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PURCHASING POLICY To establish a policy to ensure that commitments of Operating Company funds are properly authorized and controlled. SCOPE This Policy applies to all divisions, subsidiaries and joint ventures, which are accounted for under the consolidation or equity method (hereinafter, Operating Company) of Frito Lay International (FLI). STATEMENT of POLICY It is a FLIs policy that procurements will be made to the best advantage of Frito Lay Company without favoritism. Best advantage is defined as the most favorable offer available in the competitive market (need to take into consideration engineered cost structures (non competitive bidding) and product insulation) considering quality, responsiveness to specification, delivery, price, transportation, cost, performance and payment terms. Therefore, a formal purchasing policy must be developed for each Operating Company in order to conduct our purchasing activities with the best advantage. 1.0 Definitions Requisitions Authorizations to procure goods or services. Requisitioning Identifying the items, materials, commodities and services needed. Purchasing Procuring the items requested 2.0 Objectives

The Purchasing Policy encompasses three major objectives: 1. To make the most advantageous procurement decisions possible. To accomplish this objective, the policy provides guidelines for: The development, review and use of qualified vendor lists; The use of competitive quotation procedures; and The use of different methods of procurement. 2. To provide an effective control mechanism within the procurement process by establishing separate lines of authority for: Requisitioning; Purchasing; Receiving; and Safeguarding of assets.

Each function/department maintains requisitioning authority. The department heads are responsible for initiating requisitions. Requisitioners must ensure that expenditure is proper and is either within budget or is an approved capital appropriation. 3. To provide additional focus to the planning of future purchasing requirements and identify methods which can be employed by the Operating Company in order to meet its purchasing needs at the most favorable prices. 3.0 GENERAL PROCEDURES ADMINISTRATION Each Operating company (and region office) shall assign an individual as the functional manager of the purchasing process. This manager will have full responsibility and authority to administer and control the process of purchasing all goods and services for the Operating

Company, under the provisions of this policy. In smaller Operating Companies, the manager of purchasing may be the only individual in a functional area empowered to commit the Operating Company to the purchase of raw and packaging material and other goods and services. In larger Operating companies, the purchasing manager may need to appoint additional qualified staff who will have authority to make purchase commitments. PURCHASING COMMITTEE Depending upon the size of the Operating Company and the Companys particular needs, a Purchasing Committee may need to be established. A Purchasing Committee should have ultimate responsibility and authority to control the Purchasing function. The Committee should be composed of representatives from all relevant business functions. ( i.e., Finance, Operations, etc.). Responsibilities include: of the Purchasing Committee should

Review of policies (Controller), procedures (Head of Purchasing) and performance (Head of Operations) of the Purchasing Department; Approval of the Annual Purchasing Plan (Head of Operations and General Manager); Review and approval of the Operating Companys Authorization Limits (jointly Controller and Head of Purchasing); and Review and approval of bidding process (Head of Purchasing, including of quote documentation). Where an Operating company has determined that a Purchasing Committee is not necessary (e.g., impractical due to size of company), the General Manager or Head of Operations should fulfill the above responsibilities in the absence of a Purchasing Committee with the assistance of Finance (CFO/Controller) in developing and assuring policy compliance.

ANNUAL PURCHASING PLAN To achieve the objective of planning future purchasing requirements and improving methods of meeting the Operating Companys purchasing needs at the most favorable prices, competitive insulation, alignment, technical competency, quality and reliability, the manager of the purchasing function should compile and the Purchasing Committee should review an Annual Purchasing Plan (APP). The plan should identify all major items and services to be procured during the next year as well as estimates of quantities and cost for each item. ( See also, Commodity Buying, below) SEGREGATION of DUTIES Proper checks and balances must be established to control purchasing transactions and safeguarding assets. Responsibility for approving purchase orders is assigned to the purchasing function, in accordance with this policy. Separate individuals shall have responsibility for the following duties: Committing the Operating Company to the purchase and preparation of the Purchase Order (purchasing function); Receiving goods and verifying amounts and specifications against shipping documents (receiving department); Approving vendors invoices: the accounts payable department must receive a signed receiving document before a vendor invoice can be approved for payment; Disbursing cash: when the vendor invoice is approved for payment, proper authorization must be obtained to disburse funds in accordance with the Operating Companys cash disbursement policies and procedures (cash disbursement clerk should not be part of the payable department); Internal control: the accounting function shall have responsibility for maintaining proper records for inventories, operating and capital expenditures,

