65 are, for the first 10 years of credited service, 30% of the employee's
highest consecutive five-year average annual earnings plus an additional 1% of
the employee's highest consecutive five-year average annual earnings for each
additional year of credited service over ten years, less .43% of final average
earnings not to exceed Social Security covered compensation multiplied by years
of service (not to exceed 35 years) in the case of the PBG Salaried Employees
Retirement and Pension Equalization Plans. The PepsiCo International Retirement
Plan is offset by any other pension benefit PBG has contributed on the
employee's behalf, including by PBG contributions to local social security
plans. Under PBG's plans, when an

DEF 14A 18th Page of 53 TOC 1st Previous Next ↓Bottom Just 18th
executive retires at the normal retirement age (65), the approximate annual
benefits payable after January 1, 2004, for the following pay classifications
and years of service are expected to be:

[Download Table]

YEARS OF SERVICE
----------------------------------------------------------
REMUNERATION 15 20 25 30 35
------------ -------- -------- ---------- ---------- ----------

$ 250,000 $ 84,598 $ 96,130 $ 107,663 $ 119,195 $ 130,728
500,000 172,098 196,130 220,163 244,195 268,228
750,000 259,598 296,130 332,663 369,195 405,728
1,000,000 347,098 396,130 445,163 494,195 543,228
1,250,000 434,598 496,130 557,663 619,195 680,728
1,500,000 522,098 596,130 670,163 744,195 818,228
1,750,000 609,598 696,130 782,663 869,195 955,728
2,000,000 697,098 796,130 895,163 994,195 1,093,228
2,250,000 784,598 896,130 1,007,663 1,119,195 1,230,728
2,500,000 872,098 996,130 1,120,163 1,244,195 1,368,228

The pay covered by the pension plans noted on the previous page is based on
the salary and bonus shown in the Summary Compensation Table on page 10 for each
of the named executive officers. The years of credited service as of January 1,
2004 for the named executive officers are as follows: 15 years for Mr. Cahill;
22 years for Mr. Foss; 27 years for Ms. McGuire; 22 years for Mr. Drewes; 16
years for Mr. Petrides and 1 year for Mr. Lavin.

COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION

The Compensation and Management Development Committee (the "Committee") is
responsible for providing thought leadership in the development of a
compensation and benefits philosophy that drives the Company's performance and
shareholder value.

COMPENSATION PHILOSOPHY AND PROGRAMS. The Committee is focused on
maximizing value for the Company's shareholders while ensuring that the
Company's executive compensation programs attract, retain and motivate global
executive talent whose performance is critical to the Company's success. PBG's
executive compensation programs provide key employees with the opportunity to
receive fixed and variable pay through annual and long-term incentives. These
programs were developed based on the following principles:

- Align the interests of shareholders, the Company, and executives by
placing particular emphasis on long-term stock based programs that foster
a strong relationship between shareholder return and executive
compensation.

- Attract and retain key talent by providing a total compensation package
that is competitive within our industry, rewards executives for superior
performance and builds employee wealth over the long-term.

- Develop programs that are (i) appropriate within our financial structure;
and (ii) simple and straightforward so that employees have a clear
understanding of the business results required to earn variable pay.

In addition, the Committee periodically examines annual and long-term
compensation levels for executives against a peer group made up of comparably
sized companies from the consumer goods, bottling, retail and service
industries. Two of these companies are included in the Bottling Group Index
described in the Performance Graph section on page 19. The Committee believes
that targeting compensation at a level comparable to this group of companies
appropriately reflects the labor market for the Company's executives.

PBG's executives are eligible for three compensation components: (1) base
salary, (2) annual cash incentives, and (3) long-term incentives.

DEF 14A 19th Page of 53 TOC 1st Previous Next ↓Bottom Just 19th
BASE SALARIES. The Company's executive salary structure is based on broad
salary bands. Executive base pay is targeted at the third quartile of the peer
group. Individual base salaries are determined based on a targeted pay level for
each position within each salary band. Annual increases are based on individual
performance, experience and responsibilities, and reflect the Company's
philosophy of paying for performance against underlying job accountabilities.

ANNUAL CASH INCENTIVES. Executive officers are eligible to receive annual
cash incentives under the Executive Incentive Compensation Plan ("EICP"). The
EICP's objectives are to support the attainment of PBG's business and
performance goals by placing a substantial percent of an executive officer's pay
at risk. Under the EICP and in order to ensure compliance under Section 162(m)
of the Code, the Compensation Subcommittee (composed entirely of "outside
directors") (the "Compensation Subcommittee") determined the annual and
long-term incentives for our Covered Executives deemed covered by Section 162(m)
of the Code for 2003. In 2003, the pre-established incentive goal for the
Covered Executives was based 100% on earnings per share ("EPS") performance. No
payment is made to the Covered Executives if a minimum EPS threshold is not met.
Once the minimum EPS threshold is achieved, the Covered Executives are eligible
to receive a related maximum award. The Compensation Subcommittee may then
exercise discretion to decrease (but not increase) the amount payable to the
Covered Executives. Pursuant to the terms of the EICP, the Compensation
Subcommittee certified the Company's results against the EPS performance
threshold, exercised its discretion and approved the annual incentive awards for
the Covered Executives. In exercising its discretion with respect to the final
awards, the Subcommittee also considered other pre-established quantitative and
qualitative factors, some of which are described under the caption "2003
Compensation of the Chief Executive Officer" below.

LONG-TERM INCENTIVES. The Company provides long-term incentives through
its Long-Term Incentive Plans (collectively "LTIP"). These long-term incentives
may include non-qualified stock options, performance units, incentive stock
options, stock appreciation rights, and restricted share grants. The objective
of the LTIP is to provide a long-term focus that links executive compensation to
the creation of shareholder value and balances the short-term focus of the
annual incentives and base pay. Non-qualified stock options are the primary
long-term incentive vehicle of the Company. Individual grants are tied to an
executive's salary band and current base salary and are targeted at the third
quartile of the peer group.

OTHER STOCK PROGRAMS. The Committee has established stock ownership
guidelines for the Company's key senior executives. The 2003 guidelines vary
from one to five times annual salary. Ownership levels are measured annually and
affected executives must meet or exceed the guidelines within five years of
becoming a key senior executive.

2003 COMPENSATION OF THE CHIEF EXECUTIVE OFFICER. In 2003, Mr. Cahill
received a base salary increase bringing his annual base salary to $825,000.
Like other Covered Executives, Mr. Cahill receives no annual incentive if the
minimum EPS threshold is not met. Once the minimum EPS threshold is met, Mr.
Cahill is eligible to receive a related maximum award. The Compensation
Subcommittee then determines the actual amount of Mr. Cahill's annual incentive
award, which may not exceed the maximum.

Following a determination that the minimum EPS threshold was satisfied, the
Compensation Subcommittee examined Mr. Cahill's performance in light of several
quantitative and qualitative factors. The quantitative factors considered by the
Compensation Subcommittee included performance against EPS and worldwide volume
expectations. While the Company's actual performance fell short of expectations,
the Compensation Subcommittee noted an increase in EPS as well as strong cash
flow results and solid volume momentum in the U.S. business during the second
half of 2003. The qualitative factors considered by the Compensation
Subcommittee included the Company's strong execution of several new product
introductions, the Company's performance relative to the balance of the Pepsi
bottler system and a strengthened CEO succession plan. In view of these factors,
the Compensation Subcommittee awarded Mr. Cahill a bonus of $515,630.

DEF 14A 20th Page of 53 TOC 1st Previous Next ↓Bottom Just 20th
In 2003, Mr. Cahill received an annual stock option award under PBG's LTIP
reflective of his role and responsibilities. In addition, the Compensation
Subcommittee awarded a Special Leadership Award to Mr. Cahill and his direct
reports in order to strengthen retention of the senior management team and
further provide a strong link to the Company's EPS performance and stock price.
The Special Leadership Award of restricted stock is reflected in the Summary
Compensation Table. As described in footnote 2 of the Summary Compensation
Table, the actual number of shares retained by Mr. Cahill will range from 0 to a
maximum of 63,830 depending upon the financial performance of PBG for the 3-year
period commencing on the Grant Date and Mr. Cahill's continued active employment
with the Company through December 31, 2007. If the performance condition is met,
fifty percent of the award will vest on December 31, 2005 and the remaining
fifty percent will vest on December 31, 2007.

IMPACT OF INTERNAL REVENUE CODE SECTION 162(m). Under the Omnibus Budget
Reconciliation Act of 1993, provisions were added to the Code under Section
162(m) that limit the tax deduction for compensation in excess of one million
dollars paid to the Covered Executives. However, performance-based compensation
can be excluded from the limit so long as it meets certain requirements. The
Committee believes the EICP and LTIP satisfy the requirements for exemption
under Internal Revenue Code Section 162(m). Payments made under these plans are
generally expected to qualify as performance-based compensation and to
constitute the majority of aggregate incentive payments for the Covered
Executives. For 2003, the annual salary paid to Mr. Cahill and the other Covered
Executives was in each case less than one million dollars. The 2003 annual
incentives were all paid pursuant to the EICP and will, therefore, be deductible
when paid. The stock option and restricted stock awards made to the Covered
Executives under the terms of the LTIP are exempt as performance-based
compensation for purposes of calculating the one million-dollar limit. Due to
the Company's focus on performance-based compensation plans and continued
deferral of compensation by certain executive officers, the Committee expects to
continue to qualify most compensation paid to the group as tax deductible.

SUMMARY. The Committee believes that the compensation programs of the
Company are well structured to encourage attainment of objectives and foster a
shareholder perspective in management, in particular through employee stock
ownership. The Committee believes that the awards made in 2003 were competitive
and appropriate, and serve shareholders' long-term interests.

Respectfully submitted,
The Compensation and Management Development Committee

[Download Table]

Susan D. Kronick (Chairperson) Thomas H. Kean
Linda G. Alvarado Blythe J. McGarvie
Barry H. Beracha Margaret D. Moore
Ira D. Hall Clay G. Small

REPORT OF THE AUDIT AND AFFILIATED TRANSACTIONS COMMITTEE

The Audit and Affiliated Transactions Committee (the "Committee") of the
Company's Board of Directors is composed of four directors, Barry H. Beracha
(Chairperson), Ira D. Hall, Susan D. Kronick and Blythe J. McGarvie, each of
whom has been determined by the Board of Directors to be an Independent
Director. The Committee operates under a written charter that was recently
revised and approved by the Board of Directors and complies with the new NYSE
corporate governance rules and applicable SEC rules and regulations. The charter
is attached as appendix A to this Proxy Statement and is also posted on the PBG
website at http://www.pbg.com under Corporate Governance. The Committee
appoints, subject to shareholder ratification, the Company's independent
auditors.

Management is responsible for the Company's disclosure controls, internal
controls over financial reporting and the financial reporting process. The
independent auditors are responsible for

DEF 14A 21st Page of 53 TOC 1st Previous Next ↓Bottom Just 21st
performing an independent audit of the Company's consolidated financial
statements in accordance with auditing standards generally accepted in the
United States of America and for issuing a report thereon. The Committee's
responsibility is to monitor and oversee these processes.

In this context, the Committee has met and held discussions with KPMG LLP,
the independent auditing firm for the Company, with and without management
present. Management represented that the consolidated financial statements were
prepared in accordance with accounting principles generally accepted in the
United States of America. The Committee reviewed and discussed the audited
consolidated financial statements and the Company's critical accounting policies
with management and KPMG LLP. The Committee also discussed with management, the
senior most internal auditor and KPMG LLP the adequacy of the Company's internal
controls over financial reporting and disclosure controls. The Committee
discussed with KPMG LLP matters required to be discussed by Statement on
Auditing Standards No. 61 (Communication with Audit Committees). The Committee
evaluated KPMG LLP's performance, including a review of KPMG LLP's internal
quality-control procedures report.

KPMG LLP also provided the Committee with the written disclosures required
by Independence Standards Board Standard No. 1 (Independence Discussions with
Audit Committees), including a letter from KPMG LLP confirming its independence.
The Committee discussed with KPMG LLP that firm's independence from management
and the Company.

The Committee adopted a policy requiring pre-approval by the Committee or
its Chairperson of audit, audit-related, tax and other services performed by
KPMG LLP for the Company. The Committee has determined that the provision of all
non-audit, audit-related and tax services performed for the Company by KPMG LLP
is compatible with maintaining that firm's independence. The Committee also
approved a policy restricting the hiring of employees and former employees of
the Company's independent auditors. Additionally, the Committee adopted
procedures for it to receive, retain and respond to complaints regarding
accounting, internal accounting controls and auditing matters, as well as for
confidential, anonymous submission by employees of concerns related to
questionable accounting or auditing matters.

Based on reviews and discussions of the audited financial statements with
management and KPMG LLP and discussions with KPMG LLP regarding matters required
by Statement on Auditing Standards No. 61, a review of required written
disclosures from KPMG LLP required by Independence Standards Board Standard No.
1, and a discussion of KPMG LLP's independence, the Committee recommended to the
Board of Directors that the audited financial statements be included in the
Company's Annual Report on Form 10-K for fiscal year 2003 to be filed with the
SEC.

Respectfully submitted,
The Audit and Affiliated Transactions Committee

Barry H. Beracha (Chairperson)
Ira D. Hall
Susan D. Kronick
Blythe J. McGarvie

DEF 14A 22nd Page of 53 TOC 1st Previous Next ↓Bottom Just 22nd
INDEPENDENT AUDITORS

In addition to retaining KPMG LLP to audit our consolidated financial
statements for 2004, the Company and its affiliates retained KPMG LLP, as well
as other accounting firms to provide various services in 2004, and expect to
continue to do so in the future. The aggregate fees billed for professional
services by KPMG LLP in 2003 and 2002 were as follows:

Audit Fees. The aggregate fees billed by KPMG LLP for professional
services rendered for the audit of PBG's consolidated financial statements, the
reviews of its interim financial statements included in PBG's Forms 10-Q and all
statutory audits were approximately $3.6 million for the fiscal year ended
December 27, 2003 and approximately $4.6 million for the fiscal year ended
December 28, 2002.

