Pizza Hut 2012 Annual Report Download - page 74

YUM! BRANDS, INC.-2013Proxy Statement56
Proxy Statement
EXECUTIVE COMPENSATION
Life Insurance Benefi ts. For a description of the supplemental life
insurance plans that provide coverage to the Named Executive
Offi cers, see the All Other Compensation Table on page 46.
If the Named Executive Offi cers had died on December31, 2012,
the survivors of Messrs.Novak, Grismer, Su, Carucci and Pant
would have received Company-paid life insurance of $3,360,000;
$1,100 ,000; $2,365,000; $1,980,000; and $1,500,000, respectively,
under this arrangement. Executives and all other salaried employees
can purchase additional life insurance benefi ts up to a maximum
combined company paid and additional life insurance of $3.5million.
This additional benefi t is not paid or subsidized by the Company
and, therefore, is not shown here.
Change in Control. Change in control severance agreements are in effect
between YUM and certain key executives (including Messrs.Novak,
Grismer, Su, Carucci and Pant). These agreements are general
obligations of YUM, and provide, generally, that if, within two years
subsequent to a change in control of YUM, the employment of the
executive is terminated (other than for cause, or for other limited
reasons specifi ed in the change in control severance agreements) or
the executive terminates employment for Good Reason (defi ned in
the change in control severance agreements to include a diminution
of duties and responsibilities or benefi ts), the executive will be entitled
to receive the following:
• a proportionate annual incentive assuming achievement of target
performance goals under the bonus plan or, if higher, assuming
continued achievement of actual Company performance until
date of termination,
• a severance payment equal to two times the sum of the
executive’s base salary and the target bonus or, if higher, the
actual bonus for the year preceding the change in control of
the Company,
• outplacement services for up to one year following termination, and
• a “tax gross-up payment” which, in the event an executive
becomes entitled to receive a severance payment and other
severance benefi ts and such severance payment and benefi ts
are subject to an excise tax, ensures the executive will be in the
same after-tax position as if no excise tax had been imposed.
(Except, however, where the severance payment to the executive
will generate an excise tax but the total severance payment
does not exceed by more than 10% the threshold for which
the excise tax becomes payable, then no gross-up payment
will be made and the executive’s severance payment will be
reduced to the threshold to ensure no excise tax is payable.)
In addition to the payments described above under the agreements,
upon a change in control:
• All stock options and SARs held by the executive will automatically
vest and become exercisable.
• All RSUs under the Company’s EID Program held by the executive
will automatically vest.
• All PSU awards under the Company’s Performance Share Plan
awarded in the year in which the change in control occurs will
be paid out at target assuming a target level performance had
been achieved for the entire performance period, subject to a pro
rata reduction to refl ect the portion of the performance period
after the change in control. All PSUs awarded for performance
periods that begin before the year in which the change in control
occurs will be paid out assuming performance achieved for the
performance period was at the greater of target level performance
or projected level of performance at the time of the change in
control, subject to pro rata reduction to refl ect the portion of
the performance period after the change in control.
The change in control severance agreements have a three-year
term and are automatically renewable each January1 for another
three-year term. An executive whose employment is not terminated
within two years of a change in control will not be entitled to
receive any severance payments under the change in control
severance agreements.
Generally, pursuant to the agreements, a change in control is deemed
to occur:
(i) if any person acquires 20% or more of the Company’s voting
securities (other than securities acquired directly from the
Company or its affi liates);
(ii) if a majority of the Directors as of the date of the agreement
are replaced other than in specifi c circumstances; or
(iii) upon the consummation of a merger of the Company or
any subsidiary of the Company other than (a)a merger
where the Company’s Directors immediately before the
change in control constitute a majority of the directors of the
resulting organization, or (b)a merger effected to implement
a recapitalization of the Company in which no person is or
becomes the benefi cial owner of securities of the Company
representing 20% or more of the combined voting power of
the Company’s then-outstanding securities.