Exhibit 10.12


 


 





 


 


Executive Incentive Plan


 


 


2005


 


 


CONFIDENTIAL


 


The information
contained within this document is highly sensitive and confidential and must be
handled with utmost discretion and integrity.


 


 





















 


Effective Date


 


The Executive Incentive Plan
is effective January 1, 2005 and supersedes all previously implemented
plans.


 


Modification
of the Plan


 


IHOP Corp. and its
subsidiaries reserve the right to modify, terminate or make exceptions to the
Executive Incentive Plan (“Plan”) at any time without prior notice.  The Plan will be reviewed on an annual basis
allowing for updates or revisions to be considered.  The Plan and this Plan Document do not
constitute or imply an employment contract, and participants accrue no
interest, right or any benefit in the Plan, except as specifically set forth in
this document.


 


Eligibility


 


The Plan includes the
Chief Executive Officer& President, other Chief Officers, Vice
Presidents/Executive Officers, and Vice Presidents/Non-executive Officers.  Participants must be actively employed with
IHOP Corp. and its subsidiaries through the end of the Plan Year.  The Company’s Plan Year is based on IHOP’s
fiscal year.  The last day worked is the
last day an employee is considered active. 
In the case of termination, vacation or other payments can not be used
to extend the last day worked.


 


New
Hires/Re-Hires


 


Incentive eligibility
begins with the first complete calendar month worked in an eligible position.


 


For participant’s that
begin work with IHOP Corp. during the Plan Year, the incentive will be paid on
a prorated basis.  The prorated
percentage is determined based on when the employee begins work.  If the employee begins work during the first
full workweek of the month, they will be credited for a whole month worked.
However, if the employee begins work after the first full workweek of the
month, he/she will not be entitled to receive an incentive for that
month.


 


Employees hired on or
after October 1, 2005 are not eligible for a bonus payout.


 


Promotions


 


Promotion
from a non-eligible position to an eligible position: Any
employee promoted from a non-eligible position to an eligible position during
the incentive period will have an incentive based on the number of whole months
worked in the incentive period.  If the participant
is promoted on the first calendar or workday of the month, credit will be for a
full month worked. The effective date of the promotion will be used to
determine the number of whole months worked. 
Eligibility begins with the first full month in the eligible position.


 


Promotion
from an eligible position to another: When an employee is
promoted from one eligible position to another, that month’s incentive will be
based on the prior position providing that the promotion occurred after the 15th
of the month. When a promotion occurs on or before the 15th of the
month, that month’s incentive will be based on the new position.


 


Short-Term
or Long-Term Disability, Workers’ Compensation and other Leaves of Absence


 


Any participant on leave of absence or otherwise
not actively working during the incentive period may be eligible for a prorated
incentive excluding the period on leave. 
The date the leave is effective and the date ending leave will be used
to calculate the number of whole months worked in the incentive period.


 


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Termination
Due to Death or Retirement


 


Any incentive earned will be prorated for
the incentive period based upon the actual number of whole months worked and
paid simultaneously with the normal distribution of incentives.  For the purposes of this plan, retirement
occurs if the individual’s age plus years of service is equal to, or greater
than, 70.


 


Plan
Description


 


The Executive Incentive Plan is an annual
incentive.  For all participants, the
Corporate Performance Measure is based on EPS. 
In addition, some participants are measured on the achievement of
specific individual business objectives (IBOs).


 


For the Vice President, Franchise
Operations, the Performance Measure is based on a combination of Corporate
Performance (EPS) and Franchise Operations Performance (see discussion below).


 


Target
Incentive & Weighting


 


The target incentive is
expressed as a percentage of base salary and is based on the position of the
participant (see “Target Incentive Table”). 
The Target Payout % multiplied by the participant’s base salary on the
last day of the fiscal year is the Target Incentive in dollars.


 


Target Incentive Table


 


	
   

  	
   

  	
  Chief

  Executive

  Officer &

  President

  	
   

  	
  Chief

  Officers

  	
   

  	
  Vice

  Presidents/

  Executive

  Officers

  	
   

  	
  Vice

  Presidents/

  Non-Executive

  Officers

  	
   

  
	
  TARGET PAYOUT AS A% OF BASE SALARY

  	
   

  	
  75%

  	
   

  	
  50%

  	
   

  	
  40%

  	
   

  	
  40%

  	
   

  



 


The incentive weighting
for the Chief Executive Officer & President is based 100% on Corporate Performance (EPS).


 


The incentive weighting
for Chief Officers and Vice Presidents is 30% Individual
Business Objectives and 70% Corporate
Performance (EPS).


 


The incentive weighting
for the Vice President, Franchise Operations is 30% Individual
Business Objectives, 35% Corporate
Performance (EPS), and 35% Franchise
Operations Performance (Sales -  17.5%
and Operating Profit - 17.5%).


 


Corporate
Performance


 


The Corporate Performance
measure is based on EPS (Earnings Per Share). 
For calculating payouts for the 2005 Executive Incentive Plan, the EPS
calculation will include the following adjustments:


 


•                  Budgeted shares outstanding will be
used to exclude the impact of any share buyback.


 


•                  Extraordinary items may also be
excluded from bonus calculations.  If
there are any major changes in Corporate direction, budgets, or EPS target, the
Payout Matrix may be re-evaluated with Compensation Committee approval.


 


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For bonus calculation
purposes, EPS will be calculated by using the following formula:


 




	
  Net Income (taking into account any adjustments
  highlighted above)

  
	
  19,770,000 (budgeted shares)

  






 


No bonus
will be paid out if EPS is less than $1.85. 
Target bonuses are paid out for EPS between $2.05 and
$2.059.  For every one cent in EPS
achieved at and above $2.059, the payout increases by 5%.  There is no maximum on the payout matrix.


 


In addition to the
calculated individual portion of the incentive, an award may be granted at the
discretion of the Chief Executive Officer (with approval by the Compensation
Committee) to individuals exceeding expected levels of performance.


 


Refer to the “Corporate
Performance (EPS) Payout Matrix” to determine the incentive achieved for the
Company performance portion of the incentive.


 


Corporate Performance (EPS) Payout  Matrix


 




	
  Threshold EPS

  	
   

  	
  $

  	
  1.85

  	
   

  	
   

  	
   

  
	
  Target EPS

  	
   

  	
  $

  	
  2.05

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  EPS Range

  	
   

  	
  Payout (as

  a % of

  target)

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Less Than $1.85

  	
   

  	
  0

  	
  %

  	
   

  
	
  $1.850 - $1.921

  	
   

  	
  50

  	
  %

  	
   

  
	
  $1.922 - $1.953

  	
   

  	
  60

  	
  %

  	
   

  
	
  $1.954 - $1.985

  	
   

  	
  70

  	
  %

  	
   

  
	
  $1.986 - $2.017

  	
   

  	
  80

  	
  %

  	
   

  
	
  $2.018 - $2.049

  	
   

  	
  90

  	
  %

  	
   

  
	
  $2.050 - $2.059

  	
   

  	
  100

  	
  %

  	
   

  
	
  $2.060 - $2.069

  	
   

  	
  105

  	
  %

  	
   

  
	
  $2.070 - $2.079

  	
   

  	
  110

  	
  %

  	
   

  
	
  $2.080 - $2.089

  	
   

  	
  115

  	
  %

  	
   

  
	
  $2.090 - $2.099

  	
   

  	
  120

  	
  %

  	
   

  
	
  $2.100 - $2.109

  	
   

  	
  125

  	
  %

  	
   

  
	
  $2.110 - $2.119

  	
   

  	
  130

  	
  %

  	
   

  
	
  $2.120 - $2.129

  	
   

  	
  135

  	
  %

  	
   

  
	
  $2.130 - $2.139

  	
   

  	
  140

  	
  %

  	
   

  
	
  $2.140 - $2.149

  	
   

  	
  145

  	
  %

  	
   

  
	
  $2.150 - $2.159

  	
   

  	
  150

  	
  %

  	
   

  
	
  Each .01 over 2.168

  	
   

  	
  Additional

  5%

  	
   

  






 


Individual
Business Objectives (IBOs)


 


Annually,
each participant in the plan sets individual business objectives in conjunction
with his or her immediate supervisor in December of each year.  During this process, challenging and measurable
objectives that significantly impact the Company performance are to be mutually
determined.  No participant will have
more than three IBOs without approval by the Chief Executive Officer.  After the fiscal year, a percentage of
achievement is then established by the immediate supervisor and approved by the
Chief Executive Officer.  This amount is
used to determine the IBO portion of the annual payout.  If EPS is less than $1.85,
there will be no payout for Individual Business Objectives, regardless of
individual achievement level.


 


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Franchise
Operations Performance


 


Franchise Operations
Performance is based on actual sales and operating profit versus original
budget, not flex budget.


 


The following payout
matrix is used to determine the incentive achieved for the Franchise Operations
performance portion of the incentive payout.


 


Any changes to the
original budget due to sales or re-sales will require the CEO &
President’s approval.  New units are
excluded from the Franchise Operations performance portion of the plan.


 


Franchise Operations - Sales & Operating
Profit Payout Matrix


 




	
  Performance Achievement

  	
   

  	
  % Of Incentive Achieved

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  Operating

  	
   

  
	
  Min

  	
   

  	
  Max

  	
   

  	
  Sales

  	
   

  	
  Profit

  	
   

  
	
  0.00

  	
  %

  	
  91.99

  	
  %

  	
  0

  	
  %

  	
  0

  	
  %

  
	
  92.00

  	
  %

  	
  92.99

  	
  %

  	
  20

  	
  %

  	
  20

  	
  %

  
	
  93.00

  	
  %

  	
  93.99

  	
  %

  	
  30

  	
  %

  	
  30

  	
  %

  
	
  94.00

  	
  %

  	
  94.99

  	
  %

  	
  40

  	
  %

  	
  40

  	
  %

  
	
  95.00

  	
  %

  	
  95.99

  	
  %

  	
  50

  	
  %

  	
  50

  	
  %

  
	
  96.00

  	
  %

  	
  96.99

  	
  %

  	
  60

  	
  %

  	
  60

  	
  %

  
	
  97.00

  	
  %

  	
  97.99

  	
  %

  	
  70

  	
  %

  	
  70

  	
  %

  
	
  98.00

  	
  %

  	
  98.99

  	
  %

  	
  80

  	
  %

  	
  80

  	
  %

  
	
  99.00

  	
  %

  	
  99.99

  	
  %

  	
  90

  	
  %

  	
  90

  	
  %

  
	
  100.00

  	
  %

  	
  100.99

  	
  %

  	
  100

  	
  %

  	
  100

  	
  %

  
	
  101.00

  	
  %

  	
  101.99

  	
  %

  	
  105

  	
  %

  	
  105

  	
  %

  
	
  102.00

  	
  %

  	
  102.99

  	
  %

  	
  110

  	
  %

  	
  110

  	
  %

  
	
  103.00

  	
  %

  	
  103.99

  	
  %

  	
  115

  	
  %

  	
  115

  	
  %

  
	
  104.00

  	
  %

  	
  104.99

  	
  %

  	
  120

  	
  %

  	
  120

  	
  %

  
	
  105.00

  	
  %

  	
  105.99

  	
  %

  	
  125

  	
  %

  	
  125

  	
  %

  
	
  106.00

  	
  %

  	
  106.99

  	
  %

  	
  130

  	
  %

  	
  130

  	
  %

  
	
  107.00

  	
  %

  	
  107.99

  	
  %

  	
  135

  	
  %

  	
  135

  	
  %

  
	
  108.00

  	
  %

  	
  and above

  	
   

  	
  140

  	
  %

  	
  140

  	
  %

  






 


If EPS is
less than $1.85, there will be no payout for the Company Portion of the bonus,
but the Franchise Operations performance and IBO portions of the bonus will
still be paid out.  If the threshold for
both the Corporate Performance measure (EPS) and Franchise Operations measures
are not met, no bonus will be paid for IBO achievement.


 


Payment
Distribution


 


Incentive payouts will be
distributed within 90 days following the close of the fiscal year for which the
incentive was earned.  Payouts will be
paid in a separate check from the regular payroll check, and are subject to
normal withholding deductions.


 


Plan
Administration


 


The Executive Incentive
Plan is administered by the IHOP Corp. Human Resources Department.  This Plan Document and its provisions
regulate all plan guidelines and participant eligibility.  Any exception must be submitted in writing to
the Human Resources Department and must be approved by the Chief Executive
Officer and the Compensation Committee of the Board of Directors.


 


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