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This excerpt taken from the PBG DEF 14A filed Mar 31, 2006. Impact of Internal Revenue Code
Section 162(m).
Section 162(m) of the Code limits 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 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 2005, the annual salary paid to Mr. Cahill
and the other Covered Executives was in each case less than one
million dollars. The 2005 annual incentives were all paid
pursuant to the EICP and will, therefore, be deductible when
paid, to the extent permitted by Section 162(m). The 2005
awards of restricted stock units and stock options 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. In the case of annual salary paid to a
Covered Executive in excess of one million dollars, the
Committee may mandate the deferral of payment of such excess
amount to the extent that such amount would not be deductible
under Section 162(m) but for the deferral.
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