Document:

Exhibit 10.3

 

EMPLOYEE MATTERS AGREEMENT

 

BY AND BETWEEN

 

YUM! BRANDS, INC.

 

AND

 

YUM CHINA HOLDINGS, INC.

 

 DATED AS OF OCTOBER 31, 2016

 

 

EMPLOYEE MATTERS AGREEMENT

 

This EMPLOYEE MATTERS AGREEMENT (this “Agreement”), dated as of October 31, 2016, is by and between Yum! Brands, Inc., a North Carolina corporation (“YUM”), and Yum China Holdings, Inc., a Delaware corporation (“SpinCo”).

 

RECITALS

 

WHEREAS, the board of directors of YUM (the “YUM Board”) has determined that it is in the best interests of YUM and its shareholders to create a new publicly traded company that shall operate the SpinCo Business;

 

WHEREAS, in furtherance of the foregoing, the YUM Board has determined that it is appropriate and desirable to separate the SpinCo Business from the YUM Business (the “Separation”) and, following the Separation, make a distribution, on a pro rata basis and in accordance with a distribution ratio to be determined by the YUM Board, to the shareholders of YUM of all the outstanding SpinCo Shares owned by YUM (the “Distribution”);

 

WHEREAS, YUM and SpinCo are entering into the Separation and Distribution Agreement (the “Separation and Distribution Agreement”), dated as of the date hereof, in order to carry out, effect and consummate the Separation and the Distribution and set forth the principal arrangements between them regarding the terms of the Separation and the Distribution; and

 

WHEREAS, the Parties desire to provide for and agree upon the allocation between the Parties of the principal employment, compensation, equity plan, and other benefit plan arrangements of each of the Parties and their respective affiliates arising prior to, as a result of, and subsequent to the Separation and the Distribution, and to provide for and agree upon other matters relating to such matters.

 

NOW, THEREFORE, in consideration of the mutual agreements, provisions and covenants contained in this Agreement, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties, intending to be legally bound, hereby agree as follows:

 

ARTICLE I

 

DEFINITIONS

 

Section 1.01.                          Defined Terms.  For the purpose of this Agreement, the following terms shall have the following meanings, and capitalized terms used herein and not otherwise defined in this Article I shall have the respective meanings assigned to them in the Separation and Distribution Agreement.

 

 

(a)                                 “Action” has the meaning set forth in the Separation and Distribution Agreement.

 

(b)                                 “Adjusted YUM Award” means an Adjusted YUM Option, Adjusted YUM SAR, Adjusted YUM RSU Award, or Adjusted YUM PSU Award.

 

(c)                                  “Adjusted YUM Option” means a stock option granted pursuant to a YUM Equity Plan to purchase one or more YUM Shares as adjusted in accordance with Section 6.01.

 

(d)                                 “Adjusted YUM Option Value” means the Pre-Distribution Stock Value minus the exercise price of the YUM Option immediately prior to the Distribution Date.

 

(a)                                 “Adjusted YUM RSU Award” means a restricted stock unit award granted pursuant to a YUM Equity Plan as adjusted in accordance with Section 6.01.

 

(b)                                 “Adjusted YUM PSU Award” means a performance share unit award granted pursuant to a YUM Equity Plan as adjusted in accordance with Section 6.01.

 

(c)                                  “Adjusted YUM SAR” means a stock appreciation rights award granted pursuant to a YUM Equity Plan as adjusted in accordance with Section 6.01.

 

(d)                                 “Adjusted YUM SAR Value” means the Pre-Distribution Stock Value minus the exercise price of the YUM SAR immediately prior to the Distribution Date.

 

(e)                                  “Affiliate” has the meaning set forth in the Separation and Distribution Agreement.  It is expressly agreed that, prior to, at and after the Effective Time, for purposes of this Agreement, (a) no member of the SpinCo Group will be deemed to be an Affiliate of any member of the YUM Group, and (b) no member of the YUM Group will be deemed to be an Affiliate of any member of the SpinCo Group.

 

(f)                                   “Agreement” has the meaning set forth in the Preamble.

 

(g)                                  “Ancillary Agreements” has the meaning set forth in the Separation and Distribution Agreement.

 

(h)                                 “Approvals or Notifications” has the meaning set forth in the Separation and Distribution Agreement.

 

(i)                                     “Benefit Plan” means any (i) “employee benefit plan,” as defined in ERISA Section 3(3) (whether or not such plan is subject to ERISA); and (ii) employment, compensation, severance, salary continuation, bonus, thirteenth month, incentive, retirement, thrift, superannuation, savings, pension, workers’ compensation, termination benefit (including termination notice requirements), termination indemnity, other indemnification, supplemental unemployment benefit, redundancy pay, profit sharing, deferred compensation, stock ownership, stock purchase, stock option, stock appreciation right, restricted stock, “phantom” stock, performance share, restricted stock unit, other stock-based incentive, change in control, paid time off, perquisite, fringe benefit, vacation, disability, life, or other insurance, death benefit, hospitalization, medical, or other compensatory or benefit plan, program, fund, agreement,

 

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arrangement, or policy of any kind (whether written or oral, qualified or nonqualified, funded or unfunded, foreign or domestic, currently effective or terminated), and any trust, escrow or similar agreement related thereto, whether or not funded, excluding any plan, program, fund, agreement, arrangement, or policy (other than for workers’ compensation liabilities) that is mandated by and maintained solely pursuant to applicable Law.

 

(j)                                    “COBRA” means coverage required by Section 4980B of the Code or ERISA Section 601 et. seq.

 

(k)                                 “Code” means the U.S. Internal Revenue Code of 1986, as amended.

 

(l)                                     “Distribution” has the meaning set forth in the Recitals.

 

(m)                             “Distribution Date” has the meaning set forth in the Separation and Distribution Agreement.

 

(n)                                 “Distribution Ratio” means the number of SpinCo Shares distributed in the Distribution in respect of one YUM Share.

 

(o)                                 “Effective Time” has the meaning set forth in the Separation and Distribution Agreement.

 

(p)                                 “EIDP Special Conversion Employee” means any Person who is a participant in the YUM EIDP as of the Distribution Date and who was living or working in Australia at any time at which such participant made a deferral under the YUM EIDP.

 

(q)                                 “Employee” means, as applicable, an employee on the payroll of YUM or any other member of the YUM Group or SpinCo or any other member of the SpinCo Group, including any employee absent from work on account of vacation, jury duty, funeral leave, personal leave, sickness, short-term disability, long-term disability or workers’ compensation leave (in each case, unless treated as a separated employee for employment purposes), military leave, family leave, pay continuation leave, or other approved leave of absence or for whom an obligation to recall, rehire or otherwise return to employment exists under a contractual obligation or Law.  A Former Employee is not considered an “Employee” for purposes of this Agreement.

 

(r)                                    “Employee Recoupment Asset” means an employer’s right to repayment from an employee or former employee in respect of a tax equalization payment, sign-on bonus payment, relocation expense payment, tuition payment, reimbursement, loan, or other similar item, including any agreement related thereto.

 

(s)                                   “Employment Agreement” means an employment contract between a member of the YUM Group or the SpinCo Group, as applicable, and an Employee.

 

(t)                                    “ERISA” means the U.S. Employee Retirement Income Security Act of 1974, as amended.

 

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(u)                                 “First Post-Distribution Trading Day” means, with respect to YUM Shares, the first day on or following the Distribution Date on which “regular-way” trading in YUM Shares is reported on the NYSE and, with respect to SpinCo Shares, the first day on or following the Distribution Date on which “regular way” trading in SpinCo Shares is reported on the NYSE.

 

(v)                                 “Former Employee” means any individual whose employment with YUM and all of its Subsidiaries (including SpinCo and any other member of the SpinCo Group) terminated on or prior to the Distribution Date and for whom no obligation to recall, rehire or otherwise return to employment exists under a contractual obligation or applicable Law.

 

(w)                               “Governmental Authority” has the meaning set forth in the Separation and Distribution Agreement.

 

(x)                                 “Group” has the meaning set forth in the Separation and Distribution Agreement.

 

(y)                                 “Health and Welfare Plan” means any Benefit Plan established or maintained to provide Employees or Former Employees or their beneficiaries, through the purchase of insurance or otherwise, medical, dental, prescription, vision, short-term disability, long-term disability, death benefits, life insurance, accidental death and dismemberment insurance, business travel accident insurance, employee assistance program, group legal services, wellness, cafeteria (including premium payment, health care flexible spending account, and dependent care flexible spending account components), travel reimbursement, transportation, vacation benefits, apprenticeship or other training programs, day care centers, or prepaid legal services benefits, including any “employee welfare benefit plan” (as defined in ERISA Section 3(1)), whether or not subject to ERISA, that is not a severance plan.

 

(z)                                  “Incurred Claim” means a Liability related to services or benefits provided under a Benefit Plan, which will be deemed to be incurred:  (i) with respect to medical, dental, vision, and prescription drug benefits, upon the rendering of services giving rise to such Liability; (ii) with respect to death benefits, life insurance, accidental death and dismemberment insurance, and business travel accident insurance, upon the occurrence of the event giving rise to such Liability; (iii) with respect to disability benefits, upon the date of disability, as determined by the applicable disability benefit insurance carrier or claim administrator; (iv) with respect to a period of continuous hospitalization, upon the date of admission to the hospital; and (v) with respect to tuition reimbursement or adoption assistance, upon completion of the requirements for such reimbursement or assistance, whichever is applicable.

 

(aa)                          “Indemnifying Party” means a Party required to indemnify any Person hereunder.

 

(bb)                          “Indemnitee” means a Party entitled to indemnification hereunder.

 

(cc)                            “Intrinsic Value of the Pre-Distribution YUM Option” shall mean the product of (i) the number of YUM Shares subject to the corresponding YUM Option immediately prior to the Distribution Date, multiplied by (ii) the Adjusted YUM Option Value, rounded to the nearest cent.

 

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(dd)                          “Intrinsic Value of the Pre-Distribution YUM RSU Award” shall mean the product of (i) the number of YUM Shares (including those attributable to dividend equivalent units) subject to the corresponding YUM RSU immediately prior to the Distribution Date, multiplied by (ii) the Pre-Distribution Stock Value.

 

(ee)                            “Intrinsic Value of the Pre-Distribution YUM SAR” shall mean the product of (i) the number of YUM Shares subject to the corresponding YUM SAR immediately prior to the Distribution Date, multiplied by (ii) the Adjusted YUM SAR Value, rounded to the nearest cent.

 

(ff)                              “Law” has the meaning set forth in the Separation and Distribution Agreement.

 

(gg)                            “Liabilities” has the meaning set forth in the Separation and Distribution Agreement.

 

(hh)                          “Notice” means any written notice, request, demand or other communication specifically referencing this Agreement and given in accordance with Section 7.08.

 

(ii)                                  “NYSE” means the New York Stock Exchange.

 

(jj)                                “Party” or “Parties” means a party or the parties to this Agreement.

 

(kk)                          “Person” has the meaning set forth in the Separation and Distribution Agreement.

 

(ll)                                  “Pre-Distribution Stock Value” means the volume weighted average per share price of one YUM Share, trading “regular-way,” as reported on the NYSE on the day immediately prior to the Distribution Date (or if such day is not an NYSE trading day, on the next preceding NYSE trading day).

 

(mm)                  “Pre-Spin Price Ratio” means the quotient of (i) the exercise price of the YUM Option or YUM SAR, as applicable, immediately prior to the Distribution Date, divided by (ii) the Pre-Distribution Stock Value, rounded to the nearest fourth decimal place.

 

(nn)                          “Prime Rate” has the meaning set forth in the Separation and Distribution Agreement.

 

(oo)                          “Restaurant Deferred Compensation Plan” means the Tricon Restaurant Deferred Compensation Plan, as effective October 7, 1997, as amended.

 

(pp)                          “Retained Employee” means any Employee other than a SpinCo Employee.

 

(qq)                          “Securities Act” means the U.S. Securities Act of 1933, as amended.

 

(rr)                                “Separation” has the meaning set forth in the Recitals.

 

(ss)                              “Separation and Distribution Agreement” has the meaning set forth in the Recitals.

 

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(tt)                                “Special Conversion Employee” means any Person who holds any outstanding YUM Award(s) as of the Distribution Date and who meets one or more of the following:

 

(i)                                     the Person is a Chinese National who is working in China on the Distribution Date;

 

(ii)                                  the Person is living or working in Thailand on the Distribution Date;

 

(iii)                               the Person was living or working in Australia or the Netherlands when any outstanding YUM Award held by the Person as of the Distribution Date vested, in whole or in part; and/or

 

(iv)                              the Person is a SpinCo Employee or a SpinCo Former Employee that received a grant of YUM RSUs in January 2016; provided, however, that this clause shall apply solely with respect to the grant of the YUM RSUs to such Person in January 2016.

 

(uu)                          “SpinCo” has the meaning set forth in the Preamble.

 

(vv)                          “SpinCo Award” means a SpinCo Option, SpinCo SAR or SpinCo RSU Award, as applicable, issued pursuant to Section 6.01.

 

(ww)                      “SpinCo Benefit Plan” means each Benefit Plan sponsored by, maintained by, or contributed to by any member of the SpinCo Group and that covers only SpinCo Employees and/or SpinCo Former Employees.

 

(xx)                          “SpinCo Business” has the meaning set forth in the Separation and Distribution Agreement.

 

(yy)                          “SpinCo Change of Control” has the meaning set forth in Section 6.01(b).

 

(zz)                            “SpinCo Employee” means any Employee who is (i) employed by any member of the SpinCo Group immediately prior to the Distribution Date and who continues in employment with the SpinCo Group from and after the Distribution Date, or (ii) hired by any member of the SpinCo Group on or after the Distribution Date.

 

(aaa)                   “SpinCo Equity Plan” means the Yum China Holdings, Inc. Long Term Incentive Plan.

 

(bbb)                   “SpinCo Former Employee” means a Former Employee who was primarily employed or engaged in the SpinCo Business immediately prior to such individual’s termination of employment.

 

(ccc)                      “SpinCo Group” has the meaning set forth in the Separation and Distribution Agreement.

 

(ddd)                   “SpinCo Health and Welfare Plan” means a SpinCo Benefit Plan that is a Health and Welfare Plan.

 

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(eee)                      “SpinCo Leadership Retirement Plan” means the Yum China Holdings, Inc. Leadership Retirement Plan.

 

(fff)                         “SpinCo Option” means a stock option issued under a SpinCo Equity Plan to purchase one or more SpinCo Shares in accordance with Section 6.01.

 

(ggg)                      “SpinCo Percentage” means the quotient of (i) the SpinCo Post-Distribution Stock Value, divided by (ii) the Total Post-Distribution Stock Value, rounded to the nearest cent.

 

(hhh)                   “SpinCo Post-Distribution Stock Value” means the volume weighted average per share price of one SpinCo Share, trading “regular-way,” as reported on the NYSE on the First Post-Distribution Trading Day.

 

(iii)                               “SpinCo Retirement Plan” means any SpinCo Benefit Plan that is a retirement or pension plan.

 

(jjj)                            “SpinCo RSU Award” means a restricted stock unit award issued by SpinCo in accordance with Section 6.01.

 

(kkk)                   “SpinCo SAR” means a stock appreciation rights award issued by SpinCo in accordance with Section 6.01.

 

(lll)                               “SpinCo Shares” has the meaning set forth in the Separation and Distribution Agreement.

 

(mmm)       “Subsidiary” has the meaning set forth in the Separation and Distribution Agreement.

 

(nnn)                   “Tax” has the meaning set forth in the Tax Matters Agreement.

 

(ooo)                   “Tax Authority” has the meaning set forth in the Tax Matters Agreement.

 

(ppp)                   “Tax Matters Agreement” means the Tax Matters Agreement entered into between the Parties in connection with the Distribution.

 

(qqq)                   “Third Party” has the meaning set forth in the Separation and Distribution Agreement.

 

(rrr)                            “Third Party Claim” has the meaning set forth in Section 7.09(a).

 

(sss)                         “Total Post-Distribution Stock Value” means the sum of (i) the YUM Post-Distribution Stock Value plus (ii) the SpinCo Post-Distribution Stock Value.

 

(ttt)                            “YUM” has the meaning set forth in the first paragraph of this Agreement.

 

(uuu)                   “YUM 1997 LTIP” means the Yum 1997 Long Term Incentive Plan, as effective October 7, 1997.

 

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(vvv)                   “YUM 1999 LTIP” means the YUM! Brands, Inc. 1999 Long Term Incentive Plan, as effective May 20, 1999, as amended.

 

(www)             “YUM 401(k) Plan” means the YUM! Brands 401(k) Plan, as effective January 1, 2013, as amended October 21, 2015.

 

(xxx)                   “YUM Award” means a YUM Option, YUM SAR, YUM RSU Award or YUM PSU Award, as applicable, which are subject to adjustment in accordance with Section 6.01 and/or with respect to which corresponding SpinCo Awards will be issued pursuant to Section 6.01.

 

(yyy)                   “YUM Benefit Plan” means a Benefit Plan sponsored by, maintained by, or contributed to by any member of the YUM Group, other than a SpinCo Benefit Plan.

 

(zzz)                      “YUM Board” has the meaning set forth in the Recitals.

 

(aaaa)            “YUM Change of Control” has the meaning set forth in Section 6.01(b).

 

(bbbb)            “YUM Compensation Committee” means the Management Planning and Development Committee of the YUM Board.

 

(cccc)                “YUM Director Deferred Compensation Plan” means, collectively, the YUM Director Deferred Compensation 409A Plan and the YUM Director Deferred Compensation Pre-409A Plan.

 

(dddd)            “YUM Director Deferred Compensation 409A Plan” means the YUM! Brands Director Deferred Compensation Plan, as effective January 1, 2005, and as amended through November 14, 2008.

 

(eeee)                “YUM Director Deferred Compensation Pre-409A Plan” the Yum (f/k/a Tricon) Director Deferred Compensation Plan, as effective October 7, 1997.

 

(ffff)                    “YUM EICP” means the YUM! Brands, Inc. Executive Incentive Compensation Plan, as effective May 20, 2004, and as Amended through the Second Amendment, as effective May 21, 2009.

 

(gggg)                “YUM EIDP” means, collectively, the YUM EIDP Pre-409A Program and the YUM EIDP 409A Program.

 

(hhhh)            “YUM EIDP Pre-409A Program” means the YUM! Brands Executive Income Deferral Program, as effective October 7, 1997, and as amended through May 16, 2002.

 

(iiii)                            “YUM EIDP 409A Program” means the YUM! Brands Executive Income Deferral Program, as effective January 1, 2005, and as amended through June 30, 2009.

