Stock-Based Incentive Plans

General Description

From time to time, the Company has granted nonqualified stock options, restricted stock awards, cash-settled and stock-settled restricted stock units and performance units to officers, other employees and non-employee directors of the Company. Currently, the Company is authorized to grant stock options, stock appreciation rights, restricted stock awards, cash-settled and stock-settled restricted stock units and performance units to officers, other employees and non-employee directors under the DineEquity, Inc. 2011 Stock Incentive Plan (the “2011 Plan”). The 2011 Plan was approved by stockholders on May 17, 2011 and permits the issuance of up to 1,500,000 shares of the Company’s common stock for incentive stock awards. The 2011 Plan will expire in May 2021.

The IHOP Corp. 2001 Stock Incentive Plan (the "2001 Plan") was adopted in 2001 and amended and restated in 2005 and 2008 to authorize the issuance of up to 4,200,000 shares of common stock. The 2001 Plan has expired.

The Stock Option Plan for Non-Employee Directors (the "Directors Plan") was adopted in 1994 and amended and restated in 1999 to authorize the issuance of up to 400,000 shares of common stock pursuant to options to non-employee directors. The Directors Plan has expired but there are options issued under the Directors Plan outstanding as of December 31, 2011.

The 2005 Stock Incentive Plan for Non-Employee Directors (the "2005 Plan," the 2001 Plan and the Directors Plan, the "Plans") was adopted in 2005 to authorize the issuance of up to 200,000 shares of common stock to non-employee members of the Company's Board of Directors. Awards may be made in common stock, in options to purchase common stock, or in shares of Restricted Stock, or any combination thereof.

Stock-Based Compensation Expense

From time to time, the Company has granted stock options and restricted stock to officers, directors and employees of the Company under the Plans. The stock options generally vest ratably over a three-year period in one-third increments and have a maturity of ten years from the issuance date. Options vest immediately upon a change in control of the Company, as defined in the Plans. Option exercise prices equal the closing price on the New York Stock Exchange of the Company's common stock on the date of grant. Restricted stock and restricted stock units are issued at no cost to the holder and vest over terms determined by the Compensation Committee of the Company's Board of Directors, generally three years following the date of grant or immediately upon a change in control of the Company, as defined in the Plans. The Company generally issues new shares from its authorized but unissued share pool or utilizes treasury stock when vested stock options are exercised, when restricted stock awards are granted and when restricted stock units settle in stock upon vesting.

The following table summarizes the Company's stock-based compensation expense included as a component of general and administrative expenses in the consolidated financial statements:



	Year Ended December 31,
	2011			2010			2009
	(In millions)
Total stock-based compensation:
Pre-tax compensation expense	$	10.6		$	15.2		$	10.7
Book tax benefit	(4.2		)	(6.0		)	(4.2		)
Total stock-based compensation expense, net of tax	$	6.4		$	9.2		$	6.5

As of December 31, 2011, total unrecognized compensation cost (including forfeitures) related to restricted stock and restricted stock units of $7.5 million and $7.6 million related to stock options is expected to be recognized over a weighted average period of approximately 1.43 years for restricted stock and restricted stock units and 1.23 years for stock options.

Stock Options

Stock option activity for the years ended December 31, 2011, 2010 and 2009 is summarized as follows:



Shares Under Stock Option	Number of Shares		Weighted Average Exercise Price Per Share		Weighted Average Remaining Contractual Term (in Years)	Aggregate Intrinsic Value
Outstanding at December 31, 2008	933,939		$	36.37
Granted	1,016,750		8.22
Exercised	(15,500	)	20.87
Forfeited	(222,923	)	20.35
Expired	(53,166	)	40.07
Outstanding at December 31, 2009	1,659,100		21.30
Granted	415,804		31.26
Exercised	(475,705	)	16.75
Forfeited	(50,222	)	25.84
Expired	(25,267	)	44.93
Outstanding at December 31, 2010	1,523,710		24.90
Granted	233,449		53.04
Exercised	(393,075	)	17.11
Forfeited	(42,593	)	27.89
Expired	(2,851	)	47.08
Outstanding at December 31, 2011	1,318,640		$	32.06	6.74	$	17,110,000
Vested and Expected to Vest at December 31, 2011	1,143,491		$	32.75	6.53	$	13,980,000
Exercisable at December 31, 2011	620,687		$	34.21	5.07	$	5,980,000

The total intrinsic value of options exercised during the years ended December 31, 2011, 2010 and 2009 was $14.6 million, $12.0 million and $0.1 million, respectively.

Cash received from options exercised under all stock-based payment arrangements for the years ended December 31, 2011, 2010 and 2009 was $6.7 million, $8.0 million and $0.3 million, respectively. The actual tax benefit realized for the tax deduction from option exercises under the stock-based payment arrangements totaled $6.0 million, $2.7 million and $0.5 million, respectively, for the years ended December 31, 2011, 2010 and 2009.

Fair Value of Stock Options

The per share fair values of the stock options granted have been estimated as of the date of grant or assumption using the Black-Scholes option pricing model. The Black-Scholes model considers, among other factors, the expected life of the option and the expected volatility of the Company's stock price. The Black-Scholes model meets the requirements of U.S. GAAP but the fair values generated by the model may not be indicative of the actual fair values of the Company's stock-based awards. The following table summarizes the assumptions used to value options granted in the respective periods:



	2011		2010		2009
Risk free interest rate	1.8	%	2.2	%	2.0	%
Weighted average historical volatility	79.1	%	80.4	%	72.3	%
Dividend yield	—	%	—	%	—	%
Expected years until exercise	4.6		4.8		5.0
Forfeitures	11.0	%	11.0	%	11.0	%

Restricted Stock and Restricted Stock Units

Restricted stock and restricted stock unit activity for the years ended December 31, 2011, 2010 and 2009 is set forth below:



	Number of Shares		Weighted Average Grant-Date Per Share Fair Value		Restricted Stock Units		Weighted Average Grant-Date Per Share Fair Value
Outstanding at December 31, 2008	671,480		$	45.07	—		—
Granted	241,125		10.92		—		—
Released	(139,649	)	51.40		—		—
Forfeited	(122,633	)	34.23		—		—
Outstanding at December 31, 2009	650,323		33.09		—		—
Granted	209,505		30.52		20,000		$	29.32
Released	(159,893	)	48.18		(2,000	)	29.32
Forfeited	(33,691	)	34.16		—		—
Outstanding at December 31, 2010	666,244		28.62		18,000		29.32
Granted	164,632		53.03		—		—
Released	(287,735	)	37.82		—		—
Forfeited	(56,608	)	31.56		—		—
Outstanding at December 31, 2011	486,533		31.08		18,000		29.32

During the years ended December 31, 2011 and 2010, the Company issued 15,957 and 29,000 shares, respectively, of cash-settled restricted stock units to members of the Board of Directors, of which 41,957 shares are outstanding at December 31, 2011. As these instruments can only be settled in cash they are recorded as liabilities based on the closing price of the Company's common stock of $42.21 as of December 31, 2011. For the years ended December 31, 2011 and 2010, $0.5 million and $1.2 million, respectively, was included as stock-based compensation expense related to these cash-settled restricted stock units.