Audit-Related Fees. The aggregate fees billed by KPMG LLP for professional
services rendered primarily related to due diligence work on acquisitions,
accounting consultation for a proposed transaction, audits of employee benefit
plans and other audit related services were approximately $500,000 for the
fiscal year ended December 27, 2003 and approximately $1.1 million for the
fiscal year ended December 28, 2002.

Tax Fees. The aggregate fees billed by KPMG LLP for professional services
rendered, including assistance with tax audits, advice on mergers and
acquisitions, tax transition services and tax compliance in certain foreign
jurisdictions were approximately $150,000 for the fiscal year ended December 27,
2003 and approximately $120,000 for the fiscal year ended December 28, 2002.

All Other Fees. There were no fees billed by KPMG LLP for other services
rendered during each of the fiscal years ended December 27, 2003 and December
28, 2002.

Pre-Approval Policies and Procedures. In 2003, the Company adopted a
policy that defines audit, audit-related, tax and other services to be provided
to the Company by the Company's independent auditors ("Auditor Services") and
requires such Auditor Services to be pre-approved by the Audit and Affiliated
Transactions Committee. In accordance with the Company's policy and applicable
SEC rules and regulations, the Audit Committee or its Chairperson pre-approves
Auditor Services provided to the Company. Pre-approval is detailed as to the
particular service or category of services. If Auditor Services are required
prior to a regularly scheduled Audit Committee meeting, the Audit Committee
Chairperson is authorized to approve such services, provided that they are
consistent with the Company's policy and applicable SEC rules and regulations,
and that the full Audit Committee is advised of such services at the next
regularly scheduled Audit Committee meeting. The independent auditors and
management periodically report to the Audit Committee regarding the extent of
Auditor Services provided by the independent auditors in accordance with this
pre-approval, and the fees for the Auditor Services performed to date.

DEF 14A 23rd Page of 53 TOC 1st Previous Next ↓Bottom Just 23rd
PERFORMANCE GRAPH

The following performance graph compares the cumulative total return of the
Company's Common Stock to the S&P 500 Stock Index and to an index of peer
companies selected by the Company (the "Bottling Group Index"). The Bottling
Group Index consists of Coca-Cola Amatil Limited, Coca-Cola Bottling Co.
Consolidated, Coca-Cola Enterprises Inc., Coca-Cola FEMSA S.A. de C.V. and
PepsiAmericas, Inc. The graph assumes the return on $100 invested on March 31,
1999, the day the shares of PBG Common Stock began trading on the NYSE, to
December 27, 2003, the last day of the Company's fiscal year. The returns of
each member of the Bottling Group Index are weighted according to each member's
stock market capitalization as of the beginning of the period measured and
includes the subsequent reinvestment of dividends on a quarterly basis.

(Performance Graph)

[Enlarge/Download Table]

Q1 Q4 Q4 Q4 Q4 Q4
3/31/99 12/25/99 12/30/00 12/29/01 12/28/02 12/27/03
------- -------- -------- -------- -------- --------

PBG*............................. 100 75 184 221 237 222
Bottling Group Index............. 100 69 75 77 80 95
Prior Bottling Group Index**..... 100 70 68 69 81 N/A
S & P 500 Index.................. 100 113 103 93 72 91

---------------

* The closing price for a share of PBG Common Stock was $23.81 on December 26,
2003 (the last trading day before PBG's fiscal year end).

** The Prior Bottling Group Index consisted of Coca-Cola Amatil Limited,
Coca-Cola Bottling Co. Consolidated, Coca-Cola Enterprises Inc., Panamerican
Beverages, Inc. and PepsiAmericas, Inc. In May 2003, Coca-Cola FEMSA, S.A. de
C.V. acquired Panamerican Beverages, Inc. and replaced it in the Bottling
Group Index.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

STOCK OWNERSHIP AND DIRECTOR RELATIONSHIPS WITH PEPSICO. PBG was initially
incorporated in January 1999 as a wholly owned subsidiary of PepsiCo to effect
the separation of most of PepsiCo's company-owned bottling businesses. PBG
became a publicly traded company on March 31, 1999.

DEF 14A 24th Page of 53 TOC 1st Previous Next ↓Bottom Just 24th
As of February 20, 2004, PepsiCo's ownership represented 40.8% of the
outstanding Common Stock and 100% of the outstanding Class B Common Stock
together representing 46.0% of the voting power of all classes of PBG's voting
stock. PepsiCo also owns approximately 6.8% of the equity of Bottling Group,
LLC, PBG's principal operating subsidiary. In addition, Margaret D. Moore, one
of our directors, is an executive officer of PepsiCo.

AGREEMENTS AND TRANSACTIONS WITH PEPSICO AND AFFILIATES. PBG and PepsiCo
(and certain of its affiliates) have entered into transactions and agreements
with one another, incident to their respective businesses, and PBG and PepsiCo
are expected to enter into material transactions and agreements from time to
time in the future. As used in this section, "PBG" includes the Company and its
subsidiaries.

Material agreements and transactions between PBG and PepsiCo (and certain
of its affiliates) during 2003 are described below.

Beverage Agreements and Purchases of Concentrates and Finished
Products. PBG purchases concentrates from PepsiCo and manufactures, packages,
distributes and sells carbonated and non-carbonated beverages under license
agreements with PepsiCo. These agreements give PBG the right to manufacture,
sell and distribute beverage products of PepsiCo in both bottles and cans and
fountain syrup in specified territories. The agreements also provide PepsiCo
with the ability to set prices of such concentrates, as well as the terms of
payment and other terms and conditions under which PBG purchases such
concentrates. In addition, PBG bottles water under the Aquafina trademark
pursuant to an agreement with PepsiCo, which provides for the payment of a
royalty fee to PepsiCo. In certain instances, PBG purchases finished beverage
products from PepsiCo.

During 2003, total payments by PBG to PepsiCo for concentrates, royalties
and finished beverage products were approximately $2.2 billion.

PBG Manufacturing Services. PBG provides manufacturing services to PepsiCo
in connection with the production of certain finished beverage products. In
2003, amounts paid or payable by PepsiCo to PBG for these services were
approximately $5.9 million.

Purchase of Distribution Rights. During 2003, PBG paid PepsiCo
approximately $2.9 million for distribution rights relating to the SoBe brand in
certain PBG-owned territories in the United States and Canada.

Transactions with Joint Ventures in which PepsiCo holds an equity
interest. PBG purchases tea concentrate and finished beverage products from the
Pepsi/Lipton Tea Partnership, a joint venture of Pepsi-Cola North America, a
division of PepsiCo, and Lipton (the "Partnership"). During 2003, total amounts
paid or payable to PepsiCo for the benefit of the Partnership were approximately
$142.7 million.

PBG purchases finished beverage products from the North American Coffee
Partnership, a joint venture of Pepsi-Cola North America and Starbucks. During
2003, amounts paid or payable to the North American Coffee Partnership by PBG
were approximately $149.2 million.

Under tax sharing arrangements we have with PepsiCo and PepsiCo joint
ventures, we received approximately $6.6 million in tax related benefits in
2003.

Purchase of Snack Food Products from Frito-Lay, Inc. PBG purchases snack
food products from Frito-Lay, Inc., a subsidiary of PepsiCo, for sale and
distribution through all of Russia except for Moscow. In 2003, amounts paid or
payable by PBG to Frito-Lay, Inc. were approximately $50.8 million. Our
agreement with Frito-Lay expires in 2004; however, we expect to renew the
agreement and continue our relationship with Frito-Lay.

Shared Services. PepsiCo provides various services to PBG pursuant to a
shared services agreement and other arrangements, including information
technology maintenance and the procurement of raw materials. During 2003,
amounts paid or payable to PepsiCo for these services totaled approximately
$71.5 million.

DEF 14A 25th Page of 53 TOC 1st Previous Next ↓Bottom Just 25th
Pursuant to the shared services agreement and other arrangements, PBG
provides various services to PepsiCo, including employee benefit, credit and
collection, international tax and accounting services. During 2003, payments to
PBG from PepsiCo for these services totaled approximately $6.4 million.

Rental Payments. Amounts paid or payable by PepsiCo to PBG for rental of
office space at certain PBG facilities were approximately $3.3 million in 2003.

National Fountain Services. PBG provides certain manufacturing, delivery
and equipment maintenance services to PepsiCo's national fountain customers. In
2003, net amounts paid or payable by PepsiCo to PBG for these services were
approximately $199.5 million.

Bottler Incentives. PepsiCo provides PBG with various forms of marketing
support. The level of this support is negotiated annually and can be increased
or decreased at the discretion of PepsiCo. These bottler incentives are intended
to cover a variety of programs and initiatives, including direct marketplace
support (including point-of-sale materials), capital equipment funding and
advertising support. For 2003, total bottler incentives paid or payable to PBG
or on behalf of PBG by PepsiCo approximated $646.2 million.

PBG provides certain administrative support services to PepsiAmericas, Inc.
and Pepsi Bottling Ventures LLC. In 2003, amounts paid or payable by
PepsiAmericas, Inc. and Pepsi Bottling Ventures LLC to PBG for these services
were approximately $255,000.

Bottling Group, LLC Distribution. PepsiCo has approximately a 6.8%
ownership interest in Bottling Group, LLC, our principal operating subsidiary.
In accordance with Bottling Group, LLC's Limited Liability Company Agreement,
PepsiCo received a $6.8 million distribution from Bottling Group, LLC in 2003.

RELATIONSHIPS AND TRANSACTIONS WITH MANAGEMENT AND OTHERS. Linda G.
Alvarado, a member of PBG's Board of Directors, together with certain members of
her family, own interests in Taco Bell and Pizza Hut restaurant companies that
purchase beverage products from PBG. In 2003, the total amount of these
purchases was approximately $317,740.

APPROVAL OF THE PBG 2004 LONG-TERM INCENTIVE PLAN
(ITEM 2 ON PROXY CARD)

PBG provides long-term incentives to key individuals who are responsible
for the future growth and continued success of PBG. Long-term incentives provide
an important link to shareholders by making employees owners in our business. To
that end, the Board of Directors has adopted the 2004 Long-Term Incentive Plan
(the "2004 LTIP" or the "Plan"), subject to shareholder approval. This new Plan
will continue to allow PBG to attract and retain world class talent in a way
that is supportive of good governance practices and shareholder interests.

Approval of the 2004 LTIP will eliminate the use of all of PBG's existing
equity-based employee compensation plans. These plans are the PBG 1999 Long-Term
Incentive Plan, the PBG 2000 Long-Term Incentive Plan, the PBG 2002 Long-Term
Incentive Plan and the PBG Stock Incentive Plan (the "Prior Plans").

The ten million shares to be authorized under the 2004 LTIP will replace
the 9.4 million shares remaining available for issuance under the Prior Plans.
It is anticipated that the 2004 LTIP shares will be sufficient only for awards
through 2005. Unlike the shares available under the Prior Plans, these 2004 LTIP
shares will be subject to a number of provisions that we believe are consistent
with the interests of shareholders and sound corporate governance practices.
Some of these provisions are highlighted on the following page.

DEF 14A 26th Page of 53 TOC 1st Previous Next ↓Bottom Just 26th
2004 PLAN HIGHLIGHTS:

- FIXED NUMBER OF SHARES. The Plan provides that the maximum aggregate number
of shares available for awards is ten million.

- SHARES AVAILABLE FOR RESTRICTED SHARE AND OTHER SHARE AWARDS ARE LIMITED. The
Plan limits the number of shares available for restricted share and restricted
share unit awards and other share awards to 30% of the total number of shares
available for issuance under the Plan.

- THREE YEAR MINIMUM TIME-BASED RESTRICTION. The Plan provides for a minimum
three year time-based restriction for awards of restricted shares and
restricted share units (unless such awards are performance-based and the
performance criteria are satisfied), subject to certain limited exceptions set
forth in the Plan.

- THREE YEAR MINIMUM FULL VESTING PERIOD. The Plan provides for a minimum three
year period for full vesting of awards of stock options and stock appreciation
rights subject to certain limited exceptions set forth in the Plan. In
addition, the Plan provides that no portion of any such award may vest in less
than one year from the grant date, subject to certain limited exceptions set
forth in the Plan.

- ONE YEAR MINIMUM PERFORMANCE PERIOD. The Plan provides for a minimum one year
performance period for any award that is performance-based, subject to certain
limited exceptions set forth in the Plan.

- NO REPRICING OF STOCK OPTIONS. The Plan prohibits the repricing of stock
options and stock appreciation rights without the prior approval of
shareholders.

- NO DISCOUNT STOCK OPTIONS. The Plan prohibits the granting of stock options
and stock appreciation rights with an exercise price less than the fair market
value of PBG Common Stock on the date of grant.

- MAXIMUM OPTION EXERCISE PERIOD OF TEN YEARS. The Plan provides that no stock
options shall have an exercise term in excess of ten years from the date of
grant.

- INDEPENDENT COMMITTEE ADMINISTRATION. The Plan will be administered by the
Compensation and Management Development Committee of the Board (the
"Committee"), all of whose members satisfy the independence criteria of the
new NYSE corporate governance rules, the "nonemployee director" requirements
of Rule 16b-3 under the Securities Exchange Act of 1934, as amended, and the
"outside director" requirements of Section 162 (m) of the Internal Revenue
Code (the "Code").

- MATERIAL AMENDMENTS OF THE PLAN REQUIRE SHAREHOLDER APPROVAL. The Plan
provides that any material amendment to the Plan must be approved by the
Company's shareholders.

