EXHIBIT 10.4

 

EMPLOYMENT AGREEMENT

 

This Employment Agreement (the “Agreement”) is entered into as of the 17th day
of March, 1997 (the “Effective Date”), between IHOP CORP., a Delaware
corporation (the “Company”), and Richard C. Celio (the “Employee”).

 

Whereas, the Board of Directors of the Company (the “Board”) has approved and
authorized the entry into this Agreement with the Employee; and

 

Whereas, the parties desire to enter into this Agreement setting forth the terms
and conditions for the employment relationship of the Employee with the Company.

 

Now, therefore, in consideration of the promises and mutual covenants and
agreements herein contained and intending to be legally bound hereby, the
Company and the Employee hereby agree as follows:

 

1. Employment. The Employee is employed as Vice President - Development of the
Company from the Effective Date through the Term of this Agreement (as defined
in Section 2 hereof). In this capacity, the Employee shall have such duties and
responsibilities as may be designated to him by the Board from time to time and
as are not inconsistent with the Employee’s position with the Company, including
the performance of duties with respect to any subsidiaries of the Company, as
may be designated by the Board. During the Employee’s period of employment
hereunder, the Employee shall be based in the principal offices of the Company
in Southern California, and shall not be required to relocate outside of
Southern California to perform services hereunder, except for travel as
reasonably required in the performance of his duties hereunder.

 

2. Term. The “initial term” of this Agreement shall be for the period commencing
on the Effective Date and ending on the second anniversary of the Effective
Date; provided, however, that on the second anniversary of the Effective Date,
and on each subsequent anniversary date thereafter, the term of this Agreement
shall automatically be extended for one additional year unless, not later than
90 days prior to such applicable anniversary date, the Company or the Employee
shall give notice not to extend this Agreement; and provided further, however,
that, if a Change in Control (as defined in Section 11(g)) occurs prior to the
expiration of the Term of this Agreement, this Agreement shall remain in full
force and effect and shall not expire prior to the last day of the 24th month
following the date of such Change in Control. The “Term of this Agreement” or
“Term” shall mean, for purposes of this Agreement, both the “initial term” (as
hereinbefore described) and any additional term (created by

 

--------------------------------------------------------------------------------

 

extension, as described above), and the Term of this Agreement shall not be
affected by the Employee’s termination of employment.

 

3. Salary. Subject to the further provisions of this Agreement, the Company
shall pay the Employee during the Term of this Agreement a salary at an annual
rate equal to $190,000, with such salary to be increased at such times, if any,
and in such amounts as determined by the Board, which increases shall be
consistent with the historical business practices of the Company and the salary
adjustments for other senior executives of the Company. Such salary shall be
payable by the Company to the Employee not less frequently than monthly and
shall not be decreased at any time during the Term of this Agreement.
Participation in deferred compensation, discretionary bonus, retirement, and
other employee benefit plans and in fringe benefits shall not reduce the salary
payable to the Employee under this Section.

 

4. Participation in Bonus, Retirement and Employee Benefit Plans. The Employee
shall be entitled to participate equitably with other senior executives in any
plan of the Company relating to bonuses, stock options, stock purchases,
pension, thrift, profit sharing, life insurance, medical coverage, education, or
other retirement or employee benefits that the Company has adopted or may adopt
for the benefit of its senior executives. For purposes of the Company’s
Executive Incentive Plan, Employee’s target bonus will be 50% of his base pay.

 

5. Hiring Incentives.

 

(a). Upon the Effective Date, or as soon as practicable thereafter, Employee
shall receive a restricted stock award in the amount of 9456 shares of IHOP
Corp. common stock. Such restricted stock award shall be subject to the terms of
the IHOP Corp. 1991 Stock Incentive Plan, as amended, and a Restricted Stock
Award Agreement setting forth, among other things, the conditions for release of
the restrictions on the shares.