 

(jjjj)                        “YUM Equity Plan” means, collectively, the YUM 1997 LTIP, the YUM 1999 LTIP, the YUM GM Stock Plan, the YUM SharePower Plan, the YUM Performance Share Plan, and any incentive compensation program or arrangement that governs the terms of equity-

 

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based incentive awards assumed by the YUM Group in connection with a corporate transaction and that is maintained by the YUM Group immediately prior to the Distribution Date (excluding the SpinCo Equity Plan and any other plan maintained solely by SpinCo or any other member of the SpinCo Group), and any sub-plans established under those programs.

 

(kkkk)            “YUM Former Employee” means a Former Employee who is not a SpinCo Former Employee.

 

(llll)                            “YUM GM Stock Plan” means the YUM! Brands, Inc. Restaurant General Manager Stock Plan, as effective April 1, 1999, and as amended through June 23, 2003.

 

(mmmm)                                            “YUM Group” has the meaning set forth in the Separation and Distribution Agreement.

 

(nnnn)            “YUM Health and Welfare Plan” means a Health and Welfare Plan sponsored by, maintained by, or contributed to by any member of the YUM Group.

 

(oooo)            “YUM Leadership Retirement Plan” means the YUM! Brands Leadership Retirement Plan, as effective January 1, 2005, as amended through December 2009, and as otherwise amended.

 

(pppp)            “YUM Non-U.S. Retirement Plan” means any Benefit Plan that is a pension or retirement plan (other than a severance plan) that is maintained by any member of the YUM Group for the benefit of Employees employed outside the U.S., other than a SpinCo Benefit Plan.

 

(qqqq)            “YUM Option” means a stock option to purchase one or more YUM Shares granted under a YUM Equity Plan and outstanding immediately prior to the Distribution Date.

 

(rrrr)                        “YUM Pension Equalization Plans” means, collectively, the YUM! Brands Pension Equalization Plan, as effective January 2005, and as Amended through December 31, 2010, and the YUM! Brands, Inc. Pension Equalization Plan, as effective January 2005, and as Amended through December 30, 2008, and as Amended effective January 1, 2012 and January 1, 2013, respectively.

 

(ssss)                    “YUM Percentage” means the quotient of (i) the YUM Post-Distribution Stock Value, divided by (ii) the Total Post-Distribution Stock Value, rounded to the nearest fourth decimal place.

 

(tttt)                        “YUM Performance Share Plan” means the YUM! Brands, Inc. Performance Shares Plan, as amended and restated January 1, 2013.

 

(uuuu)            “YUM Post-Distribution Stock Value” means the volume weighted average per share price of one YUM Share, trading “regular-way,” as reported on the NYSE on the First Post-Distribution Trading Date.

 

(vvvv)            “YUM PSU Award” means a performance stock unit award granted pursuant to a YUM Equity Plan and outstanding immediately prior to the Distribution Date.

 

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(wwww)         “YUM RSU Award” means a restricted stock unit award granted pursuant to a YUM Equity Plan and outstanding immediately prior to the Distribution Date.

 

(xxxx)            “YUM Retirement Plan” means the YUM! Brands Retirement Plan, a defined benefit plan.

 

(yyyy)            “YUM SAR” means a stock appreciation right award granted pursuant to a YUM Equity Plan and outstanding immediately prior to the Distribution Date.

 

(zzzz)             “YUM SharePower Plan” means the YUM SharePower Plan, as effective October 7, 1997, and as amended through June 23, 2003.

 

(aaaaa)          “YUM Shares” has the meaning set forth in the Separation and Distribution Agreement.

 

ARTICLE II

 

GENERAL PRINCIPLES

 

Section 2.01.         Allocation of Liabilities.

 

(a)           SpinCo Liabilities.  Effective as of the Effective Time (but in any case prior to the Distribution), and except as expressly provided in this Agreement, SpinCo hereby assumes (or retains) or will cause any other member of the SpinCo Group to assume (or retain) and agrees to (or to cause another member of the SpinCo Group to) pay, perform, fulfill, and discharge, all Liabilities (i) to the extent relating to, arising out of, or resulting from the employment (or termination of employment) of any SpinCo Employee or any SpinCo Former Employee, whether such Liabilities relate to or arise out of periods on, prior to or after the Distribution Date or (ii) which are expressly assumed or retained by the SpinCo Group pursuant to this Agreement.

 

(b)           YUM Liabilities.  Effective as of the Effective Time (but in any case prior to the Distribution), and except as expressly provided in this Agreement, YUM hereby assumes (or retains) or will cause any other member of the YUM Group to assume (or retain) and agrees to (or to cause another member of the YUM Group to) pay, perform, fulfill, and discharge, all Liabilities (i) to the extent relating to, arising out of, or resulting from the employment (or termination of employment) of any Retained Employee or any YUM Former Employee, whether such Liabilities relate to or arise out of periods on, prior to or after the Distribution Date or (ii) which are expressly assumed or retained by the YUM Group pursuant to this Agreement.

 

(c)           Intended Effect; Other Liabilities.  The intended effect of this Agreement, except to the extent expressly provided herein, is that (i) the SpinCo Group (or a member thereof) will assume or retain all Liabilities to or related to SpinCo Employees and SpinCo Former Employees and all Liabilities under or with respect to any SpinCo Benefit Plan or any Employment Agreement with any SpinCo Employee, and (ii) the YUM Group (or a member thereof) will assume and retain all Liabilities to or related to Employees and Former Employees other than SpinCo Employees and SpinCo Former Employees and all Liabilities under the YUM Benefit Plans (including those with respect to SpinCo Employees and SpinCo Former Employees) and any Employment Agreement with any Retained Employee.  To the extent that this Agreement

 

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does not address particular Liabilities and the Parties later determine that such Liabilities should be allocated in connection with the Separation, the Parties will agree in good faith on the allocation, taking into account the handling of comparable Liabilities under this Agreement.

 

Section 2.02.         Employment with SpinCo.

 

(a)           Retention of Employees.  From and after the Effective Time, the Parties intend for SpinCo Employees to remain employed by the SpinCo Group on a basis consistent with Section 2.02(b).  The Parties will cooperate in good faith to identify clearly the SpinCo Employees.  SpinCo will be responsible for, and will indemnify the YUM Group from and against, any Liabilities incurred (including any severance payments made):  (i) in connection with the termination of a SpinCo Employee on or after the Distribution Date, (ii) arising from or in connection with a failure or refusal by any SpinCo Employee to continue in employment from and after the Distribution Date, and (iii) any other Liabilities retained or assumed by SpinCo (or any other member of the SpinCo Group) under this Agreement.

 

(b)           Compensation and Benefits.  Except as expressly provided in this Agreement, the SpinCo Group will provide to each SpinCo Employee as of the Distribution Date (i) base salary at the same rate as provided to that SpinCo Employee immediately prior to the Distribution Date, (ii) cash incentive compensation opportunities that are substantially similar to those offered to such SpinCo Employee immediately prior to the Distribution Date, and (iii) benefits under SpinCo Benefit Plans other than those specified in clause (ii) that are determined in the sole discretion of SpinCo (or the applicable member of the SpinCo Group) or otherwise as required by applicable Law, including the SpinCo Equity Plan and the SpinCo Leadership Retirement Plan.  Nothing in the preceding sentence will prevent the SpinCo Group from modifying the compensation and benefits of a SpinCo Employee after the Distribution Date.

 

Section 2.03.         Establishment of SpinCo Plans.  From and after the Distribution Date, SpinCo will (or will cause another member of the SpinCo Group to) adopt or continue in effect the SpinCo Benefit Plans (and related trusts, if applicable, as determined by the Parties) that were in effect prior to the Distribution Date and such other SpinCo Benefit Plans as determined in the discretion of the SpinCo Group (or any member thereof), subject to the terms and conditions of Section 2.02(b). Notwithstanding the foregoing or any other provision of this Agreement, SpinCo will adopt the SpinCo Equity Plan and the SpinCo Leadership Retirement Plan prior to the Distribution Date and shall cause the SpinCo Leadership Retirement Plan to reflect the assumption of Liabilities described in Section 3.07 hereof.

 

Section 2.04.         Transfers by Mutual Agreement.  The Parties recognize that, prior to and/or for a period of twelve (12) months from the Distribution Date, they may determine it to be in their mutual best interests to transfer an individual classified (or who would otherwise be classified) as a Retained Employee to the SpinCo Group or to transfer an individual classified (or who would otherwise be classified) as a SpinCo Employee to the YUM Group.  With the express written consent of each Party, such individual’s employment will be terminated by the YUM Group or the SpinCo Group, as applicable, and such Employee will be immediately hired by the other Party (such terminations and hires are referred to in this Section 2.04 as “transfers”).  Retained Employees (or a person who would otherwise be classified as a Retained Employee, in any case with such status being determined as of the date of transfer) who are subsequently

 

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transferred to the SpinCo Group pursuant to this Section 2.04 will be treated as Retained Employees for all purposes hereof during their time as Employees of the YUM Group until their actual transfer to the SpinCo Group, upon and following which the Parties will use commercially reasonable efforts to provide that they are treated as SpinCo Employees for all purposes hereof.  SpinCo Employees (or a person who would otherwise be classified as a SpinCo Employee, with such status being determined as of the date of transfer) who are subsequently transferred to the YUM Group pursuant to this Section 2.04 will be treated as SpinCo Employees for all purposes hereof during their time as Employees of the SpinCo Group until their actual transfer to the YUM Group, upon and following which the Parties will use commercially reasonable efforts to provide that they are treated as Retained Employees for all purposes hereof.

 

ARTICLE III

 

YUM U.S. QUALIFIED AND NON-QUALIFIED RETIREMENT AND DEFERRED COMPENSATION PLANS

 

Section 3.01.         YUM Retirement Plan.  From and after the Distribution Date, the YUM Retirement Plan will continue to be responsible for all Liabilities thereunder and no assets or Liabilities of the YUM Retirement Plan will be transferred to any SpinCo Benefit Plan and the SpinCo Group will not assume any Liabilities under or with respect to the YUM Retirement Plan.  Without limiting the generality of the foregoing, SpinCo Employees will cease to be active participants in the YUM Retirement Plan effective as of the Distribution Date and no SpinCo Employee will accrue any benefits under the YUM Retirement Plan for periods after the Distribution Date.  All SpinCo Employees will be fully vested in their accrued benefits under the YUM Retirement Plan effective as of the Distribution Date.

 

Section 3.02.         401(k) Plan.  From and after the Distribution Date, the YUM 401(k) Plan will continue to be responsible for all Liabilities thereunder and no assets or Liabilities of the YUM 401(k) Plan will be transferred to any SpinCo Benefit Plan and SpinCo will not assume any Liabilities under or with respect to the YUM 401(k) Plan.  Without limiting the generality of the foregoing, SpinCo Employees will cease to be active participants in the YUM 401(k) Plan effective as of the Distribution Date and no SpinCo Employee will accrue any benefits under the YUM 401(k) Plan for periods after the Distribution Date. All SpinCo Employees will be fully vested in their benefits under the YUM 401(k) Plan effective as of the Distribution Date.

 

Section 3.03.         YUM Pension Equalization Plans.  From and after the Distribution Date, the YUM Group will continue to be responsible for all Liabilities under and with respect to the YUM Pension Equalization Plans and SpinCo will not assume any Liabilities under or with respect to the YUM Pension Equalization Plans.  Without limiting the generality of the foregoing, SpinCo Employees will cease to be active participants in the YUM Pension Equalization Plans effective as of the Distribution Date and no SpinCo Employee will accrue any benefits under the YUM Pension Equalization Plans for periods after the Distribution Date.  All SpinCo Employees will be fully vested in their accrued benefits under the YUM Pension Equalization Plans effective as of the Distribution Date.  Except to the extent provided by the terms of the applicable YUM Pension Equalization Plan, no SpinCo Employee will be entitled to a distribution from any of the YUM Pension Equalization Plans effective as of the Distribution Date solely as a result of the Distribution.

 

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Section 3.04.         YUM EIDP.  From and after the Distribution Date, the YUM Group will continue to be responsible for all Liabilities under and with respect to the YUM EIDP and SpinCo will not assume any Liabilities under or with respect to the YUM EIDP.  Without limiting the generality of the foregoing, SpinCo Employees will cease to be active participants in the YUM EIDP effective as of the Distribution Date and no SpinCo Employee will accrue any benefits under the YUM EIDP for periods after the Distribution Date except in accordance with the express terms and conditions of the YUM EIDP.  Except to the extent provided by the terms of the YUM EIDP, no SpinCo Employee will be entitled to a distribution from the YUM EIDP effective as of the Distribution Date solely as a result of the Distribution.

 

Section 3.05.         YUM EICP.  From and after the Distribution Date, the YUM Group will continue to be responsible for all Liabilities under and with respect to the YUM EICP and SpinCo will not assume any Liabilities under or with respect to the YUM EICP.  Without limiting the generality of the foregoing, SpinCo Employees will cease to be active participants in the YUM EICP effective as of the Distribution Date and no SpinCo Employee will accrue any benefits under the YUM EICP for periods after the Distribution Date except in accordance with the express terms and conditions of the YUM EICP.  Except to the extent provided by the terms of the YUM EICP, no SpinCo Employee will be entitled to a distribution from the YUM EICP effective as of the Distribution Date solely as a result of the Distribution.

 

Section 3.06.         YUM Director Deferred Compensation Plan.  From and after the Distribution Date, the YUM Group will continue to be responsible for all Liabilities under and with respect to the YUM Director Deferred Compensation Plan and SpinCo will not assume any Liabilities under or with respect to the YUM Director Deferred Compensation Plan.  Except to the extent provided by the terms of the YUM Director Deferred Compensation Plan, no participant will be entitled to a distribution from the YUM Director Deferred Compensation Plan effective as of the Distribution Date solely as a result of the Distribution.

 

Section 3.07.         YUM Leadership Retirement Plan.  From and after the Distribution Date, the YUM Group will be responsible for all Liabilities under and with respect to the YUM Leadership Retirement Plan except those attributable to any SpinCo Employee or SpinCo Former Employee.  SpinCo will assume all Liabilities under or with respect to the YUM Leadership Retirement Plan attributable to each SpinCo Employee and SpinCo Former Employee.  SpinCo Employees and SpinCo Former Employees will cease to be participants in the YUM Leadership Retirement Plan effective as of the Distribution Date and no SpinCo Employee or SpinCo Former Employee will accrue any benefits under the YUM Leadership Retirement Plan for periods after the Distribution Date.  From and after the Distribution Date, no member of the YUM Group will have any Liabilities under or with respect to Yum Leadership Retirement Plan to or with respect to SpinCo Employees or SpinCo Former Employees.

 

ARTICLE IV

 

YUM NON-U.S. RETIREMENT PLANS AND SPINCO RETIREMENT PLANS

 

Section 4.01.         YUM Non-U.S. Retirement Plans.  From and after the Distribution Date, each member of the YUM Group will continue to be responsible for all Liabilities under and with respect to any YUM Non-U.S. Retirement Plan to the extent that it was responsible for such

 

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Liabilities immediately prior to the Distribution Date, no assets or Liabilities of any such YUM Non-U.S. Retirement Plan will be transferred to SpinCo or any SpinCo Benefit Plan, and the SpinCo Group will not assume any Liabilities under or with respect to any such YUM Non-U.S. Retirement Plan for which the YUM Group was responsible immediately prior to the Distribution Date.  Without limiting the generality of the foregoing, SpinCo Employees will cease to be active participants in the YUM Non-U.S. Retirement Plans effective as of the Distribution Date and no SpinCo Employee will accrue any benefits under any YUM Non-U.S. Retirement Plan for periods after the Distribution Date.

 

Section 4.02.         SpinCo Retirement Plans.  From and after the Distribution Date, each member of the SpinCo Group will continue to be responsible for all Liabilities under and with respect to any SpinCo Retirement Plan, no assets or Liabilities of any SpinCo Retirement Plan will be transferred to any YUM Benefit Plan or any member of the YUM Group and no member of the YUM Group will assume or otherwise have any Liabilities under or with respect to any SpinCo Retirement Plan.  Without limiting the generality of the foregoing, Retained Employees will cease to be active participants in any SpinCo Retirement Plan effective as of the Distribution Date and no Retained Employee will accrue any benefits under any SpinCo Retirement Plan for periods after the Distribution Date except in accordance with the express terms and conditions of and applicable SpinCo Retirement Plan.  All Retained Employees are currently, and will remain, fully vested in their accrued benefits under the YUM Retirement Plan from and after the Distribution Date.

 

ARTICLE V

 

WELFARE AND FRINGE BENEFIT PLANS

 

Section 5.01.         Health and Welfare Plans.

 

(a)           Allocation of Liabilities; Generally.

 

(i)            Except as otherwise provided in this Agreement, from and after the Distribution Date, (A) the YUM Group and the YUM Health and Welfare Plans, as applicable, will continue to be responsible for all Liabilities under and with respect to the YUM Health and Welfare Plans (including all Incurred Claims, regardless of when the Incurred Claim arose or was incurred), (B) the YUM Group and the YUM Health and Welfare Plans, as applicable, will retain all assets relating to or associated with the YUM Health and Welfare Plans and Incurred Claims (including Medicare reimbursements, insurance payments and reimbursements, pharmaceutical rebates, and similar items), and (C) no assets or Liabilities of the YUM Health and Welfare Plans will be transferred to any SpinCo Benefit Plan and the SpinCo Group will not assume any Liabilities under or with respect to the YUM Health and Welfare Plans.  Without limiting the generality of the foregoing, SpinCo Employees will cease to be active participants in the YUM Health and Welfare Plans effective as of the Distribution Date and no SpinCo Employee will be entitled to any benefits under the YUM Health and Welfare Plans for periods on or after the Distribution Date except as required by applicable Law.

 

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(ii)           Except as otherwise provided in this Agreement, from and after the Distribution Date, (A) the SpinCo Group and the SpinCo Health and Welfare Plans, as applicable, will continue to be responsible for all Liabilities under and with respect to the SpinCo Health and Welfare Plans (including all Incurred Claims, regardless of when the Incurred Claim arose or was incurred), (B) the SpinCo Group and the SpinCo Health and Welfare Plans, as applicable, will retain all assets relating to or associated with the SpinCo Health and Welfare Plans and Incurred Claims (including Medicare reimbursements, insurance payments and reimbursements, pharmaceutical rebates, and similar items), and (C) no assets or Liabilities of the SpinCo Health and Welfare Plans will be transferred to any YUM Benefit Plan and the YUM Group will not assume any Liabilities under or with respect to the SpinCo Health and Welfare Plans.  Without limiting the generality of the foregoing, YUM Employees will cease to be active participants in the SpinCo Health and Welfare Plans effective as of the Distribution Date and no YUM Employee will be entitled to any benefits under the SpinCo Health and Welfare Plans for periods on or after the Distribution Date except as required by applicable Law.