SUMMARY OF THE 2004 LTIP

Introduction. The Board of Directors recommends that shareholders approve
the 2004 LTIP, which was adopted by the Committee on March 25, 2004 subject to
shareholder approval. If the 2004 LTIP is approved by shareholders, ten million
shares of PBG Common Stock will be authorized and available for awards under the
2004 LTIP, and certain awards made under the 2004 LTIP will be eligible to
qualify as "performance-based compensation" that is exempt from the one million
dollar deduction limit imposed by Section 162(m) of the Code. In addition, the
use of all Prior Plans will be eliminated and there will be a single
equity-based employee compensation plan.

A summary of the material provisions of the 2004 LTIP is set forth below
and is qualified in its entirety by reference to the 2004 LTIP, which is
attached as Appendix B to this Proxy Statement. If the 2004 LTIP is not so
approved, it will be canceled.

Purpose. The purpose of the 2004 LTIP is to: (i) provide long-term
incentives to those persons with significant responsibility for the success and
growth of PBG; (ii) attract, retain and

DEF 14A 27th Page of 53 TOC 1st Previous Next ↓Bottom Just 27th
motivate a diverse group of individuals on a competitive basis; and (iii) align
participants' interests with those of PBG's other shareholders through
compensation that is based on the performance of PBG Common Stock.

Eligibility. Any officer, employee, or key consultant of PBG and its
subsidiaries may be granted any of the awards under the 2004 LTIP. The selection
of participants and the nature and size of grants and awards are within the
discretion of the Committee. As of February 20, 2004, PBG and its subsidiaries
had approximately 66,000 worldwide employees.

Awards. The 2004 LTIP provides for the grant of non-qualified stock
options, incentive stock options that qualify under Section 422 of the Code,
stock appreciation rights, restricted shares, restricted share units, share
awards and performance awards each as defined in the 2004 LTIP.

Stock Options. The Committee may grant options under the 2004 LTIP to
purchase PBG Common Stock that may be either non-qualified stock options or
incentive stock options. The purchase price of a share of PBG Common Stock under
each type of option shall not be less than the fair market value of a share of
PBG Common Stock on the date the option is granted (except for awards that
replace prior awards as a result of a corporate transaction involving the
Company, such as a merger). The options shall be exercisable in accordance with
the terms established by the Committee, but no stock option award shall have a
vesting period of less than one year from the date of grant, and no stock option
award shall become fully exercisable before the third anniversary of the date of
grant except in connection with (i) the recruitment of new employees, including
employees transferring from an allied organization, (ii) special recognition
awards, (iii) awards granted in connection with business turnaround plans, and
(iv) the assumption of, or substitution for, outstanding awards previously
granted to individuals who become employees of the Company as a result of
merger, consolidation, acquisition or other corporate transaction. In addition,
no options shall be exercisable more than ten years from the date of grant.
However, without regard to the vesting period assigned, the vesting and
exercisability of options may be accelerated in connection with a change of
control and certain transfers, as explained below, or in connection with a
participant's death, disability, involuntary termination of employment or
retirement. The full purchase price of each share of PBG Common Stock purchased
upon the exercise of any option shall be paid at the time of the exercise.
Except as otherwise determined by the Committee, the purchase price shall be
payable in cash or in PBG Common Stock (valued at fair market value as of the
day of exercise), or in any combination thereof.

Stock Appreciation Rights. The Committee may grant a stock appreciation
right (a right to receive the amount by which the fair market value of a
specified number of shares on the exercise date exceeds the exercise price
established by the Committee at the time the stock appreciation right ("SAR") is
granted). SARs may be granted alone or in tandem with stock option awards and
shall be exercisable in accordance with the terms established by the Committee.
No SAR award shall have a vesting period of less than one year from the date of
grant, and no SAR award shall become fully exercisable before the third
anniversary of the date of grant except in connection with (i) the recruitment
of new employees, including employees transferring from an allied organization,
(ii) special recognition awards, (iii) awards granted in connection with
business turnaround plans, and (iv) the assumption of, or substitution for,
outstanding awards previously granted to individuals who become employees of the
Company as a result of merger, consolidation, acquisition or other corporate
transaction. In addition, no SARs shall be exercisable more than ten years from
the date of grant. However, without regard to the vesting period assigned, the
vesting and exercisability of SARs may be accelerated in connection with a
change of control and certain transfers, as explained below, or in connection
with a participant's death, disability, involuntary termination of employment or
retirement. SARs shall be payable in PBG Common Stock, in cash, or in a
combination thereof, as determined by the Committee.

Performance Awards. The Committee may grant performance awards (a right to
receive a designated dollar amount or number of shares of PBG Common Stock or
cash contingent on achievement of performance goals or other objectives
established by the Committee over a period

DEF 14A 28th Page of 53 TOC 1st Previous Next ↓Bottom Just 28th
of performance established by the Committee). Notwithstanding the attainment of
any performance goal, the Committee has the discretion to reduce any award
payment. Performance awards may be paid in cash, shares of PBG Common Stock or a
combination thereof. In addition, all performance awards granted will have a
minimum performance period of one year. However, without regard to the
performance period assigned, payment related to the achievement of performance
goals may be accelerated in connection with a change of control as explained
below, and to the extent vesting of a performance award is conditioned on
employment with the Company, vesting may also be accelerated in connection with
certain transfers, as explained below, or in connection with a participant's
death, disability, involuntary termination of employment or retirement.

Restricted Shares, Restricted Share Units and Other Share Awards. The
Committee may grant restricted share and restricted share unit awards,
respectively, a grant of PBG Common Stock or the right to receive an amount
equal to the value of shares of PBG Common Stock, that are subject to a risk of
forfeiture and restrictions on disposition that lapse after a specified period
and/or upon the achievement of one or more performance or other objectives, as
determined by the Committee. Awards of restricted shares and restricted share
units may be made either alone or in tandem with other awards under the Plan and
may be awarded as additional compensation for services rendered or in lieu of
cash or other compensation to which the participant is entitled. The Committee
may also grant share awards (a grant of PBG Common Stock) which shall only be
granted in lieu of cash or other compensation to which the eligible individual
is entitled except under limited circumstances set forth in the Plan.

Any restricted share or restricted share unit awards shall be subject to
such conditions, restrictions and contingencies as the Committee determines, but
all restricted share and restricted share unit awards that are not
performance-based shall be subject to a time-based vesting restriction of at
least three years from the date of grant, except in connection with (i) the
recruitment of new employees, including employees transferring from an allied
organization, (ii) special recognition awards, (iii) awards granted in
connection with business turnaround plans and (iv) the assumption of, or
substitution for, outstanding awards previously granted to individuals who
become employees of the Company as a result of merger, consolidation,
acquisition or other corporate transaction. However, without regard to the
time-based vesting restriction assigned, the vesting of restricted share and
restricted share unit awards may be accelerated in connection with a change of
control and certain transfers, as explained below, or in connection with a
participant's death, disability, involuntary termination of employment or
retirement. If performance conditions apply, a minimum one-year performance
period will apply.

Performance-Based Compensation. A federal income tax deduction will
generally be unavailable for annual compensation in excess of one million
dollars paid to the Chief Executive Officer and the four other most highly
compensated officers of a public corporation employed on the last day of the
fiscal year ("Covered Executives"). However, amounts and awards that constitute
"performance-based compensation" within the meaning of Section 162(m) of the
Code are not counted toward the one million dollar limit. Grants of stock
options and SARs are expected to qualify as performance-based compensation. In
addition, the Committee may designate any award described in the preceding three
paragraphs as intended to be performance-based compensation. Any awards so
designated shall be conditioned on the achievement of one or more performance
goals, as required by Section 162(m) of the Code. The performance goals that may
be used by the Committee for such awards shall be based on any one or more of
the following PBG performance measures, as selected by the Committee: stock
price, market share, sales revenue, sales volume, cash flow, earnings per share,
return on equity, return on assets, return on sales, return on invested capital,
economic value added, net earnings, total shareholder return, gross margin,
profit (before or after-tax), net income, operating income, EBITDA, and/or
costs. These performance goals may be described in terms of objectives that are
related to the individual participant or that are Company-wide or related to
subsidiaries, divisions or departments and may be made relative to the
performance of other corporations or a published index. Each goal may be based
on or otherwise

DEF 14A 29th Page of 53 TOC 1st Previous Next ↓Bottom Just 29th
employ comparisons relating to capital, shareholders' equity and/or shares
outstanding, investments or to assets or net assets.

The full and/or partial payment of performance-based compensation to
Covered Executives will be made only upon certification by the Committee of the
attainment by PBG, over a performance period established by the Committee, of
any one or more performance goals, which have been established by the Committee
and which are based on objective criteria. Notwithstanding the attainment of any
performance goal, the Committee has the discretion to reduce any award payment.
In order to satisfy the requirements that apply to performance-based
compensation, these goals must be approved by PBG's shareholders, and approval
by shareholders of the 2004 LTIP will constitute approval of the foregoing
goals.

Administration. The 2004 LTIP is administered by the Committee. The
Committee is composed entirely of Independent Directors who also qualify as
"outside directors" for purposes of Section 162(m) of the Code and as
"Non-Employee Directors" within the meaning of Rule 16b-3 of the Securities
Exchange Act of 1934, as amended (the "Act"). The Committee will have the
authority and discretion to select from among the eligible individuals those
persons who shall receive awards, to determine the time or times of receipt, to
determine the types of awards and the number of shares covered by the awards, to
establish the terms, conditions, performance criteria, restrictions, and other
provisions of such awards, and subject to certain limits, to cancel or suspend
awards. The Committee will have the authority and discretion to interpret the
2004 LTIP, to establish, amend, and rescind any rules and regulations relating
to the 2004 LTIP (including establishing subplans and modified award terms and
procedures to the extent necessary or advisable to accommodate international
laws), and to make all other determinations that may be necessary or advisable
for the administration of the 2004 LTIP. Any interpretation of the 2004 LTIP by
the Committee and any decision made by the Committee under the 2004 LTIP is
final and binding on all persons. The Committee may allocate all or any portion
of its responsibilities and powers to any one or more of its members and may
delegate all or any part of its responsibilities and powers to any person or
persons selected by it to the extent not prohibited by law or inconsistent with
Section 162(m) of the Code, Rule 16b-3 of the Act or applicable stock exchange
rules.

In the event of a corporate transaction involving PBG (including, without
limitation, any stock dividend, stock split, extraordinary cash dividend,
recapitalization, reorganization, merger, consolidation, split-up, spin-off,
combination or exchange of shares), the Committee may adjust awards as it deems
necessary and appropriate to preserve the benefits or potential benefits of the
awards and to prevent dilution. Action by the Committee may include: (i)
adjustment of the number and kind of shares which may be delivered under the
2004 LTIP; (ii) adjustment of the number and kind of shares subject to
outstanding awards; (iii) adjustment of the exercise price of outstanding
options and SARs; and (iv) any other adjustments that the Committee determines
to be equitable.

Except as otherwise provided by the Committee, awards under the 2004 LTIP
are not transferable except as designated by the participant by will or by the
laws of descent and distribution.

Limit on Shares. The maximum number of shares of stock that may be
delivered to participants under the 2004 LTIP is ten million shares of PBG
Common Stock (subject to adjustment for corporate transactions described above).
The shares issued may consist of authorized but unissued shares, treasury shares
or shares acquired in the open market.

No participant may be granted awards which would result in his or her
receiving, in the aggregate, during a single calendar year, more than two
million shares. Solely for purposes of determining whether this maximum is met,
an SAR, performance share or restricted share unit shall be treated as entitling
the holder thereof to one share of PBG Common Stock and awards of performance
units shall be treated as entitling the holder to a number of shares of Common
Stock determined by dividing the dollar value of the award by the fair market
value of a share of Common Stock on the date the performance units were awarded.

DEF 14A 30th Page of 53 TOC 1st Previous Next ↓Bottom Just 30th
No more than thirty percent of the number of shares available for issuance
under the 2004 LTIP may be awarded in the form of full-value awards.

If any award is forfeited or otherwise terminates without the issuance of
shares, the shares associated with the award will be available for future
grants. In addition, any shares that are tendered to the Company by a
participant as payment of the exercise price of any stock options or that are
used to satisfy income tax withholding obligations shall be available for future
grants. Awards may be granted in connection with the assumption or substitution
of outstanding grants from an acquired or merged company, and shares associated
with such awards will not count toward the total share limit.

Change in Control and Certain Transfers. Upon a change in control, as
defined in the 2004 LTIP, all outstanding options and SARs will become fully
exercisable. Under certain circumstances, if a participant's stock option or SAR
becomes unexercisable during its term after a change in control, then the
participant shall be entitled to receive a lump sum cash payment equal to the
gain on such option or SAR, or in the case of a non-qualified stock option, the
Black-Scholes value of such option if such value is greater than the gain.

All restricted share and restricted share unit awards will become fully
vested and certificates for shares will be distributed to participants or cash
paid to participants (in the case of restricted share units payable in cash).
All performance awards will also be fully vested. The holder of a performance
award shall be entitled to a lump sum cash payment equal to the amount of the
award payable at the end of the performance period as if 100% of the performance
goals have been achieved. In addition, in connection with certain PBG-approved
transfers to certain allied organizations, as described in the 2004 LTIP, as
determined by the Committee at the time of grant, the transferred participant's
outstanding options and SARs may become fully exercisable and restricted share
and restricted share unit awards may become fully vested (to the extent they are
not conditioned on the achievement of a performance goal). Employment by the
allied organization may be treated as employment by PBG in determining the
participant's right to, or right to exercise, an award upon achievement of a
performance goal and in applying the 2004 LTIP's misconduct provisions.

