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Subsequent Events
8 Months Ended
Aug. 31, 2016
Subsequent Events [Abstract]  
Subsequent Events

Note 11 – Subsequent Events

The Company evaluates subsequent events in accordance with ASC Topic 855, Subsequent Events.  

Investment Agreements With Strategic Investors

On September 1, 2016, YUM and the Company entered into investment agreements with each of Pollos Investment L.P., an affiliate of Primavera Capital Group (“Primavera”), and API (Hong Kong) Investment Limited, an affiliate of Zhejiang Ant Small and Micro Financial Services Group Co., Ltd. (“Ant Financial” and, together with Primavera, the “Investors”).  Pursuant to the investment agreements, on November 1, 2016, Primavera and Ant Financial invested $410 million and $50 million, respectively, for a collective $460 million investment (the “Investment”) in the Company in exchange for: (i) shares of the Company’s common stock representing in the aggregate 5% of the Company’s common stock issued and outstanding immediately following the separation subject to potential adjustment for a final aggregate ownership between 4.3% and 5.9% in the Company and (ii) two tranches of warrants (the “Warrants”), which will be issued to the Investors approximately 70 days after the separation, exercisable by the Investors for an approximate additional 4% ownership, in the aggregate, of the Company’s common stock issued and outstanding after the separation, taking into account the shares previously issued to the Investors.

In connection with and at the closing of the Investment, on November 1, 2016, the Company and the Investors entered into a shareholders agreement, relating to rights and obligations of the Investors as holders of the Company’s common stock and Warrants. Under the terms of the shareholders agreement, after the closing of the Investment, Primavera will be entitled to designate one member of the Company’s board of directors and have the right to designate one non-voting board observer to the Company’s board of directors. In addition, if certain shareholding requirements are met by both Primavera and Ant Financial, Ant Financial will also have the right to designate one non-voting board observer to the Company’s board of directors. If Primavera no longer meets certain shareholding requirements, then three years after such time, Ant Financial will lose its right to designate a board observer (unless such right has been previously terminated pursuant to the terms of the shareholders agreement).

 

Long Term Incentive Plan

Effective October 31, 2016, the Company adopted the Yum China Holdings, Inc. Long Term Incentive Plan (the “2016 Plan”). The Company has reserved for issuance under the 2016 Plan of 45,000,000 shares of our common stock. Under this plan, the exercise price of stock options and stock appreciation rights (“SARs”) granted must be equal to or greater than the fair market value of the Company’s stock on the date of grant.

Potential awards to employees and non-employee directors under the 2016 Plan include stock options, incentive options, SARs, restricted stock, stock units, restricted stock units (“RSUs”), performance shares, performance units, and cash incentive awards. We have issued only stock options, SARs and RSUs under the 2016 Plan as of the date of issuance of this report. While awards under the 2016 Plan can have varying vesting provisions and exercise periods, outstanding awards under the 2016 Plan vest in periods ranging from three to five years. Stock options and SARs expire ten years after grant.

New Credit Facilities

Subsequent to August 31, 2016, the Company determined it would not renew its existing three-year credit facility. In addition, on October 31, 2016, the Company entered into three new revolving credit facilities of RMB700 million, RMB300 million and RMB200 million (approximately $180 million in the aggregate).  The credit facilities have terms ranging from 1 to 3 years.  Each credit facility bears interest based on the prevailing rate stipulated by the People’s Bank of China and contains financial covenants including, among other things, limitations on certain additional indebtedness and liens, and certain other transactions specified in the respective agreement. Each credit facility contains cross-default provision whereby our failure to make any payment on a principal amount from any credit facility will constitute a default on the respective agreement. Interest on any outstanding borrowings is due at least monthly.  No amounts are outstanding under these credit facilities as of the date of issuance of this report.