YUM! CHANGE IN CONTROL SEVERANCE AGREEMENT 409A Addendum
409A
Addendum
THIS
AGREEMENT, dated December 31, 2008, (the "409A Agreement") is made by and
between YUM! Brands Inc., a North Carolina corporation (the Company"), and Xxxx
Xxxxxxx (the "Executive").
WHEREAS,
the Company and the Executive have previously entered into a change in control
severance agreement (the “Severance Agreement”); and
WHEREAS,
the Company and the Executive wish to ensure that the Severance Agreement
complies to the extent necessary with Section 409A of the Internal Revenue Code
of 1986, as amended (the “Code”), and thereby to avoid adverse tax consequences
to the Executive (including avoiding an additional tax of 20% on compensation
payable under the Severance Agreement); and
WHEREAS,
ensuring Code Section 409A compliance requires the addition of certain
provisions to the Severance Agreement;
NOW,
THEREFORE, in consideration of the premises and the mutual covenants herein
contained, the Company and the Executive hereby agree as follows:
1. The
provisions of this 409A Agreement supplement the provisions of the Severance
Agreement. At all times, this 409A Agreement and the Severance
Agreement shall be construed together so as to permit full compliance with Code
Section 409A of any compensation subject to Code Section 409A that is provided
by the Severance Agreement.
2. With
respect to salary, compensation and benefits provided by the Severance Agreement
in the event the Executive fails to perform the Executive's full-time duties
with the Company as a result of incapacity due to physical or mental illness, to
the extent these items constitute deferred compensation that is subject to
Section 409A, the payment of such salary, compensation and benefits shall occur
upon Executive’s "disability" or "separation from service", in each case as
defined in Section 409A, whichever occurs earlier (but subject to Section
16(A)). In this case, the rate of payment shall be based on the
normal rules for the salary, compensation or benefit in question, with a lump
sum catch up for any amounts that would have been paid previously under such
rules.
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3. With
respect to the Company’s payment of the Executive's full salary to the
Executive through the Date of Termination (as defined in the Severance
Agreement) in the event the Executive's employment shall be terminated for any
reason following a Change in Control (as defined in the Severance Agreement) and
during the term of the Severance Agreement, to the extent any resulting salary,
compensation and benefits constitute deferred compensation that is subject to
Section 409A, the payment of such salary, compensation and benefits shall occur
upon Executive’s "separation from service", as defined in Section 409A, but
subject to Section 16(A). In this case, the rate of payment shall be
based on the normal rules for the salary, compensation or benefit in question,
with a lump sum catch up for any amounts that would have been paid previously
under such rules.
4. In
the event that Severance Payments (as defined in the Severance Agreement) shall
be reduced pursuant to the terms of the Severance Agreement, then Severance
Payments shall be reduced in the order that the Severance Payments are described
in the Severance Agreement (but disregarding for this purpose any Severance
Payments that would not be considered “parachute payments” under the provisions
and procedures of the Severance Agreement) and to the extent necessary so that
no portion of the Total Payments will be subject to the Excise Tax (as these
capitalized terms are defined in the Severance Agreement).
5. To
the extent the Company pays to the Executive, pursuant to the Severance
Agreement, an estimate of the minimum amount of payments to which the
Executive is entitled and the amount of the estimated payments exceeds the
amount subsequently determined to have been due, such excess shall be repaid to
the Company promptly thereafter (together with interest at 120% of the rate
provided in section 1274(b)(2)(B) of the Code). Each payment required
to be made by the Company to the Executive hereunder that relates to the Excise
Tax and each repayment required to be made by the Executive to the Company in
accordance with the preceding sentence shall in no event be paid later than the
end of the calendar year next following the calendar year in which the Executive
(or the Company on the Executive’s behalf) remits the corresponding taxes to the
Internal Revenue Service or other taxing authority.
