UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

SCHEDULE 14A

(RULE 14a-101)
SCHEDULE 14A INFORMATION

Filed by the Registrant þ

Filed by a Party other than the Registrant o

Check the appropriate box:

o		Preliminary proxy statement.
o		Confidential, for use of the Commission only (as permitted by Rule 14a-6(e)(2)).
þ		Definitive proxy statement.
o		Definitive additional materials.
o		Soliciting material under Rule 14a-12.

PEPSIAMERICAS, INC.

(Name of Registrant as Specified in Its Charter)

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

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PepsiAmericas, Inc.

4000 RBC Plaza

60 South Sixth Street

Minneapolis, Minnesota 55402

Robert C. Pohlad

Chairman and Chief Executive Officer

 

March 18, 2009

 

Dear Shareholder:

 

We are pleased to invite you to attend the 2009 Annual Meeting of Shareholders of PepsiAmericas, Inc., to be held on May 7, 2009, at 10:30 a.m., local time, at the Four Seasons Hotel, 120 East Delaware Place, Chicago, Illinois.

 

All shareholders of record and beneficial owners as of the record date for our annual meeting may now access, free of charge, our proxy materials on the Internet. In addition, all shareholders will receive either a notice of Internet availability of proxy materials referring them to a specific website, or paper copies of our proxy materials.

 

In order to complete arrangements for the meeting, we would like to know in advance how many shareholders expect to attend. If you plan to attend, please advise us when voting by telephone or Internet or check the box provided on the proxy card.

 

We look forward to seeing you at the meeting.

 

 

Robert C. Pohlad

Chairman and Chief Executive Officer

PEPSIAMERICAS, INC.
4000 RBC Plaza
60 South Sixth Street
Minneapolis, Minnesota 55402

 

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS

 

Date:   May 7, 2009

 

Time:  10:30 a.m., local time

 

120 East Delaware Place

Chicago, Illinois

 

Purposes:

 

 

The close of business on March 10, 2009, has been fixed as the record date for determination of shareholders entitled to notice of and to vote at the meeting. A complete list of the shareholders entitled to vote at the meeting will be open to the examination of any shareholder, for any purpose germane to the meeting, during ordinary business hours, during the ten days prior to the meeting at our offices at 4000 RBC Plaza, 60 South Sixth Street, Minneapolis, Minnesota 55402.

 

Even if you plan to attend the meeting, please vote your shares as promptly as possible. If you attend the meeting, you may vote your shares in person if you wish.

 

By Order of the Board of Directors

 

 

Brian D. Wenger

Corporate Secretary

 

Minneapolis, Minnesota

March 18, 2009

TABLE OF CONTENTS

 

 

PEPSIAMERICAS, INC.
4000 RBC Plaza
60 South Sixth Street
Minneapolis, Minnesota 55402

 

PROXY STATEMENT

 

ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 7, 2009

 

We manufacture, distribute and market a broad portfolio of PepsiCo and other national and regional beverage brands. We are the second largest bottler in the Pepsi system, with operations in the United States, Central and Eastern Europe and the Caribbean. Our principal executive offices are located at 4000 RBC Plaza, 60 South Sixth Street, Minneapolis, Minnesota 55402, and our telephone number is (612) 661-3883.

 

Our meeting will be held on May 7, 2009, at 10:30 a.m., local time, at the Four Seasons Hotel, 120 East Delaware Place, Chicago, Illinois. No cameras or recording equipment will be permitted at the meeting. However, our meeting will be webcast. If you are unable to attend the meeting in person, you are invited to visit www.pepsiamericas.com at 10:30 a.m., Central Daylight Saving Time, on May 7, 2009, to listen to the webcast of the meeting. An archived copy of the webcast also will be available on our website.

 

We are furnishing these proxy materials to you because our Board of Directors is soliciting your proxy to vote your shares at the meeting. “Proxy materials” means this proxy statement, our 2008 Annual Report and any amendments or updates to these documents.

 

In accordance with rules and regulations adopted by the Securities and Exchange Commission, we are now furnishing our proxy materials on the Internet. Our proxy materials are available on the Internet to shareholders who have received the required control numbers at www.proxyvote.com and to the general public at www.pepsiamericas.com.

 

If you received a notice of Internet availability of proxy materials by mail (the “notice”), you will not receive a printed copy of the proxy materials unless you request one, as described in the notice. Instead, the notice will instruct you how to access and review all of the important information contained in the proxy materials, and will connect you to various means to vote. On approximately March 18, 2009, we will send either the notice or our proxy materials to all shareholders of record and beneficial owners as of the close of business on March 10, 2009 (the “record date”). On the record date there were 124,899,755 shares outstanding and approximately 8,095 shareholders of record.

 

A quorum is necessary to hold a valid meeting. The attendance by proxy or in person of holders of 51 percent of the shares entitled to vote at the meeting will constitute a quorum to hold the meeting. Abstentions and broker non-votes are counted as present for establishing a quorum. A broker non-vote occurs when a broker votes on some matter but not on others because the broker does not have the authority to do so.

 

If a properly executed proxy is submitted and the shareholder has abstained from voting on the election of a director, the shares represented by such proxy will be considered present at the meeting for purposes of determining a quorum, but will not be considered to be represented at the meeting for purposes of calculating the vote with respect to such matter. If a properly executed proxy is submitted and the shareholder has abstained from voting on any other matter, the shares represented by such proxy will be considered present at

the meeting for purposes of determining a quorum and for purposes of calculating the vote, but will not be considered to have been voted in favor of such matter.

 

If a properly executed proxy is submitted by a broker holding shares in street name which indicates that the broker does not have discretionary authority as to certain shares to vote on one or more matters, such shares will be considered present at the meeting for purposes of determining a quorum, but will not be considered to be represented at the meeting for purposes of calculating the vote with respect to such matters.

 

You are entitled to one vote for each share of common stock that you own as of the close of business on the record date. Please carefully read the instructions below on how to vote your shares. Because the instructions vary depending on how you hold your shares, it is important that you follow the instructions that apply to your particular situation.

 

Voting by proxy.  Even if you plan to attend the meeting, please execute the proxy promptly by following the telephone or Internet voting instructions provided to you, or by signing, dating and returning the proxy card by mail.

 

Voting in person at the meeting.  If you plan to attend the meeting, you can vote in person. In order to vote at the meeting, you will need to bring your share certificates or other evidence of your share ownership with you to the meeting.

 

Revoking your proxy.  As long as your shares are registered in your name, you may revoke your proxy at any time before it is exercised. There are several ways you can do this:

 

 

Voting by proxy.  If your shares are registered in the name of your broker or nominee, you will receive instructions from the holder of record that you must follow in order for your shares to be voted.

 

Voting in person at the meeting.  If you plan to attend the meeting and vote in person, you should contact your broker or nominee to obtain a broker’s proxy card and bring it and your account statement or other evidence of your share ownership with you to the meeting.

 

Revoking your proxy.  If your shares are held in street name, you must contact your broker to revoke your proxy.