 

(b)           COBRA.  Without limiting the generality of Section 5.01(a), the YUM Group will continue to be responsible for compliance with the health care continuation requirements of COBRA, and the corresponding provisions of the YUM Health and Welfare Plans with respect to any (i) Retained Employees and any Former Employees (and their covered dependents) who incur a qualifying event under COBRA on, prior to, or following the Distribution Date, and (ii) any SpinCo Employees (and their covered dependents) who incur a qualifying event under COBRA on or prior to the Distribution Date.

 

Section 5.02.         Vacation, Holidays and Leaves of Absence.  Effective as of the Distribution Date, SpinCo will (or will cause any other member of the SpinCo Group to) retain (or assume) all Liabilities of the YUM Group with respect to vacation, holiday, annual leave or other leave of absence, and required payments related thereto, for each SpinCo Employee and each SpinCo Former Employee.  YUM will (or will cause any other member of the YUM Group to) retain all Liabilities with respect to vacation, holiday, annual leave or other leave of absence, and required payments related thereto, for all Retained Employees and YUM Former Employees.

 

Section 5.03.         Severance and Unemployment Compensation.  Effective as of the Distribution Date, SpinCo will (or will cause another member of the SpinCo Group to) retain (or assume) all Liabilities to, or relating to, SpinCo Employees and SpinCo Former Employees in respect of severance and unemployment compensation.  The YUM Group will be responsible for any and all Liabilities to, or relating to, Retained Employees and YUM Former Employees in respect of severance and unemployment compensation.

 

Section 5.04.         Workers’ Compensation.  With respect to claims for workers’ compensation in the United States, (a) the SpinCo Group will be responsible for claims in respect of SpinCo Employees and SpinCo Former Employees, whether occurring or related to events occurring prior to, on or following the Distribution Date, and (b) the YUM Group will be responsible for all claims in respect of Retained Employees and YUM Former Employees, whether occurring or related to events occurring prior to, on or following the Distribution Date.

 

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ARTICLE VI

 

EQUITY AND INCENTIVE PROGRAMS

 

Section 6.01.         Equity Plans.

 

(a)           The Parties will use commercially reasonable efforts to take all actions necessary or appropriate so that each outstanding YUM Option, YUM SAR, YUM RSU Award, and YUM PSU Award granted under a YUM Equity Plan will be adjusted as set forth in this Section 6.01.

 

(i)            YUM Options.  As determined by the YUM Compensation Committee pursuant to its authority under the applicable YUM Equity Plan, each YUM Option, regardless of by whom held, whether vested or unvested, will be converted effective as of the Distribution Date as described in this Section 6.01(a)(i).

 

(A)          Each YUM Option held by a Special Conversion Employee will be converted effective as of the Distribution Date into either an Adjusted YUM Option (for Retained Employees and YUM Former Employees) or a SpinCo Option (for SpinCo Employees and SpinCo Former Employees).  Except as otherwise provided in this Section 6.01, each Adjusted YUM Option and each SpinCo Option will be subject to the same terms and conditions (including with respect to vesting and termination) after the conversion as applied to such YUM Option immediately prior to the conversion; provided, however, that:

 

(1)           the per share exercise price of each Adjusted YUM Option subject to this Section 6.01(a)(i)(A) will be equal to the product of (I) the YUM Post-Distribution Stock Value, multiplied by (II) the Pre-Spin Price Ratio, rounded up to the nearest cent;

 

(2)           the number of YUM Shares subject to each Adjusted YUM Option subject to this Section 6.01(a)(i)(A) will be equal to the quotient of (I) the Intrinsic Value of the Pre-Distribution YUM Option; divided by (II) the difference between (A) the YUM Post-Distribution Stock Value and (B) the exercise price calculated pursuant to Section 6.01(a)(i)(A)(1), rounded down to the nearest whole share;

 

(3)           the per share exercise price of each SpinCo Option subject to this Section 6.01(a)(i)(A) will be equal to the product of (I) the SpinCo Post-Distribution Stock Value, multiplied by (II) the Pre-Spin Price Ratio, rounded up to the nearest cent;

 

(4)           the number of SpinCo Shares subject to each SpinCo Option subject to this Section 6.01(a)(i)(A) will be equal to the quotient of (I) the Intrinsic Value of the Pre-Distribution YUM Option; divided by (II) the difference between (A) the SpinCo Post-Distribution Stock Value and (B) the exercise price calculated pursuant to Section 6.01(a)(i)(A)(3), rounded down to the nearest whole share;

 

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provided, however, that the exercise price, the number of YUM Shares and the number of SpinCo Shares subject to such awards, and the terms and conditions of exercise of such awards will be determined (x) in a manner that is consistent with Code Section 409A and, (y) in the case of any YUM Option to which Code Section 421 applies by reason of its qualification under Code Section 422 immediately prior to the Distribution Date, in a manner consistent with the requirements of Code Section 424(a).

 

(5)           Except where prohibited by local law, if the sum of the differences between (I) the Intrinsic Value of the Pre-Distribution YUM Option, minus (II) the Intrinsic Value of the Post-Distribution Adjusted YUM Option for all Adjusted YUM Options subject to this Section 6.01(a)(i)(A) held by the same holder is $20.00 or more, then the holder of such Adjusted YUM Options will receive payment in respect of each such Adjusted YUM Option in an amount equal to such difference, calculated separately for each such Adjusted YUM Option.

 

(6)           Except where prohibited by local law, if the sum of the differences between (I) the Intrinsic Value of the Pre-Distribution YUM Option, minus (II) the Intrinsic Value of the Post-Distribution SpinCo Option for all SpinCo Options subject to this Section 6.01(a)(i)(A) held by the same holder is $20.00 or more, then the holder of such SpinCo Options will receive payment in respect of each such SpinCo Option in an amount equal to such difference, calculated separately for each such SpinCo Option.

 

(7)           For purposes of this Section 6.01(a)(i)(A) only, the following terms shall have the following meanings:

 

(I)            “Intrinsic Value of the Post-Distribution Adjusted YUM Option” shall mean, rounded to the nearest cent, the product of (A) the number of YUM Shares subject to Adjusted YUM Options issued pursuant to Section 6.01(a)(i)(A)(2), multiplied by (B) the difference between (x) the YUM Post-Distribution Stock Value minus (y) the per share exercise price calculated pursuant to Section 6.01(a)(i)(A)(1); and

 

(II)          “Intrinsic Value of the Post-Distribution SpinCo Option” shall mean, rounded to the nearest cent, the product of (A) the number of SpinCo Shares subject to SpinCo Options issued pursuant to Section 6.01(a)(i)(A)(4), multiplied by (B) the difference between (x) the SpinCo Post-Distribution Stock Value minus (y) the per share exercise price calculated pursuant to Section 6.01(a)(i)(A)(3).

 

(B)          Each YUM Option other than those described in Section 6.01(a)(i)(A) will be converted effective as of the Distribution Date into both an Adjusted YUM Option and a SpinCo Option.  Except as otherwise provided in

 

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this Section 6.01, each Adjusted YUM Option and each SpinCo Option will be subject to the same terms and conditions (including with respect to vesting and termination) after the conversion as applied to such YUM Option immediately prior to the conversion; provided, however, that:

 

(1)           the per share exercise price of each Adjusted YUM Option subject to this Section 6.01(a)(i)(B), will be equal to the product of (I) the YUM Post-Distribution Stock Value, multiplied by (II) the Pre-Spin Price Ratio, rounded up to the nearest cent;

 

(2)           the number of YUM Shares subject to each Adjusted YUM Option subject to this Section 6.01(a)(i)(B), rounded down to the nearest whole share, will be equal to the quotient of (I) the product of (A) the Intrinsic Value of the Pre-Distribution YUM Option, multiplied by (B) the YUM Percentage, divided by (II) the difference between (A) the YUM Post-Distribution Stock Value, minus (B) the per share exercise price calculated pursuant to Section 6.01(a)(i)(B)(1);

 

(3)           the per share exercise price of each SpinCo Option issued pursuant to this Section 6.01(a)(i)(B) will be equal to the product of (I) the SpinCo Post-Distribution Stock Value, multiplied by (II) the Pre-Spin Price Ratio, rounded up to the nearest cent; and

 

(4)           the number of SpinCo Shares subject to each SpinCo Option issued pursuant to this Section 6.01(a)(i)(B), rounded down to the nearest whole share, will be equal to the quotient of (I) the product of (A) the Intrinsic Value of the Pre-Distribution YUM Option, multiplied by (B) the SpinCo Percentage, divided by (II) the difference between (A) the SpinCo Post-Distribution Stock Value, minus (B) the per share exercise price calculated pursuant to Section 6.01(a)(i)(B)(3);

 

provided, however, that the exercise price, the number of YUM Shares and the number of SpinCo Shares subject to such awards, and the terms and conditions of exercise of such awards will be determined (x) in a manner that is consistent with Code Section 409A, and (y) in the case of any YUM Option to which Code Section 421 applies by reason of its qualification under Code Section 422 immediately prior to the Distribution Date, in a manner consistent with the requirements of Code Section 424(a).

 

(5)           Except where prohibited by local law, if the sum of the differences between (I) the Intrinsic Value of the Pre-Distribution YUM Option and (II) the Intrinsic Value of the Post-Distribution Option for all YUM Options subject to this Section 6.01(a)(i)(B) held by the same holder is $20.00 or more, then the holder of such YUM Options will receive payment in respect of each such YUM Option in an amount equal to such difference, calculated separately for each such YUM Option.

 

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(6)           For purposes of this Section 6.01(a)(i)(B) only, the following terms shall have the following meanings:

 

(I)            “Intrinsic Value of the Post-Distribution Adjusted YUM Option” shall mean, rounded to the nearest cent, the product of (A) the number of YUM Shares subject to Adjusted YUM Options issued pursuant to Section 6.01(a)(i)(B)(2), multiplied by (B) the difference between (x) the YUM Post-Distribution Stock Value, minus (y) the per share exercise price calculated pursuant to Section 6.01(a)(i)(B)(1).

 

(II)          “Intrinsic Value of the Post-Distribution SpinCo Option” shall mean, rounded to the nearest cent, the product of (A) the number of SpinCo Shares subject to SpinCo Options issued pursuant to Section 6.01(a)(i)(B)(4), multiplied by (B) the difference between (x) the SpinCo Post-Distribution Stock Value, minus (y) the per share exercise price calculated pursuant to Section 6.01(a)(i)(B)(3).

 

(III)        “Intrinsic Value of the Post-Distribution Option” shall mean, rounded to the nearest cent, the sum of (A) the Intrinsic Value of the Post-Distribution Adjusted YUM Option plus (B) the Intrinsic Value of the Post-Distribution SpinCo Option.

 

(ii)           YUM SARS.  As determined by the YUM Compensation Committee pursuant to its authority under the applicable YUM Equity Plan, each YUM SAR, regardless of by whom held, whether vested or unvested, will be converted effective as of the Distribution Date as described in this Section 6.01(a)(ii).

 

(A)          Each YUM SAR held by a Special Conversion Employee will be converted effective as of the Distribution Date into either an Adjusted YUM SAR (for Retained Employees and YUM Former Employees) or a SpinCo SAR (for SpinCo Employees and SpinCo Former Employees).  Except as otherwise provided in this Section 6.01, each Adjusted YUM SAR and each SpinCo SAR will be subject to the same terms and conditions (including with respect to vesting and termination) after the conversion as applied to such YUM SAR immediately prior to the conversion; provided, however, that:

 

(1)           the per share exercise price of each Adjusted YUM SAR subject to this Section 6.01(a)(ii)(A) will be equal to the product of (I) the YUM Post-Distribution Stock Value, multiplied by (II) the Pre-Spin Price Ratio, rounded up to the nearest cent;

 

(2)           the number of YUM Shares subject to each Adjusted YUM SAR subject to this Section 6.01(a)(ii)(A) will be equal to the quotient of (I) the Intrinsic Value of the Pre-Distribution YUM SAR; divided by (II) the difference between (A) the YUM Post-Distribution Stock Value and

 

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(B) the exercise price calculated pursuant to Section 6.01(a)(ii)(A)(1), rounded down to the nearest whole share;

 

(3)                                 the per share exercise price of each SpinCo SAR subject to this Section 6.01(a)(ii)(A) will be equal to the product of (I) the SpinCo Post-Distribution Stock Value, multiplied by (II) the Pre-Spin Price Ratio, rounded up to the nearest cent;

 

(4)                                 the number of SpinCo Shares subject to each SpinCo SAR subject to this Section 6.01(a)(ii)(A) will be equal to the quotient of (I) the Intrinsic Value of the Pre-Distribution YUM SAR; divided by (II) the difference between (A) the SpinCo Post-Distribution Stock Value and (B) the exercise price calculated pursuant to Section 6.01(a)(ii)(A)(3), rounded down to the nearest whole share;

 

provided, however, that the exercise price, the number of YUM Shares and the number of SpinCo Shares subject to such awards, and the terms and conditions of exercise of such awards will be determined (x) in a manner that is consistent with Code Section 409A, and (y) in the case of any YUM SAR to which Code Section 421 applies by reason of its qualification under Code Section 422 immediately prior to the Distribution Date, in a manner consistent with the requirements of Code Section 424(a).

 

(5)                                 Except where prohibited by local law, if the sum of the differences between (I) the Intrinsic Value of the Pre-Distribution YUM SAR, minus (II) the Intrinsic Value of the Post-Distribution Adjusted YUM SAR for all Adjusted YUM SARs subject to this Section 6.01(a)(ii)(A) held by the same holder is $20.00 or more, then the holder of such Adjusted YUM SARs will receive payment in respect of each such Adjusted YUM SAR in an amount equal to such difference, calculated separately for each such Adjusted YUM SAR.

 

(6)                                 Except where prohibited by local law, if the sum of the differences between (I) the Intrinsic Value of the Pre-Distribution YUM SAR, minus (II) the Intrinsic Value of the Post-Distribution SpinCo SAR for all SpinCo SARs subject to this Section 6.01(a)(ii)(A) held by the same holder is $20.00 or more, then the holder of such SpinCo SARs will receive payment in respect of each such SpinCo SAR in an amount equal to such difference, calculated separately for each such SpinCo SAR.

 

(7)                                 For purposes of this Section 6.01(a)(ii)(A) only, the following terms shall have the following meanings:

 

(I)                                   “Intrinsic Value of the Post-Distribution Adjusted YUM SAR” shall mean, rounded to the nearest cent, the product of (A) the number of YUM Shares subject to Adjusted YUM SARs issued pursuant to Section 6.01(a)(ii)(A)(2), multiplied by (B) the difference between (x) the YUM Post-Distribution Stock Value,

 

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minus (y) the per share exercise price calculated pursuant to Section 6.01(a)(ii)(A)(1); and

 

(II)                              “Intrinsic Value of the Post-Distribution SpinCo SAR” shall mean, rounded to the nearest cent, the product of (A) the number of SpinCo Shares subject to SpinCo SARs issued pursuant to Section 6.01(a)(ii)(A)(4), multiplied by (B) the difference between (x) the SpinCo Post-Distribution Stock Value, minus (y) the per share exercise price calculated pursuant to Section 6.01(a)(ii)(A)(3).

 

(B)                               Each YUM SAR other than those described in Section 6.01(a)(ii)(A) will be converted effective as of the Distribution Date into both an Adjusted YUM SAR and a SpinCo SAR.  Except as otherwise provided in this Section 6.01, each Adjusted YUM SAR and each SpinCo SAR will be subject to the same terms and conditions (including with respect to vesting and termination) after the conversion as applied to such YUM SAR immediately prior to the conversion; provided, however, that:

 

(1)                                 the per share exercise price of each Adjusted YUM SAR subject to this Section 6.01(a)(ii)(B) will be equal to the product of (I) the YUM Post-Distribution Stock Value, multiplied by (II) the Pre-Spin Price Ratio, rounded up to the nearest cent;

 

(2)                                 the number of YUM Shares subject to each Adjusted YUM SAR subject to this Section 6.01(a)(ii)(B), rounded down to the nearest whole share, will be equal to the quotient of (I) the product of (A) the Intrinsic Value of the Pre-Distribution YUM SAR, multiplied by (B) the YUM Percentage, divided by (II) the difference between (A) the YUM Post-Distribution Stock Value, minus (B) the per share exercise price calculated pursuant to Section 6.01(a)(ii)(B)(1);

 

(3)                                 the per share exercise price of each SpinCo SAR issued pursuant to this Section 6.01(a)(ii)(B) will be equal to the product of (I) the SpinCo Post-Distribution Stock Value, multiplied by (II) the Pre-Spin Price Ratio, rounded up to the nearest cent; and

 

(4)                                 the number of SpinCo Shares subject to each SpinCo SAR issued pursuant to this Section 6.01(a)(ii)(B), rounded down to the nearest whole share, will be equal to the quotient of (I) the product of (A) the Intrinsic Value of the Pre-Distribution YUM SAR, multiplied by (B) the SpinCo Percentage, divided by (II) the difference between (A) the SpinCo Post-Distribution Stock Value, minus (B) the per share exercise price calculated pursuant to Section 6.01(a)(ii)(B)(3);

 

provided, however, that the exercise price, the number of YUM Shares and the number of SpinCo Shares subject to such awards, and the terms and conditions of exercise of such awards

 

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will be determined (x) in a manner that is consistent with Code Section 409A, and (y) in the case of any YUM SAR to which Code Section 421 applies by reason of its qualification under Code Section 422 immediately prior to the Distribution Date, in a manner consistent with the requirements of Code Section 424(a).

 

(5)                                 Except where prohibited by local law, if the sum of the differences between (I) the Intrinsic Value of the Pre-Distribution YUM SAR and (II) the Intrinsic Value of the Post-Distribution SAR for all YUM SARs subject to this Section 6.01(a)(ii)(B) held by the same holder is $20.00 or more, then the holder of such YUM SARs will receive payment in respect of each such YUM SAR in an amount equal to such difference, calculated separately for each such YUM SAR.

 

(6)                                 For purposes of this Section 6.01(a)(ii)(B) only, the following terms shall have the following meanings:

 

(I)                                   “Intrinsic Value of the Post-Distribution Adjusted YUM SAR” shall mean, rounded to the nearest cent, the product of (A) the number of YUM Shares subject to Adjusted YUM SARs issued pursuant to Section 6.01(a)(ii)(B)(2), multiplied by (B) the difference between (x) the YUM Post-Distribution Stock Value, minus (y) the per share exercise price calculated pursuant to Section 6.01(a)(ii)(B)(1).