 

(b). Upon the Effective Date, or as soon as practicable thereafter, Employee
shall receive an option to purchase a total of 20,000 shares of IHOP Corp.
common stock. Such stock option shall be subject to the terms of the IHOP Corp.
1991 Stock Incentive Plan, as amended, and a Stock Option Agreement setting
forth, among other things, the option exercise vesting schedule and option
exercise price.

 

2

--------------------------------------------------------------------------------

 

6. Fringe Benefits; Automobile. The Employee shall be entitled to receive all
other fringe benefits which are now or may be provided to the Company’s senior
executives. In addition, the Company shall provide the Employee during the Term
of this Agreement with a car allowance of $700 per month, plus reimbursement of
all automobile expenses such as gasoline, maintenance, insurance and vehicle
registration, in accordance with the Company’s general policy on providing cars
to senior executives. Notwithstanding the foregoing, the benefits provided under
this Section 6 shall cease upon the Employee’s Date of Termination (as defined
in Section 11(d)).

 

7. Vacations. The Employee shall be entitled to an annual paid vacation as
determined in accordance with the Company’s general policy for senior
executives.

 

8. Business Expenses. During such time as the Employee is rendering services
hereunder, the Employee shall be entitled to incur and be reimbursed for all
reasonable business expenses and be provided allowances as are furnished to the
Company’s most senior executives under the Company’s then current policies. The
Company agrees that it will reimburse the Employee for all such expenses upon
the presentation by the Employee, from time to time, of an itemized account of
such expenditures, setting forth the date, the purposes for which incurred, and
the amounts thereof, together with such receipts showing payments in conformity
with the Company’s established policies. Reimbursement shall be made within a
reasonable period after the Employee’s submission of an itemized account.

 

9. Insurance and Indemnity. The Employee shall be added as an additional named
insured under all appropriate insurance policies now in force or hereafter
obtained covering any officers or directors of the Company. The Company shall
indemnify and hold the Employee harmless from any cost, expense or liability
arising out of or relating to any acts or decisions made by the Employee on
behalf of or in the course of performing services for the Company to the same
extent the Company indemnifies and holds harmless other senior executive
officers and directors of the Company and in accordance with the Company’s
established policies.

 

10. Legal and Accounting Advice. The Employee shall be entitled to reimbursement
by the Company for expenses incurred by him for personal legal, accounting,
investment or estate planning services in an amount to be determined by the
Board, but in no event greater than $5,000 annually (or a pro rata portion of
such amount for any period of employment less than a full year);

 

3

--------------------------------------------------------------------------------

 

provided, however, that no reimbursement shall be made for any such expenses
incurred by the Employee after such Employee’s Date of Termination.

 

11. Termination.

 

(a) Disability. If, as a result of the Employee’s incapacity due to physical or
mental illness, he shall have been absent from the full-time performance of his
duties with the Company for 90 consecutive days or 180 days within any 12-month
period, his employment may be terminated by the Company for “Disability.”

 

(b) Cause. Subject to the notice provisions set forth below, the Company may
terminate the Employee’s employment for “Cause” at any time. “Cause” shall mean
termination upon: (1) the willful failure by the Employee to substantially
perform his duties with the Company (other than any such failure resulting from
his incapacity due to physical or mental illness), after a written demand for
substantial performance is delivered to him by the Board, which demand
specifically identifies the manner in which the Board believes that he has not
substantially performed his duties; (2) the Employee’s willful misconduct that
is demonstrably and materially injurious to the Company, monetarily or
otherwise; or (3) the Employee’s commission of such acts of dishonesty, fraud,
misrepresentation or other acts of moral turpitude as would prevent the
effective performance of his duties. For purposes of this subsection (b), no
act, or failure to act, on the Employee’s part shall be deemed “willful” unless
done, or omitted to be done, by him not in good faith and without the reasonable
belief that his action or omission was in the best interest of the Company.
Notwithstanding the foregoing, the Employee shall not be deemed to have been
terminated for Cause unless and until there shall have been delivered to him a
copy of a resolution duly adopted by the affirmative vote of a majority of the
non-employee members of the Board at a meeting of such members (after reasonable
notice to him and an opportunity for him, together with his counsel, to be heard
before such members of the Board), finding that he has engaged in the conduct
set forth above in this subsection (b) and specifying the particulars thereof in
detail.