accounts payable and cash payments, and for conducting periodic audits and physical inventory counts to verify records; Maintaining custody of assets: the requisitioner will have responsibility for maintaining custody of assets received and for verifying the receipt of services. COMMODITY BUYING The manager of purchasing should develop detailed procedures for and closely monitor the purchasing of certain ingredient commodities used in the normal course of the Operating Companys operations. An annual plan for the procurement of agricultural material should also be developed. The plan should include projections of the Operating Companys needs for commodity products, current and prior years market prices and estimates for the future prices, and plans for purchasing (i.e., futures and/or forward contracts, spot purchases, storage needs). This plan should be reviewed quarterly by the Purchasing Committee to monitor success of the plan in achieving the purchasing objectives of the Operating Company ( see below, section 10.0 Post-Audit of Purchasing Transactions) Participation in commodity trading will be protective forward buying of commodities to be normal course of the Operating Companys Trading on a speculative basis for the gaining windfall profit is prohibited. limited to used in the operations. intent of

Forward Buying Forward buying means the use of trading instruments to enter into agreements to purchase commodities in the future at predetermined prices. Trading instruments include: Futures Contracts Standardized agreements traded on organized exchanges (e.g., Chicago Board of Trade, Coffee, Sugar and Cocoa Exchange, Chicago Mercantile Exchange)

Forward Contracts Non Standardized agreements between the purchaser and seller that obligate the purchaser to accept delivery and the seller to make delivery of an agreed-upon quantity of a commodity at a specified future date or during a specified future period for a specified price. Protective Forward Buying The use of trading instruments which provide protection to reduce the Operating Companys exposure to market price and/or supply fluctuations. To be considered protective, the forward buying must involve commodities that are used in the normal course of the Operating Companys business. The quantities to be purchased forward must be reasonable (i.e., cannot be excessive) given the Operating Companys forecasted annual requirements to the commodity. SHOPPING Is a procurement method based on comparing price quotations obtained from several suppliers, usually a minimum of three. Shopping will be used for procurement of items costing below USD$2.500 per order. Quotations will be sought from registered vendors. Awards for business will be made to the supplier offering the lowest price. REQUEST FOR QUOTATION Request for quotation are informal solicitation documents that are normally used for contract values and commercial terms for goods, works, or services that meet standard specifications. Such informal quotations are typically requested from local suppliers. REQUEST FOR PROPOSAL Request for proposals are generally issued for high-value service contracts that require services to be customized to fit unique circumstances. Specifications are often complex and the evaluations of proposals thus take significantly longer than evaluations of normal bids, Criteria such as delivery time, availability and quality of on-site support

services, clarity of technical manuals, ability to understand local language and culture, and ability to dispatch skilled personnel to a field missions, etc. are likely to be determining factors other than price for the award of contract. Contracts are typically awarded to the offer that presents the best value in accordance with the evaluation criteria. LIMITED INTERNATIONAL COMPETITIVE BIDDING (LIB) Limited International Competitive Bidding is typically only open to pre qualified suppliers. This method of bidding is mostly used in emergency or urgent situations where lead times need to be kept at a minimum and for certain categories of commodities, e.g. products with short shelf lives and/or with specific quality requirements. Submission of the registrations form will serve as a request for pre qualification for potential supplier of items in the above categories. Basically, the pre qualifying process requires the supplier to prove that the/she can meet specific requirements detailed by the Operating Company. INTERNATIONAL COMPETITIVE BIDDING Invitations to bid are issued for high-value contracts that require formal competitive procedures. Invitation to bid is open a typically advertised on a public access media. Potential suppliers submit bids based on the requirements outlined in the Bidding Document and the award is made to the lowest priced, technically acceptable bidder or best value. PURCHASING COMMITTEE CONTRACTS REVIEW In accordance with the Operating Unit financial regulations and rules, the Contracts Review Committee (CRC) at headquarters is established to formulate recommendations to the Executive Director on any contract that Operating Company proposes to enter into for a purpose totaling US$100.000 or more. The Executive Director approves the final decision on award of contract.