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6. To
the extent the Company is to pay the Executive for legal fees and expenses
incurred by the Executive (i) in disputing in good faith any issue under
the Severance Agreement relating to the termination of the Executive's
employment, or (ii) in seeking in good faith to obtain or enforce any
benefit or right provided by the Severance Agreement, or (iii) in
connection with any tax audit or proceeding to the extent attributable to
the application of section 4999 of the Code to any payment or benefit provided
hereunder (the “Legal Expenses”), such Legal Expenses must be
incurred during the period (A) beginning on the commencement date of the
Severance Agreement and, (B) ending on the date that is five years after the
Date of Termination of the Executive. The amount of Legal Expenses
that are eligible for reimbursement during an Executive’s taxable year may not
affect the Legal Expenses eligible for reimbursement in any other taxable
year. Such payments shall be made within ten (10) business days
after delivery of the Executive's written requests for payment accompanied with
such evidence of fees and expenses incurred as the Company reasonably may
require; provided, however, that in no event will the reimbursement of any Legal
Expenses be made after the last day of the Executive’s taxable year following
the Executive’s taxable year in which the Legal Expense in question was
incurred. The right to reimbursement of Legal Expenses provided
hereunder is not subject to liquidation or exchange for another
benefit.
7. If
a purported termination occurs following a Change in Control and during the
term of the Severance Agreement and the Executive provides the Company with a
Dispute Notification (as defined in the Severance Agreement), subject
to providing all payments in compliance with Code Section 409A and avoiding all
duplication of payment, the Company shall act within fifteen (15) days to
restore fully the disputed benefits (so that all benefits are provided as of
such date as would have been provided had there been no delay in providing such
benefits) and to continue to provide such benefits as contemplated by this
Agreement thereafter, but subject to termination and recapture from the
Executive of these disputed benefits in accordance with the terms of a mutual
written agreement of the parties, a binding arbitration award, or a final
judgment, order or decree of a court of competent jurisdiction (which is not
appealable or with respect to which the time for appeal therefrom has expired
and no appeal has been perfected).
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8. Notwithstanding
any other provision of this 409A Agreement or the Severance Agreement, to the
extent the Company determines in good faith that (i) one or more payments or
benefits received or to be received by the Executive pursuant to the Severance
Agreement (including but not limited to the Gross-Up Payment) would constitute
deferred compensation subject to the rules of Code Section 409A, and (b) that
the Executive is a "specified employee" under Code Section 409A, then only to
the extent required to avoid the Executive’s incurrence of any additional tax or
interest under Section 409A, such payment or benefit will be delayed until the
date that is six (6) months after the Executive’s "separation from service"
within the meaning of Section 409A. Any amounts that are postponed
pursuant to this Section 8 will be paid in a lump sum payment within 10 days
after the end of the six-month period. If the Executive dies during
the six-month period, prior to the payment of the delayed amount, the amounts
delayed on account of this Section 8 will be paid to the Executive’s
estate. In addition, to the extent the Company determines in good
faith that one or more payments or benefits received or to be received by an
Executive upon a termination of employment pursuant to the Agreement would
constitute deferred compensation subject to the rules of Code Section 409A then
in determining the time of payment of such deferred compensation a termination
of employment shall be deemed to occur only if such termination of employment
constitutes a "separation from service" as defined in Code Section 409A, as
determined by the Company in accordance with such rules and policies adopted by
it from time to time. Further, in this case, the Date of Termination
shall be the date of such separation from service.
9. This
409A Agreement shall be delivered to the Executive in advance of December 31,
2008. To permit timely and sufficient documentary compliance with Code Section
409A, the provisions of this 409A Agreement shall automatically apply to amend
the Severance Agreement unless the Executive expressly rejects the application
of these provisions in writing. However, to provide an enhanced
record of documentary compliance with Code Section 409A, the Company requests
that the Executive sign and return a copy of this Agreement to the Company at
his/her earliest convenience.
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YUM! BRANDS,
INC.
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By:
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Name:
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Xxxx
X. Xxxx
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Title:
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Corporate
Counsel and Assistant Secretary
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Xxxx
Xxxxxxx
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