 

4

--------------------------------------------------------------------------------

 

(c) Notice of Termination. Any termination of the Employee’s employment by the
Company or by the Employee shall be communicated by written Notice of
Termination to the other party hereto in accordance with Section 15. “Notice of
Termination” shall mean a notice that indicates the specific termination
provision in this Agreement relied upon and sets forth in reasonable detail the
facts and circumstances claimed to provide a basis for the termination of the
Employee’s employment under the provision so indicated.

 

(d) Date of Termination. “Date of Termination” shall mean: (1) if the Employee’s
employment is terminated by his death, the date of his death; (2) if the
Employee’s employment is terminated for Disability, 30 days after Notice of
Termination is given; and (3) if the Employee’s employment is terminated for any
other reason, the date specified in the Notice of Termination.

 

(e) Dispute Concerning Termination. If within the later of (i) fifteen (15) days
after Notice of Termination is given, or (ii) fifteen (15) days prior to the
Date of Termination (as determined without regard to this Section 11(e), the
party receiving such Notice of Termination notifies the other party that a
dispute exists concerning a termination by the Employee for Good Reason (as
defined in Section 11(h)) following a Change in Control (as defined in Section
11(g)), the Date of Termination shall be the earlier of the expiration date of
the Agreement, or the date on which the dispute is finally resolved, either by
mutual written agreement of the parties or by a final judgment, order or decree
of a court of competent jurisdiction (which is not appealable or with respect to
which the time for appeal therefrom has expired and no appeal has been
perfected); provided, however, that the Date of Termination shall be extended by
a notice of dispute only if such notice is given in good faith and the party
giving such notice pursues the resolution of such dispute with reasonable
diligence.

 

(f) Compensation During Dispute. If a purported termination by the Employee for
Good Reason occurs following a Change in Control and during the Term of this
Agreement, and such termination is disputed in accordance with Section 11(e)
hereof, the Company shall continue to pay the Employee the full compensation in
effect when the notice giving rise to the dispute was given (including, but not
limited to, salary) and continue the Employee as a participant in all
compensation, benefit and insurance plans in which the Employee was
participating when the notice giving rise

 

5

--------------------------------------------------------------------------------

 

to the dispute was given, until the dispute is finally resolved in accordance
with Section 11(e) hereof or, if earlier, the expiration date of the Agreement.
Amounts paid under this Section 11(f) are in addition to all other amounts due
under this Agreement (other than those due under Section 12(b) hereof) and shall
not be offset against or reduce any other amounts payable under this Agreement.

 

(g) Change in Control. A “Change in Control” shall be deemed to have occurred if
the conditions set forth in any one of the following paragraphs shall have been
satisfied:

 

(i) any “person” (as such term is used in Sections 14(d) and 15(d) of the
Securities Exchange Act of 1934, as amended (the “Exchange Act”)) (other than
the Company; any trustee or other fiduciary holding securities under an employee
benefit plan of the Company; or any Company owned, directly or indirectly, by
the stockholders of the Company in substantially the same proportions as their
ownership of the stock of the Company) is or becomes after the Effective Date
the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act),
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 its affiliates) representing 25% or more of the combined
voting power of the Company’s then outstanding securities; or

 

(ii) during any period of two consecutive years (not including any period prior
to the Effective Date), individuals who at the beginning of such period
constitute the Board and any new director (other than a director designated by a
person who has entered into an agreement with the Company to effect a
transaction described in subparagraph (i), (iii) or (iv) of this Section 11(g))
whose election by the Board or nomination for election by the Company’s
stockholders was approved by a vote of at least 2/3 of the directors then still
in office who either were directors at the beginning of the period or whose
election or nomination for election was previously so approved, cease for any
reason to constitute a majority thereof; or

 