 

By giving us your proxy, you authorize the individuals named as proxies to vote your shares in the manner you indicate at the meeting or any adjournments thereof.

 

Election of Directors

 

With respect to the election of individual nominees for director, you may:

 

 

 

Because the number of nominees properly nominated for the meeting is the same as the number of directors to be elected at the meeting, the 2009 election of directors is a non-contested election. Therefore, if a quorum is present at the meeting, the nominees receiving a majority of votes cast will be elected to serve as directors. For additional information, please see “Majority Voting Standard and Director Resignation Policy” below.

 

Other Proposals

 

With respect to the other proposals presented in this proxy statement, you may:

 

 

Submitting a Proxy without Voting Instructions

 

If you give us your proxy but do not specify how you want us to vote your shares, your shares will be voted as follows:

 

 

Costs and Manner of Proxy Solicitation

 

We will bear the cost of soliciting proxies. We also will request brokers, custodians, nominees and others to forward soliciting material to beneficial owners of shares held as of the record date and will reimburse said persons for their reasonable expenses so incurred. Our officers and employees may, by letter, telephone, facsimile, electronic mail, or in person, make additional requests for proxies, although we do not reimburse our own employees for soliciting proxies.

 

Under the majority vote standard for the election of directors set forth in our By-Laws, a majority of the votes cast means that the number of shares voted “for” a director must exceed the number of votes cast “against” that director. Abstentions and broker non-votes will have no effect on the election of a director since only votes “for” and “against” a nominee will be counted. In contested elections, the vote standard is a plurality of the votes cast. An election will be considered “contested” if the number of properly and timely nominated nominees, in accordance with our By-Laws, exceeds the number of directors to be elected.

 

PepsiAmericas is a Delaware corporation, and, under Delaware law, if an incumbent director is not elected, that director continues to serve as a “holdover director” until the director’s successor is duly elected and qualified. Our director resignation policy addresses this potential outcome. In particular, if the votes cast “for” an incumbent director nominee do not exceed the votes cast “against” that director, such incumbent director will offer to tender his or her resignation to the Board. The Governance, Finance and Nominating Committee will then make a recommendation to the Board on whether to accept or reject the resignation, or whether other action should be taken. Subject to the policy, the Board will act on the committee’s recommendation within 90 days from the date of the certification of the election results. Following the determination by the Board, our company will promptly disclose publicly the Board’s decision, including an explanation of the process for reaching its decision and, if applicable, the reasons for rejecting the resignation offer.

 

Representatives of Broadridge Financial Solutions, Inc. will tabulate votes and act as inspectors of election at the meeting. All votes will be tabulated by the inspectors of election, who will separately tabulate affirmative and negative votes, abstentions and broker non-votes.

 

We encourage you to conserve natural resources and help reduce our company’s printing and mailing costs by signing up to receive future shareholder communications via e-mail. With electronic delivery, we will send you an e-mail containing our proxy materials, and you can submit your vote upon the receipt of such e-mail. To sign up for electronic delivery for future communications, visit our website at www.pepsiamericas.com in the Investors’ section under “electronic delivery enrollment.”

 

Your electronic delivery enrollment will be effective until you cancel it. If you have questions about electronic delivery, please call our Investor Relations department at (612) 661-3883.

 

Our directors are elected each year at the annual meeting by our shareholders. We do not have a classified Board of Directors. Ten directors will be elected at this year’s meeting. Each director’s term lasts until the 2010 Annual Meeting of Shareholders and until he or she is succeeded by another qualified director who has been elected. All the nominees are currently directors of our company. There are no familial relationships between any director and executive officer.

 

If a nominee is unavailable for election, the proxy holders may vote for another nominee proposed by the Board or the Board may reduce the number of directors to be elected at the meeting. Set forth below is information furnished with respect to each nominee for election as a director.

 

 

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU
VOTE FOR EACH OF THE NOMINEES.

 

Our Board of Directors represents the interests of our shareholders as a whole and is responsible for directing the management of the business and affairs of PepsiAmericas, as provided by Delaware law. The Board held eight meetings in 2008. In addition to meetings of the full Board, directors also attended committee meetings. Each incumbent director attended at least 75 percent of all of the meetings of the Board and of those committees on which he or she served.

 

The Board is comprised of a majority of independent directors as defined in Section 303A.02 of the New York Stock Exchange listing standards. In this regard, the Board has affirmatively determined that a majority of its members has no material relationship with our company either directly or as a partner, shareholder or officer of an organization that has a relationship with our company. In making this determination, the Board has considered all relevant facts and circumstances, including material relationships such as commercial, industrial, banking, consulting, legal, accounting, charitable and familial relationships. Our non-independent director and our nine independent directors are identified by name in the chart that appears under the caption “Committee Overview.”

 

The non-management members of the Board meet in executive session at each regular meeting of the Board, with no members of management present. In addition, the independent directors meet separately in executive session at least once a year. The non-management members of the Board have designated a non-management director, Archie R. Dykes, as Lead Director to preside at each executive session. Shareholders and interested parties may contact Dr. Dykes in the manner described below under the caption “Communications with Board Members.”

 

The Board has adopted Corporate Governance Guidelines that establish a common set of expectations to assist the Board and its committees in performing their duties in compliance with legal and regulatory requirements. The Board has also adopted a Code of Conduct and a Code of Ethics. The Corporate Governance Guidelines, the Code of Conduct, and the Code of Ethics, as well as current copies of the Audit Committee charter, the Management Resources and Compensation Committee charter, and the Governance, Finance and Nominating Committee charter, are all available on our website at www.pepsiamericas.com or in print upon written request to PepsiAmericas, Inc., 4000 RBC Plaza, 60 South Sixth Street, Minneapolis, Minnesota 55402, Attention: Investor Relations.

 

Our Board has designated an Audit Committee, a Management Resources and Compensation Committee, and a Governance, Finance and Nominating Committee. Our Board also has designated an Affiliated Transaction Committee, as required by our By-Laws.

 

The following table shows the current membership of the committees and identifies our independent directors:

 

 

 

 

The Audit Committee, Management Resources and Compensation Committee, and Governance, Finance and Nominating Committee meet throughout the year, with regularly scheduled meetings held the day before the Board’s regularly scheduled meetings. Additional meetings, either by phone or in person, are called when deemed necessary or desirable. The Affiliated Transaction Committee meets as necessary. The chairperson of each committee, with the advice and consultation of management and the committee’s outside advisors, if any, sets the committee’s annual calendar and the agenda for each meeting. The committees receive detailed materials related to the topics on the agenda prior to each meeting.

 

Our Audit Committee was established in accordance with Section 3(a)(58)(A) of the Exchange Act. Each member of our Audit Committee is independent as defined in Exchange Act Rule 10A-3, and Section 303A.02 and Section 303A.06 of the New York Stock Exchange listing standards. Pursuant to our listing agreement with the New York Stock Exchange, each member of our Audit Committee is financially literate, and one member, James R. Kackley, has accounting or related financial management expertise. Our Board has determined that Mr. Kackley is our “audit committee financial expert” as defined by Item 407(d)(5) of Regulation S-K. No member of our Audit Committee concurrently serves on more than two other public company audit committees.

