Pizza Hut 2011 Annual Report Download - page 79

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Proxy Statement
61
(2) Reflects grants of PSUs subject to performance-based vesting conditions under the Long Term Incentive Plan in 2011. The PSUs vest on
December 28, 2013, subject to the Company’s achievement of specified earnings per share (‘‘EPS’’) growth during the performance period ending on December 28, 2013. The performance target for all the PSU awards granted to the NEOs in 2011 is compounded annual EPS growth of 10%, determined by comparing EPS as measured at the end of the performance period to base EPS (2010 EPS). Both base EPS and EPS for the performance period are adjusted to exclude certain items as described on page 47 of this proxy statement. If the 10% growth target is achieved, 100% of the PSUs will pay out in shares of Company stock. If less than 7% compounded EPS growth is achieved, there will be no payout. If EPS growth is at or above 16%, PSUs pay out at the maximum, which is 200% of target. If EPS growth is at or above the 7% threshold but below the 16% maximum, the awards will pay out in proportion to the level of EPS growth achieved between the threshold and the target and between the target and the maximum, as applicable. The terms of the PSUs provide that in case of a change in control during the first year of the award shares will be distributed assuming target performance was achieved subject to reduction to reflect the portion of the performance period following the change in control. In case of a change in control after the first year of the award, shares will be distributed assuming performance at the greater of target level or projected level at the time of the change in control subject to reduction to reflect the portion of the performance period following the change in control.
(3) Amounts in this column reflect the number of 2011 stock appreciation rights (‘‘SARs’’) and stock options granted to executives during the
Company’s 2011 fiscal year. For each executive, the grants were made February 4, 2011 and for Mr. Pant, on November 18, 2011. SARs/stock options become exercisable in equal installments on the first, second, third and fourth anniversaries of the grant date. (Except, however, 101,833 SARs and 94,949 SARs, granted to Mr. Carucci and Mr. Pant, respectively, become exercisable on the fifth anniversary of the grant date.) The terms of each SAR/stock option grant provides that, in case of a change in control, all outstanding awards become exercisable immediately. SARs allow the grantee to receive the number of shares of YUM common stock that is equal in value to the appreciation in YUM common stock with respect to the number of SARs granted from the date of grant to the date of exercise. Participants who have attained age 55 with 10 years of service who terminate employment may exercise SARs/stock options that were vested on their date of termination through the expiration date of the SAR/stock option (generally, the tenth anniversary following the SARs/stock options grant date). Vested SARs/stock options of grantees who die may also be exercised by the grantee’s beneficiary through the expiration date of the vested SARs/stock options and the grantees unvested SARs/stock options expire on the grantees’ death. If a grantee’s employment is terminated due to gross misconduct, the entire award is forfeited. For other employment terminations, all SARs/stock options expire upon termination of employment.
(4) The exercise price for Mr. Pant’s Chairman’s Award granted in 2011 equals the closing price of YUM common stock on the grant date,
November 18, 2011. The exercise price of all of the other SARs/stock options granted in 2011 equals the closing price of YUM common stock on the grant date, February 4, 2011.
(5) Amounts in this column reflect the full grant date fair value of the PSUs shown in column (g) and the SARs/stock options shown in column (j).
These amounts reflect the amounts to be recognized by the Company as accounting expense and do not correspond to the actual value that will be recognized by the NEOs. The grant date fair value is the amount that the Company is expensing in its financial statements over the award’s vesting schedule. For PSUs, fair value was calculated using the closing price of the Company’s common stock on the date of grant. For SARs/stock options, fair value was calculated using the Black-Scholes value on the February 4, 2011 and November 18, 2011 grant dates of $11.70 and $12.92, respectively. For additional information regarding valuation assumptions of SARs/stock options, see the discussion of stock awards and option awards contained in Part II, Item 8, ‘‘Financial Statements and Supplementary Data’’ of the 2011 Annual Report in Notes to Consolidated Financial Statements at Note 15, ‘‘Share-based and Deferred Compensation Plans.’’ There can be no assurance that the SARs/stock options will ever be exercised or PSUs paid out (in which case no value will be realized by the executive) or that the value upon exercise or payout will equal the grant date fair value.