(iii) the stockholders of the Company approve a merger or consolidation of the
Company with any other corporation, other than (A) a merger or consolidation
which would result in the voting securities of the Company outstanding
immediately prior thereto continuing to represent (either by remaining
outstanding or by

 

6

--------------------------------------------------------------------------------

 

being converted into voting securities of the surviving entity), in combination
with the ownership of any trustee or other fiduciary holding securities under an
employee benefit plan of the Company, at least 75% of the combined voting power
of the voting securities of the Company or such surviving entity outstanding
immediately after such merger or consolidation, or (B) a merger or consolidation
effected to implement a recapitalization of the Company (or similar transaction)
in which no person acquires more than 50% of the combined voting power of the
Company’s then outstanding securities; or

 

(iv) the stockholders of the Company approve a plan of complete liquidation of
the Company or an agreement for the sale or disposition by the Company of all or
substantially all the Company’s assets.

 

(h) Good Reason. At any time following a Change in Control, the Employee may
terminate his employment hereunder for “Good Reason.” “Good Reason” shall mean
the occurrence (without the Employee’s express written consent) of any material
breach of this Agreement, including, without limitation, any one of the
following acts by the Company, or failures by the Company to act, unless, in the
case of any act or failure to act described in subsections (i), (iv), (v), (vi)
or (vii) below, such act or failure to act is corrected prior to the Date of
Termination specified in the Notice of Termination given in respect thereof:

 

(i) the assignment to the Employee of any duties inconsistent with the
Employee’s status as a senior executive of the Company or a substantially
adverse alteration in the nature or status of the Employee’s responsibilities
from those in effect immediately prior to the Change in Control;

 

(ii) a reduction by the Company in the Employee’s annual base salary as in
effect on the date hereof or as the same may be increased from time to time ;

 

(iii) the relocation of the Company’s principal offices to a location outside
Southern California (or, if different, the metropolitan area in which such
offices are located immediately prior to the Change in Control) or the Company’s
requiring the Employee to be based anywhere other than the Company’s principal
executive offices, except for required travel on the Company’s business to an
extent

 

7

--------------------------------------------------------------------------------

 

substantially consistent with the Employee’s present business travel
obligations;

 

(iv) the failure by the Company to pay to the Employee any portion of the
Employee’s current compensation, or to pay to the Employee any portion of an
installment of deferred compensation under any deferred compensation program of
the Company, within seven days of the date such compensation is due;

 

(v) the failure by the Company to continue in effect any compensation plan in
which the Employee participates immediately prior to the Change in Control which
is material to the Employee’s total compensation, unless an equitable
arrangement (embodied in an ongoing substitute or alternative plan) has been
made with respect to such plan, or the failure by the Company to continue the
Employee’s participation therein (or in such substitute or alternative plan) on
a basis not materially less favorable, both in terms of the amount of benefits
provided and the level of the Employee’s participation relative to other
participants, as existed immediately prior to the Change in Control;

 

(vi) the failure by the Company to continue to provide the Employee with
benefits substantially similar to those enjoyed by the Employee under any of the
Company’s pension, life insurance, medical, health and accident, or disability
plans in which the Employee was participating immediately prior to the Change in
Control; or the taking of any action by the Company which would directly or
indirectly materially reduce any of such benefits or deprive the Employee of any
material fringe benefit enjoyed by the Employee immediately prior to the Change
in Control;

 

(vii) any purported termination of the Employee’s employment which is not
effected pursuant to a Notice of Termination satisfying the requirements of this
Agreement; for purposes of this Agreement, no such purported termination shall
be effective; or

 

(viii) any failure by the Company to comply with and satisfy Section 13(b) of
this Agreement.

 

The Employee’s right to terminate the Employee’s employment for Good Reason
shall not be affected by the Employee’s incapacity due to physical or mental
illness. The Employee’s continued employment shall

 

8

--------------------------------------------------------------------------------

 

not constitute consent to, or a waiver of rights with respect to, any act or
failure to act constituting Good Reason hereunder.