 

Our Audit Committee operates under a charter, which is available on our website at www.pepsiamericas.com. Our Board originally approved the charter in June 2000. Our Audit Committee reviews the charter and recommends any changes to it as part of its annual performance evaluation. The Audit Committee charter was last reviewed in February 2009, at which time certain administrative revisions were made.

 

Our Audit Committee assists the Board by assuming certain oversight responsibilities with respect to (1) the integrity of our financial statements, (2) the independent registered public accountants’ qualifications and independence, (3) the performance of our internal audit function and independent registered public accountants, and (4) our compliance with legal and regulatory requirements that may have a material impact on our financial statements.

 

Our Audit Committee met 14 times during 2008, and reviewed a wide range of issues, including the objectivity of the financial reporting process and the adequacy of internal controls. Our Audit Committee selected KPMG LLP (“KPMG”) as our independent registered public accountants, and considered factors relating to their independence. In addition, our Audit Committee received reports and reviewed matters regarding ethical considerations and business conduct, and monitored compliance with laws and regulations. Our Audit Committee also met with our management and internal auditors and reviewed the current audit activities, plans and results of selected internal audits. The committee also met privately with members of our internal audit team and with representatives of KPMG to encourage confidential discussions as to any accounting or auditing matters.

 

Our Audit Committee has reviewed and discussed with management and representatives of KPMG the audited financial statements contained in our Annual Report on Form 10-K for the year ended January 3, 2009. The committee also has discussed with KPMG the matters required to be discussed by the statement on Auditing Standards No. 61, as amended (AICPA, Professional Standards, Vol. 1. AU §380), as adopted by the Public Company Accounting Oversight Board in Rule 3200T, and has received the written disclosures and letter from KPMG required by applicable professional standards delineating all relationships they have with us, and has discussed with them their independence. Based on the review and discussions referred to above, the committee recommended to the Board that the audited financial statements be included in our Annual Report on Form 10-K for the year ended January 3, 2009, for filing with the Securities and Exchange Commission. The Audit Committee also determined that KPMG’s fees and services are consistent with the maintenance of their independence as our independent registered public accountants.

The name of each person who serves as a member of our Audit Committee is set forth below.

 

Jarobin Gilbert, Jr., Chairman
Herbert M. Baum
Michael J. Corliss
Pierre S. du Pont
James R. Kackley
Matthew M. McKenna

 

Each member of our Management Resources and Compensation Committee is independent as defined in Section 303A.02 of the New York Stock Exchange listing standards. In addition, each member of the committee is a non-employee director as defined in Rule 16b-3 of the Exchange Act, and is an outside director as defined in Section 162(m) of the Internal Revenue Code.

 

Our Management Resources and Compensation Committee operates under a charter, which is available on our website at www.pepsiamericas.com. Our Board originally approved the charter in February 2003. Our Management Resources and Compensation Committee reviews the charter and recommends any changes to it as part of its annual performance evaluation. The charter was last reviewed in February 2009, at which time no revisions were made.

 

The primary purpose of our Management Resources and Compensation Committee is to discharge the Board’s responsibilities related to executive compensation. The committee reviews and makes recommendations to the Board regarding employee benefit policies and programs, incentive compensation and equity-based plans, director compensation, and succession planning for our executive team. The committee’s specific duties and responsibilities, which have not been delegated to any other person, are to:

 

 

In addition, our Management Resources and Compensation Committee reviews the establishment, amendment and termination of employee benefit plans, and oversees the operation and administration of such plans. Our employee benefit plans provide our Executive Vice President, Human Resources with limited authority to amend the employee benefit plans and responsibility for the day-to-day operation and administration of such plans.

 

Our Management Resources and Compensation Committee has the sole authority to retain and terminate compensation consultants used in the evaluation of director or executive officer compensation or employee benefit plans. The committee also has the authority to obtain advice and assistance from internal or external legal, accounting or other experts and advisors to assist in carrying out its responsibilities.

 

Our Management Resources and Compensation Committee engaged Watson Wyatt Worldwide beginning in 2004 as its outside compensation consultant. Watson Wyatt was selected after reviewing proposals submitted by multiple compensation consultants, based on its ability to meet the committee’s needs at the most effective

cost. The committee regularly meets with Watson Wyatt and receives reports on our compensation strategy, compensation levels and general market practices. Specific assignments are determined by the committee, with the advice of management. Watson Wyatt has advised the committee on: the development and use of a competitive peer group; market assessment and review of our Long-Term Incentive Plan, including plan design; top five executive compensation analysis; equity plan analysis and executive ownership analysis; regulatory compliance matters; director compensation; development of executive compensation tally sheets; retirement and welfare plans; and analysis of and changes to our compensation structure implemented in 2008.

 

Management has also engaged Watson Wyatt from time-to-time on employee benefit matters, including actuarial work for pension and retiree medical benefits as well as pension administration services. Our Management Resources and Compensation Committee has reviewed the type and amount of work performed by Watson Wyatt on behalf of management, and has determined that the relationship between management and Watson Wyatt has not influenced the advice offered to the committee by Watson Wyatt.

 

Our Management Resources and Compensation Committee met six times during 2008. Our Executive Vice President, Human Resources and our Corporate Secretary also attended these meetings. See “Our Executive Compensation Program — Role of Executive Officers” in our Compensation Discussion and Analysis for more detail on the role of our executive officers relative to the design and assessment of our compensation programs. The committee meets regularly in executive session throughout the year.

 

Directors who are not members of the committee typically attend committee meetings. Our Management Resources and Compensation Committee specifically consults with the other directors in the annual evaluation of the Chief Executive Officer and in the approval of annual compensation for the executive officers, including the Chief Executive Officer.

 

The members of our Management Resources and Compensation Committee are identified below under “Management Resources and Compensation Committee Report.” None of the members was an officer or employee of PepsiAmericas during fiscal year 2008 or in any prior year and none of the members had any relationship requiring disclosure under Item 404 of Regulation S-K. There were no compensation committee interlocks as described in Item 407(e)(4) of Regulation S-K.

 

Our Management Resources and Compensation Committee has reviewed and discussed with management the Compensation Discussion and Analysis that appears herein. Based on such review and discussion, the committee recommended to our Board of Directors that the Compensation Discussion and Analysis be included in this proxy statement and in our Annual Report on Form 10-K for the year ended January 3, 2009.

 

The name of each person who serves as a member of the committee is set forth below.

 

Richard G. Cline, Chairman
Herbert M. Baum
Michael J. Corliss
Archie R. Dykes
James R. Kackley
Deborah E. Powell

 

The members of our Governance, Finance and Nominating Committee are identified above under “Committee Overview.” Each member of our Governance, Finance and Nominating Committee is independent as defined in Section 303A.02 of the New York Stock Exchange listing standards.