E-PROCUREMENT E-Procurement (Electronic Procurement) is the business-tobusiness purchase and sale of supplies and services through the Internet as well as other information and networking systems, such as electronic data interchange (SDI) and enterprise resource planning (ERP). EProcurement web sites allow qualified and registered users to look for buyers or sellers of goods and services. Depending on the approach, buyers or sellers may specify prices or invite bids. E-procurement software makes it possible to automate some buying and selling. Companies participating expect to able to control part inventories more effectively, reduce purchasing agent overhead and improve manufacturing cycles. FUNCTIONAL REVIEW The manager of purchasing should conduct the appropriate review of the purchasing function on an annual basis. CONFLICT of INTEREST All purchasing personnel are subject to the PepsiCo Worldwide Code of Conduct in the performance of their duties and shall avoid all conflicts of interest ( see, FLI Policy). 4.0 REQUISITIONING of GOOD and SERVICES All purchases (greater than $2M) must be initiated by an approved requisition. Department heads will have the requisitioning authority for his/her function within the limits established by the Operating Company. A standard requisition form shall be used to provide written notification to the manager of purchasing that goods or services are required. Detailed generic specifications of the items needed should be provided on a timely basis so the manager of purchasing may solicit and evaluate competitive quotes from vendor, select a vendor and issue a Purchase Order.

5.0 COMPETITIVE QUOTATION / BIDDING PROCESS In order to ensure that purchases are made at the most favorable price and terms, it is preferable that at least three, but no less than two, competitive quotations be solicited from vendor. All quotes should be written; oral quotes should be confirmed in writing. All companies responding to a request for quotation should submit their best bid. Information to be included with the quotations includes the following:
Vendor name and address; Vendor name and address; Shipping terms and delivery date: Shipping terms and delivery date: Item number, quantities and price; Item number, quantities and price; Warranty / guarantee information; Warranty / guarantee information; Any unique item specifications; Any unique item specifications; Expiration date of quotation; Expiration date of quotation; Payment terms; Payment terms; Signature // title of the representative Signature title of the representative

Purchase of goods and services for $5.000 (to be tailored to each specific country) or more requires bids in writing for a minimum of three suppliers. Bidding Process The bidding process will be carried as follows: Preparation of bid requirement and getting authorization based on the purchase request; Mailing bids; Performing follow-up of non-responsive bids; Tabulating the results of the bid process; Filling out the quotation form including all replies with a summary of the financial terms and conditions.

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Quotes should be obtained by the purchasing department. The purchasing manager should select one of the bids, taking into consideration factors such as quality of the product, reliability of the vendor, price, etc. The purchasing manager should then document the reasons for the selection of a particular quote, giving this as well as other bids to the purchasing committee for review. The Purchasing Committee should review and approve the bid selected as well as the bidding process a s whole. CONTROL OF QUOTATIONS No one shall disclose a bidders quotation to other bidders. A deadline date shall be set for receiving quotations from vendors. VENDOR SELECTION Selection of the vendor should be based on the most favorable price and terms consistent with quality and on the vendors ability to perform in a timely manner. Bids within 5% of the lowest bid are deemed to be equally competitive. Factors to consider other than price when considering competitive bids include: Maintenance of adequate or multiple sources of supply; High standards of quality and reliability; Ability to meet service and delivery dates; Need for specific brands; Financial stability of the vendor; Payment terms; Effect upon relations with customers in the local business community; Long term/strategic relationship/partnership; Ability to simplify and bundle leveraging anothers company competency more broadly (outsourcing).

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All instances of selection of other than the lowest bidder must adequately justified in writing and maintained in the purchasing records. Situations may arise where an operating company function or location may become dependent on a vendor for a particular food or service for reasons such as: Vendor has a long and positive work history with the Operating Company Vendor has a working knowledge of the Operating Companys machinery/equipment or plant specifications Vendor is convenient to the location In these situations, the appropriate Purchasing Official should review the purchasing rationale and balance the needs with the barrier(s) to entry by other suppliers. Action should be taken to eliminate the vendor dependency and promote relationships with other capable suppliers. If single-sourcing is evaluated to be in the best interest of the Operating Company, refer to the paragraphs below. SINGLE-SOURCING PURCHASING For certain items, the Operating Company may prefer a particular vendor. Although alternative sources may exist, one vendor may be preferred because of better terms, service, delivery or special expertise. Al least annually, purchases from single-sourcing suppliers must be reviewed by the manager of purchasing to ensure the following: that an acceptable alternative source is not available, that will provide similar benefits at a lower or equal price, that the price charged is not excessive in comparison to other vendors, giving consideration to the additional benefits received from the preferred source, and that the transactions are at arms length. Review by regional purchasing for ensuring that a regional supplier would not provide competition. SOLE SOURCE PURCHASING

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Certain items may only be available from a single supplier. The manager of purchasing has the responsibility to ensure that sole-sourcing is to the best advantage of the Operating Company. An annual review of all sole-source procurement must be conducted by the manager of purchasing to assess these relationships and develop a program to seek alternative sources. WAIVER of OBTAINNING COMPETITIVE QUOTATIONS Situations will arise where obtaining competitive quotations is not feasible or practical. Example of these situations are set out below: Specialized purchasing functions, including: Law firm services; Annual audit by public accountants; Charitable contributions; Acquisition of real state; Taxes, dues and subscriptions; Utilities, rent, postage.