 

(i) Voluntary Termination. The Employee may terminate his employment hereunder
(“Voluntary Termination”) upon a material breach of this Agreement by the
Company, unless the Company shall fully correct such breach within 30 days of
the Employee’s Notice of Termination given in respect thereof.

 

12. Compensation Upon Termination or During Disability. The Employee shall be
entitled to the following benefits during a period of disability, or upon
termination of his employment, as the case may be, provided that such period or
termination occurs during the Term of this Agreement:

 

(a) During any period that the Employee fails to perform his full-time duties
with the Company as a result of incapacity due to physical or mental illness, he
shall continue to receive his base salary at the rate in effect at the
commencement of any such period, together with all compensation payable to him
under the Company’s disability plan or program or other similar plan during such
period, until his employment is terminated pursuant to Section 11 hereof.
Thereafter, or in the event the Employee’s employment shall be terminated by
reason of his death, his benefits shall be determined under the Company’s
retirement, insurance and other compensation programs then in effect in
accordance with the terms of such programs.

 

(b) If at any time the Employee’s employment shall be terminated: (i) by the
Company for Cause or Disability or (ii) by him for any reason (other than in a
Voluntary Termination or for Good Reason following the occurrence of a Change in
Control), the Company shall pay him his full base salary through the Date of
Termination at the rate in effect at the time Notice of Termination is given,
plus all other amounts to which he is entitled through the Date of Termination
under any compensation plan of the Company at the time such payments are due,
and the Company shall have no further obligations to him under this Agreement.

 

(c) If the Employee’s employment should be terminated: (1) by reason of his
death, (2) by the Company other than for Cause or Disability or (3) by the
Employee in a Voluntary Termination, he shall be entitled to the benefits
provided below:

 

9

--------------------------------------------------------------------------------

 

(i) the Company shall pay to the Employee or the appropriate payee (as
determined in accordance with Section 13(c)) (A) his full base salary through
the Date of Termination at the rate in effect at the time Notice of Termination
is given; plus (B)(x) in the case of death or a Voluntary Termination all salary
and bonus payments that would have been payable to the Employee pursuant to this
Agreement for the remaining Term of this Agreement, or (y) in all other cases,
all salary and bonus payments that would have been payable to the Employee had
the Employee continued to be employed for a period of 12 months, assuming for
the purpose of such payments that his salary for such remaining period is equal
to his salary at the Date of Termination and that his annual bonus for such
remaining Term is equal to the average of the annual bonuses paid to him by the
Company with respect to the three fiscal years ended immediately prior to the
fiscal year in which the Date of termination occurs; plus (C) all other amounts
to which he is entitled under any compensation plan of the Company, in cash in a
lump sum no later than the 15th day following the Date of Termination;

 

(ii) for a 12-month period after the Date of Termination, the Company shall
arrange to provide the Employee with life, disability, accident and health
insurance benefits substantially similar to those which the Employee and his
covered family members are receiving immediately prior to the Notice of
Termination (without giving effect to any reduction in such benefits subsequent
to a Change in Control); provided, however, that such continued benefits shall
be reduced to the extent comparable benefits are actually received by or made
available to the Employee without cost during the 12-month period following the
Employee’s termination of employment (and the Employee agrees that he shall
promptly report any such benefits actually received to the Company); and

 

(iii) the Company shall continue in effect for the benefit of the Employee all
insurance or other provisions for indemnification and defense of officers or
directors of the Company which are in effect on the date the Notice of
Termination is sent to the Employee with respect to all of his acts and
omissions while an officer or director as fully and completely as if such
termination had not occurred, and until the final expiration or running of all
periods of limitation against actions which may be applicable to such acts or
omissions.