 

Our Governance, Finance and Nominating Committee operates under a charter, which is available on our website at www.pepsiamericas.com. The Board originally approved the charter in February 2003. The

committee reviews the charter and recommends any changes to it as part of its annual performance evaluation. The charter was last reviewed in February 2009, at which time no revisions were made.

 

Our Governance, Finance and Nominating Committee, which met five times during 2008, develops and recommends to the Board corporate governance principles applicable to our company, recommends individuals qualified to serve as members of our Board, reviews and recommends appointments for all committees of our Board, serves as our company’s Qualified Legal Compliance Committee, and oversees the evaluation of our Board and its committees. In addition, the committee assists our Board in reviewing and discussing with management our financing needs, including corporate borrowing, sales of our securities and other matters of a financial nature.

 

Our Governance, Finance and Nominating Committee generally identifies individual nominees for director based upon suggestions by outside directors, management and/or shareholders. Our Board member selection criteria include: integrity; high level of education and/or business experience; broad-based business acumen; understanding of our business and industry; strategic thinking and willingness to share ideas; and diversity of experiences, expertise and backgrounds among Board members. The committee has used these criteria to evaluate potential nominees. The committee does not evaluate proposed nominees differently depending upon who has made the recommendation. The committee has not to date paid any third party to identify, evaluate or assist in the identification or evaluation of potential nominees.

 

It is the policy of our Governance, Finance and Nominating Committee to consider director candidates recommended by shareholders who appear to be qualified to serve on the Board. The committee may choose not to consider an unsolicited recommendation if no vacancy exists on our Board and the committee does not perceive a need to increase the size of our Board. Our Governance, Finance and Nominating Committee will consider only those director candidates recommended in accordance with the procedures set forth below.

 

Nomination Procedures

 

To submit a recommendation of a director candidate to our Governance, Finance and Nominating Committee, a shareholder must submit the following information in writing, addressed to the chairperson of the committee, in the care of the Corporate Secretary, at the main office of PepsiAmericas:

 

(1) The name of the person recommended as a director candidate;

 

 

In order for a director candidate to be considered for nomination at the next annual meeting of shareholders, our Governance, Finance and Nominating Committee must receive the recommendation as provided under “Shareholder Proposals for 2010 Annual Meeting.”

 

Minimum Qualifications

 

In carrying out its responsibility to find the best-qualified persons to serve as directors on our Board, our Governance, Finance and Nominating Committee will consider appropriate data with respect to each suggested candidate, consisting of business experience, educational background, current directorships, involvement in

legal proceedings during the last five years which are material to an evaluation of the integrity of the candidate, and an indication of the willingness of the candidate to serve as a director. In addition, prior to nominating an existing director for re-election to our Board, our Governance, Finance and Nominating Committee will consider and review an existing director’s attendance and performance; length of service; experience, skills and contributions; and independence.

 

Our Affiliated Transaction Committee was established in accordance with our By-Laws. Each member of our Affiliated Transaction Committee is independent as defined in our By-Laws. This means that each member of the committee is not, and for the last two years has not been, (1) an officer or director of PepsiCo or an affiliate of PepsiCo, (2) an owner of more than 1 percent of the shares of PepsiCo, or (3) an owner of any ownership interest in a party to an affiliated transaction.

 

Our Affiliated Transaction Committee reviews, considers and passes upon any affiliated transaction. Our By-Laws define an affiliated transaction as certain transactions with a value of more than $10 million with affiliates, including PepsiCo and certain entities in which PepsiCo has an ownership interest. The committee also has responsibility for reviewing and approving related party transactions requiring disclosure under Rule 404(a) of Regulation S-K. Our Affiliated Transaction Committee took action by written consent once during 2008.

 

Interested parties may contact our Board, its committees, individual directors, the Lead Director, or non-management directors as a group, at the following address: PepsiAmericas, Inc., 4000 RBC Plaza, 60 South Sixth Street, Minneapolis, Minnesota 55402, Attention: Corporate Secretary. All communications sent to the chairperson of the Audit Committee or to any individual director will be received directly by such individuals and will not be screened or reviewed by any company personnel. All other communications are distributed to the Board, or to any individual directors as appropriate, depending on the facts and circumstances outlined in the communication. Certain items which are unrelated to the duties and responsibilities of the Board will be excluded, such as product complaints, product inquiries, new product suggestions, resumes and other forms of job inquiries, surveys, and business solicitations or advertisements. In addition, material that is unduly hostile, threatening, illegal or similarly unsuitable will be excluded, with the provision that any communication that is filtered out must be made available to any non-management director upon request.

 

PepsiAmericas encourages all of its directors to attend the annual meeting of shareholders. We generally hold a Board meeting coincident with the shareholders’ meeting to minimize director travel obligations and facilitate their attendance at the shareholders’ meeting. Nine of our ten directors attended the 2008 Annual Meeting of Shareholders.

 

Our Management Resources and Compensation Committee periodically reviews and makes recommendations to our Board regarding the components and amount of non-employee director compensation. Directors who are employees of our company receive no fees for their services as director.

 

Our non-employee directors each receive annual compensation as follows:

 

 

The restricted stock awards are granted to our non-employee directors each year in February. Pursuant to the terms of such awards, directors may not sell such stock while they serve on the Board.

 

In addition to the compensation described above, certain additional annual retainers (also paid in quarterly installments) are paid in cash as follows:

 

 

We pay for or provide (or reimburse directors for out-of-pocket costs incurred for) transportation, hotel, food and other incidental expenses related to attending Board and committee meetings or participating in director education programs and other director orientation or education meetings. These amounts are not reflected in the Director Compensation Table because we do not consider them to be compensation as they are directly and integrally related to the performance of our directors’ duties.

 

The following table sets forth the compensation of our non-employee directors for fiscal year 2008:

 

 

 

 

 

 

 

 

 

 

Under this plan, directors may, by written election, defer payment of up to 100% of their cash compensation. We maintain a bookkeeping account for each director who has elected to defer cash compensation to which we credit the amount deferred, plus accrued interest thereon, compounded annually, based upon the prime rate, as reported in The Wall Street Journal, on December 31 of each year. Directors may elect to receive payment of deferred cash compensation upon retirement from the Board or on another specified date, and in a lump sum or in monthly installments. Upon a change in control, the director would be entitled to a lump sum distribution of all such deferred cash amounts.

 

The plan also provides that directors may, by written election, defer payment of up to 100% of their equity compensation. We maintain an account for each director who has elected to defer equity compensation to which we credit the number of shares deferred plus dividends accrued thereon. Directors may elect to receive payment of deferred equity compensation in a lump sum upon retirement from the Board or on another specified date, provided such date is at least six months later than the date the equity compensation is awarded. Upon a change in control, the director would be entitled to a lump sum distribution of all such deferred equity compensation and dividends.

 

The following table sets forth information, as of March 10, 2009, with respect to the beneficial ownership of shares of our common stock by each person who, to our knowledge, beneficially owned more than five percent of our common stock. Percentage of beneficial ownership is based on 124,899,755 shares outstanding as of March 10, 2009.

