Pizza Hut 2012 Annual Report Download - page 39

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YUM! BRANDS, INC.-2013Proxy Statement 21
Proxy Statement
ITEM4 Re-Approval of YUM! Brands,Inc. LongTerm
Incentive Plan Performance Measures
(Item4ontheProxyCard)
What am I voting on?
A proposal to re-approve the material terms of the performance
measures available under the YUM! Brands,Inc. Long Term
Incentive Plan (“LTIP”), as required by the performance-based
compensation rules under Section 162(m) of the Internal Revenue
Code (“Section 162(m)”).
IMPORTANT: This proposal does not seek to increase the
number of shares of common stock that may be issued under
the LTIP or to amend any performance objectives or other
existing provisions under the LTIP, and approval will not result
in any additional cost to the Company.
Why am I voting on this?
To preserve the Company’s ability to grant performance-based
compensation awards under the LTIP which may be exempt from
Section 162(m)’s $1million limit on tax deductible compensation.
If shareholders do not approve the proposal, the Company will
thereafter be unable to structure awards (other than options and
stock appreciation rights) that may be exempt from Section 162(m)’s
$1million limit on tax deductible compensation. It is important
to note that we reserve the right to make awards under the LTIP
(and otherwise) that may not be deductible, in whole or in part,
under Section 162(m).
Generally, Section 162(m) limits the deductibility of compensation
paid to the Company’s Chief Executive Offi cer and three additional
most highly compensated employees, other than the Chief
Financial Offi cer, to $1million per year. This limit does not apply,
however, to compensation that qualifi es as performance-based
compensation within the meaning of Section 162(m) (sometimes
referred to as “qualifi ed performance-based compensation”).
One of the requirements that must be met in order to satisfy the
qualifi ed performance-based compensation exception is that the
material terms of the performance measures that would apply to
compensation that is intended to be qualifi ed performance-based
compensation must be disclosed to and approved by the Company’s
shareholders at least once every fi ve years. Shareholder approval
is only one of several requirements under Section 162(m) which
must be met in order to satisfy the qualifi ed performance-based
compensation exception. Even if our shareholders approve the
proposal, there is no guarantee that awards granted under the
LTIP will be treated as qualifi ed performance- based compensation
and we reserve the right to make awards of compensation that
do not qualify for the qualifi ed performance-based compensation
exception of Section 162(m) (whether under the LTIP or otherwise).
What are the material terms that must be approved?
For purposes of Section 162(m), the material terms include: (i) the
individuals eligible to receive compensation; (ii) a description of
the business criteria on which the performance goal is based; and
(iii) the maximum amount of compensation that can be paid to an
individual under the performance measure. Disclosure regarding
each of these material terms is included in the summary of the
LTIP below and is qualifi ed in its entirety by reference to the full
text of the LTIP set forth on Appendix A of this proxy statement.
Summary of the LTIP
Plan Administration. The LTIP is administered by a committee
(the “Committee”) selected by the Board and consisting solely of
two or more outside 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 LTIP that would otherwise
be the responsibility of the Committee. The Management Planning
and Development Committee of the Company’s Board currently
serves as the Committee under the LTIP.
Committee Authority. The Committee has 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 certain limits, to cancel or suspend awards. To the extent
that the Committee determines that the restrictions imposed by
the LTIP preclude the achievement of the material purposes of the