Pizza Hut 2009 Annual Report Download - page 61

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YUM’s Stock Option and Stock Appreciation Rights Granting Practices
Historically, we have awarded non-qualified stock option and stock appreciation rights grants annually
at the Committee’s January meeting. This meeting date is set by the Board of Directors more than
6 months prior to the actual meeting. Beginning with the 2008 grant, the Committee set the annual grant
date as the 2nd business day after the Q4 earnings release. We do not backdate or make grants
retroactively. In addition, we do not time such grants in coordination with our possession or release of
material, non-public or other information.
We make grants at the same time other elements of annual compensation are determined so that we
can consider all elements of compensation in making the grants. Pursuant to the terms of our LTI Plan, the
exercise price is set as the closing price on the date of grant. We make these grants to NEOs at the same
time they are granted to the other approximately 600 above restaurant leaders of our Company who are
eligible for stock option and stock appreciation rights grants.
Management recommends the awards to be made pursuant to our LTI Plan to the Committee. While
the Committee gives significant weight to management recommendations concerning grants to executive
officers (other than the CEO), the Committee makes the determination whether and to whom to issue
grants and determines the amount of the grant. The Board of Directors has delegated to Mr. Novak and
Anne Byerlein, our Chief People Officer, the ability to make grants to employees who are not executive
officers and whose grant is less than approximately 28,572 options or appreciation rights annually. In the
case of these grants, the Committee sets all the terms of each award, except the actual number of stock
appreciation rights or options, which are determined by Mr. Novak and Ms. Byerlein pursuant to
guidelines approved by the Committee in January of each year.
Grants may also be made on other dates that the Board of Directors meets. These grants generally are
Chairman’s Awards, which are made in recognition of superlative performance and extraordinary impact
on business results. Over the last 4 years, we have averaged 12 Chairman’s Award grants per year outside
of the January time frame, and these grants have been awarded to employees below the executive officers
level. In 2009, we made 8 Chairman’s Award grants.
Payments upon Termination of Employment
Proxy Statement
The Company does not have agreements concerning payments upon termination of employment
except in the case of a change in control of the Company. The terms of these change of control agreements
are described beginning on page 61. The Committee believes these are appropriate agreements for
retaining the executive officer to preserve shareholder value in case of a threatened change in control. The
Committee periodically reviews these agreements or other aspects of the Company’s change in control
program.
The Company’s change in control agreements, in general, pay, in case of an executive’s termination of
employment for other than cause within two years of the change in control, a benefit of two times salary
and bonus and provide for a tax gross-up in case of any excise tax. In addition, unvested stock options and
stock appreciation rights vest upon a change of control (as fully described under ‘‘Change in Control’’
beginning on page 62). Other benefits (i.e., bonus, severance payments and outplacement) generally
require a change in control, followed by a termination of an executive’s employment. In adopting the
so-called ‘‘single’’ trigger treatment for equity awards, the Company is guided by:
• keeping employees relatively whole for a reasonable period but avoiding creating a ‘‘windfall’’
• ensuring that ongoing employees are treated the same as terminated employees with respect to
outstanding equity awards
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