Effective Date, Term, Amendment and Termination. If approved by
shareholders, the 2004 LTIP shall become effective as of the date of such
shareholder approval and will remain in effect until May 26, 2014. The Committee
may, at any time, amend or terminate the 2004 LTIP without shareholder approval,
provided that no amendment or termination may, in the absence of consent to the
change by the affected participant, adversely affect the rights of any
participant or beneficiary under any award granted under the 2004 LTIP prior to
the date such amendment or termination is adopted by the Board. However,
amendments to the Plan shall be subject to the approval of shareholders to the
extent required by applicable rules of the NYSE and Sections 162(m) and 422 of
the Code.

Other Provisions. The Committee may determine that an award, whether made
in cash, shares or a combination thereof, may be deferred and may approve
deferral elections made by participants.

Federal Income Tax Considerations Relating to Stock Options. The following
discussion is a summary of certain federal income tax issues with respect to
stock options and does not purport to be a complete analysis of all of the
potential tax aspects relating to the 2004 LTIP or the awards thereunder. The
discussion is not intended as a substitute for careful tax planning by each
participant, and does not consider state and local taxes that may be applicable
to the awards. Therefore, PBG encourages participants to consult with their
individual tax advisors regarding the taxation of their awards. The discussion
is based on federal income tax laws, regulations and interpretations thereof
presently in effect, all of which are subject to change, possibly with
retroactive effect. Nothing in this discussion is or should be construed as
legal or tax advice.

Non-Qualified Options. The grant of a non-qualified option under the 2004
LTIP should not result in taxable income to the participant. Generally, the
participant would realize ordinary income at the time of exercise in an amount
equal to the excess of the fair market value at the date of

DEF 14A 31st Page of 53 TOC 1st Previous Next ↓Bottom Just 31st
exercise of the shares of PBG Common Stock acquired over the exercise price for
those shares and PBG would be entitled to a corresponding deduction. Gains or
losses realized by the participant upon the subsequent disposition of such
shares will be treated as capital gains and losses, with the basis in such PBG
Common Stock equal to the fair market value of the shares at the time of
exercise.

Incentive Stock Options. The grant of an incentive stock option should not
result in taxable income to the participant. The exercise of an incentive stock
option will not result in taxable income to the participant provided that the
participant was, without a break in service, an employee of PBG or a subsidiary
during the period beginning on the date of the grant of the option and ending on
the date three months prior to the date of exercise (one year prior to the date
of exercise if the participant is disabled, as that term is defined in the Code,
with an extended exercise period also applying following the participant's
death). The excess of the fair market value of the PBG Common Stock at the time
of the exercise of an incentive stock option over the exercise price is an
adjustment that is included in the calculation of the participant's alternative
minimum taxable income for the tax year in which the incentive stock option is
exercised.

If the participant does not sell or otherwise dispose of the PBG Common
Stock within two years from the date of the grant of the incentive stock option,
nor within one year after the transfer of such PBG Common Stock to the
participant, then, upon disposition of such PBG Common Stock, any amount
realized in excess of the exercise price will be taxed to the participant as a
capital gain and PBG will not be entitled to a corresponding deduction. A
capital loss will be recognized to the extent that the amount realized is less
than the exercise price. If the foregoing holding period requirements are not
met, the participant will generally realize ordinary income at the time of the
disposition of the shares, in an amount equal to the lesser of (i) the excess of
the fair market value of PBG Common Stock on the date of exercise over the
exercise price, or (ii) the excess, if any, of the amount realized upon
disposition of the shares over the exercise price and PBG will be entitled to a
corresponding deduction. In this case, if the amount realized upon the
disposition of the shares exceeds the value of the shares on the date of
exercise, any additional amount will be a capital gain. If the amount realized
upon the disposition of the shares is less than the exercise price, the
participant will recognize no income, and a capital loss will be recognized
equal to the excess of the exercise price over the amount realized upon the
disposition of the shares.

Withholding of Taxes. PBG may withhold amounts to satisfy withholding tax
requirements from amounts due to participants. Subject to guidelines established
by the Committee, participants may have PBG Common Stock withheld from awards or
may tender PBG Common Stock to PBG to satisfy tax withholding requirements.

One Million Dollar Limit. As previously noted, Section 162(m) of the Code
disallows a federal income tax deduction for certain compensation in excess of
one million dollars per year paid to each of PBG's Covered Executives. However,
compensation that qualifies as "performance-based compensation" is not subject
to the one million dollar limit. The 2004 LTIP has been structured to permit
awards and payments that will satisfy the requirements applicable to
"performance-based compensation".

THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE APPROVAL
OF THE PBG 2004 LONG-TERM INCENTIVE PLAN.

NEW PLAN BENEFITS

The future benefits or amounts that would be received under the 2004 LTIP
by executive officers and non-executive officer employees are discretionary and
are therefore not determinable at this time.

DEF 14A 32nd Page of 53 TOC 1st Previous Next ↓Bottom Just 32nd
RATIFICATION OF INDEPENDENT AUDITORS
(ITEM 3 ON PROXY CARD)

The Audit and Affiliated Transactions Committee has appointed KPMG LLP,
subject to shareholder ratification, to serve as PBG's independent auditors for
fiscal 2004. They have been PBG's independent auditors since 1999.
Representatives of KPMG LLP will be available to answer questions at the Annual
Meeting and are free to make statements during the Meeting.

THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE
RATIFICATION OF KPMG LLP AS PBG'S INDEPENDENT AUDITORS FOR FISCAL 2004.

OTHER MATTERS

As of the mailing date of this Proxy Statement, the Board of Directors
knows of no other matters to be brought before the Annual Meeting. If matters
other than the ones listed in this Proxy Statement arise at the Annual Meeting,
the persons named in the proxy will vote the shares represented by the proxy
according to their judgment.

CONFIDENTIALITY. PBG's policy is that proxies identifying individual
shareholders are private except as necessary to determine compliance with law,
or assert or defend legal claims, or in a contested proxy solicitation, or in
the event that a shareholder makes a written comment on a proxy card or an
attachment to it. PBG retains an independent organization to tabulate
shareholder votes and certify voting results.

YEAR 2005 SHAREHOLDERS' PROPOSALS

PBG welcomes comments or suggestions from its shareholders. If a
shareholder wants to have a proposal formally considered, including
recommendations for Director, at the 2005 Annual Shareholders' Meeting, and
included in the Proxy Statement for that meeting, PBG must receive the proposal
in writing on or before December 2, 2004. Please see CORPORATE GOVERNANCE --
Committees of the Board of Directors -- The Nominating and Corporate Governance
Committee for a description of the procedures to be followed for shareholder
recommendations for Director. Proposals should be sent to the Secretary of The
Pepsi Bottling Group, Inc. at One Pepsi Way, Somers, New York, 10589. If a
proposal is received by February 20, 2005, PBG may include it in the Proxy
Statement and, if it does, may use its discretionary authority to vote on the
proposal. For proposals that are not submitted by February 20, 2005, PBG may use
its discretionary voting authority when the proposal is raised at the 2005
Annual Meeting, without inclusion of the proposal in its Proxy Statement.

GENERAL

PBG will pay the costs of preparing, assembling and mailing this Proxy
Statement and the costs relating to the Annual Meeting. In addition to the
solicitation of proxies by mail, PBG intends to ask brokers and bank nominees to
solicit proxies from their principals and will pay the brokers and bank nominees
their expenses for such solicitation.

To be sure that we have the necessary quorum to hold the Annual Meeting,
PBG has hired the firm of Morrow & Co., Inc. to help in soliciting proxies by
mail, telephone and personal interview for fees estimated at approximately
$8,500.

Employees of PBG may also solicit proxies. They will not receive any
additional compensation for such solicitation.

The Annual Report to Shareholders for 2003, including our consolidated
financial statements, was mailed with this Proxy Statement or was previously
delivered to shareholders and is not part of the material for the solicitation
of proxies. To reduce postage costs, we sent materials at bulk mail rates. If
you have not received the Annual Report by the time you receive your Proxy
Statement,

DEF 14A 33rd Page of 53 TOC 1st Previous Next ↓Bottom Just 33rd
please write or call PBG's Director of Investor Relations, at The Pepsi Bottling
Group, Inc., One Pepsi Way, Somers, NY 10589 or (914) 767-7216.

Please complete, sign, and date the enclosed proxy card and mail it
promptly in the enclosed postage-paid envelope. The enclosed proxy card can be
revoked at anytime before the proxy is exercised by filing with the Secretary of
the Company either a notice of revocation or a duly executed proxy bearing a
later date. The powers of the proxy holders will be suspended if you attend the
meeting in person and so request, although attendance at the meeting will not by
itself revoke a previously granted proxy.

By Order of the Board of Directors,

/s/ Pamela C. McGuire
Pamela C. McGuire
Secretary

DEF 14A 34th Page of 53 TOC 1st Previous Next ↓Bottom Just 34th
APPENDIX A

THE PEPSI BOTTLING GROUP, INC.

REVISED AUDIT AND AFFILIATED TRANSACTIONS COMMITTEE CHARTER

(ADOPTED ON JANUARY 23, 2004)

A. STATEMENT OF PURPOSE

The purpose of the Audit and Affiliated Transactions Committee (the
"Committee") of the Board of Directors (the "Board") of The Pepsi Bottling
Group, Inc. (the "Company") is to assist the Board in its oversight of the
quality and integrity of the Company's financial statements, compliance with
legal and regulatory requirements, qualifications and independence of the
Company's independent auditors, the performance of the Company's independent
auditors and internal audit function, and to prepare the audit committee report
for inclusion in the Company's proxy statement. The purpose is also to review
and approve certain significant transactions between the Company and PepsiCo,
Inc. ("PepsiCo").

While the Committee has the responsibilities and powers set forth in this
Charter, the role of the Committee is oversight. It is not the duty of the
Committee to plan or conduct audits or to determine that the Company's financial
statements and disclosures are complete and accurate and are in accordance with
generally accepted accounting principles and applicable rules and regulations.
These are the responsibilities of management and the independent auditors.

B. ORGANIZATION

1. The Committee will include not less than three directors, each of whom must
be independent in accordance with the applicable listing standards of the
New York Stock Exchange (the "NYSE") and any other applicable laws and
regulations, as of the effective date of such standards, laws and
regulations.

2. Each member of the Committee must be financially literate, as such
qualification is interpreted by the Board in its business judgment. In
addition, at least one member of the Committee must have accounting or
related financial management expertise, as such qualification is interpreted
by the Board in its business judgment.

3. The members of the Committee, including the Chairperson, are appointed by
the Board. The Board may, at any time and in its complete discretion, add or
remove any member of the Committee and may fill any vacancy in the
Committee.

4. The Committee will meet at least four times each year, or more frequently as
circumstances require. The timing of the meetings will be determined by the
Committee. The Committee will meet in separate executive sessions at least
quarterly with the Chief Financial Officer and the independent auditors and
at least twice annually with the senior-most internal auditor. Any action
required or permitted to be taken at a meeting, may be taken without a
meeting in accordance with the Company's By-laws and applicable law.

5. A majority of the total number of members constitutes a quorum of the
Committee. A majority of the members of the Committee is empowered to act on
behalf of the Committee, except as provided otherwise in this Charter. The
Committee may delegate any of its responsibilities, as it deems appropriate,
to a subcommittee composed of one or more members. Minutes will be kept of
each meeting of the Committee.

A-1

DEF 14A 35th Page of 53 TOC 1st Previous Next ↓Bottom Just 35th
C. RESPONSIBILITIES

The primary responsibilities of the Committee are as follows:

INDEPENDENT AUDITORS

1. Appoint, retain, compensate (at the Company's expense), oversee, evaluate
and, where appropriate, terminate the Company's independent auditors. The
review and evaluation of the Company's independent auditors will include
obtaining and reviewing, at least annually, reports from the independent
auditors describing their internal quality control procedures, independence
and any other subjects required to be disclosed by the independent auditors
to the Committee.

2. Oversee the work of the independent auditors, review the annual audit plan
and approve fees to be paid to the independent auditors for audit,
audit-related, tax and all other services. Ensure that the independent
auditors report directly to the Committee.

3. Pre-approve all audit, audit-related and non-audit services to be provided
by the independent auditors. A designated member of the Committee is
authorized to grant pre-approval of specific services as required, provided
that the full Committee is advised of such approval at the next
regularly-scheduled Committee meeting.

4. Review the independent auditors' required reports, including the auditors'
conclusions regarding the Company's critical accounting policies, the
application of those policies, alternative treatments of financial
information within GAAP that have been discussed with management, the
ramifications of the use of such alternative disclosures and treatments, the
treatment preferred by the independent auditors, material written
communications between the Company's management and the independent auditors
and any other matters required to be discussed with the independent
auditors, including matters required to be reviewed under applicable listing
standards of the NYSE and any other applicable laws and regulations.

5. Review with the independent auditors any audit problems or difficulties and
management's response. Resolve any disagreements between management and the
independent auditors regarding financial reporting.

6. Provide an open avenue of communication among the Company's independent
auditors, senior management, the internal audit department and the Board.

INTERNAL AUDITORS

7. Review the internal audit department's staffing and responsibilities.

8. Review with the senior-most internal auditor the internal audit plans, audit
results and actions taken in response to such results. Review any internal
audit difficulties and management's response.

FINANCIAL INFORMATION AND PERIODIC SEC REPORTS

9. Review with management and the independent auditors the Company's quarterly
financial statements and annual audited financial statements, including any
material financial reporting issues and significant judgments made in
connection with the preparation of the financial statements.

10. Review the Company's reports on Form 10-Q and 10-K before they are filed
with the Securities and Exchange Commission (the "SEC"), including the
Company's critical accounting policies and any changes to those policies or
their application, disclosures under "Management's Discussion and Analysis
of Financial Condition and Results of Operations" and management's
certification of such statements. Review with management and the independent
auditors

A-2

DEF 14A 36th Page of 53 TOC 1st Previous Next ↓Bottom Just 36th
correspondence with the SEC or the NYSE regarding material issues relating
to the Company's financial statements.