 

(II)                              “Intrinsic Value of the Post-Distribution SpinCo SAR” shall mean, rounded to the nearest cent, the product of (A) the number of SpinCo Shares subject to SpinCo SARs issued pursuant to Section 6.01(a)(ii)(B)(4), multiplied by (B) the difference between (x) the SpinCo Post-Distribution Stock Value, minus (y) the per share exercise price calculated pursuant to Section 6.01(a)(ii)(B)(3).

 

(III)                         “Intrinsic Value of the Post-Distribution SAR” shall mean, rounded to the nearest cent, the sum of (A) the Intrinsic Value of the Post-Distribution Adjusted YUM SAR plus (B) the Intrinsic Value of the Post-Distribution SpinCo SAR.

 

(iii)                               YUM RSU Awards.  As determined by the YUM Compensation Committee pursuant to its authority under the applicable YUM Equity Plan, each YUM RSU Award, regardless of by whom held, whether vested or unvested, will be converted effective as of the Distribution Date as described in this Section 6.01(a)(iii).

 

(A)                               Except as otherwise provided in the Employment Agreement or offer letter of a holder of a YUM RSU Award, each YUM RSU Award held by a Special Conversion Employee will be converted effective as of the Distribution Date into either an Adjusted YUM RSU Award (for Retained Employees and YUM Former Employees) or a SpinCo RSU Award (for SpinCo Employees and

 

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SpinCo Former Employees).  Except as otherwise provided in this Section 6.01, each Adjusted YUM RSU Award and each SpinCo RSU Award be subject to the same terms and conditions (including with respect to vesting, settlement and termination) after the conversion as applied to such YUM RSU Award immediately prior to the conversion; provided, however, that:

 

(1)                                 the number of YUM Shares (including those attributable to dividend equivalent units) subject to each Adjusted YUM RSU Award subject to this Section 6.01(a)(iii)(A) will be equal to the quotient of (I) the product of (a) the number of YUM Shares (including those attributable to dividend equivalent units) subject to the corresponding YUM RSU Award immediately prior to the Distribution Date, multiplied by (b) the Pre-Distribution Stock Value, rounded to the nearest cent; divided by (II) the YUM Post-Distribution Stock Value, rounded down to the nearest whole number;

 

(2)                                 the number of SpinCo Shares subject to each SpinCo RSU Award (including those attributable to dividend equivalent units) subject to this Section 6.01(a)(iii)(A) will be equal to the quotient of (I) the product of (a) the number of YUM Shares (including those attributable to dividend equivalent units) subject to the corresponding YUM RSU Award immediately prior to the Distribution Date, multiplied by (b) the Pre-Distribution Stock Value, rounded to the nearest cent; divided by (II) the SpinCo Post-Distribution Stock Value, rounded down to the nearest whole number.

 

(3)                                 Except where prohibited by local law, if the sum of the differences between (I) the Intrinsic Value of the Pre-Distribution YUM RSU Award, minus (II) the Intrinsic Value of the Post-Distribution SpinCo RSU Award for all SpinCo RSUs subject to this Section 6.01(a)(iii)(A) held by the same holder is $20.00 or more, then the holder of such SpinCo RSUs will receive payment in respect of each such SpinCo RSU in an amount equal to such difference, calculated separately for each such SpinCo RSU.

 

(4)                                 For purposes of this Section 6.01(a)(iii)(A) only, the following terms shall have the following meanings:

 

(I)                                   “Intrinsic Value of the Post-Distribution Adjusted YUM RSU” shall mean, rounded to the nearest cent, the product of (A) the number of YUM Shares subject to Adjusted YUM RSUs issued pursuant to Section 6.01(a)(iii)(A)(1), multiplied by (B) the YUM Post-Distribution Stock Value; and

 

(II)                              “Intrinsic Value of the Post-Distribution SpinCo RSU” shall mean, rounded to the nearest cent, the product of (A) the number of SpinCo Shares subject to SpinCo RSUs issued

 

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pursuant to Section 6.01(a)(iii)(A)(2), multiplied by (B) the SpinCo Post-Distribution Stock Value.

 

(B)                               Except as otherwise provided in the Employment Agreement or offer letter of a holder of a YUM RSU Award, effective as of the Distribution Date, each holder of an outstanding YUM RSU Award other than those described in Section 6.01(a)(iii)(A) will receive an Adjusted YUM RSU Award and a SpinCo RSU Award.  Except as otherwise provided in this Section 6.01, each Adjusted YUM RSU Award and each SpinCo RSU Award will be subject to the same terms and conditions (including with respect to vesting, settlement and termination) after the conversion as applied to such YUM RSU Award immediately prior to the conversion; provided, however, that:

 

(1)                                 the number of YUM Shares (including those attributable to dividend equivalent units) subject to each Adjusted YUM RSU Award subject to this Section 6.01(a)(iii)(B) will be equal to the product of (I) the number of YUM Shares (including those attributable to dividend equivalent units) subject to the corresponding YUM RSU Award immediately prior to the Distribution Date, multiplied by (II) the Distribution Ratio, rounded down to the nearest whole number;

 

(2)                                 the number of SpinCo Shares (including those attributable to dividend equivalent units) subject to each SpinCo RSU Award subject to this Section 6.01(a)(iii)(B) will be equal to the quotient of (I) the number of YUM Shares (including those attributable to dividend equivalent units) subject to the corresponding YUM RSU Award immediately prior to the Distribution Date, divided by (II) the Distribution Ratio, rounded down to the nearest whole number.

 

(3)                                 Except where prohibited by local law, if the sum of the differences between (I) the Intrinsic Value of the Pre-Distribution YUM RSU Award, minus (II) the Intrinsic Value of the Post-Distribution RSU for all YUM RSUs subject to this Section 6.01(a)(iii)(A) held by the same holder is $20.00 or more, then the holder of such YUM RSUs will receive payment in respect of each such YUM RSU in an amount equal to such difference, calculated separately for each such YUM RSU.

 

(4)                                 For purposes of this Section 6.01(a)(iii)(B) only, the following terms shall have the following meanings:

 

(I)                                   “Intrinsic Value of the Post-Distribution Adjusted YUM RSU” shall mean, rounded to the nearest cent, the product of (A) the number of YUM Shares subject to Adjusted YUM RSU issued pursuant to Section 6.01(a)(iii)(B)(1), multiplied by (B) the YUM Post-Distribution Stock Value.

 

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(II)                              “Intrinsic Value of the Post-Distribution SpinCo RSU” shall mean, rounded to the nearest cent, the product of (A) the number of SpinCo Shares subject to SpinCo RSU issued pursuant to Section 6.01(a)(iii)(B)(2), multiplied by (B) the SpinCo Post-Distribution Stock Value.

 

(III)                         “Intrinsic Value of the Post-Distribution RSU” shall mean, rounded to the nearest cent, the sum of (A) the Intrinsic Value of the Post-Distribution Adjusted YUM RSU plus (B) the Intrinsic Value of the Post-Distribution SpinCo RSU.

 

(iv)                              YUM PSU Awards.  Each YUM PSU Award outstanding on the Distribution Date will be converted effective as of the Distribution Date into an Adjusted YUM PSU Award. Except as otherwise provided in this Section 6.01, each Adjusted YUM PSU Award will be subject to the same terms and conditions (including with respect to vesting, settlement and termination) after the conversion as applied to the corresponding YUM PSU Award immediately prior to the conversion; provided, however, that:

 

(A)                               the number of YUM Shares subject to each Adjusted YUM PSU Award subject to this Section 6.01(a)(iv) will be equal to the quotient of (I) the product of (a) the number of YUM Shares subject to the corresponding YUM PSU Award immediately prior to the Distribution Date, multiplied by (b) the Pre-Distribution Stock Value, rounded to the nearest cent; divided by (II) the YUM Post-Distribution Stock Value, rounded to four decimal places; and

 

(B)                               the performance criteria and performance targets under each Adjusted YUM PSU Award subject to this Section 6.01(a)(iv) will be equitably adjusted prior to the Distribution as determined appropriate or required in the sole discretion of the YUM Compensation Committee.

 

(b)                                 Miscellaneous Award Terms.  After the Distribution Date, Adjusted YUM Awards, regardless of by whom held, will be settled by YUM, and SpinCo Awards, regardless of by whom held, will be settled by SpinCo.  Except as otherwise provided in this Agreement, with respect to grants described in this Section 6.01, (i) no SpinCo Employee will be treated as having incurred a termination of employment with respect to any YUM Award solely by reason of the transfer of employment, (ii) employment with the YUM Group will be treated as employment with SpinCo with respect to SpinCo Awards held by Retained Employees, and (iii) employment with the SpinCo Group will be treated as employment with YUM with respect to Adjusted YUM Awards held by SpinCo Employees.  In addition, none of the Separation, the Distribution, or any employment transfer described in Section 2.04 will constitute a termination of employment for any Employee for purposes of any Adjusted YUM Award or any SpinCo Award.  Following the Distribution Date, for any award adjusted under this Section 6.01, any reference to a “change in control,” “change of control” or similar definition in an award agreement, Employment Agreement or YUM Equity Plan applicable to such award (A) with respect to Adjusted YUM Awards, will be deemed to refer to a “change in control,” “change of control” or similar definition as set forth in the applicable award agreement, Employment Agreement or YUM

 

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Equity Plan (a “YUM Change of Control”), and (B) with respect to SpinCo Awards, will be deemed to refer to a “Change in Control” as defined in the SpinCo Equity Plan (a “SpinCo Change of Control”).  Without limiting the foregoing, with respect to provisions related to vesting of awards (including lapse of performance conditions, if applicable), a YUM Change of Control will be treated as a SpinCo Change of Control for purposes of SpinCo Awards held by Retained Employees and YUM Former Employees, and a SpinCo Change of Control will be treated as a YUM Change of Control for purposes of Adjusted YUM Awards held by SpinCo Employees and SpinCo Former Employees.

 

(c)                                  Tax Reporting and Withholding.  Following the Distribution Date, it is expected that: (i) YUM will be responsible for all income, payroll and other tax remittance and reporting related to income of Retained Employees, YUM Former Employees, and individuals who are or were YUM non-employee directors in respect of Adjusted YUM Awards and SpinCo Awards; and (ii) SpinCo will be responsible for all income, payroll and other tax remittance and reporting related to income of SpinCo Employees and SpinCo Former Employees in respect of Adjusted YUM Awards and SpinCo Awards.  YUM or SpinCo, as applicable, will facilitate performance by the other Party of its obligations hereunder by promptly remitting amounts or shares withheld in conjunction with a transfer of shares or cash, either (as mutually agreed by the Parties) directly to the applicable taxing authority or to the other Party for remittance to such taxing authority.  The Parties will cooperate and communicate with each other and with third-party providers to effectuate withholding and remittance of taxes, as well as required tax reporting, in a timely, efficient and appropriate manner.

 

(d)                                 Registration and Other Regulatory Requirements.  Prior to the Distribution Date (and in any case before the date of issuance of any SpinCo Shares pursuant to the SpinCo Equity Plan), SpinCo agrees to file a Form S-8 registration statement (or an S-1 or S-3 if a Form S-8 Registration Statement is not then available for any such awards to be granted in accordance with the terms of this Agreement) with respect to, and to cause to be registered pursuant to the Securities Act, the SpinCo Shares authorized for issuance under the SpinCo Equity Plan, as required pursuant to the Securities Act.  The Parties will take such additional actions as are deemed necessary or advisable to effectuate the foregoing provisions of this Section 6.01, including compliance with securities Laws and other legal requirements associated with equity compensation awards in affected non-U.S. jurisdictions.  YUM agrees to facilitate the adoption and approval of the SpinCo Equity Plan consistent with the requirements of Treasury Regulations Section 1.162-27(f)(4)(iii).

 

(e)                                  YUM Equity-Based Awards in Certain Non-U.S.  Jurisdictions.  Notwithstanding the foregoing provisions of this Section 6.01, the Parties may mutually agree, in their sole discretion, not to adjust certain outstanding YUM equity-based awards pursuant to the foregoing provisions of this Section 6.01 where those actions would create or trigger adverse legal, accounting or tax consequences for YUM, SpinCo and/or the affected non-U.S. award holders.  In such circumstances, YUM and/or SpinCo may take any action necessary or advisable to prevent any such adverse legal, accounting or tax consequences, including agreeing that the outstanding YUM equity-based awards of the affected non-U.S. award holders will terminate in accordance with the terms of the YUM Equity Plans and the underlying award agreements, in which case SpinCo or YUM, as applicable, will equitably compensate the affected non-U.S. award holders in an alternate manner determined by SpinCo or YUM, as applicable, in its sole

 

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discretion, or apply an alternate adjustment method.  Where and to the extent required by applicable Law or tax considerations outside the United States, the adjustments described in this Section 6.01 will be deemed to have been effectuated immediately prior to the Distribution Date.

 

(f)                                   Limitations on Value After Conversion of Awards.  Notwithstanding any other provision of this Agreement to the contrary, in the case of any YUM Option, YUM SAR, YUM RSU Award or YUM PSU Award, all conversions and adjustments pursuant to this Section 6.01 will be made in accordance with Code Sections 409A and 424.  Without limiting the generality of the preceding sentence, in no event shall the excess of the aggregate fair market value of the YUM Shares and/or SpinCo Shares subject to any Adjusted YUM Option, Adjusted YUM SAR, Adjusted YUM RSU Award or Adjusted YUM PSU Award and a corresponding SpinCo Option, SpinCo SAR or SpinCo RSU Award, as applicable, plus the value of any cash payment to be made pursuant to the individual pursuant to Sections 6.01(a)(i)(A)(5), 6.01(a)(i)(A)(6), 6.01(a)(i)(B)(5), 6.01(a)(ii)(A)(5), 6.01(a)(ii)(A)(6), 6.01(a)(ii)(B)(5), 6.01(a)(iii)(A)(3) or 6.01(a)(iii)(B)(3) exceed the fair market value of the number of YUM Shares subject to the corresponding YUM Option, YUM SAR, YUM RSU Award or YUM PSU Award immediately prior to the Distribution Date.  In addition, following the conversion or adjustment, the ratio of the exercise price to the fair market value of the YUM Shares or SpinCo Shares, as applicable, subject to the Adjusted YUM Option, Adjusted YUM SAR and corresponding SpinCo Option or SpinCo SAR, as applicable, shall not exceed the ratio of the exercise price to the fair market value of the shares subject to the YUM Option or YUM SAR, as applicable, immediately before the Distribution Date.  For purposes of this Section 6.01(f), the fair market value of YUM Shares or SpinCo Shares, as of any date, will be equal to the volume weighted average per share price of one YUM Share or SpinCo Share, as applicable, trading “regular-way,” as reported on the NYSE on the applicable date (or if such day is not a NYSE trading day, on the next preceding NYSE trading day) or, for periods on or after the Distribution Date, on the First Post-Distribution Trading Day.

 

Section 6.02.                          Bonus and Incentive Plans.

 

(a)                                 Generally.  The SpinCo Group will be responsible for all annual bonus payments and other cash incentive payments to SpinCo Employees in respect of any plan year, the payment date for which occurs on or after the applicable SpinCo Employee’s Distribution Date.

 

(b)                                 YUM EIDP.  Effective as of the Distribution Date, the YUM EIDP will be amended to provide for (i) a SpinCo common stock account with respect to the YUM EIDP Pre-409A Program and (ii) a Phantom SpinCo common stock fund with respect to the YUM EIDP 409A Program.  Effective as of the Distribution Date:

 

(i)                                     For each YUM Common Stock Account (as such term is used under the YUM EIDP Pre-409A Program) held by an EIDP Special Conversion Employee under the YUM EIDP Pre-409A Program, such YUM Common Stock Account will be converted effective as of the Distribution Date into an Adjusted YUM Common Stock Account.  The Adjusted YUM Common Stock Account will be credited with that number of phantom YUM Shares equal to the quotient of (A) the product of (1) the number of phantom YUM Shares credited to the YUM Common Stock Account under the YUM EIDP Pre-409A Program immediately prior to the Distribution Date, multiplied by (2) the

 

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Pre-Distribution Stock Value; divided by (B) the YUM Post-Distribution Stock Value, rounded to four decimal places.

 

(ii)                                  For each YUM Common Stock Account under the YUM EIDP Pre-409A Program other than those described in Section 6.02(b)(i), such YUM Common Stock Account will be converted effective as of the Distribution Date into an Adjusted YUM Common Stock Account and a SpinCo Common Stock Account.  The Adjusted YUM Common Stock Account will be credited with that number of phantom YUM Shares equal to the product of (A) the number of phantom YUM Shares credited to the YUM Common Stock Account under the YUM EIDP Pre-409A Program immediately prior to the Distribution Date, multiplied by (B) the Distribution Ratio, rounded to four decimal places.  The SpinCo Common Stock Account will be credited with that number of phantom SpinCo Shares equal to the quotient of (A) the number of phantom YUM Shares credited to the YUM Common Stock Account under the YUM EIDP Pre-409A Program immediately prior to the Distribution Date, divided by (B) the Distribution Ratio, rounded to four decimal places.

 

(iii)                               For each Phantom Yum! Brands Common Stock Fund (as such term is used under the YUM EIDP 409A Program) held by an EIDP Special Conversion Employee under the YUM EIDP 409A Program, such Phantom Yum! Brands Common Stock Fund will be converted effective as of the Distribution Date into an Adjusted Phantom YUM Common Stock Fund.  The Adjusted Phantom YUM Common Stock Fund will be credited with that number of phantom YUM Shares equal to the quotient of (A) the product of (1) the number of phantom YUM Shares credited to the Phantom Yum! Brands Common Stock Fund under the YUM EIDP 409A Program immediately prior to the Distribution Date, multiplied by (2) the Pre-Distribution Stock Value; divided by (B) the YUM Post-Distribution Stock Value, rounded to four decimal places.

 

(iv)                              For each Phantom Yum! Brands Common Stock Fund under the YUM EIDP 409A Program other than those described in Section 6.02(b)(iii), such Phantom Yum! Brands Common Stock Fund will be converted effective as of the Distribution Date into an Adjusted Phantom YUM Common Stock Fund and a Phantom SpinCo Common Stock Fund.  The Adjusted Phantom YUM Common Stock Fund will be credited with that number of phantom YUM Shares equal to the product of (A) the number of phantom YUM Shares credited to the Phantom Yum! Brands Common Stock Fund under the YUM EIDP 409A Program immediately prior to the Distribution Date, multiplied by (B) the Distribution Ratio, rounded to four decimal places.  The Phantom SpinCo Common Stock Fund will be credited with that number of phantom SpinCo Shares equal to the quotient of (A) the number of phantom YUM Shares credited to the Phantom Yum! Brands Common Stock Fund under the YUM EIDP 409A Program immediately prior to the Distribution Date, divided by (B) the Distribution Ratio, rounded to four decimal places.