 

 

 

 

The table below lists the beneficial ownership of shares of our common stock, as of March 10, 2009, by each director and nominee for director, by each executive officer named in the summary compensation table below, and by all directors and executive officers as a group. The table lists voting securities, including restricted stock held by our executive officers over which they have sole voting power but no investment power. Otherwise, except as identified below, the named individual has sole voting and investment power with respect to the listed shares and none of the stated shares has been pledged as security. Given that our directors are required to hold the shares of restricted stock they receive as compensation while they continue to serve on the Board, the following table includes such directors’ qualifying shares. Percentage of beneficial ownership is based on 124,899,755 shares outstanding as of March 10, 2009.

 

 

 

 

 

Section 16(a) of the Exchange Act requires our directors and executive officers, as well as persons who own more than 10 percent of our common stock, to file reports of ownership and changes in ownership of our common stock with the Securities and Exchange Commission. We have procedures in place to assist our directors and executive officers in preparing and filing these reports on a timely basis. Based solely on our review of the forms furnished to us, upon our records and other information, we believe that all required reports were timely filed during the past year, except that (a) one report on Form 4 for Kenneth E. Keiser setting forth his acquisition of 596.818 units of the PAS Stock Fund (representing 475.462 share equivalents) on October 16, 2008, and (b) one report on Form 4 for Mr. Keiser setting forth his acquisition of 13,442.891 units of the PAS Stock Fund (representing 10,717.218 share equivalents) on October 17, 2008, were not filed on a timely basis.

 

Executive Summary

 

Our company is committed to an executive compensation philosophy based on pay-for-performance. Our committee executes this philosophy by linking a significant portion of total direct compensation paid to our named executive officers to company and individual performance. In 2008, this meant that 79.9 percent of the actual total direct compensation provided to our named executive officers was based on the achievement of either short-term or long-term performance goals.

 

Our committee ensures that compensation paid to our named executive officers continually reflects our company’s evolving business priorities and the execution of its strategic plan and initiatives by annually reviewing and adjusting the performance measures and targets on which compensation is based. In 2008, our committee tied the measures for the annual incentives for our named executive officers to net income, operating cash flow, revenue, and, for two named executive officers, volume. Overall our company exceeded the targets for these measures in 2008, resulting in annual incentives paid in cash to the named executive officers at 139.8 percent of target.

 

Our committee linked the pool of long-term incentives available in 2008 to the company’s achievement of its targeted adjusted return on invested capital for 2007. We utilized 107 percent of the target for long-term incentives awarded in February 2008, which reflected the actual adjusted return on invested capital in 2007 of 7.9 percent versus a target of 7.4 percent. Our committee linked the pool of long-term incentives available in 2009 to the company’s achievement of its targeted adjusted return on invested capital for 2008. We utilized 101 percent of the target for long-term incentives awarded in February 2009, which reflected the actual adjusted return on invested capital in 2008 of 8.3 percent versus a target of 8.0 percent. Adjusted return on invested capital is a non-GAAP financial measure. We reconcile such measure to our GAAP results on our website at www.pepsiamericas.com and in our Annual Report on Form 10-K which accompanies this proxy statement.

The success of our pay-for-performance philosophy is illustrated by comparing our company’s performance in adjusted net income against Annual Incentive Plan payouts to our named executive officers. The close historical alignment between Annual Incentive Plan payouts and adjusted net income is illustrated by the chart below.

 

 

The remainder of our Compensation Discussion and Analysis is organized into the following sections:

 

 

Unless the context indicates otherwise, this Compensation Discussion and Analysis describes our executive compensation program as in effect during 2008. We frequently review our executive compensation program and may change or discontinue any aspect of the program at any time. This flexibility ensures that we continue to be responsive to the dynamics of the marketplace for executive talent while maintaining our focus on driving shareholder value.

 

This Compensation Discussion and Analysis contains statements regarding our company’s performance targets and goals. These targets and goals are discussed in the limited context of our 2008 executive compensation program and should not be considered statements of management’s expectations or estimates of results or other guidance. Our company specifically cautions investors not to apply these statements to other contexts.

 

Our Executive Compensation Program

 

Our executive compensation program is designed to:

 

 

 

We are committed to an executive compensation philosophy that rewards performance. Our executive compensation program fulfills our pay-for-performance philosophy by:

 

 

With these goals in mind, our committee meets regularly throughout the year on the same general schedule to review and assess current compensation elements and compensation levels, and to plan for the future in response to shifts in the economic environment, market trends, regulations and other variables. The agendas for the committee’s regular meetings are set in advance and generally include the following items:

 

 

Benchmarking Against Peer Companies.  To assist with its review and analysis of our executive compensation program, our committee benchmarks executive compensation against a peer group of companies. Our committee uses compensation data available from the public filings of each member of our peer group as a reference point to provide a framework for reviewing and analyzing our compensation program and pay levels against potential competitors for our executive talent.

 

Our peer group contains companies with the following characteristics:

 

 

Our peer group consists of the following companies:

 

 

 

Our committee annually reviews the companies included in our peer group to ensure that each remains relevant for comparative purposes. This review was last conducted in July 2008, at which time the committee removed Performance Food Group Company, which recently had become a privately-held company, and added Brown-Forman Corporation, which has the characteristics identified above.

 

Shown below are comparative financial measures and number of employees for our peer group, as well as our company. Also included is an indication of our company’s percentile rank in these measures relative to our peer group. The information shown is based on data for fiscal year 2007 (with the exception of United Natural Foods, Inc. which represents fiscal year 2008 data), reported as of October 31, 2008, with dollars in millions.

 

 

In addition to benchmarking compensation against our peer group, our committee compares the annual compensation paid to our executives using surveys published by executive compensation firms. The surveys used to assess 2008 compensation were 2008/09 Watson Wyatt Data Services Top Management Report, 2008 William M. Mercer Executive Compensation Survey, 2008 Towers Perrin General Industry Executive Database, and 2008 Towers Perrin Food Industry Group Report. Our outside compensation consultant adjusts the survey data using regression analysis to reflect comparable revenue levels. Our committee uses this data to obtain a general understanding of current compensation practices. Our committee believes that data from both the peer group and compensation surveys has its advantages, and that multiple data sources provide different reference points and a broader context for interpreting and assessing executive compensation.

 

Competitive Market Review.  At its last meeting of the year our committee reviews a competitive market assessment of the compensation provided all of our executive officers, including our named executive officers. All key compensation elements are assessed, including base salary, annual cash compensation (base salary plus annual incentives), long-term incentives, and total direct compensation (annual cash compensation plus long-term incentives).

 

In connection with this assessment, our committee also reviews an analysis of our company’s financial performance as compared to our peer group. Financial measures analyzed include revenue growth, earnings per share growth, net income growth, return on invested capital, and total shareholder return for the last five years and for the current trailing 12-month period.

