Pizza Hut 2012 Annual Report Download - page 71

YUM! BRANDS, INC.-2013Proxy Statement 53
Proxy Statement
EXECUTIVE COMPENSATION
Nonqualifi ed Deferred Compensation
Amounts refl ected in the Nonqualifi ed Deferred Compensation table
below are provided for under the Company’s Executive Income Deferral
(“EID”) Program and Leadership Retirement Plan (“LRP”). Both plans
are unfunded, unsecured deferred, account based compensation
plans. For each calendar year, participants are permitted under the
EID program to defer up to 85% of their base pay and up to 100%
of their annual incentive award. As discussed beginning at page 40 ,
Messrs. Grismer and Pant are eligible to participate in the LRP. The
LRP provides an annual allocation to Mr.Grismer’s account equal
to 9.5% of his salary plus target bonus and to Mr.Pant’s account
equal to 28% of his salary plus target bonus.
Deferred Investments under the EID Program. Amounts deferred under
the EID Program may be invested in the following phantom investment
alternatives (12month investment returns are shown in parenthese s):
•YUM! Stock Fund (12.52%*)
•YUM! Matching Stock Fund (12.52%*)
•S&P500 Index Fund (15.97%)
•Bond Market Index Fund (4.13%)
•Stable Value Fund (1.48%)
All of the phantom investment alternatives offered under the EID
Program are designed to match the performance of actual investments;
that is, they provide market rate returns and do not provide for
preferential earnings. The S&P500 index fund, bond market index fund
and stable value fund are designed to track the investment return of
like-named funds offered under the Company’s 401(k) Plan. The YUM!
Stock Fund and YUM! Matching Stock Fund track the investment
return of the Company’s common stock. Participants may transfer
funds between the investment alternatives on a quarterly basis except
(1)funds invested in the YUM! Stock Fund or YUM! Matching Stock
Fund may not be transferred once invested in these funds and (2)a
participant may only elect to invest into the YUM! Matching Stock
Fund at the time the annual incentive deferral election is made. In
the case of the Matching Stock Fund, participants who defer their
annual incentive into this fund acquire additional phantom shares
(called restricted stock units (“RSUs”)) equal to 33% of the RSUs
received with respect to the deferral of their annual incentive into the
YUM! Matching Stock Fund (the additional RSUs are referred to as
“matching contributions”). The RSUs attributable to the matching
contributions are allocated on the same day the RSUs attributable to
the annual incentive are allocated, which is the same day we make
our annual stock appreciation right grants. Amounts attributable to
the matching contribution under the YUM! Matching Stock Fund
are refl ected in column (c)below as contributions by the Company
(and represent amounts actually credited to the Named Executive
Offi cer’s account during 2012). Beginning with their 2009 annual
incentive award, Named Executive Offi cers are no longer eligible to
participate in the Matching Stock Fund. Mr.Grismer deferred his
2012 annual incentive award into the YUM! Matching Stock Fund
since he was ineligible for a performance share unit award upon his
promotion to Chief Financial Offi cer in May2012.
RSUs attributable to annual incentive deferrals into the YUM! Matching
Stock Fund and matching contributions vest on the second anniversary
of the grant (or upon a change of control of the Company, if earlier)
and are payable as shares of YUM common stock pursuant to the
participant’s deferral election. Unvested RSUs held in a participant’s
Matching Stock Fund account are forfeited if the participant voluntarily
terminates employment with the Company within two years of the
deferral date. If a participant terminates employment involuntarily,
the portion of the account attributable to the matching contributions
is forfeited and the participant will receive an amount equal to the
amount of the original amount deferred. If a participant dies or
becomes disabled during the restricted period, the participant fully
vests in the RSUs. Dividend equivalents are accrued during the
restricted period but are only paid if the RSUs vest. RSUs held by
a participant who has attained age 65 with fi ve years of service
vest immediately. In the case of a participant who has attained age
55 with 10years of service, RSUs attributable to pre-2009 bonus
deferrals into the YUM! Matching Stock Fund vest immediately and
RSUs attributable to the matching contribution vest on a pro rata
basis during the period beginning on the date of grant and ending
on the fi rst anniversary of the grant and are fully vested on the fi rst
anniversary.
LRP Account Returns. The LRP provides an annual earnings credit
to each participant’s account based on the value of participant’s
account at the end of each year. Under the LRP, Mr.Grismer and
Mr.Pant each receive an annual earnings credit equal to 5%.
Distributions under EID Program. When participants elect to defer
amounts into the EID Program, they also select when the amounts
ultimately will be distributed to them. Distributions may either be
made in a specifi c year—whether or not employment has then
ended—or at a time that begins at or after the executive’s retirement
or separation or termination of employment.
Distributions can be made in a lump sum or up to 20 annual
installments. Initial deferrals are subject to a minimum two year
deferral. In general, with respect to amounts deferred after 2005
or not fully vested as of January1,2005, participants may change
their distribution schedule, provided the new elections satisfy the
requirements of Section409A of the Internal Revenue Code. In
general, Section409A requires that:
• Distribution schedules cannot be accelerated (other than for a
hardship)
•To delay a previously scheduled distribution,
– A participant must make an election at least one year before the
distribution otherwise would be made, and
–The new distribution cannot begin earlier than fi ve years after it
would have begun without the election to re-defer.
With respect to amounts deferred prior to 2005, to delay a distribution
the new distribution cannot begin until two years after it would have
begun without the election to re-defer.
Investments in the YUM! Stock Fund and YUM! Matching Stock
Fund are only distributed in shares of Company stock.
Distributions under LRP. Under the LRP, participants receive a
distribution of their vested account balance following the later to
occur of their attainment of age 55 or retirement from the Company.
* Assumes dividends are not reinvested.