Document:

Exhibit 10.8

 

YUM CHINA HOLDINGS, INC.

 

LEADERSHIP RETIREMENT PLAN

 

 

Effective as of October 31, 2016

 

 

Yum China Holdings, Inc. Leadership Retirement Plan

Table of Contents

 

	
 
    	
 
    	
 
    	
 
    	
Page
    
	
 
    	
 
    	
 
    
	
ARTICLE I – FOREWORD
    	
 
    	
1
    
	
 
    	
 
    	
 
    
	
ARTICLE II   – DEFINITIONS
    	
 
    	
2
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
2.01
    	
 
    	
ALLOCATION DATE:
    	
 
    	
2
    
	
2.02
    	
 
    	
AUTHORIZED LEAVE OF ABSENCE:
    	
 
    	
2
    
	
2.03
    	
 
    	
BASE COMPENSATION:
    	
 
    	
2
    
	
2.04
    	
 
    	
BENEFICIARY:
    	
 
    	
3
    
	
2.05
    	
 
    	
BONUS COMPENSATION:
    	
 
    	
3
    
	
2.06
    	
 
    	
BREAK IN SERVICE PAYMENT ELECTION:
    	
 
    	
3
    
	
2.07
    	
 
    	
CHANGE IN CONTROL:
    	
 
    	
4
    
	
2.08
    	
 
    	
CODE:
    	
 
    	
5
    
	
2.09
    	
 
    	
COMPANY:
    	
 
    	
5
    
	
2.10
    	
 
    	
DISABILITY:
    	
 
    	
5
    
	
2.11
    	
 
    	
DISABILITY BENEFITS:
    	
 
    	
6
    
	
2.12
    	
 
    	
DISABILITY LEAVE OF ABSENCE:
    	
 
    	
6
    
	
2.13
    	
 
    	
DISABILITY PAYMENT ELECTION:
    	
 
    	
6
    
	
2.14
    	
 
    	
EARNINGS CREDIT:
    	
 
    	
6
    
	
2.15
    	
 
    	
EARNINGS RATE:
    	
 
    	
6
    
	
2.16
    	
 
    	
EMPLOYER:
    	
 
    	
7
    
	
2.17
    	
 
    	
EMPLOYER CREDIT / EMPLOYER CREDIT PERCENTAGE:
    	
 
    	
7
    
	
2.18
    	
 
    	
ERISA:
    	
 
    	
7
    
	
2.19
    	
 
    	
EXECUTIVE / ELIGIBLE EXECUTIVE:
    	
 
    	
7
    
	
2.20
    	
 
    	
KEY EMPLOYEE:
    	
 
    	
9
    
	
2.21
    	
 
    	
LRP ACCOUNT:
    	
 
    	
10
    
	
2.22
    	
 
    	
LRP BENEFIT:
    	
 
    	
10
    
	
2.23
    	
 
    	
ONE-YEAR BREAK IN SERVICE:
    	
 
    	
10
    
	
2.24
    	
 
    	
PARTICIPANT:
    	
 
    	
10
    
	
2.25
    	
 
    	
PLAN:
    	
 
    	
10
    
	
2.26
    	
 
    	
PLAN ADMINISTRATOR:
    	
 
    	
11
    
	
2.27
    	
 
    	
PLAN YEAR:
    	
 
    	
11
    
	
2.28
    	
 
    	
RETIREMENT:
    	
 
    	
11
    
	
2.29
    	
 
    	
SECTION 409A:
    	
 
    	
11
    
	
2.30
    	
 
    	
SEPARATION FROM SERVICE:
    	
 
    	
11
    
	
2.31
    	
 
    	
SPOUSE:
    	
 
    	
11
    
	
2.32
    	
 
    	
TERMINATION DATE:
    	
 
    	
12
    
	
2.33
    	
 
    	
VALUATION DATE:
    	
 
    	
12
    
	
2.34
    	
 
    	
VESTING SCHEDULE:
    	
 
    	
12
    
	
2.35
    	
 
    	
VESTED LRP ACCOUNT:
    	
 
    	
12
    
	
2.36
    	
 
    	
UNITED STATES:
    	
 
    	
12
    
	
2.36
    	
 
    	
VICE PRESIDENT FOR GLOBAL TALENT MANAGEMENT:
    	
 
    	
12
    
	
2.37
    	
 
    	
YEAR OF PARTICIPATION:
    	
 
    	
12
    
	
2.38
    	
 
    	
YEARS OF SERVICE:
    	
 
    	
13
    
	
2.39
    	
 
    	
YUM CHINA ORGANIZATION:
    	
 
    	
13
    

 

i

 

Yum China Holdings, Inc. Leadership Retirement Plan

Table of Contents

 

	
 
    	
 
    	
 
    	
 
    	
Page
    
	
 
    	
 
    	
 
    
	
ARTICLE III   – PARTICIPATION
    	
 
    	
14
    
	
 
    	
 
    	
 
    
	
3.01
    	
 
    	
ELIGIBILITY TO PARTICIPATE
    	
 
    	
14
    
	
3.02
    	
 
    	
INCEPTION OF PARTICIPATION
    	
 
    	
14
    
	
3.03
    	
 
    	
TERMINATION OF PARTICIPATION
    	
 
    	
15
    
	
3.04
    	
 
    	
BREAK IN SERVICE
    	
 
    	
16
    
	
3.05
    	
 
    	
AGREEMENTS NOT TO PARTICIPATE
    	
 
    	
16
    
	
 
    	
 
    	
 
    
	
ARTICLE IV   – ELECTIONS
    	
 
    	
18
    
	
 
    	
 
    	
 
    
	
4.01
    	
 
    	
BENEFICIARIES
    	
 
    	
18
    
	
4.02
    	
 
    	
DEFERRAL OF PAYMENT WHILE RECEIVING DISABILITY   BENEFITS
    	
 
    	
18
    
	
4.03
    	
 
    	
BREAK IN SERVICE DEFERRAL OF PAYMENT
    	
 
    	
19
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
ARTICLE V   – PARTICIPANT LRP BENEFITS
    	
 
    	
21
    
	
 
    	
 
    	
 
    
	
5.01
    	
 
    	
CREDITS TO A PARTICIPANT’S LRP ACCOUNT
    	
 
    	
21
    
	
5.02
    	
 
    	
VESTING SCHEDULE
    	
 
    	
24
    
	
5.03
    	
 
    	
DISTRIBUTION OF A PARTICIPANT’S VESTED LRP ACCOUNT
    	
 
    	
24
    
	
5.04
    	
 
    	
VALUATION
    	
 
    	
26
    
	
5.05
    	
 
    	
FICA TAXES AND LRP ACCOUNT REDUCTION
    	
 
    	
27
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
ARTICLE VI   – PLAN ADMINISTRATION
    	
 
    	
28
    
	
 
    	
 
    	
 
    
	
6.01
    	
 
    	
PLAN ADMINISTRATOR
    	
 
    	
28
    
	
6.02
    	
 
    	
POWERS OF THE PLAN ADMINISTRATOR
    	
 
    	
28
    
	
6.03
    	
 
    	
COMPENSATION, INDEMNITY AND LIABILITY
    	
 
    	
29
    
	
6.04
    	
 
    	
TAXES
    	
 
    	
29
    
	
6.05
    	
 
    	
RECORDS AND REPORTS
    	
 
    	
30
    
	
6.06
    	
 
    	
RULES AND PROCEDURES
    	
 
    	
30
    
	
6.07
    	
 
    	
APPLICATIONS AND FORMS
    	
 
    	
30
    
	
6.08
    	
 
    	
CONFORMANCE WITH SECTION 409A
    	
 
    	
30
    
	
6.09
    	
 
    	
SECTION 457A
    	
 
    	
30
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
ARTICLE VII   – CLAIMS PROCEDURES
    	
 
    	
32
    
	
 
    	
 
    	
 
    
	
7.01
    	
 
    	
CLAIMS FOR BENEFITS
    	
 
    	
32
    
	
7.02
    	
 
    	
APPEALS
    	
 
    	
32
    
	
7.03
    	
 
    	
SPECIAL CLAIMS PROCEDURES FOR DISABILITY   DETERMINATIONS
    	
 
    	
32
    
	
7.04
    	
 
    	
EXHAUSTION OF CLAIMS PROCEDURES
    	
 
    	
33
    
	
7.05
    	
 
    	
LIMITATIONS ON ACTIONS
    	
 
    	
35
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
ARTICLE VIII   – AMENDMENT AND TERMINATION
    	
 
    	
36
    
	
 
    	
 
    	
 
    
	
8.01
    	
 
    	
AMENDMENT TO THE PLAN
    	
 
    	
36
    
	
8.02
    	
 
    	
TERMINATION OF THE PLAN
    	
 
    	
36
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
ARTICLE IX   – MISCELLANEOUS
    	
 
    	
38
    
	
 
    	
 
    	
 
    
	
9.01
    	
 
    	
LIMITATION ON PARTICIPANT RIGHTS
    	
 
    	
38
    
	
9.02
    	
 
    	
UNFUNDED OBLIGATION OF INDIVIDUAL EMPLOYER
    	
 
    	
38
    
	
9.03
    	
 
    	
OTHER BENEFIT PLANS
    	
 
    	
38
    
	
9.04
    	
 
    	
RECEIPT OR RELEASE
    	
 
    	
38
    

 

ii

 

Yum China Holdings, Inc. Leadership Retirement Plan

Table of Contents

 

	
 
    	
 
    	
 
    	
 
    	
Page
    
	
 
    	
 
    	
 
    
	
9.05
    	
 
    	
GOVERNING LAW
    	
 
    	
39
    
	
9.06
    	
 
    	
ADOPTION OF PLAN BY RELATED EMPLOYERS
    	
 
    	
39
    
	
9.07
    	
 
    	
RULES OF CONSTRUCTION
    	
 
    	
39
    
	
9.08
    	
 
    	
SUCCESSORS AND ASSIGNS; NONALIENATION OF BENEFITS
    	
 
    	
40
    
	
9.09
    	
 
    	
FACILITY OF PAYMENT
    	
 
    	
40
    
	
9.10
    	
 
    	
MISSING PARTICIPANTS OR BENEFICIARIES
    	
 
    	
40
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
ARTICLE X   – SIGNATURE
    	
 
    	
41
    
	
 
    	
 
    	
 
    
	
APPENDIX
    	
 
    	
42
    
	
 
    	
 
    	
 
    
	
APPENDIX   ARTICLE A – TRANSFERS FROM THE YUM! BRANDS LRP
    	
 
    	
43
    
	
 
    	
 
    	
 
    
	
A.01
    	
 
    	
SCOPE
    	
 
    	
43
    
	
A.02
    	
 
    	
DEFINITIONS
    	
 
    	
43
    
	
A.03
    	
 
    	
TRANSFER OF YUM! BRANDS LRP ACCOUNTS
    	
 
    	
44
    
	
A.04
    	
 
    	
CERTAIN ELECTIONS
    	
 
    	
44
    
	
A.05
    	
 
    	
SERVICE
    	
 
    	
44
    
	
A.06
    	
 
    	
EMPLOYER CREDIT FOR DESIGNATED PARTICIPANTS
    	
 
    	
45
    
	
A.07
    	
 
    	
RIGHTS AND BENEFITS FROM AND AFTER TRANSFER
    	
 
    	
46
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
ARTICLE B   – PARTICIPATION BY EXECUTIVES ON INTERNATIONAL ASSIGNMENTS
    	
 
    	
47
    
	
 
    	
 
    	
 
    
	
B.01
    	
 
    	
SCOPE
    	
 
    	
47
    
	
B.02
    	
 
    	
ELIGIBLE COUNTRIES
    	
 
    	
47
    

 

iii

 

ARTICLE I – FOREWORD

 

Yum China Holdings, Inc. (the “Company”) has established the Yum China Holdings, Inc. Leadership Retirement Plan (the “Plan”) effective as of the “Distribution Date”, as that term is defined in the Separation and Distribution Agreement between YUM! Brands, Inc. and the Company.

 

The Plan has been created by a spinoff of certain liabilities for benefits from the YUM! Brands Leadership Retirement Plan, and special rules applicable to Participants who transferred from YUM! Brands, Inc. to Yum China Holdings, Inc. are set forth in Appendix Article A.

 

With respect to benefits covered by this document, this document sets forth the terms of the Plan, specifying the group of executives of the Company and certain affiliated employers who are eligible to participate and the Plan’s general provisions for determining and distributing benefits.  From time to time, additional and alternate provisions applicable to certain eligible executive’s benefits may be set forth in the Appendix.

 

The Plan is unfunded and unsecured for purposes of the Code and ERISA.  The benefits of an executive are an obligation of that executive’s individual Employer.  With respect to his employer, the executive has the rights of an unsecured general creditor.

 

1

 

ARTICLE II – DEFINITIONS

 

When used in this Plan, the following bold terms shall have the meanings set forth below unless a different meaning is plainly required by the context:

 

2.01        Allocation Date:

 

The date as of which an Employer Credit is credited to the Participant’s LRP Account for a Plan Year.  Except as otherwise provided in the Appendix for one or more specific Plan Participants –

 

(a)           The last business day of each Plan Year shall be an Allocation Date, if the Executive is an active Participant on such day; and

 

(b)           When a Participant no longer is an active Participant, the last business day of the calendar quarter containing his Termination Date shall also be an Allocation Date (if it is not already an Allocation Date as provided in subsection (a) above).

 

2.02        Authorized Leave of Absence:

 

A period of time when a Participant is considered to remain in the employment of his Employer (except as provided below) while not actively rendering services to his Employer as a result of one or more of the following –

 

(a)           Any absence of 6 months or less (or 24 months or less, if the Participant retains a contractual right to return to work) that is authorized by an Employer under the Employer’s standard personnel practices, whether paid or unpaid, as long as there is a reasonable expectation that the Participant will return to perform services for the Employer;

 

(b)           A leave of absence pursuant to the Uniformed Services Employment and Reemployment Rights Act (“USERRA”); or

 

(c)           A leave of absence pursuant to the Family Medical Leave Act (“FMLA”) or any other similar family medical leave law of a particular state, if such law provides for a longer leave of absence than the FMLA.

 

2.03        Base Compensation:

 

An Eligible Executive’s gross base salary, as determined by the Plan Administrator and to the extent paid in U.S. dollars from an Employer’s U.S. payroll for a period that the Eligible Executive is an active Participant in the Plan.  For any applicable period, an Eligible Executive’s gross base salary shall be determined without regard to any reductions that may apply to the base salary, including applicable tax withholdings, Executive-authorized deductions (including deductions for any Company Code Section 401(k) plan and applicable health and welfare benefits), tax levies and garnishments.

 

2

 

2.04        Beneficiary:

 

The person or persons (including a trust or trusts) properly designated by a Participant, as determined by the Plan Administrator, to receive the Participant’s Vested LRP Account in the event of the Participant’s death.  To be effective, any Beneficiary designation must be in writing, signed by the Participant, and filed with the Plan Administrator prior to the Participant’s death, and it must meet such other standards (including the requirement for spousal consent to the naming of a non-Spouse beneficiary by a married Participant) as the Plan Administrator shall require from time to time.  An incomplete Beneficiary designation, as determined by the Plan Administrator, shall be void and of no effect.  If some but not all of the persons designated by a Participant to receive his Vested LRP Account at death predecease the Participant, the Participant’s surviving Beneficiaries shall be entitled to the portion of the Participant’s Vested LRP Account intended for such pre-deceased persons in proportion to the surviving Beneficiaries’ respective shares; provided that primary beneficiaries shall be paid before contingent beneficiaries.  If no designation is in effect at the time of a Participant’s death or if all designated Beneficiaries have predeceased the Participant, then the Participant’s Beneficiary shall be (i) in the case of a Participant who is married at death, the Participant’s Spouse, or (ii) in the case of a Participant who is not married at death, the Participant’s estate.  A Beneficiary designation of an individual by name (or name and relationship) remains in effect regardless of any change in the designated individual’s relationship to the Participant.  A Beneficiary designation solely by relationship (for example, a designation of “Spouse,” that does not give the name of the Spouse) shall designate whoever is the person (if any) in that relationship to the Participant at his death.  An individual who is otherwise a Beneficiary with respect to a Participant’s Vested LRP Account ceases to be a Beneficiary when all applicable payments have been made from the LRP Account.

 

2.05        Bonus Compensation:

 

The gross amount of an Eligible Executive’s target annual incentive or bonus award, which shall be equal to the Eligible Executive’s current annualized Base Compensation multiplied by the Eligible Executive’s current target bonus percentage, in effect as of the applicable Allocation Date, under his Employer’s annual incentive or bonus plan; provided, however, if a Participant has incurred a mid-year Termination Date under Section 3.03(a), the Participant’s target bonus percentage on the Participant’s Termination Date shall be used for the Allocation Date specified by Section 2.01(b).  Bonus Compensation shall be determined by the Plan Administrator and shall only be taken into account to the extent paid in U.S. dollars from an Employer’s U.S. payroll.  An Eligible Executive’s Bonus Compensation shall be determined without regard to any reductions that may apply, including applicable tax withholdings, Executive-authorized deductions (including deductions for any Company Code Section 401(k) plan and applicable health and welfare benefits), tax levies, and garnishments.

 

2.06        Break in Service Payment Election:

 

The election to defer the distribution of a Participant’s Pre-Break Subaccount, if applicable, pursuant to the provisions of Section 4.03.