 

Competitive compensation information is obtained from the proxy statements of each member of our peer group and from the published executive compensation surveys identified above. This competitive market assessment and the analysis of our company’s financial performance as compared to our peer group provides context for our compensation positioning within the market. These reviews are timed to allow committee members to ask for additional information and to raise and discuss questions before base salary adjustments for the named executive officers are finalized at the committee’s first meeting of the next year.

 

Tally Sheets and Termination Benefits Analyses.  At its first meeting of the year our committee reviews a compensation tally sheet for each named executive officer. The tally sheets, prepared by our outside compensation consultant, provide a five-year history of total compensation and benefits for each named

executive officer, including base salary, annual incentives (target and actual payouts), long-term incentives (restricted stock awards, including dividends), perquisites, and retirement and deferred compensation contributions. The tally sheets also summarize realized equity value (stock option exercises and vesting of restricted stock), current unrealized equity value, current 401(k) and deferred compensation balances, and compliance with our stock ownership guidelines.

 

Our committee also reviews a termination benefits analysis for each named executive officer. This analysis estimates severance, retirement and other benefits payable under certain scenarios, including voluntary resignation, termination for cause, termination without cause, termination following a change in control of the company, and termination upon disability, death or retirement. Termination benefits are projections based on a variety of assumptions such as termination date, base salary and target incentive levels, stock price, and present value of benefits.

 

Our committee uses tally sheets and termination benefits analyses to bring together, in one place, all of the elements of actual current and potential future compensation for our named executive officers, as well as information about wealth accumulation. These tools assist our committee in analyzing the individual elements of compensation, the mix of compensation, and the aggregate total amounts of actual and projected compensation. The committee reviews pay equity among executives and against the market to ensure that our executive compensation continues to meet our compensation philosophy and objectives. After completing its most recent review, our committee determined that compensation for each named executive officer continues to be consistent with our company’s compensation philosophy and objectives.

 

Role of Consultants.  Our committee has engaged Watson Wyatt Worldwide as its outside compensation consultant. Please see the discussion under the caption “Management Resources and Compensation Committee” in the section “Our Board of Directors and Committees.”

 

Role of Executive Officers.  Our committee looks to certain executive officers, including named executive officers, for assistance with the design and assessment of our compensation program. Our Chairman of the Board and Chief Executive Officer, President and Chief Operating Officer, Executive Vice President and Chief Financial Officer, and Executive Vice President, Human Resources provide insight on our company’s business goals and results, help define objectives for individual executives, and assess the effect on our culture and personnel of suggested changes to our compensation program. No executive officer is involved in assessing or setting his or her own compensation.

 

Impact of Tax and Accounting Treatment on Compensation Decisions.  Our committee regularly reviews the tax and accounting treatment of each component of compensation paid to our named executive officers. The potential tax and accounting treatment are factors, but not the only factors, the committee takes into consideration when approving compensation components and amounts.

 

Section 162(m) of the Internal Revenue Code generally limits the deductibility of compensation in excess of $1 million for the Chief Executive Officer and the four most highly compensated employees other than the Chief Executive Officer. Certain performance-based compensation is not subject to this limitation. In certain circumstances our committee has determined that our compensation objectives are not furthered when compensation must be paid in a specific manner to be tax deductible. For instance, our Annual Incentive Plan payouts do not qualify as performance-based compensation for purposes of Section 162(m). Our Long-Term Incentive Plan is, however, structured and administered in a way that restricted stock awards qualify as performance-based compensation, which is not subject to the $1 million limitation. Each of these plans is discussed in detail below.

 

Total Direct Compensation

 

Total direct compensation paid to our named executive officers consists of base salary, annual incentives (payable in cash) and long-term incentives (payable in restricted stock). In support of our philosophy of

pay-for-performance, targeted total direct compensation is substantially weighted toward performance-based pay. These elements of total direct compensation are positioned as follows to achieve the following objectives:

 

 

For 2008, actual total direct compensation for the named executive officers is illustrated in the chart below.

 

 

Our committee believes that the total direct compensation provided to our named executive officers supports our company’s compensation philosophy. Targeted total direct compensation, together with the perquisites and benefits described below, is positioned to provide a competitive pay package that encourages and rewards strong performance and contributions consistent with our company’s high standards. Targeted total direct compensation is weighted so that a significant portion of compensation is tied to both annual and long-term performance, with performance goals reviewed and adjusted annually in order to continually reflect our company’s evolving business priorities. The balance of annual cash incentives and long-term equity incentives, coupled with our share ownership guidelines, encourages our executives to achieve our business priorities without taking unreasonable or excessive risks that would threaten the value of the company. Our committee will continue to monitor and review any risks associated with our executive compensation program, particularly in light of the current global economic situation.

 

Each component of total direct compensation provided to our named executive officers is discussed in detail below.

 

Base Salary.  Named executive officers receive a base salary as compensation for services rendered during the year. At the end of each year our committee previews base salary adjustments for all salaried employees, including the named executive officers, for the following year. The committee first establishes an overall budget for base salary increases. To do so, the committee considers general economic factors, including the rates of inflation, unemployment and cost of living, as well as salary data for our peer group and from

published compensation surveys. Once the overall budget is established, the committee develops a general matrix for distribution of the budget among all salaried employees. Actual base salary adjustments for each individual are based on performance.

 

The committee sets any base salary adjustments for the named executive officers at its first meeting of the year. Before it approves base salary adjustments for the named executive officers, the committee considers the information provided in the tally sheets, our company’s performance during the previous year, and the individual’s job performance and accomplishment of predetermined objectives during the previous year. After this review, the committee approves specific base salary adjustments for the named executive officers within the general matrix for base salary increases.

 

The committee benchmarks base salary for our named executive officers to the 50th percentile of our peer group. The exception is our Chief Executive Officer, whose base salary the committee sets well below median based upon his stated preference. Actual 2008 base salaries for our named executive officers were generally at the median of the competitive market, consistent with this philosophy.

 

Notwithstanding our company’s strong performance in 2008, we and many other companies have been required to reanalyze costs in the current macroeconomic environment. As part of our company’s global approach to cost containment in this challenging environment, the committee has determined that there will be no annual base salary adjustments for the named executive officers in March of 2009. However, as part of the committee’s review of executive succession plans in late 2008, it determined that an annual base salary increase, effective January 2009, for Mr. Durkin was warranted.

 

Annual Incentives.  Named executive officers are eligible for annual incentives, payable in cash, under our Annual Incentive Plan (the “AIP”). The AIP payout targets, which are achieved if the company meets certain goals set out in the annual operating plan, are approved by the committee each year. The AIP payout targets were set at the 75th percentile of the company’s peer group in 2007, the last time that our overall compensation structure was evaluated.

 

The AIP performance measures and their weightings are also approved by the committee each year. The AIP performance measures and their weightings are team-based to strengthen our culture of accountability, integrity and respect. Additionally, our AIP performance measures and their weightings are tied to business results to support our philosophy of pay-for-performance. We believe that this team-based, quantitative approach to annual incentive compensation ensures that we pay for performance that drives shareholder value.