11. Based on the Committee's review and discussion of the Company's annual
financial statements with management and the independent auditors, recommend
to the Board that the annual financial statements be included in the
Company's Annual Report on Form 10-K.

12. Review and discuss the Company's earnings releases and financial information
and earnings guidance provided to analysts and ratings agencies. The
Chairperson may represent the Committee for the review of the earnings
releases.

13. Review regulatory and accounting initiatives and their effect on the
Company's financial statements.

INTERNAL AND DISCLOSURE CONTROLS

14. Review with management, the independent auditors and the senior-most
internal auditor, the adequacy of the Company's internal controls and
disclosure controls.

15. Review with management and the independent auditors any significant
deficiencies in the design or operation of internal controls. Review with
management and the independent auditors any fraud involving management or
employees having a significant role in internal controls.

CORPORATE OVERSIGHT

16. Develop and recommend to the Board a corporate compliance program, including
reviewing and revising the Worldwide Code of Conduct (the "Code") applicable
to the directors, officers and employees of the Company. Monitor the
Company's compliance with applicable laws and regulations and with the Code.
Review conflicts of interest of directors and senior executives and consider
waivers or other action related thereto.

17. Discuss policies with respect to the Company's risk assessment and risk
management.

18. Establish and maintain hiring policies for employees or former employees of
independent auditors.

19. Establish procedures for the Committee to receive, retain and respond to
complaints regarding accounting, internal accounting controls, and auditing
matters, as well as for confidential, anonymous submission by employees of
concerns related to questionable accounting or auditing matters.

20. Conduct or authorize investigations into any matters within the Committee's
scope of responsibilities.

21. Consider such other matters with respect to the Company's financial affairs,
internal controls and the internal and external audits as the Committee may
deem advisable.

AFFILIATED TRANSACTIONS

22. Review and approve any transaction between the Company and PepsiCo, or any
entity in which PepsiCo has a 20% or greater ownership interest, where the
transaction is other than in the ordinary course of business and has a value
of more than $10 million.

MISCELLANEOUS

23. Report to shareholders in the Company's annual proxy statement on those
Committee matters required by SEC rules.

24. Seek the assistance and counsel of independent advisors, including
accountants and attorneys, at the Company's expense, as the Committee or
Committee Chair determines is necessary to carry out its duties.
A-3

DEF 14A 37th Page of 53 TOC 1st Previous Next ↓Bottom Just 37th
25. Annually assess the performance and effectiveness of the Committee.
Periodically review this Charter, update it as appropriate, and submit it to
the Board for approval when updated.

26. Regularly report Committee actions to the Board, with such recommendations
as the Committee deems appropriate.

27. Undertake such other responsibilities or tasks as the Board may delegate or
assign to the Committee from time to time.

A-4

DEF 14A 38th Page of 53 TOC 1st Previous Next ↓Bottom Just 38th
APPENDIX B

PBG 2004 LONG-TERM INCENTIVE PLAN

1. PURPOSE.

The purposes of the PBG 2004 Long-Term Incentive Plan (the "Plan") are: (a)
to provide long-term incentives to those persons with significant responsibility
for the success and growth of The Pepsi Bottling Group, Inc. ("PBG") and its
subsidiaries, divisions and affiliated businesses (collectively the "Company");
(b) to assist the Company in attracting, retaining and motivating a diverse
group of employees on a competitive basis; (c) to ensure a pay for performance
linkage for such employees; and (d) to associate the interests of such employees
with those of PBG shareholders.

If this Plan is approved by PBG's shareholders, no further awards will be
made under the PBG 1999 Long-Term Incentive Plan, the PBG 2000 Long-Term
Incentive Plan, the PBG 2002 Long-Term Incentive Plan and the PBG Stock
Incentive Plan (the "Prior Plans").

2. ADMINISTRATION OF THE PLAN.

(a) The Plan shall be administered by the Compensation and Management
Development Committee of the Board of Directors of PBG (the "Committee").
The Committee shall be appointed by the Board of Directors of PBG (the
"Board") and shall consist entirely of members of the Board who qualify as
"outside directors" for purposes of Section 162(m) of the Internal Revenue
Code of 1986, as amended (the "Code"), as "Non-Employee Directors" within
the meaning of Rule 16b-3 of the Securities Exchange Act of 1934 as amended
(the "Act") and as "independent" for purposes of any rules and regulations
of a stock exchange on which PBG's Common Stock is traded. The foregoing
notwithstanding, no act of the Committee shall be void or deemed to be
without authority because a member fails to meet the qualification
requirements of this Section.

(b) The Committee shall have all powers vested in it by the terms of the Plan,
such powers to include the authority (within the limitations described
herein):

- to select the individuals to be granted awards under the Plan;

- to determine the type, size and terms of awards to be granted to each
individual selected;

- to determine the guidelines and procedures for the payment or exercise of
awards;

- to determine the time when awards will be granted and any conditions
which must be satisfied by employees before an award is granted;

- to establish objectives and conditions for earning awards that are
otherwise applicable to awards;

- to determine whether such objectives and conditions have been met and
whether awards will be paid at the end of the award period or at the time
the award is exercised (whichever applies);

- to determine whether payment of an award will be deferred;

- to determine whether payment of an award should be reduced or eliminated;
and

- to determine whether any such award should qualify, regardless of its
amount, as deductible in its entirety for federal income tax purposes,
including whether any award is intended to comply with the
performance-based exception under Code Section 162(m) in the case of an
award to a "Covered Executive," i.e., an employee who is a "named
executive officer" (within the meaning of Item 402(a)(3) of Regulation
S-K) or an individual who is expected to be a named executive officer and
an employee at the time the Company is entitled to a tax deduction
related to such award.
B-1

DEF 14A 39th Page of 53 TOC 1st Previous Next ↓Bottom Just 39th
(c) The Committee shall have full power and authority to administer and
interpret the Plan and to adopt such rules, regulations, agreements,
guidelines and instruments for the administration of the Plan and for the
conduct of its business as the Committee deems necessary or advisable. The
Committee's interpretations of the Plan, and all actions taken and
determinations made by the Committee pursuant to the powers vested in it
hereunder, shall be conclusive and binding on all parties concerned,
including the Company, PBG shareholders and any person receiving an award
under the Plan.

(d) To the extent not prohibited by law and not inconsistent with the
requirements of Code Section 162(m), Rule 16b-3 of the Act or applicable
stock exchange rules, the Committee may delegate its authority hereunder
(including to a member of the Committee or an officer of PBG) and may
designate employees of the Company to execute documents on behalf of the
Committee or to otherwise assist the Committee in the administration and
operation of the Plan.

3. ELIGIBILITY.

Subject to the provisions of the Plan, the Committee may, from time to
time, designate any of the following individuals as eligible to receive an award
available under the Plan: (i) officer, (ii) employee, or (iii) key consultant or
advisor of the Company, other than a non-employee director, who provides bona
fide services to the Company not in connection with the offer or sale of
securities in a capital-raising transaction, in each case subject to limitations
provided by the Code or the Act as determined by the Committee; and the
Committee shall determine the nature and amount of each award.

In addition, notwithstanding any provision of the Plan to the contrary, in
order to foster and promote achievement of the purposes of the Plan or to comply
with provisions of laws in other countries in which the Company operates or has
employees, the Committee, in its sole discretion, shall have the power and
authority to: (i) determine which eligible individuals (if any) performing
services for the Company outside the United States are eligible to participate
in the Plan, (ii) modify the terms, conditions and types of any awards made to
such eligible individuals, and (iii) establish subplans, modified stock option
exercise procedures and other award terms and procedures to the extent such
actions may be necessary or advisable.

4. AWARDS.

(a) Types. Awards under the Plan include stock options (incentive stock options
and nonqualified stock options), stock appreciation rights, restricted
shares, restricted share units, performance shares, performance units and
share awards.

(i) Stock Options. Stock options are rights to purchase shares of PBG
Common Stock ("Common Stock") at a fixed price for a specified period
of time. Stock options may consist of incentive stock options
satisfying the requirements of Section 422 of the Code ("ISOs") and
designated by the Committee as ISOs and non-qualified stock options
that do not satisfy the aforementioned requirements. The purchase
price per share of Common Stock covered by a stock option awarded
pursuant to this Plan (the "Exercise Price" as defined for stock
options), including any ISOs, shall be equal to or greater than the
"Fair Market Value" of a share of Common Stock on the date the stock
option is awarded unless the stock option was granted through the
assumption of, or in substitution for, outstanding awards previously
granted to individuals who became employees of the Company as a result
of merger, consolidation, acquisition or other corporate transaction
involving the Company, in which case, an Exercise Price may be used
that reasonably preserves the value of the previously granted award.
"Fair Market Value" means an amount equal to the average of the high
and low sales prices for Common Stock as reported on the composite
tape for securities listed on the New York Stock Exchange, Inc.

B-2

DEF 14A 40th Page of 53 TOC 1st Previous Next ↓Bottom Just 40th
(the "Exchange") on the date in question (or, if no sales of Common
Stock were made on such Exchange on such date, on the immediately
preceding day on which sales were made on such Exchange), except that
such average price shall be rounded up to the nearest one-fourth
solely for purposes of determining the Exercise Price of stock options
and stock appreciation rights ("SARs" which are more fully described
below in paragraph (ii) hereof). The Exercise Price per share may be
payable, in whole or in part, in cash or in shares of Common Stock
held by the option holder, including previously acquired shares and
shares issuable or deliverable in connection with an award (with any
Common Stock valued at its Fair Market Value on the date of exercise),
provided that no Common Stock may be used to pay the Exercise Price if
and to the extent that additional accounting expense would result to
the Company under then applicable accounting rules.

Stock options may be granted alone or in tandem with other awards,
including SARs. With respect to stock options granted in tandem with
SARs, the exercise of either such stock options or SARs will result in
the simultaneous cancellation of the same number of stock options or
tandem SARs, as the case may be.

Except for adjustments made pursuant to Section 7, the Exercise Price
for any outstanding stock option granted under the Plan may not be
decreased after the date of grant nor may any outstanding stock option
granted under the Plan be surrendered to the Company as consideration
for the grant of a new stock option with a lower Exercise Price
without the approval of PBG's shareholders.

Except in the case of grants in connection with: (1) the recruitment
of new employees, including employees transferring from an allied
organization, (2) special recognition awards (3) awards granted in
connection with business turnaround plans, and (4) the assumption of,
or substitution for, outstanding awards previously granted to
individuals who become employees of the Company as a result of merger,
consolidation, acquisition or other corporate transaction, stock
options shall vest over a period of three years from the grant date
and no options shall have a vesting period of less than one year.
However, without regard to the vesting period assigned, the vesting of
stock options may be accelerated in connection with a change in
control and certain transfers, or in connection with a participant's
death, disability, retirement or involuntary termination of
employment, in each case as determined by the Committee. The term of
options shall be determined by the Committee in its sole discretion at
the time of grant, but in no event shall the term exceed ten years
from the date of grant.

ISOs may only be granted to employees of PBG, its subsidiaries and
divisions and may only be granted to an employee who, at the time the
option is granted, does not own stock possessing more than 10% of the
total combined voting power of all classes of stock of PBG. The
aggregate Fair Market Value (determined at the time of grant) of all
shares with respect to which ISOs are exercisable by a participant for
the first time during any year shall not exceed $100,000. Any option
that is intended to be an ISO but which does not qualify as such shall
remain outstanding and constitute a non-qualified stock option. In
determining the shares available for issuance as ISOs under Section 5,
adjustment under Section 5(a) shall not apply to the extent not
permitted under Section 422 of the Code and regulations promulgated
thereunder.

(ii) Stock Appreciation Rights. SARs are rights to receive the amount by
which the Fair Market Value of a share of Common Stock on the date
the SAR is exercised exceeds the purchase price of the SAR (the
"Exercise Price" as defined for SARs), which shall be equal to or
greater than the Fair Market Value of a share of Common Stock on the
grant date, unless the SAR was granted through the assumption of, or
in substitution for, outstanding awards previously granted to
individuals who became employees of the Company as a result of
merger, consolidation, acquisition or other corporate transaction
involving the Company, in which case, an Exercise Price may be used
that reasonably

B-3

DEF 14A 41st Page of 53 TOC 1st Previous Next ↓Bottom Just 41st
preserves the value of the previously granted award. Such difference
may be paid in cash, shares of Common Stock or both, or by any other
method as determined by the Committee in its sole discretion.

Except in the case of grants in connection with: (1) the recruitment
of new employees, including employees transferring from an allied
organization, (2) special recognition awards, (3) awards granted in
connection with business turnaround plans, and (4) the assumption of,
or substitution for, outstanding awards previously granted to
individuals who become employees of the Company as a result of merger,
consolidation, acquisition or other corporate transaction, SARs shall
vest over a period of three years from the grant date and no SARs
shall have a vesting period of less than one year from the grant date.
However, without regard to the vesting period assigned, the vesting of
SARs may be accelerated in connection with a change in control and
certain transfers, or in connection with a participant's death,
disability, retirement or involuntary termination of employment, in
each case as determined by the Committee. The term of an SAR shall be
determined by the Committee in its sole discretion at the time of
grant, but in no event shall the term exceed ten years from the date
of grant.

SARs may be granted alone or in tandem with stock options. The grant
of SARs related to ISOs must be concurrent with the grant of the ISOs.
The grant of SARs related to nonqualified stock options may be
concurrent with the grant of the nonqualified stock options or in
connection with such nonqualified stock options, previously granted
under Section 4(a)(i), that are unexercised and have not terminated or
lapsed. With respect to SARs granted in tandem with stock options, the
exercise of either such stock options or such SARs will result in the
simultaneous cancellation of the same number of tandem stock options
or SARs, as the case may be.

