Wendy's International (WEN)

Annual Performance-Based Bonus Awards

Annual incentive cash bonuses under the stockholder approved 1999 Executive Bonus Plan are designed to reward and motivate our senior executives over a one-year time frame based on the achievement of financial and business objectives that increase the value and prospects of the Company. While the expected value of an executive’s total compensation package is set at a highly competitive level, each executive officer’s pay package places a significant portion of total compensation at risk, and the actual value of the package may exceed or fall below such competitive compensation levels, both annually and over time. For example, annual incentive cash bonuses earned with respect to the Company’s 2006 fiscal year (without giving effect to any allocation to or payments by the Management Company) ranged from approximately 76% to 89% of the direct cash compensation paid to the named executive officers.

For fiscal 2006, the Company’s Chairman and Chief Executive Officer and President and Chief Operating Officer (Messrs. Peltz and May) participated in Part I of the Bonus Plan, and these two executives, plus four other senior executives (Messrs. Garden, McCarron, Schorr and another senior executive) participated in Part II of the 1999 Executive Bonus Plan.

Under Part I of the 1999 Executive Bonus Plan, Messrs. Peltz and May have been designated as eligible to receive formulaic bonuses which have remained in effect since the adoption of the Plan in

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1999, consisting of an “Applicable Percentage” (66.667% in the case of Mr. Peltz and 33.333% in the case of Mr. May) of an “Annual Bonus” component and an “Improvement Bonus” component. The Annual Bonus component is a fixed percentage of an annual bonus pool the size of which is based on the Company’s consolidated adjusted cash flow (“Adjusted EBITDA”) and capital charges for the designated year under the terms of the Plan, (the result of combining Adjusted EBITDA and capital charges is designated “Economic Profit”). The Improvement Bonus is a fixed percentage of an additional bonus pool based on the improvement in Economic Profit from the last year in which an Improvement Bonus was paid (effectively establishing an “improvement” threshold based on historical performance before additional Improvement Bonuses can be paid). EBITDA is defined as earnings before interest, taxes, depreciation and amortization. Amounts earned under Part I are not subject to negative discretion or reduction on the part of the Performance Committee. Additionally, Messrs. Peltz and May are entitled, under their employment agreements, to receive an annual bonus at least equal to the Part I Formula Bonus Award for which they are eligible.

Under Part II of the 1999 Executive Bonus Plan, eligible executives are designated each year by the Performance Committee to receive an annual Performance Goal Bonus Award that is tied to the achievement of various “Performance Goals” (i.e., objective quantifiable measures for the Company or its operating units). Under the terms of the 1999 Executive Bonus Plan, individual performance and individual contributions are not recognized as separate compensable elements, and participants are eligible for bonus compensation based only on Company results. Each year, the Performance Committee is responsible for establishing the Performance Goals in a timely manner and may exercise negative discretion with respect to the payment of all or a portion of any Performance Goal Bonus Award even if all Performance Goals have been achieved. Such negative discretion was exercised with respect to the Part II bonuses payable with respect to 2006 and the two preceding fiscal years (2005 and 2004) for all named executive officers receiving such bonuses. Under the terms of the 1999 Executive Bonus Plan no payment under Part II of the Plan to any participant may exceed $5 million.

Performance Goals for 2006 included the following target criteria:

These goals were chosen for a variety of reasons: goals tied to operations and earnings per share (e.g., adjusted EBITDA margin and adjusted earnings per share) were selected to encourage senior management to focus on profitability and operational efficiencies in connection with the consolidation of Arby’s existing company owned stores with those acquired from RTM in 2005 and the expansion of the asset management operations of D&C; investment related goals (e.g., total return, net investment income and net realized gains) were selected to maximize senior management’s stewardship of the considerable liquid assets and investments maintained by the Company; stock price appreciation was selected to help align management’s incentive opportunities with increase in direct shareholder value; and transactional goals (e.g. dispositions, acquisitions, etc.) were selected to reward and motivate

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management in connection with strategic and financial challenges and opportunities that might arise during the fiscal year.

Performance Goal Bonus Awards may result in payment if actual results satisfy or exceed designated performance goals. The size of the payment is expressed as a percentage of the participants’ average base salary, with payments generally ranging from between 50% of base salary per target criteria (if minimum performance goals are achieved) to 100% of base salary per target criteria (if target levels are achieved) to 125% of base salary per target criteria (if target levels are exceeded), though in some cases the percentage of base salary tied to a specific criteria may be higher depending on the executive and the target criteria in question.

At the time that the Performance Goals are established for any fiscal year the compensation that would be payable if the goals were to be achieved is intended to be “qualified performance based compensation” under Section 162(m) of the Code, in that the goals that are selected are substantially uncertain of being achieved at the time they are established and there can be no guaranty that all or any one of the performance goals will be satisfied based on actual fiscal year results.

With respect to Part II payments under the 1999 Executive Bonus Plan, the Company has in the past met minimum or target levels for certain performance goals, such as Adjusted EBITDA margin for ARG and D&C operations, has met or exceeded target levels for other target criteria, such as total return on the Company’s investments, increase in common stock price and net investment income, and, during years in which there has been transactional activity, satisfied goals relating to criteria such as acquisitions or dispositions.

With respect to Part I payments under the 1999 Executive Bonus Plan, while the actual amount of the Annual Bonus Pool will vary each year depending on operating results, in the past there have been Part I bonuses of varying sizes paid to Messrs. Peltz and May based on the Annual Bonus Pool component. The portion of the Part I bonuses tied to the Improvement Bonus Pool, however, has only been paid to Messrs. Peltz and May with respect to 1999, 2001, 2005 and 2006 results. (As a result of the contractual settlements reached with Messrs. Peltz and May there are no active participants in Part I of the 1999 Executive Bonus Plan for 2007; and it cannot now be determined whether in future years there will be any additional participants in Part I of the plan).

In connection with the administration of the 1999 Executive Bonus Plan, our CFO provides the Performance Committee with a certificate regarding the computation of the various components of the Part I and Part II bonus awards and the Company’s outside accountants confirm the amount of the bonus awards to the underlying financial statement detail and assess the reasonableness of any adjustments made in accordance with the 1999 Executive Bonus Plan.

The Compensation Committee reviews annual bonus payments to executives who do not participate in the 1999 Executive Bonus Plan. These bonuses are based on the recommendations of senior management and are intended to recognize individual efforts that have contributed to the success and growth of the business. Historically the Compensation Committee has generally followed the recommendation of senior management with respect to these discretionary bonuses.