Pizza Hut 2008 Annual Report Download - page 93

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$1,147,000, 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 Control. Change in control severance agreements are in effect between YUM and certain
key executives (including Messrs. Novak, Carucci, Su, Allan and Creed). 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,
• outplacement services for up to one year following termination, and
• a ‘‘tax gross-up payment’’ which, in the event an executive becomes entitled to receive a severance
payment and other severance benefits and such severance payment and benefits are subject to an
excise tax, ensures the executive will be in the same after-tax position as if no excise tax had been
imposed. (Except, however, where the severance payment to the executive will generate an excise
tax but the total severance payment does not exceed by more than 10% the threshold for which the
excise tax becomes payable, then no gross-up payment will be made and the executive’s severance
payment will be reduced to the threshold to ensure no excise tax is payable.)
In addition, to the payments described above under the agreements, upon a change of control:
• All stock options and SARs held by the executive will automatically vest and become exercisable.
Proxy Statement
• All RSUs under the Company’s EID Program will vest.
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 of control will not be entitled to receive any severance payments under the change in
control severance agreements.
Generally, pursuant to the agreements, a change of 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
(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.
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