(iii) Restricted Shares/Restricted Share Units. Restricted shares are
shares of Common Stock that may not be traded or sold until the date
that the restrictions on transferability imposed by the Committee
with respect to such shares have lapsed (the "Restriction Period").
Restricted share units are the right to receive an amount equal to
the value of a specified number of shares of Common Stock. Awards of
restricted shares or restricted share units may be made either alone
or in addition to or in tandem with other awards granted under the
Plan, and they may be awarded as additional compensation for services
rendered by the eligible individual or in lieu of cash or other
compensation to which the eligible individual is entitled from the
Company.

The Committee shall impose such terms, conditions and/or restrictions
on any restricted share awards or restricted share units granted
pursuant to the Plan as it may deem advisable including, without
limitation: (1) a requirement that participants pay a stipulated price
for each restricted share or each restricted share unit, (2)
restrictions based upon the achievement of specific performance goals
(Company-wide, divisional, and/or individual), (3) time-based
restrictions on vesting, including the time during which the award is
subject to a risk of forfeiture, and (4) restrictions under applicable
Federal or state securities laws.

Except in the case of performance-based awards and awards made in
connection with: (1) the recruitment of new employees, including
employees transferring from an allied organization, (2) special
recognition awards, (3) awards granted in connection with business
turnaround plans, and (4) the assumption of, or substitution for,
outstanding awards previously granted to individuals who become
employees of the Company as a result of merger, consolidation,
acquisition or other corporate transaction, all restricted share and
restricted share unit awards shall be subject to a time-based vesting
restriction of at least three years from the date of grant. However,
without regard to the time-based vesting restriction assigned, the
vesting of restricted share and restricted share unit awards may be
accelerated in connection with a change in control and certain
transfers or

B-4

DEF 14A 42nd Page of 53 TOC 1st Previous Next ↓Bottom Just 42nd
in connection with a participant's death, disability, retirement or
involuntary termination of employment, in each case as determined by
the Committee. To the extent the restricted shares or restricted share
units granted to a Covered Executive are intended to be deductible
under Code Section 162(m), the applicable restrictions shall be based
on the achievement of performance goals over a performance period, as
described in Section 4(a)(iv).

Restricted share units that become payable in accordance with their
terms and conditions shall be settled in cash, shares of Common Stock,
or a combination of cash and shares of Common Stock, as determined by
the Committee.

During any Restriction Period, restricted shares may not be sold,
assigned, transferred or otherwise disposed of, or mortgaged, pledged
or otherwise encumbered. In order to enforce the limitations imposed
upon the restricted shares, the Committee may (1) cause a legend or
legends to be placed on any certificates relating to such restricted
shares, and/or (2) issue "stop transfer" instructions, as it deems
necessary or appropriate.

Unless otherwise determined by the Committee, during any Restriction
Period, participants who hold restricted shares shall have the right
to receive dividends, in cash or property, as well as other
distributions or rights in respect of such shares, shall have the
right to vote such shares as the record owner thereof, and
participants who hold restricted share units shall have the right to
receive dividend equivalents. Unless otherwise determined by the
Committee, any dividends, distributions or rights, or dividend
equivalents payable to a participant during the Restriction Period
shall be distributed to the participant only if and when the
restrictions imposed on the applicable restricted shares or restricted
share units lapse.

Each certificate issued for restricted shares shall be registered in
the name of the participant and deposited with the Company or its
designee. At the end of the Restriction Period, a certificate
representing the number of shares to which the participant is then
entitled shall be delivered to the participant free and clear of the
restrictions (or the participant's unrestricted ownership shall be
otherwise reflected). No certificate shall be issued with respect to a
restricted share unit unless and until such unit is paid in shares of
Common Stock.

(iv) Performance Awards. Performance awards are performance shares or
performance units. Each performance share shall have an initial value
equal to the Fair Market Value of a share of Common Stock on the date
of grant. Each performance unit shall have an initial value that is
established by the Committee at the time of grant. Performance awards
may be granted either alone or in addition to other awards made under
the Plan.

Unless otherwise determined by the Committee, performance awards shall
be conditioned on the achievement of performance goals (which shall be
based on one or more performance measures, as determined by the
Committee) over a performance period established by the Committee,
provided that no performance period shall be less than one year.

The performance measure(s) to be used for purposes of performance
awards (and for restricted shares and restricted share units, as
provided in Section 4(a)(iii)) may be described in terms of objectives
that are related to the individual participant or objectives that are
Company-wide or related to one or more subsidiaries, divisions,
departments, regions, functions or business units of the Company to
which the contributions of the participant are relevant, and may
consist of one or more or any combination of the following criteria:
stock price, market share, sales revenue, sales volume, cash flow,
earnings per share, return on equity, return on assets, return on
sales, return on invested capital, economic value added, net earnings,
total shareholder return, gross margin, profit (before or
after-taxes), net income, operating income, EBITDA (earnings before
interest,

B-5

DEF 14A 43rd Page of 53 TOC 1st Previous Next ↓Bottom Just 43rd
taxes, depreciation and amortization) and/or costs. The performance
goals based on these performance measures may be made relative to the
performance of other corporations or a published index. The Committee
can establish other performance measures for performance awards
granted to participants who are not Covered Executives and, with
respect to such participants, shall have the sole discretion to adjust
the determination of the degree of attainment of the pre-established
performance goals.

Notwithstanding the achievement of any performance goal established
under this Plan, the Committee has the discretion, on a participant by
participant basis, to reduce some or all of a performance award that
would otherwise be paid.

At, or at any time after, the time an award is granted, and in the
case of Covered Executives to the extent permitted under Code Section
162(m) and the regulations thereunder without adversely affecting the
treatment of the award under the performance-based exception, the
Committee may provide for the manner in which performance will be
measured against the performance goals (or may adjust the performance
goals) to reflect the impact of unusual or nonrecurring events
affecting the Company, or its financial statements or changes in
applicable laws, regulations or accounting principles.

With respect to any award that is intended to satisfy the conditions
for the performance-based exception under Code Section 162(m): (1) the
Committee shall interpret the Plan and this Section 4 in light of Code
Section 162(m) and the regulations thereunder; (2) the Committee shall
have no discretion to amend the award in any way that would adversely
affect the treatment of the award under Code Section 162(m) and the
regulations thereunder; and (3) such award shall not be paid until the
Committee shall first have certified that the performance goals have
been achieved.

If applicable tax and/or securities laws change to permit Committee
discretion to alter the governing performance measures without
obtaining shareholder approval of such changes, the Committee shall
have the sole discretion to make such changes without first obtaining
shareholder approval.

(v) Share Awards. Share awards are grants of shares of Common Stock. The
Committee may grant a share award to any eligible individual on such
terms and conditions as the Committee may determine in its sole
discretion. Share awards may be made only in lieu of cash or other
compensation to which the eligible individual is entitled from the
Company except as to limited awards to non-executive employees or key
consultants made in connection with special recognition programs.

(b) Maximum Awards. An eligible individual may be granted multiple awards under
the Plan, but no one employee may be granted awards which would result in
his or her receiving in the aggregate, during a single calendar year, more
than 2 million shares of Common Stock. Solely for the purposes of
determining whether this maximum is met, an SAR, restricted share unit, or
performance share shall be treated as entitling the holder thereof to one
share of Common Stock, and an award of performance units shall be treated as
entitling the holder to the number of shares of Common Stock that is
determined by dividing the dollar value of the award by the Fair Market
Value of a share of Common Stock on the date the performance units were
awarded.

(c) Employment by the Company. To the extent the vesting, exercise, or term of
any stock option, SAR, restricted share, restricted share unit, performance
share and/or performance unit award is conditioned on employment by the
Company, an award recipient whose Company employment terminates through a
Company-approved transfer to an allied organization: (i) shall vest in (and
where applicable) be entitled to exercise immediately prior to the transfer
any stock option, SAR, restricted share or restricted share unit, that is
not conditioned on the achievement of a performance goal, (ii) shall have
employment with the allied organization treated as employment by the Company
in determining any applicable term of such award and period for

B-6

DEF 14A 44th Page of 53 TOC 1st Previous Next ↓Bottom Just 44th
exercise (as well as any right to, or right to exercise, the award upon
achievement of a performance goal), and (iii) shall have the allied organization
considered part of the Company for purposes of applying the misconduct
provisions of Section 8. The Chief Personnel Officer shall specify the
entities that are considered allied organizations as of any time. The
Committee may decide, when granting an award, to exclude some or all of the
award from the application of this subsection, or to provide the recipient
of the grant with less protection in connection with a transfer than would
otherwise apply under the foregoing provisions of this subsection.

(d) Company Buy-Out Right. At any time after any award becomes exercisable, the
Committee shall have the right to elect, in its sole discretion and without
the consent of the holder thereof, to cancel such award and to cause PBG to
pay to the participant the excess of the Fair Market Value of the shares of
Common Stock covered by such award over its Exercise Price or purchase price
on the date the Committee provides written notice (the "Buy-Out Notice") of
its intention to exercise such right (the "Buy-Out"). Buy-Outs pursuant to
this provision shall be effected by PBG as promptly as possible after the
date of the Buy-Out Notice. Payments of Buy-Out amounts may be made in cash,
in shares of Common Stock, or partly in cash and partly in Common Stock, as
the Committee deems advisable. To the extent payment is made in shares of
Common Stock, the number of shares shall be determined by dividing the
amount of the payment to be made by the Fair Market Value of a share of
Common Stock on the date of the Buy-Out Notice. This Buy-Out provision shall
not apply in the case of a "Change in Control" within the meaning of Section
9, in which case the provisions of Section 9 shall apply.

5. SHARES OF COMMON STOCK SUBJECT TO THE PLAN.

The maximum aggregate number of shares of Common Stock available for
issuance under the Plan shall be 10 million, determined as provided in this
Section and as may be adjusted pursuant to Section 7 hereof. Any of the
authorized shares may be used for any of the types of awards described in the
Plan, provided however, that in no event shall the number of restricted shares
which become fully vested, shares delivered in settlement of restricted share
units and performance awards, and shares granted as share awards ("full-value
awards") exceed 30% of the maximum aggregate number of shares of Common Stock
available for issuance under the Plan as may be adjusted pursuant to Section 7
hereof.

(a) Shares Remaining. The following shall apply in determining the number
of shares remaining available for grant under this Plan:

(i) In connection with the granting of a stock option or other award
(other than SARs payable only in cash or a performance unit
denominated in dollars or property other than Common Stock), the
number of shares of Common Stock available for issuance under
this Plan shall be reduced by the number of shares in respect of
which the stock option or award is granted or denominated;
provided, however, that where an SAR or performance unit is
settled in shares of Common Stock, the number of shares of
Common Stock available for issuance under this Plan shall be
reduced only by the number of shares issued in such settlement.

(ii) If any stock option is exercised by tendering or having the
Company withhold shares of Common Stock to PBG as full or
partial payment of the Exercise Price or to satisfy tax
withholding obligations, the number of shares available for
issuance under this Plan shall be increased by the number of
shares so tendered or withheld.

(iii) Whenever any outstanding stock option or other award under the
Plan (or portion thereof) expires, is cancelled, is settled in
cash or is terminated for any reason, the shares allocable to
the expired, cancelled, settled or terminated portion of the
stock option or award shall remain available for awards under
this Plan.

(iv) Awards granted through the assumption of, or in substitution
for, outstanding awards previously granted to individuals who
become employees as a result of a

B-7

DEF 14A 45th Page of 53 TOC 1st Previous Next ↓Bottom Just 45th
merger, consolidation, acquisition or other corporate
transaction involving the Company as a result of an acquisition
will not count against the reserve of available shares under
this Plan.

(b) Shares to be Delivered. Shares of Common Stock to be delivered by the
Company under this Plan shall be determined by the Committee and may
consist in whole or in part of authorized but unissued shares, treasury
shares or shares acquired on the open market.

6. DEFERRED PAYMENTS.

The Committee may determine that all or a portion of a payment to a
participant under the Plan, whether it is to be made in cash, shares of Common
Stock or a combination thereof, shall be deferred or may, in its sole
discretion, approve deferral elections made by participants. Deferrals shall be
for such periods and upon such terms as the Committee may determine in its sole
discretion. The Committee may take such steps as reasonably necessary to permit
the deferral of taxes in connection with any award deferral.

7. DILUTION AND OTHER ADJUSTMENTS.

In the event of (a) any change in the outstanding shares of Common Stock by
reason of any stock split, reverse stock split, stock dividend,
recapitalization, merger, reorganization, consolidation, combination or exchange
of shares, (b) any separation of a corporation (including a spin-off or other
distribution of assets of the Company to its shareholders), (c) any partial or
complete liquidation, or (d) other similar corporate change, the Committee may,
but shall not be required to make such equitable adjustments in the Plan and the
awards thereunder as the Committee determines are necessary and appropriate to
prevent dilution or enlargement of a participant's rights hereunder, including,
if necessary, an adjustment in (i) the maximum number or kind of shares that may
be issued under the Plan, (ii) the individual maximum in Section 4(b), (iii) the
number and kind of shares and the Exercise Price or purchase price applicable to
awards that may be or have been awarded to any participant (including the
conversion of shares subject to awards from Common Stock to stock of another
entity), and (iv) related terms of awards, including any performance conditions,
and to make cash payments in lieu of such adjustments. No adjustment to
performance conditions is authorized in connection with any awards to a Covered
Executive intended to qualify as performance-based under Code Section 162(m) if
and to the extent that such adjustment would cause the award to fail to so
qualify. Such adjustment shall be conclusive and binding for all purposes of the
Plan.

