Wendy's International (WEN)

Stock Based Compensation

The Group elected to account for its stock awards and options in accordance with Statement of Financial Accounting Standards No. 123, Accounting for Stock-Based Compensation (“SFAS 123”). Based on their terms, the Group’s stock awards and options are accounted for as liability awards. As a result, the Group recognizes compensation expense related to stock awards and options or reverses previously recognized expense as the estimated market value of its common stock changes from year to year. Because the common stock is not publicly traded, there is no ready market from which to determine its value. As a result, the Group has historically obtained an independent valuation to estimate the market value of its common stock. A critical estimate in the valuation is anticipated future cash flows of the business. This estimate is subject to change as a result of many factors including, among other things, changing economic conditions and the competitive environment. During 2005, the estimated fair value was determined based on the terms of an agreement and plan of merger which was executed on May 27, 2005. See Note 19 for further discussion.

Stock Based Compensation

      The Group has elected to account for its stock awards and options in accordance with Accounting Principles Board Opinion No. 25 (“APB 25”),