 

Except as otherwise provided under the YUM EIDP, any amounts credited to the SpinCo Common Stock Account and the Phantom SpinCo Common Stock Fund will be settled in cash (and not in SpinCo Shares).

 

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(c)                                  Restaurant Deferred Compensation Plan.  Effective as of the Distribution Date, the Restaurant Deferred Compensation Plan will be amended to provide for a Phantom SpinCo Common Stock Account.  Effective as of the Distribution Date for each Account (as such term is used under the Restaurant Deferred Compensation Plan) under the Restaurant Deferred Compensation Plan, any portion of such Account deemed invested in YUM Shares will be converted effective as of the Distribution Date into an Adjusted YUM Common Stock Account and a SpinCo Common Stock Account.  The Adjusted YUM Common Stock Account will be credited with that number of phantom YUM Shares equal to the product of (A) the number of phantom YUM Shares credited to the Account under the Restaurant Deferred Compensation Plan immediately prior to the Distribution Date, multiplied by (B) the Distribution Ratio, rounded to four decimal places.  The SpinCo Common Stock Account will be credited with that number of phantom SpinCo Shares equal to the quotient of (A) the number of phantom YUM Shares credited to the Account under the Restaurant Deferred Compensation Plan immediately prior to the Distribution Date, divided by (B) the Distribution Ratio, rounded to four decimal places.

 

(d)                                 YUM Director Deferred Compensation Plan.  Effective as of the Distribution Date, the YUM Director Deferred Compensation Plan will be amended to provide for a Phantom SpinCo Common Stock Account.  Effective as of the Distribution Date:

 

(i)                                     For each participant Account (as such term is used under the YUM Director Deferred Compensation Pre-409A Plan) under the YUM Director Deferred Compensation Pre-409A Plan, such participant Account will be converted effective as of the Distribution Date into an Adjusted Phantom YUM Common Stock Account and a Phantom SpinCo Common Stock Account.  The Adjusted Phantom YUM Common Stock Account will be credited with that number of phantom YUM Shares equal to the product of (A) number of phantom YUM Shares credited to participant Account under the YUM Director Deferred Compensation Pre-409A Plan immediately prior to the Distribution Date, multiplied by (B) the Distribution Ratio, rounded to four decimal places.  The Phantom SpinCo Common Stock Account will be credited with that number of phantom SpinCo Shares equal to the quotient of (A) number of phantom YUM Shares credited to the participant Account under the YUM Director Deferred Compensation Pre-409A Plan immediately prior to the Distribution Date, divided by (B) the Distribution Ratio, rounded to four decimal places.

 

(ii)                                  For each phantom Yum! Brands Common Stock Fund (as such term is used under the YUM Director Deferred Compensation 409A Plan) under the YUM Director Deferred Compensation 409A Plan, such phantom Yum! Brands Common Stock Fund will be converted effective as of the Distribution Date into an Adjusted Phantom YUM Common Stock Account and a Phantom SpinCo Common Stock Account.  The Adjusted Phantom YUM Common Stock Account will be credited with that number of phantom YUM Shares equal to the product of (A) number of phantom YUM Shares credited to the phantom Yum! Brands Common Stock Fund under the YUM Director Deferred Compensation 409A Plan immediately prior to the Distribution Date, multiplied by (B) the Distribution Ratio, rounded to four decimal places.  The Phantom SpinCo Common Stock Account will be credited with that number of phantom SpinCo Shares equal to the quotient of (A) number of phantom YUM Shares credited to the phantom Yum! Brands Common Stock Fund under the YUM Director Deferred Compensation

 

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409A Plan immediately prior to the Distribution Date, divided by (B) the Distribution Ratio, rounded to four decimal places.

 

Except as otherwise provided under the YUM Director Deferred Compensation Plan, any amounts credited to the Phantom SpinCo Common Stock Account will be settled in cash (and not in SpinCo Shares).

 

ARTICLE VII

 

MISCELLANEOUS

 

Section 7.01.                          Transfer of Records.  YUM will transfer to SpinCo any and all employment records and information (including any Form 1-9, Form W-2 or other Internal Revenue Service forms, personnel files, performance reviews and other employment related information) with respect to SpinCo Employees and other records reasonably required by SpinCo to enable SpinCo properly to carry out its obligations under this Agreement.  Such transfer of records generally will occur as soon as administratively practicable on or after the Distribution Date.  Each Party will permit the other Party reasonable access to Employee records to the extent reasonably necessary for such accessing Party to carry out its obligations hereunder. Any transfer required hereunder will be required only to the extent required or permitted by applicable local Law.

 

Section 7.02.                          Cooperation.  Each Party will upon reasonable request provide the other Party and the other Party’s respective Affiliates, agents and vendors all information reasonably necessary to the other Party’s performance of its obligations hereunder.  The Parties agree to use commercially reasonable efforts and to cooperate with each other to carry out their obligations hereunder and to effectuate the terms of this Agreement.  Without limiting the generality of the foregoing, no later than January 15, 2017, (a) YUM shall provide to SpinCo all information relating to the performance of the YUM Group following the Distribution that is necessary for SpinCo to calculate any performance bonuses (including any leadership bonuses) payable to any SpinCo Employee or SpinCo Former Employee for the 2016 calendar year and (b) SpinCo shall provide to YUM all information relating to the performance of the SpinCo Group following the Distribution that is necessary for YUM to calculate any performance bonuses (including any leadership bonuses) payable to any YUM Employee or YUM Former Employee for the 2016 calendar year.

 

Section 7.03.                          Tax Benefits.  If any member of the YUM Group remits a payment to a Tax Authority for Taxes for any SpinCo Employee or a SpinCo Former Employee, SpinCo shall remit to YUM the amount for which it is liable within thirty (30) days after receiving written notification requesting such amount.  If any member of the SpinCo Group remits a payment to a Tax Authority for Taxes for any Retained Employee or any YUM Former Employee, YUM shall remit to SpinCo the amount for which it is liable within thirty (30) days after receiving written notification requesting such amount.  Effective as of the Distribution Date, the YUM Group will be entitled to all Employee Recoupment Assets in respect of all Employees and Former Employees to the extent that the Employee Recoupment Asset relates to a payment made prior to the Distribution Date and shall be entitled to all Employee Recoupment Assets in respect of all Employees and Former Employees regardless of when (or by whom) the payment to which the

 

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Employee Recoupment Asset was made.  The SpinCo Group will be entitled all Employee Recoupment Assets in respect of SpinCo Employees and SpinCo Former Employees to the extent that the Employee Recoupment Asset relates to a payment made by the SpinCo Group after the Distribution Date.  Without limiting the generality of the foregoing, the SpinCo Group shall assume all liabilities and obligations for tax equalization payments payable to the individuals set forth on Schedule 7.03 and, to the extent necessary, the YUM Group shall be entitled to reimbursement from the SpinCo group with respect to any tax equalization payments made after the Distribution Date to any individual listed in Schedule 7.03.

 

Section 7.04.                          Compliance.  The agreements and covenants of the Parties hereunder will at all times be subject to the requirements and limitations of applicable Law (including local Laws, rules and customs relating to the treatment of benefit plans) and collective bargaining agreements.  Where an agreement or covenant of a Party hereunder cannot be effected in compliance with applicable Law or an applicable collective bargaining agreement, the Parties agree to negotiate in good faith to modify such agreement or covenant to the least extent possible in keeping with the original agreement or covenant in order to comply with applicable Law or such applicable collective bargaining agreement.  Each provision of this Agreement is subject to and qualified by this Section 7.04, whether or not such provision expressly states that it is subject to or limited by applicable Law or by applicable collective bargaining agreements.  Each reference to the Code, ERISA, or the Securities Act or any other Law will be deemed to include the rules, regulations, and guidance issued thereunder.

 

Section 7.05.                          Preservation of Rights.  Unless expressly provided otherwise in this Agreement, nothing herein will be construed as a limitation on the right of the YUM Group or the SpinCo Group to (a) amend or terminate any Benefit Plan or (b) terminate the employment of any Employee.

 

Section 7.06.                          Not a Change in Control.  The Parties acknowledge and agree that the Separation, Distribution and other transactions contemplated by the Separation and Distribution Agreement and this Agreement do not constitute a “change in control” or a “change of control” for purposes of any Benefit Plan, any Employment Agreement or any other agreement or arrangement.

 

Section 7.07.                          Reimbursements; Interest on Late Payments.  The Parties acknowledge and agree that the YUM Group, on one hand, and the SpinCo Group, on the other hand, may incur costs and expenses (including payment of compensation) which are the responsibility of the other Party as set forth in this Agreement.  Accordingly, the Parties agree to reimburse each other for Liabilities and obligations for which such Party is responsible, and will provide such reimbursement reasonably promptly and in accordance with the terms of any agreement between the Parties or their Affiliates addressing such matters.  Payments pursuant to this Agreement that are not made by the date prescribed in this Agreement or, if no such date is prescribed, within thirty (30) days after written demand for payment is made, shall accrue interest for the period from and including the date immediately following the due date therefor through and including the date of payment at a rate per annum equal to the Prime Rate plus three percent (3%). Such rate shall be redetermined at the beginning of each calendar quarter following such due date. Such interest will be payable at the same time as the payment to which it relates and shall be

 

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calculated on the basis of a year of three hundred sixty-five (365) days and the actual number of days for which due.

 

Section 7.08.                          Notices.  Unless expressly provided herein, all notices, requests, claims, demands or other communications under this Agreement shall be delivered in accordance with the requirements for the provision of notice set forth in Section 10.5 of the Separation and Distribution Agreement.

 

Section 7.09.                          Procedures for Indemnification of Third-Party Claims.

 

(a)                                 Notice of Claims.  If, at or following the Effective Time, an Indemnitee shall receive notice or otherwise learn of the assertion by a Person (including any Governmental Authority) who is not a member of the YUM Group or the SpinCo Group of any claim or of the commencement by any such Person of any Action (collectively, a “Third-Party Claim”) with respect to which an Indemnifying Party may be obligated to provide indemnification to such Indemnitee pursuant to or any Section of this Agreement, such Indemnitee shall give such Indemnifying Party written notice thereof as soon as practicable, but in any event no later than fourteen (14) days after becoming aware of such Third-Party Claim.  Any such notice shall describe the Third-Party Claim in reasonable detail, including the facts and circumstances giving rise to such claim for indemnification, and include copies of all notices and documents (including court papers) received by the Indemnitee relating to the Third-Party Claim.  Notwithstanding the foregoing, the failure of an Indemnitee to provide notice in accordance with this Section 7.09(a) shall not relieve an Indemnifying Party of its indemnification obligations under this Agreement, except to the extent (if any) to which the Indemnifying Party is actually prejudiced by the Indemnitee’s failure to provide notice in accordance with this Section 7.09(a).

 

(b)                                 Control of Defense.  An Indemnifying Party may elect to defend (and seek to settle or compromise, subject to Section 7.09(e)), at its own expense and with its own counsel, any Third-Party Claim; provided that, prior to the Indemnifying Party assuming and controlling defense of such Third-Party Claim, it shall first confirm to the Indemnitee in writing that, assuming the facts presented to the Indemnifying Party by the Indemnitee being true, the Indemnifying Party shall indemnify the Indemnitee for any Liabilities to the extent resulting from, or arising out of, such Third-Party Claim.  Notwithstanding the foregoing, if the Indemnifying Party assumes such defense and, in the course of defending such Third-Party Claim, (i) the Indemnifying Party discovers that the facts presented at the time the Indemnifying Party acknowledged its indemnification obligation in respect of such Third-Party Claim were not true in all material respects and (ii) such untruth provides a reasonable basis for asserting that the Indemnifying Party does not have an indemnification obligation in respect of such Third-Party Claim, then (A) the Indemnifying Party shall not be bound by such acknowledgment, (B) the Indemnifying Party shall promptly thereafter provide the Indemnitee written notice of its assertion that it does not have an indemnification obligation in respect of such Third-Party Claim and (C) the Indemnitee shall have the right to assume the defense of such Third-Party Claim.  Within thirty (30) days after the receipt of a notice from an Indemnitee in accordance with Section 7.09(a) (or sooner, if the nature of the Third-Party Claim so requires), the Indemnifying Party shall provide written notice to the Indemnitee indicating whether the Indemnifying Party shall assume responsibility for defending the Third-Party Claim.  If an Indemnifying Party elects not to assume responsibility for defending any Third-Party Claim or fails to notify an Indemnitee

 

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of its election within thirty (30) days after receipt of the notice from an Indemnitee as provided in Section 7.09(a), then the Indemnitee that is the subject of such Third-Party Claim shall be entitled to continue to conduct and control the defense of such Third-Party Claim.

 

(c)                                  Allocation of Defense Costs.  If an Indemnifying Party has elected to assume the defense of a Third-Party Claim, then such Indemnifying Party shall be solely liable for all fees and expenses incurred by it in connection with the defense of such Third-Party Claim and shall not be entitled to seek any indemnification or reimbursement from the Indemnitee for any such fees or expenses incurred by the Indemnifying Party during the course of the defense of such Third-Party Claim by such Indemnifying Party, regardless of any subsequent decision by the Indemnifying Party to reject or otherwise abandon its assumption of such defense.  If an Indemnifying Party elects not to assume responsibility for defending any Third-Party Claim or fails to notify an Indemnitee of its election within thirty (30) days after receipt of a notice from an Indemnitee as provided in Section 7.09(a), and the Indemnitee conducts and controls the defense of such Third-Party Claim and the Indemnifying Party has an indemnification obligation with respect to such Third-Party Claim, then the Indemnifying Party shall be liable for all reasonable fees and expenses incurred by the Indemnitee in connection with the defense of such Third-Party Claim.

 

(d)                                 Right to Monitor and Participate.  An Indemnitee that does not conduct and control the defense of any Third-Party Claim, or an Indemnifying Party that has failed to elect to defend any Third-Party Claim as contemplated hereby, nevertheless shall have the right to employ separate counsel (including local counsel, as necessary) of its own choosing to monitor and participate in (but not control) the defense of any Third-Party Claim for which it is a potential Indemnitee or Indemnifying Party, but the fees and expenses of such counsel shall be at the expense of such Indemnitee or Indemnifying Party, as the case may be, and the provisions of Section 7.09(c) shall not apply to such fees and expenses.  Notwithstanding the foregoing, but subject to Sections 6.7 and 6.8 of the Separation and Distribution Agreement, such Indemnitee or Indemnifying Party shall cooperate with the Party entitled to conduct and control the defense of such Third-Party Claim in such defense and make available to the controlling Party, at the non-controlling Party’s expense, all witnesses, information and materials in such Party’s possession or under such Party’s control relating thereto as are reasonably required by the controlling Party.  In addition to the foregoing, if any Indemnitee shall in good faith determine that such Indemnitee and the Indemnifying Party have actual or potential differing defenses or conflicts of interest between them that make joint representation inappropriate, then the Indemnitee shall have the right to employ separate counsel (including local counsel, as necessary) and to participate in (but not control) the defense, compromise, or settlement thereof, and the Indemnifying Party shall bear the reasonable fees and expenses of such counsel for all Indemnitees.

 

(e)                                  No Settlement.  Neither Party may settle or compromise any Third-Party Claim for which either Party is seeking to be indemnified hereunder without the prior written consent of the other Party, which consent may not be unreasonably withheld, conditioned or delayed, unless such settlement or compromise is solely for monetary damages that are fully payable, and are capable of being paid in full, by the settling or compromising Party, does not involve any admission, finding or determination of wrongdoing or violation of Law by the other Party (or any other member of its Group or any of their respective past, present or future directors, officers or employees) and provides for a full, unconditional and irrevocable release of the other Party (and

 

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each other relevant member of its Group and any of its or their relevant past, present, or future directors, officers or employees) from all Liability in connection with the Third-Party Claim.  The Parties hereby agree that if a Party presents the other Party with a written notice containing a proposal to settle or compromise a Third-Party Claim for which either Party is seeking to be indemnified hereunder and the Party receiving such proposal does not respond in any manner to the Party presenting such proposal within thirty (30) days (or within any such shorter time period that may be required by applicable Law or court order) of receipt of such proposal, then the Party receiving such proposal shall be deemed to have consented to the terms of such proposal.

 

Section 7.10.                          Limitation on Enforcement.  This Agreement is an agreement solely between the Parties.  Nothing in this Agreement, whether express or implied, will be construed to:  (a) confer upon any current or former Employee of the YUM Group or the SpinCo Group, or any other person any rights or remedies, including to any right to (i) employment or recall; (ii) continued employment or continued service for any specified period; or (iii) claim any particular compensation, benefit or aggregation of benefits, of any kind or nature; or (b) create, modify, or amend any Benefit Plan.

 

Section 7.11.                          Disputes.  The procedures for discussion, negotiation, mediation and arbitration set forth in Article VII of the Separation and Distribution Agreement shall apply to all disputes, controversies or claims (whether sounding in contract, tort or otherwise) that may arise out of or relate to, or arise under or in connection with, this Agreement.

 

Section 7.12.                          Schedules.  The Schedules referenced in this Agreement are attached hereto and incorporated herein and form a part of this Agreement.  From time to time, the Parties may add Schedules to this Agreement, which Schedules, if added, will be incorporated herein and will form a part of this Agreement.

 

Section 7.13.                          Third Party Consents.  Without limiting or otherwise modifying the provisions regarding Approvals or Notifications set forth in the Separation and Distribution Agreement, if the obligation of any Party under this Agreement depends upon the Approval or Notification of a Third Party, such as a vendor or insurer, and that Approval or Notification is withheld, the Parties will use commercially reasonable efforts to implement the affected provisions of this Agreement to the fullest extent practicable; provided that, except to the extent expressly provided in this Agreement or any of the Ancillary Agreements or as otherwise agreed between YUM and SpinCo, neither YUM nor SpinCo shall be obligated to contribute capital or pay any consideration in any form (including providing any letter of credit, guaranty or other financial accommodation) to any Person in order to obtain or make such Approvals or Notifications.  If any provision of this Agreement cannot be implemented due to the failure of a Third Party to provide a required Approval or Notification, the Parties will negotiate in good faith to implement the provision in a mutually satisfactory manner, taking into account the original purpose of the affected provision.