8. MISCONDUCT.

Except as otherwise provided in agreements covering Awards hereunder, a
participant shall forfeit all rights in his or her outstanding awards under the
Plan, and all such outstanding awards shall automatically terminate and lapse,
if the Committee determines that such participant has engaged in "Misconduct" as
defined below. The Committee may in its sole discretion require the participant
to pay to the Company any and all gains realized from any awards granted
hereunder that were exercised, vested or paid out within the twelve month period
immediately preceding a date on which the participant engaged in such
Misconduct, as determined by the Committee.

"Misconduct" means any of the following, as determined by the Committee in
good faith: (i) violation of any agreement between the Company and the
participant, including but not limited to a violation relating to the disclosure
of confidential information or trade secrets, the solicitation of employees,
customers, suppliers, licensors or contractors, or the performance of
competitive services, (ii) violation of any duty to the Company, including but
not limited to violation of the Company's Code of Conduct; (iii) making, or
causing or attempting to cause any other person to make, any statement (whether
written, oral or electronic), or conveying any information about the Company
which is disparaging or which in any way reflects negatively upon the Company,
unless required by law or pursuant to a Company policy; (iv) improperly
disclosing or otherwise misusing

B-8

DEF 14A 46th Page of 53 TOC 1st Previous Next ↓Bottom Just 46th
any confidential information regarding the Company; (v) unlawful trading in the
securities of PBG or of another company based on information gained as a result
of that participant's employment or other relationship with the Company, (vi)
engaging in any act which is considered to be contrary to the best interests of
the Company, including but not limited to recruiting or soliciting employees of
the Company or (vii) commission of a felony or other serious crime or engaging
in any activity which constitutes gross misconduct.

This section shall also apply in the case of a former Company employee
(including, without limitation, a retired or disabled employee) who commits
Misconduct after his or her employment with the Company terminated.

9. CHANGE IN CONTROL.

Upon a "Change in Control" (as defined in subsection (f) below), the
following shall occur, unless otherwise provided by the Committee:

(a) Options. Effective on the date of such Change in Control, all
outstanding and unvested stock options granted under the Plan shall
immediately vest and become exercisable, and all stock options then
outstanding under the Plan shall remain outstanding in accordance with
their terms. Notwithstanding anything to the contrary in this Plan, in
the event that any stock option granted under the Plan becomes
unexercisable during its term on or after a Change in Control because:
(i) the individual who holds such stock option is involuntarily
terminated (other than for cause), or such individual terminates for
"Good Reason" as defined in the agreement governing the stock option
award, within two years after the Change in Control; (ii) such stock
option is terminated or adversely modified; or (iii) Common Stock is no
longer issued and outstanding, or no longer traded on a national
securities exchange, then the holder of such stock option shall
immediately be entitled to receive a lump sum cash payment equal to (A)
the gain on such stock option or (B) only if greater than the gain and
only with respect to non-qualified stock options the Black-Scholes
value of such stock option (as determined by a nationally recognized
independent investment banker chosen by PBG), in either case calculated
on the date such stock option becomes unexercisable. For purposes of
the preceding sentence, the gain on a stock option shall be calculated
as the difference between the Fair Market Value per share of Common
Stock as of the date such stock option becomes unexercisable, less the
Exercise Price of the stock option; provided, however, if the shares of
Common Stock are not traded on a national exchange on such date, the
Fair Market Value on the immediately preceding day on which the shares
were traded shall be used.

(b) Stock Appreciation Rights. Effective on the date of such Change in
Control, all outstanding and unvested SARs granted under the Plan shall
immediately vest and become exercisable, and all SARs then outstanding
under the Plan shall remain outstanding in accordance with their terms.
In the event that any SAR granted under the Plan becomes unexercisable
during its term on or after a Change in Control because: (i) the
individual who holds such SAR is involuntarily terminated (other than
for cause), or such individual terminates for "Good Reason" as defined
in the agreement governing the SAR award, within two years after the
Change in Control; (ii) such SAR is terminated or adversely modified;
or (iii) Common Stock is no longer issued and outstanding, or no longer
traded on a national securities exchange, then the holder of such SAR
shall immediately be entitled to receive a lump sum cash payment equal
to the gain on such SAR. For purposes of the preceding sentence, the
gain on an SAR shall be calculated as the difference between the Fair
Market Value per share of Common Stock as of the date such SAR becomes
unexercisable and the purchase price per share of Common Stock covered
by the SAR; provided, however, if the shares of Common Stock are not
traded on a national exchange on such date, the Fair Market Value on
the immediately preceding day on which the shares were traded shall be
used.

B-9

DEF 14A 47th Page of 53 TOC 1st Previous Next ↓Bottom Just 47th
(c) Restricted Shares/Restricted Share Units. Upon a Change of Control all
restricted shares and restricted share units shall immediately vest.
Immediately upon such vesting, certificates for all such vested
restricted shares shall be distributed to the participants, and the
cash or shares payable upon vesting of the restricted stock units shall
be paid to the participants.

(d) Performance Awards. Each performance award granted under the Plan that
is outstanding on the date of the Change in Control shall immediately
vest and the holder of such performance award shall be entitled to a
lump sum cash payment equal to the amount of such performance award
payable at the end of the performance period as if 100% of the
performance goals have been achieved.

(e) Time of Payment. Any amount required to be paid pursuant to this
Section shall be paid within 20 days after the date such amount becomes
payable.

(f)Definition of Change in Control. A "Change in Control" means the
occurrence of any of the following events: (i) any individual,
corporation, partnership, group, association or other entity, other than
PepsiCo, Inc. ("PepsiCo") or an entity approved by PepsiCo, is or
becomes the "beneficial owner" (as defined in Rule 13d-3 under the Act),
directly or indirectly, of 50% or more of the combined voting power of
PBG's outstanding securities ordinarily having the right to vote at
elections of directors; (ii) during any consecutive two-year period,
persons who constitute the Board at the beginning of the period cease to
constitute at least 50% of the Board (provided that any new Board member
who was approved by a majority of directors who began the two-year
period or who was approved by PepsiCo shall be considered a director who
began the two-year period); (iii) the approval by the shareholders of
PBG of a plan or agreement providing for a merger or consolidation of
PBG with another company, other than with PepsiCo or an entity approved
by PepsiCo, and PBG is not the surviving company (unless the
shareholders of PBG prior to the merger or consolidation continue to
have 50% or more of the combined voting power of the surviving company's
outstanding securities); (iv) the sale, exchange or other disposition of
all or substantially all of PBG's assets, other than to PepsiCo or an
entity approved by PepsiCo; or (v) any other event, circumstance, offer
or proposal occurs or is made, which is intended to effect a change in
the control of PBG and which results in the occurrence of one or more of
the events set forth in clauses (i) through (iv) of this paragraph.

In addition, a "Change in Control" means the occurrence of any of the
following events with respect to PepsiCo: (i) acquisition of 20% or
more of the outstanding voting securities of PepsiCo by another entity
or group; excluding, however, any acquisition by an employee benefit
plan or related trust sponsored or maintained by PepsiCo; (ii) during
any consecutive two-year period, persons who constitute the Board of
Directors of PepsiCo (the "PepsiCo Board") at the beginning of the
period cease to constitute at least 50% of the PepsiCo Board (provided
that any new PepsiCo Board member who was approved by a majority of
directors who began the two-year period shall be considered a director
who began the two-year period); (iii) PepsiCo shareholders approve, and
there is completed, a merger or consolidation of PepsiCo with another
company, and PepsiCo is not the surviving company; or, if after such
transaction, the other entity owns, directly or indirectly, 50% or more
of the outstanding voting securities of PepsiCo; (iv) PepsiCo
shareholders approve a plan of complete liquidation of PepsiCo or the
sale or disposition of all or substantially all of PepsiCo's assets; or
(v) any other event, circumstance, offer or proposal occurs or is made,
which is intended to effect a change in the control of PepsiCo, and
which results in the occurrence of one or more of the events set forth
in clauses (i) through (iv) of this paragraph.

B-10

DEF 14A 48th Page of 53 TOC 1st Previous Next ↓Bottom Just 48th
10. MISCELLANEOUS PROVISIONS.

(a) Rights as Shareholder. Except as otherwise provided herein, a participant
in the Plan shall have no rights as a holder of Common Stock with respect to
awards hereunder, unless and until certificates for shares of Common Stock
are issued to such participant or registered in the name of the participant
on the Company's records.

(b) Assignment or Transfer. Unless the Committee shall specifically determine
otherwise, no award granted under the Plan or any rights or interests
therein (other than an award of shares that is not subject to any
restrictions) shall be assignable or transferable by a participant, except
by will or the laws of descent and distribution.

(c) Agreements. All awards granted under the Plan shall be evidenced by
agreements in such form and containing such terms and conditions (not
inconsistent with the Plan), as the Committee shall approve.

(d) Requirements for Transfer. The Committee shall have no obligation to issue
or transfer a share of Common Stock under the Plan until all legal
requirements applicable to the issuance or transfer of such shares have been
complied with to the satisfaction of the Committee. The Committee shall have
the right to condition any issuance of shares of Common Stock made to any
participant upon such participant's written undertaking to comply with such
restrictions on his subsequent disposition of such shares as the Committee
or PBG shall deem necessary or advisable as a result of any applicable law,
regulation or official interpretation thereof, and certificates representing
such shares may be legended to reflect any such restrictions.

(e) Withholding Taxes. PBG shall have the right to deduct from all awards
hereunder paid in cash any federal, state, local or foreign taxes required
by law to be withheld with respect to such awards, and with respect to
awards paid or satisfied in stock, to require the payment (through
withholding from the participant's salary or otherwise) of any such taxes.
The obligations of PBG to make delivery of awards in cash or shares of
Common Stock shall be subject to currency or other restrictions imposed by
any government. With respect to withholding required upon the exercise of
stock options or SARs, upon the lapse of restrictions on restricted shares
or upon any other taxable event arising as a result of awards granted
hereunder, unless other arrangements are made with the consent of the
Committee, participants shall satisfy the withholding requirement by having
the Company withhold shares of Common Stock having a Fair Market Value on
the date the tax is to be determined equal to not more than the minimum
amount of tax required to be withheld with respect to the transaction unless
a fractional share is payable in which case, such minimum amount plus the
next highest share will be withheld. The Committee may permit a participant
to surrender or direct the withholding of other shares of Common Stock to
satisfy tax obligations but only if and to the extent that no additional
accounting expense would result to the Company under then applicable
accounting rules.

If a participant makes a disposition, within the meaning of Section 424(c)
of the Code and regulations promulgated thereunder, of any shares of Common
Stock issued to him pursuant to the exercise of an incentive stock option
within the two-year period commencing on the day after the date of the grant
or within the one-year period commencing on the day after the date of
transfer of such shares to the participant pursuant to such exercise, the
participant shall, within ten (10) days of such disposition, notify PBG
thereof, by delivery of written notice to PBG at its principal executive
office, and immediately deliver to PBG (or allow to be withheld from other
compensation) any taxes required to be withheld.

(f) No Implied Rights to Awards. Except as set forth herein, no employee or
other person shall have any claim or right to be granted an award under the
Plan. Neither the Plan nor any action taken hereunder shall be construed as
giving any employee any right to be retained in the employ of the Company.

B-11

DEF 14A 49th Page of 53 TOC 1st Previous Next ↓Bottom Just 49th
(g) Fractional Shares. Fractional shares of Common Stock shall not be issued or
transferred under an award, but the Committee may pay cash in lieu of a
fraction or round the fraction, in its discretion.

(h) Beneficiary Designation. To the extent allowed by the Committee, each
participant under the Plan may, from time to time, name any beneficiary or
beneficiaries (who may be named on a contingent or successive basis) to whom
any benefit under the Plan is to be paid in case of his or her death before
he or she receives any or all of such benefit. Unless the Committee
determines otherwise, each such designation shall revoke all prior
designations by the same participant, shall be in a form prescribed by the
Committee, and will be effective only when filed by the participant in
writing with the Company during the participant's lifetime. In the absence
of any such designation, benefits remaining unpaid at the participant's
death shall be paid to the participant's estate.

(i) Costs and Expenses. The cost and expenses of administering the Plan shall
be borne by PBG and not charged to any award or to any employee receiving an
award.

(j) Funding of Plan. PBG shall not be required to establish any special or
separate fund or to make any other segregation of assets to assure the
payment of any award under the Plan.

(k) Successors. All obligations of the Company under the Plan with respect to
awards granted hereunder shall be binding on any successor to the Company,
whether the existence of such successor is the result of a direct or
indirect purchase, merger, consolidation, or otherwise, of all or
substantially all of the business and/or assets of the Company.

11. EFFECTIVE DATE, AMENDMENTS AND TERMINATION.

(a) Effective Date. The Plan shall become effective on its approval by PBG's
shareholders.

(b) Amendments. The Committee may at any time terminate or from time to time
amend the Plan in whole or in part, but no such action shall materially
adversely affect any rights or obligations with respect to any awards
theretofore granted under the Plan without the consent of the affected
participant.

In addition, amendments to the Plan and any transaction that would
constitute a "repricing" shall be subject to shareholder approval to the
extent required under Section 303A.08 of the Listed Company Manual of the
New York Stock Exchange or Section 162(m) or 422 of the Code (or any
successor provision or provisions).

The Committee may, at any time, amend outstanding agreements evidencing
awards under the Plan in a manner not inconsistent with the terms of the
Plan; provided, however, that except as provided in Section 4(d) with
respect to the Company's Buy-Out right, if such amendment is materially
adverse to the participant, the amendment shall not be effective unless and
until the participant consents, in writing, to such amendment.

Notwithstanding the preceding provisions of this subsection (b), following
a Change in Control (as defined in Section 9), the Committee may not amend
the Plan or outstanding agreements evidencing awards under the Plan in a
way that would be adverse to a participant, even if the amendment would not
be materially adverse, without the written consent of the participant.

