IHOP CORP
EXECUTIVE INCENTIVE PLAN
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EFFECTIVE DATE
The Executive Incentive Plan is effective January 1, 1998, and supersedes all
previously implemented plans.
MODIFICATION OF THE PLAN
IHOP CORP reserves the right to modify, terminate or make exceptions to the
Executive Incentive 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 President, Vice Presidents and all director level reports
to the Vice Presidents or President, including legal counsels of the IHOP
Corporation and its subsidiaries; except those otherwise covered by another
plan. Any director level employee not qualifying to the previous conditions may
become eligible with the written approval of the President. Participants must
be actively employed with IHOP Corp. and its subsidiaries through the plan year
of the bonus plan. 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.
The incentive calculations are based on the position held at the end of the
fiscal year the incentive was earned, unless otherwise stated below.
NEW HIRES/RE-HIRES
New hires and re-hires eligible for the Plan will have the incentive amount
prorated based on the number of whole months worked in the fiscal year. If the
participant begins work on the first calendar or workday of the month, they will
be credited for a whole month worked. In the event an eligible employee is
terminated and re-hired in the same fiscal year, the re-hire date will be used
to determine the number of whole months to be prorated for the given year. For
re-hired participants, incentive will not consider any time worked prior to the
re-hire date.
PROMOTIONS
Any employee promoted to an eligible position during the fiscal year will have
an incentive prorated based on the number of whole months in the fiscal year.
If the participant is promoted on the first calendar or workday of the month,
they will be credited for a whole month worked. The effective date of the
promotion will be used to determine the number of whole months worked.
DEMOTIONS
When an employee is demoted from one eligible position to another the incentive
will be calculated using the base pay at the end of the fiscal year. The
percentage multiplier will be derived from the factor that relates to the
specific job at the end of the fiscal year. Therefore, the calculations for the
incentive will be based on the attributes of the current job. There will be no
prorated incentives for individuals demoted during the fiscal year to an
eligible position.
JOB CHANGE TO A NON-ELIGIBLE POSITION
Any employee changing from an eligible position to a non-eligible position
during the fiscal year will have an incentive prorated based on the number of
whole months in the fiscal year. The effective date of the job change will be
used to determine the number of whole months worked. If the participant changed
positions on the first calendar or workday of the month, the previous month will
be used to determine the last whole month worked.
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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 fiscal year will have an incentive prorated 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 fiscal year. This incentive
will only be paid upon the employees returning to active duty.
TERMINATION DUE TO DEATH OR RETIREMENT
Any incentive earned will be prorated for the fiscal year earned and awarded
with the normal distribution of incentives. The incentive amount will be based
on the number of whole months worked in the fiscal year earned.
PLAN DESCRIPTION
The Executive Incentive Plan is an annual incentive based on the profitability
growth of IHOP Corp. and on the achievement of specific individual business
objectives of the participants.
DETERMINING INCENTIVE
The incentive award is a percentage of base salary which is dependent on the
position of the participant (see "Bonus Allocation Table"). The Target Payout %
multiplied by the participants base salary on the last day of the fiscal year is
the Target Incentive in dollars. Any eligible participant that is not an
Officer will have an incentive based on the Directors Target Payout as a
percentage of Base Salary. The incentive weighting for the CEO is solely based
on Company Performance. The incentive weighting for Executive Vice President,
Vice Presidents, and Directors is 40% Individual Business Objectives and 60%
Company Performance.
BONUS ALLOCATION TABLE
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CEO EXECUTIVE VICE VICE PRESIDENTS DIRECTORS
PRESIDENT
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TARGET PAYOUT AS A %
OF BASE SALARY 60% 50% 35% 20%
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Incentive Payout Calculation
The incentive payout is based solely on performance, therefore no limiting
factors will be used in calculating the incentive. The Level of Performance is
always based on the last whole percentage actually achieved.
Examples of incentive calculations in various scenarios are attached to the Plan
Document.
COMPANY PERFORMANCE
The Company Performance is based on a comparison of the actual profit before
taxes and extraordinary items to the budgeted figure for the Plan Year. To
determine the Profit Achievement for the organization divide the actual profit
before taxes, bonus and extraordinary items by the budgeted profit before taxes,
bonus and extraordinary items. Refer to the "Company Payout Table" to determine
the bonus achieved for Company portion of the incentive. The bonus achieved is
multiplied by the percentage weighting for the respective position (see
"Determining Incentive") and then multiplied by the individual's base salary to
determine the company portion of the payout.