 

10

--------------------------------------------------------------------------------

 

(d) If the Employee’s employment should be terminated by the Employee for Good
Reason following a Change in Control, he shall be entitled to the benefits
provided below:

 

(i) the Company shall pay to the Employee or the appropriate payee (as
determined in accordance with Section 13(c)) (A) his full base salary through
the Date of Termination at the rate in effect at the time Notice of Termination
is given; plus (B)(x) in the case of death or a Voluntary Termination all salary
and bonus payments that would have been payable to the Employee pursuant to this
Agreement for the remaining Term of this Agreement, or (y) in all other cases,
all salary and bonus payments that would have been payable to the Employee had
the Employee continued to be employed for a period of 24 months, assuming for
the purpose of such payments that his salary for such remaining period is equal
to his salary at the Date of Termination and that his annual bonus for such
remaining Term is equal to the average of the annual bonuses paid to him by the
Company with respect to the three fiscal years ended immediately prior to the
fiscal year in which the Date of termination occurs; plus (C) all other amounts
to which he is entitled under any compensation plan of the Company, in cash in a
lump sum no later than the 15th day following the Date of Termination;

 

(ii) for a 24-month period after the Date of Termination, the Company shall
arrange to provide the Employee with life, disability, accident and health
insurance benefits substantially similar to those which the Employee and his
covered family members are receiving immediately prior to the Notice of
Termination (without giving effect to any reduction in such benefits subsequent
to a Change in Control); provided, however, that such continued benefits shall
be reduced to the extent comparable benefits are actually received by or made
available to the Employee without cost during the 24-month period following the
Employee’s termination of employment (and the Employee agrees that he shall
promptly report any such benefits actually received to the Company); and

 

(iii) the Company shall continue in effect for the benefit of the Employee all
insurance or other provisions for indemnification and defense of officers or
directors of the Company which are in effect on the date the Notice of
Termination is sent to the Employee with respect to all of his acts and
omissions while an officer or director as

 

11

--------------------------------------------------------------------------------

 

fully and completely as if such termination had not occurred, and until the
final expiration or running of all periods of limitation against actions which
may be applicable to such acts or omissions.

 

(e) Notwithstanding any other provisions of this Agreement, in the event that
any payment or benefit received or to be received by the Employee in connection
with the termination of the Employee’s employment (whether such benefit is
pursuant to the terms of this Agreement or any other plan, arrangement or
agreement with the Company, and all such payments and benefits being hereinafter
called “Total Payments”) would not be deductible (in whole or part), by the
Company as a result of the application of Section 280G of the Internal Revenue
Code of 1986, as amended (“Code”), then, to the extent necessary to make the
nondeductible portion of the Total Payments deductible, (i) the cash payments
under this Agreement shall first be reduced (if necessary, to zero), and (ii)
all other non-cash payments under this Agreement shall next be reduced (if
necessary, to zero).

 

(f) If it is established as described in the preceding subsection (d) that the
aggregate benefits paid to or for the Employee’s benefit are in an amount that
would result in any portion of such “parachute payments” not being deductible by
reason of Section 280G of the Code, then the Employee shall have an obligation
to pay the Company upon demand an amount equal to the sum of: (i) the excess of
the aggregate “parachute payments” paid to or for the Employee’s benefit over
the aggregate “parachute payments” that could have been paid to or for the
Employee’s benefit without any portion of such “parachute payments” not being
deductible by reason of Section 280G of the Code; and (ii) interest on the
amount set forth in clause (i) of this sentence at the rate provided in Section
1274(b)(2)(B) of the Code from the date of the Employee’s receipt of such excess
until the date of such payment.

 

(g) The Employee shall not be required to mitigate the amount of any payment
provided for in this Agreement by seeking other employment or otherwise.

 

(h) If the employment of the Employee is terminated by the Company without Cause
or the Employee’s employment is terminated by the Employee under conditions
entitling him to payment hereunder and the Company fails to make timely payment
of the amounts then owed to the Employee under this Agreement, the Employee
shall be entitled to interest on such amounts at the rate of 1% above the prime
rate (defined

 

12

--------------------------------------------------------------------------------

 

as the base rate on corporate loans at large U.S. money center commercial banks
as published by the Wall Street Journal), compounded monthly, for the period
from the date such amounts were otherwise due until payment is made to the
Employee (which interest shall be in addition to all rights which the Employee
is otherwise entitled to under this Agreement).