 

3

 

2.07        Change in Control:

 

A “Change in Control” shall be deemed to occur if the event set forth in any one of the following paragraphs shall have occurred:

 

(a)           Any Person is or becomes the Beneficial Owner, directly or indirectly, of securities of the Company (not including in the securities beneficially owned by such Person any securities acquired directly from the Company or an Affiliate) representing 20% or more of the combined voting power of the Company’s then outstanding securities, excluding any Person who becomes such a Beneficial Owner in connection with a transaction described in clause (i) of Subsection (c) below;

 

(b)           The following individuals cease for any reason to constitute a majority of the number of directors then serving; individuals who, on the date hereof, constitute the Board and any new director (other than a director whose initial assumption of office is in connection with an actual or threatened election contest, including a consent solicitation, relating to the election of directors of the Company), whose appointment or election by the Board or nomination for election by the Company’s stockholders was approved or recommended by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors on the date hereof or whose appointment, election or nomination for election was previously so approved or recommended; or

 

(c)           There is consummated a merger or consolidation of the Company or any direct or indirect Subsidiary with any other corporation, other than (i) a merger or consolidation immediately following which those individuals who immediately prior to the consummation of such merger or consolidation, constituted the Board, constitute a majority of the board of directors of the Company or the surviving or resulting entity or any parent thereof, or (ii) a merger or consolidation effected to implement a recapitalization of the Company (or similar transaction) in which no Person is or becomes the Beneficial Owner, directly or indirectly, of securities of the Company (not including in the securities beneficially owned by such Person any securities acquired directly from the Company or an Affiliate) representing 20% or more of the combined voting power of the Company’s then outstanding securities.

 

Notwithstanding the foregoing, a “Change in Control” shall not be deemed to have occurred by virtue of the consummation of any transaction or series of integrated transactions immediately following which the record holders of the common stock of the Company immediately prior to such transaction or series of transactions continue to have substantially the same proportionate ownership in an entity which owns all or substantially all of the assets of the Company immediately following such transaction or series of transactions.

 

For purposes of the foregoing, the following capitalized and underlined words shall have the meanings ascribed to them below:

 

“Affiliate” shall have the meaning set forth in Rule 12b-2 under Section 12 of the Exchange Act.

 

4

 

“Beneficial Owner” shall have the meaning set forth in Rule 13d-3 under the Exchange Act, except that a Person shall not be deemed to be the Beneficial Owner of any securities which are properly filed on a Form 13-G.

 

“Exchange Act” shall mean the Securities Exchange Act of 1934, as amended from time to time.

 

“Person” shall have the meaning given in Section 3(a)(9) of the Exchange Act, as modified and used in Sections 13(d) and 14(d) thereof, except that such term shall not include (i) the Company or any of its Affiliates; (ii) a trustee or other fiduciary holding securities under an employee benefit plan of the Company or any of its Subsidiaries; (iii) an underwriter temporarily holding securities pursuant to an offering of such securities; or (iv) a corporation owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company.

 

“Subsidiary” means any corporation, partnership, joint venture or other entity during any period in which at least a fifty percent voting or profits interest is owned, directly or indirectly, by the Company (or by any entity that is a successor to the Company).

 

2.08        Code:

 

The Internal Revenue Code of 1986, as amended from time to time.

 

2.09        Company:

 

Yum China Holdings, Inc., or its successor or successors.

 

2.10        Disability:

 

A Participant shall be considered to suffer from a Disability, if, in the judgment of the Plan Administrator (determined in accordance with the provisions of Section 409A), the Participant –

 

(a)           Is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, or

 

(b)           By reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, is receiving income replacement benefits for a period of not less than 3 months under an accident and health plan of the Company (including any Company or Employer sponsored short or long term disability plan).

 

A Participant who has received a Social Security disability award will be conclusively deemed to satisfy the requirements of Subsection (a).  In turn, a Participant who has not received 

 

5

 

a Social Security disability award will be conclusively deemed to not meet the requirements of Subsection (a).

 

The related term, “Disabled,” shall mean to suffer from a Disability.

 

2.11        Disability Benefits:

 

The receipt by a Participant of short-term or long-term disability benefits from a Company or Employer sponsored short-term or long-term disability plan.

 

2.12        Disability Leave of Absence:

 

A continuous period of absence during which the Participant is receiving Disability Benefits.  A Participant’s Disability Leave of Absence shall end on the earlier of the date when the Participant is no longer receiving Disability Benefits or the date that the Participant is entitled to payment under Section 5.03 as a result of the Participant’s Separation from Service (i.e., when the Participant Separates from Service as a result of his Disability or age 55, if later).  However, if the Participant executes a valid Disability Payment Election pursuant to Section 4.02, such Participant’s Disability Leave of Absence shall be extended until the specific payment date listed in the Disability Payment Election (or such later Disability Payment Election), but not beyond the date that the Participant is no longer receiving Disability Benefits.

 

2.13        Disability Payment Election:

 

The voluntary election that can be made by a Disabled Participant under Section 4.02 to extend his Disability Leave of Absence and the payment of his LRP Benefits.

 

2.14        Earnings Credit:

 

The increment added to a Participant’s LRP Account as a result of crediting the account with a return based on the Participant’s Earnings Rate.

 

2.15        Earnings Rate:

 

(a)           Earnings Rate as of the Distribution Date.  As of the Distribution Date, the Earnings Rate shall be 5% per annum, compounded annually.  In the event a Valuation Date occurs less than 12 months after the prior Valuation Date, this Earnings Rate shall be converted to a rate for the period since the last Valuation Date by reducing it to a rate that is appropriate for such shorter period.  Such conversion shall be done in a way that would result in the specified 5% annual rate of return being earned for the number of such periods that equals one year.  This same conversion shall be done with respect to the Earnings Rate for the short Plan Year that begins on the Distribution Date.  The Earnings Rate is used to determine the Earnings Credit that is credited to the Participant’s LRP Account from time to time pursuant to the provisions of Section 5.01(d).

 

(b)           Adjustments to the Earnings Rate.  As provided by Section 5.01(d), the Earnings Rate shall be evaluated and may be revised by the Company on an annual basis.

 

6

 

2.16        Employer:

 

(a)           The Company, and each division of the Company and each of the Company’s subsidiaries and affiliates (if any) and each Approved Foreign Subsidiary (as defined in subsection (b) below) that is currently designated as an adopting Employer of the Plan by the Company.  Where there is a question as to whether a particular division, subsidiary, affiliate or Approved Foreign Subsidiary is an Employer under the Plan, the determination of the Plan Administrator shall be absolutely conclusive.  An entity shall be an Employer hereunder only for the period that it is (i) so determined by the Plan Administrator, and (ii) a member of the Yum China Organization.

 

(b)           As used in subsection (a) above and elsewhere in the Plan, an “Approved Foreign Subsidiary” means any corporation organized under the laws of any country other than the United States that is a member of the Yum China Organization, provided that a corporation described in this subsection shall be an Employer only with respect to a person who is an Executive pursuant to subsection (b) of the definition of “Executive” (and only while such person is described in subsection (b) of the definition of “Executive”).

 

2.17        Employer Credit / Employer Credit Percentage:

 

The Employer Credit is an amount that is credited to a Participant’s LRP Account as of each Allocation Date pursuant to the provisions of Section 5.01(b) and (c) or the Appendix.  The “Employer Credit Percentage” is the percentage in Section 5.01(b) of Base Compensation or Bonus Compensation (or both), which is used to calculate a Participant’s Employer Credit pursuant to Section 5.01(c).

 

2.18        ERISA:

 

Public Law 93-406, the Employee Retirement Income Security Act of 1974, as amended from time to time.

 

2.19        Executive / Eligible Executive:

 

An “Executive” is any individual in an executive classification of an Employer who (i) is receiving remuneration for personal services that he or she is currently rendering in the employment of an Employer (or who is on an Authorized Leave of Absence), and (ii) is either a “U.S. Executive” or a “Foreign-Assigned Executive” as those terms are defined in subsections (a) and (b) below.  Certain terms used in this Section are further defined in subsections (c) and (d) below.

 

(a)           U.S. Executive.  Subject to the next sentence, a “U.S. Executive” is any person who is on an Employer’s United States payroll.  Notwithstanding the preceding sentence, an executive who:

 

7

 

(1)           transfers to an executive classification (which would otherwise cause him to be an Executive under this subsection) as a result of a transfer within the Yum China Organization from a worksite outside the United States to a worksite in the United States, and

 

(2)           is a nonresident alien at the time of such transfer,

 

shall not become an Executive hereunder for any period that the employment at the United States worksite constitutes a Temporary Assignment (as defined in subsection (d) below).  As used in this Section, “United States payroll” means a payroll administered within the United States.

 

(b)           Foreign-Assigned Executive.  A “Foreign-Assigned Executive” means any individual who:

 

(1)           initially became a Participant while a U.S. Executive under subsection (a) above,

 

(2)           is working outside of both the United States and his Home Country (as defined in subsection (c) below) in connection with a Temporary Assignment to a country that is specified in Appendix B for this purpose, and

 

(3)           is no longer a U.S. Executive (because he is not on a United States payroll at such time).

 

Notwithstanding the foregoing, the Chief People Officer or Head of Total Rewards, in his sole discretion, may waive the requirement in paragraph (1) above and classify as a Foreign-Assigned Executive any individual who otherwise satisfies the requirements of paragraphs (2) and (3) above.  The waiver described in the preceding sentence must be made in writing prior to the time benefits would otherwise be paid to the individual under the Plan.

 

(c)           Home Country.  An individual’s “Home Country” means the country of his citizenship; provided that if an individual has acquired (or acquires) legal status as a permanent resident of another country, such other country shall be his Home Country for the period that he has such legal status.  Notwithstanding the preceding sentence, an individual’s “Home Country” shall be the country that is listed as his home country on the appropriate administrative records of the Company, if the Plan Administrator determines that such records are intended to override the designation of Home Country that would apply under the preceding sentence.  An Executive’s Home Country may change during the course of a work assignment, e.g., if an individual’s Home Country is initially based on his citizenship, and he then acquires legal status as a permanent resident of another country, any such change shall be taken into account in determining whether the individual may be an Executive under the Plan following the change.

 

8

 

(d)           Temporary Assignment.  A “Temporary Assignment” means a work assignment that the Employer reasonably expects to continue for a period that does not exceed five years.  An assignment that is described in the preceding sentence at its inception may continue to be considered a Temporary Assignment for a period that extends beyond five years, if such assignment is extended by the Employer for bona fide business reasons, and the nature of the extension does not cause the Employer to consider it a permanent assignment.  Every assignment to a worksite in the United States (from outside the United States) shall be deemed to be a Temporary Assignment at its inception, except in those instances in which (i) the duration of the assignment, by the express terms of the assignment at such time, is more than five years, or (ii) the assignment is designated at such time by the Company’s Chief People Officer or Head of Total Rewards, for bona fide business reasons, as being other than a Temporary Assignment.  Notwithstanding the preceding provisions of this subsection (d), if, at any time subsequent to the inception of a Temporary Assignment, the assignment is changed to a designation other than a Temporary Assignment, the Chief People Officer or Head of Total Rewards, in his sole discretion, may treat the individual as having been in other than a Temporary Assignment for the duration of the entire assignment or portion thereof.

 

2.20        Key Employee:

 

A “Key Employee” is any individual who is:

 

(1)           An officer of any member of the Yum China Organization having annual compensation greater than $130,000 (as adjusted for the applicable year under Code Section 416(i)(1));

 

(2)           A five-percent (5%) owner of any member of the Yum China Organization; or

 

(3)           A one-percent (1%) owner of any member of the Yum China Organization having annual compensation of more than $150,000.

 

For purposes of (1) above, no more than 50 employees identified in the order of their annual compensation shall be treated as officers.

 

For purposes of (1) and (3) above, “annual compensation” means compensation as defined in Treas. Reg. § 1.415(c)-2(a), without regard to Treas. Reg. §§ 1.415(c)-2(d), 1.415(c)-2(e), and 1.415(c)-2(g); provided, however, that annual compensation shall not include compensation excludible from an employee’s gross income on account of the location of the services or the identity of the employer that is not effectively connected with the conduct of a trade or business in the United States, in accordance with Treas. Reg. § 1.415(c)-2(g)(5)(ii).

 

Whether an individual is a Key Employee shall be determined in accordance with Section 416(i) of the Code and the applicable regulations and other guidance of general applicability issued thereunder or in connection therewith; provided, that Section 416(i)(5) of the Code shall not apply in making such determination, and provided further that the applicable year shall be determined in accordance with Section 409A of the Code and that any modification of the 

 

9

 

foregoing Code Section 416(i) definition that applies under Section 409A of the Code shall be taken into account.  The provisions of this definition shall be interpreted and applied in all respects to comply with Section 409A.

 

2.21        LRP Account:

 

The individual account maintained for a Participant on the books of his Employer that indicates the dollar amount that, as of any time, is credited under the Plan for the benefit of the Participant.  The balance in such LRP Account shall be determined by the Plan Administrator.  The Plan Administrator may establish one or more subaccounts as it deems necessary for the proper administration of the Plan, and may also combine one or more subaccounts to the extent it deems separate subaccounts are not then needed for sound recordkeeping.  Where appropriate, a reference to a Participant’s LRP Account shall include a reference to each applicable subaccount that has been established thereunder.  “Pre-Break Subaccount” and “Post-Break Subaccount” shall have the meanings given to them in Section 3.04.

 

2.22        LRP Benefit:

 

The amount or amounts that are distributable to a Participant (or Beneficiary) in accordance with Section 5.03.  A Participant’s LRP Benefit shall be determined by the Plan Administrator based on the terms of the entire Plan.

 

2.23        One-Year Break in Service:

 

A 12 consecutive-month period beginning on a Participant’s Separation from Service and ending on the first anniversary of such date.  Subsequent One-Year Breaks in Service shall begin on the first and later anniversaries of such date and end on the next following anniversary.  A Break in Service shall continue until the Participant is reemployed as an eligible Executive.  No break in service shall begin until after a Participant is no longer an active Participant pursuant to Section 3.03(b).

 

2.24        Participant:

 

Any Executive who is qualified to participate in this Plan in accordance with Section 3.01 and for whom an Employer maintains on its books a LRP Account.  An active Participant is one who is due an Employer Credit for the Plan Year (as provided in Section 3.03).  A Break in Service Participant shall have the meaning assigned by Section 3.04.

 

2.25        Plan:

 

The YUM China Holdings, Inc. Leadership Retirement Plan, the plan set forth herein, as it may be amended and restated from time to time (subject to the limitations on amendment that are applicable hereunder).

 

10

 

2.26        Plan Administrator:

 

The Company or any other individual or committee appointed by the Company as the Plan Administrator who shall have the authority to administer the Plan as provided in Article V.  Any individual or committee so designated has the authority to re-delegate operational responsibilities to other persons or parties.  References in this document to the Plan Administrator shall be understood as referring to individuals or the committee designated as the Plan Administrator and any others re-delegated with responsibilities, as appropriate under the circumstances.

 

2.27        Plan Year:

 

The 12-consecutive month period beginning on January 1 and ending on the following December 31 of each year, provided that the first plan year shall begin on the Distribution Date and end on December 31 of the same year.

 

2.28        Retirement:

 

A Participant’s Separation from Service after attaining age 60.

 

2.29        Section 409A:

 

Section 409A of the Code and the applicable regulations and other guidance of general applicability that is issued thereunder.

 

2.30        Separation from Service:

 

A Participant’s separation from service with the Yum China Organization, within the meaning of Section 409A(a)(2)(A)(i).  The term may also be used as a verb (i.e., “Separates from Service”) with no change in meaning.  In addition, a Separation from Service shall not occur while the Participant is on an Authorized Leave of Absence or a Disability Leave of Absence.  For purposes of a Disability Leave of Absence, however, a Separation from Service shall occur on the earlier of the date that the Participant has reached 29 continuous months of a Disability Leave of Absence or the date that the Participant formally resigns his employment with the Employer and the Yum China Organization.

 

2.31        Spouse:

 

An individual shall be recognized by the Plan Administrator as a Spouse or as being married to an Eligible Executive if the individual and the Eligible Executive are legally married (including same sex and opposite sex spouses) as of the applicable time.  Marriage also includes a common law marriage, if the common law marriage (i) was formed in a location that permits the formation of common law marriage and (ii) was formed at a time when common law marriage was permitted.  Only one individual may be recognized as a spouse as of any applicable time.

 

11

 

2.32        Termination Date:

 

The date that a Participant’s active participation in this Plan terminates as defined in Section 3.03.

 

2.33        Valuation Date:

 

Each date as specified by the Plan Administrator from time to time as of which Participant LRP Accounts are valued in accordance with Plan procedures that are currently in effect.  The Plan shall have a Valuation Date for all Plan Participants as of the last day of each Plan Year.  In addition, if a Participant is entitled to a distribution under Article V, such Participant shall have a Valuation Date under the Plan that is the last day of the calendar quarter that contains the date as of which such Participant becomes entitled to a distribution under Article V.  In accordance with procedures that may be adopted by the Plan Administrator, any current Valuation Date may be changed.  Values under the Plan are determined as of the close of a Valuation Date.  If a Valuation Date is not a business day, then the Valuation Date will be the immediately preceding business day.

 

2.34        Vesting Schedule:

 

The schedule under which a Participant’s LRP Account becomes vested and nonforfeitable in accordance with Section 5.02.

 

2.35        Vested LRP Account:

 

The portion of a Participant’s LRP Account that has become vested and nonforfeitable within the meaning of Section 5.02(a) or the Appendix.

 

2.36        United States:

 

Any of the 50 states, the District of Columbia, and the U.S. Virgin Islands.

 

2.36        Vice President for Global Talent Management:

 

The Company vice president or other Company officer who is responsible for global talent management for the Company.

 

2.37        Year of Participation:

 

The period during a Plan Year (or such other period as provided in the Appendix) – (a) during which an Eligible Executive is an active Participant, and (b) during which an Eligible Executive has not incurred a Termination Date (the “Participation Period”).  An Eligible Executive is considered an active Participant only for the period from and after when his participation begins under Section 3.02 until when it terminates under Section 3.03.  If the Participation Period encompasses the entire Plan Year (or such other period as provided in the Appendix), the Participant shall be credited with a complete Year of Participation for such Plan Year (or such other period as provided in the Appendix).  If the Participation Period covers only 

 

12

 

a portion of the Plan Year (or such other period as provided in the Appendix), then the Participant shall be credited with a fractional Year of Participation for such Plan Year (or such other period as provided in the Appendix).  Such fractional Year of Participation shall be equal to the number of months during the Participation Period divided by twelve; provided, that if the Participation Period includes at least one day of a month, the Eligible Executive shall receive credit for the whole month.

 

2.38        Years of Service:

 

The number of 12-month periods of the most recent continuous employment with the Yum China Organization commencing on the Participant’s most recent day of employment or re-employment with the Yum China Organization and ending on the Participant’s Separation from Service (including those periods that may have occurred prior to becoming a Plan Participant).  Years of Service shall include completed years and months.  A partial month shall be counted as a whole month.  If an individual is previously employed by the Yum China Organization, incurs a Separation from Service, is rehired by the Yum China Organization and becomes a Participant in this Plan, the individual’s previous period or periods of employment are only credited towards the Participant’s Years of Service to the extent provided in Section 3.01 and Section 3.04.

 

2.39        Yum China Organization:

 

The controlled group of organizations of which the Company is a part, as defined by Code section 414(b) and (c) and the regulations issued thereunder.  An entity shall be considered a member of the Yum China Organization only during the period it is one of the group of organizations described in the preceding sentence.

 

13

 

ARTICLE III – PARTICIPATION

 

3.01        Eligibility to Participate.

 

(a)           An Executive shall be eligible to participate in this Plan, if the Executive satisfies all of the following requirements:

 

(1)           The Executive meets one of the following –

 

(i)            The Executive is classified by his Employer as Level 12 or above as of the Distribution Date (and while he remains so classified);

 

(ii)           The Executive is hired by an Employer as an Executive classified as Level 12 or above (and while he remains so classified); or

 

(iii)          The Executive is promoted by an Employer from below Level 12 into a Level 12 or above position (and while he remains so classified);

 

(2)           The Executive is not eligible to participate in any defined benefit pension plan sponsored by the Company or an Employer that is qualified under Code section 401; and

 

(3)           The Executive has attained at least age 21.

 

(b)           If an Executive was previously employed by the Yum China Organization, such Executive was not eligible to participate in this Plan (e.g., the Executive was eligible to participate in a qualified defined benefit pension plan sponsored by the Company or an Employer) as a result of such previous employment and such Executive is later rehired by the Yum China Organization and becomes eligible to participate in this Plan on or after his rehire date, then such rehired Executive –

 

(1)           Shall be credited at the start of his first Year of Participation with Years of Service that include his service relating to his prior period or periods of employment with the Yum China Organization; and

 

(2)           Shall not receive an Employer Credit or any LRP Benefit with respect to any period prior to his rehire date.

 

During the period an individual satisfies the eligibility requirements of the above Subsections, whichever applies to the individual, he shall be referred to as an “Eligible Executive.”

 

3.02        Inception of Participation.

 

An Eligible Executive shall become a Participant in this Plan as of the date – (a) the Eligible Executive first satisfies the eligibility requirements to be an Eligible Executive that are set forth in Section 3.01, and (b) specified by the Company in a written authorization that

 

14

 

expressly provides for the Eligible Executive to be an Active Participant in the Plan as of such date.

 

3.03        Termination of Participation.

 

(a)           General.  Except as modified below and except as provided in subsection (b), an individual’s eligibility to participate actively in this Plan shall cease upon his “Termination Date,” which is the earliest to occur of the following:

 

(1)           The date the individual ceases to be an Eligible Executive; or

 

(2)           The first day an individual begins a period of severance (i.e., the period that follows a Separation from Service).

 

Notwithstanding the prior sentence, an individual shall continue to participate actively in this Plan during a period of an Authorized Leave of Absence, and an individual who is on an Authorized Leave of Absence shall have a “Termination Date” on the day the individual does not return to active work at the end of such Authorized Leave of Absence.  The calculation of an individual’s Employer Credit shall not take into account any compensation earned from and after his Termination Date.  In addition, a Participant’s Participation Period for purposes of determining Years of Participation shall end on the Participant’s Termination Date.  If an individual incurs a Termination Date but otherwise remains an employee of the Yum China Organization (e.g., does not incur a Separation from Service), such individual shall continue to accrue Years of Service while remaining in the employ of the Yum China Organization.

 

(b)           Disability Leave of Absence.  Notwithstanding subsection (a) above, an individual shall continue to participate actively in this Plan during a period of a Disability Leave of Absence.  Accordingly, such individual shall have a “Termination Date” on the last day of his Disability Leave of Absence.  If the Participant executes a valid Disability Payment Election pursuant to Section 4.02, such Participant’s Disability Leave of Absence shall be extended until the specific payment date listed in the Disability Payment Election (or such later Disability Payment Election), but not beyond the date the Participant ceases receiving Disability Benefits.  However, if the Participant’s Disability Leave of Absence terminates due to the Participant’s cessation of Disability Benefits and he returns to active work with an Employer, such Participant shall not have a Termination Date (and active participation shall continue) if the Participant returns to work as an eligible Executive pursuant to Section 3.01.  A Participant’s Participation Period for purposes of determining Years of Participation shall end on the Participant’s Termination Date.  Active participation in this Plan shall continue as provided above without regard to whether the Participant is generally considered to be a continuing Employee of the Employer.

 

(c)           Effect of Distribution of Benefits.  An individual, who has been a Participant under the Plan, ceases to be a Participant on the date his Vested LRP Account is fully distributed.

 

15

 

3.04        Break in Service.

 

(a)           Less than a One-Year Break in Service.  If a Participant incurs a break in service and returns in an eligible classification, but such break in service is less than a One-Year Break in Service, such Participant shall be deemed to not have incurred a Termination Date and his Participation Period, Years of Service, Employer Credit and Earnings Credit shall be recomputed as if such break in service never occurred.

 

(b)           One-Year Break in Service – Vested Participants.  A Participant who has satisfied the requirements for vesting under Section 5.02 at the time he incurs a One-Year Break in Service and who is again employed at any time thereafter in an eligible classification shall re-participate in this Plan as of the date he becomes an eligible Executive.  Such individual’s pre-break Years of Service shall be restored in determining his rights and benefits under the Plan.  In addition, such individual shall begin a new Participation Period beginning with the date he once again becomes an active Participant pursuant to Section 3.02.  However, such individual shall not be entitled to an Employer Credit for the period of the break.

 

(c)           One-Year Break in Service – Non-Vested Participants.  Any Participant not described in subsection (b) who incurs a One-Year Break in Service and who is again employed in an eligible classification shall re-participate in this Plan as of the date he becomes an eligible Executive.  His pre-break Years of Service shall be restored, but only if the number of his consecutive One-Year Breaks in Service is less than the greater of: (i) 5, or (ii) the aggregate number of his pre-break Years of Service.  In addition, such individual shall begin a new Participation Period beginning with the date he once again becomes an active Participant pursuant to Section 3.02.  However, such individual shall not be entitled to an Employer Credit for the period of the break.

 

(d)           Break in Service Subaccounts.  If a Participant incurs a break in service under this Section and the Participant did not receive a distribution of his LRP Benefit during or as a result of the break in service (e.g., the break in service occurs prior to the Participant’s 55th birthday), the Employer Credits (and the Earnings Credits related thereto) that are credited after the break in service shall be credited to a separate subaccount of the Participant’s LRP Account (the “Post-Break Subaccount”).  The Post-Break Subaccount shall be separately distributed from the value of the Participant’s pre-break LRP Account, which shall be referred to as the “Pre-Break Subaccount.”  An affected Participant shall be able to extend the payment date of the Participant’s Pre-Break Subaccount by making a Break in Service Payment Election pursuant to Section 4.03.  A Participant’s Pre-Break Subaccount and Post-Break Subaccount shall constitute the Participant’s entire LRP Account.  A Participant who has a Pre-Break and Post-Break Subaccount shall be referred to as a “Break in Service Participant.”

 

3.05        Agreements Not to Participate.

 

The eligibility provisions of this Article III have been and will continue to be construed in combination with any other documents that constitute part of the overall agreement between the Company or an Employer and an Executive regarding the Executive’s participation in the Company’s benefit plans.  For example, an agreement between the Company and an Executive 

 

16

 

that provides for the Executive to have retirement benefits provided by a specific plan or arrangement that is not this Plan will be construed, absent a clear expression of intent by the parties to the contrary, to preclude participation in this Plan, even if the Executive might otherwise be eligible to participate in the Plan.  An agreement that is otherwise described in the preceding two sentences shall not bar an Executive’s participation for the period before the earliest date such agreement may apply without violating the restrictions on elections under Section 409A.

 

17

 

ARTICLE IV – ELECTIONS

 

4.01        Beneficiaries.

 

A Participant shall be able to designate, on a form provided by the Plan Administrator for this purpose, a Beneficiary to receive payment, in the event of his death, of the Participant’s Vested LRP Account.  A Beneficiary shall be paid in accordance with the terms of the Beneficiary designation form, as interpreted by the Plan Administrator in accordance with the terms of this Plan.  At any time, a Participant may change a Beneficiary designation by completing a new Beneficiary designation form that is signed by the Participant and provided to the Plan Administrator prior to the Participant’s death, and that meets such other standards (including the requirement of Spousal consent for married Participants) as the Plan Administrator shall require from time to time.

 

4.02        Deferral of Payment While Receiving Disability Benefits.

 

(a)           General.  Subject to subsection (b) below, a Participant who is on a Disability Leave of Absence (and active participation continues under Section 3.03(b)) may make one or more elections to extend the time of payment of his LRP Benefit.  This opportunity to extend the Participant’s time of payment is referred to as a “Disability Payment Election.”

 

(b)           Requirements for Disability Payment Elections.  A Disability Payment Election must comply with all of the following requirements:

 

(1)           If a Participant’s LRP Benefit will be paid at age 55 pursuant to Section 5.03(a) (e.g,, because the Participant’s Separation from Service occurred prior to age 55), the Participant must make his first Disability Payment Election no later than 12 months before the Participant’s 55th birthday.

 

(2)           If a Participant’s LRP Benefit will be paid at Separation from Service pursuant to Section 5.03(a) (e.g., because the Participant will be age 55 or older upon Separation from Service), the Participant must make his first Disability Payment Election at least 12 months before his Separation from Service.

 

(3)           A Participant’s first Disability Payment Election must specify a new specific payment date for his LRP Benefits that is at least 5 years after his 55th birthday or Separation from Service, whichever is applicable as provided in paragraphs (1) or (2).

 

(4)           Subsequent Disability Payment Elections must be made at least 12 months before the specific payment date of the prior Disability Payment Election and must provide for a new specific payment date for his LRP Benefits that is at least 5 years after the prior specific payment date listed in the prior Disability Payment Election.

 

(5)           All Disability Payment Elections must specify a specific payment date, and Separation from Service or any other event cannot be selected on a Disability Payment Election.

 

18

 

(6)           All Disability Payment Elections must comply with all of the requirements of this Section 4.02.

 

(7)           A Participant cannot change the form of payment of his LRP Benefit pursuant to a Disability Payment Election.

 

(8)           A Participant may not make a Disability Payment Election if the election would provide for a specific payment date after the Participant’s 80th birthday.

 

A Disability Payment Election will be void and payment will be made based on the provisions of the Plan other than this Section 4.02, if all of the provisions of the foregoing paragraphs of this subsection are not satisfied in full.  A Participant’s Disability Payment Election shall become effective 12 months after the date on which the election is made pursuant to Section 409A(a)(4)(C)(i).  If a Participant’s Disability Payment Election becomes effective in accordance with the provisions of this subsection, the Participant’s prior payment date shall be superseded (including any specific payment date specified in a prior Disability Payment Election).

 

(c)           Plan Administrator’s Role.  Each Participant has the sole responsibility to make a Disability Payment Election by contacting the Plan Administrator and to comply with the requirements of this Section.  The Plan Administrator may provide a notice of a Disability Payment Election opportunity to some or all affected Participants, but the Plan Administrator is under no obligation to provide such notice (or to provide it to all affected Participants, in the event a notice is provided only to some Participants).  The Plan Administrator has no discretion to waive or otherwise modify any requirement set forth in this Section or in Section 409A.

 

4.03        Break in Service Deferral of Payment.

 

(a)           General.  Subject to subsection (b) below, a Break in Service Participant may make one or more elections to extend the time of payment of his Pre-Break Subaccount.  This opportunity to extend the Participant’s time of payment for his Pre-Break Subaccount is referred to as a “Break in Service Payment Election.”

 

(b)           Requirements for Break in Service Payment Elections.  A Break in Service Payment Election must comply with all of the following requirements:

 

(1)           The Participant must make his first Break in Service Payment Election no later than 12 months before the Participant’s 55th birthday, and the Break in Service Payment Election must provide for either (i) a specific payment date that is at least 5 years after the Participant’s 55th birthday, or (ii) the later of a specific payment date that is at least 5 years after the Participant’s 55th birthday or his Separation from Service.

 

(2)           Subsequent Break in Service Payment Elections must be made at least 12 months before the specific payment date of the prior election and must provide for a new specific payment date that is at least 5 years after the specific payment date listed in the 

 

19

 

prior election.  If a Participant’s prior election was the later of 5 years after his 55th birthday or Separation from Service, a subsequent Break in Service Payment Election must be made at least 12 months prior to the specific payment date selected on the prior election and at least 12 months prior to his Separation from Service.  Such subsequent Break in Service Payment Election must also provide for a distribution on the later of a new specific payment date that is least 5 years after the specific payment date listed in the prior election or his Separation from Service.

 

(3)           All Break in Service Payment Elections must specify a specific payment date.

 

(4)           All Break in Service Payment Elections must comply with all of the requirements of this Section 4.03.

 

(5)           A Participant cannot change the form of payment of his LRP Benefit pursuant to a Break in Service Payment Election.

 

(6)           A Participant may not make a Break in Service Payment Election if the election would provide for a specific payment date after the Participant’s 80th birthday.

 

(7)           The Break in Service Payment Election shall only apply to distribution of the Break in Service Participant’s Pre-Break Subaccount.

 

(8)           A Break in Service Payment Election may not be made if Section 5.03(e) applies.

 

A Break in Service Payment Election will be void and payment will be made based on the provisions of the Plan other than this Section 4.03, if all of the provisions of the foregoing paragraphs of this subsection are not satisfied in full.  A Participant’s Break in Service Payment Election shall become effective 12 months after the date on which the election is made pursuant to Section 409A(a)(4)(C)(i).  If a Participant’s Break in Service Payment Election becomes effective in accordance with the provisions of this subsection, the Participant’s prior payment date shall be superseded (including any specific payment date specified in a prior Break in Service Payment Election).

 

(c)           Plan Administrator’s Role.  Each Participant has the sole responsibility to make a Break in Service Payment Election by contacting the Plan Administrator and to comply with the requirements of this Section.  The Plan Administrator may provide a notice of a Break in Service Payment Election opportunity to some or all affected Participants, but the Plan Administrator is under no obligation to provide such notice (or to provide it to all affected Participants, in the event a notice is provided only to some Participants).  The Plan Administrator has no discretion to waive or otherwise modify any requirement set forth in this Section or in Section 409A.

 

20

 

ARTICLE V – PARTICIPANT LRP BENEFITS

 

5.01        Credits to a Participant’s LRP Account.

 

(a)           General.  The Plan Administrator shall credit to each Participant’s LRP Account the Employer Credit (if any) and the Earnings Credit at the times and in the manner specified in this Section.  A Participant’s LRP Account is solely a bookkeeping device to track the value of his LRP Benefit (and the Employer’s liability therefor).  No assets shall be reserved or segregated in connection with any LRP Account, and no LRP Account shall be insured or otherwise secured.

 

(b)           Employer Credit Percentage.  A Participant’s Employer Credit Percentage (if any) shall be equal to  –

 

(1)           1.0% for a Participant of any level who is an active Participant for a period as of the Allocation Date, but who does not qualify for a greater Employer Credit Percentage under the remaining provisions of this Section 5.01 for such period, and

 

(2)           the following applicable percentage for an active Participant whose age is 40 or greater as of the Allocation Date –

 

	
Participant Level as of
   Allocation Date
    	
 
    	
Employer Credit Percentage for
   Participants Age 40 or Greater
    	
 
    
	
Level 12
    	
 
    	
4.5
    	
%
    
	
Level 13
    	
 
    	
5.0
    	
%
    
	
Level 14
    	
 
    	
5.5
    	
%
    
	
Level 15
    	
 
    	
6.5
    	
%
    
	
Level 16
    	
 
    	
7.5
    	
%
    
	
Leadership Team (LT)
    	
 
    	
8.0
    	
%
    

 

The Participant shall be assigned the corresponding Employer Credit Percentage for a Plan Year based upon his level (and age) as of the last Allocation Date in such Plan Year, regardless of whether the Participant was at that level (or age) for the entire Plan Year; provided, however, if a Participant has incurred a mid-year Termination Date under Section 3.03(a), the Participant’s level and age on the Participant’s Termination Date shall be used for the Allocation Date specified by Section 2.01(b).

 

(c)           Employer Credit Amount.

 

(1)           General Rules.  Unless otherwise provided in the Appendix for one or more specified Participants, the Plan Administrator shall convert the Employer Credit Percentage into a dollar amount by multiplying the Employer Credit Percentage by the Participant’s Base Compensation and Bonus Compensation (each as modified in paragraph (2) below) for the Plan Year, thereafter crediting the resulting product to the Participant’s LRP Account.  In each Plan Year, the Employer Credit shall be determined

 

21

 

by the Plan Administrator as soon as administratively practicable after the Participant’s Allocation Date related to the Plan Year and shall be credited to the Participant’s LRP Account effective as of such Allocation Date.  The calculation of the Employer Credit by the Plan Administrator shall be conclusive and binding on all Participants (and their Beneficiaries).  A Participant shall not receive an Employer Credit for any Allocation Dates that occur after the Allocation Date that immediately follows the Participant’s Termination Date.

 

(2)           Operating Rules.  Unless otherwise provided in the Appendix, the following operating rules shall apply for purposes of determining a Participant’s Employer Credit under this subsection (c):

 

(i)            The Plan Administrator shall use the Participant’s annualized Base Compensation in effect on the Allocation Date (without regard to whether the Participant’s Base Compensation changed during the Plan Year) in determining the Participant’s Base Compensation and Bonus Compensation.  Notwithstanding the foregoing, if a Participant has incurred a mid-year Termination Date under Section 3.03(a), the Participant’s annualized Base Compensation in effect on the Participant’s Termination Date shall be used in determining the Participant’s Base Compensation and Bonus Compensation for the Allocation Date specified by Section 2.01(b).

 

(ii)           If a Participant has less than 1 full Year of Participation for the Plan Year (e.g., as may apply in the Participant’s first and last Plan Year of Participation), the Participant’s Base Compensation and Bonus Compensation that shall be used shall be multiplied by the Participant’s fractional Year of Participation for the Plan Year.

 

(iii)          If the Participant is on an Authorized Leave of Absence or a Disability Leave of Absence when an Allocation Date occurs, and as of the Allocation Date the Participant is not treated by his Employer as having currently applicable information with respect to Base Compensation, Bonus Compensation or Participant level, then the item or items of information that is inapplicable shall be replaced with the corresponding information that was applicable to the Participant as of the day prior to the Participant commencing the Authorized Leave of Absence or Disability Leave of Absence.

 

(iv)          For those Employer Credits that are at a level of 4.5% or higher with respect to an Allocation Date (referred to as a “Full Employer Credit”), once a Participant has been credited with Full Employer Credits for 20 years (i.e., after 20 full Years of Participation) at the percentage levels specified in Section 5.01(b)(2), the Participant shall cease receiving Full Employer Credits and all subsequent Employer Credits made to the Participant’s LRP Account shall be at the percentage level specified in Section 5.01(b)(1).  For this purpose, a Participant’s Years of Participation shall be the total number that is counted pursuant to the break in service rules in Article III, and fractional Years of

 

22

 

Participation shall be aggregated into full Years of Participation.  Accordingly, if a Participant has an initial fractional Year of Participation and thereafter works continuously as an Eligible Executive for at least 20 years, the Participant would have an initial fractional Year of Participation, followed by 19 full Years of Participation, and ending with a fractional Year of Participation, which when added to the initial Year of Participation results in a full Year of Participation.  Employer Credits that are made before or after a Participant is receiving Full Employer Credits (i.e. ̧ Employer Credits made at the percentage level specified in Section 5.01(b)(1)) shall not be limited pursuant to this subparagraph.

 

(d)           Earnings Credit.

 

(1)           General Rules.  As of each Valuation Date, the Plan Administrator shall determine a Participant’s Earnings Credit for the period since the last Valuation Date by multiplying the Earnings Rate for the period since the last Valuation Date by the balance of the Participant’s LRP Account as of the last Valuation Date.  This Earnings Credit will be determined as soon as practicable after the applicable Valuation Date, and it shall be credited to the Participant’s LRP Account effective as of such Valuation Date.  If a Participant has less than 1 full Year of Participation for the Plan Year (e.g., as may apply in the Participant’s first and last Plan Year of participation), the Participant shall receive a pro-rated Earnings Credit for that Plan Year that shall be based upon the Participant’s fractional Year of Participation for the Plan Year that was earned prior to the Valuation Date on which the pro-rated Earnings Credit will be made. Notwithstanding the preceding sentence, when distributions are delayed, to a Plan Year beyond the last Plan Year of participation, pending attainment of age 55 or the occurrence of a specific payment date elected under Section 4.02 or 4.03, the Plan Administrator may adopt procedures that provide an Earnings Credit through the Valuation Date that occurs on or after attainment of age 55 or the occurrence of the specific payment date, as applicable.  These procedures shall provide for proration of the Earnings Credit for any period that an Earnings Credit is determined that is less than a full year.

 

(2)           Revisions to Earnings Rate.  As of the end of each Plan Year, the Company shall analyze the current Earnings Rate to determine if the rate provides a market rate of interest.  If the Earnings Rate is considered to provide a market rate of interest, then the Earnings Rate will remain the same for the following Plan Year.  If the Company concludes, in its discretion, that the Earnings Rate does not provide for a market rate of interest, then the Company currently intends to establish a new Earnings Rate to provide a market rate of interest, and the Company currently intends that such new Earnings Rate will apply for the following Plan Year.  The determination of a market rate of interest shall be entirely within the discretion of the Company and shall be based on such factors as the Company determines to consider (e.g., the current 30-year Treasury Bond yield, the current yield on a certificate of deposit equal to the remaining time period for the average Participant to reach Retirement and the LRP Account balance for the average Participant, and such other factors as the Company shall determine in its sole discretion).  The Company’s determination regarding a market rate of interest is final and non-reviewable, and the Company reserves the right to revise its intent in this regard.

 

23

 

If the Earnings Rate is revised for a Plan Year, the Company shall authorize attaching an Exhibit to this Plan document indicating the revised Earnings Rate and the Plan Year to which it applies.

 

5.02        Vesting Schedule.

 

(a)           General.  Upon a Separation from Service, a Participant shall only be entitled to a distribution (at the time provided in Section 5.03) of the portion (if any) of his LRP Account that has become vested and nonforfeitable at such time pursuant to the Vesting Schedule (as determined under this Section) that applies to the Participant.  The portion (if any) of the Participant’s LRP Account that has not become vested by the Participant’s Separation from Service shall be forfeited and shall not be distributed to the Participant hereunder.  The portion of the Participant’s LRP Account (from time to time) that has become vested and nonforfeitable pursuant to the Participant’s Vesting Schedule and this Section 5.02 shall be referred to as the Participant’s “Vested LRP Account.”

 

(b)           Vesting Schedule.  Unless Subsection (c) applies or unless otherwise provided in the Appendix for one or more specific Participants, a Participant’s LRP Account shall become 100% vested in his LRP Account upon attaining three (3) Years of Service.

 

(c)           Acceleration of Vesting.  Notwithstanding Subsection (b) above, a Participant’s LRP Account shall become 100% vested and nonforfeitable upon the earliest of the following to occur:

 

(1)           The Participant’s Retirement;

 

(2)           The Participant becoming Disabled;

 

(3)           The Participant’s death; or

 

(4)           The occurrence of a Change in Control.

 

5.03        Distribution of a Participant’s Vested LRP Account.

 

The Participant’s Vested LRP Account shall be distributed as provided in this Section.  All distributions shall be paid in cash.  In no event shall any portion of a Participant’s Vested LRP Account be distributed earlier or later than is allowed under Section 409A.

 

(a)           Distribution upon Separation from Service.  Unless the provisions of subsection (b), (c), (d) or (e) apply, a Participant’s Vested LRP Account shall be distributed upon a Participant’s Separation from Service (other than for death) as follows:

 

(1)           If a Participant is age 55 or older on the Participant’s Separation from Service, the Participant’s Vested LRP Account shall be distributed in a single lump sum payment as of the calendar quarter’s last day that occurs on or immediately follows the Participant’s Separation from Service.

 

24

 

(2)           If a Participant is less than age 55 on the Participant’s Separation from Service, the Participant’s Vested LRP Account shall be distributed in a single lump sum payment as of the calendar quarter’s last day that occurs on or immediately follows the Participant’s 55th birthday.

 

(3)           If the Participant is classified as a Key Employee at the time of the Participant’s Separation from Service (or at such other time for determining Key Employee status as may apply under Section 409A), then such Participant’s Vested LRP Account shall not be paid, as a result of the Participant’s Separation from Service, earlier than the date that is at least 6 months after the Participant’s Separation from Service.  This shall be implemented as follows –

 

(i)            If the Participant is less than age 55 on the Participant’s Separation from Service and the Participant is classified as a Key Employee, the distribution shall occur as provided in paragraph (2) above, or if later, the calendar quarter’s last day that occurs on or immediately follows the date that is 6 months after the Participant’s Separation from Service; and

 

(ii)           If the Participant is age 55 or older on the Participant’s Separation from Service and the Participant is classified as a Key Employee, the distribution shall occur as of the calendar quarter’s last day that occurs on or immediately follows the date that is 6 months after the Participant’s Separation from Service.

 

The classification of a Participant as a Key Employee shall be based on the default rules that are applicable under Section 409A for determining specified employees, unless the Company has adopted other rules that are permissible under Section 409A and that have become effective as of the applicable time.

 

If the Participant’s Vested LRP Account balance is zero on his Separation from Service, the Participant shall be deemed to have received a distribution on his Separation from Service equal to zero dollars and the unvested portion of his LRP Benefit shall be forfeited subject to Section 3.04.

 

(b)           Distributions Upon Death.  Notwithstanding subsection (a), (c) or (d), if a Participant dies, the Participant’s Vested LRP Account shall be distributed in accordance with the following terms and conditions:

 

(1)           Upon a Participant’s death, the Participant’s Vested LRP Account shall be distributed in a single lump sum payment as of the calendar quarter’s last day that occurs on or immediately follows the Participant’s death.  Amounts paid following a Participant’s death shall be paid to the Participant’s Beneficiary.

 

(2)           Any claim to be paid any amounts standing to the credit of a Participant in connection with the Participant’s death must be received by the Plan Administrator at least 14 days before any such amount is distributed.  Any claim received thereafter is 

 

25

 

untimely, and it shall be unenforceable against the Plan, the Company, the Plan Administrator or any other party acting for one or more of them.

 

(c)           Disability Payment Elections.  If a Participant has made a valid Disability Payment Election, his Vested LRP Account shall be distributed in a single lump sum payment on the calendar quarter’s last day that occurs on or immediately follows the specific payment date selected on the Disability Payment Election.

 

(d)           Break in Service.  Subject to subsection (e), a Break in Service Participant’s Vested LRP Account shall be distributed as follows:

 

(1)           Pre-Break Subaccount.  A Break in Service Participant’s Pre-Break Subaccount shall be distributed in a single lump sum payment as of the calendar quarter’s last day that occurs on or immediately follows the Participant’s 55th birthday.  However, if a Break in Service Participant has made a valid Break in Service Payment Election, his Pre-Break Subaccount shall be distributed in a single lump sum payment on the calendar quarter’s last day that occurs on or immediately follows the specific payment date (or if applicable, a later Separation from Service) as selected on the Break in Service Payment Election.

 

(2)           Post-Break Subaccount.  The distribution of a Break in Service Participant’s Post-Break Subaccount shall be governed by the provisions of subsection (a).

 

(e)           Involuntary Cashout.  Notwithstanding subsection (a) or (d), if a Participant incurs a Separation from Service (other than for death or Disability) and the Participant’s Vested LRP Benefit (together with any other deferred compensation benefits that are required to be aggregated with the LRP Benefit under Section 409A) is equal to or less than $15,000 at any time on or after such Separation from Service, the Participant’s Vested LRP Account shall be distributed in a single lump sum payment as of the calendar quarter’s last day on or immediately following the Participant’s Separation from Service (or on or immediately following such later date that this subsection is determined to apply).  However, if the Participant is classified as a Key Employee in accordance with subsection (a) above at the time of the Participant’s Separation from Service (or at such other time for determining Key Employee status as may apply under Section 409A), then such Participant’s Vested LRP Account shall be paid as of the calendar quarter’s last day on or immediately following the date that is 6 months after the Participant’s Separation from Service.

 

(f)            Actual Payment Date.  An amount payable on a date specified in this Section shall be paid no later than the later of (a) the end of the calendar year in which the specified date occurs, or (b) the 15th day of the third calendar month following such specified date.  In addition, the Participant (or Beneficiary) is not permitted to designate the taxable year of the payment.

 

5.04        Valuation.

 

In determining the amount of any individual distribution pursuant to Section 5.03, the Participant’s LRP Account shall continue to be credited with earnings (whether positive or 

 

26

 

negative) as specified in Section 5.01(d) until the Valuation Date that is used in determining the amount of the distribution under Section 5.03.  The Valuation Date to be used in valuing a distribution under Section 5.03 shall be the Valuation Date that occurs on the last business day of the calendar quarter (the last day of which is the payment date).

 

5.05        FICA Taxes and LRP Account Reduction.

 

(a)           Calculation of FICA Taxes.  For each Plan Year in which a Participant’s Account (or portion of the Account) vests pursuant to Section 5.02 or the Appendix, the Company shall calculate the applicable FICA taxes that are due and shall pay such FICA taxes to the applicable tax authorities as provided by Treasury Regulation Section 31.3121(v)(2)-1.  The amount of the applicable FICA taxes that are the responsibility of the Participant pursuant to Code Section 3101 shall be paid from the Participant’s LRP Account as provided in Subsection (b).

 

(b)           Reduction in LRP Account Balance.  Effective as of each Allocation Date in a Plan Year for which FICA taxes are paid for a Participant pursuant to Subsection (a), the Company shall withhold such FICA taxes from the Participant’s LRP Account and reduce the Participant’s LRP Account balance by the following amount –

 

(1)           The amount of the applicable FICA taxes calculated by the Company that are the responsibility of the Participant pursuant to Code Section 3101 (the “FICA Amount”), plus

 

(2)           The amount of Federal, state and local income taxes that are due on the distribution of the FICA Amount from the Participant’s LRP Account, which net of its own Federal, state and local income taxes, is sufficient to enable the Company to pay the full FICA Amount from the Participant’s LRP Account to the applicable tax authorities.

 

The amount calculated pursuant to this Subsection shall be final and binding on the Participant and shall reduce the Participant’s LRP Account effective as of each applicable Allocation Date for which a FICA Amount is paid.

 

27

 

ARTICLE VI – PLAN ADMINISTRATION

 

6.01        Plan Administrator.

 

The Plan Administrator is responsible for the administration of the Plan.  The Plan Administrator has the authority to name one or more delegates to carry out certain responsibilities hereunder, as specified in the definition of Plan Administrator.  Action by the Plan Administrator may be taken in accordance with procedures that the Plan Administrator adopts from time to time or that the Company’s Law Department determines are legally permissible.

 

6.02        Powers of the Plan Administrator.

 

The Plan Administrator shall administer and manage the Plan and shall have (and shall be permitted to delegate) all powers necessary to accomplish that purpose, including the power:

 

(a)           To exercise its discretionary authority to construe, interpret, and administer this Plan;

 

(b)           To exercise its discretionary authority to make all decisions regarding eligibility, participation and benefits, to make allocations and determinations required by this Plan, and to maintain records regarding Participants’ LRP Accounts;

 

(c)           To compute and certify to the Employer the amount and kinds of payments to Participants or their Beneficiaries, and to determine the time and manner in which such payments are to be paid;

 

(d)           To authorize all disbursements by the Employer pursuant to this Plan;

 

(e)           To maintain (or cause to be maintained) all the necessary records for administration of this Plan;

 

(f)            To make and publish such rules for the regulation of this Plan as are not inconsistent with the terms hereof;

 

(g)           To delegate to other individuals or entities from time to time the performance of any of its duties or responsibilities hereunder;

 

(h)           To hire agents, accountants, actuaries, consultants and legal counsel to assist in operating and administering the Plan; and

 

(i)            To perform any other acts or make any other decisions with respect to the Plan as it deems are appropriate or necessary.

 

28

 

The Plan Administrator has the exclusive and discretionary authority to construe and to interpret the Plan, to decide all questions of eligibility for benefits, to determine the amount and manner of payment of such benefits and to make any determinations that are contemplated by (or permissible under) the terms of this Plan, and its decisions on such matters shall be final and conclusive on all parties.  Any such decision or determination shall be made in the absolute and unrestricted discretion of the Plan Administrator, even if (1) such discretion is not expressly granted by the Plan provisions in question, or (2) a determination is not expressly called for by the Plan provisions in question, and even though other Plan provisions expressly grant discretion or call for a determination.  As a result, benefits under this Plan will be paid only if the Plan Administrator decides in its discretion that the applicant is entitled to them.  In the event of a review by a court, arbitrator or any other tribunal, any exercise of the Plan Administrator’s discretionary authority shall not be disturbed unless it is clearly shown to be arbitrary and capricious.

 

6.03        Compensation, Indemnity and Liability.

 

The Plan Administrator shall serve without bond and without compensation for services hereunder.  All expenses of the Plan and the Plan Administrator shall be paid by the Employer.  To the extent deemed appropriate by the Plan Administrator, any such expense may be charged against specific Participant LRP Accounts, thereby reducing the obligation of the Employer.  No member of the Plan Administrator, and no individual acting as the delegate of the Plan Administrator, shall be liable for any act or omission of any other member or individual, nor for any act or omission on his own part, excepting his own willful misconduct.  The Employer shall indemnify and hold harmless each member of the Plan Administrator and any employee of the Company (or a Company affiliate, if recognized as an affiliate for this purpose by the Plan Administrator) acting as the delegate of the Plan Administrator against any and all expenses and liabilities, including reasonable legal fees and expenses, arising out of his service as the Plan Administrator (or his serving as the delegate of the Plan Administrator), excepting only expenses and liabilities arising out of his own willful misconduct.

 

6.04        Taxes.

 

If the whole or any part of any Participant’ s LRP Account becomes liable for the payment of any estate, inheritance, income, employment, or other tax which the Company may be required to pay or withhold, the Company will have the full power and authority to withhold and pay such tax out of any moneys or other property in its hand for the account of the Participant.  If such withholding is made from a Participant’s Plan distribution (or the Participant’s LRP Account), the amount of such withholding will reduce the amount of the Plan distribution (or the Participant’s LRP Account).  To the extent practicable, the Company will provide the Participant notice of such withholding.  Prior to making any payment, the Company may require such releases or other documents from any lawful taxing authority as it shall deem necessary.  In addition, to the extent required by Section 409A amounts deferred under this Plan shall be reported on the Participants’ Forms W-2.  Also, any amounts that become taxable hereunder shall be reported as taxable wages on a Participant’s Form W-2.

 

29

 

6.05        Records and Reports.

 

The Plan Administrator shall exercise such authority and responsibility as it deems appropriate in order to comply with ERISA and government regulations issued thereunder relating to records of Participants’ service and benefits, notifications to Participants; reports to, or registration with, the Internal Revenue Service; reports to the Department of Labor; and such other documents and reports as may be required by ERISA.

 

6.06        Rules and Procedures.

 

The Plan Administrator may adopt such rules and procedures as it deems necessary, desirable, or appropriate.  To the extent practicable and as of any time, all rules and procedures of the Plan Administrator shall be uniformly and consistently applied to Participants in the same circumstances.  When making a determination or calculation, the Plan Administrator shall be entitled to rely upon information furnished by a Participant or Beneficiary and the legal counsel of the Plan Administrator or the Company.

 

6.07        Applications and Forms.

 

The Plan Administrator may require a Participant or Beneficiary to complete and file with the Plan Administrator an application for a distribution and any other forms (or other methods for receiving information) approved by the Plan Administrator, and to furnish all pertinent information requested by the Plan Administrator.  The Plan Administrator may rely upon all such information so furnished it, including the Participant’s or Beneficiary’s current mailing address, age and marital status.

 

6.08        Conformance with Section 409A.

 

At all times during each Plan Year, this Plan shall be operated in accordance with the requirements of Section 409A.  In all cases, the provisions of this Section shall apply notwithstanding any contrary provision of the Plan that is not contained in this Section.

 

6.09        Section 457A.

 

To avoid the application of Code section 457A (“Section 457A”) to a Participant’s LRP Account or the Participant’s LRP Benefit, the following shall apply to a Participant who is or is expected to become, during the current year, subject to income taxation under the Code (a “US-Taxed Participant”), and who transfers to a work location outside of the United States to provide services to a member of the Yum China Organization that is neither a United States corporation nor a pass-through entity that is wholly owned by a United States corporation (“Covered Transfer”):

 

(a)           The US-Taxed Participant shall automatically vest in his or her LRP Account as of the end of the last business day before the Covered Transfer;

 

30

 

(b)           From and after the Covered Transfer, any Earnings Credits, special allocations, or other similar increases or enhancements to the US-Taxed Participant’s LRP Account or LRP Benefit relating to –

 

(1)           A whole or partial Year of Participation,

 

(2)           Base or Bonus Compensation,

 

(3)           The attainment of a specified age or level (“age/level attainment”),

 

(collectively, a “Benefit Enhancement”) will not be credited to the US-Taxed Participant until the end of the last day of the Plan Year in or for which the US-Taxed Participant has the whole or partial Year of Participation, the Base or Bonus Compensation or the age/level attainment that results in such Benefit Enhancement, and then only if and to the extent permissible under subsection (c) below at that time; and

 

(c)           The US-Taxed Participant shall have no legal right to (and the US-Taxed Participant shall not receive) any Benefit Enhancement, which relates to a whole or partial Year of Participation, Base or Bonus Compensation or the age/level attainment, from and after the Covered Transfer to the extent such Benefit Enhancement would constitute compensation that is includable in income under Section 457A.

 

Notwithstanding the foregoing, one or more of the foregoing subsections shall not apply to a US-Taxed Participant who has a Covered Transfer if, prior to the Covered Transfer (or prior to the start of a calendar year beginning after the Covered Transfer, with respect to such calendar year), the Company provides a written communication (either to the Participant individually, to a group of similar Participants, to Participants generally, or framed in any other way that is intended to cause the communication to apply to the Participant – i.e., an “applicable communication”) that one or more of these subsections do not apply to the Covered Transfer in question.  Subsection (b) shall cease to apply as of the earlier of – (i) the date the Participant returns to service for a member of the Yum China Organization that is a United States corporation or a pass-through entity that is wholly owned by a United States corporation, or (ii) the effective date for such cessation that is stated in an applicable communication.  In addition, the Company’s Vice President with responsibility for this Plan may (in his or her discretion) waive the application of one or more of these subsections retroactively with respect to some or all of the period that begins with the Covered Transfer, by providing the US-Taxed Participant with a written notification that clearly and expressly provides for such waiver.

 

31

 

ARTICLE VII – CLAIMS PROCEDURES

 

7.01        Claims for Benefits.

 

If a Participant, Beneficiary or other person (hereafter, “Claimant”) does not receive timely payment of any benefits which he believes are due and payable under the Plan, he may make a claim for benefits to the Plan Administrator.  The claim for benefits must be in writing and addressed to the Plan Administrator.  If the claim for benefits is denied, the Plan Administrator shall notify the Claimant in writing within 90 days after the Plan Administrator initially received the benefit claim.  However, if special circumstances require an extension of time for processing the claim, the Plan Administrator shall furnish notice of the extension to the Claimant prior to the termination of the initial 90-day period and such extension may not exceed one additional, consecutive 90-day period.  Any notice of extension shall indicate the reasons for the extension and the date by which the Plan Administrator expects to make a determination.  Any notice of a denial of benefits shall be in writing and drafted in a manner calculated to be understood by the Claimant and shall advise the Claimant of the basis for the denial, any additional material or information necessary for the Claimant to perfect his claim, and the steps which the Claimant must take to have his claim for benefits reviewed on appeal.

 

7.02        Appeals.

 

Each Claimant whose claim for benefits has been denied may file a written request for a review of his claim by the Plan Administrator.  The request for review must be filed by the Claimant within 60 days after he received the written notice denying his claim.  Upon review, the Plan Administrator shall provide the Claimant a full and fair review of the claim, including the opportunity to submit written comments, documents, records and other information relevant to the claim and the Plan Administrator’s review shall take into account such comments, documents, records and information regardless of whether they were submitted or considered at the initial determination.  The decision of the Plan Administrator shall be made within 60 days after receipt of a request for review and will be communicated in writing and in a manner calculated to be understood by the Claimant.  Such written notice shall set forth the basis for the Plan Administrator’s decision.  If there are special circumstances which require an extension of time for completing the review, the Plan Administrator shall furnish notice of the extension to the Claimant prior to the termination of the initial 60-day period and such extension may not exceed one additional, consecutive 60-day period.  Any notice of extension shall indicate the reasons for the extension and the date by which the Plan Administrator expects to make a determination.

 

7.03        Special Claims Procedures for Disability Determinations.

 

Notwithstanding Sections 7.01 and 7.02, if the claim or appeal of the Claimant relates to benefits while a Participant is disabled, such claim or appeal shall be processed pursuant to the applicable provisions of Department of Labor Regulation Section 2560.503-1 relating to disability benefits, including Sections 2560.503-1(d), 2560.503-1(f)(3), 2560.503-1(h)(4) and 2560.503-1(i)(3).  These provisions include the following:

 

32

 

(a)           If the Plan Administrator wholly or partially denies a Claimant’s claim for disability benefits, the Plan Administrator shall provide the Claimant, within a 45-day response period following the receipt of the claim by the Plan Administrator, a comprehensible written notice setting forth (1) the basis for the denial, (2) any additional material or information necessary for the Claimant to perfect his claim, and (3) the steps which the Claimant must take to have his claim for benefits reviewed on appeal.  If, for reasons beyond the control of the Plan Administrator, an extension of time is required for processing the claim, the Plan Administrator will send a written notice of the extension, an explanation of the circumstances requiring extension and the expected date of the decision before the end of the 45-day period.  The Plan Administrator may only extend the 45-day period twice, each in 30-day increments.  If at any time the Plan Administrator requires additional information in order to determine the claim, the Plan Administrator shall send a written notice explaining the unresolved issues that prevent a decision on the claim and a listing of the additional information needed to resolve those issues.  The Claimant will have 45 days from the receipt of that notice to provide the additional information, and during the time that a request for information is outstanding, the running of the time period in which the Plan Administrator must decide the claim will be suspended.

 

(b)           If the Plan Administrator denies all or part of a claim, further review of the claim is available upon written request by the Claimant to the Plan Administrator within 180 days after receipt by the Claimant of written notice of the denial.  Upon review, the Plan Administrator shall provide the Claimant a full and fair review of the claim, including the opportunity to submit written comments, documents, records and other information relevant to the claim and the Plan Administrator’s review shall take into account such comments, documents, records and information regardless of whether it was submitted or considered at the initial determination.  The decision on review shall be made within 45 days after receipt of the request for review, unless circumstances beyond the control of the Plan Administrator warrant an extension of time not to exceed an additional 45 days.  If this occurs, written notice of the extension will be furnished to the Claimant before the end of the initial 45-day period, indicating the special circumstances requiring the extension and the date by which the Plan Administrator expects to make the final decision.  The final decision shall be in writing and drafted in a manner calculated to be understood by the Claimant, and shall include the specific reasons for the decision with references to the specific Plan provisions on which the decision is based.

 

7.04        Exhaustion of Claims Procedures.

 

(a)           Before filing any Claim (including a suit or other action) in court or in another tribunal, a Claimant must first fully exhaust all of the Claimant’s actual or potential rights under the claims procedures of Sections 7.01, 7.02 and 7.03.

 

(b)           Upon review by any court or other tribunal, the exhaustion requirement of this Section is intended to be interpreted to require exhaustion in as many circumstances as possible (and any steps necessary to clarify or effect this intent may be taken).

 

(c)           In any action or consideration of a Claim in court or in another tribunal following exhaustion of the Plan’s claims procedure as described in this Section, the subsequent

 

33

 

action or consideration shall be limited, to the maximum extent permissible, to the record that was before Plan Administrator in the claims procedure process.

 

(d)           The exhaustion requirement of this Section shall apply – (1) regardless of whether other Disputes that are not Claims (including those that a court might consider at the same time) are of greater significance or relevance, (2) to any rights the Plan Administrator may choose to provide in connection with novel Disputes or in particular situations, (3) regardless of whether the rights are actual or potential and (4) even if the Plan Administrator has not previously defined or established specific claims procedures that directly apply to the submission and consideration of such Claim (in which case the Plan Administrator upon notice of the Claim shall either promptly establish such claims procedures or shall apply or act by analogy to the claims procedures of Sections 7.01, 7.02 and 7.03 that apply to claims).

 

(e)           The Plan Administrator may make special arrangements to consider a Claim on a class basis or to address unusual conflicts concerns, and such minimum arrangements in these respects shall be made as are necessary to maximize the extent to which exhaustion is required.

 

(f)            For purposes of this Section, the following definitions apply –

 

(1)           A “Dispute” is any claim, dispute, issue, assertion, allegation, action or other matter.

 

(2)           A “Claim” is any Dispute that implicates in whole or in part any one or more of the following –

 

(i)            The interpretation of the Plan;

 

(ii)           The interpretation of any term or condition of the Plan;

 

(iii)          The interpretation of the Plan (or any of its terms or conditions) in light of applicable law;

 

(iv)          Whether the Plan or any term or condition under the Plan has been validly adopted or put into effect;

 

(v)           The administration of the Plan,

 

(vi)          Whether the Plan, in whole or in part, has violated any terms, conditions or requirements of ERISA or other applicable law or regulation, regardless of whether such terms, conditions or requirements are, in whole or in part, incorporated into the terms, conditions or requirements of the Plan,

 

(vii)         A request for Plan benefits or an attempt to recover Plan benefits;

 

34

 

(viii)        An assertion that any entity or individual has breached any fiduciary duty;

 

(ix)          An assertion that any individual or entity is a Participant, former Participant, Plan beneficiary, former Plan beneficiary or assignee of any of the foregoing; or

 

(x)           Any Dispute or Claim that: (i) is deemed similar to any of the foregoing by the Plan Administrator, or (ii) relates to the Plan in any way.

 

(3)           A “Claimant” is any Employee, former Employee, Participant, former Participant, Plan beneficiary, former Plan beneficiary or any other individual, person, entity, estate, heir, or representative with a relationship to any of the foregoing individuals or the Plan, as well as any group of one or more of the foregoing, who has a Claim.  A “Claimant” also includes any individual or entity who is alleging the individual or entity has the status of a Participant, former Participant, Plan beneficiary, former Plan beneficiary, or any other individual or entity asserting a Claim.

 

7.05        Limitations on Actions.

 

Any claim or action filed in court (or any other tribunal) by or on behalf of a Claimant (as defined in Section 7.04) with respect to this Plan must be brought within the applicable timeframe that relates to the claim or action, listed as follows:

 

(a)           Any claim or action relating to the alleged wrongful denial of Plan benefits must be brought within two years of the earlier of the date that the Claimant received the payment of the Plan benefits that are the subject of the claim or action or the date that the Claimant has received his calculation of Plan benefits that are the subject of the claim or action; and

 

(b)           Any other claim or action not covered by subsection (a) above (including a claim or action relating to an alleged interference or violation of ERISA-protected rights), must be brought within two years of the date when the Claimant has actual or constructive knowledge of the acts that are alleged to give rise to the claim or action.

 

Failure to bring any such claim or action within the aforementioned timeframes shall mean that such claim or action is null and void and of no effect.  The mandatory claim and appeal process in Article VII and any other correspondence or communications by the Company, an Employer, the Plan Administrator or any other person or entity related or affiliated with the Yum China Organization shall not toll the above timeframes and shall have no effect whatsoever on the above timeframes.

 

Any claim or action brought or filed in court or any other tribunal in connection with the Plan by or on behalf of a Claimant (as defined in Section 7.04) shall only be brought and filed in the United States District Court for the District of Delaware.

 

35

 

ARTICLE VIII – AMENDMENT AND TERMINATION

 

8.01        Amendment to the Plan.

 

The Company, or its delegate, has the right in its sole discretion to amend this Plan in whole or in part at any time and in any manner, including the terms and conditions of LRP Benefits, the terms on which distributions are made, and the form and timing of distributions.  However, except for mere clarifying amendments necessary to avoid an inappropriate windfall, no Plan amendment shall reduce the balance of a Participant’s Vested LRP Account as of the date such amendment is adopted.  In addition, the Company shall have the limited right to amend the Plan at any time, retroactively or otherwise, in such respects and to such extent as may be necessary to fully qualify it under existing and applicable laws and regulations (including Section 409A), and if and to the extent necessary to accomplish such purpose, may by such amendment decrease or otherwise affect benefits to which Participants may have already become entitled, notwithstanding any provision herein to the contrary.

 

The Company’s right to amend the Plan shall not be affected or limited in any way by a Participant’s Retirement or other Separation from Service.  In addition, the Company’s right to amend the Plan shall not be affected or limited in any way by a Participant’s death or Disability.  Prior practices by the Company or an Employer shall not diminish in any way the rights granted the Company under this Section.  Also, it is expressly permissible for an amendment to affect less than all of the Participants covered by the Plan.

 

Any amendment shall be in writing and adopted by the Company or by any officer of the Company who has authority or who has been granted or delegated the authority to amend this Plan.  An amendment or restatement of this Plan shall not affect the validity or scope of any grant or delegation of such authority, which shall instead be solely determined based upon the terms of the grant or delegation (as determined under applicable law).  All Participants and Beneficiaries shall be bound by such amendment.

 

Any amendments made to the Plan shall be subject to any restrictions on amendment that are applicable to ensure continued compliance under Section 409A.

 

8.02        Termination of the Plan.

 

The Company expects to continue this Plan, but does not obligate itself to do so.  The Company reserves the right to discontinue and terminate the Plan at any time, in whole or in part, for any reason (including a change, or an impending change, in the tax laws of the United States or any state).  Such termination shall be in writing and adopted by the Company or by any officer of the Company who has authority or who has been granted or delegated the authority to terminate this Plan.  An amendment or restatement of this Plan shall not affect the validity or scope of any grant or delegation of such authority, which shall instead be solely determined based upon the terms of the grant or delegation (as determined under applicable law).

 

Termination of the Plan shall be binding on all Participants (and a partial termination shall be binding upon all affected Participants), but in no event may such termination reduce the 

 

36

 

balance of a Participant’s Vested LRP Account at the time of the termination.  If this Plan is terminated (in whole or in part), the affected Participants’ Vested LRP Accounts may either be paid in a single lump sum immediately, or distributed in some other manner consistent with this Plan, as provided by the Plan termination resolution.  The Company’s rights under this Section shall be no less than its rights under Section 8.01.  Thus, for example, the Company may amend the Plan pursuant to the third sentence of Section 8.01 in conjunction with the termination of the Plan, and such amendment will not violate the prohibition on reducing a Participant’s Vested LRP Account under this Section 8.02.  This Section is subject to the same restrictions related to compliance with Section 409A that apply to Section 8.01.

 

37

 

ARTICLE IX – MISCELLANEOUS

 

9.01        Limitation on Participant Rights.

 

Participation in this Plan does not give any Participant the right to be retained in the Employer’s or Company’s employ (or any right or interest in this Plan or any assets of the Company or Employer other than as herein provided).  The Company and Employer reserve the right to terminate the employment of any Participant without any liability for any claim against the Company or Employer under this Plan, except for a claim for payment of benefits as provided herein.

 

9.02        Unfunded Obligation of Individual Employer.

 

The benefits provided by this Plan are unfunded.  All amounts payable under this Plan to Participants are paid from the general assets of the Participant’s individual Employer.  Nothing contained in this Plan requires the Company or Employer to set aside or hold in trust any amounts or assets for the purpose of paying benefits to Participants.  Neither a Participant, Beneficiary, nor any other person shall have any property interest, legal or equitable, in any specific Employer asset.  This Plan creates only a contractual obligation on the part of a Participant’s individual Employer, and the Participant has the status of a general unsecured creditor of his Employer with respect to benefits granted hereunder.  Such a Participant shall not have any preference or priority over, the rights of any other unsecured general creditor of the Employer.  No other Employer guarantees or shares such obligation, and no other Employer shall have any liability to the Participant or his Beneficiary.  In the event a Participant transfers from the employment of one Employer to another, the former Employer shall transfer the liability for benefits made while the Participant was employed by that Employer to the new Employer (and the books of both Employers shall be adjusted appropriately).

 

9.03        Other Benefit Plans.

 

This Plan shall not affect the right of any Eligible Executive or Participant to participate in and receive benefits under and in accordance with the provisions of any other employee benefit plans which are now or hereafter maintained by any Employer, unless the terms of such other employee benefit plan or plans specifically provide otherwise or it would cause such other plan to violate a requirement for tax-favored treatment.

 

9.04        Receipt or Release.

 

Any payment to a Participant or Beneficiary in accordance with the provisions of this Plan shall, to the extent thereof, be in full satisfaction of all claims against the Plan Administrator, the Employer and the Company, and the Plan Administrator may require such Participant or Beneficiary, as a condition precedent to such payment, to execute a receipt and release to such effect.

 

38

 

9.05        Governing Law.

 

This Plan shall be construed, administered, and governed in all respects in accordance with ERISA and, to the extent not preempted by ERISA, in accordance with the laws of the State of Delaware.  If any provisions of this instrument shall be held by a court of competent jurisdiction to be invalid or unenforceable, the remaining provisions hereof shall continue to be fully effective.

 

9.06        Adoption of Plan by Related Employers.

 

The Plan Administrator may select as an Employer any division of the Company, as well as any member of the Yum China Organization, and permit or cause such division or organization to adopt the Plan.  The selection by the Plan Administrator shall govern the effective date of the adoption of the Plan by such related Employer.  The requirements for Plan adoption are entirely within the discretion of the Plan Administrator and, in any case where the status of an entity as an Employer is at issue, the determination of the Plan Administrator shall be absolutely conclusive.

 

9.07        Rules of Construction.

 

The provisions of this Plan shall be construed according to the following rules:

 

(a)           Gender and Number.  Whenever the context so indicates, the singular or plural number and the masculine, feminine, or neuter gender shall be deemed to include the other.

 

(b)           Examples.  Whenever an example is provided or the text uses the term “including” followed by a specific item or items, or there is a passage having a similar effect, such passage of the Plan shall be construed as if the phrase “without limitation” followed such example or term (or otherwise applied to such passage in a manner that avoids limitation on its breadth of application).

 

(c)           Compounds of the Word “Here”.  The words “hereof”, “herein”, “hereunder” and other similar compounds of the word “here” shall mean and refer to the entire Plan, not to any particular provision or section.

 

(d)           Effect of Specific References.  Specific references in the Plan to the Plan Administrator’s discretion shall create no inference that the Plan Administrator’s discretion in any other respect, or in connection with any other provisions, is less complete or broad.

 

(e)           Subdivisions of the Plan Document.  This Plan document is divided and subdivided using the following progression: articles, sections, subsections, paragraphs, subparagraphs and clauses.  Articles are designated by capital roman numerals.  Sections are designated by Arabic numerals containing a decimal point.  Subsections are designated by lower-case letters in parentheses.  Paragraphs are designated by Arabic numbers in parentheses.  Subparagraphs are designated by lower-case roman numerals in parenthesis.  Clauses are designated by upper-case letters in parentheses.  Any reference in a section to a subsection (with

 

39

 

no accompanying section reference) shall be read as a reference to the subsection with the specified designation contained in that same section.  A similar reading shall apply with respect to paragraph references within a subsection and subparagraph references within a paragraph.

 

(f)            Invalid Provisions.  If any provision of this Plan is, or is hereafter declared to be void, voidable, invalid or otherwise unlawful, the remainder of the Plan shall not be affected thereby.

 

9.08        Successors and Assigns; Nonalienation of Benefits.

 

This Plan inures to the benefit of and is binding upon the parties hereto and their successors, heirs and assigns; provided, however, that the amounts credited to the LRP Account of a Participant are not (except as provided in Sections 5.05 and 6.04) subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, charge, garnishment, execution or levy of any kind, either voluntary or involuntary, and any attempt to anticipate, alienate, sell, transfer, assign, pledge, encumber, charge or otherwise dispose of any right to any benefits payable hereunder, including, without limitation, any assignment or alienation in connection with a separation, divorce, child support or similar arrangement, will be null and void and not binding on the Plan or the Company or any Employer.  Notwithstanding the foregoing, the Plan Administrator reserves the right to make payments in accordance with a divorce decree, judgment or other court order as and when cash payments are made in accordance with the terms of this Plan from the Vested LRP Account of a Participant.  Any such payment shall be charged against and reduce the Participant’s Account.

 

9.09        Facility of Payment.

 

Whenever, in the Plan Administrator’s opinion, a Participant or Beneficiary entitled to receive any payment hereunder is under a legal disability or is incapacitated in any way so as to be unable to manage his financial affairs, the Plan Administrator may direct the Employer to make payments to such person or to the legal representative of such person for his benefit, or to apply the payment for the benefit of such person in such manner as the Plan Administrator considers advisable.  Any payment in accordance with the provisions of this Section shall be a complete discharge of any liability for the making of such payment to the Participant or Beneficiary under the Plan.

 

9.10        Missing Participants or Beneficiaries.

 

Each Participant and each designated beneficiary must notify the Plan Administrator in writing as to his current mailing address and of any changes to such address in a timely manner.  Any communication, statement or notice addressed to the Participant or beneficiary will be binding on a Participant and his beneficiary for all purposes of the Plan if it is mailed to the Participant or beneficiary at such address, or if no such address has been provided to the Plan Administrator, then at the last address shown on the Employer’s records.

 

40

 

ARTICLE X – SIGNATURE

 

IN WITNESS WHEREOF, this Plan is hereby adopted by the Company’s duly authorized officer to be effective as provided herein.

 

	
 
    	
Yum   China Holdings, Inc.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Name:
    
	
 
    	
 
    	
Title:
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
Signature Date
    

 

41

 

APPENDIX

 

This Appendix modifies particular terms of this Plan document as it may apply to certain groups and situations.  Except as specifically modified in this Appendix, the foregoing main provisions of this Plan document shall fully apply in determining the rights and benefits of Participants.  In the event of a conflict between this Appendix and the foregoing main provisions of this Plan document, the Appendix shall govern.

 

42

 

APPENDIX ARTICLE A – TRANSFERS FROM THE YUM! BRANDS LRP

 

A.01       Scope.

 

This Appendix Article A applies to any Executive who – (i) Transfers from the YUM! Organization to the Yum China Organization on the Distribution Date (or pursuant to a transfer by mutual agreement during the Transition Period), and (ii) has an account balance under the YUM! Brands LRP immediately prior to such Transfer.

 

A.02       Definitions.

 

When used in this Article, the following underlined terms shall have the meanings set forth below.  Except as otherwise provided in this Article, all terms that are defined in Article II of the Plan shall have the meaning assigned to them by Article II.

 

(a)           Distribution Date.  The “Distribution Date” as defined in Article I of the main Plan document.

 

(b)           Transfer.  The act of transferring an Executive from the YUM! Brands organization of affiliated companies to the Yum China Organization.  A Transfer may occur at any time on or after the Closing Date as determined by YUM! Brands and YUM! China.  If an Executive is employed in the China business of the YUM! Organization immediately prior to the Distribution Date, and the Executive’s employer is a member of the Yum China Organization immediately after the Distribution Date, such Executive shall be deemed to have had a Transfer on the Distribution Date.

 

(c)           Transfer Date.  The effective date and time of a Transfer.

 

(d)           Transferred Participant.  Any Executive who (i) Transfers from YUM! Brands to the Yum China Organization on or after the Closing Date, and (ii) has a YUM! Brands LRP Account balance immediately prior to such Transfer.

 

(e)           Transition Period.  A limited period after the Distribution Date for transferring employees by mutual agreement, as applies under the Employee Matters Agreement between YUM! Brands. and the Company, as amended.

 

(e)           YUM! Brands.  YUM! Brands, Inc..

 

(f)            YUM! Brands LRP.  The YUM! Brands Leadership Retirement Plan, as in effect immediately prior to a Transfer.

 

(g)           YUM! Brands LRP Account.  An individual account of a Transferred Participant that is maintained under the YUM! Brands LRP immediately prior to the Transfer.

 

43

 

(i)            YUM! China LRP Account.  The Transferred Participant’s LRP Account under this Plan.

 

(j)            YUM! Organization.  The controlled group of organizations of which YUM Brands, Inc. is a part, as defined by Code section 414(b) and (c) and the regulations issued thereunder.  An entity shall be considered a member of the YUM! Organization only during the period it is one of the group of organizations described in the preceding sentence.

 

A.03       Transfer of YUM! Brands LRP Accounts.

 

(a)           A Transferred Participant’s YUM! Brands LRP Account shall be transferred to this Plan effective as of the Transfer Date and shall become such Transferred Participant’s initial LRP Account balance under this Plan.  In addition, all benefit-determining elements under the YUM! Brands LRP shall also be transferred to this Plan together with the Transferred Participant’s YUM! Brands LRP Account balance effective as of the Transfer Date.  Any such Transferred Participant shall thereafter continue as a Participant under the Plan until the Transferred Participant’s Termination Date under this Plan.  Upon the transfer of a Transferred Participant’s YUM! Brands LRP Account to this Plan, such Transferred Participant’s participation in the YUM! Brands LRP shall terminate pursuant to the terms and conditions of the YUM! Brands LRP.

 

(b)           A Beneficiary’s (including any individual claiming an interest through or on behalf of a Beneficiary or Transferred Participant) interest in the YUM! Brands LRP that is derived from a Transferred Participant shall also be transferred, and any reference in this Article to a Transferred Participant or Transferred Participant’s interest shall also refer to any Beneficiary and Beneficiary’s interest related thereto.

 

(c)           When a Transferred Participant’s YUM! Brands LRP Account is transferred to this Plan pursuant to subsection (a), the liability to pay the Transferred Participant’s LRP Benefit shall be assigned by the Company to the applicable Employer of the Transferred Participant.

 

A.04       Certain Elections.

 

All Beneficiary designations and distribution elections made by a Transferred Participant under the YUM! Brands LRP shall be transferred to this Plan as of the Transfer Date.  Such elections shall remain in effect under this Plan (as if originally made under this Plan) until changed in accordance with the terms of the Plan.

 

A.05       Service.

 

A Transferred Participant’s Years of Participation and Years of Service under the YUM! Brands LRP shall be transferred to this Plan and shall be recognized and taken into account for all purposes (e.g., vesting) under this Plan as of the Transfer Date.  For avoidance of any doubt, 

44

 

the Transfer shall not cause a Separation of Service or a Break in Service for the Transferred Participant under either the YUM! Brands LRP or this Plan.

 

A.06       Employer Credit for Designated Participants.

 

(a)           Employer Credit Percentage.  For a Participant designated in this Section A.06(a) (a “Designated Participant”), in lieu of the Employer Credit Percentage under Section 5.01(b), and in lieu of the 20-year limitation on more-than-1% Employer Credits in Section 5.01(c)(iv), the Employer Credit Percentage and the maximum number of years that a Designated Participant may receive a greater-than-1% Employer Credit (“Maximum Years of > 1% Employer Credits”) shall be as follows –

 

	
Designated Participant
    	
 
    	
Employer Credit Percentage
    	
 
    	
Maximum Years of > 1%
   Employer Credits
    
	
Micky Pant
    	
 
    	
20
    	
%
    	
No maximum
    
	
Ted Stedem
    	
 
    	
8
    	
%
    	
No maximum
    

 

The Employer Credit Percentage listed above shall remain the same during the Designated Participant’s participation in the Plan and shall not change due to a change in his employment, level or age.  Notwithstanding the prior sentence, the Company retains the right to amend the provisions of this Section A.06.

 

(b)           Employer Credit Amount.

 

(1)           General Rule.  In lieu of the provisions under Section 5.01(c), a Designated Participant’s Employer Credit shall be determined by the Plan Administrator by converting the Employer Credit Percentage applicable under subsection (a) above into a dollar amount by multiplying the Employer Credit Percentage by the Designated Participant’s Base Compensation (as modified in paragraph (2) below), thereafter crediting the resulting product to the Designated Participant’s LRP Account.  However, notwithstanding the foregoing, the Employer Credit for Mickey Pant shall be determined by multiplying the respective Employer Credit Percentage by his Base Compensation and Bonus Compensation (as modified in paragraph (2) below), and thereafter crediting the resulting product to the Designated Participant’s LRP Account.  The Employer Credit shall be determined by the Plan Administrator as soon as administratively practicable after each Allocation Date and shall be credited to the Designated Participant’s LRP Account effective as of the Allocation Date.  The calculation of the Employer Credit by the Plan Administrator shall be conclusive and binding on all Designated Participants (and their Beneficiaries).

 

(2)           Operating Rules.  The following operating rules shall apply for purposes of determining a Designated Participant’s Employer Credit under this Subsection (b):

 

45

 

(i)            The Plan Administrator shall use the Designated Participant’s annualized Base Compensation in effect on the Allocation Date (and shall not prorate the compensation if the Designated Participant received an increase in Base Compensation during the applicable period).

 

(ii)           If a Designated Participant has less than one (1) Year of Participation measured from the last Allocation Date for which the Designated Participant received an Employer Credit to the current Allocation Date (e.g., as may apply upon the Designated Participant’s Termination Date), the Designated Participant’s Base Compensation that shall be used shall be equal to the Designated Participant’s annualized Base Compensation multiplied by the Designated Participant’s fractional Year of Participation for such period.

 

(iii)          The rules of Section 5.01(c)(2)(iii) shall apply (i.e., the rules on Employer Credits during an Authorized Leave of Absence); provided, however, an Employer Credit for a Designated Participant shall only be based on his Base Compensation (or his Base Compensation and Bonus Compensation for Mickey Pant).

 

(iv)          Notwithstanding anything in the Plan or the Appendix to the contrary, a Designated Participant shall not receive an Employer Credit using his applicable Bonus Compensation; provided however this subparagraph shall not apply to Mickey Pant.

 

(v)           A Designated Participant shall not receive an Employer Credit under the Plan after the Designated Participant’s LRP Account has been credited with the “Maximum Years of > 1% Employer Credits” listed in the table in subsection (a) above.  For this purpose, all of a Designated Participant’s Years of > 1% Employer Credits shall be counted (including such years under the YUM! Brands LRP and before a Break in Service).  Further, in determining the applicable Years of > 1% Employer Credits, any > 1% Employer Credits based on fractional Years of Participation shall be aggregated.  However, if a Designated Participant has “no maximum” listed in the table in Subsection (a) above, then the provisions of this subparagraph (v) shall not apply to such Designated Participant.

 

A.07       Rights and Benefits From and After Transfer.

 

The rights and benefits of a Transferred Participant (and of those claiming through or on his/her behalf) from and after the Transfer Date shall be governed by the terms of this Plan.  Notwithstanding anything in this Plan to the contrary, benefits payable under this Plan with respect to a Transferred Participant shall be adjusted by the Plan Administrator in an appropriate manner to avoid duplication of benefits under this Plan and the YUM! Brands LRP.

 

46

 

ARTICLE B – PARTICIPATION BY EXECUTIVES ON INTERNATIONAL ASSIGNMENTS

 

B.01       Scope.

 

This Article B supplements the main portion of the Plan document with respect to any person who qualifies as a Foreign-Assigned Executive and who is transferred to a Temporary Assignment outside the United States with an Approved Foreign Subsidiary, as those terms are defined in Article II of the Plan.

 

B.02       Eligible Countries.

 

(a)           In general.  For purposes of the definition of Executive under Article II of the Plan, and subject to any additional requirements that may apply under subsection (b) below, the following are the countries to which an individual may be assigned (in connection with a Temporary Assignment that is referenced in subsection (b) of the Plan’s definition of Executive):

 

(1)           China.

 

(2)           [Reserved]

 

(b)           Adjustments for Benefits Earned Under Local Plans.

 

(1)           The LRP Account of a Participant to whom subsection (a) applies shall be adjusted to reflect any vested benefits payable to the Participant from a “broad-based foreign retirement plan” (as defined in Treasury Regulation § 1.409A-1(a)(3)) with respect to his Temporary Assignment.

 

(2)           If a benefit is payable to such Participant with respect to his Temporary Assignment in one of the countries identified in subsection (a) under a plan or arrangement that is not a broad-based foreign retirement plan, the Participant’s LRP Account shall be reduced only to the extent of the value of the Participant’s benefit under such other plan or arrangement as of immediately prior to the Participant’s return to an executive classification on an Employer’s United States payroll, and such reduction shall be applied only to the benefit that accrues upon the Participant’s return.

 

47Exhibit 10.9

 

YUM CHINA HOLDINGS, INC.

LONG TERM INCENTIVE PLAN

 

YUM CHINA STOCK APPRECIATION RIGHTS AGREEMENT

 

This Yum China Stock Appreciation Rights Agreement is made as of the      day of November, 2016, by and between Yum China Holdings, Inc., a Delaware corporation having its principal office at [Insert] (the “Company”), and [Insert] (the “Participant”).

 

W I T N E S S E T H:

 

WHEREAS, Yum Brands, Inc., the sole shareholder of the Company, approved the Yum China Holdings Inc. Long Term Incentive Plan (the “Plan”), for the purposes and subject to the provisions set forth in the Plan;

 

WHEREAS, pursuant to authority granted to it in said Plan, the Committee (as defined in the Plan), has granted to the Participant stock appreciation rights (to be known hereinafter as “Yum China Stock Appreciation Rights”) with respect to the number of shares of the Company’s common stock as set forth below;

 

WHEREAS, Yum China Stock Appreciation Rights granted under the Plan are to be evidenced by an Award Agreement in such form and containing such terms and conditions as the Committee shall determine;

 

WHEREAS, capitalized terms used but not defined in this Yum China Stock Appreciation Rights Agreement shall have the meaning set forth in the Plan;

 

NOW, THEREFORE, it is mutually agreed as follows:

 

1.                                      Grant.  In consideration of the Participant remaining in the employ of the Company or one of its Subsidiaries (collectively the “Company Group”), the Company hereby grants to the Participant, as of November    , 2016 (the “Grant Date”), on the terms and conditions set forth in this Yum China Stock Appreciation Rights Agreement, including any country-specific terms set forth in the attached appendix (the “Appendix” and together with the Yum China Stock Appreciation Rights Agreement, the “Agreement”) and the Plan, stock appreciation rights with respect to      aggregate number of shares of Stock (the “Covered Shares”), with an Exercise Price of $     per share, which was the Closing Value (as defined in Section 25) of a share of Stock on the Grant Date.

 

(a)                                 Provided the Participant remains continuously employed by the Company Group through the applicable vesting date and subject to the terms and conditions of this Agreement including, without limitation, Section 4, the Yum China Stock Appreciation Rights shall vest and become exercisable (i) with respect to one-fourth (1/4) of the Covered Shares on the one-year anniversary of the Grant Date (i.e., November    , 2017, which is referred to as the “Initial Vesting Date”), and (ii) after the Initial Vesting Date, with respect to an additional one-fourth (1/4) of the Covered Shares at each of (1) the two-year anniversary of the Grant Date, (2) the three-year anniversary of the Grant Date, and (3) the four-year anniversary of the Grant Date, respectively.

 

 

(b)                                 Exercisable Yum China Stock Appreciation Rights must be exercised no later than 4PM Eastern Standard Time (“EST”), November    , 2026.  The time during which Yum China Stock Appreciation Rights are exercisable is referred to as the “Yum China Stock Appreciation Right Term.”  If the expiration date falls on a New York Stock Exchange market holiday or weekend, 4PM EST will mean the business day prior to the expiration date.

 

(c)                                  Once exercisable and until the end of the Yum China Stock Appreciation Term or such earlier date of the termination of the Yum China Stock Appreciation Rights as set forth in Section 4, all or a portion of the exercisable Yum China Stock Appreciation Rights may be exercised from time to time and at any time under procedures that the Committee shall establish from time to time, including, without limitation, procedures regarding the frequency of exercise and the minimum number of Yum China Stock Appreciation Rights which may be exercised at any time.  Fractional Yum China Stock Appreciation Rights may not be exercised and no fractional shares shall be deliverable hereunder.  No omission to exercise a Yum China Stock Appreciation Right shall result in the lapse of any other Yum China Stock Appreciation Right granted hereunder until the forfeiture, expiration or termination of such Yum China Stock Appreciation Right.  The Yum China Stock Appreciation Rights shall terminate and expire no later than the end of the Yum China Stock Appreciation Right Term.

 

2.                                      Exercise Procedure. Subject to the terms and conditions set forth herein, Yum China Stock Appreciation Rights may be exercised by giving notice of exercise to Merrill Lynch, the stock plan administrator (or any other stock plan administrator or vendor designated by the Company) in the manner specified from time to time by the Company or the stock plan administrator.  Upon the exercise of a Yum China Stock Appreciation Right with respect to a share of Stock, the Participant shall receive an amount from the Company which is equal to the excess of the market price of a share of Stock at the time of exercise over the Exercise Price of one share of Stock.  Such amount will be paid to the Participant, in shares of Stock (based on the market price of such shares at the date of exercise), and in cash with respect to any fractional shares or in a combination thereof as determined by the Committee in its sole discretion, subject to satisfaction of all Tax-Related Items (as defined in Section 6 below).

 

3.                                      Effect of Termination of Employment, Death, and Retirement.

 

(a)                                 The Participant shall have a period of 90 days following the Participant’s termination of employment with the Company Group (as determined in accordance with Section 7(k) below) to exercise Yum China Stock Appreciation Rights that are vested and exercisable as of the Participant’s last day of employment, but such exercise period shall not extend beyond the end of the Yum China Stock Appreciation Right Term.  Except as otherwise provided in this Section 4 or as otherwise provided by the Committee, the Yum China Stock Appreciation Rights shall automatically expire, and no Yum China Stock Appreciation Right may be exercised after, such 90-day period (or, if earlier, the last day of the Yum China Stock Appreciation Right Term).

 

(b)                                 In the event the Participant’s employment with the Company Group is involuntarily terminated by a member of the Company Group other than for cause, including, without limitation, as a result of (i) a disposition (or similar transaction) with respect to an identifiable Company business or segment (“Business”), and in accordance with the terms of the transaction, the Participant and a substantial portion of the other employees of the Business

 

2

 

continue in employment with such Business or commence employment with its acquiror, (ii) the elimination of the Participant’s position within the Company Group, or (iii) the selection of the Participant for work force reduction (whether voluntary or involuntary), the Yum China Stock Appreciation Rights will pro rata vest on a monthly basis for the vesting period in which the termination occurs such that a portion of the Participant’s otherwise unvested Yum China Stock Appreciation Rights for the vesting period in which the termination occurs will vest based on the time the Participant was employed during such vesting period up to the last day of employment (as determined in accordance with Section 7(k) below) and all Yum China Stock Appreciation Rights that remain unvested will be forfeited.  In the event the Participant’s employment with the Company Group is terminated for cause, the Participant’s outstanding Yum China Stock Appreciation Rights will be forfeited and become unexercisable upon such termination unless otherwise provided by the Committee.

 

(c)                                  In the event the Participant’s employment with the Company Group is terminated by reason of death or Retirement (as defined in Section 25), the Yum China Stock Appreciation Rights will pro rata vest on a monthly basis for the vesting period in which the termination occurs such that a portion of the Participant’s otherwise unvested Yum China Stock Appreciation Rights for the vesting period in which the termination occurs will vest based on the time the Participant was employed during the vesting period up to the last day of employment (as determined in accordance with Section 7(k) below) and all Yum China Stock Appreciation Rights that remain unvested will be forfeited.  The Participant’s vested Yum China Stock Appreciation Rights may be exercised during the Yum China Stock Appreciation Right Term in accordance with this Agreement.

 

4.                                      Compensation Recovery Policy.

 

(a)                                 The Participant acknowledges and agrees that the Yum China Stock Appreciation Rights granted to the Participant under this Agreement shall be subject to any compensation recovery or recoupment policy established or adopted from time to time by the Company, including those established or adopted after the Grant Date (“Compensation Recovery Policy”)..

 

(b)                                 This Agreement is a voluntary agreement, and each Participant who has accepted the Agreement has chosen to do so voluntarily.  The Participant understands that all Yum China Stock Appreciation Rights provided under the Agreement and all amounts paid to the individual under the Agreement are provided as an advance that is contingent on the Company’s financial statements not being subject to a material restatement.  As a condition of the Agreement, the Participant specifically agrees that the Committee may cancel, rescind, suspend, withhold or otherwise limit or restrict the Yum China Stock Appreciation Rights for any individual party to such an agreement due to a material restatement of the Company’s financial statements, as provided in the Compensation Recovery Policy.  In the event that amounts have been paid to the Participant pursuant to the Agreement and the Committee determines that the Participant must repay an amount to the Company as a result of the Committee’s cancellation, rescission, suspension, withholding or other limitation or restriction of rights, the Participant agrees, as a condition of being awarded such rights, to make such repayments.

 

5.                                      Responsibility for Taxes.  The Participant acknowledges that regardless of any action taken by the Company or the Participant’s employer (if different) (the “Employer”), the

 

3

 

ultimate liability for all income tax, social insurance, payroll tax, fringe benefit tax, payment on account or other tax-related items arising out of the Participant’s participation in the Plan and legally applicable to the Participant (“Tax-Related Items”), the ultimate liability for all Tax-Related Items is and remains the Participant’s responsibility and such liability may exceed the amount, if any, actually withheld by the Company and/or the Employer.  The Participant further acknowledges that the Company and/or the Employer (a) make no representations or undertakings regarding the treatment of any Tax-Related Items in connection with any aspect of any Yum China Stock Appreciation Right, including without limitation, the grant, vesting or exercise of the Yum China Stock Appreciation Right, the subsequent sale of shares acquired under the Plan and the receipt of any dividends; and (b) do not commit and are under no obligation to structure the terms of the grant or any aspect of a Yum China Stock Appreciation Right to reduce or eliminate the Participant’s liability for Tax-Related Items or achieve any particular tax result.  Further, the Participant acknowledges that the Company and/or the Employer (or former employer, as applicable) may be required to withhold or account for Tax-Related Items in more than one jurisdiction.

 

Prior to any relevant taxable, tax and/or social security contribution withholding event, the Participant shall pay or make adequate arrangements satisfactory to the Company and/or the Employer to satisfy all Tax-Related Items.  In this regard, the Participant authorizes the Company and/or the Employer, at their sole discretion, to satisfy their withholding obligations with respect to Tax-Related Items by one or a combination of the following: (i) withholding from the Participant’s wages or other cash compensation paid to him or her by the Company and/or the Employer; or (ii) withholding from the proceeds of the sale of shares acquired upon exercise of a Yum China Stock Appreciation Right, either through a voluntary sale or through a mandatory sale arranged by the Company (on the Participant’s behalf pursuant to this authorization); or (iii) withholding in shares to be issued upon exercise of the Yum China Stock Appreciation Right, provided, however, that if the Participant is a Section 16 officer of the Company under the Exchange Act, then the Participant may elect the form of withholding from the alternatives above in advance of any taxable or tax withholding event, as applicable, and in the absence of the Participant’s timely election, the Company will withhold from proceeds of the sale of shares upon the relevant taxable or tax withholding event, as applicable, or the Committee (as constituted in accordance with Rule 16b-3 under the Exchange Act) may determine that a particular method be used to satisfy any obligations for Tax-Related Items in advance of any taxable or tax withholding event, as applicable.

 

Depending on the withholding method, the Company or the Employer may withhold or account for Tax-Related Items by considering applicable minimum statutory withholding amounts or other applicable withholding rates, including maximum applicable rates, in which case the Participant may receive a refund of any over-withheld amount in cash and will have no entitlement to the Stock equivalent.  If the obligation for Tax-Related Items is satisfied by withholding in shares, for tax purposes, the Participant is deemed to have been issued the full number of shares subject to the exercised Yum China Stock Appreciation Rights, notwithstanding that a number of shares are held back solely for the purpose of paying the Tax-Related Items.

 

Finally, the Participant shall pay to the Company or the Employer any amount of Tax-Related Items that the Company or the Employer may be required to withhold or account for as a

 

4

 

result of Participant’s participation in the Plan that cannot be satisfied by the means previously described.  The Company may refuse to honor the exercise and refuse to issue or deliver the shares or the proceeds of the sale of the shares to the Participant if the Participant fails to comply with Participant’s obligations in connection with the Tax-Related Items.

 

6.                                      Nature of Grant.  In accepting the Yum China Stock Appreciation Rights, the Participant acknowledges, understands and agrees that:

 

(a)                                 the Plan is established voluntarily by the Company, it is discretionary in nature and may be modified, amended, suspended or terminated by the Company at any time, to the extent permitted by the Plan;

 

(b)                                 this grant of Yum China Stock Appreciation Rights is voluntary and occasional and does not create any contractual or other right to receive future grants of Yum China Stock Appreciation Rights, or benefits in lieu of Yum China Stock Appreciation Rights, even if Yum China Stock Appreciation Rights have been granted in the past;

 

(c)                                  all decisions with respect to future grants of Yum China Stock Appreciation Rights or other awards, if any, will be at the sole discretion of the Company;

 

(d)                                 the Participant is voluntarily participating in the Plan;

 

(e)                                  the Yum China Stock Appreciation Rights and the shares of Stock acquired under the Plan, and the income and value of same, are not part of normal or expected compensation or salary for purposes of calculating any severance, resignation, termination, redundancy, dismissal, end-of-service payments, bonuses, long-service awards, pension or retirement or welfare benefits or similar payments;

 

(f)                                   the Yum China Stock Appreciation Rights and any shares of Stock acquired under the Plan, and the income and value of same, are not intended to replace any pension rights or compensation;

 

(g)                                  the Yum China Stock Appreciation Rights grant and the Participant’s participation in the Plan shall not be interpreted to form an employment contract or relationship with the Company or the Employer or any Subsidiary or affiliate of the Company;

 

(h)                                 the future value of the underlying shares is unknown, indeterminable and cannot be predicted with certainty;

 

(i)                                     if the underlying shares do not increase in value, the Yum China Stock Appreciation Right will have no value;

 

(j)                                    no claim or entitlement to compensation or damages shall arise from termination of this award of Yum China Stock Appreciation Rights or diminution in value of the Stock acquired upon exercise resulting from the Participant’s separation from service (regardless of the reason for the termination and whether or not the

 

5

 

termination is later found to be invalid or in breach of employment laws in the jurisdiction where Participant is employed or the terms of the Participant’s employment agreement, if any);

 

(k)                                 for purposes of the Yum China Stock Appreciation Rights, the Participant’s employment or service relationship with the Company Group will be considered terminated as of the date the Participant is no longer actively providing services to the Company or one of its Subsidiaries (regardless of the reason for such termination and whether or not later found to be invalid or in breach of employment laws in the jurisdiction where the Participant is employed or the terms of the Participant’s employment agreement, if any)and, unless otherwise determined in this Agreement, will not be extended by any notice period (e.g., the Participant’s period of service would not include any contractual notice period or any period of “garden leave” or similar period mandated under employment laws in the jurisdiction where the Participant is employed or the terms of the Participant’s employment agreement, if any); the Committee shall have the exclusive discretion to determine when the Participant is no longer actively providing services for purposes of the Yum China Stock Appreciation Rights (including whether the Participant may still be considered to be providing services while on a leave of absence);

 

(l)                                     the following additional provisions apply only if the Participant is providing services outside the United States:

 

(i)                                     the Yum China Stock Appreciation Rights and the shares of Stock acquired under the Plan, and the income and value of same, are not part of normal or expected compensation or salary for any purpose; and

 

(ii)                                  neither the Company, the Employer nor any other Subsidiary shall be liable for any foreign exchange rate fluctuation between his or her local currency and the United States Dollar that may affect the value of the Yum China Stock Appreciation Rights or of any amounts due to Participant pursuant to the exercise of the Yum China Stock Appreciation Rights or the subsequent sale of any shares of Stock acquired upon exercise.

 

7.                                      No Advice Regarding Grant.  The Company is not providing any tax, legal or financial advice, nor is the Company making any recommendations regarding the Participant’s participation in the Plan, or his or her acquisition or sale of the underlying shares.  The Participant is hereby advised to consult with his or her own personal tax, legal and financial advisors regarding the Participant’s participation in the Plan before taking any action related to the Plan.

 

8.                                      Adjustment for Change in Stock.  As set forth in the Plan, in the event of any change in the outstanding shares of Stock by reason of any stock split, stock dividend, recapitalization, merger, consolidation, combination or exchange of shares or similar corporate change, the number of shares which the Participant may purchase pursuant to the Yum China

 

6

 

Stock Appreciation Rights and the Exercise Price at which the Participant may purchase such shares shall be adjusted appropriately in the Committee’s sole discretion.

 

9.                                      Nontransferability.  These Yum China Stock Appreciation Rights are personal to the Participant and, during his or her lifetime, may be exercised only by the Participant.  The Yum China Stock Appreciation Rights shall not be transferable or assignable, other than by will or the laws of descent and distribution, and any such purported transfer or assignment shall be null and void without the express consent of the Committee.  In the event of the Participant’s death, the Yum China Stock Appreciation Rights may be exercised by the Participant’s designated beneficiary (or, if none, his or her legal representative).

 

10.                               Change in Control.  Notwithstanding anything in this Agreement to the contrary (including Section 4 above), if the Participant is employed on the date of a Change in Control (as defined in the Plan), and the Participant’s employment is involuntarily terminated by a member of the Company Group (other than for cause) on or within two years following the Change in Control, the outstanding unvested Yum China Stock Appreciation Rights shall become fully and immediately exercisable.  If the employment of the Participant is terminated by the Company (other than for cause) on or within two years following a Change in Control, all outstanding vested and exercisable Yum China Stock Appreciation Rights shall continue to be exercisable at any time within three years after the date of such termination of employment, but in no event after the end of the Yum China Stock Appreciation Right Term.

 

11.                               Notices.  Any notice to be given to the Company under the terms of this Agreement shall be addressed to the Company at [Insert], Attention: [Insert], or such other address (including any email address) as the Company may hereafter designate to the Participant.  Any such notice shall be deemed to have been given when personally delivered, addressed as aforesaid, or when enclosed in a properly sealed envelope or wrapper, addressed as aforesaid, and deposited, postage prepaid, with the federal or other official postal service for the Participant’s country.

 

12.                               Binding Effect.

 

(a)                                 This Agreement shall be binding upon and inure to the benefit of any assignee or successor in interest to the Company, whether by merger, consolidation or the sale of all or substantially all of the Company’s assets.  the Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform if no such succession had taken place.

 

(b)                                 This Agreement shall be binding upon and inure to the benefit of the Participant or his or her legal representative and any person to whom a Yum China Stock Appreciation Right may be transferred by will, the applicable laws of descent and distribution or consent of the Committee.

 

13.                               Receipt of Prospectus.  The Participant hereby acknowledges that he or she has received a copy of the Company’s Prospectus relating to the Yum China Stock Appreciation

 

7

 

Rights, the Covered Shares and the Plan, and that he or she fully understands his or her rights under the Plan.

 

14.          Data Privacy.  The Participant hereby explicitly and unambiguously consents to the collection, use and transfer, in electronic or other form, of the Participant’s personal data as described in this Agreement and any other award materials, by and among, as applicable, the Employer, the Company and its Subsidiaries, for the exclusive purpose of implementing, administering and managing the Participant’s participation in the Plan.

 

The Participant understands that the Company and the Employer may hold certain personal information about the Participant, including, but not limited to, the Participant’s name, home address and telephone number, email address, date of birth, social insurance number, passport or other identification number (e.g., resident registration number), salary, nationality, job title, any Stock or directorships held in the Company, details of all awards of Yum China Stock Appreciation Rights or any other entitlement to Stock or equivalent benefits awarded, canceled, purchased, exercised, vested, unvested or outstanding in the Participant’s favor (“Data”), for the exclusive purpose of implementing, administering and managing the Plan.

 

The Participant understands that Data will be transferred to Merrill Lynch, which is assisting the Company with the implementation, administration and management of the Plan.  The Participant understands that the recipients of Data may be located in the United States or elsewhere, and that the recipient’s country (e.g., the United States) may have different data privacy laws and protections from the Participant’s country.  The Participant understands that if he or she resides outside the United States, he or she may request a list with the names and addresses of any potential recipients of Data by contacting his or her local human resources representative.  The Participant authorizes the Company, Merrill Lynch and any other possible recipients which may assist the Company (presently or in the future) with implementing, administering and managing the Plan to receive, possess, use, retain and transfer Data, in electronic or other form, for the sole purpose of implementing, administering and managing his or her participation in the Plan.  The Participant understands that Data will be held only as long as is necessary to implement, administer and manage the Participant’s participation in the Plan, including any requisite transfer of such Data as may be required to a broker, escrow agent or other third party with whom any shares of Stock acquired under the Plan may be deposited.  The Participant understands that if he or she resides outside the United States, he or she may, at any time, view Data, request information about the storage and processing of Data, require any necessary amendments to Data or refuse or withdraw the consents herein, in any case without cost, by contacting his or her local human resources representative.  Further, the Participant understands that he or she is providing the consents herein on a purely voluntary basis.  If the Participant does not consent, or if the Participant later seeks to revoke his or her consent, his or her employment status or service and career with the Employer will not be affected; the only consequence of refusing or withdrawing his or her consent is that the Company would not be able to grant the Participant Yum China Stock Appreciation Rights or other awards or administer or maintain such awards.  Therefore, the Participant understands that refusing or withdrawing his or her consent may affect the Participant’s ability to participate in the Plan.  For more information on the consequences of

 

8

 

the Participant’s refusal to consent or withdrawal of consent, the Participant understands that he or she may contact his or her local human resources representative.

 

15.          Plan Controls.  The Yum China Stock Appreciation Rights and the terms and conditions set forth herein are subject in all respects to the terms and conditions of the Plan and any Operating Guidelines or other policies or regulations which govern administration of the Plan, which shall be controlling.  The Company reserves its right to amend or terminate the Plan at any time without the consent of the Participant; provided, however, that Yum China Stock Appreciation Rights outstanding under the Plan at the time of such amendment or termination shall not be adversely affected thereby, as set forth in Section 7 of the Plan.  All interpretations or determinations of the Committee shall be final, binding and conclusive upon the Participant and his or her legal representatives on any question arising hereunder or under the Plan, the Operating Guidelines or other policies or regulations which govern administration of the Plan.

 

16.          No Rights as Shareholder.  The Participant shall not be a shareholder of record and therefore shall have no voting, dividend or other shareholder rights until a Yum China Stock Appreciation Right is exercised and shares of Stock subject thereto have been issued to the Participant.

 

17.          Compliance with Law.  Notwithstanding any other provision of the Plan or this Agreement, unless there is an available exemption from any registration, qualification or other legal requirement applicable to the shares of Stock, the Company shall not be required to deliver any shares issuable upon exercise of the Yum China Stock Appreciation Rights prior to the completion of any registration or qualification of the shares under any local, state, federal or foreign securities or exchange control law or under rulings or regulations of the United States Securities and Exchange Commission (“SEC”) or of any other governmental regulatory body, or prior to obtaining any approval or other clearance from any local, state, federal or foreign governmental agency, which registration, qualification or approval the Company shall, in its absolute discretion, deem necessary or advisable.  The Company is under no obligation to register or qualify the shares with the SEC or any state or foreign securities commission or to seek approval or clearance from any governmental authority for the issuance or sale of the shares.  The Company shall have unilateral authority to amend the Plan and the Agreement without my consent to the extent necessary to comply with securities or other laws applicable to issuance of shares.

 

18.          Governing Law & Venue.  The Participant’s participation in the Plan and this Agreement shall be governed by and construed in accordance with the laws of the State of Delaware, without giving effect to the principles of conflicts of laws thereof.

 

For purposes of litigating any dispute that arises in connection with this grant, the Participant’s participation in the Plan or this Agreement, the parties hereby submit to and consent to the jurisdiction of the State of Delaware and agree that such litigation shall be conducted in the courts of [Insert], or the federal courts for the United States for the [Insert], where this grant is made and/or to be performed.

 

9

 

19.          Language.  If the Participant has received this Agreement or any other document related to the Plan translated into a language other than English and if the meaning of the translated version is different than the English version, the English version will control.

 

20.          Electronic Delivery.  The Company may, in its sole discretion, decide to deliver any documents related to current or future participation in the Plan by electronic means.  The Participant hereby consents to receive such documents by electronic delivery and to agree to participate in the Plan through an on-line or electronic system established and maintained by the Company or a third party designated by the Company.

 

21.          Severability.  The provisions of this Agreement are severable and if any one or more provisions are determined to be illegal or otherwise unenforceable, in whole or in part, the remaining provisions shall nevertheless be binding and enforceable.

 

22.          Imposition of Other Requirements.  The Committee reserves the right to impose other requirements on the Participant’s participation in the Plan and on any Stock acquired under the Plan, to the extent the Committee determines it is necessary or advisable for legal or administrative reasons, and to require the Participant to accept the terms of any additional agreements or undertakings that may be necessary to accomplish the foregoing.

 

23.          Appendix.  Notwithstanding any provisions herein, the Participant’s participation in the Plan shall be subject to any special terms and conditions set forth in the Appendix to this Yum China Stock Appreciation Rights Agreement for the Participant’s country.  Moreover, if the Participant relocates to one of the countries included in the Appendix, the special terms and conditions for such country will apply to the Participant, to the extent Committee determines in its sole discretion that the application of such terms and conditions is necessary or advisable for legal or administrative reasons.  The Appendix constitutes part of this Agreement.

 

24.          Definitions.  As used in this Agreement, the following terms shall have the meanings set forth below:

 

(a)           “Closing Value” of a share of Stock on any date shall mean an amount equal to the closing sales price of a share of Stock as reported on the composite tape for securities listed on The New York Stock Exchange, on the date in question (or, if no sales of Stock were made on said Exchange on such date, on the next preceding day on which sales were made on such Exchange), rounded to two decimal places.

 

(b)           “Retirement” shall mean termination of employment by the Participant on or after the Participant’s attainment of age 55 and 10 years of service or age 65 and 5 years of service (and not for any other reason).  Notwithstanding the definition of Retirement set forth immediately above, if the Company receives an opinion of counsel that there has been a legal judgment and/or legal development in the Participant’s jurisdiction that would likely result in the favorable Retirement treatment that applies to this grant under the Plan being deemed unlawful and/or discriminatory, then the Committee will not apply the favorable Retirement treatment at the time of the Participant’s termination of employment and the Yum China Stock Appreciation Rights shall be governed by the remaining provisions related to termination of the Participant’s employment.

 

10

 

By electronically accepting the grant of the Yum China Stock Appreciation Rights and participating in the Plan, the Participant agrees to be bound by the terms and conditions in the Plan and this Agreement.

 

Yum China Holdings, Inc.

 

	
By:
    	
 
    	
 
    
	
Its:
    	
 
    	
 
    

 

11

 

APPENDIX TO

 

YUM CHINA HOLDINGS, INC.

LONG TERM INCENTIVE PLAN

 

YUM CHINA STOCK APPRECIATION RIGHTS AGREEMENT

 

Certain capitalized terms used but not defined in this Appendix have the meanings set forth in the Yum China Stock Appreciation Rights Agreement and the Plan.

 

Terms and Conditions

 

This Appendix includes additional terms and conditions that govern the Yum China Stock Appreciation Rights granted to the Participant under the Yum China Holdings, Inc. Long Term Incentive Plan if the Participant works and/or resides in one of the countries listed below.

 

If the Participant is a citizen or resident of a country other than the one in which he or she is currently residing and/or working or transfers residency and/or employment after the Grant Date, the Company shall determine to which extent the additional terms and conditions shall be applicable to the Participant.

 

Notifications

 

This Appendix also includes information regarding exchange controls and certain other issues of which the Participant should be aware with respect to his or her participation in the Plan.  The information is based on the securities, exchange control and other laws in effect in the respective countries as of August 2016.  Such laws are often complex and change frequently.  As a result, the Company strongly recommends that the Participant not rely on the information in this Appendix as the only source of information relating to the consequences of the Participant’s participation in the Plan because the information may be out of date at the time that Yum China Stock Appreciation Rights vest or the Participant sells Stock acquired at vesting of the Yum China Stock Appreciation Rights under the Plan.

 

In addition, the information contained herein is general in nature and may not apply to the Participant’s particular situation, and the Company is not in a position to assure the Participant of a particular result.  Accordingly, the Participant is advised to seek appropriate professional advice as to how the relevant laws in the Participant’s country may apply to his or her situation.

 

Finally, if the Participant is a citizen or resident of a country other than the one in which he or she is currently working or transfers residency and/or employment after the Grant Date, the information contained herein may not be applicable to the Participant in the same manner.

 

 

CHINA

 

Terms and Conditions

 

The following provisions apply only to nationals of the People’s Republic of China (the “PRC”) residing in the PRC, unless otherwise determined by the Company or required by the State Administration of Foreign Exchange (“SAFE”):

 

Exercisability and Exercise Procedure.  This provision supplements Sections 2 and 3 of the Yum China Stock Appreciation Rights Agreement:

 

The exercisability and settlement of the Yum China Stock Appreciation Rights is conditioned on the Company’s completion of a registration of the Plan with SAFE and on the continued effectiveness of such registration (the “SAFE Registration Requirement”).  If the Company is unable to complete the registration or maintain the registration, the Participant shall not be permitted to exercise the Yum China Stock Appreciation Right.

 

Further, notwithstanding anything in the Agreement (including Section 4 of the Yum China Stock Appreciation Rights Agreement), if the Participant’s employment or service relationship with the Company Group is terminated at a time when the SAFE Registration Requirement is not met, all Yum China Stock Appreciation Rights shall be forfeited.

 

Mandatory Exercise and Sale of Shares Upon Termination of Service.  To ensure compliance with exchange control laws in China, and notwithstanding any provision in the Agreement (including Section 4 of the Yum China Stock Appreciation Rights Agreement), the Participant agrees that any vested and exercisable Yum China Stock Appreciation Rights must be exercised immediately upon, and in no event later than six months after, the Participant’s termination of service, or within any such other period as may be permitted by the Company or required by SAFE.  The Participant understands and acknowledges that, notwithstanding Section 4 of the Yum China Stock Appreciation Rights Agreement, any vesting of the Yum China Stock Appreciation Rights will cease in no event later than six months after the Participant’s termination of Service, or within such other period as may be permitted by the Company or required by SAFE.  In addition, the Participant acknowledges and agrees that any vested and exercisable Yum China Stock Appreciation Rights not exercised immediately upon the Participant’s termination, or within such other period as may be permitted by the Company or required by SAFE, will be forfeited or may be exercised by the Company on behalf of the Participant (pursuant to this authorization).

 

Further, the Participant agrees that any Stock issued upon exercise of the China Yum Stock Appreciation Rights and held by the Participant at the time of his or her termination of service must be sold immediately upon, and in no event later than six months after, the Participant’s termination of service, or within any such other period as may be permitted by the Company or required by SAFE..  Any Stock that is not sold by the Participant upon his her termination, or within such other period as may be permitted by the Company or required by SAFE, will be sold on his or her behalf as soon as practicable after the Participant’s termination of service and in no event more than six months after his or her termination of service or after such other period as required by SAFE.  The Participant authorizes(i) the Company to instruct its designated broker to sell such Stock and (ii) the designated broker to assist with the sale of such Stock.  The Participant acknowledges that the Company’s designated broker is under no obligation to arrange for the sale of the Stock at any particular price.  Upon the sale of the Stock, the Company agrees to pay the Participant the cash proceeds from the sale of the Stock, less any brokerage fees or

 

 

commissions and subject to any obligation on the Company or the Employer to satisfy any Tax-Related Items.

 

Broker Account.  Any Stock issued to the Participant upon exercise of the China Yum Stock Appreciation Rights must be maintained in an account with Merrill Lynch or such other broker as may be designated by the Company until the Stock is sold through that broker.

 

Repatriation.  Pursuant to exchange control laws in China, when the Stock acquired at exercise of the China Yum Stock Appreciation Rights is sold, whether immediately or thereafter, including on the Participant’s behalf after termination of his or her service, the Participant will be required to immediately repatriate the cash proceeds from the sale of the Stock and any cash dividends paid on such Stock to China.  The Participant further understands that, under local law, such repatriation of his or her cash proceeds will need to be effectuated through a special exchange control account established in China by the Company or any Subsidiary or the Employer, and the Participant hereby consents and agrees that any proceeds from the sale of Stock will be transferred to such special account prior to being delivered to the Participant.  Unless the Company in its sole discretion decides otherwise, the proceeds will be paid to the Participant in local currency.  The Company is under no obligation to secure any exchange conversion rate, and the Company may face delays in converting the proceeds to local currency due to exchange control restrictions in China.  The Participant agrees to bear any currency fluctuation risk between the time the Stock is sold and the time the sale proceeds are distributed through such special exchange control account.

 

Other.  The Participant further agrees to comply with any other requirements that may be imposed by the Company in the future in order to facilitate compliance with exchange control requirements in China and to sign any agreements, forms and/or consents that may be reasonably requested by the Company or its designated broker to effectuate any of the remittances, transfers, conversions or other processes affecting the proceeds.

 

Notifications

 

Foreign Asset and Account Reporting.  The Participant may be required to report to SAFE all details of their foreign financial assets and liabilities, as well as details of any economic transactions conducted with non-PRC residents.  The Participant should consult with his or her personal advisor in order to ensure compliance with applicable reporting requirements.

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00262-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00262-of-00352.parquet"}]]