 

Section 7.14.                          Further Assurances and Consents.  Without limiting or otherwise modifying the provisions of Article VIII of the Separation and Distribution Agreement, in addition to the actions specifically provided for in this Agreement, each of the Parties will use commercially reasonable efforts to (a) execute and deliver such further instruments and documents and take such other actions as the other Party may reasonably request to effectuate

 

34

 

the purposes of this Agreement and to carry out the terms hereof, and (b) take, or cause to be taken, all actions and do, or cause to be done, all things, reasonably necessary, proper or advisable under applicable Law and agreements or otherwise to consummate and make effective the transactions contemplated by this Agreement, including using commercially reasonable effort to obtain any required consents and approvals and to make any filings and applications necessary or desirable to consummate the transactions contemplated by this Agreement; provided, that, except to the extent expressly provided in this Agreement or any of the Ancillary Agreements or as otherwise agreed between YUM and SpinCo, no Party will be obligated to contribute capital or pay any consideration in any form therefor.

 

Section 7.15.                          Effect if Distribution Does Not Occur.  If the Distribution does not occur, then all actions and events that are to be taken under this Agreement, or otherwise in connection with the Distribution, will not be taken or occur, except to the extent specifically provided by YUM.

 

Section 7.16.                          Counterparts; Entire Agreement; Authority; Facsimile Signatures.

 

(a)                                 Counterparts.  This Agreement may be executed in one (1) or more counterparts, all of which shall be considered one (1) and the same agreement, and shall become effective when one (1) or more counterparts have been signed by each of the Parties and delivered to the other Party.  The provisions of Section 10.1(d) of the Separation and Distribution Agreement shall, for the avoidance of doubt, apply to the execution of this Agreement.

 

(b)                                 Entire Agreement.  This Agreement, together with the Separation and Distribution Agreement and the other Ancillary Agreements, contain the entire agreement between the Parties with respect to the subject matter hereof, and supersede all previous agreements, negotiations, discussions, writings, understandings, commitments and conversations with respect to such subject matter, and there are no agreements or understandings between the Parties other than those set forth or referred to herein or therein.

 

(c)                                  Authority.  YUM represents on behalf of itself, and SpinCo represents on behalf of itself, as follows:

 

(i)                                     it has the requisite corporate or other power and authority and has taken all corporate or other action necessary in order to execute, deliver and perform this Agreement and to consummate the transactions contemplated hereby; and

 

(ii)                                  this Agreement has been duly executed and delivered by it and constitutes a valid and binding agreement of it enforceable against it in accordance with the terms hereof.

 

Section 7.17.                          Governing Law.  This Agreement (and any claims or disputes arising out of or related hereto or to the transactions contemplated hereby or to the inducement of any Party to enter herein, whether for breach of contract, tortious conduct or otherwise and whether predicated on common law, statute or otherwise) shall be governed by and construed and interpreted in accordance with the Laws of the State of Delaware irrespective of the choice of laws principles of the State of Delaware including all matters of validity, construction, effect, enforceability, performance and remedies.

 

35

 

Section 7.18.                          Binding Effect; Assignability.  This Agreement shall be binding upon and inure to the benefit of the Parties and their respective successors and permitted assigns; provided, that neither Party may assign any of its rights or assign or delegate any of its obligations under this Agreement without the express prior written consent of the other Party.

 

Section 7.19.                          No Third Party Beneficiaries.  The provisions of this Agreement are solely for the benefit of the Parties and do not and are not intended to confer upon any Person except the Parties any rights or remedies hereunder, and there are no Third Party beneficiaries of this Agreement and this Agreement shall not provide any Third Party with any remedy, claim, Liability, reimbursement or other right in excess of those existing without reference to this Agreement.

 

Section 7.20.                          Severability.  If any provision of this Agreement or the application thereof to any Person or circumstance is determined by an arbitrator or by a court of competent jurisdiction to be invalid, void or unenforceable, the remaining provisions hereof, or the application of such provision to Persons or circumstances or in jurisdictions other than those as to which it has been held invalid, void or unenforceable, shall remain in full force and effect and shall in no way be affected, impaired or invalidated thereby.  Upon such determination, the Parties shall negotiate in good faith in an effort to agree upon such a suitable and equitable provision to effect, as closely as possible, the original intent of the Parties.

 

Section 7.21.                          No Set Off.  Except as mutually agreed to in writing by the Parties, neither Party nor any other member of such Party’s Group shall have any right of set-off or other similar rights with respect to (a) any amounts payable pursuant to this Agreement or (b) any other amounts claimed to be owed to the other Party or any other member of its Group arising out of this Agreement.

 

Section 7.22.                          Survival of Covenants.  Except as expressly set forth in this Agreement, the covenants and agreements contained in this Agreement, and Liability for the breach of any such obligations contained herein, shall survive the Separation and the Distribution and shall remain in full force and effect.

 

Section 7.23.                          Waivers of Default; Remedies Cumulative.  Waiver by a Party of any default by the other Party of any provision of this Agreement shall not be deemed a waiver by the waiving Party of any subsequent or other default, nor shall it prejudice the rights of the other Party.  No failure or delay by a Party in exercising any right, power or privilege under this Agreement shall operate as a waiver thereof, nor shall a single or partial exercise thereof prejudice any other or further exercise thereof or the exercise of any other right, power or privilege. All rights and remedies existing under this Agreement are cumulative to, and not exclusive of, any rights or remedies otherwise available.

 

Section 7.24.                          Amendments.  No provisions of this Agreement may be deemed waived, amended, supplemented or modified by a Party, unless such waiver, amendment, supplement or modification is in writing and signed by the authorized representative of the Party against whom it is sought to enforce such waiver, amendment, supplement or modification.

 

36

 

Section 7.25.                          Specific Performance.  Subject to the provisions of Article VII of the Separation and Distribution Agreement, in the event of any actual or threatened default in, or breach of, any of the terms, conditions and provisions of this Agreement, the Party or Parties who are, or are to be, thereby aggrieved shall have the right to specific performance and injunctive or other equitable relief in respect of its or their rights under this Agreement, in addition to any and all other rights and remedies at law or in equity, and all such rights and remedies shall be cumulative.  The Parties agree that the remedies at law for any breach or threatened breach, including monetary damages, are inadequate compensation for any loss and that any defense in any action for specific performance that a remedy at law would be adequate is waived.  Any requirements for the securing or posting of any bond with such remedy are waived by each of the Parties.

 

Section 7.26.                          Mutual Drafting.  This Agreement shall be deemed to be the joint work product of the Parties, and any rule of construction that a document shall be interpreted or construed against a drafter of such document shall not be applicable.

 

Section 7.27.                          Predecessors or Successors.  Any reference to YUM, SpinCo, a Person or a Subsidiary in this Agreement shall include any predecessors or successors (e.g., by merger or other reorganization, liquidation or conversion) of YUM, SpinCo, such Person or such Subsidiary, respectively.

 

Section 7.28.                          Change in Law.  Any reference to a provision of the Code or any other Tax Law shall include a reference to any applicable successor provision or Law.

 

Section 7.29.                          Limitations of Liability. Notwithstanding anything in this Agreement or the Separation and Distribution Agreement to the contrary, neither SpinCo or any other member of the SpinCo Group, on the one hand, nor YUM or any other member of the YUM Group, on the other hand, shall be liable under this Agreement to the other for any indirect, punitive, exemplary, remote, speculative or similar damages in excess of compensatory damages of the other (other than any such damages awarded to a Third Party with respect to a Third-Party Claim).

 

Section 7.30.                          Performance.  YUM shall cause to be performed, and hereby guarantees the performance of, all actions, agreements and obligations set forth in this Agreement to be performed by any member of the YUM Group. SpinCo shall cause to be performed, and hereby guarantees the performance of, all actions, agreements and obligations set forth in this Agreement to be performed by any member of the SpinCo Group.

 

Section 7.31.                          Incorporation.  Sections 10.10 (Headings) and 10.15 (Interpretation) of the Separation and Distribution Agreement are hereby incorporated in this Agreement as if fully set forth herein.

 

[Signatures set forth on following page]

 

37

 

IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed by their authorized representatives.

 

	
YUM! BRANDS, INC.
    	
YUM   CHINA HOLDINGS, INC.
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
By:   
    	
/s/   Greg Creed
    	
 
    	
By:   
    	
/s/   Micky Pant
    
	
Name:   
    	
Greg   Creed 
    	
 
    	
Name:   
    	
Micky   Pant 
    
	
Title:
    	
Chief   Executive Officer
    	
 
    	
Title:   
    	
Chief   Executive Officer
    

 

[Signature Page to Employee Matters Agreement]

 

 

Schedule 7.03

 

Employees With Tax Equalization Payments

 

1.              Joaquin Pelaez

 

2.              Anthony Longo

 

3.              Nghe Quan

 

4.              Jane Gannaway

 

5.              Paula Robinson

 

6.              Sam Su

 

7.              Don Miller

 

8.              Paul Hill

 

9.              Micky Pant

 

10.       Milind Pant

 

11.       Ted StedemExhibit 10.4

 

TRANSITION SERVICES AGREEMENT

 

BY AND BETWEEN

 

YUM! BRANDS, INC.

 

AND

 

YUM CHINA HOLDINGS, INC.

 

DATED AS OF OCTOBER 31, 2016

 

 

Table of Contents

 

	
 
    	
 
    	
Page
    
	
 
    	
 
    	
 
    
	
ARTICLE I
    	
 
    	
DEFINITIONS
    	
1
    
	
 
    	
 
    	
 
    
	
ARTICLE II
    	
 
    	
TERM AND TERMINATION
    	
3
    
	
 
    	
 
    	
 
    
	
2.1
    	
Term and Termination
    	
3
    
	
2.2
    	
Early Termination
    	
3
    
	
2.3
    	
Effect of Termination
    	
4
    
	
 
    	
 
    	
 
    
	
ARTICLE III
    	
 
    	
TRANSITION SERVICES
    	
4
    
	
 
    	
 
    	
 
    
	
3.1
    	
Provision of Transition Services
    	
4
    
	
3.2
    	
Use of Transition Services
    	
7
    
	
3.3
    	
Right to Suspend Transition Services
    	
7
    
	
3.4
    	
Access
    	
7
    
	
3.5
    	
Project Managers
    	
7
    
	
3.6
    	
Security; Systems Compliance
    	
8
    
	
 
    	
 
    	
 
    
	
ARTICLE IV
    	
 
    	
COMPENSATION
    	
9
    
	
 
    	
 
    	
 
    
	
4.1
    	
Fees for Transition Services
    	
9
    
	
4.2
    	
Payment
    	
9
    
	
4.3
    	
Taxes
    	
9
    
	
4.4
    	
Adjustment to Prices for Transition Services
    	
10
    
	
 
    	
 
    	
 
    
	
ARTICLE V
    	
 
    	
CONFIDENTIALITY
    	
10
    
	
 
    	
 
    	
 
    
	
5.1
    	
Confidentiality
    	
10
    
	
 
    	
 
    	
 
    
	
ARTICLE VI
    	
 
    	
LIMITED WARRANTY; LIABILITY; RELATED MATTERS
    	
10
    
	
 
    	
 
    	
 
    
	
6.1
    	
Limited Warranty
    	
10
    
	
6.2
    	
Disclaimer of Implied Warranties
    	
10
    
	
6.3
    	
Limitations on Liability
    	
11
    
	
6.4
    	
Compliance with Law and Governmental Regulations
    	
11
    
	
 
    	
 
    	
 
    
	
ARTICLE VII
    	
 
    	
INDEMNIFICATION
    	
12
    
	
 
    	
 
    	
 
    
	
7.1
    	
Indemnification
    	
12
    
	
7.2
    	
Treatment of the Indemnification Claims
    	
12
    
	
 
    	
 
    	
 
    
	
ARTICLE VIII
    	
 
    	
INDEPENDENT CONTRACTOR
    	
12
    
	
 
    	
 
    	
 
    
	
8.1
    	
Independent Contractor
    	
12
    
	
 
    	
 
    	
 
    
	
ARTICLE IX
    	
 
    	
FORCE MAJEURE
    	
13
    
	
 
    	
 
    	
 
    
	
9.1
    	
Force Majeure
    	
13
    
	
 
    	
 
    	
 
    
	
ARTICLE X
    	
 
    	
MISCELLANEOUS
    	
13
    
	
 
    	
 
    	
 
    
	
10.1
    	
Notices
    	
13
    
	
10.2
    	
Amendments
    	
13
    
	
10.3
    	
Non-Exclusivity
    	
13
    
	
10.4
    	
Expenses
    	
13
    

 

i

 

Table of Contents

(continued)

 

	
 
    	
 
    	
Page
    
	
 
    	
 
    	
 
    
	
10.5
    	
Waivers of Default; Remedies Cumulative
    	
13
    
	
10.6
    	
Binding Effect; Assignability
    	
14
    
	
10.7
    	
No Third Party Beneficiaries
    	
14
    
	
10.8
    	
Severability
    	
14
    
	
10.9
    	
Entire Agreement
    	
14
    
	
10.10
    	
Governing Law
    	
14
    
	
10.11
    	
Disputes
    	
15
    
	
10.12
    	
Counterparts
    	
15
    
	
10.13
    	
Authority
    	
15
    
	
10.14
    	
Incorporation
    	
15
    

 

ii

 

TRANSITION SERVICES AGREEMENT

 

This TRANSITION SERVICES AGREEMENT (this “Agreement”), dated as of October 31, 2016 is by and between Yum! Brands, Inc., a North Carolina corporation (“YUM”) and Yum China Holdings, Inc., a Delaware corporation (“SpinCo”).

 

RECITALS

 

WHEREAS, the board of directors of YUM (the “YUM Board”) has determined that it is in the best interests of YUM and its shareholders to create a new publicly traded company that shall operate the SpinCo Business;

 

WHEREAS, in furtherance of the foregoing, the YUM Board has determined that it is appropriate and desirable to separate the SpinCo Business from the YUM Business (the “Separation”) and, following the Separation, make a distribution, on a pro rata basis and in accordance with a distribution ratio to be determined by the YUM Board, to holders of YUM Shares on the Record Date of all the outstanding SpinCo Shares owned by YUM (the “Distribution”);

 

WHEREAS, YUM, SpinCo and Yum Restaurants Consulting (Shanghai) Company Limited are entering into a Separation and Distribution Agreement (the “Separation and Distribution Agreement”), dated as of the date hereof, in order to carry out, effect and consummate the Separation and the Distribution and set forth the principal arrangements between them regarding the terms of the Separation and the Distribution, and are entering into certain other agreements that will govern certain matters relating to the Separation and the Distribution and the relationship of YUM, SpinCo and the members of their respective Groups following the Distribution; and

 

WHEREAS, the Parties have agreed that, after the Separation and Distribution, YUM will provide certain services to SpinCo and its Affiliates and that SpinCo will provide certain services to YUM and its Affiliates, each on a transitional basis following the Separation and in accordance with the terms and conditions set forth herein.

 

AGREEMENT

 

NOW, THEREFORE, in consideration of the mutual agreements, provisions and covenants contained in this Agreement, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties, intending to be legally bound, hereby agree as follows:

 

ARTICLE I

 

DEFINITIONS

 

For the purpose of this Agreement, the following terms shall have the following meanings, and capitalized terms used herein and not otherwise defined in this Article I shall have the respective meanings assigned to them in the Separation and Distribution Agreement.

 

1

 

“Actual Cost” shall have the meaning set forth in Section 4.4.

 

“Additional Services” shall have the meaning set forth in Section 3.1(b).

 

“Agreement” shall have the meaning set forth in the Preamble.

 

“Confidential Information” shall have the meaning set forth in Section 5.1(a).

 

“Consents” shall have the meaning set forth in Section 3.1(g).

 

“Control”, when used with respect to SpinCo, shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of SpinCo, whether through the ownership of voting securities or other interests, by Contract, agreement, obligation, indenture, instrument, lease, promise, arrangement, release, warranty, commitment, undertaking or otherwise.

 

“Current Capacity” shall have the meaning set forth in Section 3.1(c).

 

“Distribution” shall have the meaning set forth in the Recitals.

 

“Due Date” shall have the meaning set forth in Section 4.2(b).

 

“Fiscal Quarter” shall mean each of the three-month periods ending March, June, September and December.

 

“Initial Services” shall have the meaning set forth in Section 3.1(a).

 

“Invoice” shall have the meaning set forth in Section 4.1.

 

“Party” or “Parties” shall mean a party or the parties to this Agreement.

 

“Project Manager” shall have the meaning set forth in Section 3.5.

 

“Provider” shall mean, with respect to any particular Transition Service, the Party identified on the applicable Schedule as the Party to provide such Transition Service.

 

“Recipient” shall mean, with respect to any particular Transition Service, the Party identified on the applicable Schedule as the Party to receive such Transition Service.

 

“Recipient Business” shall mean (i) with respect to SpinCo as the Recipient, the SpinCo Business and (ii) with respect to YUM as the Recipient, the YUM Business.

 

“Related Parties” shall mean, as to either Party, that Party’s Affiliates, directors, officers employees, counsel, accountants, advisors, representatives and agents and, as to Provider, Third Parties engaged by Provider to provide Transition Services.

 

“Schedule” or “Schedules” shall mean any Schedule annexed hereto or all of the Schedules collectively (in each case including any Exhibit thereto).

 

2

 

“Separation” shall have the meaning set forth in the Recitals.

 

“Separation and Distribution Agreement” shall have the meaning set forth in the Recitals.

 

“Service Termination Date” shall mean, with respect to any Transition Service, the earlier of (i) the date Recipient terminates the provision of such Transition Service pursuant to Section 2.2 and (ii) the termination date specified with respect to such Transition Service on the Schedule applicable to such Transition Service, as such date may be extended or modified in accordance with the terms of this Agreement.

 

“SpinCo” shall have the meaning set forth in the Preamble.

 

“Term” shall have the meaning set forth in Section 2.1(b).

 

“Termination Notice” shall have the meaning set forth in Section 2.2(e).

 

“Transition Services” shall have the meaning set forth in Section 3.1(b).

 

“YUM” shall have the meaning set forth in the Preamble.

 

“YUM Board” shall have the meaning set forth in the Recitals.

 

ARTICLE II

 

TERM AND TERMINATION

 

2.1                               Term and Termination.  Unless otherwise terminated pursuant to Section 2.2, this Agreement shall commence on the date hereof and shall terminate:

 

(a)                                 with respect to any Transition Service, at the close of business on the Service Termination Date for such Transition Service; and

 

(b)                                 with respect to this Agreement, on the earlier of (i) the close of business on the final Service Termination Date or (ii) one (1) year after the date hereof (the period commencing on the date hereof and ending on the earlier of (i) and (ii), the “Term”), unless the Parties have agreed in writing to an extension of the Term.

 

2.2                               Early Termination.  Without limiting the rights of the Parties under any other provision of this Agreement, this Agreement may be terminated by YUM, on the one hand, or SpinCo, on the other hand, as follows:

 

(a)                           in the event that either YUM or SpinCo sends to the other Party initial written notice of a material breach of this Agreement by such other Party and the breaching Party fails to cure such material breach within twenty (20) days of receipt of such initial notice, by written notice by the non-breaching Party to the breaching Party;

 

(b)                           by written notice by either YUM, on the one hand, or SpinCo, on the other hand, as applicable, in the event that SpinCo or YUM (i) becomes insolvent or admits in writing

 

3

 

its inability to pay its debts as they become due, (ii) has instituted against it a proceeding seeking a judgment of insolvency, suspension of payments or bankruptcy, or a petition is presented against it for its winding up or liquidation, in each case that is not dismissed within sixty (60) days, (iii) institutes a proceeding seeking a judgment of insolvency, suspension of payments or bankruptcy, or files a petition for its winding up or liquidation, (iv) makes a general assignment for the benefit of its creditors, (v) seeks or becomes subject to the appointment of a receiver over all or substantially all of its assets or (vi) any analogous procedure or step is taken in any jurisdiction;

 

(c)                            by written notice of YUM to SpinCo in the event of a change in the Person who has Control of SpinCo following the Distribution;

 

(d)                           by the mutual written consent of the Parties; or

 

(e)                            with respect to all or any one or more of the Transition Services provided to Recipient, and in accordance with the terms set forth in the Schedules (including, if set forth on the related Schedule, the required number of days for written notice), Recipient may terminate this Agreement with respect to all or any one or more of the Transition Services provided to Recipient, at any time and from time to time (except in the event such termination will constitute a breach by Provider of a third party agreement related to providing such Transition Services), by giving written notice to Provider of such termination (each, a “Termination Notice”).

 

2.3                               Effect of Termination.  Upon expiration of the Term or other termination of this Agreement, there shall be no liability on the part of either Party with respect to this Agreement, other than that such expiration or termination shall not (a) relieve a Party of any liabilities resulting from any breach hereof by such Party on or prior to the date of such expiration or termination, (b) relieve a Party of any payment obligation arising prior to the date of such expiration or termination or (c) affect any rights arising as a result of such a breach or such expiration or termination.  The provisions of this Section 2.3 and Articles V, VI, VII and X shall survive any expiration or termination hereof. In the event of any termination with respect to one or more, but less than all, of the Transition Services, this Agreement will continue in full force and effect with respect to any Transition Services not so terminated. Upon the termination of any or all of the Transition Services, Provider will cease, or will cause its applicable Affiliates or third party service providers to cease, providing the terminated Transition Services. Upon each such termination, Recipient will promptly pay to Provider all fees accrued through the effective date of the Termination Notice.

 

ARTICLE III

 

TRANSITION SERVICES

 

3.1                               Provision of Transition Services.

 

(a)                                 Transition Services.  Provider shall use commercially reasonable efforts to provide, or to cause to be provided, to Recipient, or to an Affiliate of Recipient, the transition services set forth in the Schedules (collectively, the “Initial Services”), in each case for the period beginning on the date hereof and ending on the applicable Service Termination Date.

 

4

 

Each Party acknowledges and agrees that neither Party shall have any obligation under this Agreement to provide any transition support or other services other than the Initial Services.  Each Initial Service required to be delivered under this Agreement, and any Additional Service (as defined below) as may be mutually agreed upon by the Parties from time to time, shall be provided in the English language, unless otherwise expressly set forth on the related Schedule.

 

(b)                                 Additional Services. From time to time prior to the expiration of the Term, the Parties may identify additional services to be provided in accordance with the terms of this Agreement (the “Additional Services” and, together with the Initial Services, the “Transition Services”). If the Parties mutually agree to add any Additional Service, the Parties will mutually create a Schedule or amend an existing Schedule for each such Additional Service setting forth a description of such Additional Service, the term during which such Additional Service will be provided, the price for such Additional Service and any other provisions applicable thereto. In order to become a part of this Agreement, such new Schedule or amendment to an existing Schedule must be in writing and signed by a duly authorized representative of each Party, at which time such Additional Service will, together with the Initial Services, be deemed to constitute a “Transition Service” for purposes of this Agreement and will be subject to the terms and conditions hereof. The Parties may, but are not required to, agree on Additional Services, and neither Party will have any obligation to agree to provide or receive any Additional Services.

 

(c)                                  Amount of Service.  Except as set forth in the Schedules, Provider shall use commercially reasonable efforts to provide or cause to be provided to Recipient the Transition Services in an amount up to the amount necessary for Recipient to (i) operate the Recipient Business at the level and capacity at which Recipient operated during the twelve-month period immediately prior to the date hereof (“Current Capacity”) and (ii) effect the Separation.

 

(d)                                 Level of Service.  Provider shall use commercially reasonable efforts to furnish or cause to be furnished to Recipient the Transition Services substantially in the manner in which they were provided to the Recipient Business immediately prior to the date hereof; provided, that nothing in this Agreement will require Provider to prioritize or otherwise favor Recipient over any third parties or any of Provider’s or Provider’s Affiliates’ business operations. The Parties acknowledge and agree that nothing contained in any Schedule will be deemed to (i) increase the level of service or standard of care required of Provider, (ii) expand the scope of the Transition Services to be provided as set forth in this Section 3.1 or (iii) limit Section 6.2 or 6.3, it being understood and agreed that Provider is not a commercial provider of any of the Transition Services and shall not be held to the same service standard as would a professional service provider with respect to such Transition Services.

 

(e)                                  Errors or Omissions.  Except as provided in Article VI, Provider’s sole responsibility to Recipient for errors or omissions committed by Provider in performing the Transition Services will be to correct such errors or omissions in the Transition Services at no additional cost to Recipient.

 

(f)                                   Means of Provision of Transition Services.  Provider shall have the sole responsibility and right to determine the personnel, assets and other resources used to provide the Transition Services, as well as the manner in which Provider provides the Transition Services, provided that the Transition Services are otherwise in compliance with the express requirements

 

5

 

of this Agreement.  Except as set forth in a Schedule, Provider shall have the right to arrange for any of the Transition Services to be provided to Recipient directly or indirectly through any Affiliate of Provider or third party and, subject to Section 10.6, to assign its obligation to supply any specific Transition Service to any Affiliate or third party.  The Transition Services provided by Provider through any Affiliate or third party, or use of intellectual property, services or other assets owned by, licensed from or purchased from any Affiliate or third party, will be subject to the terms and conditions of any agreements with such Affiliates or third parties, and each Party will comply with such terms and conditions of such agreements to the extent applicable to such Party in connection with this Agreement. If Provider is unable to provide a Transition Service because it does not have the necessary assets because such asset was transferred from Provider to Recipient, the Parties will determine a mutually acceptable arrangement to provide the necessary access to such asset and, until such time as access is provided, Provider’s failure to provide such Transition Service will not constitute a breach of this Agreement.

 

(g)                                  Cooperation in Connection with Performance of Transition Services.  Recipient shall, and shall cause its Affiliates to, use commercially reasonable efforts to cooperate with Provider (and its Affiliates and third party service providers) in connection with the performance of the Transition Services, including producing on a timely basis all information that is reasonably requested with respect to the performance of Transition Services; provided, that such cooperation does not unreasonably disrupt the normal operations of Recipient and its Affiliates. Such cooperation will include exchanging information, providing electronic access to systems used in connection with the Transition Services and obtaining or granting all consents, licenses, sublicenses, permits, registrations, authorizations or approvals (collectively, “Consents”) necessary to permit Provider to perform its obligations hereunder. Recipient will be solely responsible for paying for the costs of providing such cooperation and obtaining such Consents, including reasonable legal fees and expenses. The Parties shall reasonably cooperate to obtain any Consents that may be required from third parties in order for Provider to provide any of the Transition Services hereunder. Either Party providing electronic access to systems used in connection with Transition Services may limit the scope of access to the applicable requirements of the relevant matter through any reasonable means available, and any such access will be subject to the terms of Section 5.1. The exchange of information related to the provision of Transition Services hereunder will be made to the extent that (A) such information exists and is created in the ordinary course, (B) does not involve the incurrence of any material expense, and (C) is reasonably necessary for Provider to comply with its obligations hereunder. For the avoidance of doubt, and without limiting any privilege or protection that now or hereafter may be shared by Provider and Recipient, neither Party will be required to provide any document if the Party who would provide such document reasonably believes that so doing would waive any privilege or protection (e.g., attorney-client privilege) applicable to such document. If Provider reasonably believes it is unable to provide any Transition Service because of a failure to obtain necessary Consents contemplated by this Section 3.1(g), such failure shall not constitute a breach hereof by Provider and the Parties will cooperate to determine the best alternative approach; provided, that in no event will Provider be required to provide such Transition Service until an alternative approach reasonably satisfactory to Provider is found or the Consents have been obtained.

 

(h)                                 Modification of Transition Services.  The Parties agree and acknowledge that Provider may make changes from time to time in the manner of performing the applicable

 

6

 

Transition Services if Provider is making similar changes in performing similar services for itself, its Affiliates or other Third Parties, if any, and if Provider furnishes to Recipient substantially the same notice (in content and timing) as Provider provides to its Affiliates or other third parties, if any, respecting such changes. Without limiting the foregoing, and notwithstanding anything to the contrary in this Agreement, Provider may make any of the following changes without obtaining the prior consent of, and without prior notice to, Recipient: (i) changes to the process of performing a particular Transition Service that do not adversely affect the benefits to Recipient of Provider’s provision or quality of such Transition Service in any material respect or materially increase the charge for such Transition Service; (ii) emergency changes on a temporary and short-term basis; and (iii) changes to a particular Transition Service in order to comply with applicable Law or regulatory requirements.

 

3.2                               Use of Transition Services.  Recipient shall and shall cause its Affiliates to use or permit to be used the Transition Services (a) only in a manner consistent with the current use of such Transition Services in the operation of the Recipient Business and (b) only to the extent necessary to (i) operate the Recipient Business at the Current Capacity and (ii) effect the Separation.

 

3.3                               Right to Suspend Transition Services.  Notwithstanding anything to the contrary in this Agreement, Provider shall not be required to provide, and will incur no liability for not providing, all or any part of any Transition Service to the extent: (i) the performance of such Transition Service would require Provider to violate any applicable Law or Contract and (ii) a third party service provider or third party intellectual property or other asset used to provide any Transition Service ceases to be, or otherwise is not, available to Provider on commercially reasonable terms.  Any such non-provision of Transition Services will apply in each of clauses (i) and (ii): (a) only to the extent reasonably necessary for Provider to address the issue raised; (b) to the extent practicable, only after Provider has applied commercially reasonable efforts to reduce the amount or effect of any such restrictions; and (c) if Provider has delivered written notice thereof to Recipient.

 

3.4                               Access.  Recipient shall provide Provider, and any Affiliate or Third Party who provides the Transition Services on behalf of Provider, reasonable access to Recipient’s premises, or to the premises of any Affiliate of Recipient receiving the applicable Transition Services, during regular business hours and at such other times as are reasonably requested by Provider or such Affiliate or Third Party, for the purpose of providing the Transition Services.  Subject to obtaining any required consents, Recipient hereby grants to Provider during the Term, to the extent required, a non-exclusive license to use or access, as the case may be, all software, equipment, space and other items owned or leased by or licensed to Recipient or any of Recipient’s Affiliates, which are required for Provider, Provider’s Affiliates or a Third Party, as applicable, to perform the Transition Services.

 

3.5                               Project Managers.  Each of YUM, on the one hand, and SpinCo, on the other hand, shall designate in writing one or more individuals with all the requisite power and authority, in each such individual’s sole discretion, to authorize, approve and otherwise act on its behalf with respect to the Transition Services and other matters contained in this Agreement (each, a “Project Manager”).  Each of YUM and SpinCo may change its Project Manager or Project Managers, as the case may be, from time to time by written notice to the other Party.

 

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Each Project Manager shall be authorized to receive on behalf of YUM or SpinCo, as the case may be, notices required or permitted herein other than with respect to notices of breach, claims or disputes, which notices shall be provided in accordance with Section 10.1.  Each of YUM, on the one hand, and SpinCo, on the other hand, may rely and shall be protected in acting or refraining from acting in reliance upon any oral or written statement, notice, request, direction, consent or other document or instrument delivered to it by the other Party’s Project Manager, or by any of the other Party’s Project Managers, as the case may be.  Each of YUM, on the one hand, and SpinCo, on the other hand, agrees to make its Project Manager or Project Managers, as the case may be, reasonably available to the other Party during regular business hours for consultation regarding any matters for which such Project Manager has responsibility under this Agreement.  The Project Managers of each of YUM and SpinCo shall meet from time to time to review and discuss matters relating to the performance of the Parties’ obligations under this Agreement.

 

3.6                               Security; Systems Compliance.

 

(a)                                 Without limiting or modifying (i) any maintenance obligations of a Party or other Person under the Separation and Distribution Agreement or any other Ancillary Agreement or (ii) any right of a Party or other Person under any such agreement (including YUM’s and its Affiliates’ rights to modify its practices and policies), during the Term, each Party shall, and shall cause its Affiliates to, maintain (and may reasonably upgrade or otherwise modify without adversely affecting the connectivity with, functionality of or compatibility with the systems of the other Party) its existing physical, information and other security practices and policies, except that, if an addition or change to such practices or policies is either (i) required by Provider’s outside auditors or (ii) required to be implemented by Provider by Law or a Governmental Authority, then each Party will implement the required changes as soon as practicable to the extent necessary to perform or receive Transition Services, but no later than the last day Provider has implemented such changes with respect to restaurants operated by it or its Affiliates that receive services similar to the Transition Service affected by such addition or change.  The Parties will reasonably cooperate in maintaining reasonable security measures with respect to any interfaces required between Provider and Recipient (and their respective Affiliates) in connection with the Transition Services.

 

(b)                                 At all times during the Term, each Party shall not, and shall cause its Affiliates not to, introduce, and shall take, and shall cause its Affiliates to take, commercially reasonable measures to prevent the introduction, into the other Party’s (or its Affiliates’) computer systems, networks, databases, or software any viruses or any other contaminants (including, but not limited to, codes, commands, instructions, devices, techniques, bugs, web bugs, or design flaws) that (or that are intended to) access (without authorization), alter, delete, threaten, infect, assault, vandalize, defraud, disrupt, damage, disable, inhibit or shut down such other Party’s (or its Affiliates’) computer systems, networks, databases, software, or other information or property.  Each Party shall not, and shall cause its Affiliates not to, tamper with, compromise or attempt to circumvent any physical or electronic security or audit measures employed by the other Party (or its Affiliates) in the course of its business operations or compromise the security of the other Party’s (or its Affiliates’) computer systems, networks, databases, or software.

 

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ARTICLE IV

 

COMPENSATION

 

4.1                               Fees for Transition Services.  Recipient shall pay, or shall cause its Affiliates to pay, for Transition Services provided to Recipient and its Affiliates pursuant to the terms of this Agreement at the prices set forth for such Transition Services on the applicable Schedule. On or before the twentieth (20th) day of each month following the end of a month or Fiscal Quarter (at Provider’s discretion) during the Term, or following the month during which a Service Termination Date for particular Transition Services occurs, Provider shall prepare and deliver (or cause its applicable Affiliate to prepare and deliver) to Recipient an invoice or invoices, as applicable (each, an “Invoice”), setting forth the amounts payable by Recipient, or by an Affiliate of Recipient, if applicable, for the Transition Services during the preceding month, Fiscal Quarter or portion of a Fiscal Quarter, as the case may be.  Such amounts shall be calculated in accordance with the prices set forth in the applicable Schedules.  The first Fiscal Quarter shall be deemed to be the period beginning on the date of this Agreement and ending on December 31, 2016.

 

4.2                               Payment.

 

(a)                           Amounts payable by Recipient, or an Affiliate of Recipient, as set forth in an Invoice are due no later than twenty (20) days from the date of the Invoice.

 

(b)                           All payments hereunder shall be in United States dollars and shall be made by wire transfer to the account of Provider, as specified in writing by Provider from time to time.  Payments pursuant to this Agreement that are not made by the date prescribed in this Agreement (the “Due Date”) shall accrue interest for the period from and including the date immediately following the Due Date through and including the date of payment at a rate per annum equal to the Prime Rate plus three percent (3%). Such rate shall be redetermined at the beginning of each calendar quarter following such Due Date. Such interest will be payable at the same time as the payment to which it relates and shall be calculated on the basis of a year of three hundred sixty-five (365) days and the actual number of days for which due.

 

4.3                               Taxes.  Recipient shall pay Provider, in addition to the amounts calculated in accordance with Section 4.1, the amount of all Taxes in respect of the sale and delivery of any of the Transition Services; provided, that Recipient shall not be required to pay any Tax assessed on or measured by Provider’s net income. All fees and other consideration with respect to Transition Services will be paid free and clear of and without deduction or withholding for or on account of any Tax, except as may be required by applicable Law. If Recipient shall be required by applicable Law to deduct or withhold any Taxes from such payments, then (i) Recipient shall make such deductions or withholdings as are required by applicable Law, (ii) Recipient shall timely pay the full amount deducted or withheld to the applicable taxing authorities and provide Provider with receipts or other proof of such payment promptly upon receipt, and (iii) Recipient shall gross up its payment to Provider so that the net amount that Provider receives is the same that it would have received had the deductions or withholding taxes (including such deductions and withholding taxes applicable to additional sums payable under this Section) imposed by the applicable tax authorities not applied.

 

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4.4                               Adjustment to Prices for Transition Services.  Unless a different time period is agreed to in writing by the Parties, at the end of each twelve (12) months during the Term, Provider will review the charges, costs and expenses actually incurred by Provider in providing any Transition Service (collectively, “Actual Cost”) during the previous twelve (12) months. In the event Provider determines that the Actual Cost for any Transition Service materially differs from the anticipated costs that were used by Provider to calculate the price for that Transition Service on the applicable Schedule, Provider will deliver to Recipient documentation for such Actual Cost and anticipated costs and the Parties will renegotiate in good faith to adjust the prices charged to Recipient for the applicable Transition Services prospectively.

 

ARTICLE V

 

CONFIDENTIALITY

 

5.1                               Confidentiality.

 

(a)                           Each Party shall hold, and shall cause its Related Parties to hold, in strict confidence, with at least the same degree of care and confidentiality that applies to such Party’s own confidential and proprietary information pursuant to policies in effect as of the Effective Time, all proprietary and confidential information of the other Party or any of such other Party’s Affiliates received by such Party or any of its Related Parties at any time pursuant to this Agreement or otherwise (collectively, “Confidential Information”) and shall not disclose the same to any third party which is not its Related Party nor use the same, except as expressly permitted by the terms hereof.  A Party’s or its Affiliate’s information shall not constitute Confidential Information for purposes of this Section 5.1(a) if such information is not subject to the protections on confidential and proprietary information set forth in Section 6.9 of the Separation and Distribution Agreement.  The provisions of Section 6.9 of the Separation and Distribution Agreement shall govern the confidentiality, disclosure and use of all Confidential Information.

 

(b)                           Without limiting any confidentiality, disclosure or use obligations set forth in the Separation and Distribution Agreement or any other Ancillary Agreement, the obligations of confidentiality under this Section 5.1 (i) with respect to Confidential Information that embodies trade secrets, know-how or similar Intellectual Property, shall indefinitely survive the expiration of the Term or other termination of this Agreement and (ii) with respect to all other Confidential Information, shall survive for a period of five (5) years from the date of the expiration of the Term or other termination of this Agreement.

 

ARTICLE VI

 

LIMITED WARRANTY; LIABILITY; RELATED MATTERS

 

6.1                               Limited Warranty.  Provider represents and warrants that it shall furnish or cause to be furnished all of the Transition Services only to the standard set forth in Section 3.1(d).

 

6.2                               Disclaimer of Implied Warranties.  EXCEPT AS SET FORTH IN SECTION 6.1, PROVIDER MAKES NO AND DISCLAIMS ALL WARRANTIES, EXPRESS OR IMPLIED,

 

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INCLUDING THE IMPLIED WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE AND NONINFRINGEMENT, WITH RESPECT TO THE TRANSITION SERVICES. PROVIDER MAKES NO REPRESENTATIONS OR WARRANTIES AS TO THE QUALITY, SUITABILITY OR ADEQUACY OF THE TRANSITION SERVICES FOR ANY PURPOSE OR USE.

 

6.3                               Limitations on Liability.

 

(a)                                 Each Party acknowledges and agrees that the obligations of the other Party hereunder are exclusively the obligations of such other Party and are not guaranteed directly or indirectly by such other Party’s Affiliates, directors, officers, managers, employees or agents or any other Person.

 

(b)                                 Notwithstanding anything to the contrary in this Agreement, Recipient acknowledges and agrees that performance by Provider of the Transition Services pursuant to this Agreement will not subject Provider or any of its Related Parties to any liability whatsoever, except as directly caused by gross negligence or willful misconduct on the part of Provider or any of its Related Parties in providing the Transition Services; provided, that Provider’s liability as a result of any such gross negligence or willful misconduct will be limited to an amount not to exceed the lesser of (i) the price paid for the particular Transition Service, (ii) Recipient’s, or its Affiliate’s, cost of performing the Transition Service itself until the applicable Service Termination Date, (iii) Recipient’s cost of obtaining the Transition Service from a third party until the applicable Service Termination Date; provided further that Recipient will, and will cause its Affiliates to, exercise its commercially reasonable efforts to minimize the cost of any such alternatives to the Transition Services by selecting the most cost effective alternatives which provide the functional equivalent of the Transition Services replaced.

 

(c)                                  NOTWITHSTANDING ANYTHING TO THE CONTRARY IN THIS AGREEMENT, IN NO EVENT WILL EITHER PARTY OR ANY OF ITS RELATED PARTIES BE LIABLE FOR ANY SPECIAL, INCIDENTAL, INDIRECT, COLLATERAL, CONSEQUENTIAL, EXEMPLARY, REMOTE, SPECULATIVE OR PUNITIVE DAMAGES, LOST PROFITS OR SIMILAR DAMAGES SUFFERED BY THE OTHER PARTY OR ANY OF ITS AFFILIATES, HOWEVER CAUSED AND ON ANY THEORY OF LIABILITY (INCLUDING NEGLIGENCE), IN CONNECTION WITH ANY BREACH OR OTHER MATTER ARISING HEREUNDER OR ARISING IN ANY WAY OUT OF THIS AGREEMENT.  Notwithstanding anything to the contrary in this Agreement, Provider shall have no liability to Recipient to the extent any failure to provide to Recipient, or defect in, any Transition Service is caused by Recipient’s failure to comply with Section 3.1(g) or 3.4.

 

(d)                                 Each Party agrees that it shall, in all circumstances, use commercially reasonable efforts to mitigate, and to otherwise minimize, its damages, and those of its Related Parties, whether direct or indirect, resulting from, or arising in connection with, any failure by the other Party to comply fully with its obligations under this Agreement.

 

6.4                               Compliance with Law and Governmental Regulations.  Recipient will be solely responsible for (a) compliance with all Laws affecting the Recipient Business and (b) any use Recipient may make of the Transition Services to assist it in complying with such Laws. Without

 

11

 

limiting any other provisions of this Agreement, the Parties agree and acknowledge that Provider has no responsibility or liability for advising Recipient with respect to, or ensuring Recipient’s compliance with, any public disclosure, compliance or reporting obligations of Recipient (including under the Securities Act of 1933, the Securities Exchange Act of 1934 and the Sarbanes-Oxley Act of 2002), regardless of whether any failure to comply relates to information or Transition Services provided hereunder.

 

ARTICLE VII

 

INDEMNIFICATION

 

7.1                               Indemnification.  Subject to the limitations set forth in Article 6, Provider shall indemnify, defend and hold harmless Recipient and each of its Related Parties from and against any and all Liabilities directly arising or resulting from any gross negligence or willful misconduct by Provider or any of its Related Parties in providing the Transition Services.  Recipient shall indemnify, defend and hold harmless Provider and each of its Related Parties from and against any and all Liabilities arising or resulting from the provision by Provider or any of its Related Parties of the Transition Services, excluding (i) any costs or expenses incurred by Provider or any of its Related Parties to provide the Transition Services in the ordinary course or (ii) Liabilities directly arising or resulting from Provider’s, or any of its Related Parties’, gross negligence or willful misconduct in performing the Transition Services.

 

7.2                               Treatment of the Indemnification Claims.  The procedures for indemnification pursuant to this Article 7 shall be the same as the procedures set forth in Sections 4.5 and 4.6 of the Separation and Distribution Agreement.

 

ARTICLE VIII

 

INDEPENDENT CONTRACTOR

 

8.1                               Independent Contractor.  The relationship of Provider and Recipient is that of vendor and customer, and this Agreement does not, and shall not be deemed or construed to, create any partnership or joint venture relationship between the Parties or any of their respective Affiliates, successors or assigns.  Each Party understands and agrees that this Agreement does not make it or any of its Related Parties an agent or legal representative of the other Party or any of its Affiliates for any purpose whatsoever. No Party is granted, by this Agreement or otherwise, any right or authority to assume or create any obligation or responsibilities, express or implied, on behalf of or in the name of any other Party or any of its Affiliates, or to bind the other Party or any of its Affiliates in any manner whatsoever.  The Parties expressly acknowledge that Provider is an independent contractor with respect to Recipient in all respects, including with respect to the provision of the Transition Services.

 

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ARTICLE IX

 

FORCE MAJEURE

 

9.1                               Force Majeure.  No Party shall be deemed in default of this Agreement for any delay or failure to fulfill any obligation (other than a payment obligation) hereunder so long as and to the extent to which any delay or failure in the fulfillment of such obligation is prevented, frustrated, hindered or delayed as a consequence of circumstances of Force Majeure.  In the event of any such excused delay, the time for performance of such obligation (other than a payment obligation) shall be extended for a period equal to the time lost by reason of the delay.  A Party claiming the benefit of this provision shall, as soon as reasonably practicable after the occurrence of any such event, (a) provide written notice to the other Party of the nature and extent of any such Force Majeure condition and (b) use commercially reasonable efforts to remove any such causes and resume performance under this Agreement, as applicable, as soon as reasonably practicable.

 

ARTICLE X

 

MISCELLANEOUS

 

10.1                        Notices.  Unless otherwise expressly provided herein, all notices, requests, claims, demands or other communications under this Agreement shall be delivered in accordance with the requirements for the provision of notice set forth in Section 10.5 of the Separation and Distribution Agreement.

 

10.2                        Amendments.  No provision of this Agreement may be waived, amended, supplemented or modified, unless such waiver, amendment, supplement or modification is in writing and signed by the authorized representative of the Party against whom it is sought to enforce such waiver, amendment, supplement or modification.

 

10.3                        Non-Exclusivity.  Provider and its Affiliates may provide services of a nature similar to the Transition Services to any other Person. There is no obligation for Provider to provide the Transition Services to Recipient on an exclusive basis.

 

10.4                        Expenses.  Except as otherwise expressly provided for herein, or as otherwise agreed to in writing by the Parties, all out-of-pocket fees, costs and expenses incurred prior to the Effective Time in connection with the preparation, execution, delivery and implementation of this Agreement will be borne by the Party or the applicable member of such Party’s Group incurring such fees, costs or expenses.

 

10.5                        Waivers of Default; Remedies Cumulative.  Waiver by a Party of any default by the other Party of any provision of this Agreement shall not be deemed a waiver by the waiving Party of any subsequent or other default, nor shall it prejudice the rights of the other Party.  No failure or delay by a Party in exercising any right, power or privilege under this Agreement shall operate as a waiver thereof, nor shall a single or partial exercise thereof prejudice any other or further exercise thereof or the exercise of any other right, power or privilege. All rights and

 

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remedies existing under this Agreement are cumulative to, and not exclusive of, any rights or remedies otherwise available.

 

10.6                        Binding Effect; Assignability.  This Agreement shall be binding upon and inure to the benefit of the Parties and their respective successors and permitted assigns, provided, that neither Party may assign any of its rights or assign or delegate any of its obligations under this Agreement without the express prior written consent of the other Party, except that (a) Recipient may assign its rights under this Agreement to any Affiliate or Affiliates of Recipient without the prior written consent of Provider, (b) Provider may assign or delegate any rights and obligations hereunder to (i) any Affiliate or Affiliates of Provider capable of providing such Transition Services hereunder or (ii) Third-Parties to the extent such Third-Parties are used to provide the Transition Services, in either case without the prior written consent of Recipient, and (c) an assignment by operation of Law in connection with a merger or consolidation will not require the consent of the other Party. Notwithstanding the foregoing, each Party will remain liable for all of its respective obligations under this Agreement.

 

10.7                        No Third Party Beneficiaries.  Except as provided in Articles 6 and 7, (a) the provisions of this Agreement are solely for the benefit of the Parties and do not and are not intended to confer upon any Person except the Parties any rights or remedies hereunder, and (b) there are no Third Party beneficiaries of this Agreement, and this Agreement shall not provide any Third Party with any remedy, claim, Liability, reimbursement or other right in excess of those existing without reference to this Agreement.

 

10.8                        Severability.  If any provision of this Agreement is determined by an arbitrator or by a court of competent jurisdiction to be invalid, void or unenforceable, the remaining provisions hereof, or the application of such provision to Persons or circumstances or in jurisdictions other than those as to which it has been held invalid, void or unenforceable, shall remain in full force and effect and shall in no way be affected, impaired or invalidated thereby. Upon such determination, the Parties shall negotiate in good faith in an effort to agree upon such a suitable and equitable provision to effect, as closely as possible, the original intent of the Parties.

 

10.9                        Entire Agreement.  This Agreement, together with the Separation and Distribution Agreement and the other Ancillary Agreements, contain the entire agreement between the Parties with respect to the subject matter hereof, and supersede all previous agreements, negotiations, discussions, writings, understandings, commitments and conversations with respect to such subject matter, and there are no agreements or understandings between the Parties other than those set forth or referred to herein or therein.

 

10.10                 Governing Law.  This Agreement (and any claims or disputes arising out of or related hereto or to the transactions contemplated hereby or to the inducement of either Party to enter herein, whether for breach of contract, tortious conduct or otherwise and whether predicated on common law, statute or otherwise) shall be governed by and construed and interpreted in accordance with the Laws of the State of Delaware irrespective of the choice of laws principles of the State of Delaware including all matters of validity, construction, effect, enforceability, performance and remedies.

 

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10.11                 Disputes.  The procedures for discussion, negotiation, mediation and arbitration set forth in Article VII of the Separation and Distribution Agreement shall apply to all disputes, controversies or claims that may arise out of or relate to this Agreement.

 

10.12                 Counterparts.  This Agreement may be executed in one (1) or more counterparts, all of which shall be considered one (1) and the same agreement, and shall become effective when one (1) or more counterparts have been signed by each of the Parties and delivered to the other Party.  The provisions of Section 10.1(d) of the Separation and Distribution Agreement shall, for the avoidance of doubt, apply to the execution of this Agreement.

 

10.13                 Authority.  YUM represents on behalf of itself, and SpinCo represents on behalf of itself, as follows:

 

(a)                                 it has the requisite corporate or other power and authority and has taken all corporate or other action necessary in order to execute, deliver and perform this Agreement and to consummate the transactions contemplated hereby; and

 

(b)                                 this Agreement has been duly executed and delivered by it and constitutes a valid and binding agreement of it enforceable against it in accordance with the terms hereof.

 

10.14                 Incorporation.  Sections 10.8 (No Set-Off), 10.10 (Headings), 10.15 (Interpretation) and 10.18 (Mutual Drafting) of the Separation and Distribution Agreement are hereby incorporated in this Agreement as if fully set forth herein.

 

[Signatures set forth on following page]

 

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IN WITNESS WHEREOF, this Agreement has been executed as of the date first above written.

 

	
 
    	
YUM! BRANDS, INC.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By: 
    	
/s/ Greg Creed
    
	
 
    	
 
    	
Name: Greg Creed
    
	
 
    	
 
    	
Title:      Chief Executive Officer
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
YUM CHINA HOLDINGS, INC.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/ Micky Pant
    
	
 
    	
 
    	
Name: Micky Pant
    
	
 
    	
 
    	
Title:      Chief Executive Officer
    

 

[Signature Page to Transition Services Agreement]

 

 

Schedule 1

 

QUALITY ASSURANCE TRANSITION SERVICES PROVIDED BY SPINCO

 

Transition Services

 

	
Service
    	
 
    	
Description
    	
 
    	
Service Termination
   Date
    
	
Quality   Assurance Services
    	
 
    	
Kenny Poon to   provide quality assurance and premium sourcing support to YUM, including   identifying and qualifying suppliers for premium items (kid meal toys,   balloons, etc.) to ensure they meet Yum! Brands Quality Assurance   Standards (product quality, safety, regulatory compliance, etc.).
    	
 
    	
October 31,   2017
    

 

Price

 

Actual cost for travel and expense; 55% of actual cost for other costs, including compensation, benefits and occupancy.

 

Recipient and, if applicable, Affiliate of Recipient to receive the Transition Services

 

YUM

 

Provider and, if applicable, Affiliate of Provider or Third Party to provide the Transition Services

 

SpinCo; Bai Sheng Restaurants China Holdings LTD

 

Point of Contact, Recipient

 

Clive Newton, YUM Chief Food Safety Officer

 

Point of Contact, Provider

 

Harry Wang, SpinCo Head of Engineering

 

S-1-1

 

Schedule 2

 

BRAZIL POULTRY SUPPORT TRANSITION SERVICES PROVIDED BY YUM

 

Transition Services

 

	
Service
    	
 
    	
Description
    	
 
    	
Service Termination 
   Date
    
	
Brazil Poultry   Sourcing
    	
 
    	
Yum!   Restaurantes do Brasil Ltda. (“Yum Brazil”) will source poultry from   Brazil poultry suppliers according to SpinCo product and pricing specifications,   as described in the Goods Sourcing Agreement dated the date hereof between   SpinCo and Yum Brazil.
    	
 
    	
October 31,   2017
    

 

Price

 

U.S. $6,000 per month, which represents the actual cost to Yum Brazil.

 

Recipient and, if applicable, Affiliate of Recipient to receive the Transition Services

 

SpinCo; Yum Restaurants Consulting (Shanghai) Company Limited

 

Provider and, if applicable, Affiliate of Provider or Third Party to provide the Transition Services

 

YUM; Yum! Restaurantes do Brasil Ltda.

 

Point of Contact, Recipient

 

Danny Tan, SpinCo Chief Support Officer

 

Point of Contact, Provider

 

Carl Mount, YUM Vice President Supply Chain Management

 

S-2-1

 

Schedule 3

 

OFFICE LEASE TRANSITION SERVICES PROVIDED BY YUM

 

Transition Services

 

	
Service
    	
 
    	
Description
    	
 
    	
Service Termination
   Date
    
	
Office Lease
    	
 
    	
Pizza Hut of   America, LLC to lease 520 square feet to SpinCo at 7100 Corporate Drive,   Plano, Texas, 75024, as described in the office lease letter agreement dated   the date hereof between SpinCo and Pizza Hut of America, LLC (the “Office   Lease”).
    	
 
    	
October 31,   2017
    

 

Price

 

Actual cost which will include any third-party expenses incurred by Provider after the date hereof in connection with providing this Transition Service as set forth in the Office Lease.

 

Recipient and, if applicable, Affiliate of Recipient to receive the Transition Services

 

SpinCo

 

Provider and, if applicable, Affiliate of Provider or Third Party to provide the Transition Services

 

YUM; Pizza Hut of America, LLC

 

Point of Contact, Recipient

 

YuanYuan Chen, Sr. Director Finance US Office

 

Point of Contact, Provider

 

Jen Hall, Pizza Hut CORE Services

 

S-3-1

 

Schedule 4

 

INFORMATION TECHNOLOGY (“IT”) TRANSITION SERVICES

PROVIDED BY YUM

 

Transition Services

 

	
Service
    	
 
    	
Description
    	
 
    	
Service Termination
   Date
    
	
IT and Data   Support
    	
 
    	
YUM to provide   certain IT and Data Support services related to forwarding and replying to   emails, spam filtering, use of current YUM circuits, voice support and   virtual desktop (VDI) technology to access applications hosted in China for   the employees using the Plano, Texas office space (see Schedule 3 and the   Office Lease)
    	
 
    	
February 28,   2017
    

 

Price

 

Actual cost. Estimated costs, which may differ from actual costs, are as follows:

 

·                  Estimated monthly costs:

 

·                  $3,000 for spam filtering

 

·                  $7,900 to $9,000 for circuits

 

·                  $45 per user for VDI

 

·                  $16 per user for voice support

 

·                  Estimated one time set up costs:

 

·                  $4,000 for VDI

 

Recipient and, if applicable, Affiliate of Recipient to receive the Transition Services

 

SpinCo

 

Provider and, if applicable, Affiliate of Provider or Third Party to provide the Transition Services

 

YUM; Yum! Restaurant Services Group

 

S-4-1

 

Point of Contact, Recipient

 

Johnson Huang, SpinCo Chief Information and Marketing Support Officer

 

Point of Contact, Provider

 

David Held, YUM Director Corporate Systems

 

S-4-2

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