 

The committee also reviews and approves a schedule that details the required company performance and resulting AIP payouts for each performance measure. If the threshold performance goals are met, AIP payouts equal at least 25 percent of target. The committee maintains the discretion to vary from the formula, either to increase or decrease an AIP payout. This process ensures that our AIP remains consistent with our compensation philosophy and reflects our current business priorities. Actual AIP payouts, which can vary from 0 to 200 percent of target, are delivered after the company’s results are known and applied to the AIP.

 

The table below identifies, for each named executive officer, the 2008 AIP targets as a percentage of base salary, and the 2008 performance measures and weightings. Each of the performance measures is subject to adjustment for items that are unusual, infrequent, unrelated to ongoing core operations or involve special charges.

 

 

Following the release of our company’s second quarter 2008 results, our company raised its adjusted diluted earnings per share (“EPS”) outlook for the full year. Accordingly, our committee approved a global performance modification in recognition of our strong performance and in recognition of the fact that the macroeconomic environment faced by our individual business units had changed dramatically from the time that original unit AIP targets were established. The intent of this modification was to align the entire organization around the global performance necessary to deliver our revised EPS outlook. Our committee approved the use of worldwide net income as a performance factor to modify 2008 AIP payouts for those units that were below plan. This modification was designed to increase individual payouts by up to 25 percentage points so long as our company’s worldwide net income target was met or exceeded (including the cost of the modified payout). Modified payouts were capped at a total of target (100 percent), so that no unit received an above-target payout based upon these incremental percentage points. Those units performing above plan were not eligible for the modification.

 

Our company reported strong results for 2008, with net income of $226.4 million, net cash provided by operating activities of continuing operations of $500.6 million, and net revenue of $4,937.2 million. On an adjusted basis, we attained adjusted net income of $238.7 million, adjusted operating cash flow of $249.8 million, and adjusted net revenue of $4,884.5 million. Actual performance exceeded our expectations for adjusted net income and adjusted operating cash flow. Management reviews results of operations and evaluates performance on both a GAAP basis and using adjusted comparisons. For 2008, adjusted net income excluded the impact of the 53^rd week and special charges and adjustments. Adjusted operating cash flow for 2008 represented net cash flow from operating activities of continuing operations less capital investments plus the proceeds from the sale of property less net cash used in discontinued operations. We reduced our reported net revenue for 2008 by the impact of the 53^rd week to arrive at our adjusted net revenue.

 

The table below identifies the AIP payout schedules and actual payout percentages for cash incentives paid in February 2009 based on the company’s performance in 2008.

 

 

 

 

Based on cumulative performance compared to target within our business units as well as worldwide net income (adjusted to reflect the modification discussed above), the international unit received an aggregate payout of 134.3 percent of target and the U.S. unit received an aggregate payout of 82.5 percent of target.

 

In December 2008 our committee approved changes to the AIP design for 2009 to foster further alignment with our global portfolio management. As a result, company performance under the 2009 AIP for

our named executive officers will be measured entirely on worldwide results for EPS and cash flow. We anticipate that the impact of foreign exchange rates will be neutralized based on planned rates. The committee will retain the discretion to adjust actual payouts either up or down.

 

Long-Term Incentives.  Named executive officers are eligible for awards under our Long-Term Incentive Plan (the “LTIP”), granted annually since 2004 in restricted shares under our 2000 Stock Incentive Plan. Restricted shares awarded under the LTIP vest in their entirety on the third anniversary of the award, although the committee may accelerate the vesting of restricted shares if a participant who is 55 years of age or older retires. The LTIP is structured and administered to comply with Section 162(m) of the Internal Revenue Code so awards qualify as performance-based compensation and are not subject to the $1 million limitation.

 

Our LTIP reinforces our pay-for-performance philosophy because awards are tied to both our company’s performance and individual performance. Each February the committee approves the company’s performance measure to be used to determine the size of the annual LTIP pool relative to target. Achievement of our planned adjusted return on invested capital would result in target funding. Once a minimum level of adjusted return on invested capital is met, the total annual pool can adjust from 90 percent to 110 percent of target.

 

The committee set targeted adjusted return on invested capital for 2007 and 2008 at 7.4 percent and 8.0 percent, respectively. We utilized 107 percent of the target for long-term incentives awarded in February 2008, which reflected the actual adjusted return on invested capital of 7.9 percent in 2007. We utilized 101 percent of the target for long-term incentives awarded in February 2009, based on the actual adjusted return on invested capital of 8.3 percent in 2008.

 

After the committee defines the overall LTIP pool, it applies grant guidelines to allocate the pool among salary grades and then grants awards to individual participants within those grades. Target awards for our named executive officers are above-median. LTIP ranges for each salary grade, including those for the named executive officers, are based on the established target, with the threshold equal to 50 percent of target and the maximum equal to 120 percent of target.

 

Individual awards for named executive officers are determined by a variety of factors, including salary grade, tenure in the current position, performance during the prior year, and future leadership potential. Our committee has the discretion to award restricted shares within a range or to award a lower number of restricted shares. Our committee approves individual awards for the named executive officers under the LTIP in February, based on company and individual performance for the prior year.

 

Outside the LTIP and the awards based on the grant guidelines described above, in February 2007 the committee granted a performance-based award of 113,000 restricted shares to Mr. Keiser under our 2000 Stock Incentive Plan. The purpose of this award was to recognize Mr. Keiser’s contributions to the company, and to further the company’s executive retention and succession planning objectives. The award provided that half of such shares would be earned if the company met or exceeded a 2007 adjusted return on invested capital target of 7.2 percent. The other half of such shares would be earned if the company met or exceeded a 2008 adjusted return on invested capital target of the greater of 7.4 percent or a 20 basis point improved over actual 2007 adjusted return on invested capital. The company met the each of these performance measures causing the shares to be earned in full. The award will vest on January 1, 2010 so long as Mr. Keiser remains employed by the company through such date.

 

In February 2009, our Board of Directors adopted the 2009 Long-Term Incentive Plan, subject to shareholder approval. If the 2009 Long-Term Incentive Plan is approved by our shareholders, future equity awards will be granted pursuant to such plan. Awards outstanding or granted under the 2000 Stock Incentive Plan will continue to be governed by the 2000 Stock Incentive Plan. Further information regarding the 2009 Long-Term Incentive Plan appears under the caption “Proposal 2: Approval of 2009 Long-Term Incentive Plan.”

 

Other Arrangements, Policies and Practices

 

Perquisites and Other Benefits:  Our named executive officers are eligible for certain perquisites and other benefits. Our committee believes that these perquisites and other benefits are reasonable and consistent

with our philosophy to attract, motivate and retain outstanding employees while maintaining fiscal responsibility. Our committee periodically reviews the type and amount of perquisites and other benefits offered, which are positioned competitively with the external market. The specific perquisites and other benefits offered to our named executive officers are described below.