 

13. Assignment.

 

(a) This Agreement is personal to each of the parties hereto. No party may
assign or delegate any rights or obligations hereunder without first obtaining
the written consent of the other party hereto, except that this Agreement shall
be binding upon and inure to the benefit of any successor corporation to the
Company.

 

(b) The Company shall 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 it if no such succession had taken place. As used in this
Agreement, “Company” shall mean the Company as hereinbefore defined and any
successor to its business and/or assets as aforesaid which assumes this
Agreement by operation of law, or otherwise.

 

(c) This Agreement shall inure to the benefit of and be enforceable by the
Employee and his personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees. If the Employee should
die while any amount would still be payable to him hereunder had he continued to
live, all such amounts, unless otherwise provided herein, shall be paid in
accordance with the terms of this Agreement to his devisee, legatee or other
designee or, if there is no such designee, to his estate.

 

14. (a) Confidential Information. During the Term of this Agreement and
thereafter, the Employee shall not, except as may be required to perform his
duties hereunder or as required by applicable law, disclose to others for use,
whether directly or indirectly, any Confidential Information regarding the
Company. “Confidential Information” shall mean information about the Company,
its subsidiaries and affiliates, and their respective clients and customers that
is not available to the general public and that was learned by the Employee in
the course of his employment by the Company, including (without limitation) any
data,

 

13

--------------------------------------------------------------------------------

 

formulae, information, proprietary knowledge, trade secrets and client and
customer lists and all papers, resumes, records and the documents containing
such Confidential Information. The Employee acknowledges that such Confidential
Information is specialized, unique in nature and of great value to the Company,
and that such information gives the Company a competitive advantage. Upon the
termination of his employment, the Employee will promptly deliver to the Company
all documents (and all copies thereof) containing any Confidential Information.

 

(b) Noncompetition. The Employee agrees that during the Term of this Agreement,
and for a period of one year thereafter, he will not, directly or indirectly,
without the prior written consent of the Company, provide consultative service
with or without pay, own, manage, operate, join, control, participate in, or be
connected as a stockholder, partner, or otherwise with any business, individual,
partner, firm, corporation, or other entity which is then in competition with
the Company or any present affiliate of the Company; provided, however, that the
“beneficial ownership” by the Employee, either individually or as a member of a
“group,” as such terms are used in Rule 13d of the General Rules and Regulations
under the Exchange Act, of not more than 1% of the voting stock of any publicly
held corporation shall not be a violation of this Agreement. It is further
expressly agreed that the Company will or would suffer irreparable injury if the
Employee were to compete with the Company or any subsidiary or affiliate of the
Company in violation of this Agreement and that the Company would by reason of
such competition be entitled to injunctive relief in a court of appropriate
jurisdiction, and the Employee further consents and stipulates to the entry of
such injunctive relief in such a court prohibiting the Employee from competing
with the Company or any subsidiary or affiliate of the Company in violation of
this Agreement.

 

(c) Right to Company Materials. The Employee agrees that all styles, designs,
recipes, lists, materials, books, files, reports, correspondence, records, and
other documents (“Company Material”) used, prepared, or made available to the
Employee, shall be and shall remain the property of the Company. Upon the
termination of his employment or the expiration of this Agreement, all Company
Materials shall be returned immediately to the Company, and Employee shall not
make or retain any copies thereof.

 

(d) Antisolicitation. The Employee promises and agrees that during the Term of
this Agreement, and for a period of one year thereafter,

 

14

--------------------------------------------------------------------------------

 

he will not influence or attempt to influence customers, franchisees, landlords,
or suppliers of the Company or any of its present or future subsidiaries or
affiliates, either directly or indirectly, to divert their business to any
individual, partnership, firm, corporation or other entity then in competition
with the business of the Company, or any subsidiary or affiliate of the Company.

 

15. Notice. For the purpose of this Agreement, notices and all other
communications provided for in this Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
certified or registered mail, return receipt requested, postage prepaid,
addressed to the respective addresses set forth below, or to such other
addresses as either party may have furnished to the other in writing in
accordance herewith, except that notice of a change of address shall be
effective only upon actual receipt:

 

 

Company:

IHOP Corp.

