Pizza Hut 2012 Annual Report Download - page 42

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YUM! BRANDS, INC.-2013Proxy Statement24
Proxy Statement
ITEM4RE-APPROVAL OF YUM! BRANDS,INC. LONGTERM INCENTIVE PLAN PERFORMANCE MEASURES
Participant upon disposition of such shares will be treated as
capital gains and losses, with the basis in such stock equal
to the fair market value of the shares at the time of exercise.
•
INCENTIVE STOCK OPTIONS. The grant of an incentive stock
option will not result in taxable income to the Participant. The
exercise of an incentive stock option will not result in taxable
income to the Participant provided that the Participant was,
without a break in service, an employee of the Company or a
subsidiary during the period beginning on the date of the grant
of the option and ending on the date three months prior to the
date of exercise (one year prior to the date of exercise if the
Participant is disabled, as that term is defi ned in the Internal
Revenue Code). The excess of the fair market value of the
stock at the time of the exercise of an incentive stock option
over the exercise price is an adjustment that is included in the
calculation of the Participant’s alternative minimum taxable
income for the tax year in which the incentive stock option is
exercised. If the Participant does not sell or otherwise dispose
of the stock within two years from the date of the grant of the
incentive stock option or within one year after the transfer of
such stock to the Participant, then, upon disposition of such
stock, any amount realized in excess of the exercise price will
be taxed to the Participant as capital gain and the Company
will not be entitled to a corresponding tax deduction. A capital
loss will be recognized to the extent that the amount realized
is less than the exercise price. If the foregoing holding period
requirements are not met, the Participant will generally realize
ordinary income at the time of the disposition of the shares, in
an amount equal to the lesser of (i)the excess of the fair market
value of the stock on the date of exercise over the exercise price,
or (ii)the excess, if any, of the amount realized upon disposition
of the shares over the exercise price, and the Company will be
entitled to a corresponding tax deduction. If the amount realized
exceeds the value of the shares on the date of exercise, any
additional amount will be capital gain. If the amount realized is
less than the exercise price, the Participant will recognize no
ordinary income, and a capital loss will be recognized equal to
the excess of the exercise price over the amount realized upon
the disposition of the shares.
•
STOCK APPRECIATION RIGHTS. The grant of a SAR will not
result in taxable income to the Participant. Upon exercise of
a SAR, the amount of cash or the fair market value of stock
received will be taxable to the Participant as ordinary income
and the Company will be entitled to a corresponding deduction.
Gains and losses realized by the Participant upon disposition
of any such shares will be treated as capital gains and losses,
with the basis in such shares equal to the fair market value of
the shares at the time of exercise.
•
PERFORMANCE SHARES AND PERFORMANCE UNITS.
AParticipant who has been granted a performance share award
or performance unit award will not realize taxable income at the
time of grant. The Participant will have compensation income
at the time of distribution equal to the amount of cash received
and the then fair market value of the distributed shares. The
Company will be entitled to a corresponding tax deduction.
•
RESTRICTED AND OTHER STOCK. A Participant who has
been granted a restricted stock award will not realize taxable
income at the time of grant and the Company will not be entitled
to a corresponding deduction, assuming that the restrictions
constitute a “substantial risk of forfeiture” for federal income tax
purposes. Upon the vesting of stock subject to an award, the
holder will realize ordinary income in an amount equal to the
then fair market value of those shares, and the Company will
be entitled to a corresponding tax deduction. Gains or losses
realized by the Participant upon disposition of such shares will
be treated as capital gains and losses, with the basis in such
shares equal to the fair market value of the shares at the time
of vesting. Dividends paid to the holder during the restriction
period, if so provided, will also be compensation income to the
Participant and the Company will be entitled to a corresponding
tax deduction. A Participant may elect pursuant to Section83(b)
of the Internal Revenue Code to have income recognized at
the date of grant of a restricted stock award and to have the
applicable capital gain holding period commence as of that
date. If the Participant makes this election, the Company will
be entitled to a corresponding tax deduction.
What vote is required to approve this proposal?
Approval of this proposal requires the affi rmative vote of a majority of the shares present in person or represented by proxy and entitled
to vote at the A nnual M eeting.
What is the recommendation of the Board of Directors?
The Board of Directors R ecommends That You V ote FOR A pproval of T his Proposal.