IHOP Performance Share Plan (PSP) Award Terms and Calculation Methodology
This document outlines the terms of IHOP's Performance Share Plan (PSP) for employees, detailing how performance shares are awarded and calculated over a three-year period. Awards are based on IHOP's total shareholder return (TSR) relative to the Value Line Restaurant Index and aggregate cash flow from operations. The number of shares and cash awarded at the end of the period depends on performance against set financial targets, with dividends reinvested. The plan is administered by Mercer Human Resource Consulting and includes specific multipliers for different performance levels.
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Exhibit 10.2
Based upon the recommended plan features, IHOP's PSP
will operate as follows:
ILLUSTRATION: RECOMMENDED PSP
Step 1
Year 0 Award
1,500 target
Performance
Shares
Step 2
3-year Performance
| IHOP's 3-year TSR | Value Line Restaurant Index Percentile 3-year TSR | |
| 11% | > | 65th %ile = 12% 50th %ile = 10% 35th %ile = 7% |
| Aggregate 3-yr Cash Flow from Ops = $167M Target Cash Flow from Ops = $160-170M | ||
Target Award Adjusted based on Dividends
(Dividend payment reinvested)
| | Year 0 | Year 1 | Year 2 | Year 3 | ||||
|---|---|---|---|---|---|---|---|---|
| # of Target Performance Shares | 1,500 | 1,500 | 1,535 | 1,567 | ||||
Stock Price | $39.00 | $42.90 | $47.19 | $51.91 | ||||
Dividend per Share | $0.00 | $1.00 | $1.00 | $1.00 | ||||
$ to Reinvest | $0 | $1,500 | $1,535 | $1,567 | ||||
# of Shares from Reinvested Dividends | 0 | 35 | 33 | 30 | ||||
"Account Balance" | 1,500 | 1,535 | 1,567 | 1,598 | ||||
Step 3
3-year Award Calculation
Relative Total Shareholder Return
Performance Share Matrix Multiplier on "Account Balance"(1) | ||||
|---|---|---|---|---|
Superior Performance (65th Percentile) | 0.75x Account Balance | 1.0x Account Balance | 1.25x Account Balance | 1.5x Account Balance |
Target Performance (50th Percentile) | 0.5x Account Balance | 0.75x Account Balance | 1.0x Account Balance | 1.25x Account Balance |
Threshold Performance (35th Percentile) | 0.25x Account Balance | 0.5x Account Balance | 0.75x Account Balance | 1.0x Account Balance |
Below Threshold Performance (<35th Percentile) | 0.0x Account Balance | 0.25x Account Balance | 0.5x Account Balance | 0.75x Account Balance |
Below Threshold Performance | Threshold Performance ($140 million) | Target Performance ($160-170 million) | Superior Performance ($190 million) | |
Aggregate Net Cash Flow from Operations
- (1)
- Actual dividends will be reinvested as they are paid (e.g., quarterly)
Multiplier = 1.125x
Step 4
3-year Award
| Acct. Balance = 1,598 perf. shares x 1.125 x $51.91/share = $93,321 Payment = 899 shares & $46,660 cash |
Mercer Human Resource Consulting
FACER TO PAGE 30
Relative Total Shareholder Return
| | Performance Share Matrix Multiplier on "Account Balance"(1) | |||
|---|---|---|---|---|
| Superior Performance (65th Percentile) | 0.75x Account Balance | 1.0x Account Balance | 1.25x Account Balance | 1.5x Account Balance |
Target Performance (50th Percentile) | 0.5x Account Balance | 0.75x Account Balance | 1.0x Account Balance | 1.25x Account Balance |
Threshold Performance (35th Percentile) | 0.25x Account Balance | 0.5x Account Balance | 0.75x Account Balance | 1.0x Account Balance |
Below Threshold Performance (<35th Percentile) | 0.0x Account Balance | 0.25x Account Balance | 0.5x Account Balance | 0.75x Account Balance |
Below Threshold Performance | Threshold Performance ($140 million) | Target Performance ($160-170 million) | Superior Performance ($190 million) | |
Aggregate Net Cash Flow from Operations(2)(3)(4)
(1)- Interpolate for performance between discrete points
- (2)
- To be adjusted for changes in interest charges on outstanding notes to franchisees over the performance period
- (3)
- Before cash disbursement for PSP
- (4)
- Subject to budget discussions on 12/15/2003
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