The Head of Operations and Chief Operating Officer may waive the requirements for obtaining competitive quotations in the following situations : When it is clear that an item can be obtained from one source only; When raw materials are available in the open commodity market. Operating personnel may waive competitive quotations under the following circumstances without prior permission: When purchasing an item(s) for which a bid has been received for the identical item(s) within the past six months;

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When an emergency requirement exists for an item or service: (emergency situations should be rare-frequent emergency requests should be monitored by the purchasing manager to ensure this allowance is no abused). When competitive quotations are not obtained, the purchaser should document, in writing, the following items to be maintained with the purchasing records: Name and signature of the purchaser; Vendor name and address; Cost of the purchase; and Reason for the waiver. 6.0 METHODS OF PROCUREMENT All purchases must be made via properly prepared and approved Purchase Orders or written contracts. For Capital Expenditure refer to CAPEX manual and Accounting for Property. Plant & Equipment. Purchase Orders document an agreement by the Operating Company and a vendor for the purchase and delivery of goods at the specified price and terms. The manager of purchasing will be assigned pre-numbered Purchase Orders and will have responsibility for controlling the receipt and issuance of all Purchase Orders. All Purchase Orders issued to the manager of purchasing must be numerically accounted for. Copies of all issued and canceled forms (marked Void) must be retained on file. All contracts for the purchase of capital assets or for capital leases are to be covered by a Capital Appropriation Request. Contracts are required for real estate acquisitions, building construction, non-standard purchases, long-term commitments or large blanket orders and services. Authority to approve Purchase Orders and contracts is vested in individuals by the manager of purchasing with the

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approval of the General Manager and is subject to the limits defined in a signing authority Limits Table. Blanket Purchase Orders may be used for longterm, indefinite quantity purchases which are negotiated with a qualified supplier, only when high volume centralized buying or other advantages offset the negotiated price. Blanket Purchase Orders must all be approved by the General Manager, and should not be issued for periods in excess of one year or for amounts in excess of specified limits. Such arrangements must be reviewed at least semi-annually by the manager of purchasing with regard to price, performance, service, quality and other terms. The guidelines for obtaining competitive quotations apply to Blanket Purchase Orders. The Operating Company shall establish review procedures to ensure that limitations on Purchase Order authority are not exceeded by the con current placement of several Purchase Orders below the limit for the same item. Approval for multiyear contracts must be obtained by the Region. Any changes to an order must be executed through the issuance of a revised Purchase order. The original Purchase order should not be altered. Changes require the same level of control and approval as the original, the total value being the value of the original Purchase Order plus the value of the revision. Under no circumstances will Purchase order be accepted. an after-the-fact

Authority limits for requisitioning and approving Purchase Orders must be established by the manager of purchasing. The limits must be approved by the Purchasing Committee or its equivalent and the CFO of the Operating Company.

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7.0 REBATES All procurement transactions involving rebates from vendors must be formally documented through a Rebate Agreement specifying the rebate amount, time of payment and entity to be paid. It is the responsibility of the Operating Companys Controller to ensure all rebates are accrued on a timely basis. 8.0 APPROVED VENDOR LIST The Purchasing Committee shall establish the relevant criteria upon which to evaluate vendors; these criteria should be documented in the Operating Companys purchasing manual. The extent of a vendor evaluation should be related directly to the amount and nature of the purchase. The Committee shall also establish procedures to conduct and document vendor evaluations and approval decisions. The decision for selecting a vendor should be based on a balance of the following: Price and terms; Quality and service; Technological expertise; Past performance; Reputation and professionalism; Financial stability; Convenience; Related parties; Innovation; Productivity; Alignment;

The purchasing manager will be responsible for conducting the evaluation and maintaining the necessary documentation related to the evaluation. Before a vendor

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may be added to the Approved Vendor List, the Purchasing Committee must review the records and approve the recommendation.