 

 

525 North Brand Blvd.

 

 

Glendale, California  91203-1903

 

 

to the attention of the Board;

 

with a copy to:

the Secretary of the Company 

 

 

 

 

Employee:

Richard C. Celio

 

 

525 North Brand Boulevard

 

 

Glendale, California  91203.

 

16. Amendments or Additions. No amendments or additions to this Agreement shall
be binding unless in writing and signed by both parties hereto.

 

17. Section Headings. The section headings used in this Agreement are included
solely for convenience and shall not affect, or be used in connection with, the
interpretation of this Agreement.

 

18. Severability. The provisions of this Agreement shall be deemed severable and
the invalidity or unenforceability of any provision shall not affect the
validity or enforceability of the other provisions hereof.

 

19. Counterparts. This Agreement may be executed in counterparts, each of which
shall be deemed to be an original, but both of which together will constitute
one and the same instrument.

 

20. Arbitration. Any dispute or controversy arising under or in connection with
this Agreement shall be settled exclusively by arbitration,

 

15

--------------------------------------------------------------------------------

 

conducted before a panel of three arbitrators in Los Angeles, California, in
accordance with the rules of the American Arbitration Association then in
effect. Judgment may be entered on the arbitrator’s award in any court having
jurisdiction; provided, however, that the Employee shall be entitled to seek
specific performance of his right to be paid until the Date of Termination
during the pendency of any dispute or controversy arising under or in connection
with this Agreement.

 

21. Attorneys’ Fees. The Company shall pay to the Employee all out-of- pocket
expenses, including attorneys’ fees, incurred by the Employee in connection with
any claim, legal action or proceeding involving this Agreement in which the
Employee prevails in whole or in part, whether brought by the Employee or by or
on behalf of the Company or by another party. The Company shall pay prejudgment
interest on any money judgment obtained by the Employee calculated at 3% above
the prime rate (defined as the base rate on corporate loans at large U.S. money
center commercial banks as published by the Wall Street Journal), from the date
that payment(s) to the Employee should have been made under this Agreement.

 

22. Miscellaneous. No provision of this Agreement may be modified, waived or
discharged unless such waiver, modification or discharge is agreed to in writing
and signed by the Employee and such officer as may be specifically designated by
the Board. No waiver by either party hereto at any time of any breach by the
other party hereto of, or compliance with, any condition or provision of this
Agreement to be performed by such other party shall be deemed a waiver of
similar or dissimilar provisions or conditions at the same or at any prior or
subsequent time. No agreements or representations, oral or otherwise, express or
implied, with respect to the subject matter hereof have been made by either
party which are not expressly set forth in this Agreement and this agreement
shall supersede any prior understanding or agreement either written or oral,
will respect to the subject matter hereto. The validity, interpretation,
construction and performance of this Agreement shall be governed by the laws of
the State of California without regard to its conflicts of law principles. All
references to sections of the Exchange Act or the Code shall be deemed also to
refer to any successor provisions to such sections.

 

Any payments provided for hereunder shall be paid net of any applicable
withholding required under federal, state or local law. The obligations of the

 

16

--------------------------------------------------------------------------------

 

Company under Section 12 and Section 20 and the obligations of the Employee
under Section 14 and Section 20 shall survive the expiration of the Term of this
Agreement.

 

IN WITNESS WHEREOF, each of the parties hereto has executed this Agreement on
the date first indicated above.

 

 

ATTEST:

 

IHOP CORP. 

 

 

 

 

 

 

 

 

 

 

 

 

 

/s/ Mark D. Weisberger

 

By:

/s/ Richard K. Herzer

 

 

Mark D. Weisberger

 

Richard K. Herzer

 

Secretary

 

President

 

 

 

 

 

EMPLOYEE:

 

 

/s/ Richard C. Celio

 

 

Richard C. Celio

 

 

17