(c) Termination. No awards shall be made under the Plan on or after the tenth
anniversary of the date on which PBG's shareholders approve the Plan.
Determination of the award actually earned and payout or settlement of the
award may occur later, and as to any outstanding award, the Plan's terms
shall remain in effect (including authority under Section 11(b) relating to
the Committee's authority to modify outstanding awards).

B-12

DEF 14A 50th Page of 53 TOC 1st Previous Next ↓Bottom Just 50th
THE PEPSI BOTTLING GROUP, INC.

PROXY FOR ANNUAL MEETING OF SHAREHOLDERS

MAY 26, 2004

THIS PROXY IS SOLICITED ON BEHALF OF
THE PEPSI BOTTLING GROUP, INC.'S BOARD OF DIRECTORS

The undersigned hereby appoints John T. Cahill, Pamela C. McGuire, and
each of them, proxies for the undersigned, with full power of substitution, to
vote all shares of The Pepsi Bottling Group, Inc. Common Stock which the
undersigned may be entitled to vote at the Annual Meeting of Shareholders of The
Pepsi Bottling Group, Inc., in Somers, New York, on Wednesday, May 26, 2004 at
10:00 A.M., or at any adjournment thereof, upon the matters set forth on the
reverse side and described in the accompanying Proxy Statement and upon such
other business as may properly come before the meeting or any adjournment
thereof.

YOUR VOTE IS IMPORTANT! PLEASE SIGN AND DATE ON THE REVERSE AND RETURN
PROMPTLY IN THE ENCLOSED ENVELOPE.

(Continued and to be signed on other side)

THE PEPSI BOTTLING GROUP, INC.
P.O. BOX 11425
NEW YORK, N.Y. 10203-0425

DEF 14A 51st Page of 53 TOC 1st Previous Next ↓Bottom Just 51st
[PBG LOGO]
The Pepsi Bottling Group, Inc.

March 29, 2004

Your proxy card is attached below.

Please read the enclosed Proxy Statement, then vote and
return the card at your earliest convenience.

* FOLD AND DETACH HERE *
------------------------------------------------------------------------------

THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ITEMS 1, 2 AND 3.

Where no voting instructions are given, the shares represented by this Proxy
will be VOTED FOR Items 1, 2 AND 3.

Vote on Directors

1. Election of Directors: Nominees Linda G. Alvarado, Barry H. Beracha, John
T. Cahill, Ira D. Hall, Thomas H. Kean, Susan D. Kronick, Blythe J.
McGarvie, Margaret D. Moore, Rogelio Rebolledo and Clay G. Small

FOR all nominees [ ] WITHHOLD AUTHORITY [ ] EXCEPTIONS [ ]
to vote for all
nominees

(INSTRUCTION: To withhold authority to vote for any individual nominee, mark the
"EXCEPTIONS" box and write that nominee's name in the space provided below.)

*Exceptions
-------------------------------------------------------------------

Vote on Proposal

2. Approval of the PBG 2004 Long-Term Incentive Plan

FOR [ ] AGAINST [ ] ABSTAIN [ ]

3. Ratification of Independent Auditors

FOR [ ] AGAINST [ ] ABSTAIN [ ]

IF OTHER MATTERS ARE PROPERLY PRESENTED, THE PERSONS NAMED AS PROXIES WILL VOTE
IN ACCORDANCE WITH THEIR JUDGMENT WITH RESPECT TO THOSE MATTERS.

Change of Address and/ I PLAN TO ATTEND ANNUAL MEETING. If you
or Comments Mark Here [ ] check this box to the right an admission
card will be sent to you. [ ]

Receipt is hereby acknowledged of The Pepsi Bottling Group, Inc. Notice of
Meeting and Proxy Statement.

IMPORTANT: Please sign exactly as your name or names appear on this Proxy. Where
shares are held jointly, both holders should sign. When signing as attorney,
executor, administrator, trustee or guardian, please give your full title as
such. If the holder is a corporation, execute in full corporate name by
authorized officer.

Dated: 2004
----------------------------,

----------------------------------------
Signature

(Please sign, date and return this Votes MUST be indicated
proxy card in the enclosed envelope.) in black or blue ink. [x]

DEF 14A 52nd Page of 53 TOC 1st Previous Next ↓Bottom Just 52nd
------------------------------------------------------------------------------
Please Detach Here
* You Must Detach This Portion of the Proxy Card *
Before Returning it in the Enclosed Envelope

Directions to The Pepsi Bottling Group, Inc.
Somers, New York

----------------
MAPS
----------------

DIRECTIONS BY CAR

The Pepsi Bottling Group's Headquarters is located at the Intersection of Rt. 35
and Rt. 100 in Somers, New York. The headquarters has two entrances, one on Rt.
35 approximately 500 yards East of the intersection of Rt. 35 and Rt. 100 and
the second on Rt. 100 approximately 100 yards North of the Intersection of Rt.
35 and Rt. 100.

FROM I-684

If you are using I-684 (either North or South) take exit #6 (Katonah-Cross
River, Rt. 35) Take Rt. 35 West for approximately two miles. Entrance is on Rt.
35 approximately 500 yards East of the intersection of Rt. 35 and Rt. 100.

FROM MANHATTAN - WEST SIDE

West Side Highway/Henry Hudson Parkway to Saw Mill River Parkway. Saw Mill River
Parkway merges with I-684 at exit #6. Take exit #6 and follow directions above.

FROM MANHATTAN - EAST SIDE

FDR Drive to I-87 Major Deegan North to Saw Mill River Parkway and follow
directions above.

FROM BRONX - EAST SIDE

Hutchinson River Parkway North to I-684 (Brewster) North and follow directions
above.

FROM BROOKLYN AND J.F.K. AIRPORT

Van Wyck Expressway (676) to the Bronx Whitestone Bridge to Hutchinson River
Parkway North, Take I-684 (Brewster) North and follow directions above.

FROM LAGUARDIA AIRPORT

Grand Central Parkway East. Exit Whitestone Expressway. Cross the Whitestone
Bridge North to Hutchinson River Parkway to I-684 (Brewster) North and follow
directions above.

FROM LONG ISLAND AND QUEENS

Long Island Expressway or the Grand Central Parkway to the Cross Island Parkway.
Cross Island Parkway West to the Throgs Neck Bridge. Cross the Bridge North and
travel North on New England Thruway (Route 95) to Cross Westchester (I-287) to
(I-684) North and follow directions above.

FROM WEST OF HUDSON RIVER-TAPPAN ZEE BRIDGE

DEF 14A Last Page of 53 TOC 1st Previous Next ↓Bottom Just 53rd
Cross Tappan Zee Bridge South. Follow Cross Westchester (I-287) to I-684
(Brewster) North and follow directions above.

FROM CONNECTICUT-MERRITT PARKWAY

Take the Merritt Parkway South, which becomes the Hutchinson River Parkway to
I-684 (Brewster) North and follow directions above.

NEW ENGLAND THRUWAY

Follow the New England Thruway to Exit for Cross Westchester Expressway
Westbound to Exit 9 North, Hutchinson River Parkway to I-684 (Brewster) North
and follow directions above.

FROM CONNECTICUT - RT. 35

Heading West on Rt. 35 from the Connecticut/New York line (Ridgefield, CT.),
proceed on Rt. 35 past the intersection of I-684 and follow directions above.

DEF 14A	1st Page of 53	TOC	↑Top	Previous	Next	↓Bottom	Just 1st

DEF 14A	2nd Page of 53	TOC	1st	Previous	Next	↓Bottom	Just 2nd

DEF 14A	3rd Page of 53	TOC	1st	Previous	Next	↓Bottom	Just 3rd

DEF 14A	4th Page of 53	TOC	1st	Previous	Next	↓Bottom	Just 4th

DEF 14A	5th Page of 53	TOC	1st	Previous	Next	↓Bottom	Just 5th

DEF 14A	6th Page of 53	TOC	1st	Previous	Next	↓Bottom	Just 6th

DEF 14A	7th Page of 53	TOC	1st	Previous	Next	↓Bottom	Just 7th

DEF 14A	8th Page of 53	TOC	1st	Previous	Next	↓Bottom	Just 8th

DEF 14A	9th Page of 53	TOC	1st	Previous	Next	↓Bottom	Just 9th

DEF 14A	10th Page of 53	TOC	1st	Previous	Next	↓Bottom	Just 10th

DEF 14A	11th Page of 53	TOC	1st	Previous	Next	↓Bottom	Just 11th

DEF 14A	12th Page of 53	TOC	1st	Previous	Next	↓Bottom	Just 12th

DEF 14A	13th Page of 53	TOC	1st	Previous	Next	↓Bottom	Just 13th

DEF 14A	14th Page of 53	TOC	1st	Previous	Next	↓Bottom	Just 14th

DEF 14A	15th Page of 53	TOC	1st	Previous	Next	↓Bottom	Just 15th

DEF 14A	16th Page of 53	TOC	1st	Previous	Next	↓Bottom	Just 16th

DEF 14A	17th Page of 53	TOC	1st	Previous	Next	↓Bottom	Just 17th

DEF 14A	18th Page of 53	TOC	1st	Previous	Next	↓Bottom	Just 18th

DEF 14A	19th Page of 53	TOC	1st	Previous	Next	↓Bottom	Just 19th

DEF 14A	20th Page of 53	TOC	1st	Previous	Next	↓Bottom	Just 20th

DEF 14A	21st Page of 53	TOC	1st	Previous	Next	↓Bottom	Just 21st

DEF 14A	22nd Page of 53	TOC	1st	Previous	Next	↓Bottom	Just 22nd

DEF 14A	23rd Page of 53	TOC	1st	Previous	Next	↓Bottom	Just 23rd

DEF 14A	24th Page of 53	TOC	1st	Previous	Next	↓Bottom	Just 24th

DEF 14A	25th Page of 53	TOC	1st	Previous	Next	↓Bottom	Just 25th

DEF 14A	26th Page of 53	TOC	1st	Previous	Next	↓Bottom	Just 26th

DEF 14A	27th Page of 53	TOC	1st	Previous	Next	↓Bottom	Just 27th

DEF 14A	28th Page of 53	TOC	1st	Previous	Next	↓Bottom	Just 28th

DEF 14A	29th Page of 53	TOC	1st	Previous	Next	↓Bottom	Just 29th

DEF 14A	30th Page of 53	TOC	1st	Previous	Next	↓Bottom	Just 30th

DEF 14A	31st Page of 53	TOC	1st	Previous	Next	↓Bottom	Just 31st

DEF 14A	32nd Page of 53	TOC	1st	Previous	Next	↓Bottom	Just 32nd

DEF 14A	33rd Page of 53	TOC	1st	Previous	Next	↓Bottom	Just 33rd

DEF 14A	34th Page of 53	TOC	1st	Previous	Next	↓Bottom	Just 34th

DEF 14A	35th Page of 53	TOC	1st	Previous	Next	↓Bottom	Just 35th

DEF 14A	36th Page of 53	TOC	1st	Previous	Next	↓Bottom	Just 36th

DEF 14A	37th Page of 53	TOC	1st	Previous	Next	↓Bottom	Just 37th

DEF 14A	38th Page of 53	TOC	1st	Previous	Next	↓Bottom	Just 38th

DEF 14A	39th Page of 53	TOC	1st	Previous	Next	↓Bottom	Just 39th

DEF 14A	40th Page of 53	TOC	1st	Previous	Next	↓Bottom	Just 40th

DEF 14A	41st Page of 53	TOC	1st	Previous	Next	↓Bottom	Just 41st

DEF 14A	42nd Page of 53	TOC	1st	Previous	Next	↓Bottom	Just 42nd

DEF 14A	43rd Page of 53	TOC	1st	Previous	Next	↓Bottom	Just 43rd

DEF 14A	44th Page of 53	TOC	1st	Previous	Next	↓Bottom	Just 44th

Dates Referenced Herein and Documents Incorporated by Reference

		Referenced-On Page
This ‘DEF 14A’ Filing	Date	First	Last	Other Filings

	5/26/14	30
	12/31/07	14	20
	3/30/06	16
	12/31/05	14	20	10-K
	3/30/05	16		4
	2/20/05	32
	12/2/04	11	32
For Period End:	5/26/04	2	50
	4/5/04	5
	3/30/04	16		8-K
Filed on / Effective on:	3/29/04	2	51
	3/25/04	8	26
	2/20/04	12	27
	2/13/04	12
	2/6/04	12		SC 13G
	1/23/04	34
	1/1/04	18
	12/27/03	15	23	10-K, 5, 8-K
	12/26/03	16	23
	4/1/03	12
	3/1/03	14
	12/28/02	22		10-K, 10-K/A
	4/1/02	12
	2/11/02	12		SC 13G/A
	4/2/01	12
	6/1/00	12
	12/25/99	17		10-K
	3/31/99	23		424B4
	3/30/99	17
				List all Filings

↑Top

Filing Submission 0000950123-04-003924 – Alternative Formats (Word / Rich Text, HTML, Plain Text, et al.)

Pepsi Bottling Group Inc – ‘DEF 14A’ for 5/26/04

On: Monday, 3/29/04, at 4:58pm ET · Effective: 3/29/04 · For: 5/26/04 · Accession #: 950123-4-3924 · File #: 1-14893

Previous ‘DEF 14A’: ‘DEF 14A’ on 3/31/03 for 5/28/03 · Next: ‘DEF 14A’ on 3/31/05 for 5/25/05 · Latest: ‘DEF 14A’ on 4/7/09 for 5/27/09

Definitive Proxy Solicitation Material — Schedule 14AFiling Table of Contents

Document Table of Contents

Dates Referenced Herein and Documents Incorporated by Reference

Definitive Proxy Solicitation Material — Schedule 14A
Filing Table of Contents