IHOP 2009 Annual Report Download - page 135

DineEquity, Inc. and Subsidiaries
Notes to the Consolidated Financial Statements (Continued)
15. Preferred Stock and Stockholders’ Equity (Continued)
Series A Certificate of Designations is computed on the sum of the stated value of the share plus such
unpaid Passed Dividend. In the event that Passed Dividends shall have accrued but remain unpaid for
two consecutive quarterly dividend periods (each such quarterly dividend period, a ‘‘Passed Quarter’’),
the applicable dividend rate under the Series A Certificate of Designations is, as of the end of such
two-Passed Quarters period, prospectively increased by two percent (2.0%) per annum, and the
applicable dividend rate under the Series A Certificate of Designations further increases prospectively
by two percent (2.0%) per annum as of the end of each subsequent two-Passed Quarters period with
respect to which Passed Dividends shall have accrued but remain unpaid. The Series A Certificate of
Designations further provides that (i) under no circumstances shall the dividend rate applicable at any
time prior to the tenth (10th) anniversary of the issue date of the Series A Perpetual Preferred Stock
exceed sixteen percent (16%) per annum, and (ii) upon payment by the Company of all accrued and
unpaid Passed Dividends, the dividend rate is thereupon automatically reduced prospectively to the
applicable per annum dividend rate under the Series A Certificate of Designations. As of December 31,
2009, all required dividends have been paid in cash on the scheduled dividend payment dates.
The Certificate of Designations for Series A Perpetual Preferred Stock requires that, upon the
occurrence of a Change of Control, unless prohibited by applicable law, the Company shall redeem all
then outstanding shares of the Series A Perpetual Preferred Stock for cash at a redemption price per
share corresponding to the timing of such Change of Control, as specified in the Certificate of
Designations. U.S. GAAP requires preferred securities that are redeemable for cash or other assets to
be classified outside of permanent equity if they are redeemable upon the occurrence of an event that
is not solely within the control of the issuer. Accordingly, the Series A Perpetual Preferred Stock is not
included as a component of Stockholders’ Equity in the accompanying Consolidated Balance Sheets.
Series B Convertible Preferred Stock
On November 29, 2007, the Company issued and sold 35,000 shares of Series B Convertible
Preferred Stock for an aggregate purchase price of $35.0 million in cash. Total issuance costs were
approximately $0.8 million. All of the shares were sold to affiliates of Chilton Investment
Company, LLC (collectively, ‘‘Chilton’’) pursuant to a purchase agreement dated as of July 15, 2007.
The shares of Series B Convertible Preferred Stock rank (i) senior to the common stock, and any series
of preferred stock specifically designated as junior to the Series B Convertible 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; and (ii) on a parity with all other series of
preferred stock, including 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.
Each share of Series B Convertible Preferred Stock has an initial stated value of $1,000, that
increases at the rate of 6.0% per annum, compounded quarterly, commencing on the issue date of such
share of Series B Convertible Preferred Stock to and including the earlier of (i) the date of liquidation,
dissolution or winding up or the redemption of such share, or (ii) the date such share is converted into
the Company’s common stock. The stated value of a share as so accreted as of any date is referred to
as the accreted value of the share as of that date. Shares of Series B Convertible Preferred Stock may
be redeemed by the Company, in whole or in part at the Company’s option, on or after the fourth
anniversary of the issue date, at a redemption price equal to the accreted value as of the applicable
redemption date, subject to the terms set forth in the Certificate of Designations for the Series B
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