What is the main purpose of the 2004 Executive Incentive Compensation Plan (EICP)?

The primary purpose of the EICP is to provide incentive compensation to key executives that qualifies as 'performance-based' compensation, thus exempting it from the $1 million deduction limit under Section 162(m) of the Internal Revenue Code.

How are performance goals for executive compensation determined?

Performance goals are established annually by PepsiCo's Compensation Committee in the first quarter. These targets are generally based on earnings per share (EPS) and must be met for any incentive award to be made. The committee may also consider additional targets such as volume and profit for the executive's line of business, and potentially qualitative factors.

Can the Compensation Committee adjust the incentive awards?

Yes, the Compensation Committee has the authority to exercise 'negative discretion' to reduce the maximum award amount if pre-established targets are met. This discretion can be guided by additional performance metrics and qualitative factors, ensuring that awards reflect overall company and divisional performance.

Are there any specific conditions for the payment of incentive awards?

For certain executive officers, a portion of their cash incentive award will be paid in equal installments over a three-year period. This payment is contingent on the executive's continued employment with PepsiCo, although immediate vesting can occur in cases of retirement, death, or disability, as determined by the Compensation Committee.

PEP 8-K SEC Disclosure — Mar 23, 2005

Summary

This Form 8-K filing from PepsiCo, Inc. (PEP) on March 23, 2005, primarily provides details regarding its 2004 Executive Incentive Compensation Plan (EICP). The plan was adopted in January 2004 and approved by shareholders in May 2004. The key objective of the EICP is to ensure that incentive payments to executives qualify as "performance-based" compensation, thereby exempting them from the $1 million deduction limit imposed by Section 162(m) of the Internal Revenue Code.

Key Highlights

1PepsiCo's 2004 Executive Incentive Compensation Plan (EICP) is detailed.
2The EICP aims to align executive compensation with company performance.
3Payments under the EICP are designed to be exempt from the Section 162(m) $1 million deduction limit.
4The Compensation Committee determines eligible executives and sets performance goals.
5Performance goals are typically based on earnings per share (EPS) and are established quarterly.
6The Compensation Committee can use negative discretion to reduce awards based on additional targets like volume, profit, and qualitative factors.
7A portion of awards for certain executives may be paid over three years, contingent on continued employment.

PEPSICO INC 8-K Report, Corporate Update (Mar 23, 2005)

Summary

Key Highlights

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