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COMPANY PAYOUT TABLE
Actual Profit Achieved % OF BONUS ACHIEVED
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Less than 90 % 0 %
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90 % 75.0%
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91 % 77.5%
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92 % 80.0%
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93 % 82.5%
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94 % 85.0%
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95 % 87.5%
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96 % 90.0%
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97 % 92.5%
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98 % 95.0%
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99 % 97.5%
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100 % 100.0%
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101 % 105.0%
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102 % 110.0%
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103 % 115.0%
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104 % 120.0%
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105 % 125.0%
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106 % 130.0%
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107 % 135.0%
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108 % 140.0%
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109 % 145.0%
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110 % 150.0%
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111 % 155.0%
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112 % 160.0%
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113 % 165.0%
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114 % or more 170.0%
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INDIVIDUAL BUSINESS OBJECTIVES
Annually, each eligible 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, measurable objectives that
significantly impact the Company business objectives are to be mutually
determined.
After the fiscal year, a percentage of Achievement is then established by the
immediate supervisor and approved by the CEO. This percentage of Achievement is
multiplied by the percentage weighting for the respective position (see
"Determining Incentive") and then multiplied by the individual's base salary to
determine the individual portion of the payout.
In addition to the calculated individual portion of the incentive, an award may
be granted at the discretion of the President to individuals exceeding expected
levels of performance.
PAYMENT DISTRIBUTION
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Incentive payouts will be distributed as soon as possible following the closing
of the fiscal year. Payouts will be paid in a separate check from the regular
payroll check, and is subject to normal withholding deductions.
PLAN ADMINISTRATION
The Executive Incentive plan is administered by the IHOP Human Resources
Department. This Plan Document and its provisions regulate all plan guidelines
and participant eligibility. Any special circumstances must be submitted in
writing to the Human Resources Department and approved by the President at the
time of the exception.
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INCENTIVE CALCULATION SCENARIOS
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EXAMPLE #1: LOW INDIVIDUAL ACHIEVER & LOW COMPANY
Assume a Vice President has a Base Salary of $170,000.
INDIVIDUAL COMPONENT
- --------------------
The Individual Performance was reviewed and found 1 out of 4 goals were
achieved. Assuming each goal was weighted equally, the Individual Component is
25%. Assume the EPS growth for the fiscal year was 11%.
COMPANY COMPONENT
- -----------------
Profit Before Taxes and Extraordinary Items for the year is 95% of the Target
Amount. Therefore, the Bonus Achieved is 87.5% for the Company Component (see
"Company Payout Table" on page 4 of the Plan).
Step # 1 - Target Payout
- --------------------------
Base Salary * Target Payout % = Target Payout
$170,000 * (35%) = $59,500
Step # 2 - Individual Payout
- ----------------------------
Individual * Weighted as 40% = Individual Payout
Component of Target Payout
25% * (40% * $59,500) = $5,950
Step # 3 - Company Payout
- -------------------------
Company * Weighted as 60% = Company Target
Component of Target
87.5% * (60% * $59,500) = $31,237.50
Step # 4 - Incentive Payout
- ---------------------------
Individual Payout + Company Payout = Incentive Payout
$5,950 + $31,237.50 = $37,187.50
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EXAMPLE #2: HIGH INDIVIDUAL ACHIEVER & HIGH COMPANY
Assume a Vice President has a Base Salary of $170,000.
INDIVIDUAL COMPONENT
- --------------------
The Individual Performance was reviewed and found 4 out of 4 goals were
achieved. Assuming each goal was weighted equally, the Individual Component is
100%. Assume the EPS growth for the fiscal year was 17%.
COMPANY COMPONENT
- -----------------
Profit Before Taxes and Extraordinary Items for the year is 108% of the Target
Amount. Therefore, the Bonus Achieved is 140% for the Company Component (see
"Company Payout Table" on page 4 of the Plan).
Step # 1 - Target Payout
- --------------------------
Base Salary * Target Payout % = Target Payout
$170,000 * (35%) = $59,500
Step # 2 - Individual Payout
- ----------------------------
Individual * Weighted as 40% = Individual Payout
Component of Target Payout
100% * (40% * $59,500) = $23,800
Step # 3 - Company Payout
- -------------------------
Company * Weighted as 60% = Company Target
Component of Target
140% * (60% * $59,500) = $49,980
Step # 4 - Incentive Payout
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Individual Payout + Company Payout = Incentive Payout
$23,800 + $49,980 = $73,780
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