 

 

Employment Agreements and Change-in-Control Arrangements:  We do not enter into employment agreements or change-in-control agreements with our named executive officers. Our committee has reviewed the relative costs and benefits of these agreements, and has determined that the benefits to be derived are not worth the associated costs.

 

Upon a change in control of our company, our 2000 Stock Incentive Plan and the 2009 Long-Term Incentive Plan, which is the subject of Proposal No. 2 in this proxy statement, provide that any unvested restricted shares or unvested stock options would vest in their entirety. In addition, if a named executive officer has a termination of employment following a change in control of our company, the named executive officer may receive a lump sum distribution from our Executive Deferred Compensation Plan and our Supplemental

Pension Plan. The 2000 Stock Incentive Plan, the 2009 Long-Term Incentive Plan, the Executive Deferred Compensation Plan and the Supplemental Pension Plan each define “change in control.”

 

Severance Policy:  Our named executive officers are eligible for benefits under our severance policy. Our severance policy provides for the continuation of salary and benefits for a specified time period, plus a lump-sum tenure payment and the payment of a prorated non-equity incentive award earned, if an employee’s position is eliminated due to a restructuring, facility closure, or if employment is terminated under certain other circumstances. The duration during which salary and benefits continue, and the amount of the tenure payment, depend on the employee’s salary grade and the circumstances of the termination. Generally, the minimum total severance, including salary and benefits continuation and tenure payment, for named executive officers is 52 weeks.

 

We believe that it is appropriate to provide severance benefits to our named executive officers for the following reasons:

 

 

Stock Ownership Guidelines:  The committee established in 2004 stock ownership guidelines for our named executive officers. Our stock ownership guidelines require named executive officers to own a number of shares of our company’s stock equal to a multiple of their base salary. For named executive officers this multiple ranges from two and one-half to six times base salary. Each named executive officer has five years to attain the stock ownership requirement. The number of shares of company stock that must be held is determined by multiplying the named executive officer’s annual base salary rate at the end of each calendar year by the applicable multiple, and dividing the result by the 200-day average closing stock price at the end of each year. Shares held in trust and retirement accounts, and restricted shares that have not yet vested, count toward share ownership, but unexercised stock options do not.

 

As of the record date for our annual meeting, each of our named executive officers was in compliance with our stock ownership guidelines. We believe that promoting share ownership aligns the interests of our named executive officers with those of our shareholders and provides strong motivation to build shareholder value.

 

The following table sets forth information concerning the compensation of our named executive officers for fiscal years 2008, 2007 and 2006:

 

 

 

 

 

 

Personal Use of Company Airplane.  The dollar amounts listed represent the aggregate incremental cost for personal use of our airplane. In calculating the aggregate incremental cost, we determined the total hours flown for other than business purposes (including deadhead flights that create incremental cost) during fiscal year 2008 as well as the total variable cost associated with the use of the airplane. We measured total variable cost by adding the costs of the following items: fuel, repair and maintenance, aircraft use and flight fees, travel and entertainment expenses, various other services (cleaning, uniforms, etc.), and supplies, less purchase rebates. Dividing the total variable cost by the number of hours flown, we established a variable cost per hour flown. The entries set forth above represent the product of the sum of hours of personal use by the named executive officers and the variable cost per hour flown.

 

We reimbursed certain named executive officers for taxes associated with spousal travel on an airplane associated with business meetings. These reimbursed amounts were as follows: Mr. Ware, $932 and Mr. Durkin, $2,470. Such amounts are set forth in the above chart under the caption “Amounts Reimbursed for the Payment of Taxes.”

 

Car Allowance.  These entries represent amounts paid directly to our named executive officers to facilitate their purchases or leases of vehicles.

 

Financial and Tax Planning Services.  These entries represent half of the annual participant fees paid to a financial planning firm on behalf of our named executive officers. We estimate that these amounts represent the amounts attributable to personal financial planning services. Such amounts do not include travel and entertainment expenses associated with participant meetings with the financial planning firm nor do they reflect the corporate retainer we paid such firm.

 

Amounts Reimbursed for the Payment of Taxes.  The nature and dollar amounts of reimbursements for the payment of taxes are specified above under the caption “Personal Use of Company Airplane.”

 

Executive Long-Term Disability.  The amounts set forth in this column of the above chart reflect amounts paid on behalf of our named executive officers under our executive long-term disability program. We offer this program in addition to, and in coordination with, the long-term disability benefits available through our group plan. In order to participate in the executive long-term disability program, the named executive officer must be at or above a certain salary grade, must be enrolled in the voluntary long-term disability program through our group plan and must have purchased an increased benefit under such program providing for a total benefit of 60 percent of salary with a maximum of $10,000 per month. Given the base salaries of our named executive officers, the company’s basic and voluntary long-term disability program benefits are effectively capped at $10,000 per month. The executive long-term disability program provides additional benefits such that named executive officers are eligible to receive 60 percent of salary. That is, subject to medical underwriting, the benefits provided under the executive long-term disability program provide benefits equal to 60 percent of the named executive officer’s base salary when combined with the benefits provided under the basic and voluntary group plan. The executive long-term disability program also provides an additional catastrophic disability benefit equal to 40 percent of salary with a maximum of $8,000 per month that would be paid in the event of certain serious disabilities.

 

Company Contributions to Executive Deferred Compensation and 401(k) Plans.  The amounts set forth in this column of the above chart reflect matching contributions and basic contributions we made under such plans for fiscal year 2008. In particular, we sponsor a non-qualified Executive Deferred Compensation Plan (the “EDCP”). The EDCP is a supplemental, deferred compensation plan that provides eligible U.S. executives with the opportunity for contributions that could not be credited to their individual accounts under the qualified 401(k) plan because of Internal Revenue Code limitations. The EDCP is a defined contribution plan designed to accumulate retirement funds for executives, and includes a company matching contribution (up to 6 percent) and a basic 2 percent contribution similar to that of the qualified 401(k) plan. The overall maximum company contribution to the qualified 401(k) plan and the EDCP is 8 percent of eligible pay. Generally, executives may elect the form and timing of their distributions from the EDCP. Employees hired before January 1, 2004, are immediately vested in the company contributions. Employees hired after January 1, 2004, are vested in the company contributions made under the plan in 20 percent annual increments until the employee is 100 percent vested after five years. Annual contributions made after the five-year period are immediately vested. The executive’s and the company’s contributions are credited with investment gain or loss based on the investment options deemed to have been selected by the executive.

 

The following table sets forth information concerning non-equity incentive plan awards paid in February 2009 for 2008 performance and equity incentive plan awards granted in February 2008 to our named executive officers:

 

 

 

 

For details on the criteria utilized to determine the specific amounts payable under these plans, including the relationship to target levels with respect to specific quantitative or qualitative performance-related factors, please review “Compensation Discussion and Analysis” above.

 

For details on the proportion of salary and incentive compensation to total compensation, please review “Compensation Discussion and Analysis” above.

 

The following table sets forth information concerning outstanding equity awards held by our named executive officers at fiscal year end 2008: