• | Distribution schedules cannot be accelerated (other than for a hardship) To delay a previously scheduled distribution, | | | | | – | | • | To delay a previously scheduled distribution, |
| – | A participant must make an election at least one year before the distribution otherwise would be made, and | – | | | | – | The new distribution cannot begin earlier than five years after it would have begun without the election tore-defer. |
With respect to amounts deferred prior to 2005, to delay a distribution the new distribution cannot begin until two years after it would have begun without the election tore-defer. Investments in the YUM! Stock Fund and YUM! Matching Stock Fund are only distributed in shares of Company stock. *Assumes dividends are not reinvested.
YUM! BRANDS, INC. -2016 Proxy Statement70
LRP LRP Account Returns. The LRP provides an annual earnings credit to each participant’s account based on the value of participant’s account at the end of each year. Under the LRP, Mr. Novak receivesKesselman received an annual earnings credit equal to 120%5% of his account balance, while he was employed with the applicable federal interest rate. Mr. Grismer, Mr. Niccol and Mr. Pant receive an annual earnings credit equal to 5%.Company. The Company’s contribution (“Employer Credit”) for 2015 is2018 was equal to 9.5%8% of salary plus target bonus for Mr. Novak, Mr. Niccol and Mr. Grismer and 20% for Mr. Pant. Kesselman. Distributions under LRP. Under the LRP, participants age 55 or older are entitled to a lump sum distribution | | | | YUM! BRANDS, INC. -2019 Proxy Statement | | 69 |
of their account balance in the quarter following their separation of employment. Participants under age 55 with a vested LRP benefit that, combined with any other deferred compensation benefits covered under Code Section 409A exceeds $15,000, will not receive a distribution until the calendar quarter that follows the participant’s 55th55th birthday. TCN TCN Account Returns. The TCN provides an annual earnings credit to each participant’s account based on the value of each participant’s account at the end of each year. Under the TCN, Mr.Messrs. Creed receivesand Eaton receive an annual earnings credit equal to 5%. For Mr.Messrs. Creed and Eaton, the Employer Credit for 20152018 was equal to 15% of his salarytheir salaries plus target bonus. bonuses. Distributions under TCN. Under the TCN, participants age 55 or older with a balance of $15,000 or more, are entitled to a lump sum distribution of their account balance in the quarter following their separation of employment. Participants under age 55 who separate employment with the Company will receive interest annually and their account balance will be distributed in the quarter following their 55th55th birthday. | | | Executive | | | Registrant | | | Aggregate | | | Aggregate | | | Aggregate | | | | | Contributions | | | Contributions | | | Earnings in | | | Withdrawals/ | | | Balance at | | | | | in Last FY | | | in Last FY | | | Last FY | | | Distributions | | | Last FYE | | | Name | | | ($)(1) | | | | ($)(2) | | | | ($)(3) | | | | ($)(4) | | | | ($)(5) | | | (a) | | | (b) | | | | (c) | | | | (d) | | | | (e) | | | | (f) | | | Creed | | | — | | | | 412,500 | | | | 215,583 | | | | 16,049 | | | | 9,883,463 | | | Grismer | | | 267,410 | | | | 155,800 | | | | 89,060 | | | | 65,019 | | | | 3,336,050 | | | Novak | | | 512,720 | | | | 190,000 | | | | 5,705,086 | | | | 6,684 | | | | 239,013,330 | | | Pant | | | 721,683 | | | | 408,500 | | | | 288,715 | | | | 15,894 | | | | 11,508,418 | | | Niccol | | | 669,630 | | | | 349,560 | | | | 90,856 | | | | 199,584 | | | | 3,860,857 | | | Su | | | 378,235 | | | | — | | | | 188,939 | | | | 3,866,147 | | | | 1,051,872 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | Name | | Plan
Name | | | Executive Contributions in Last FY ($)(1) | | | Registrant Contributions in Last FY ($)(2) | | | Aggregate Earnings in Last FY ($)(3) | | | Aggregate Withdrawals/ Distributions ($)(4) | | | Aggregate Balance at Last FYE ($)(5) | | | (a) | | | | | (b) | | | (c) | | | (d) | | | (e) | | | (f) | | Creed | | | EID | | | | — | | | | — | | | | 699,884 | | | | 232,306 | | | | 12,945,177 | | | | | TCN | | | | — | | | | 515,625 | | | | 137,469 | | | | 19,233 | | | | 3,383,245 | | | | | Total | | | | — | | | | 515,625 | | | | 837,353 | | | | 251,539 | | | | 16,328,422 | | Gibbs | | | EID | | | | — | | | | — | | | | 103,561 | | | | 83,043 | | | | 3,732,617 | | | | | Total | | | | — | | | | — | | | | 103,561 | | | | 83,043 | | | | 3,732,617 | | Eaton | | | EID | | | | — | | | | — | | | | 507,147 | | | | — | | | | 9,207,724 | | | | | TCN | | | | — | | | | 255,000 | | | | 98,598 | | | | 9,512 | | | | 2,316,046 | | | | | Total | | | | — | | | | 255,000 | | | | 605,745 | | | | 9,512 | | | | 11,523,770 | | Skeans | | | EID | | | | — | | | | — | | | | 25,636 | | | | 331,761 | | | | 359,754 | | | | | Total | | | | — | | | | — | | | | 25,636 | | | | 331,761 | | | | 359,754 | | Russell | | | EID | | | | 408,135 | | | | 136,045 | | | | 194,512 | | | | 218,965 | | | | 1,428,480 | | | | | Total | | | | 408,135 | | | | 136,045 | | | | 194,512 | | | | 218,965 | | | | 1,428,480 | | Kesselman | | | EID | | | | 203,565 | | | | — | | | | (26,890 | ) | | | — | | | | 675,763 | | | | | LRP | | | | — | | | | 89,540 | | | | 8,498 | | | | — | | | | 268,007 | | | | | | Total | | | | 203,565 | | | | 89,540 | | | | (18,392 | ) | | | — | | | | 943,770 | |
| (1) | Amounts in column (b) reflect deferred amounts that were also reported as compensation in our Summary Compensation Table filed last year or, would have been reported as compensation in our Summary Compensation Table last year if the executive were a NEO.NEO, and deferrals of base salary into the EID Program. |
| | | | (2) | Amounts in column (c) reflect Company contributions for EID, Program matching contribution, LRP and/or TCN allocation as follows: Mr. Novak, $190,000 LRP allocation; Mr. Grismer, $155,800 LRP allocation; Mr. Creed, $412,500 TCN allocation; Mr. Niccol, $126,350 LRP allocation and $223,210 EID matching contribution, and Mr. Pant, $408,500 LRP allocation. See footnote 65 of the Summary Compensation Table for more detail. |
| | | | (3) | Amounts in column (d) reflect earnings during the last fiscal year on deferred amounts. All earnings are based on the investment alternatives offered under the EID Program or the earnings credit provided under the LRP or the TCN described in the narrative above this table. The EID Program earnings are market based returns and, therefore, are not reported in the Summary Compensation Table. For Messrs. Grismer, Pant and Niccol, of their earnings reflected in this column, $12,861, $42,979 and $8,123 respectively were deemed above market earnings accruing to each of their accounts under the LRP. For Mr. Creed,Kesselman, of his earnings reflected in this column, $23,096 were$1,734 was deemed above market earnings accruing to his account under the TCN. Mr. Novak receives aLRP. For Messrs. Creed and Eaton, of their earnings reflected in this column, $28,044 and $20,114, respectively, were deemed above market rate of interest on his accountearnings accruing to their accounts under the LRP.TCN. For above market earnings on nonqualified deferred compensation, see the “Change in Pension Value and Nonqualified Deferred Compensation Earnings” column of the Summary Compensation Table. |
| | | | (4) | All amounts shown in column (e) were distributed in accordance with the executive’s deferral election, except in the case of the following amounts distributed to pay payroll taxes due upon their account balance under the EID Program, LRP or TCN for 2015.2018. |
| | | | | Creed | | 16,049 | 19,233 | | | Grismer Gibbs | | 65,019 | — | | | Novak Eaton | | 6,684 | 9,512 | | | Pant Skeans | | 15,894 | 15,484 | | | Niccol Russell | | 69,469 | 10,879 | | Kesselman | | | — | |
| | | | 70 | | YUM! BRANDS, INC. -2016 Proxy Statement71-2019 Proxy Statement |
| (5) | Amounts reflected in column (f) are theyear-end balances for each executive under the EID Program, TCN and the LRP. As required under SEC rules, below is the portion of theyear-end balance for each executive which has previously been reported as compensation to the executive in the Company’s Summary Compensation Table for 20152018 and prior years. |
| | | | | Creed | | 4,954,757 | 6,072,875 | | | Grismer Gibbs | | 2,887,547 | — | | | Novak Eaton | | 88,280,855 | 823,855 | | | Pant Skeans | | 2,933,282 | — | | | Niccol Russell | | 1,027,313 | 1,026,425 | | | Su Kesselman | | 993,025 | 497,246 | |
Potential Payments Upon Termination or Change in Control The information below describes and quantifies certain compensation that would become payable under existing plans and arrangements if the NEO’s employment had terminated on December 31, 2015,2018, given the NEO’s compensation and service levels as of such date and, if applicable, based on the Company’s closing stock price on that date. These benefits are in addition to benefits available generally to salaried employees, such as distributions under the Company’s 401(k) Plan, retiree medical benefits, disability benefits and accrued vacation pay. Due to the number of factors that affect the nature and amount of any benefits provided upon the events discussed below, any actual amounts paid or distributed may be different. Factors that could affect these amounts include the timing during the year of any such event, the Company’s stock price and the executive’s age. Stock Options and SAR Awards. If one or more NEOs terminated employment for any reason other than retirement, death, disability or following a change in control as of December 31, 2015,2018, they could exercise the stock options and SARs that were exercisable on that date as shown at the Outstanding Equity Awards atYear-End table on page 65,63, otherwise all options and SARs, pursuant to their terms, would have been forfeited and cancelled after that date. If the NEO had retired, died or become disabled as of December 31, 2015,2018, exercisable stock options and SARs would remain exercisable through the term of the award. Except in the case of a change in control, no stock options or SARs become exercisable on an accelerated basis. Benefits a NEO may receive on a change of control are discussed below.
Executive Income Deferral Program. As described in more detail beginning at page 70,68, the NEOs participate in the EID Program, which permits the deferral of salary and annual incentive compensation. The last column of the Nonqualified Deferred Compensation Table on page 7170 includes each NEO’s aggregate balance at December 31, 2015.2018. The NEOs are entitled to receive their vested amount under the EID Program in case of voluntary termination of employment. In the case of involuntary termination of employment, they are entitled to receive their vested benefit and the amount of the unvested benefit that corresponds to their deferral. In the case of death, disability or retirement after age 65, they or their beneficiaries are entitled to their entire account balance as shown in the last column of the Nonqualified Deferred Compensation table on page 71. 70. In the case of an involuntary termination of employment as of December 31, 2015,2018, each NEO would receive the following: Mr. Creed $8,190,193,$12,945,177, Mr. Grismer $2,465,015,Gibbs $3,732,617, Mr. Novak $207,535,309, Mr. Pant $8,702,530, Mr. Niccol $2,661,027Eaton $9,207,724, Ms. Skeans $359,754, and Mr. Su $1,051,872.Russell $1,428,480. As discussed at page 71,68, these amounts reflect bonuses previously deferred by the executive and appreciation on these deferred amounts (see page 7068 for discussion of investment alternatives available under the EID). In Mr. Novak’s case, approximately 80% of his balance is invested in Company RSUs, which he will receive in the form of Company stock following his retirement. The other NEOs’ EID balances are invested primarily in RSUs. Thus, Mr. Novak and the other NEOs’these EID account balances represent deferred base salary or bonuses (earned in prior years) and appreciation of their accounts based primarily on the performance of the Company’s stock. Leadership Retirement PlanPlan.. Under the LRP, participants age 55 are entitled to a lump sum distribution of their account balance following their termination of employment. Participants under age 55 who terminate with more than five years of service will receive their account balance at their 55th birthday. In case of termination of employment as of December 31, 2015, Mr. Grismer would receive $871,035 when he attains age 55, Mr. Novak would have received $31,478,021, Mr. Pant would have received $2,805,888 and Mr. Niccol would receive $576,508 when he attains age 55. | | | | YUM! BRANDS, INC. -2019 Proxy Statement | | 71 |
Third Country National PlanPlan.. Under the TCN, participants age 55 or older are entitled to a lump sum distribution of their account balance in the quarter following their termination YUM! BRANDS, INC. -2016 Proxy Statement72
of employment. Participants under age 55 who terminate will receive interest annually and their account balance will be distributed in the quarter following their 55th birthday. In case of termination of employment as of December 31, 2015,2018, Mr. Creed would have received $1,693,271. $3,383,245 and Mr. Eaton would have received $2,316,046. Performance Share Unit AwardsAwards.. If one or more NEOs terminated employment for any reason other than retirement or death or following a change in control and prior to achievement of the performance criteria and vesting period, then the award would be cancelled and forfeited. If the NEO had retired, or died as of December 31, 2015,2018, the PSU award would be paid out based on actual performance for the performance period, subject to a pro rata reduction reflecting the portion of the performance period not worked by the NEO. If any of these terminationspayouts had occurred on December 31, 2015,2018, Messrs. Creed, Grismer, Novak, Pant, NiccolGibbs, and SuEaton and Ms. Skeans would have been entitled to $592,442, $391,229, $1,629,718, $369,464, $83,643,$9,992,278, $3,345,817, $3,017,885, and $475,906,$1,779,827, respectively, assuming target performance. Pension BenefitsBenefits.. The Pension Benefits Table on page 6766 describes the general terms of each pension plan in which the NEOs participate, the years of credited service and the present value of the annuity payable to each NEO assuming termination of employment as of December 31, 2015.2018. The table on page 6967 provides the present value of the lump sum benefit payable to each NEO when they attain eligibility for Early Retirement (i.e., age 55 with 10 years of service) under the plans. Life Insurance Benefits. For a description of the supplemental life insurance plans that provide coverage to the NEOs, see the All Other Compensation Table on page 63.60. If the NEOs had died on December 31, 2015,2018, the survivors of Messrs. Creed, Grismer, Novak, Pant, NiccolGibbs, Eaton, Ms. Skeans and SuMr. Russell would have received Company-paid life insurance of $2,750,000; $1,640,000; $2,000,000; $2,043,000; $1,330,000$3,000,000, $1,722,000, $1,650,000, $1,120,000 and $2,365,000,$660,000, respectively, under this arrangement. Executives and all other salaried employees can purchase additional life insurance benefits up to a maximum combined company paid and additional life insurance of $3.5 million. This additional benefit is not paid or subsidized by the Company and, therefore, is not shown here. Change in ControlControl.. Change in control severance agreements are in effect between YUM and certain key executives (including Messrs. Creed, Grismer, Novak, PantGibbs, Eaton and Niccol)Ms. Skeans). These agreements are general obligations of YUM, and provide, generally, that if, within two years subsequent to a change in control of YUM, the employment of the executive is terminated (other than for cause, or for other limited reasons specified in the change in control severance agreements) or the executive terminates employment for Good Reason (defined in the change in control severance agreements to include a diminution of duties and responsibilities or benefits), the executive will be entitled to receive the following: • | a proportionate annual incentive assuming achievement of target performance goals under the bonus plan or, if higher, assuming continued achievement of actual Company performance until date of termination, | | | • | a severance payment equal to two times the sum of the executive’s base salary and the target bonus or, if higher, the actual bonus for the year preceding the change in control of the Company, and | | | • | outplacement services for up to one year following termination. |
a proportionate annual incentive assuming achievement of target performance goals under the bonus plan or, if higher, assuming continued achievement of actual Company performance until date of termination, a severance payment equal to two times the sum of the executive’s base salary and the target bonus or, if higher, the actual bonus for the year preceding the change in control of the Company, and outplacement services for up to one year following termination. In March 2013, the Company eliminated excise taxgross-ups and implemented a best netafter-tax method. See the Company’s CD&A on page 4339 for more detail. The change in control severance agreements have a three-year term and are automatically renewable each January 1 for another three-year term. An executive whose employment is not terminated within two years of a change in control will not be entitled to receive any severance payments under the change in control severance agreements. Generally, pursuant to the agreements, a change in control is deemed to occur: | (i) | if any person acquires 20% or more of the Company’s voting securities (other than securities acquired directly from the Company or its affiliates); | | |
| (ii) | if a majority of the directors as of the date of the agreement are replaced other than in specific circumstances; or |
| | | | 72 | | YUM! BRANDS, INC.-2019 Proxy Statement |
| (iii) | upon the consummation of a merger of the Company or any subsidiary of the Company other than (a) a merger where the Company’s directors immediately before the change in control constitute a majority of the directors of the resulting organization, or (b) a merger effected to implement a recapitalization of the Company in which no person is or becomes the beneficial owner of securities of the Company representing 20% or more of the combined voting power of the Company’s then-outstanding securities. |
In addition to the payments described above, upon a change in control: All stock options andoutstanding SARs granted prior to 2013 and held by the executive will automatically vest and become exercisable. For all stock options and SARs granted beginning in 2013, outstanding awardsnot otherwise exercisable will fully and immediately vest following a change in control if the executive is employed on the date of the change in control of the Company and is involuntarily terminated (other than by the Company for cause) on or within two years following the change in control. See Company’s CD&A on page 39 for more detail. All RSUs under the Company’s EID Program held by the executive will automatically vest. YUM! BRANDS, INC. -2016 Proxy Statement73Pursuant to the Company’s Performance Share Plan under the LTIP, all PSU awards awarded in the year in which the change in control occurs, will be paid out at target assuming a target level performance had been achieved for the entire performance period, subject to a pro rata reduction to reflect the portion of the performance period after the change in control. All PSUs awarded for performance periods that began before the year in which the change in control occurs will be paid out assuming performance achieved for the performance period was at the greater of target level performance or projected level of performance at the time of the change in control, subject to pro rata reduction to reflect the portion of the performance period after the change in control. In all cases, executives must be employed with the Company on the date of the change in control and involuntarily terminated upon or following the change in control and during the performance period. See Company’s CD&A on page 39 for more detail.
• | All RSUs under the Company’s EID Program held by the executive will automatically vest. | | | • | All PSU awards under the Company’s Performance Share Plan awarded in the year in which the change in control occurs will be paid out at target assuming a target level performance had been achieved for the entire performance period, subject to a pro rata reduction to reflect the portion of the performance period after the change in control. All PSUs awarded for performance periods that began before the year in which the change in control occurs will be paid out assuming performance achieved for the performance period was at the greater of target level performance or projected level of performance at the time of the change in control, subject to pro rata reduction to reflect the portion of the performance period after the change in control. In all cases, executives must be employed with the Company on the date of the change in control and involuntarily terminated upon or following the change in control and during the performance period. See Company’s CD&A on page 39 for more detail. |
If a change in control and each NEO’s involuntary termination had occurred as of December 31, 2015,2018, the following payments or other benefits would have been made or become available. | | | Creed | | Grismer | | Novak | | Pant | | Niccol | | | | | | | | | | | | | | | $ | | $ | | $ | | $ | | $ | | | Creed $ | | | Gibbs $ | | | Eaton $ | | | Skeans $ | | | Russel(1) $ | | | Severance Payment | | | 5,500,000 | | | | 3,280,000 | | | | 4,000,000 | | | | 3,906,875 | | | | 2,739,260 | | | | 10,128,986 | | | | 5,634,054 | | | | 5,673,200 | | | | 3,502,650 | | | | — | | | Annual Incentive | | | 1,650,000 | | | | 840,000 | | | | 1,000,000 | | | | 1,003,438 | | | | 669,630 | | | | 3,144,531 | | | | 1,467,113 | | | | 1,338,750 | | | | 824,766 | | | | — | | | Accelerated Vesting of Stock Options and SARs | | | 957,743 | | | | 1,073,957 | | | | 3,202,648 | | | | 2,692,655 | | | | 455,067 | | | Accelerated Vesting of SARs | | | | 22,609,379 | | | | 8,008,032 | | | | 5,093,830 | | | | 4,292,927 | | | | 2,932,869 | | | Accelerated Vesting of RSUs | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 1,199,286 | | | Acceleration of PSU Performance/Vesting | | | 592,442 | | | | 391,229 | | | | 1,629,718 | | | | 369,464 | | | | 83,643 | | | | 9,992,278 | | | | 3,345,817 | | | | 3,017,885 | | | | 1,779,827 | | | | — | | | Outplacement | | | 25,000 | | | | 25,000 | | | | 25,000 | | | | 25,000 | | | | 25,000 | | | | 25,000 | | | | 25,000 | | | | 25,000 | | | | 25,000 | | | | — | | | TOTAL | | | 8,725,185 | | | | 5,610,186 | | | | 9,857,366 | | | | 7,997,432 | | | | 3,972,600 | | | | 45,900,174 | | | | 18,480,016 | | | | 15,148,665 | | | | 10,425,170 | | | | 4,132,155 | |
If a change in control without an involuntary termination had occurred as of December 31, 2015, the following benefits would have become available.
| | | Creed | | | Grismer | | | Novak | | | Pant | | | Niccol | | | | | $ | | | $ | | | $ | | | $ | | | $ | | | Accelerated Vesting of Stock Options and SARs | | | 178,132 | | | | 71,256 | | | | 812,199 | | | | 2,073,350 | | | | 71,256 | | | Accelerated Vesting of RSUs | | | — | | | | — | | | | — | | | | — | | | | — | | | Acceleration of PSU Performance/Vesting | | | — | | | | — | | | | — | | | | — | | | | — | | | TOTAL | | | 178,132 | | | | 71,256 | | | | 812,199 | | | | 2,073,350 | | | | 71,256 | |
YUM! BRANDS, INC. -2016 Proxy Statement74
Back(1) | A severance payment and annual incentive is not listed for Mr. Russell because he does not have a change in control agreement with the Company, as he is not a direct report to Contentsthe CEO. |
In connection with his departure from the Company, Mr. Kesselman received payments from the Company totaling $442,768. DIRECTOR COMPENSATIONCEO Pay Ratio
The table below summarizesEach year Yum! Brands and our franchisees around the world create thousands of restaurant jobs, which are part-time, entry-level opportunities to grow careers at KFC, Pizza Hut and Taco Bell. Wherever we operate, our employee compensation paid to each non-employee director during 2015.
The Company primarily uses stock-based incentive compensationpractices comply with local regulations and are designed to attract and retain qualified candidates to serve on the Board. In setting director compensation,best talent. We’re proud that 80% of our
Company-owned restaurant general managers located in the Company considersU.S. began as hourly employees and often earn competitive pay greater than the significant amountaverage American household income. Approximately 90% of time that directors expend in fulfilling their duties to the Company as well as the skill level requiredour Company-owned restaurant employees are part-time. At least 60% have been employed by the Company of members of the Board. The Board typically reviews each element of director compensation every two years.for less than a year. In 2015, the Management Planning and Development Committee of the Board (“Committee”) benchmarked the Company’s director compensation against director compensation from the Company’s Executive Peer Group discussed at page 36 as well as published survey data from the National Association of Corporate Directors for the largest 200 companies in the S&P 500. Data for this review was prepared for the Committee by its independent consultant, Meridian Compensation Partners LLC. This data revealed that the Company’s director compensation was below the 50thpercentile against both benchmarks and that the retainers paid to the Lead Director and the Chairpersons of the Audit Committee and the Management Planning and Development Committee were consistent with market practice. Following its review, the Board elected to increase non-employee director annual compensation to $240,000 which was approximately at the 50thpercentile of the Company’s Executive Peer Group (directors will receive a stock grant retainer with a fair market value of $200,000 and an annual SARs grant with an economic value of approximately $40,000). This change became effective in February 2016 and was paid beginning in February 2016. Previously, directors were paid in November of each year. This change in timing to February 2016 means that directors did not receive a stock retainer award or a SARs award during 2015, and, therefore, no stock retainer award or SARs award is reported below, except in the case of Messrs. Cornell and Meister who received initial stock retainer awards of $25,000 upon joining the Board in 2015. In addition, Mr. Cornell received a prorated stock retainer and SARs award for joining the Board two months prior to the Board adopting the changes described above.
The Board elected not to change retainers paid to the Chairpersons or Lead Director.
| Name | | Fees Earned or
Paid in Cash
($) | | | Stock
Awards
($)(1) | | | Option/SAR
Awards
($)(2)(3) | | | All Other
Compensation
($)(4) | | | Total
($) | | | (a) | | (b) | | | (c) | | | (d) | | | (e) | | | (f) | | | Cavanagh, Michael | | | — | | | | — | | | | — | | | | 15,172 | | | | 15,172 | | | Cornell, Brian | | | — | | | | 39,167 | | | | 2,807 | | | | — | | | | 41,973 | | | Dorman, Dave | | | — | | | | — | | | | — | | | | 10,000 | | | | 10,000 | | | Ferragamo, Massimo | | | — | | | | — | | | | — | | | | — | | | | — | | | Graddick-Weir, Mirian | | | — | | | | — | | | | — | | | | 7,500 | | | | 7,500 | | | Hill, Bonnie | | | — | | | | — | | | | — | | | | — | | | | — | | | Linen, Jonathan | | | — | | | | — | | | | — | | | | 10,000 | | | | 10,000 | | | Meister, Keith | | | — | | | | 25,000 | | | | — | | | | 25,000 | | | | 50,000 | | | Nelson, Thomas | | | — | | | | — | | | | — | | | | 1,000 | | | | 1,000 | | | Ryan, Thomas | | | — | | | | — | | | | — | | | | 2,500 | | | | 2,500 | | | Stock, Elane | | | — | | | | — | | | | — | | | | 1,000 | | | | 1,000 | | | Walter, Robert | | | — | | | | — | | | | — | | | | 5,000 | | | | 5,000 | |
(1) | Amounts in column (c) represent the grant date fair value for annual stock retainer awards granted to directors in 2015. | (2) | Amounts in column (d) represent the grant date fair value for annual SARs granted in fiscal 2015. For a discussion of the assumptions used to value the awards, see the discussion of stock awards and option awards contained in Part II, Item 8, “Financial Statements and Supplementary Data” of the 2015 Annual Report in Notes to Consolidated Financial Statements at Note 14, “Share-based and Deferred Compensation Plans.” |
YUM! BRANDS, INC. -2016 Proxy Statement75
3) | At December 31, 2015, the aggregate number of options and SARs awards outstanding for each non-management director was: |
Name | | | | YUM! BRANDS, INC. -2019 Proxy Statement | | 73 |
As required by Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, and applicable SEC rules, we are providing the following information about the relationship of the annual total compensation of our employees and the annual total compensation of Mr. Creed, our Chief Executive Officer (our “CEO”). To identify the median employee, we used the December 2018 base wages or base salary information for all employees who were employed by us on December 31, 2018, excluding our CEO. We included all full-time and part-time employees and annualized the employees’ base salary or base wages to reflect their compensation for 2018. We believe the use of base wages or base salary for all employees is a consistently applied compensation measure. As of December 31, 2018, our global workforce used for determining the pay ratio was estimated to be 32,076 employees (16,480 in the U.S. and 15,596 internationally). After calculating employee compensation, our median employee was identified as a part-time Taco Bell restaurant employee in the United States. After identifying the median employee, we calculated total annual compensation in accordance with the requirements of the Summary Compensation Table. For 2018, the total compensation of our CEO, as reported in the Summary Compensation Table at page 59, was $14,007,038. The total compensation of our median employee was estimated to be $11,865. As a result, we estimate that our CEO to median employee pay ratio is 1181:1. This pay ratio is a reasonable estimate calculated in a manner consistent with SEC rules based on our payroll and employment records and the methodology described above. The SEC rules for identifying the median compensated employee and calculating the pay ratio based on that employee’s annual total compensation allow companies to adopt a variety of methodologies, to apply certain exclusions, and to make reasonable estimates and assumptions that reflect their compensation practices. As such, the pay ratio reported by other companies may not be comparable to the pay ratio reported above, as other companies may have different employment and compensation practices and may utilize different methodologies, exclusions, estimates and assumptions in calculating their own pay ratios. | | | | 74 | | SARs | | Cavanagh, Michael | | | 6,252 | | Cornell, Brian | | | 150 | | Dorman, Dave | | | 28,150 | | Ferragamo, Massimo | | | 28,150 | | Graddick-Weir, Mirian | | | 8,391 | | Hill, Bonnie | | | 28,150 | | Linen, Jonathan | | | 28,150 | | Meister, Keith | | | — | | Nelson, Thomas | | | 19,733 | | Ryan, Thomas | | | 28,150 | | Stock, Elane | | | 1,927 | | Walter, Robert | | | 21,717 | |
YUM! BRANDS, INC.(4)- | Represents amount of matching charitable contributions made on behalf of the director under the Company’s matching gift program and/or the amount of charitable contribution made in the director’s name.2019 Proxy Statement |
Employee Directors. Employee directors do not receive additional compensation for serving on the Board of Directors.
Non-Employee Directors Annual Compensation prior to 2015. Prior to 2015, each director who was not an employee of YUM received an annual stock grant retainer with a fair market value of $170,000 and an annual grant of vested SARs having an economic value of approximately $30,000 with an exercise price equal to the fair market value of Company stock on the date of grant. Directors may request to receive up to one-half of their stock retainer in cash. The request must be submitted to the Chair of the Management Planning and Development Committee. Directors may also defer payment of their retainers pursuant to the Directors Deferred Compensation Plan. Deferrals are invested in phantom Company stock and paid out in shares of Company stock. Deferrals may not be made for less than two years.
Committee Chairperson Retainer. In recognition of their added duties, the Lead Director of the Board (Mr. Ryan in 2015) receives an additional $25,000 stock retainer annually, the Chair of the Audit Committee (Mr. Nelson in 2015) receives an additional $20,000 stock retainer annually and the Chair of the Management Planning and Development Committee (Mr. Walter in 2015) receives an additional $15,000 stock retainer annually. These retainers were paid in November 2014 for 2015.
Initial Stock Grant upon Joining Board. Non-employee directors also receive a one-time stock grant with a fair market value of $25,000 on the date of grant upon joining the Board, distribution of which is deferred until termination from the Board.
Stock Ownership Requirements. Similar to executive officers, directors are subject to share ownership requirements. The directors’ requirements provide that directors will not sell any of the Company’s common stock received as compensation for service on the Board until the director has ceased being a member of the Board for one year (sales are permitted to the extent necessary to pay income taxes attributable to any stock retainer payment or exercise of a stock option or SAR).
Matching Gifts. To further YUM’s support for charities, non-employee directors are able to participate in the YUM! Brands, Inc. Matching Gifts Program on the same terms as YUM’s employees. Under this program, the YUM! Brands Foundation will match up to $10,000 a year in contributions by the director to a charitable institution approved by the YUM! Brands Foundation. At its discretion, the Foundation may match director contributions exceeding $10,000. In 2015, the Foundation implemented a matching gift incentive program in which it agreed to match without limit charitable contributions to the World Food Programme by any Yum employee or non-employee director. The Foundation matched Mr. Cavanagh’s and Mr. Meister’s contributions in excess of $10,000 to the World Food Programme under this program in 2015.
Insurance. We also pay the premiums on directors’ and officers’ liability and business travel accident insurance policies. The annual cost of this coverage was approximately $2 million. This is not included in the tables above as it is not considered compensation to the directors.
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EQUITY COMPENSATION PLAN INFORMATION The following table summarizes, as of December 31, 2015,2018, the equity compensation plans under which we may issue shares of stock to our directors, officers, current employees and employees underformer employees. Those plans include the Long Term Incentive Plan (the “1999 Plan”“LTIP”), the 1997 Long Term Incentive Plan (the “1997 Plan”), the SharePower Plan and the Restaurant General Manager Stock Option Plan (the “RGM(“RGM Plan”). | | | Number of | | Weighted- | | | Number of Securities | | | | | | Securities To | | Average | | | Remaining Available for | | | | | | be Issued Upon | | Exercise Price | | | Future Issuance Under | | | | | | Exercise of | | of Outstanding | | | Equity Compensation | | | | | | Outstanding | | Options, | | | Plans (Excluding | | | | | | Options, Warrants | | Warrants and | | | Securities Reflected in | | | | | | | | | | Plan Category | | and Rights | | Rights | | | Column (a)) | | | Number of Securities To be Issued Upon Exercise of Outstanding Options, Warrants and Rights | | Weighted- Average Exercise Price of Outstanding Options, Warrants and Rights | | Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in Column (a)) | | | | | (a) | | (b) | | | (c) | | | (a) | | (b) | | (c) | | | Equity compensation plans approved by security holders | | 13,674,543 | (1) | | 51.50 | (2) | | 4,344,985 | (3) | | | 9,748,812 | (1) | | | 51.88 | (2) | | | 28,326,263 | (3) | | Equity compensation plans not approved by security holders(4) | | 157,891 | | | 61.89 | (2) | | 8,208,434 | | | Equity compensation plans not approved by security holders | | | | 170,937 | (4) | | | 50.33 | (2) | | | — | | | TOTAL | | 13,832,434 | (1) | | 51.80 | (2) | | 12,553,419 | (3) | | | 9,919,749 | (1) | | | 51.84 | (2) | | | 28,326,263 | (3) |
| (1) | Includes 5,139,6122,515,616 shares issuable in respect of RSUs, performance units and deferred units. |
| (2) | Weighted average exercise price of outstanding optionsOptions and SARs only. |
| (3) | Includes 2,172,49314,163,131 shares available for issuance of awards of stock units, restricted stock, restricted stock units and performance share unit awards under the 1997 Plan, the 1999 Plan and the SharepowerLTIP Plan. |
| (4) | Awards are made under the RGM Plan. |
What are the key features of the 1999 Plan?LTIP? The 1999 PlanLTIP provides for the issuance of up to 70,600,00092,600,000 shares of stock asnon-qualified stock options, incentive stock options, SARs, restricted stock, restricted stock units, performance shares or performance units. Only our employees and directors are eligible to receive awards under the 1999 Plan.LTIP. The purpose of the 1999 PlanLTIP is to motivate participants to achieve long range goals, attract and retain eligible employees, provide incentives competitive with other similar companies and align the interest of employees and directors with those of our shareholders. The 1999 PlanLTIP is administered by the Management Planning and Development Committee of the Board of Directors (the “Committee” “Committee”). The exercise price of a stock option grant or SAR under the 1999 PlanLTIP may not be less than the average market price of our stock on the date of grant for years prior to 2008 or the closing price of our stock on the date of the grant beginning in 2008, and no options or SARs may have a term of more than ten years. The options and SARs that are currently outstanding under the 1999 PlanLTIP generally vest over a one to four year period and expire ten years from the date of the grant. Our shareholders approved the 1999 PlanLTIP in May 1999, and the plan as amended in 2003, 2008 and again in 2008.2016. The performance measures of the 1999 PlanLTIP werere-approved by our shareholders in May 2013.2013 and in 2016. What are the key features of the 1997 Plan?
The 1997 Plan provides for the issuance of up to 90,000,000 shares of stock. Effective January 1, 2002, only restricted shares could be issued under this plan. This plan is utilized with respect to payouts on shares from our deferral plans and was originally approved by PepsiCo, Inc. as the sole shareholder of the Company in 1997, prior to the spin-off of the Company from PepsiCo, Inc. on October 6, 1997.
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What are the key features of the SharePower Plan?
The SharePower Plan provides for the issuance of up to 28,000,000 shares of stock. The SharePower Plan allows us to award non-qualified stock options, SARs, restricted stock and restricted stock units. Employees, other than executive officers, are eligible to receive awards under the SharePower Plan. The SharePower Plan is administered by the Committee. The exercise price of a stock option or SAR grant under the SharePower Plan may not be less than the closing price of our stock on the date of the grant and no option or SAR may have a term of more than ten years. The options that are currently outstanding under the SharePower Plan generally vest over a one to four year period beginning on the date of grant.
The SharePower Plan was originally approved by PepsiCo, Inc. as the sole shareholder of the Company in 1997, prior to the spin-off of the Company from PepsiCo, Inc. on October 6, 1997.
What are the key features of the RGM Plan? Effective May 20, 2016, we canceled the remaining shares available for issuance under the RGM Plan, except for the approximately 220,000 shares necessary to satisfy then outstanding awards. No future awards will be made under the RGM Plan. The RGM Plan provideshas provided for the issuance of up to 30,000,000 shares of common stock at a price equal to or greater than the closing price of our stock on the date of grant. The RGM Plan allowsallowed us to awardnon-qualified stock options, SARs, restricted stock and RSUs. Employees, other than executive officers, arehave been eligible to receive awards under the RGM Plan. The purpose of | | | | YUM! BRANDS, INC. -2019 Proxy Statement | | 75 |
| | | | | | | | | | | | | EQUITY COMPENSATION PLAN INFORMATION | | | | | | | | |
the RGM Plan iswas (i) to give restaurant general managers (“RGMs”) the opportunity to become owners of stock, (ii) to align the interests of RGMs with those of YUM’s other shareholders, (iii) to emphasize that the RGM is YUM’s #1 leader, and (iv) to reward the performance of RGMs. In addition, the Plan provides incentives to Area Coaches, Franchise Business Leaders and other supervisory field operation positions that support RGMs and have profit and loss responsibilities within a defined region or area. While all non-executive officer employees arehave been eligible to receive awards under the RGM plan, all awards granted have been to RGMs or their direct supervisors in the field. Grants to RGMs generally have four year vesting and expire after ten years. The RGM Plan is administered by the Committee, and the Committee has delegated its responsibilities to the Chief People Officer of the Company. The Board of Directors approved the RGM Plan on January 20, 1998. | | | | 76 | | YUM! BRANDS, INC.-2019 Proxy Statement |
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AUDIT COMMITTEE REPORT Who serves on the Audit Committee of the Board of Directors? The members of the Audit Committee are Michael Cavanagh, Brian Cornell, Jonathan S. Linen, Keith Meister,Paget L. Alves, Tanya L. Domier, P. Justin Skala, Elane B. Stock and Thomas C. Nelson, Chair. (Mr. Skala was appointed to the committee on March 4, 2016 after the committee had approved this report and, therefore, did not sign the report.) The Board of Directors has determined that all of the members of the Audit Committee are independent within the meaning of applicable SEC regulations and the listing standards of the NYSE and that Mr. Nelson, the chair of the Committee, is qualified as an audit committee financial expert within the meaning of SEC regulations. The Board has also determined that Mr. Nelson has accounting and related financial management expertise within the meaning of the listing standards of the NYSE and that each member of the Committee is financially literate within the meaning of the NYSE listing standards. What document governs the activities of the Audit Committee? The Audit Committee operates under a written charter adopted by the Board of Directors. The Committee’s responsibilities are set forth in this charter, which was amended and restated effective November 22, 2013. The charter is reviewed by management at least annually, and any recommended changes are presented to the Audit Committee for review and approval. The charter is available on our Web site atwww.yum.com/investors/governance/charters.asp. www.investors.yum.com/corporate-governance/committee-composition-and-charters. What are the responsibilities of the Audit Committee? The Audit Committee assists the Board in fulfilling its responsibilities for general oversight of the integrity of the Company’s financial statements, the adequacy of the Company’s system of internal controls and procedures and disclosure controls and procedures, the Company’s risk management, the Company’s compliance with legal and regulatory requirements, the independent auditors’ qualifications and independence and the performance of the Company’s internal audit function and independent auditors. The Committee has the authority to obtain advice and assistance from outside legal, accounting or other advisors as the Committee deems necessary to carry out its duties and receive appropriate funding, as determined by the Committee, from the Company for such advice and assistance. The Committee has sole authority over the selection of the Company’s independent auditors and manages the Company’s relationship with its independent auditors (who report directly to the Committee). KPMG LLP has served as the Company’s independent auditors since the date of the Company’s inception in 1997. Each year, the Committee evaluates the performance, qualifications and independence of the independent auditors. The Committee is also involved in the selection of the lead audit partner. In doing so,evaluating the Company’s independent auditors, the Committee considers the quality of the services provided, byas well as the independent auditors, itsauditors’ and lead partner’s capabilities and technical expertise and knowledge of the Company’s operations and industry. The Committee met 108 times during 2015.2018. The Committee schedules its meetings with a view to ensuring that it devotes appropriate attention to all of its tasks. The Committee’s meetings generally include private sessions with the Company’s independent auditors and with the Company’s internal auditors, in each case without the presence of the Company’s management, as well as executive sessions consisting of only Committee members. In addition to the scheduled meetings, senior management confers with the Committee or its Chair from time to time, as senior management deems advisable or appropriate, in connection with issues or concerns that arise throughout the year. Management is responsible for the Company’s financial reporting process, including its system of internal control over financial reporting, and for the preparation of | | | | YUM! BRANDS, INC. -2019 Proxy Statement | | 77 |
consolidated financial statements in accordance with accounting principles generally accepted in the U.S. The Company’s independent auditors are responsible for auditing those financial statements in accordance with professional standards and expressing an opinion as to their material conformity with U.S. generally accepted accounting principles and for auditing the effectiveness of the Company’s internal control over financial reporting. The Committee’s responsibility is to monitor and review the Company’s financial reporting YUM! BRANDS, INC. - 2016 Proxy Statement79
process and discuss management’s report on the Company’s internal control over financial reporting. It is not the Committee’s duty or responsibility to conduct audits or accounting reviews or procedures. The Committee has relied, without independent verification, on management’s representations that the financial statements have been prepared with integrity and objectivity and in conformity with accounting principles generally accepted in the U.S. and that the Company’s internal control over financial reporting is effective. The Committee has also relied, without independent verification, on the opinion of the independent auditors included in their report regarding the Company’s financial statements and effectiveness of internal control over financial reporting. What matters have members of the Audit Committee discussed with management and the independent auditors? As part of its oversight of the Company’s financial statements, the Committee reviews and discusses with both management and the Company’s independent auditors all annual and quarterly financial statements prior to their issuance. During 2015,With respect to each 2018 fiscal reporting period, management advised the Committee that each set of financial statements reviewed had been prepared in accordance with accounting principles generally accepted in the U.S., and reviewed significant accounting and disclosure issues with the Committee. These reviews included discussions with the independent auditors of matters required to be discussed pursuant to Public Company Accounting Oversight Board (“PCAOB”) Auditing Standard No. 161301 (Communication with Audit Committees), including the quality (not merely the acceptability) of the Company’s accounting principles, the reasonableness of significant judgments, the clarity of disclosures in the financial statements and disclosures related to critical accounting practices. The Committee has also discussed with KPMG LLP matters relating to its independence, including a review of audit andnon-audit fees and the written disclosures and letter received from KPMG LLP required by applicable requirements of the PCAOB regarding KPMG LLP’s communications with the Committee concerning independence. The Committee also considered whethernon-audit services provided by the independent auditors are compatible with the independent auditors’ independence. The Committee also received regular updates, and written summaries as required by the PCAOB rules (for tax and other services), on the amount of fees and scope of audit, audit-related, tax and other services provided. In addition, the Committee reviewed key initiatives and programs aimed at strengthening the effectiveness of the Company’s internal and disclosure control structure. As part of this process, the Committee continued to monitor the scope and adequacy of the Company’s internal auditing program, reviewing staffing levels and steps taken to implement recommended improvements in internal procedures and controls. The Committee also reviews and discusses legal and compliance matters with management, and, as necessary or advisable, the Company’s independent auditors. Has the Audit Committee made a recommendation regarding the audited financial statements for fiscal 2015?2018? Based on the Committee’s discussions with management and the independent auditors and the Committee’s review of the representations of management and the report of the independent auditors to the Board of Directors and shareholders, and subject to the limitations on the Committee’s role and responsibilities referred to above and in the Audit Committee Charter, the Committee recommended to the Board of Directors that it include the audited consolidated financial statements in the Company’s Annual Report onForm 10-K for the fiscal year ended December 26, 201531, 2018 for filing with the SEC. | | | | 78 | | YUM! BRANDS, INC.-2019 Proxy Statement |
Who prepared this report? This report has been furnished by the members of the Audit Committee: Thomas C. Nelson,Chair Paget L. Alves Tanya L. Domier P. Justin Skala Elane B. Stock Thomas C. Nelson, Chairperson | Jonathan S. Linen | | Michael Cavanagh | Keith Meister | Brian CornellYUM! BRANDS, INC. -2019 Proxy Statement | | 79 |
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ADDITIONAL INFORMATION Who pays the expenses incurred in connection with the solicitation of proxies? Expenses in connection with the solicitation of proxies will be paid by us. Proxies are being solicited principally by mail, by telephone and through the Internet. In addition, our directors, officers and regular employees, without additional compensation, may solicit proxies personally, bye-mail, telephone, fax or special letter. We will reimburse brokerage firms and others for their expenses in forwarding proxy materials to the beneficial owners of our shares. How may I elect to receive shareholder materials electronically and discontinue my receipt of paper copies? YUM shareholders with shares registered directly in their name who received shareholder materials in the mail may elect to receive future annual reports and proxy statements from us and to vote their shares through the Internet instead of receiving copies through the mail. We are offering this service to provide shareholders with added convenience, to reduce our environmental impact and to reduce Annual Report printing and mailing costs. To take advantage of this option, shareholders must subscribe to one of the various commercial services that offer access to the Internet. Costs normally associated with electronic access, such as usage and telephone charges, will be borne by the shareholder. To elect this option, go towww.amstock.comwww.computershare.com, click on Shareholder Account Access, log in and locate the option to receive Company mailing viae-mail. Shareholders who elect this option will be notified by mail how to access the proxy materials and how to vote their shares on the Internet or by phone. If you consent to receive future proxy materials electronically, your consent will remain in effect unless it is withdrawn by writing our Transfer Agent, American Stock Transfer and Trust Company, LLC, 59 Maiden Lane, New York, NY 10038Computershare, Inc., 462 South 4th Street, Suite 1600, Louisville, Kentucky 40202 or by logging onto our Transfer Agent’s website atwww.amstock.comwww.computershare.com and following the applicable instructions. Also, while this consent is in effect, if you decide you would like to receive a hard copy of the proxy materials, you may call, write ore-mail American Stock Transfer and Trust Company, LLC. Computershare, Inc. I share an address with another shareholder and we received only one paper copy of the proxy materials. How may I obtain an additional copy of the proxy materials? The Company has adopted a procedure called “householding” which has been approved by the SEC. The Company and some brokers household proxy materials, delivering a single Notice and, if applicable, this proxy statement and Annual Report, to multiple shareholders sharing an address unless contrary instructions have been received from the affected shareholders or they participate in electronic delivery of proxy materials. Shareholders who participate in householding will continue to access and receive separate proxy cards. This process will help reduce our printing and postage fees, as well as save natural resources. If at any time you no longer wish to participate in householding and would prefer to receive a separate proxy statement, or if you are receiving multiple copies of the proxy statement and wish to receive only one, please notify your broker if your shares are held in a brokerage account or us if you hold registered shares. You can notify us by sending a written request to YUM! Brands, Inc., Investor Relations, 1441 Gardiner Lane, Louisville, KY 40213 or by calling Investor Relations at1 (888) 298-6986 or by sending an e- maile-mail toyum.investor@yum.com. YUM! BRANDS, INC. - 2016 Proxy Statement81
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May I propose actions for consideration at next year’s Annual Meeting of Shareholders or nominate individuals to serve as directors? Under the rules of the SEC, if a shareholder wants us to include a proposal in our proxy statement and proxy card for presentation at our 20172020 Annual Meeting of Shareholders, the proposal must be received by us at our principal executive offices at YUM! Brands, Inc., 1441 Gardiner Lane, Louisville, Kentucky 40213 by December 10, 2016.7, 2019. The proposal should be sent to the attention of the Corporate Secretary. Under our bylaws, certain procedures are provided that a shareholder must follow to nominate persons for election as directors or to introduce an item of business at an Annual Meeting of Shareholders that is not included in our proxy statement. These procedures provide that nominations for director nominees and/or an item of business to be introduced at an Annual Meeting of Shareholders must be submitted in writing to our Corporate Secretary at our principal executive offices and you must include information set forth in our bylaws. We must receive the notice of your intention to introduce a nomination or to propose an item of business at our 20172020 Annual Meeting no later than the date specified in our bylaws. If the 20172020 Annual Meeting is not held within 30 days before or after the anniversary of the date of this year’s Annual Meeting, then the nomination or item of business must be received by the tenth day following the earlier of the date of mailing of the notice of the meeting or the public disclosure of the date of the meeting. Our Annual Meeting of Shareholders is generally held on the third Thursday of May. Assuming that our 20172020 Annual Meeting is held on schedule,within 30 days of the anniversary of this Annual Meeting, we must receive notice of your intention to introduce a nomination or other item of business at that meeting by February 20, 2017.16, 2020. In addition, we recently amended our bylaws to provide for proxy access for director nominations by shareholders (as described at page 8)18). A shareholder, or group of up to 20 shareholders, owning continuously for at least three years shares of YUM common stock representing an aggregate of at least 3% of our outstanding shares, may nominate, and include in YUM’s proxy materials, director nominees constituting up to 20% of YUM’s Board, provided that the shareholder(s) and nominee(s) satisfy the requirements in YUM’s bylaws. Notice of proxy access director nominees must be received no earlier than November 10, 2016,7, 2019, and no later than December 10, 2016. 7, 2019. The Board is not aware of any matters that are expected to come before the 20162019 Annual Meeting other than those referred to in this proxy statement. If any other matter should come before the Annual Meeting, the individuals named on the form of proxy intend to vote the proxies in accordance with their best judgment. The chairman of the Annual Meeting may refuse to allow the transaction of any business, or to acknowledge the nomination of any person, not made in compliance with the foregoing procedures. Bylaw ProvisionsProvisions.. You may contact YUM’s Corporate Secretary at the address mentioned above for a copy of the relevant bylaw provisions regarding the requirements for making shareholder proposals and nominating director candidates. | | | | YUM! BRANDS, INC. -2019 Proxy Statement | | 81 |
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| APPENDIX A: | Reconciliation of Adjusted Operating Profit Growth |
The Company usesnon-GAAP Adjusted Operating Profit Growth as a key performance measure of results of operations for the purpose of evaluating performance against targets set under our YUM Leaders’ Bonus Program. Adjusted Operating Profit Growth is the calculated growth rate from our prior year’snon-GAAP Adjusted Base Operating Profit to the current fiscal year’snon-GAAP Adjusted Base Operating Profit. Adjusted Operating Profit Growth includes adjustments to our GAAP Operating Profit that we believe are necessary to ensure that growth rates for bonus purposes are indicative of underlying business performance. General and administrative expense reductions expected to be realized in 2018 related to YUM’s Strategic Transformation Initiatives were incorporated into our targets for KFC and YUM Adjusted Operating Profit Growth during the target-setting process and are thus not included in the reconciliation below. Reconciliation of GAAP Operating Profit to Adjusted Base Operating Profit | | | | | | | | | | | | KFC | | | YUM | | 2017 GAAP Operating Profit | | $ | 981 | | | $ | 2,761 | | Special Items (Income) Expense — Operating Profit(a) | | | | | | | (1,001 | ) | Impact of Pizza Hut U.S. Transformation Agreement(d) | | | | | | | 25 | | Impact of Refranchising(e) | | | (75 | ) | | | (122 | ) | Other | | | 1 | | | | 19 | | 2017 Adjusted Base Operating Profit | | $ | 907 | | | $ | 1,682 | | 2018 GAAP Operating Profit | | $ | 959 | | | $ | 2,296 | | Special Items (Income) Expense — Operating Profit(a) | | | | | | | (530 | ) | Impact of Revenue Recognition Standard(c) | | | 36 | | | | 41 | | Impact of Pizza Hut U.S. Transformation Agreement(d) | | | | | | | 13 | | Impact of Refranchising(e) | | | 20 | | | | 42 | | Other | | | 8 | | | | 13 | | Foreign Currency Impact on Reported Operating Profit(b) | | | | | | | (1 | ) | 2018 Adjusted Base Operating Profit | | $ | 1,023 | | | $ | 1,874 | | Adjusted Operating Profit Growth | | | 12.8 | % | | | 11.4 | % |
the results provided in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”), the Company providesAppendix Anon-GAAP | YUM! Brands, Inc. LONG TERM INCENTIVE PLAN (As Amended measurements which present operating results on a basis excluding Special Items. The Company uses earnings excluding Special Items as a key performance measure of results of operations for the purpose of evaluating performance internally. Thisnon-GAAP measurement is not intended to replace the presentation of our financial results in accordance with GAAP. Rather, the Company believes that the presentation of earnings excluding Special Items provides additional information to investors to facilitate the comparison of past and Restated Effectivepresent results, excluding items that the Company does not believe are indicative of our ongoing operations due to their size and/or nature. Special Items are not allocated to our Divisions and, thus, are not necessary to include as an adjustment when determining Adjusted Operating Profit Growth for the KFC Division. Refer to page 29 of May 20, 2016)YUM’s Form10-K for further details related to these Special Items. |
Section 1 General
| b) | The Company excludes the impact of foreign currency translation from the calculation of Adjusted Operating Profit Growth. The foreign currency impact is determined by translating current year results at prior year average exchange rates. We believe the elimination of the foreign currency impact provides betteryear-to-year comparability without the distortion of foreign currency fluctuations. |
| c) | The Financial Accounting Standards Board (“FASB”) has issued standards to provide principles within a single framework for revenue recognition of transactions involving contracts with customers across all industries (“Topic 606”). As a result, the Company has changed its accounting policy for revenue recognition as detailed in Note 2 of Item 8 in YUM’s Form1.110-K. We adopted Topic 606 on January 1, 2018, using the modified retrospective method. Therefore, the GAAP Operating Profit for fiscal 2017 has not been adjusted and continues to be reported under our accounting polices related to revenue recognition prior to the adoption of Topic 606. The Company has added back to 2018 GAAP Operating Profit the negative impact resulting from the adoption of Topic 606. |
| | | | A-1 | | Purpose. YUM! Brands, Inc. Long Term Incentive Plan (the “Plan”) has been established by YUM! Brands, Inc. (“YUM!”) to (i) attract and retain persons eligible to participate in the Plan; (ii) motivate Participants, by means of appropriate incentives, to achieve long-range goals; (iii) provide incentive compensation opportunities that are competitive with those of other similar companies; and (iv) align the interests of Participants with those of YUM!’s shareholders.BRANDS, INC.-2019 Proxy Statement |
| d) | In May 2017, we reached an agreement with Pizza Hut U.S. franchisees that will improve brand marketing alignment, accelerate enhancements in operations and technology and includes a permanent commitment to incremental advertising and digital and technology contributions by franchisees. In connection with this agreement, we incurred $13 million of incremental system advertising expense in 2018 and $25 million of incremental system advertising expense in 2017. These amounts were added back to GAAP Operating Profit when determining Adjusted Base Operating Profit. |
| e) | We have refranchised a significant number of Company-owned restaurants since the announcement of YUM’s Strategic Transformation Initiatives in October 2016. The impact on GAAP Operating Profit due to refranchising includes the loss of restaurant profit, which reflects the decrease in Company sales, and the increase in Franchise and property revenues from restaurants that have been refranchised. We have removed from 2017 GAAP Operating Profit the net impact of stores refranchised in 2017 so as to present 2017 Adjusted Base Operating Profit as if those stores were franchised for all of 2017 (as they were in 2018). We have added back to 2018 GAAP Operating Profit the net impact of stores refranchised in 2018 so as to present 2018 Adjusted Based Operating Profit as if those stores were Company-owned for all of 2018 (as they were in 2017). |
| | | 1.2YUM! BRANDS, INC. -2019 Proxy Statement | | A-2 |
YUM! BRANDS, INC. 1441 GARDINER LANE LOUISVILLE, KY 40213 ADMISSION TICKET Your Vote is important. Please vote immediately. VOTE BY INTERNET -www.proxyvote.com Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 P.M. Eastern Daylight Time the day before the cut-off date or meeting date. Have your proxy card in hand when you access the website and follow the instructions to obtain your records and to create an electronic voting instruction form. ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALS If you would like to reduce the costs incurred by our company in mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards and annual reports electronically via e-mail or the Internet. To sign up for electronic delivery, please follow the instructions above to vote using the Internet and, when prompted, indicate that you agree to receive or access proxy materials electronically in future years. VOTE BY PHONE -1-800-690-6903 Use any touch-tone telephone to transmit your voting instructions up until 11:59 P.M. Eastern Daylight Time the day before the cut-off date or meeting date. Have your proxy card in hand when you call and then follow the instructions. VOTE BY MAIL Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, Yum! Brands, Inc., c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. If you are voting by Internet or telephone, please DO NOT mail your proxy card. TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: E72135-P19158 KEEP THIS PORTION FOR YOUR RECORDS — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — | | | Participation. Subject to the terms and conditions of the Plan, the Committee shall determine and designate, from time to time, from among the Eligible Individuals, those persons who will be granted one or more Awards under the Plan, and thereby become “Participants” in the Plan.THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. | | DETACH AND RETURN THIS PORTION ONLY | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 1.3 | Operation, Administration, and Definitions. The operation and administration of the Plan shall be vested in the Committee, as described in Section 7 Capitalized terms in the Plan shall be defined as set forth in the Plan (including the definition provisions of Section 9 hereof). |
Section 2 Options and SARS
2.1YUM! BRANDS, INC. | Definitions. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | (a) | | | | The grantBoard of an “Option” entitles the Participant to purchase shares of Stock at an Exercise Price (as defined in subsection 2.4)Directors recommends a vote FOR items1, 2 and during a specified time established by the Committee. Any Option granted under this Section 2 may be either a non-qualified option (an “NQO”) or an incentive stock option (an “ISO”)3, as determined in the discretion of the Committee. An “NQO” is an Option that is not intended to be an “incentive stock option” as that term is described in Code Section 422(b)and AGAINST items4, 5 and 6. An “ISO” is an Option that is intended to satisfy the requirements applicable to an “incentive stock option” described in Code Section 422(b). An Option will be deemed to be a Non-Qualified Stock Option unless it is specifically designated by the Committee as an Incentive Stock Option and/or to the extent that it does not meet the requirements of an ISO. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | (b) | A stock appreciation right (an “SAR”) entitles | | | 1. | | Election of Directors. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Nominees: | | | | | | | | | | For | | Against | | Abstain | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 1a. Paget L. Alves | | | | | | | | | | ☐ | | ☐ | | ☐ | | | | | | | | | | | | For | | Against | | Abstain | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 1b. Michael J. Cavanagh | | | | | | | | | | ☐ | | ☐ | | ☐ | | | | 2. | | Ratification of Independent Auditors. | | | | | | ☐ | | ☐ | | ☐ | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 1c. Christopher M. Connor | | | | | | | | | | ☐ | | ☐ | | ☐ | | | | 3. | | Advisory Vote on Executive Compensation. | | | | | | ☐ | | ☐ | | ☐ | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 1d. Brian C. Cornell | | | | | | | | | | ☐ | | ☐ | | ☐ | | | | 4. | | Shareholder Proposal Regarding the Participant to receive, in cash or Stock, value equal to (or otherwise based on) the excess of: (i) the Fair Market ValueIssuance of a specified numberReport on Renewable Energy. | | | | | | ☐ | | ☐ | | ☐ | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 1e. Greg Creed | | | | | | | | | | ☐ | | ☐ | | ☐ | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 1f. Tanya L. Domier | | | | | | | | | | ☐ | | ☐ | | ☐ | | | | 5. | | Shareholder Proposal Regarding Issuance of sharesAnnual Reports on Efforts to Reduce Deforestation. | | | | | | ☐ | | ☐ | | ☐ | | | | | | | | | 1g. Mirian M. Graddick-Weir | | | | | | | | | | ☐ | | ☐ | | ☐ | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 1h. Thomas C. Nelson | | | | | | | | | | ☐ | | ☐ | | ☐ | | | | 6. | | Shareholder Proposal Regarding the Issuance of a Report on Sustainable Packaging. | | | | | | ☐ | | ☐ | | ☐ | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 1i. P. Justin Skala | | | | | | | | | | ☐ | | ☐ | | ☐ | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 1j. Elane B. Stock at | | | | | | | | | | ☐ | | ☐ | | ☐ | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 1k. Robert D. Walter | | | | | | | | | | ☐ | | ☐ | | ☐ | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | For address changes and/or comments, please check this box and write them on the time of exercise; over (ii) an Exercise Price established byback where indicated. | | ☐ | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Please indicate if you plan to attend this meeting. | | | | | | ☐ | | ☐ | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Yes | | No | | | | | | | | | NOTE: Please sign exactly as the Committee.name(s) appear(s) hereon. Joint owners should each sign. When signing as attorney, executor, administrator, trustee or guardian, please give full title as such. | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | 2.2 | Eligibility. The Committee shall designate the Participants to whom Options or SARs are to be granted under this Section 2 and shall determine the number of shares of Stock subject to each such Option or SAR and the other terms and conditions thereof, not inconsistent with the Plan. Without limiting the generality of the foregoing, the Committee may not grant dividends or dividend equivalents (current or deferred) with respect to any Option or SAR granted under the Plan. ISOs may only be granted to employees of YUM! or a Subsidiary. | | | | | 2.3 | Limits | | | | | | | | | | | |
| | | | | | | | | | | | | | | Signature [PLEASE SIGN WITHIN BOX] | | Date | | | | Signature (Joint Owners) | | Date | | |
YUM! BRANDS, INC. ANNUAL MEETING May 16, 2019 9:00 A.M., EDT YUM! Brands, Inc. Yum! Conference Center 1900 Colonel Sanders Lane Louisville, Kentucky 40213 ADMISSION TICKET YUM! BRANDS, INC.’S 2019 ANNUAL SHAREHOLDERS MEETING WILL BE HELD AT 9:00 A.M. (EASTERN DAYLIGHT TIME) ON THURSDAY, MAY 16, 2019, at the Yum! Conference Center at 1900 Colonel Sanders Lane in Louisville, Kentucky. If you plan to attend the Annual Shareholders Meeting, please tear off and keep the upper portion of this form as your ticket for admission to the Meeting. YOUR VOTE IS IMPORTANT. The proxy voting instruction card on the reverse side covers the voting of all shares of Common Stock of YUM! Brands, Inc., which you are entitled to vote or to direct the voting of, including those shares in the YUM! Brands 401(k) Plan. If you plan to vote by mail, please date and sign the proxy card and return it promptly in the enclosed business reply envelope. If you plan to vote by mail and do not sign and return a proxy, the shares cannot be voted. You may also vote by Internet or phone as described on the reverse side or by attending the Annual Meeting. Important Notice Regarding Internet Availability of Proxy Materials for the Annual Meeting: The Notice, Proxy Statement and Annual Report are available at www.proxyvote.com (PLEASE DETACH PROXY CARD AT PERFORATION) — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — E72136-P19158 | | | | | 
| | YUM! BRANDS, INC. This proxy is solicited on ISOs. Ifbehalf of the Committee grants ISOs, thenBoard of Directors | | | | The undersigned hereby appoints Scott A. Catlett, John P. Daly, and Carson T. Stewart, as Proxies with full power of substitution, to vote, as designated on the reverse side, for director substitutes if any nominee becomes unavailable, and in their discretion, on matters properly brought before the Meeting and on matters incident to the extent thatconduct of the aggregate fair market valueMeeting, all of the shares of Stock with respect to which ISOs are exercisable for the first time by any individual during any calendar year (under all planscommon stock of YUM! Brands, Inc. which the undersigned has power to vote at the Annual Shareholders Meeting to be held on May 16, 2019, or any adjournment thereof. | | NOMINEES FOR DIRECTOR: | | Paget L. Alves, Michael J. Cavanagh, Christopher M. Connor, Brian C. Cornell, Greg Creed, Tanya L. Domier, Mirian M. Graddick-Weir, Thomas C. Nelson,P. Justin Skala, Elane B. Stock and its Subsidiaries) exceeds $100,000, such Options shallRobert D. Walter. | | THE BOARD OF DIRECTORS RECOMMENDS A VOTEFOR ITEMS 1, 2 and 3, andAGAINST ITEMS 4, 5 and 6. | | This Proxy, when properly executed, will be treatedvoted as NQOs to the extent required by Code Section 422. Any Option thatdirected; if no direction is intended to constitute an ISO shall satisfy any other requirements of Code Section 422 and, to the extent such Option does not satisfy such requirements, the Option shallindicated, it will be treatedvoted as a NQO.follows: |
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2.4FOR (1) the Election of All Nominees for Director FOR (2) the Ratification of Independent Auditors FOR (3) the Advisory Vote on Executive Compensation | Exercise Price. The “Exercise Price” of each Option or SAR granted under this Section 2 shall be established by | AGAINST (4) Shareholder Proposal Regarding the Committee or shall be determined by a method established by the Committee at the time the Option or SAR is granted; except that the Exercise Price shall not be less than the Fair Market ValueIssuance of a shareReport on Renewable Energy. AGAINST (5) Shareholder Proposal Regarding Issuance of StockAnnual Reports on Efforts to Reduce Deforestation. AGAINST (6) Shareholder Proposal Regarding the dateIssuance of grant. Notwithstandinga Report on Sustainable Packaging. | | This card also provides voting instructions to the foregoing, Options and SARs grantedAdministrator or Trustee for shares beneficially owned under the Plan in replacement for awards under plans and arrangements of YUM! or a Subsidiary that are assumed in business combinations may provide for Exercise Prices that are less than the Fair Market Value of the Stock at the time of the replacement grants, if the Committee determines that such Exercise Price is appropriate to preserve the economic benefit of the award. | | | 2.5 | Exercise. An Option or SAR shall be exercisable in accordance with such terms and conditions and during such periods as may be established by the Committee. In no event shall an Option or SAR be exercisable later than the ten-year anniversary of the date on which the Option or SAR is granted (or such shorter period required by law or the rules of any stock exchange on which the Stock is listed). | | | 2.6 | Payment of Option Exercise Price. The payment of the Exercise Price of an Option granted under this Section 2 shall be subject to the following: | | | (a) | Subject to the following provisions of this subsection 2.6, the full Exercise Price for shares of Stock purchased upon the exercise of any Option shall be paid at the time of such exercise (except that, in the case of an exercise arrangement approved by the Committee and described in paragraph 2.6(c), payment may be made as soon as practicable after the exercise). | | | (b) | The Exercise Price shall be payable in cash or by tendering (including by way of a net exercise), by either actual delivery of shares or by attestation, shares of Stock acceptable to the Committee, and valued at Fair Market Value as of the day of exercise, or in any combination thereof, as determined by the Committee. | | | (c) | The Committee may permit a Participant to elect to pay the Exercise Price upon the exercise of an Option by irrevocably authorizing a third party to sell shares of Stock (or a sufficient portion of the shares) acquired upon exercise of the Option and remit to YUM! a sufficient portion of the sale proceeds to pay the entire Exercise Price and any tax withholding resulting from such exercise. | | | 2.7 | Tandem Grants of Options and SARS. An Option may but need not be in tandem with an SAR, and an SAR may but need not be in tandem with an Option (in either case, regardless of whether the original award was granted under this Plan or another plan or arrangement). If an Option is in tandem with an SAR, the Exercise Price of both the Option and SAR shall be the same, and the exercise of the corresponding tandem SAR or Option shall cancel the corresponding tandem SAR or Option with respect to such share. If an SAR is in tandem with an Option but is granted after the grant of the Option, or if an Option is in tandem with an SAR but is granted after the grant of the SAR, the later granted tandem Award shall have the same Exercise Price as the earlier granted Award, but in no event less than the Fair Market Value of a share of Stock at the time of such grant. | | | 2.8 | No Repricing. Except for either adjustments pursuant to subsection 4.2 (relating to the adjustment of shares), or reductions of the Exercise Price approved by YUM!’s shareholders, the Exercise Price for any outstanding Option or SAR may not be decreased after the date of grant nor may an outstanding Option or SAR granted under the Plan be surrendered to YUM! as consideration for the grant of a replacement Option or SAR with a lower Exercise Price or a Full Value Award. Except as approved by YUM!’s shareholders, in no event shall any Option or SAR granted under the Plan be surrendered to YUM! in consideration for a cash payment if, at the time of such surrender, the Exercise Price of the Option or SAR is greater than the then current Fair Market Value of a share of Stock.Brands 401(k) Plan. |
Section 3 Full Value Awards
3.1 | Definition. A “Full Value Award” is a grant of one or more shares of Stock or a right to receive one or more shares of Stock in the future (including restricted stock, restricted stock units, performance shares, and performance units) which is contingent on continuing service, the achievement of performance objectives during a specified period performance, or other restrictions as determined by the Committee. The grant of Full Value Awards may also be subject to such other conditions, restrictions and contingencies, as determined by the Committee, including provisions relating to dividend or dividend equivalent rights and deferred payment or settlement. Notwithstanding the foregoing, no dividends or dividend equivalent rights will be paid or settled on Full Value Awards that have not been earned or vested. |
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3.2 | Restrictions on Full Value Awards. Each Full Value Award shall be subject to the following: | | | (a) | Any Full Value Award shall be subject to such conditions, restrictions and contingencies as the Committee shall determine. | | | (b) | Except for Full Value Awards that are granted (i) in lieu of other compensation, (ii) as a form of payment of earned performance awards or other incentive compensation, (iii) to new hires, or (iv) as retention awards outside the United States, if the right to become vested in a Full Value Award granted to an employee is conditioned on the completion of a specified period of service with YUM! and the Subsidiaries, without achievement of Performance Measures or other performance objectives being required as a condition of vesting, then the required period of service for full vesting of the Full Value Award shall be not less than three years (provided that the required period for full vesting shall, instead, not be less than two years in the case of annual incentive deferrals payable in restricted shares), subject to pro rated vesting over the applicable minimum service period and to acceleration of vesting, to the extent permitted by the Committee, in the event of the Participant’s death, disability, retirement, change in control or involuntary termination). Awards to Directors are not subject to this paragraph 3.2(b). | | | 3.3 | Performance-Based Compensation. The Committee may designate a Full Value Award granted to any Participant as “Performance-Based Compensation” within the meaning of Code Section 162(m) and regulations thereunder. To the extent required by Code Section 162(m), any Full Value Award so designated shall be conditioned on the achievement of one or more Performance Measures determined by the Committee and the following additional requirements shall apply: | | | (a) | The performance targets established for the performance period established by the Committee shall be objective (as that term is described in regulations under Code Section 162(m)) and shall be established in writing by the Committee not later than ninety (90) days after the beginning of the performance period (but in no event after 25% of the performance period has elapsed), and while the outcome as to the performance targets is substantially uncertain. The performance targets established by the Committee may be with respect to YUM!, a Subsidiary, operating unit, division, or group or individual performance (or any combination thereof) and shall be based on one or more Performance Measures. | | | (b) | A Participant otherwise entitled to receive a Full Value Award for any performance period shall not receive a settlement or payment of the Award until the Committee has determined that the applicable performance target(s) have been attained. To the extent that the Committee exercises discretion in making the determination required by this paragraph 3.3(b), such exercise of discretion may not result in an increase in the amount of the payment. |
Nothing in this subsection 3.3 shall preclude the Committee from granting Full Value Awards under the Plan that are not intended to constitute Performance-Based Compensation; provided, however, that, at the time of grant of Full Value Awards by the Committee, the Committee shall designate whether such Awards are intended to constitute Performance-Based Compensation.
Section 4 Stock Reserved and Limitations
4.1. | Shares Reserved/Limitations. The shares of Stock for which Awards may be granted under the Plan shall be subject to the following: | | | (a) | The shares of Stock with respect to which Awards may be made under the Plan shall be shares currently authorized but unissued or currently held or subsequently acquired by YUM! as treasury shares (to the extent permitted by law), including shares purchased in the open market or in private transactions. | | | (b) | Subject to the following provisions of this subsection 4.1, the maximum number of shares of Stock that may be delivered to Participants and their beneficiaries under the Plan shall be 92,600,000 (which number includes all shares delivered under the Plan since its establishment in 1999, determined in accordance with the terms of the Plan). For purposes of applying the limitations of this paragraph 4.1(b), each share of Stock delivered pursuant to Section 3 (relating to Full Value Awards) shall be counted as covering two shares of Stock, and shall reduce the number of shares of Stock available for delivery under this paragraph 4.1(b) by two shares except, however, in the case of restricted shares or restricted units delivered pursuant to the settlement of earned annual incentives, each share of Stock shall be counted as covering one share of Stock and shall reduce the number of shares of Stock available for delivery by one share. | | | (c) | To the extent provided by the Committee, any Award may be settled in cash rather than Stock. To the extent any shares of Stock covered by an Award are not delivered to a Participant or beneficiary because the Award is forfeited or canceled, or the shares of Stock are not delivered because the Award is settled in cash or used to satisfy the applicable tax withholding obligation, such |
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| shares shall not be deemed to have been delivered for purposes of determining the maximum number of shares of Stock available for delivery under the Plan. | | | | | (d) | If the Exercise Price of any stock option granted under the Plan is satisfied by tendering shares of Stock to YUM! (by either actual delivery or by attestation, including net exercise), only the number of shares of Stock issued net of the shares of Stock tendered shall be deemed delivered for purposes of determining the maximum number of shares of Stock available for delivery under the Plan. | | Address Changes/Comments: | | | (e) | Subject to the terms and conditions of the Plan, the maximum number of shares of Stock that may be delivered to Participants and their beneficiaries with respect to ISOs under the Plan shall be 84,600,000; provided, however, that to the extent that shares not delivered must be counted against this limit as a condition of satisfying the rules applicable to ISOs, such rules shall apply to the limit on ISOs granted under the Plan. | | | | (f) | The maximum number of shares of Stock that may be issued in conjunction with Awards granted pursuant to Section 3 (relating to Full Value Awards) shall be 12,000,000 shares except that shares subject to Full Value Awards granted with respect to the deferral of annual cash incentive awards under a deferred compensation plan of YUM! or a Subsidiary will not count towards this maximum. | | | | (g) | Subject to subsection 4.2, the following additional maximums are imposed under the Plan. | | | | | | (i) | The maximum number of shares that may be covered by Awards granted to any one individual pursuant to Section 2 (relating to Options and SARs) shall be 9,000,000 shares during any five calendar-year period. If an Option is in tandem with an SAR, such that the exercise of the Option or SAR with respect to a share of Stock cancels the tandem SAR or Option right, respectively, with respect to such share, the tandem Option and SAR rights with respect to each share of Stock shall be counted as covering one share of Stock for purposes of applying the limitations of this subparagraph (i). | | | | | | (ii) | For Full Value Awards that are intended to be Performance-Based Compensation, no more than 3,000,000 shares of Stock may be subject to such Awards granted to any one individual during any five-calendar-year period (regardless of when such shares are deliverable). Notwithstanding the foregoing, in the case of any Full Value Award that is a performance unit award that is intended to be Performance-Based Compensation, no more than $10,000,000 may be subject to any such Awards granted to any one individual during any one-calendar-year period (regardless of when such amounts are deliverable). For purposes of this subparagraph (ii), a “performance unit award” means a Full Value Award that is the grant of a right to receive a designated dollar value amount of Stock which is contingent on the achievement of performance or other objectives during a specified period. | | | | | | (iii) | In the case of any Award to a Director, in no event shall the dollar value of the Award granted to any Director for any calendar year (determined as of the date of grant) exceed $750,000. |
If the Awards are denominated in Stock but an equivalent amount of cash is delivered in lieu of delivery of shares of Stock, the limits of this paragraph 4.1(g) shall be applied based on the methodology used by the Committee to convert the number of shares of Stock into cash. If delivery of Stock is deferred until after the Stock has been earned, any adjustment in the amount delivered to reflect actual or deemed investment experience after the date the Stock is earned shall be disregarded.
4.2. | Adjustments to Shares of Stock and Awards. If any change in corporate capitalization, such as a stock split, reverse stock split, or stock dividend; or any corporate transaction such as a reorganization, reclassification, merger or consolidation or separation, including a spin-off, or sale or other disposition by YUM! of all or a portion of its assets, any other change in YUM!’s corporate structure, or any distribution to shareholders (other than a cash dividend that is not an extraordinary cash dividend) results in the outstanding shares of Stock, or any securities exchanged therefor or received in their place, being exchanged for a different number or class of shares or other securities of YUM!, or for shares of stock or other securities of any other corporation (or new, different or additional shares or other securities of YUM! or of any other corporation being received by the holders of outstanding shares of Stock), or a material change in the market value of the outstanding shares of Stock as a result of the change, transaction or distribution, then equitable adjustments shall be made by the Committee, as it determines are necessary and appropriate, in: | | | | | | (a) | the number and type of Shares (or other property) with respect to which Awards may be granted; | | | (b) | the number and type of Shares (or other property) subject to outstanding Awards; | | | (c) | the grant or Exercise Price with respect to outstanding Awards; | | | (d) | the limitations set forth in subsection 4.1 (including the limitations set forth in paragraph 4.1(g)); and | | | (e) | the terms, conditions or restrictions of outstanding Awards and/or Award Agreements; |
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provided, however, that all such adjustments made in respect of each ISO shall be accomplished so that such Option shall continue to be an ISO. However, in no event shall this subsection 4.2 be construed to permit a modification (including a replacement) of an Option or SAR if such modification either: (i) would result in accelerated recognition of income or imposition of additional tax under Code Section 409A; or (ii) would cause the Option or SAR subject to the modification (or cause a replacement Option or SAR) to be subject to Code Section 409A, provided that the restriction of this subparagraph (ii) shall not apply to any Option or SAR that, at the time it is granted or otherwise, is designated as being deferred compensation subject to Code Section 409A.
Section 5 Change in Control
Subject to the provisions of subsection 4.2 (relating to the adjustment of shares), and except as otherwise provided in the Plan or the Award Agreement reflecting the applicable Award, if a Change in Control occurs prior to the date on which an Award is vested and prior to the Participant’s separation from service and if the Participant’s employment is involuntarily terminated by the Company (other than for cause) on or within two years following the Change in Control, then:
(a) | All outstanding Options (regardless of whether in tandem with SARs) shall become fully exercisable. | | | (b) | All outstanding SARs (regardless of whether in tandem with Options) shall become fully exercisable. | | | (c) | All Full Value Awards (including any Award payable in Stock which is granted in conjunction with a Company deferral program) shall become fully vested and the Committee shall determine the extent to which performance conditions are met in accordance with the terms of the Plan and the applicable Award Agreement. |
Notwithstanding anything in this Plan or any Award agreement to the contrary, to the extent any provision of this Plan or an Award agreement would cause a payment of deferred compensation that is subject to Code Section 409A to be made upon the occurrence of a Change in Control, then such payment shall not be made unless such Change in Control also constitutes a “change in ownership”, “change in effective control” or “change in ownership of a substantial portion of the Company’s assets” within the meaning of Code Section 409A.
Section 6 Miscellaneous
6.1. | Effective Date; Duration; Effect on Other Plans. The Plan was originally effective as of May 20, 1999. The Plan shall be unlimited in duration and, in the event of Plan termination, shall remain in effect as long as any Awards under it are outstanding; provided, however, that no Awards may be granted under the Plan on or after the ten-year anniversary of May 20, 2016, the date on which the Plan was amended and restated. In no event shall Awards be made under the Plan as amended and restated as set forth herein unless and until this amendment and restatement is approved by YUM!’s shareholders. | | | 6.2. | General Restrictions. Delivery of shares of Stock or other amounts under the Plan shall be subject to the following: | | | (a) | Notwithstanding any other provision of the Plan, YUM! shall have no liability to deliver any shares of Stock under the Plan or make any other distribution of benefits under the Plan unless such delivery or distribution would comply with all applicable laws (including, without limitation, the requirements of the Securities Act of 1933), and the applicable requirements of any securities exchange or similar entity. | | | (b) | To the extent that the Plan provides for issuance of stock certificates to reflect the issuance of shares of Stock, the issuance may be effected on a non-certificated basis, to the extent not prohibited by applicable law or the applicable rules of any stock exchange. | | | 6.3. | Tax Withholding. All distributions under the Plan are subject to withholding of all applicable taxes, and the Committee may condition the delivery of any shares or other benefits under the Plan on satisfaction of the applicable withholding obligations. The Committee, in its discretion, and subject to such requirements as the Committee may impose prior to the occurrence of such withholding, may permit such withholding obligations to be satisfied through cash payment by the Participant, through the surrender of shares of Stock which the Participant already owns, or through the surrender of shares of Stock to which the Participant is otherwise entitled under the Plan; provided, however, previously-owned Stock that has been held by the Participant or Stock to which the Participant is entitled under the Plan may only be used to satisfy the minimum tax withholding required by applicable law (or other rates that will not have a negative accounting impact). |
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6.4. | Grant and Use of Awards. Subject to subsection 4.1, in the discretion of the Committee, a Participant may be granted any Award permitted under the provisions of the Plan, and more than one Award may be granted to a Participant. Awards may be granted as alternatives to or replacement of awards granted or outstanding under the Plan, or any other plan or arrangement of YUM! or a Subsidiary (including a plan or arrangement of a business or entity, all or a portion of which is acquired by YUM! or a Subsidiary). Subject to the overall limitation on the number of shares of Stock that may be delivered under the Plan, the Committee may use available shares of Stock as the form of payment for compensation, grants or rights earned or due under any other compensation plans or arrangements of YUM! or a Subsidiary, including the plans and arrangements of YUM! or a Subsidiary assumed in business combinations. | | | 6.5. | Settlement and Payments. Awards may be settled through cash payments, the delivery of shares of Stock, the granting of replacement Awards, or combination thereof as the Committee shall determine. Any Award settlement, including payment deferrals, may be subject to such conditions, restrictions and contingencies as the Committee shall determine. The Committee may permit or require the deferral of any Award payment (other than Option or SAR other than to the extent permitted by Code Section 409A), subject to such rules and procedures as it may establish, which may include provisions for the payment or crediting of interest, or dividend equivalents, including converting such credits into deferred Stock equivalents. Each Subsidiary shall be liable for payment of cash due under the Plan with respect to any Participant to the extent that such benefits are attributable to the services rendered for that Subsidiary by the Participant. Any disputes relating to liability of a Subsidiary for cash payments shall be resolved by the Committee. | | | 6.6. | Transferability. Except as otherwise provided by the Committee, Awards under the Plan are not transferable except as designated by the Participant by will or by the laws of descent and distribution. | | | 6.7. | Form and Time of Elections. Unless otherwise specified herein, each election required or permitted to be made by any Participant or other person entitled to benefits under the Plan, and any permitted modification, or revocation thereof, shall be in writing filed with the Committee at such times, in such form, and subject to such restrictions and limitations, not inconsistent with the terms of the Plan, as the Committee shall require. | | | 6.8. | Agreement with Company. An Award under the Plan shall be subject to such terms and conditions, not inconsistent with the Plan, as the Committee shall, in its sole discretion, prescribe. The terms and conditions of any Award to any Participant shall be reflected in such form of written document as is determined by the Committee. A copy of such document shall be provided to the Participant, and the Committee may, but need not require that the Participant sign a copy of such document. Such document is referred to in the Plan as an “Award Agreement” regardless of whether any Participant signature is required. | | | 6.9. | Action by Company or Subsidiary. Any action required or permitted to be taken by YUM! or any Subsidiary shall be by resolution of its board of directors, or by action of one or more non-employee members of the board (including a committee of the board) who are duly authorized to act for the board, or (except to the extent prohibited by applicable law or applicable rules of any stock exchange) by a duly authorized officer of such company, or by any employee of YUM! or a Subsidiary who is delegated by the board of directors authority to take such action. | | | 6.10. | Gender and Number. Where the context admits, words in any gender shall include any other gender, words in the singular shall include the plural and the plural shall include the singular. | | | 6.11. | Limitation of Implied Rights. | | | (a) | Neither a Participant nor any other person shall, by reason of participation in the Plan, acquire any right in or title to any assets, funds or property of YUM! or any of the Subsidiaries whatsoever, including, without limitation, any specific funds, assets, or other property which YUM! or any of the Subsidiaries, in its sole discretion, may set aside in anticipation of a liability under the Plan. A Participant shall have only a contractual right to the Stock or amounts, if any, payable under the Plan, unsecured by any assets of YUM! or any of the Subsidiaries, and nothing contained in the Plan shall constitute a guarantee that the assets of YUM! or any of the Subsidiaries shall be sufficient to pay any benefits to any person. | | | (b) | The Plan does not constitute a contract of employment or continued service, and selection as a Participant will not give any participating employee or other individual the right to be retained in the employ of YUM! or a Subsidiary or the right to continue to provide services to YUM! or a Subsidiary, nor any right or claim to any benefit under the Plan, unless such right or claim has specifically accrued under the terms of the Plan. Except as otherwise provided in the Plan, no Award under the Plan shall confer upon the holder thereof any rights as a shareholder of YUM! prior to the date on which the individual fulfills all conditions for receipt of such rights. |
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6.12. | Evidence. Evidence required of anyone under the Plan may be by certificate, affidavit, document or other information which the person acting on it considers pertinent and reliable, and signed, made or presented by the proper party or parties. | | | 6.13. | Misconduct. If the Committee determines that a present or former employee has (a) used for profit or disclosed to unauthorized persons, confidential or trade secrets of YUM! or any Subsidiary; (b) breached any contract with or violated any fiduciary obligation to YUM! or any Subsidiary; or (c) engaged in any conduct which the Committee determines is injurious to YUM! or its Subsidiaries, the Committee may cause that employee to forfeit his or her outstanding awards under the Plan, provided, however, that during the pendency of a Potential Change in Control and as of and following the occurrence a Change in Control, no outstanding awards under the Plan shall be subject to forfeiture pursuant to this subsection 6.13. | | | 6.14. | Restrictions on Shares and Awards. The Committee, in its discretion, may impose such restrictions on shares of Stock acquired pursuant to the Plan, whether pursuant to the exercise of an Option or SAR, settlement of a Full Value Award or otherwise, as it determines to be desirable, including, without limitation, restrictions relating to disposition of the shares and forfeiture restrictions based on service, performance, Stock ownership by the Participant, conformity with YUM’s recoupment, compensation recovery, or clawback policies and such other factors as the Committee determines to be appropriate. Without limiting the generality of the foregoing, unless otherwise specified by the Committee, any awards under the Plan and any shares of Stock issued pursuant to the Plan shall be subject to YUM!’s compensation recovery, clawback, and recoupment policies as in effect from time to time. | | | 6.15. | Foreign Individuals. Notwithstanding any other provision of the Plan to the contrary, the Committee may grant Awards to eligible persons who are foreign nationals on such terms and conditions different from those specified in the Plan as may, in the judgment of the Committee, be necessary or desirable to foster and promote achievement of the purposes of the Plan. In furtherance of such purposes, the Committee may make such modifications, amendments, procedures and subplans as may be necessary or advisable to comply with provisions of laws in other countries or jurisdictions in which YUM! or any of the Subsidiaries operates or has employees. The foregoing provisions of this subsection 6.15 shall not be applied to increase the share limitations of Section 4 or to otherwise change any provision of the Plan that would otherwise require the approval of YUM!’s shareholders. |
Section 7 Committee
7.1. | Administration. The authority to control and manage the operation and administration of the Plan shall be vested in a committee (the “Committee”) in accordance with this Section 7. The Committee shall be selected by the Board, and shall consist solely of two or more non-employee members of the Board. If the Committee does not exist, or for any other reason determined by the Board, the Board may take any action under the Plan that would otherwise be the responsibility of the Committee. As of the Approval Date, the Committee shall mean the Management Planning and Development Committee of the Board of Directors. | | | 7.2. | Powers of Committee. The Committee’s administration of the Plan shall be subject to the following: | | | (a) | Subject to the provisions of the Plan, the Committee will have the authority and discretion to select from among the Eligible Individuals those persons who shall receive Awards, to determine the time or times of receipt, to determine the types of Awards and the number of shares covered by the Awards, to establish the terms, conditions, performance criteria, restrictions, and other provisions of such Awards, and (subject to the restrictions imposed by Section 8 to cancel or suspend Awards. | | | (b) | To the extent that the Committee determines that the restrictions imposed by the Plan preclude the achievement of the material purposes of the Awards in jurisdictions outside the United States, the Committee will have the authority and discretion to modify those restrictions as the Committee determines to be necessary or appropriate to conform to applicable requirements or practices of jurisdictions outside of the United States. | | | (c) | The Committee will have the authority and discretion to conclusively interpret the Plan, to establish, amend, and rescind any rules and regulations relating to the Plan, to determine the terms and provisions of any Award Agreement made pursuant to the Plan, and to make all other determinations that may be necessary or advisable for the administration of the Plan. | | | (d) | Any interpretation of the Plan by the Committee and any decision made by it under the Plan is final and binding on all persons. | | | (e) | In controlling and managing the operation and administration of the Plan, the Committee shall take action in a manner that conforms to the articles and by-laws of YUM!, and applicable state corporate law. |
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7.3. | Delegation by Committee. Except to the extent prohibited by applicable law or the applicable rules of a stock exchange, the Committee may allocate all or any portion of its responsibilities and powers to any one or more of its members and may delegate all or any part of its responsibilities and powers to any person or persons selected by it. Any such allocation or delegation may be revoked by the Committee at any time. Until action to the contrary is taken by the Board or the Committee, the Committee’s authority with respect to Awards and other matters concerning Participants below the Partners Council or Executive Officer level is delegated to the Chief Executive Officer or the Chief People Officer of YUM!. | | | 7.4. | Information to be Furnished to Committee. YUM! and the Subsidiaries shall furnish the Committee with such data and information as it determines may be required for it to discharge its duties. The records of YUM! and the Subsidiaries as to an individual’s or Participant’s employment (or other provision of services), termination of employment (or cessation of the provision of services), leave of absence, reemployment and compensation shall be conclusive on all persons unless determined to be incorrect. Participants and other persons entitled to benefits under the Plan must furnish the Committee such evidence, data or information as the Committee considers desirable to carry out the terms of the Plan. |
Section 8 Amendment and Termination
The Board may, at any time, amend or terminate the Plan (and the Committee may amend any Award Agreement); provided, however, that no amendment or termination of the Plan or amendment of any Award Agreement may, in the absence of written consent to the change by the affected Participant (or, if the Participant is not then living, the affected beneficiary), adversely affect the rights of any Participant or beneficiary under any Award granted under the Plan prior to the date such amendment is adopted; and provided further that, adjustments pursuant to subsection 4.2 shall not be subject to the foregoing limitations of this Section 8; and provided further that, amendments to the provisions of subsection 2.8 (relating to Option and SAR repricing), amendments expanding the group of Eligible Individuals, or amendments increases in the number of shares reserved under the Plan pursuant to paragraphs 4.1(b) (total shares reserved), 4.1(e) (relating to the limitations on ISOs), 4.1(f) (relating to limitations on certain Full Value Awards) and 4.1(g) (relating to individual limits) will not be effective unless approved by YUM!’s shareholders; and provided further that, no other amendment shall be made to the Plan without the approval of YUM!’s shareholders if such approval is required by law or the rules of any stock exchange on which the Common Stock is listed. It is the intention of YUM! that, to the extent that any provisions of this Plan or any Awards granted hereunder are subject to Code Section 409A, the Plan and the Awards comply with the requirements of Code Section 409A and that the Board shall have the authority to amend the Plan as it deems necessary or desirable to conform to Code Section 409A. Notwithstanding the foregoing, neither YUM! nor the Subsidiaries guarantee that Awards under the Plan will comply with Code Section 409A and the Committee is under no obligation to make any changes to any Award to cause such compliance.
Section 9 Defined Terms
In addition to the other definitions contained herein, the following definitions shall apply:
(a) | Approval Date. The term “Approval Date” shall mean the date on which YUM!’s shareholders approve this amendment and restatement of the Plan. | | | (b) | Award. The term “Award” shall mean any award or benefit granted under the Plan, including, without limitation, the grant of Options, SARs, or Full Value Awards. | | | (c) | Board. The term “Board” shall mean the Board of Directors of YUM!. | | | (d) | Change in Control. Except as otherwise provided by the Committee, a “Change in Control” shall be deemed to have occurred if the event set forth in any one of the following subparagraphs shall have occurred: |
| (i) | any Person is or becomes the Beneficial Owner, directly or indirectly, of securities of YUM! (not including in the securities beneficially owned by such Person any securities acquired directly from YUM! or its Affiliates) representing 20% or more of the combined voting power of YUM!’s then outstanding securities, excluding any Person who becomes such a Beneficial Owner in connection with a transaction described in clause (I) of subparagraph (iii) below; or | | | | | (ii) | the following individuals cease for(If you noted any reason to constitute a majority of the number of directors then serving; individuals who,Address Changes/Comments above, please mark corresponding box on the date hereof, |
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| | constitute the Board and any new director (other than a director whose initial assumption of office is in connection with an actual or threatened election contest, including but not limited to a consent solicitation, relating to the election of directors of YUM!), whose appointment or election by the Board or nomination for election by YUM!’s shareholders was approved or recommended by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors on the date hereof or whose appointment, election or nomination for election was previously so approved or recommended; orSEE REVERSE SIDE | | | | | (iii) | there is consummated a merger or consolidation of YUM! or any direct or indirect Subsidiary with any other corporation, other than (I) a merger or consolidation immediately following which those individuals who immediately prior to the consummation of such merger or consolidation, constituted the Board, constitute a majority of the board of directors of YUM! or the surviving or resulting entity or any parent thereof, or (II) a merger or consolidation effected to implement a recapitalization of YUM! (or similar transaction) in which no Person is or becomes the Beneficial Owner, directly or indirectly, of securities of YUM! (not including in the securities beneficially owned by such Person any securities acquired directly from YUM! or its Affiliates) representing 20% or more of the combined voting power of YUM!’s then outstanding securities. |
Notwithstanding the foregoing, a “Change in Control” shall not be deemed to have occurred by virtue of the consummation of any transaction or series of integrated transactions immediately following which the record holders of the common stock of YUM! immediately prior to such transaction or series of transactions continue to have substantially the same proportionate ownership in an entity which owns all or substantially all of the assets of YUM! immediately following such transaction or series of transactions.
(CONTINUEDand To Be Signed and Dated onREVERSE SIDE) | (I) | “Affiliate” shall have the meaning set forth in Rule 12b-2 under Section 12 of the Exchange Act. | | | | | (II) | “Beneficial Owner” shall have the meaning set forth in Rule 13d-3 under the Exchange Act, except that a Person shall not be deemed to be the Beneficial Owner of any securities which are properly filed on a Form 13-G. | | | | | (III) | “Exchange Act” shall mean the Securities Exchange Act of 1934, as amended from time to time. | | | | | (IV) | “Person” shall have the meaning given in Section 3(a)(9) of the Exchange Act, as modified and used in Sections 13(d) and 14(d) thereof, except that such term shall not include (i) YUM! or any of its Affiliates; (ii) a trustee or other fiduciary holding securities under an employee benefit plan of YUM! or any of its subsidiaries; (iii) an underwriter temporarily holding securities pursuant to an offering of such securities; or (iv) a corporation owned, directly or indirectly, by the shareholders of YUM! in substantially the same proportions as their ownership of stock of YUM!. |
(e) | Code. The term “Code” shall mean the Internal Revenue Code of 1986, as amended. A reference to any Code provision shall include reference to any successor provision of the Code. | | | (f) | Director. For purposes of the Plan, the term “Director” shall mean a member of the Board who is not an officer or employee of YUM! or any Subsidiary. | | | (g) | Eligible Individual. For purposes of the Plan, the term “Eligible Individual” shall mean any officer, director or other employee of YUM! or its Subsidiaries, consultants, independent contractors or agents of YUM! or a Subsidiary, and persons who are expected to become officers, employees, directors, consultants, independent contractors or agents of YUM! or a Subsidiary (but effective no earlier than the date on which such individual begins to provide services to YUM! or a Subsidiary), including, in each case, Directors. | | | (h) | Fair Market Value. The “Fair Market Value” of a share of Stock as of any date shall mean the closing price of a share of Stock on such date as reported on the composite tape for securities listed on the New York Stock Exchange (or if no sales of Stock were made on said exchange on such date, on the next preceding day on which sales were made on such exchange). If the Stock is not at the time listed or admitted to trading on a stock exchange, the Fair Market Value shall be the closing average of the closing bid and asked price of a share of Stock on the date in question in the over-the-counter market, as such price is reported in a publication of general circulation selected by the Committee and regularly reporting the market price of Stock in such market. If the Stock is not listed or admitted to trading on any stock exchange or traded in the over-the-counter market, the Fair Market Value shall be as determined by the Committee in good faith. | | | (i) | Performance Measures. In the case of any Award that is intended to constitute Performance-Based Compensation, the term “Performance Measures” shall mean any one or more of the following: cash flow; earnings; earnings per share; market value added or economic value added; profits; return on assets; return on equity; return on investment; revenues; stock price; total shareholder return; customer satisfaction metrics; or restaurant unit development. Each goal may be |
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| expressed on an absolute and/or relative basis, may be based on or otherwise employ comparisons based on internal targets, the past performance of YUM! and/or the past or current performance of other companies, and in the case of earnings-based measures, may use or employ comparisons relating to capital, shareholders’ equity and/or shares outstanding, investments or to assets or net assets. | | | (j) | Potential Change in Control. A “Potential Change in Control” shall exist during any period in which the circumstances described in items (i), (ii), (iii) or (iv), below, exist (provided, however, that a Potential Change in Control shall cease to exist not later than the occurrence of a Change in Control): |
| (i) | YUM! or any successor or assign thereof enters into an agreement, the consummation of which would result in the occurrence of a Change in Control; provided that a Potential Change in Control described in this item (i) shall cease to exist upon the expiration or other termination of all such agreements. | | | | | (ii) | Any Person (including YUM!) publicly announces an intention to take or to consider taking actions which if consummated would constitute a Change in Control; provided that a Potential Change in Control described in this item (ii) shall cease to exist upon the withdrawal of such intention, or upon a reasonable determination by the Board that there is no reasonable chance that such actions would be consummated. | | | | | (iii) | Any Person becomes the Beneficial Owner, directly or indirectly, of securities of YUM! representing 15% or more of the combined voting power of YUM!’s then outstanding securities (not including in the securities beneficially owned by such Person any securities acquired directly from YUM! or any of its Affiliates). However, a Potential Change in Control shall not be deemed to exist by reason of ownership of securities of YUM! by any person, to the extent that such securities of YUM! are acquired pursuant to a reorganization, recapitalization, spin-off or other similar transactions (including a series of prearranged related transactions) to the extent that immediately after such transaction or transactions, such securities are directly or indirectly owned in substantially the same proportions as the proportions of ownership of YUM!’s securities immediately prior to the transaction or transactions. | | | | | (iv) | The Board adopts a resolution to the effect that, for purposes of this Plan, a potential change in control exists; provided that a Potential Change in Control described in this item (iv) shall cease to exist upon a reasonable determination by the Board that the reasons that give rise to the resolution providing for the existence of a Potential Change in Control have expired or no longer exist. |
(k) | Subsidiaries. The term “Subsidiary” shall mean any corporation, partnership, joint venture or other entity during any period in which at least a fifty percent voting or profits interest is owned, directly or indirectly, by YUM! (or by any entity that is a successor to YUM!), and any other business venture designated by the Committee in which YUM! (or any entity that is a successor to YUM!) has a significant interest, as determined in the discretion of the Committee; provided, however, that except for options and SARs designated as intended to be subject to Code Section 409A, options and SARs shall not be granted to employees or directors of Subsidiaries unless the ownership of the Subsidiary satisfies Treas. Reg. § 1.409A-1(b)(5)(iii). For purposes of applying the Plan to an ISO, the term “Subsidiary” shall mean a subsidiary determined in accordance with Code Section 424(f). | | | (l) | Stock. The term “Stock” shall mean shares of common stock of YUM!. |
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