IHOP 2008 Annual Report Download - page 128

DineEquity, Inc. and Subsidiaries
Notes to the Consolidated Financial Statements (Continued)
15. Commitments and Contingencies (Continued)
recorded in non-current liabilities in the consolidated balance sheet. This program expired on
October 31, 2007, however, the Company’s guarantee will remain outstanding until the provisions for
release have been satisfied, as defined in the related agreement.
Litigation, Claims and Disputes
In addition to those matters described in previous filings, the Company is subject to various
lawsuits, claims and governmental inspections or audits arising in the ordinary course of business. Some
of these lawsuits purport to be class actions and/or seek substantial damages. In the opinion of
management, these matters are adequately covered by insurance or, if not so covered, are without
merit or are of such a nature or involve amounts that would not have a material adverse impact on the
Company’s business or consolidated financial statements.
Severance Agreements
Applebee’s had severance and employment agreements with certain officers which provided for
severance payments to be made in the event of a change in control. In connection with the Company’s
acquisition of Applebee’s, the change in control provisions of these agreements were triggered. Certain
officers were terminated at the acquisition date. The severance amounts for these individuals have been
accrued in the consolidated financial statements. In addition, certain officers will be terminated over
the next two years. The Company will accrue these severance costs over the expected service period. As
of December 31, 2008 and 2007, the Company has accrued $0.8 million and $10.9 million, respectively,
in its consolidated balance sheet.
16. Preferred Stock and Stockholders’ Equity
Preferred Stock
As part of the financing for the Applebee’s acquisition, on November 29, 2007, the Company
completed two separate private placements of preferred stock.
Series A Perpetual Preferred Stock
On November 29, 2007, the Company issued and sold 190,000 shares of Series A Perpetual
Preferred Stock (the ‘‘Series A Perpetual Preferred Stock’’) for an aggregate purchase price of
$190.0 million in cash. Total issuance costs were approximately $3.0 million. All of the shares were sold
to MSD SBI, L.P., an affiliate of MSD Capital, L.P., pursuant to a purchase agreement dated as of
July 15, 2007, as amended as of November 29, 2007. The shares of Series A Perpetual Preferred Stock
rank (i) senior to the common stock, and any series of preferred stock specifically designated as junior
to the Series A Perpetual Preferred Stock, with respect to the payment of dividends and distributions,
in a liquidation, dissolution or winding up, and upon any other distribution of the Company’s assets,
(ii) on a parity with all other series of preferred stock, including the Series B Convertible Preferred
Stock, described below, with respect to the payment of dividends and distributions, in a liquidation,
dissolution or winding up, and upon any other distribution of the Company’s assets.
The holders of the Series A Perpetual Preferred Stock are entitled to receive dividends, at the
rates and on the dates set forth in the Certificate of Designations for the Series A Perpetual Preferred
Stock (the ‘‘Series A Certificate of Designations’’), if, as, and when such dividends are declared by the
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